PEC Prospectus

PROSPECTUS DATED 30 JULY 2009
(Registered by the Monetary Authority of Singapore on 30 July 2009)

This document is important. If you are in any doubt as to the action you should take, you should consult your legal, nancial, tax or other professional adviser. We have made an application to the Singapore Exchange Securities Trading Limited (SGXST) for permission to deal in, and for quotation of, the ordinary shares (the Shares) in the capital of PEC Ltd. (the Company) already issued, the new Shares which are the subject of this Invitation (the New Shares), the new Shares which may be issued upon the exercise of the over-allotment option (the Over-allotment Option) (the Additional Shares) and the new Shares which may be issued upon the exercise of the options to be granted under the PEC Employee Share Option Scheme (the ESOS Shares) on the Ofcial List of the SGX-ST. Such permission will be granted when we have been admitted to the Ofcial List of the SGX-ST. The dealing in and quotation of our Shares will be in Singapore dollars. Acceptance of applications will be conditional upon, inter alia, permission being granted to deal in, and for quotation of, all the existing issued Shares, the New Shares, the Additional Shares and the ESOS Shares. If the completion of the Invitation does not occur because the SGX-STs permission is not granted or for any other reasons, monies paid in respect of any application accepted will be returned to you at your own risk, without interest or any share of revenue or other benet arising therefrom and you will not have any claims whatsoever against us, the Issue Manager, the Underwriter or the Placement Agent. The SGX-ST assumes no responsibility for the correctness of any of the statements made or opinions expressed or reports contained in this Prospectus. Admission to the Ofcial List of the SGX-ST is not to be taken as an indication of the merits of the Invitation, our Company, our Subsidiaries, our Associated Companies, our Joint-Venture Company, our Shares, the New Shares, the Additional Shares and the ESOS Shares, as the case may be. In connection with the Invitation, our Company has granted DBS Bank Ltd. an Over-allotment Option to subscribe up to an aggregate of 12,600,000 Additional Shares (which in aggregate represents no more than 20.0% of the New Shares) at the issue price exercisable in full or in part within 30 days upon the commencement of trading of our Shares on the SGX-ST solely for the purpose of covering over-allotments (if any) of the New Shares made in connection with the Invitation. The total number of issued Shares immediately after the completion of the Invitation (and prior to the exercise of the Over-allotment Option in full) will be 238,000,000 Shares. If the Over-allotment Option is exercised in full, the total number of issued Shares will increase by 12,600,000 Shares to 250,600,000 Shares. A copy of this Prospectus has been lodged with and registered by the Monetary Authority of Singapore (the Authority). The Authority assumes no responsibility for the contents of the Prospectus. Registration of the Prospectus by the Authority does not imply that the Securities and Futures Act (Chapter 289) of Singapore, or any other legal or regulatory requirements, have been complied with. The Authority has not, in any way, considered the merits of our Shares, the New Shares, the Additional Shares or the ESOS Shares, as the case may be, being offered for investment. We have not lodged or registered this Prospectus in any other jurisdictions. Investing in our Shares involves risks which are described in the section entitled Risk Factors in this Prospectus. No Shares will be allotted or allocated on the basis of this Prospectus later than six months after the date of registration of this Prospectus by the Authority.
(Incorporated in Singapore on 8 January 1982) (Company Registration No: 198200079M)
Invitation in respect of 63,000,000 New Shares comprising: (i) (ii) 2,000,000 Offer Shares at S$0.40 for each Offer Share by way of public offer; 61,000,000 Placement Shares by way of placement, comprising: (a) 58,000,000 Placement Shares at S$0.40 each for application by way of Placement Shares Application Forms (or such other forms of application as the Issue Manager deems appropriate); 300,000 Internet Placement Shares at S$0.40 each for applications made through the Internet website of DBS Vickers Securities (Singapore) Pte. Ltd; and 2,700,000 Reserved Shares at S$0.40 each reserved for our directors, employees, business associates and those who have contributed to the success of our Group,
(b)
(c)
payable in full on application (subject to the Over-allotment Option). Issue Manager, Underwriter and Placement Agent
OUR COMPANY
PRC
PEC Ltd. (PEC or the Group) is a specialist engineering group servicing the oil and gas, petrochemical, oil and chemical terminal, and pharmaceutical industries. Our two core business activities are project works (currently being carried out in Singapore, Malaysia, Thailand, Indonesia, Vietnam, the PRC and the Middle East) and maintenance services (currently being carried out in Singapore and the PRC).
INDONESIA THAILAND MALAYSIA SINGAPORE MIDDLE EAST VIETNAM
PEC Fabrication & Maintenance Facilities/Support
PEC Projects
PLANT AND TE R MI NAL E NGI NE E R I NG SPE C I ALI ST
MAINTENANCE SERVICES
Plant maintenance works and related services works range from maintenance carried out on plant equipment to single-source maintenance services for a production plant. Maintenance works include: - Tankage maintenance - Static equipment maintenance - Rotating equipment maintenance - Electrical equipment maintenance - Instrument and control equipment maintenance Plant turnaround, plant de-bottlenecking and plant upgrading services Typically, we offer our maintenance services in the form of a long-term service contract, usually for a xed term of two to ve years.
PROJECT WORKS
Scope of works includes: Engineering, procurement and construction management (EPCm) and engineering, procurement and construction (EPC) in respect of a terminal/section of a plant/terminal Engineering services include conceptual design, front-end engineering design and detailed engineering Procurement services entail material and equipment purchasing and material management Construction services include fabrication and installation of piping, structures and pressure vessels, installation of mechanical equipment, electrical, instrumentation and control systems and provision of scaffolding, painting, insulation and re proong services
Project management consultancy Construction of a certain part of a plant/terminal Depending on the nature, scale and complexity of the works, it takes approximately one to two years to complete a project.
OTHER OPERATIONS
Other ancillary business activities include: Provision of information technology services and products Heat treatment services Equipment leasing Engineering consultancy services
OUR FINA NCIAL HIGHLIGHTS

REVENUE
S$million 360 330 300 270 236.6 240 210 180 150 120 90 60 30 0 0 5 149.3 117.1 10 8.3 15 12.4 11.5 220.3 20 314.6 26.2 25
PROFIT AFTER TAXATION

S$million 30 27.0
FY
20
06
FY
20
07
FY
20
08
HY
20
08
HY
20
09
FY
20
06
FY
20
07
FY
20
08
HY
20
08
HY
20
09
REVENUE BREAKDOWN
BUSINESS SEGMENTS
36.2% 0.2% Project Works Maintenance Services Other Operations FY2 0 0 8 H Y2 0 0 9 63.6% 76.0% 23.8% 0.2%
GEOGRAPHICAL SEGMENTS
15.7% 8.0% 34.4% 6.1% Singapore 76.3% Middle East Asia Pacific (excluding Singapore) and Africa 59.5%
FY2 0 0 8
H Y2 0 0 9
COM P E TI TI VE S TR E N G TH S
Our ability in providing EPC project works and single-source maintenance services
We have distinguished ourselves from our competitors as a provider of integrated engineering solutions With our sub-contractors, we are able to provide all the requisite major engineering disciplines
We own a large and growing fleet of construction equipment

Our eet of about 2,000 pieces of construction equipment as at the Latest Practicable Date provides great assurance to customers that we have the necessary construction equipment resources to perform our work efciently and without delay Competitive advantage in securing bigger projects due to our reliability in providing construction resources, our exibility in crossdeploying equipment to our various operation sites and to respond more readily and efciently to emergency or un-planned plant shutdown work
O ur es t a b lis hed t r a c k rec o rd a nd ex p er ienc ed management team

Long operating history spanning over 25 years and some of our major customers have worked with us since 1982 Established reputation as a reliable provider of integrated engineering solutions Executive Directors each with more than 20 years of experience in the oil and gas and/ or oil and chemical terminal industries A team of experienced Executive Ofcers, project managers and senior engineers, many of whom have been with our Group for more than 15 years
Our innovative use of information communication technology

The use of our in-house developed resource management solution, EIS, our project management platform, PECMm, and the use of advanced third party software have greatly enhanced our operations and productivity and enabled us to have a competitive edge over other companies in our industry
Our focus on staff training and development

Workers are equipped with necessary skills to perform their duties prociently and deliver quality works Well-trained and motivated workforce is a key asset of our Group Awarded the certication Singapore Quality Class
PROSPECT S
Growth trends and developments in the industries we service:
Oil and gas and petrochemical industries

Singapore is host to one of the largest oil and gas and petrochemical complexes in Southeast Asia. We believe that further integration and upgrading of existing reneries in Singapore will open up business opportunities for PEC Middle Eastern countries are moving towards projects which produce higher valued derivatives and functional products which we believe will offer new business opportunities for PEC
Oil and chemical terminal industry

Continuing demand for design, engineering and construction of oil and chemical terminal facilities in Asia and the Middle East largely driven by the sustained growth in demand for oil, chemical and new clean fuel products
Pharmaceutical industry
We expect Singapores growing pharmaceutical industry to develop further through the expansion of existing plants and establishment of new plants in the mid to longer term leading to new project works and business opportunities for PEC
STR ATEGY A ND FUTURE PLANS

We intend to focus on a three-pronged strategy towards the future growth and expansion of our business:
Expansion of our customer base Expansion of our scope of work Geographical expansion
To meet our three-pronged strategy, our future plans for the growth and expansion of our business are: Construction of a new fabrication facility in the Middle East Further expansion of our on-site capabilities through the acquisition of new equipment and machineries Further expansion by way of strategic alliances and/or joint-ventures, acquisitions of, and investments in, related businesses Further expansion of our EPC and EPCm services by technological upgrading and investments.
INDICAT IVE T IMETABLE

Date and Time 31 July 2009, 9.00 a.m. 7 August 2009, 9.00 a.m. Event Commencement of public offer Commence trading on a ready basis
5 August 2009, 12.00 noon Closing date and time for public offer
Applications for the Shares may be made through: ATMs of DBS Bank (including POSB), OCBC and UOB Group; Internet banking websites of DBS Bank and UOB Group; or Printed Application Forms which form part of the Prospectus.
TABLE OF CONTENTS
CORPORATE INFORMATION.............................................................................................................. DEFINITIONS ........................................................................................................................................ GLOSSARY OF TECHNICAL TERMS.................................................................................................. SELLING RESTRICTIONS .................................................................................................................. DETAILS OF THE INVITATION LISTING ON THE SGX-ST ........................................................................................................ INDICATIVE TIMETABLE FOR LISTING .................................................................................. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS ...................................... PROSPECTUS SUMMARY .................................................................................................................. RISK FACTORS RISK RELATING TO OUR GROUP AND OUR INDUSTRIES .................................................. GENERAL RISKS AND RISKS RELATING TO OUR OVERSEAS OPERATIONS .................. RISKS RELATING TO INVESTMENT IN OUR SHARES .......................................................... THE INVITATION .................................................................................................................................. USE OF PROCEEDS AND INVITATION EXPENSES.......................................................................... MANAGEMENT, UNDERWRITING AND PLACEMENT ARRANGEMENTS ...................................... PLAN OF DISTRIBUTION .................................................................................................................... CLEARANCE AND SETTLEMENT ...................................................................................................... SELECTED FINANCIAL INFORMATION ............................................................................................ MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW ................................................................................................................................ REVENUE .................................................................................................................................. COST OF SALES ...................................................................................................................... GROSS PROFIT ........................................................................................................................ OTHER OPERATING INCOME .................................................................................................. OTHER OPERATING EXPENSES ............................................................................................ ADMINISTRATIVE EXPENSES.................................................................................................. FINANCE EXPENSES ................................................................................................................ SHARE OF RESULTS OF ASSOCIATES AND JOINT-VENTURE .......................................... TAXATION .................................................................................................................................. INFLATION.................................................................................................................................. REVIEW OF RESULTS OF OPERATIONS ................................................................................ REVIEW OF FINANCIAL POSITION ........................................................................................ LIQUIDITY AND CAPITAL RESOURCES.................................................................................. FOREIGN EXCHANGE .............................................................................................................. i 42 42 43 45 45 45 45 45 45 45 46 46 52 54 58 22 28 30 31 32 34 36 39 40 13 15 17 18 1 3 10 12
CHANGES IN ACCOUNTING POLICIES .................................................................................. POSSIBLE IMPACT ON OUR FUTURE FINANCIAL RESULTS AND POSITION .................. DIVIDEND POLICY .............................................................................................................................. EXCHANGE CONTROLS .................................................................................................................... CAPITALISATION AND INDEBTEDNESS .......................................................................................... DILUTION.............................................................................................................................................. SHARE CAPITAL.................................................................................................................................. SHAREHOLDERS ................................................................................................................................ MORATORIUM ...................................................................................................................................... GROUP STRUCTURE .......................................................................................................................... GENERAL INFORMATION ON OUR GROUP HISTORY .................................................................................................................................... BUSINESS .................................................................................................................................. QUALITY ASSURANCE ............................................................................................................ FABRICATION FACILITIES AND UTILISATION........................................................................ MARKETING AND BUSINESS DEVELOPMENT...................................................................... RESEARCH AND DEVELOPMENT .......................................................................................... TRAINING .................................................................................................................................. INTELLECTUAL PROPERTY .................................................................................................... MAJOR SUPPLIERS/SUB-CONTRACTORS ............................................................................ MAJOR CUSTOMERS................................................................................................................ CREDIT MANAGEMENT ............................................................................................................ SEASONALITY .......................................................................................................................... AWARDS AND CERTIFICATES ................................................................................................ PROPERTIES AND FIXED ASSETS ........................................................................................ INSURANCE .............................................................................................................................. GOVERNMENT REGULATIONS ................................................................................................ COMPETITION .......................................................................................................................... COMPETITIVE STRENGTHS .................................................................................................... PROSPECTS .............................................................................................................................. TREND INFORMATION AND ORDER BOOKS ........................................................................ STRATEGY AND FUTURE PLANS .......................................................................................... DIRECTORS, MANAGEMENT AND STAFF MANAGEMENT REPORTING STRUCTURE ............................................................................ DIRECTORS .............................................................................................................................. EXECUTIVE OFFICERS ............................................................................................................ REMUNERATION ...................................................................................................................... EMPLOYEES .............................................................................................................................. SERVICE AGREEMENTS ..........................................................................................................
60 61 62 63 68 70 71 74 76 77
82 84 88 88 89 90 90 91 92 93 94 94 95 95 96 97 103 104 106 108 109
111 112 116 119 121 122
ii
PEC EMPLOYEE SHARE OPTION SCHEME .................................................................................... INTERESTED PERSON TRANSACTIONS PAST INTERESTED PERSON TRANSACTIONS...................................................................... PRESENT AND ON-GOING INTERESTED PERSON TRANSACTIONS ................................ CONFLICT OF INTERESTS ...................................................................................................... GUIDELINES FOR FUTURE INTERESTED PERSON TRANSACTIONS ................................ REVIEW PROCEDURES FOR ON-GOING AND FUTURE INTERESTED PERSON TRANSACTIONS ........................................................................................................................ CORPORATE GOVERNANCE ............................................................................................................ GENERAL AND STATUTORY INFORMATION INFORMATION ON DIRECTORS AND EXECUTIVE OFFICERS ............................................ SHARE CAPITAL ...................................................................................................................... LITIGATION ................................................................................................................................ MATERIAL CONTRACTS .......................................................................................................... MISCELLANEOUS .................................................................................................................... CONSENTS ................................................................................................................................ DOCUMENTS AVAILABLE FOR INSPECTION ........................................................................ STATEMENT BY THE DIRECTORS OF OUR COMPANY ........................................................ APPENDIX A AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF PEC LTD. AND ITS SUBSIDIARIES FOR THE YEARS ENDED 30 JUNE 2006, 2007 AND 2008................................................................ APPENDIX B UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF PEC LTD. AND ITS SUBSIDIARIES FOR THE FINANCIAL PERIOD FROM 1 JULY 2008 TO 31 DECEMBER 2008 ............................................................................................................................ APPENDIX C SUMMARY OF THE CONSTITUTION OF OUR COMPANY................................................................ APPENDIX D DESCRIPTION OF OUR SHARES ...................................................................................................... APPENDIX E TAXATION ............................................................................................................................................ APPENDIX F RULES OF THE PEC EMPLOYEE SHARE OPTION SCHEME .......................................................... APPENDIX G PROPERTIES LEASED ........................................................................................................................ APPENDIX H TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION AND ACCEPTANCE..................
124
132 133 134 138 139 141
143 145 146 147 147 148 149 149
A-1
B-1
C-1
D-1
E-1
F-1
G-1
H-1
iii
CORPORATE INFORMATION
BOARD OF DIRECTORS : Edna Ko Poh Thim (Executive Chairman) Robert Dompeling (Group Chief Executive Officer) Wong Peng (Managing Director) Dr Foo Fatt Kah (Lead Independent Director) Chia Kim Huat (Independent Director) Ho Yew Mun (Independent Director) Abdul Jabbar Bin Karam Din, LLB (Hons) Loh Lee Eng, ACIS 21 Shipyard Road Singapore 628144 Boardroom Corporate & Advisory Services Pte. Ltd. 3 Church Street #08-01 Samsung Hub Singapore 049483 DBS Bank Ltd. 6 Shenton Way DBS Building Tower One Singapore 068809 Rajah & Tann LLP 4 Battery Road #26-01 Bank of China Building Singapore 049908 Drew & Napier LLC 20 Raffles Place #17-00 Ocean Towers Singapore 048620 Ali Budiardjo, Nugroho, Reksodiputro Graha Niaga, 24th Floor Jl. Jend. Sudirman Kav. 58 Jakarta 12190 Indonesia Amin Yap & Co. Level 7, UBN Tower Box 100 10, Jalan P. Ramlee 50250 Kuala Lumpur Malaysia Jingtian & Gongcheng 15th Floor, The Union Plaza 20 Chaoyangmenwai Dajie Beijing 100020 The Peoples Republic of China GFE Law Office 18th Floor, Guangdong Holdings Tower 555 Dongfeng East Road Guangzhou The Peoples Republic of China 1
JOINT COMPANY SECRETARIES
REGISTERED OFFICE, HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS SHARE REGISTRAR AND SHARE TRANSFER OFFICE
ISSUE MANAGER, UNDERWRITER AND PLACEMENT AGENT
SOLICITORS TO THE INVITATION
SOLICITORS TO THE ISSUE MANAGER, UNDERWRITER AND PLACEMENT AGENT
LEGAL ADVISERS TO THE COMPANY AS TO INDONESIA LAW
LEGAL ADVISERS TO THE COMPANY AS TO MALAYSIA LAW
LEGAL ADVISERS TO THE COMPANY AS TO PRC LAW
LEGAL ADVISERS TO THE ISSUE MANAGER, UNDERWRITER AND PLACEMENTAGENT AS TO PRC LAW
LEGAL ADVISERS TO THE COMPANY AS TO SRI LANKA LAW
Julius & Creasy 41 Janadhipathi Mawatha P.O. Box 154 Colombo 1 Sri Lanka Dej-Udom & Associates Charn Issara Tower 9th Floor 942/142-3 Rama IV Road Bangrak District Bangkok Thailand 10500 Simmons & Simmons Level 7 The Gate Village Building 10 Dubai International Financial Centre P O Box 506688 Dubai UAE Chen Shan & Partners 2 Ngo Duc Ke Street #12-05 Me Linh Point Tower District 1 Ho Chi Minh City Vietnam Ernst & Young LLP Public Accountants and Certified Public Accountants One Raffles Quay North Tower, Level 18 Singapore 048583 Partner-in-charge : Mr Max Loh Khum Whai
LEGAL ADVISERS TO THE COMPANY AS TO THAILAND LAW
LEGAL ADVISERS TO THE COMPANY AS TO UAE LAW
LEGAL ADVISERS TO THE COMPANY AS TO VIETNAM LAW
AUDITORS AND REPORTING ACCOUNTANTS
RECEIVING BANK
DBS Bank Ltd. 6 Shenton Way DBS Building Tower One Singapore 068809 The Hongkong and Shanghai Banking Corporation Limited 21 Collyer Quay #08-01 HSBC Building Singapore 049320 Oversea-Chinese Banking Corporation Limited 63 Chulia Street #06-00 OCBC Centre East Singapore 049514
PRINCIPAL BANKERS
DEFINITIONS
In this Prospectus and the accompanying Application Forms and, in relation to Electronic Applications, the instructions appearing on the screens of ATMs and IB websites of the relevant Participating Banks and the Internet website of DBS Vickers, the following definitions apply where the context so admits:
Our Group Companies Associated Companies

: The associated companies of PEC, comprising PEI, PEC Thailand and PMC Thailand Audex Pte Ltd, a company incorporated in Singapore Audex (Shanghai) Co., Ltd incorporated in the PRC , a company
Audex Audex Shanghai
: :
Audex Sri Lanka Audex UAE
: :
Audex (Private) Limited, a branch office of Audex registered in Sri Lanka Audex Fujairah L.L FZE, a company incorporated in the United Arab Emirates Audex Engineering (Vietnam) Co., Ltd, a company incorporated in Vietnam PEC Ltd., a company incorporated in Singapore CTS (Far East) Pte. Ltd., a company incorporated in Singapore
Audex Vietnam
Company or PEC CTS or Joint-Venture Company Group or Group Companies Huizhou Tianxin
: :
Our Company, Subsidiaries, Associated Companies and Joint-Venture Company Huizhou Tianxin Petrochemical Engineering Co., Ltd , a company incorporated in the PRC IT Re-engineering Pte Ltd, a company incorporated in Singapore PEC Construction Equipment Leasing Company (Huizhou) Ltd , a company incorporated in the PRC PT. PEC Anugerah Sejahtera, a company incorporated in Indonesia PEC (Malaysia) Sdn. Bhd., a company incorporated in Malaysia PECI-THAI Co., Ltd., a company incorporated in Thailand PEC International Investments Pte Ltd, a company incorporated in Singapore Plant Electrical Instrumentation Pte Ltd, a company incorporated in Singapore Plant Engineering Services Pte. Ltd., a company incorporated in Singapore Plant General Services Pte. Ltd., a company incorporated in Singapore
ITR PCELC Huizhou
: :
PEC Indonesia PEC Malaysia PEC Thailand PECII
: : : :
PEI
PES
PGS
PMC Thailand
Plant Maintenance and Construction (Thailand) Co., Ltd., a company incorporated in Thailand PEC Technology Consultancy Services (Huizhou) Ltd , a company incorporated in the PRC The subsidiaries of PEC, comprising Audex, Audex Shanghai, Audex UAE, Audex Vietnam, Huizhou Tianxin, ITR, PCELC Huizhou, PEC Indonesia, PEC Malaysia, PECII, PES, PGS, PTCS Huizhou and TIS Testing Inspection & Solution Pte. Ltd., a company incorporated in Singapore
PTCS Huizhou
Subsidiaries
TIS
Other Corporations and Agencies Authority Case C CDP CPF DBS Bank, Issue Manager, Placement Agent, Receiving Bank or Underwriter DBS Vickers FIC MMP Participating Banks
: : : : : The Monetary Authority of Singapore Case C Pte. Ltd., a company incorporated in Singapore The Central Depository (Pte) Limited The Central Provident Fund DBS Bank Ltd.
: : : :
DBS Vickers Securities (Singapore) Pte. Ltd. The Foreign Investment Committee of Malaysia MMP Holdings Pte. Ltd., a company incorporated in Singapore DBS Bank (including POSB), United Overseas Bank Limited and its subsidiary, Far Eastern Bank Limited (the UOB Group), and OverseaChinese Banking Corporation Limited (OCBC) Securities Clearing & Computer Services (Pte) Ltd Singapore Exchange Securities Trading Limited Tian San Corporation Sdn. Bhd., a company incorporated in Malaysia Tian San Shipping (Private) Limited, a company incorporated in Singapore Tian San Company (Pte.) Limited, a company incorporated in Singapore V Investments Private Limited, a company incorporated in Singapore
SCCS SGX-ST Tian San Malaysia Tian San Shipping
: : : :
Tian San Singapore V Investments General Additional Shares
: :
Up to 12,600,000 new Shares to be issued upon the exercise of the Overallotment Option The printed application forms to be used for the purpose of the Invitation and which form part of this Prospectus The list of applications for subscription for the New Shares 4
Application Forms
Application List
Articles associates
: :
The articles of association of our Company (a) in relation to an entity, means: (i) in a case where the entity is a substantial shareholder, controlling shareholder, substantial interest-holder or controlling interest-holder, its related corporation, related entity, associated company or associated entity; or in any other case, (A) a director or an equivalent person, (B) where the entity is a corporation, a controlling shareholder of the entity, (C) where the entity is not a corporation, a controlling interest-holder of the entity, (D) a subsidiary, a subsidiary entity, an associated company, or an associated entity, or (E) a subsidiary, a subsidiary entity, an associated company, or an associated entity, of the controlling shareholder or controlling interest-holder, as the case may be, of the entity; and
(ii)
(b)
in relation to an individual, means: (i) his immediate family, being the persons spouse, child, adopted child, step-child, sibling and parent; a trustee of any trust of which the individual or any member of the individuals immediate family is (A) a beneficiary or, (B) where the trust is a discretionary trust, a discretionary object, when the trustee acts in that capacity; or any corporation in which he and his immediate family (whether directly or indirectly) have interests in voting shares of an aggregate of not less than 30% of the total votes attached to all voting shares.
(ii)
(iii)
The terms associated company, associated entity, controlling interest-holder, related corporation, related entity, subsidiary, subsidiary entity and substantial interest-holder shall have the same meanings ascribed to them respectively in the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005
ATM Audex FY2009 Interim Dividend Audit Committee Board or Board of Directors Bonus Issue
: :
Automated teller machine of a Participating Bank The interim dividend of S$2.0 million declared and paid by Audex on 25 June 2009 and 29 June 2009 respectively The audit committee of our Company The board of Directors of our Company
: :
The bonus issue of an aggregate of 20,000,000 new ordinary shares by way of capitalisation of S$20,000,000 from our Companys retained earnings, allotted and issued by our Company on 25 June 2009 The Companies Act, Chapter 50 of Singapore Compound annual growth rate
Companies Act CAGR
: :
Controlling Shareholder
A person who: (a) (b) in fact exercises control over our Company; or has an interest in the voting Shares of our Company of an aggregate of not less than 15% of the total vote attached to all the voting Shares in our Company
Directors EIT Electronic Applications
: : :
The directors of our Company as at the date of this Prospectus Enterprise income tax Applications for the Offer Shares made through an ATM or the IB website of one of the relevant Participating Banks or applications for the Internet Placement Shares made through the Internet website of DBS Vickers, subject to and on the terms and conditions of this Prospectus Has the same meaning as in Section 2 of the Securities and Futures Act Earnings per Share PEC Employee Share Option Scheme The new Shares which may be issued upon the exercise of the options to be granted under the PEC Employee Share Option Scheme The executive Directors of our Company as at the date of this Prospectus The executive officers of our Company as at the date of this Prospectus Financial year ended or, as the case may be, ending 30 June The final dividend of S$250,000 declared and paid by our Company on 3 December 2008 and 6 January 2009 respectively The interim dividend of S$8.0 million declared and paid by our Company on 25 June 2009 and 17 July 2009 respectively A confirmed employee of our Company and/or Subsidiaries (including any Executive Director) selected by our Remuneration Committee to participate in the ESOS Financial period of six months ended or, as the case may be, ending 31 December Internet banking The independent Directors of our Company as at the date of this Prospectus The 300,000 Placement Shares available for application through the Internet website of DBS Vickers, subject to and on the terms and conditions of this Prospectus The invitation by our Company to the public to subscribe for the New Shares at the Issue Price, subject to and on the terms and conditions of this Prospectus S$0.40 for each New Share
entity EPS ESOS ESOS Shares
: : : :
Executive Directors Executive Officers FY FY2008 Final Dividend
: : : :
FY2009 Interim Dividend :
Group Employee
HY
IB Independent Directors
: :
Internet Placement Shares
Invitation
Issue Price
Latest Practicable Date
17 June 2009, being the latest practicable date prior to the lodgment of this Prospectus with the Authority The listing manual of the SGX-ST The management and underwriting agreement dated 30 July 2009 entered into between our Company and DBS Bank as the Issue Manager and the Underwriter A day on which the SGX-ST is open for trading in securities The memorandum of association of our Company Net asset value The 63,000,000 new Shares for which our Company invites applications to subscribe for pursuant to the Invitation, subject to and on the terms and conditions of this Prospectus Net tangible assets The offer by our Company of the Offer Shares to the public in Singapore for subscription at the Issue Price, subject to and on the terms and conditions of this Prospectus The date on which an offer to grant an Option is made pursuant to the ESOS 2,000,000 New Shares which are the subject of the Offer The right to subscribe for Shares granted or to be granted to a Group Employee pursuant to the ESOS and for the time being subsisting The over-allotment option granted by our Company to the Issue Manager which is exercisable by the Issue Manager, in full or in part, within 30 days from the commencement of trading of our Shares on the SGX-ST, to subscribe for up to an aggregate of 12,600,000 Additional Shares (representing not more than 20.0% of the New Shares) at the Issue Price, solely to cover the over-allotment (if any) made in connection with the Invitation. Unless we indicate otherwise, all information in this Prospectus assumes that the Issue Manager does not exercise the Over-allotment Option The placement by the Placement Agent on behalf of our Company of the Placement Shares at the Issue Price, subject to and on the terms and conditions of this Prospectus The placement agreement dated 30 July 2009 entered into between our Company and DBS Bank as the Placement Agent 61,000,000 New Shares which are the subject of the Placement (including the Internet Placement Shares and Reserved Shares) The Peoples Republic of China, which for the purposes of this Prospectus and for geographical reference only, excludes Hong Kong and Macau Special Administrative Regions of the Peoples Republic of China, and Taiwan This prospectus dated 30 July 2009 issued by our Company in respect of the Invitation 7
Listing Manual Management and Underwriting Agreement
: :
Market Day Memorandum NAV New Shares
: : : :
NTA Offer
: :
Offer Date
Offer Shares Option
: :
Over-allotment Option
Placement
Placement Agreement
Placement Shares
PRC or China
Prospectus
Remuneration Committee : Reserved Shares

:
The remuneration committee of our Company The 2,700,000 Placement Shares reserved for our directors, employees, business associates and those who have contributed to the success of our Group The securities account maintained by a Depositor with CDP The Securities and Futures Act, Chapter 289 of Singapore
Securities Account Securities and Futures Act Service Agreements
: :
The service agreements entered into between our Company and each of our Executive Directors as described in the section entitled Service Agreements in this Prospectus The share lending agreement as described in the section entitled Share Lending in this Prospectus Registered holders of Shares, except where the registered holder is CDP, the term Shareholders shall, in relation to such Shares, mean the Depositors whose Securities Accounts are credited with Shares Ordinary shares in the capital of our Company The sub-division, following completion of the Bonus Issue, of every one Share into seven Shares as described in the section entitled Share Capital in this Prospectus A person who has an interest or interests in one or more voting Shares in our Company, and the total votes attached to those Share(s) represents not less than 5.0% of the total votes attached to all the voting Shares in our Company United Arab Emirates
Share Lending Agreement Shareholders
Shares Sub-Division
: :
Substantial Shareholders :
UAE Currencies AED AUD Baht Euro RM RMB Rp S$ or $ and cents
: : : : : : : :
UAE Dirham, the lawful currency of the UAE Australian dollars, the lawful currency of Australia Thai Baht, the lawful currency of Thailand Euro, the lawful currency of the European Union Malaysian Ringgit, the lawful currency of Malaysia PRC Renminbi, the lawful currency of the PRC Rupiah, the lawful currency of Indonesia Singapore dollars and cents respectively, the lawful currency of the Republic of Singapore United States dollars, the lawful currency of the United States of America Vietnamese Dong, the lawful currency of Vietnam
US$ VND
: :
Units mt sq m %
: : : Metric tonne(s) Square metre(s) Per centum or percentage
Any reference in this Prospectus, the Application Forms or the Electronic Applications to any statute or enactment is a reference to that statute or enactment for the time being amended or re-enacted. Any word defined under the Companies Act, the Securities and Futures Act or any statutory modification thereof and used in this Prospectus, the Application Forms or the Electronic Applications shall have the meaning assigned to it under the Companies Act, the Securities and Futures Act or such statutory modification, as the case may be. Any reference in this Prospectus, the Application Forms or the Electronic Applications to Shares being allotted to an applicant includes allotment to CDP for the account of that applicant. Any reference to a time of day in this Prospectus is a reference to Singapore time unless otherwise stated. The expressions we, us, our, ourselves, or other grammatical variations thereof shall, unless otherwise stated, mean our Company and our Group Companies. The terms Depositor, Depository Agent and Depository Register shall have the meanings ascribed to them respectively in Section 130A of the Companies Act. Words importing the singular shall, where applicable, include the plural and vice versa and words importing the masculine gender shall, where applicable, include the feminine and neuter genders. References to persons shall include corporations. Any discrepancies between the amounts listed and the totals thereof in tables included herein are due to rounding. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them. Certain names in languages other than English have been translated into English names. Such translations are provided solely for the convenience of the investors. The English names may not have been registered with the relevant authorities and may not be the official translations and should not be construed as such. Unless we indicate otherwise, all information in this Prospectus assumes that the Issue Manager does not exercise the Over-allotment Option.
GLOSSARY OF TECHNICAL TERMS

To facilitate a better understanding of the business of our Group, the following glossary contains an explanation and description (which should not be treated as being definitive of their meanings) of certain terms used in this Prospectus in connection with our Group. The terms and their assigned meanings may not correspond to standard industry or common meanings, as the case may be, or usage of these terms.
EIS
Our executive information system, an in-house developed integrated information system providing integration and functionality for our operations. It is an enterprise collaborative resource management solution developed to plan, schedule and monitor the operations of our Group Engineering, procurement and construction Engineering, procurement and construction management Electrical and instrumentation International Organization for Standardization, a worldwide federation of national standards bodies from more than 140 countries, whose mission is to develop industrial standards that facilitate international trade. Our isometric and piping works management system, an in-house developed software programme to track piping work progress by capturing information such as weld joint, spools, pipe-support, bolting and blockset An ISO standard which specifies the requirements for an environmental management system to enable an organisation to develop and implement a policy and objectives to control the impact of its activities, products or services on the environment An ISO standard which specifies the requirements for a quality management system for any organisation that needs to demonstrate its ability to consistently provide products that meet customer and applicable requirements and aim to enhance customer satisfaction A constituent part of the ISO 9000 series which specifies the requirements for a quality management system where an organisation needs to demonstrate its ability to provide products that fulfil customer and applicable regulatory requirements and aims to enhance customer satisfaction Specifies requirements for an occupational health and safety management system to enable an organisation to develop and implement a policy and objectives which take into account legal requirements and information about occupational health and safety risks A constituent part of the OHSAS 18000 series which specifies the requirements for an occupational health and safety management system to enable an organisation to develop and implement a policy and objectives which take into account legal requirements and information about health and safety risks Our occupational health, safety environment and quality management system which fulfils the ISO 9001, ISO 14001 and OHSAS 18001 standards
EPC EPCm E&I ISO
: : : :
ISOMAN
ISO 14001
ISO 9000
ISO 9001
OHSAS 18000
OHSAS 18001
OHSEQ
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PECMm
Our procurement, engineering, construction and maintenance management system, a project management platform deployed by our Group that brings together engineering software (used on an as it is condition) comprising our in-house developed ISOMAN, STIS and WRIS which when used with various third party licensed engineering and design software programmes, functions to effectively manage the execution of our projects Safety, health and environment Our structural steel information system, an in-house developed software to manage the installation of structural steel works Oil and chemical storage facilities Fabricated containers usually made of steel or other metal components which form part of a process plant Our work rate information system, an in-house developed software programme which tracks maintenance activities
SHE STIS
: :
tank terminal vessel
: :
WRIS
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SELLING RESTRICTIONS
This Prospectus does not constitute an offer, solicitation or invitation to subscribe for our Shares in any jurisdiction in which such offer, solicitation or invitation is unlawful or is not authorised or to any person to whom it is unlawful to make such offer, solicitation or invitation. No action has been or will be taken under the requirements of the legislation or regulations of, or of the legal or regulatory authorities of, any jurisdiction, except for the lodgment and/or registration of this Prospectus in Singapore in order to permit a public offering of our Shares and the public distribution of this Prospectus in Singapore. The distribution of this Prospectus and the offering of our Shares in certain jurisdictions may be restricted by the relevant laws in such jurisdictions. Persons who may come into possession of this Prospectus are required by our Company, the Issue Manager, the Underwriter and the Placement Agent to inform themselves about, and to observe and comply with, any such restrictions at their own expenses and without liability to our Company, the Issue Manager, the Underwriter and the Placement Agent. HONG KONG This Prospectus does not constitute an offer to the public in Hong Kong to subscribe for the New Shares. This Prospectus has not been and will not be registered with the Registrar of Companies in Hong Kong. Accordingly, except as mentioned below, this Prospectus may not be issued, circulated or distributed in Hong Kong. A copy of this Prospectus may, however, be distributed by the Placement Agent or its designated subplacement agents to a limited number of prospective applicants for the Placement Shares in Hong Kong in a manner which does not constitute an offer of the Placement Shares to the public in Hong Kong or an issue, circulation or distribution in Hong Kong of a prospectus for the purposes of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong). The offer of the Placement Shares is personal to the person named in the accompanying Application Form, and application for the Placement Shares will only be accepted from such person. An application for the Placement Shares is not invited from any person in Hong Kong other than a person to whom a copy of this Prospectus has been issued by the Placement Agent or its designated sub-placement agents, and if made, will not be accepted, unless the applicant satisfies the Placement Agent or its respective designated sub-placement agents that he is a professional investor as defined in the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). No person to whom a copy of this Prospectus is issued may issue, circulate or distribute this Prospectus in Hong Kong or make or give a copy of this Prospectus to any other person, other than their legal, financial, tax or other appropriate advisers who are subject to a duty of confidentiality to such person. The Placement Agent has agreed with our Company that it (and its sub-placement agents, if any) has not offered or sold, and will not offer or sell, in Hong Kong, by means of any document, any of our Shares other than (i) as permitted under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), or (ii) in circumstances which do not constitute an offer of the Placement Shares to the public within the meaning of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong).
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DETAILS OF THE INVITATION

LISTING ON THE SGX-ST We have applied to the SGX-ST for permission to deal in, and for quotation of, all our existing issued Shares, the New Shares, the Additional Shares as well as the ESOS Shares on the Official List of the SGX-ST. Such permission will be granted when our Company has been admitted to the Official List of the SGX-ST. Acceptance of applications for the New Shares will be conditional upon, inter alia, permission being granted by the SGX-ST to deal in, and for the quotation of, all our issued Shares, the New Shares, the Additional Shares and the ESOS Shares. If the said permission is not granted or for any other reasons, monies paid in respect of any application accepted will be returned to you at your own risk, without interest or any share of revenue or other benefit arising therefrom, and you will not have any claim against us, the Issue Manager, the Underwriter or the Placement Agent. In connection with the Invitation, our Company has granted to the Issue Manager an Over-allotment Option to subscribe up to an aggregate of 12,600,000 Additional Shares (which in aggregate represents no more than 20.0% of the New Shares) at the Issue Price exercisable in full or in part within 30 days upon the commencement of trading of our Shares on the SGX-ST solely for the purpose of covering overallotments (if any) made in connection with the Invitation. The Issue Manager may, in its discretion but subject to compliance with applicable laws and regulations in Singapore, over-allot or effect transactions which stabilise or maintain the market price of our Shares. Such stabilisation activities, if commenced, may be discontinued by the Issue Manager at any time at the Issue Managers discretion in accordance with the laws of Singapore and shall not be effected after the earlier of (i) the date falling 30 days after the commencement of trading of our Shares on the SGX-ST, or (ii) the date when the over-allotment of Shares which are subject to the Over-allotment Option has been fully covered (either through the purchase of our Shares on the SGX-ST or the exercise of the Over-allotment Option by the Issue Manager, or through both). The SGX-ST assumes no responsibility for the correctness of any of the statements or opinions made, reports contained or opinions expressed in this Prospectus. Admission to the Official List of the SGX-ST is not to be taken as an indication of the merits of the Invitation, our Company, our Subsidiaries, our Associated Companies, our Joint-Venture Company, our Shares, the New Shares, the Additional Shares or the ESOS Shares. A copy of this Prospectus has been lodged with and registered by the Authority. The Authority assumes no responsibility for the contents of our Prospectus. Registration of this Prospectus by the Authority does not imply that the Securities and Futures Act, or any other legal or regulatory requirements, have been complied with. The Authority has not, in any way, considered the merits of our Shares, the New Shares, the Additional Shares or the ESOS Shares, as the case may be, being offered for investment. We are subject to the provisions of the Securities and Futures Act and the Listing Manual regarding corporate disclosure. In particular, if after this Prospectus is registered but before the close of the Invitation, we become aware of: (a) (b) a false or misleading statement in this Prospectus; an omission from this Prospectus of any information that should have been included in it under Section 243 of the Securities and Futures Act; or a new circumstance that has arisen since this Prospectus was lodged with the Authority which would have been required by Section 243 of the Securities and Futures Act to be included in this Prospectus, if it had arisen before this Prospectus was lodged,
(c)
that is materially adverse from the point of view of an investor, we may lodge a supplementary or replacement prospectus with the Authority pursuant to Section 241 of the Securities and Futures Act.
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Where applications have been made for the New Shares prior to the lodgment of the supplementary or replacement prospectus, we shall, within seven days from the date of lodgment of the supplementary or replacement prospectus, either: (a) provide the applicants with a copy of the supplementary or replacement prospectus and, as the case may be, provide the applicants with an option to withdraw their applications; or treat the applications as withdrawn and cancelled and return all monies paid, without interest or any share of revenue or other benefit arising therefrom, in respect of any application accepted within seven days from the date of lodgment of the supplementary or replacement prospectus.
(b)
Any applicant who wishes to exercise his option to withdraw his application shall, within 14 days from the date of lodgment of the supplementary or replacement prospectus, notify us whereupon we shall, within seven days from the receipt of such notification, return the application monies without interest or any share of revenue or other benefit arising therefrom and at the applicants own risk. Under the Securities and Futures Act, the Authority may, in certain circumstances issue a stop order (the Stop Order) to our Company, directing that no Shares or no further Shares to which this Prospectus relates, be allotted, issued or sold. Such circumstances will include a situation where this Prospectus (i) contains a statement, which in the opinion of the Authority is false or misleading, (ii) omits any information that should be included in accordance with the Securities and Futures Act, (iii) does not, in the opinion of the Authority comply with the requirements of the Securities and Futures Act or (iv) if the Authority is of the opinion that it is in the public interest to do so. Where applications to subscribe for the New Shares to which this Prospectus relates have been made prior to the Stop Order, and: (a) where the New Shares have not been issued to the applicants, the applications shall be deemed to have been withdrawn and cancelled and our Company shall within 14 days from the date of the Stop Order, pay to the applicants all monies the applicants have paid on account of their applications for the New Shares; or where the New Shares have been issued to the applicants, the Securities and Futures Act provides that the issue of our Shares shall be deemed to be void and our Company is required to, within 14 days from the date of the Stop Order, pay to the applicants all monies paid by them for the New Shares.
(b)
Where monies are to be returned to applicants for the New Shares, it shall be paid to the applicants without interest or share of revenue or other benefit arising therefrom, and at the applicants own risk and applicants will not have any claim against our Company, the Issue Manager, the Underwriter or the Placement Agent. This Prospectus has been seen and approved by our Directors and they individually and collectively accept full responsibility for the accuracy of the information given in this Prospectus and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, the facts stated and the opinions expressed in this Prospectus are fair and accurate in all material respects as at the date of this Prospectus and that there are no material facts the omission of which would make any statements in the Prospectus misleading, and that this Prospectus constitutes full and true disclosure of all material facts about the Invitation, our Group and our Shares. No person has been or is authorised to give any information or to make any representation not contained in this Prospectus in connection with the Invitation and, if given or made, such information or representation must not be relied upon as having been authorised by us, the Issue Manager, the Underwriter or the Placement Agent. Neither the delivery of this Prospectus and the Application Forms nor the Invitation shall, under any circumstances, constitute a continuing representation or create any suggestion or implication that there has been no change in our affairs or in the statements of fact or information contained in this Prospectus since the date of this Prospectus. Where such changes occur, we may lodge a supplementary or replacement prospectus with the Authority and make an announcement of the same to the SGX-ST and will comply with the requirements of the Securities and
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Futures Act. All applicants should take note of any such announcement and, upon release of such an announcement, shall be deemed to have notice of such changes. Save as expressly stated in this Prospectus, nothing herein is, or may be relied upon as, a promise or representation as to our future performance or policies. This Prospectus has been prepared solely for the purpose of the Invitation and may not be relied upon by any persons other than the applicants in connection with their application for the New Shares for any other purpose. This Prospectus does not constitute an offer, solicitation or invitation to subscribe for New Shares in any jurisdiction in which such offer, solicitation or invitation is unlawful or is not authorised or to any person to whom it is unlawful to make such offer, solicitation or invitation. Copies of this Prospectus, the Application Forms and envelopes may be obtained on request during office hours, subject to availability, from: DBS Bank Ltd. 6 Shenton Way DBS Building Tower One Singapore 068809 and from branches of DBS Bank (including POSB), members of the Association of Banks in Singapore, members of the SGX-ST and merchant banks in Singapore. A copy of this Prospectus is also available on: (a) (b) the SGX-ST website: http://www.sgx.com; and the Authority website: http://www.masnet.gov.sg/opera/sdrprosp.nsf.
The Application List will open at 10.00 a.m. on 5 August 2009 and will remain open until noon on the same day or for such further period or periods as our Directors may, in consultation with the Issue Manager, in their absolute discretion decide, subject to any limitation under all applicable laws. In the event a supplementary prospectus or replacement prospectus is lodged, the Application List will remain open for at least 14 days after the lodgment of the supplementary or replacement prospectus. Details for the procedure for application for the New Shares are set out in Appendix H of this Prospectus. INDICATIVE TIMETABLE FOR LISTING An indicative timetable for the Invitation and trading of our Shares is set out below for reference of applicants: Indicative date/time 5 August 2009 at 12.00 noon 6 August 2009 Event Close of Application List Balloting of applications or otherwise as may be approved by the SGX-ST, if necessary (in the event of an over-subscription for the Offer Shares) Commence trading on a ready basis Settlement date for all trades done on a ready basis
7 August 2009 at 9.00 a.m. 13 August 2009
The above timetable is only indicative as it assumes that the date of closing of the Application List is 5 August 2009, the date of admission of our Company to the Official List of the SGX-ST is [7 August 2009, the SGX-STs shareholding spread requirement will be complied with and the New Shares will be issued and fully paid-up prior to 7 August 2009. The actual date on which our Shares will commence trading on a ready basis will be announced when it is confirmed by the SGX-ST.
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The above timetable and procedure may be subject to such modifications as the SGX-ST may in its discretion decide, including the decision to permit trading on a ready basis and the commencement date of such trading. In the event of any changes in the closure of the Application List or the time period during which the Invitation is open, we will publicly announce the same: (a) through a SGXNET announcement to be posted on the Internet at the SGX-ST website http://www.sgx.com; and in a local English newspaper.
(b)
Investors should consult the SGXNET announcement of the ready trading date on the Internet (at the SGX-ST website http://www.sgx.com), or the newspapers, or check with their brokers on the date on which trading on a ready basis will commence. We will publicly announce the results of the Invitation through the channels set out in (a) and (b) above.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

All statements contained in this Prospectus, statements made in press releases and oral statements that may be made by our Company or our Directors, Executive Officers or employees acting on our behalf, that are not statements of historical fact, constitute forward-looking statements. You can identify some of these statements by forward-looking terms such as expect, believe, plan, intend, estimate, forecast, project, future, probable, possible, anticipate, may, will, would, and could or similar words. However, you should note that these words are not the exclusive means of identifying forward-looking statements. All statements regarding our expected financial position, business strategy, plans and prospects are forward-looking statements. These forward-looking statements, including statements as to our revenue and profitability, expected growth in demand, expected industry trends, anticipated expansion plans and any other matters discussed in this Prospectus regarding matters that are not historical facts are only predictions. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual future results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks, uncertainties and other factors include, amongst others, changes in political, social and economic conditions and the regulatory environment in Singapore and other countries in which we conduct business, changes in currency exchange rates, changes in competitive conditions and our ability to compete under such conditions and other factors beyond our control. Some of these risk factors are discussed in more detail under the section entitled Risk Factors in this Prospectus. Given the risks and uncertainties that may cause our actual future results, performance or achievements to be materially different from that expected, expressed or implied by the forward-looking statements in this Prospectus, undue reliance must not be placed on these statements. Neither our Company, the Issue Manager, the Underwriter and the Placement Agent nor any other person represents or warrants that our Groups actual future results, performance or achievements will be as discussed in those statements. Our actual future results may differ materially from those anticipated in these forward-looking statements as a result of the risks faced by us. Our Company, the Issue Manager, the Underwriter and the Placement Agent disclaim any responsibility to update any forward-looking statements or publicly announce any revisions to those forward-looking statements to reflect future developments, events or circumstances for any reason, even if new information becomes available or other events occur in the future. We are, however, subject to the provisions of the Securities and Futures Act and the Listing Manual regarding corporate disclosure. In particular, pursuant to Section 241 of the Securities and Futures Act, if after this Prospectus is registered but before the close of the Invitation, we become aware of (a) a false or misleading statement or matter in this Prospectus; (b) an omission from this Prospectus of any information that should have been included in it under Section 243 of the Securities and Futures Act; or (c) a new circumstance that has arisen since this Prospectus was lodged with the Authority and would have been required by Section 243 of the Securities and Futures Act to be included in this Prospectus, if it had arisen before this Prospectus was lodged, and that is materially adverse from the point of view of an investor, we may lodge a supplementary or replacement prospectus with the Authority.
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PROSPECTUS SUMMARY
The information contained in this summary is derived from, and should be read in conjunction with, the full text of this Prospectus. As it is a summary, it does not contain all of the information that prospective investors should consider before investing in our Shares. Prospective investors should read this entire Prospectus carefully, especially the matters set out in the section entitled Risk Factors in this Prospectus and our financial statements and related notes before deciding to invest in our Shares. OUR BUSINESS We are a specialist engineering group servicing the oil and gas, petrochemical, oil and chemical terminal, and pharmaceutical industries. Our two core business activities are project works and maintenance services. Our project works are currently being carried out mainly in Singapore, Malaysia, Thailand, Indonesia, Vietnam, the PRC and the Middle East while our maintenance services are currently being carried out in Singapore and the PRC. To support our business activities, we have established fabrication facilities in Singapore, Malaysia, Indonesia, Thailand and the PRC. Project works The scope of our project works ranges from EPCm and EPC in respect of a terminal or a section of a plant or terminal, project management consultancy, to the construction of a certain part of a plant or terminal. In any projects works, we provide engineering, procurement and/or construction/ construction management services. For EPC projects where we are engaged to provide all three engineering, procurement and construction services, these projects are highly valued as their conceptual design and project management elements necessitate a greater degree of technical know-how and expertise. Depending on the nature, scale and complexity of the works, we usually take approximately one to two years to complete a project. The engineering services we provide include conceptual design, front-end engineering design, and detailed engineering. Such services cover various engineering disciplines such as process, civil, mechanical, E&I, pressure vessel, structural and piping. Our procurement services entail material and equipment purchasing and material management. Our construction services include fabrication and installation of piping, structures and pressure vessels, installation of mechanical equipment, electrical, instrumentation and control systems, and provision of scaffolding, painting, insulation and fire proofing services. Maintenance services Our maintenance services business segment covers both plant maintenance works as well as related services works and range from maintenance carried out on plant equipment to single-source maintenance services for a production plant. As a single-source maintenance services provider, we serve as the sole contractor responsible to the plant operator/ owner for all elements of the contracted works. With our sub-contractors, we are able to provide all the requisite major engineering disciplines including civil, mechanical, E&I, tankage, structural, piping, painting, scaffolding, insulation, fire proofing and hydro jetting. We also provide EPCm services to plant upgrading and/or plant de-bottlenecking of an existing plant. Our maintenance works typically include tankage maintenance, static equipment maintenance, rotating equipment maintenance, electrical equipment maintenance, instrument and control equipment maintenance. We also provide other related services works such as plant turnaround, plant debottlenecking and plant upgrading services. Further details of our business activities are set out in the section entitled Business in this Prospectus.
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OUR COMPETITIVE STRENGTHS Our Directors believe that our key competitive strengths are as follows: (a) Our ability in providing EPC project works and single-source maintenance services We believe that through our ability to provide EPC project works and single-source maintenance services, we have distinguished ourselves from our competitors as a provider of integrated engineering solutions. (b) Our established track record and experienced management team We have a long operating history spanning over 25 years and some of our major customers have worked with us since 1982. Our Directors believe that we have established our reputation as a reliable provider of integrated engineering solutions and that having such repeat customers is a recognition of our capabilities and would be a competitive strength that we can leverage on to further increase our market share in the industries that we operate in. Our Executive Directors, Ms Edna Ko Poh Thim, Mr Robert Dompeling and Mr Wong Peng have each accumulated more than 20 years of experience in the oil and gas and/or oil and chemical terminal industries and are supported by a team of experienced Executive Officers, project managers, and senior engineers, many of whom have been with our Group for more than 15 years. (c) Our focus on staff training and development Staff training and development is one of the top priorities of our Group. Our Directors believe that our well-trained and motivated workforce is a key asset of our Group and our focus on the development and training of our staff is one of our competitive strengths. (d) We own a large and growing fleet of construction equipment As at the Latest Practicable Date, we own approximately 2,000 pieces of construction equipment. The size of our fleet of construction equipment provides great assurance to our customers that we have the necessary construction equipment resources on hand to perform our work efficiently and without delay. Our Directors believe that our large fleet of construction equipment provides our Group with a competitive advantage in securing bigger projects due to our reliability in providing construction resources, our flexibility in cross-deploying our equipment to our various operation sites and our ability to respond more readily and efficiently to emergency or un-planned plant shutdown work. (e) Our innovative use of information communication technology We have developed our resource management solution, EIS, and our project management platform, PECMm, to manage our operations. Our Directors believe that the use of our in-house developed resource management solution and project management platform as well as our use of advanced third party software have greatly enhanced our Groups operations and enabled us to have a competitive edge over other companies in our industry. For more details, please refer to the section entitled Competitive Strengths in this Prospectus. OUR STRATEGY AND FUTURE PLANS We intend to focus on a three-pronged strategy towards the future growth and expansion of our business: (a) Expansion of our customer base In order to expand our customer base, we intend to explore and develop new business opportunities by leveraging on our existing sales and marketing network and by further enhancing our cost effectiveness and competitiveness through the streamlining of our operations.
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(b)
Expansion of our scope of work We intend to expand our existing scope of work by further developing our engineering works capabilities, including other related disciplines, so as to offer our customers, both existing and prospective, a more comprehensive, more integrated and higher quality engineering solution.
(c)
Geographical expansion We intend to explore and develop new business opportunities in countries or regions where we currently have a business presence, as well as in countries and regions where we do not already have a business presence. We also intend to locate our fabrication facilities nearer to our customers to reduce transportation costs and to enable us to respond to our customers needs more effectively.
To meet our three-pronged strategy, our future plans for the growth and expansion of our business are described below: (a) Construction of a new fabrication facility in the Middle East We intend to set up a new fabrication facility in the Middle East near our customers project sites in order to be cost effective. We are currently exploring several sites with site areas ranging from approximately 15,000 sq m to approximately 25,000 sq m. We intend to commence construction by the end of 2009 and expect this new facility to be operational by 2010. It is estimated that a new facility of 20,000 sq m would increase our Groups production area by approximately 5,000 sq m and increase our production capacity by approximately 6,000 mt per annum. As at the date of this Prospectus, no expenditure had been made in respect of the fabrication facility. We intend to invest approximately S$8.0 million of the net proceeds from the Invitation towards the setting up costs of this facility. In the event that the allocated proceeds are insufficient, we will finance such shortfall through internal cash flow and/or bank borrowings. (b) Further expansion of our on-site capabilities through the acquisition of new equipment and machineries The nature of the business we target, in particular EPC projects, are not only complex but also massive in scale, thereby necessitating the deployment of substantial construction equipment as well as other resources. We intend to use S$5.0 million of the net proceeds from the Invitation to purchase new construction equipment and machineries over a period of one year to upgrade our equipment and machineries. To the extent that we have financed such purchases by way of bank borrowings during the period pending our receipt of the net proceeds from the Invitation, we shall utilise such portion of the S$5.0 million of the net proceeds intended for the purchase of such construction equipment and machineries as may be required to repay such bank borrowings. (c) Further expansion by way of strategic alliances and/or joint-ventures, acquisitions of, and investments in, related businesses While we intend to focus on areas in which we have a niche and a proven track record, we will continuously explore opportunities to collaborate with suitable partners in related fields of project works and maintenance services through strategic alliances, joint-ventures, acquisition of, and investments, in particular for specialist engineering projects with high potential for design and value engineering contents which translate into higher profit margins for us. In September 2008, we signed a memorandum of understanding (MOU) with a Saudi Arabian entity to explore a possible joint-venture to provide project works and maintenance services to the oil and chemical industry in the Kingdom of Saudi Arabia. Save for the MOU, we have not identified any other prospective strategic alliances, joint-ventures, acquisitions of, and investments in, related businesses at this point in time.
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Whilst we intend to set aside S$7.0 million of the net proceeds from the Invitation to fund any such expansion in the event we are unable to use proceeds for this purpose, whether in part or in full, such proceeds shall be utilised for working capital and general corporate purposes. (d) Further expansion of our EPC and EPCm services by technological upgrading and investments EPC and EPCm projects are highly valued as their conceptual design and project management elements necessitate a greater degree of technical know-how and expertise. Our in-house developed integrated information and operating systems such as EIS and PECMm are integral to our ability to successfully implement our EPC and EPCm projects. We intend to purchase new advanced engineering hardware and design software to ensure that we are always equipped with up-to-date EPC and EPCm technological know-how, such costs to be funded from our internal sources. For more details, please refer to the section entitled Strategy and Future Plans in this Prospectus. OUR FINANCIAL INFORMATION The following table represents a summary of the financial highlights of our Group. The data presented in this table are derived from the section entitled Selected Financial Information and the financial statements and notes thereto which are included elsewhere in this Prospectus. You should read those sections and the section entitled Managements Discussion and Analysis of Financial Condition and Results of Operations in this Prospectus for a further explanation of the financial data summarised here. Selected items on the operating results of our Group
FY2006 S$000 Revenue Gross profit Profit before taxation Profit after taxation 149,327 31,909 10,343 8,302 Audited FY2007 S$000 236,592 60,626 31,038 26,209 FY2008 S$000 314,647 80,828 33,564 27,004 Unaudited HY2008 HY2009 S$000 S$000 117,135 32,172 13,363 11,461 220,257 49,100 15,493 12,418
Selected items on the financial position of our Group

Audited As at 30 June 2008 S$000 Non-current assets Working capital Share capital and reserves (excluding minority interests) 45,160 57,149 95,230 Unaudited As at 31 December 2008 S$000 53,098 62,329 103,417
OUR CONTACT DETAILS Our registered office and business address is at 21 Shipyard Road, Singapore 628144. Our telephone number is +65 6268 9788 and our facsimile number is +65 6268 9488. Our Internet address is http://www.peceng.com. Information contained on our website does not constitute part of this Prospectus.
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RISK FACTORS
Prospective investors should carefully consider and evaluate the following considerations and all the other information contained in this Prospectus before deciding to invest in our Shares. Some of the following risk factors relate principally to the industries in which our Group operates and the business of our Group in general. Other considerations relate principally to general economic and political conditions, our overseas operations, the securities market and ownership of our Shares, including possible future sales of our Shares. If any of the following considerations and uncertainties develops into actual events, our business, results of operations and financial condition could be materially and adversely affected. In such cases, the trading price of our Shares could decline due to any of these considerations and uncertainties, and you may lose all or part of your investment in our Shares. To the best of the knowledge and belief of our Directors, all risk factors which are material to investors in making an informed judgment about our Company have been set out below.
RISKS RELATING TO OUR GROUP AND OUR INDUSTRIES
We are reliant on the oil and gas, petrochemical, oil and chemical terminal, and pharmaceutical industries
We service customers engaged in the oil and gas, petrochemical, oil and chemical terminal, and pharmaceutical industries in Singapore, the Asia Pacific region and the Middle East. These industries are cyclical and any economic downturn and resulting pricing pressure experienced by companies in these industries have in the past led to reductions in capital and operating expenditures by many of these companies. Accordingly, the performance of our Group would be affected by the outlook of these industries. A slowdown in these industries or the occurrence of any events that adversely affect these industries such as the demand and supply for oil, fluctuations in oil prices, changes in the regulatory environment governing the sector and natural disasters will result in a decrease in demand for our services, and our business, profitability and financial performance will be adversely affected. In particular, since 2007, there have been fluctuations in oil prices, including a significant decline in oil prices between mid-2008 and the first quarter of 2009 in connection with the global economic crises. Such fluctuations, together with the deterioration in the global economic situation, have resulted in the postponement or cancellation of certain projects. Should such postponements of projects be prolonged or if we experience a significant postponement or cancellation of our confirmed projects, our business, profitability and financial performance will be adversely affected.
We are reliant on our key management personnel to develop and grow our business
Our continued success is dependent to a large extent on our ability to retain the services of our key management personnel, in particular, our Executive Directors who are responsible for formulating and implementing our business plans, corporate development and overall business strategy and who have been instrumental in our growth and expansion. All of them are experienced in the industries we operate in and are instrumental in maintaining good relationships with our customers, suppliers and subcontractors. The loss of our key management personnel without suitable and timely replacements will have an adverse impact on our future operations and our ability to achieve our objectives. Further, if we are unable to attract and retain qualified and experienced management personnel, our operations may be adversely affected.
Our failure to attract and retain skilled personnel could materially affect our operations and business
Our business requires highly skilled personnel such as engineers, supervisors and other skilled workers. Skilled personnel with the appropriate experience in our industries are limited and competition for the employment of such personnel is intense. There is no assurance that we will be able to attract the necessary skilled personnel to work in the regions which we operate or that we will be able to retain the skilled personnel whom we have trained at our cost or whether suitable and timely replacements can be found for skilled personnel who leave us. If we are unable to continue to attract and retain skilled employees, it could materially affect the quality and timelines of our services and our ability to compete effectively and to grow our business. 22
Our business is generally project-based and we face the risk of any delay or premature termination of our secured projects and/or we may not be able to secure new projects
Our two core business activities consist of project works and maintenance services, both of which are generally project-based. We therefore have to continuously and consistently secure new customers and/or new projects. If we are unable to secure new projects and/or our secured projects are delayed or prematurely terminated because of factors such as changes in our customers businesses, poor market conditions or lack of funds on the part of the plant owners/ operators or main contractors of projects, this would lead to idle or excess capacity for us or may expose us to claims from our sub-contractors and/or suppliers, and may adversely affect our business, financial performance and financial condition. The delay or premature termination of any projects or contracts in progress or customers decision not to proceed with a contracted project whereby our Group will not be adequately compensated will have a material adverse effect on our business, financial condition and results of operations.
We are dependent on our major customers

We are dependent on our major customers for our project works and maintenance services. Our major customers for project works accounted in aggregate for approximately 23.9%, 37.0%, 21.1% and 42.6% of our Groups total revenue in FY2006, FY2007, FY2008 and HY2009 respectively. Our major customers for maintenance services accounted in aggregate for approximately 28.8%, 20.0%, 31.1% and 13.3% of our Groups total revenue in FY2006, FY2007, FY2008 and HY2009 respectively. Please refer to the section entitled Major Customers in this Prospectus for more details as to our major customers. There is no assurance that we will be able to retain our major customers or continue to receive work orders from them at current levels or prices. Any material cancellation, reduction in orders and/or claims for whatever reasons by any of our major customers, would adversely affect our results of operations and financial condition.
We are dependent on foreign manpower and are vulnerable to the availability and costs of employing foreign personnel
Currently, more than 50.0% of our Groups workforce consists of foreign personnel. We are dependent on foreign manpower, mainly from the Philippines, the PRC, Myanmar, India, Bangladesh, Thailand and Malaysia, and are vulnerable to the availability and costs of employing foreign personnel. Any changes in the labour policies of these countries of origin or market demand may affect such supply of foreign manpower and cause disruption to our operations, and may result in delays in the completion of projects. The supply of foreign manpower is also subject to the policies imposed by the Ministry of Manpower in Singapore or other relevant authorities in the jurisdictions where we operate. In the event that there is a shortage of foreign manpower, our operations and profitability may be adversely affected.
We face the risk of any significant increase in prices or shortage of materials

The main materials for our works are steel, piping and process equipment (such as valves and pumps). The prices of these materials fluctuate, mainly due to changes in supply and demand conditions. There is no assurance that we will continue to be able to obtain these materials from our suppliers at acceptable prices or that our suppliers would be able to meet our requirements. In the event that our suppliers are unable to meet our requirements, or we are unable to obtain sufficient quantities of these materials at reasonable prices or if we are unable to pass on the higher costs of these materials to our customers, our profitability may be adversely affected.
We face intense competition from other engineering and maintenance services companies and new entrants to the oil and gas, petrochemical, oil and chemical terminal, and pharmaceutical industries
The engineering and maintenance services business in the oil and gas, petrochemical, oil and chemical terminal, and pharmaceutical industries is highly competitive in Singapore, the Asia Pacific region, the Middle East region and in the other jurisdictions where we have a business presence. Some of our competitors may have longer operating histories, larger customer bases, stronger relationships with customers and suppliers and greater financial strength, technical, marketing and public relations expertise than we have. Furthermore, competition may lead to downward price pressure for the services we supply. In the event that we are not able to retain our existing customers, attract new customers or respond effectively to the intense competition, our profitability and financial performance would be materially and adversely affected. 23
There is no assurance that we will not face competition from new entrants or that we can compete successfully against these new entrants. In the event that we are unable to complete effectively and successfully against the new entrants, our sales and profitability will be adversely affected. Please refer to the section entitled Competition in this Prospectus for more details of our competitors.
We require various licences and permits to operate our business

We may be required to obtain various licences and permits in countries which we operate in. The licences and permits are generally subject to conditions stipulated in the licences and permits and/or relevant laws or regulations under which such licences and permits are issued. Failure to comply with the stipulated conditions could result in the revocation or non-renewal of the relevant licence or permit. As such, we have to constantly monitor and ensure our compliance with such conditions. Should there be any failure to comply with such conditions resulting in the revocation of any of the licences and permits or the failure to obtain or procure any necessary licences and permits, we will not be able to carry out our operations in the relevant country. In such an event, our operations and financial performance will be adversely affected.
We are subject to risks associated with the regulatory environment in which our customers operate
The oil and gas, petrochemical, oil and chemical terminal, and pharmaceutical industries are subject to regulatory risks. The laws and regulations in the places and industries which our customers operate in may require our customers to meet certain standards and impose liabilities if these are not met. Though we may not be directly regulated by these laws and regulations, there is no assurance that any noncompliance by our customers with such laws and regulations will not indirectly affect us, such as delays to our project schedules. In addition, the liabilities and risks imposed on our customers by such laws and regulations may adversely impact demand for some of our services or impose greater liabilities and risks on us, which could also have an adverse effect on our competitive and financial position.
We may be adversely affected by cost overruns

Our revenue is largely derived from project-based contracts. The contract value quoted in the tender submission is determined after the evaluation of our scope of work and all related costs including the indicative prices of our suppliers and sub-contractors. Our maintenance service contracts are usually negotiated in advance of the actual service periods and such contracts can have a validity period of two to five years. Similarly, our contracts for project works are negotiated in advance of the actual project execution and projects can vary in duration from several months up to three years. Our profitability is therefore dependent on our ability to obtain competitive quotations from suppliers and sub-contractors at or below our estimated costs, and our ability to execute the contracts efficiently. However, unforeseen circumstances such as logistic disruptions, adverse soil conditions, unfavourable weather or unanticipated construction constraints at the work site may arise during the course of project execution. As these circumstances may require additional work which has not been factored into the contract value, they may lead to cost overruns which may erode our profit margin for the project. There is no assurance that our actual costs incurred will not exceed the estimated costs, due to under-estimation of costs, wastage, inefficiency, damage or additional costs incurred during the course of the contract. Any under-estimation of costs, delay or other circumstances resulting in cost overruns in a contract may adversely affect our profitability.
We may be adversely affected by disputes with our customers, suppliers and sub-contractors
Claims are frequently made by and against customers, suppliers and sub-contractors in the industries which we operate in due to various reasons such as delays, non-payment, defective workmanship and non-compliance with specifications. Generally, during the course of a project, a customer may also instruct us to perform additional work volume and/or certain works which are not included in the original specifications. These are known as variation orders. In order to avoid delays in the completion of the project, we may perform the variation orders before the charges for such additional works are finalised, and the final value of the variation order is subject to negotiation after the completion of the project. In such event, there is a risk that we may not be able to recover the full value that we claim for the variation orders due to disagreement in respect of the claim amounts.
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Typically, we are also required to adhere to project schedules as agreed in the contracts with our customers. In the event that we fail to meet project deadlines, we could be required to pay penalties or liquidated damages, equivalent to a certain percentage of the contract sum, to the affected customers. There is no assurance that we will not face claims for penalties or liquidated damages, which may result in a negative impact on our business reputation, operations and financial position. It is also common for our customers to withhold a certain percentage of the contract sum as retention monies ranging from 2.5% to 10.0% of the contract sum to cover any defects which may surface during the defects liability period. The defects liability periods applicable to us are generally up to 12 months. During this period, we are required to rectify defects free of charge. If we are required to rectify defects during the defect liability period which result in substantial additional costs being borne by us, the profitability of the particular project will be reduced. In the event that our customers suffer loss and damage due to the defects, they may claim against us thereby adversely affecting our financial performance. If a customer withholds the retention monies beyond the defects liability period instead of refunding the same to us, we may have to lodge a claim for the outstanding retention monies, after initial attempts to collect them prove unsuccessful. In addition, we may not be able to recover the retention monies if our customers go into liquidation or judicial management before such retention monies are due and payable to us. Any disputes on progress payments, variation orders, retention monies, defective workmanship, noncompliance with specifications or otherwise relating to our projects may have an adverse impact on our financial performance and cash flow.
We are exposed to the performance and quality of our sub-contracted works

In some of our projects, we may sub-contract the delivery of a certain portion of the contracts. Where we have sub-contracted such works, we are exposed to the timely delivery and the quality required of the works sub-contracted to our sub-contractors. In the event that the sub-contractor is unable to perform the works, we will be exposed to the ultimate contract performance of the scope of sub-contracted works. Our profitability will be adversely affected should we be unable to obtain other sub-contractors or are unable to perform the works from our internal resources at the price allocated to the sub-contractor.
Disruptions to our fabrication facilities and/or project schedules will affect our financial position and results
Our fabrication facilities are located in Singapore, Malaysia, Thailand, Indonesia and the PRC and our projects are typically carried out in the open, which may be affected by inclement weather. Our business will be affected by disruptions to our fabrication facilities and/or project schedules, due to causes such as natural disasters, fire, machine down-time due to annual maintenance or break-down, or the occurrence of power failures or power surges at our fabrication facilities which would result in damage to our fabrication equipment and facilities or cause production halt or delay in our fabrication process and project schedule. Any major disruption to our fabrication facilities and/or project schedules due, inter alia, to the foregoing reasons could have a material adverse effect on our operations and our Groups financial results.
We are exposed to risk of loss, and public and workmen liability

We face the risk of loss or damage to our properties, machinery and inventories due to fire, theft and natural disasters such as earthquakes and floods. Such events may cause a disruption or cessation in our operations, and thus adversely affect our financial results. Our insurance coverage may not be sufficient to cover all of our potential losses. In the event such loss exceeds the insurance coverage or is not covered by the insurance policies we have taken up, we may be liable to cover the amounts claimed. Due to the nature of our operations, there is a risk of accidents occurring either to our employees or to third parties on our premises and/or on our customers premises. These accidents may occur as a result of fire, explosions or other incidents. In the event that any claims arise in respect of our projects and liability for such claims are attributed to us or that our insurance coverage is insufficient, we may be exposed to losses which may adversely affect our profitability.
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We are exposed to risks of infringement of our intellectual property rights and we may face litigation suits for intellectual property infringement
The success of our business is contributed by EIS, an in-house developed integrated information system providing integration and functionality for our operations, and PECMm, a project management platform deployed by our Group, that brings together engineering software (used on an as it is condition) comprising our in-house developed ISOMAN, STIS and WRIS which when used with various third party licensed engineering and design software programmes, functions to effectively manage the execution of our projects. We believe that our use of such information communication technology is one of our competitive strengths. We have not sought to register any patents in respect of these software systems and programmes. In the event that there is a replication of our EIS, PECMm and ISOMAN, STIS and WRIS programmes by our competitors or other third parties, it may limit our ability to maintain our competitive edge in this regard. There is no assurance that we will be able to obtain adequate remedies in the event of an unauthorised replication or usage of such systems by our competitors or other third parties. Our Directors believe that our trade marks, PEC and Audex, are recognised by our customers and in the market to represent quality and reliable engineering services. In order to protect our trade marks, we have registered our PEC and Audex trade marks in Singapore, and have applied to register our PEC trade mark in Indonesia, Malaysia, the PRC and the UAE and our Audex trade mark in Indonesia, Malaysia, the PRC, Vietnam, Thailand and the UAE. We rely on the laws relating to intellectual property rights in these countries to protect us. For further details, please refer to the section entitled Intellectual Property in this Prospectus. Our Group is susceptible to third parties imitation and infringement of our intellectual property rights, and given our limited resources, we may not be able to effectively prevent third parties from copying or otherwise obtaining and using our Groups intellectual property rights without authorisation. If we fail to protect our intellectual property rights adequately, there may be an adverse impact on our Groups business reputation, goodwill and financial performance. In addition, there can be no assurance that third parties may not initiate litigation or other legal proceedings against us alleging infringement of their intellectual property rights. We have previously settled a claim for intellectual property rights infringement of a third party software. Please refer to the section entitled Intellectual Property in this Prospectus for further details. As at the Latest Practicable Date, whilst we have not experienced any other claims for intellectual property rights infringement, there is no assurance that we will not infringe any patents or other intellectual property rights of third parties in the future. In the event of any claims or litigation by third parties involving infringement of their intellectual property rights, whether with or without merit, our financial results and operations may be adversely affected.
We are exposed to risk in respect of outbreaks of Severe Acute Respiratory Syndrome (SARS), avian influenza, Influenza A (H1N1), and/or other communicable diseases which, if uncontrolled, could affect our financial performance and prospects
An outbreak of SARS, avian influenza, Influenza A (H1N1) and/or other communicable diseases, if uncontrolled, could affect our operations, as well as the operations of our customers, sub-contractors and suppliers. Any occurrence of a pandemic, an epidemic or outbreak of other disease may have an adverse effect on our business operations including our ability to travel and deploy personnel for projects. Further, in the event that any of our employees is infected or suspected to be infected with SARS, avian influenza, Influenza A (H1N1) and/or other communicable diseases, we may be required to quarantine some of our employees and shut down part of our operations to prevent the spread of the disease. This would result in delays in the completion of our projects. Failure to meet our customers expectations could damage our reputation, and may, as a result, lead to loss of business and affect our ability to attract new business. An outbreak of SARS, avian influenza, Influenza A (H1N1) and/or other communicable diseases could therefore have an adverse impact on our business and operations.
We face the risk of terrorist attacks and other acts of violence or wars which may affect the markets in which we operate
Terrorist attacks such as those that occurred in the United States and Indonesia, or armed conflicts may lead to political and economic instability and may negatively affect our business, operations and financial condition. Such terrorist attacks or armed conflicts could have an adverse impact on the oil and gas, petrochemical, oil and chemical terminal, and pharmaceutical industries, our supply chain and our ability 26
to carry out our operations in a timely and cost-effective manner, and may also have a direct physical impact on our physical assets or projects. The consequences of any such terrorist attacks or armed conflicts are unpredictable, and we are not able to foresee events of such nature, which could have an adverse effect on our business, operations and financial condition.
We may fail to successfully implement our expansion strategy

As set out in the section entitled Strategy and Future Plans in this Prospectus, we intend to purchase new equipment and set up new fabrication facilities. Our growth and future success will be dependent on, amongst others, the successful completion of such expansion plans proposed to be undertaken by us and the sufficiency of demand for our services. There is no assurance that these initiatives undertaken will achieve results that commensurate with our investment costs or that we will be successful in securing more projects or new customers. Should we fail to implement our expansion plans or there is insufficient demand for our services, our business, results of operation and financial position will be materially and adversely affected.
We are dependent on obtaining financing to fund our larger scale projects and we may require additional funding for our future growth
For most of our projects, we are paid according to work done on a progressive basis. As such, we require financing to fund the initial costs of the project, such as labour and material costs and the performance securities, bonds and/or guarantees required under the projects. For larger scale projects which we intend to tender for in future, we will require financing from banks or other financial institutions to fund the initial costs of such projects. If we are unable to secure financing for this purpose, our ability to secure larger scale projects will be impeded and our growth and expansion plans will be adversely affected. This will adversely affect our future financial performance. In view of the fast-changing business requirements and market conditions, certain business opportunities that may increase our revenue may arise from time to time and we may be required to expand our capabilities and business through acquisitions, investments, joint-ventures and/or strategic partnerships with parties who are able to add value to our business. If such situation arises, we may require additional funds to take advantage of these opportunities. Such funding, if raised through the issuance of equity or securities convertible into equity, may be priced at a discount to the then prevailing market price of our Shares trading on the SGX-ST, resulting in a dilution of our Shareholders equity interest. If we fail to utilise the new equity to generate a commensurate increase in earnings, our EPS may be diluted, and this could lead to a decline in the price of our Shares. Alternatively, if our funding requirements are met by way of additional debt financing, we may have restrictions placed on us through such debt financing arrangements which may: limit our ability to pay dividends or require us to seek consent for the payment of dividends; increase our vulnerability to general adverse economic and industry conditions; limit our ability to pursue our growth plans; require us to dedicate a substantial portion of our cash flow from operations to payment for our debt, thereby reducing the availability of our cash flow to fund other capital expenditure, working capital requirements and other general corporate purposes; limit our flexibility in planning for, or reacting to, changes in our business and our industry; and impose restrictions on the dilution or change in the shareholding of certain major Shareholders of our Company. While we have so far been able to borrow the funds necessary to finance our operations, the current disruptions, uncertainty or volatility to the credit markets could limit our ability to borrow funds or cause our borrowing to be more expensive. As such, we may be forced to pay unattractive interest rates, thereby increasing our interest expense, decreasing our profitability and reducing our financial flexibility. 27
GENERAL RISKS AND RISKS RELATING TO OUR OVERSEAS OPERATIONS
The uncertain global economic outlook may adversely affect our business operations, financial condition, prospects and future plans
Since 2008, disruption in global credit markets, coupled with a repricing of credit risks, and a slowdown in the global economy have created increasingly difficult conditions in the financial markets. These developments have resulted in historic volatility in equity securities markets, tightening of liquidity in credit markets, widening of credit spread and loss of market confidence. Most recently, these developments have resulted in the failure of a number of financial institutions in the United States and unprecedented actions by governmental authorities and central banks around the world. There is a potential for new laws and regulations regarding lending and funding practices and liquidity stands, and governments and bank regulatory agencies are expected to be aggressive in adopting such new measures in response to concerns and identified trends. It is difficult to predict how long these developments and measures will exist and how our markets and businesses may be affected. These developments may be exacerbated by persisting volatility in the financial sector and the capital markets or concerns about, or a default by, one or more institutions which could lead to significant market wide liquidity problems, losses or defaults by other institutions. Accordingly, these developments and measures could potentially present risks to our Group for an extended period of time, including a slowdown in securing new projects and work orders, increase in interest expenses on our bank borrowings, or reduction of the amount of banking facilities currently available to us, our customers and our suppliers, thereby adversely affecting our future financial performance or results of operations. In addition, conditions in the capital markets could also adversely affect the Invitation and limit or reduce the number of investors in our Shares, thereby adversely affecting the liquidity and potentially, the price of our Shares.
We operate in countries or may expand into other countries where we would be subject to local legal and regulatory conditions and may be affected by the political, economic and social conditions in these countries
We have a business presence or carry out operations in, amongst other countries, Indonesia, Malaysia, the PRC, Thailand, Vietnam, the UAE, Qatar and Saudi Arabia. We may also expand into other countries in which we presently do not have a business presence. Some of the countries in which we operate have been affected by political upheavals, internal strife, civil commotions, epidemics and terrorist attacks. The recurrence of these political and social conditions in countries where we currently or may in the future operate, may affect our ability to provide our services to our customers in those countries. Our business and operations are subject to the legal and regulatory framework in these countries. Laws and regulations governing business entities in these countries may change and are often subject to a number of possibly conflicting interpretations, both by business entities and by the courts. Our business, financial condition, profitability and results of operations may be adversely affected by changes in and uncertainty surrounding governmental policies, in particular with respect to business laws and regulations, licences and permits, taxation, inflation, interest rates, currency fluctuations, price and wage controls, exchange control regulations, labour laws and expropriation. Any changes in economic, political, legal and regulatory conditions or policies in these countries could adversely affect the results of our operations and in turn, the market price of our Shares. We are subject to the applicable laws, regulations and guidelines in the countries and jurisdictions in which we have a business presence or carry out operations, particularly in relation to entry and employment requirements and restrictions in respect of our employees and workers. If we fail to comply with such laws, regulations and guidelines, we may be subject to penalties for such breaches, including fines or restrictions on our ability to carry on business or operate in such counties or jurisdictions. In addition, the relevant employees in breach of such laws regulations and/or guidelines may also be subject to penalties such as fines, imprisonment or deportation. Our Subsidiary, Audex UAE, had previously not obtained the relevant UAE residence visas and work permits for two of its foreign employees based in the Fujairah Free Zone, UAE since November 2007. Whilst these necessary visas and permits have since been obtained, in the event that Audex UAE is prosecuted for its previous non-compliance, it may be subject to a fine of up to AED50,000 and may face restrictions on its ability to engage additional foreign employees in the UAE.
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On 30 June 2009, the Prime Minister of Malaysia announced that the guidelines issued by the FIC on the acquisition of interests, mergers and take-overs by local and foreign interests of companies in Malaysia dated 1 January 2008 (the FIC Guidelines) is repealed with immediate effect. The FIC will therefore no longer process share transactions, nor impose equity conditions on such transactions with effect from 30 June 2009. However, equity conditions will be imposed on strategic sectors by the respective sector regulators. It is not defined what the strategic sectors will be but the Economic Planning Unit of the Prime Ministers Department indicated that the sectors will encompass but are not limited to medical tourism, education, information communications technology, oil and gas. For sectors that are not deemed strategic, there will no longer be any equity conditions imposed. We have obtained two FIC approvals for the transfer of shares in our Malaysian Subsidiary, PEC Malaysia. The FIC approvals were obtained on 3 June 2008 and 9 October 2008 but both approvals are subject to the condition that PEC Malaysia must have a 30.0% Bumiputera equity before 30 June 2010 and 31 December 2010 respectively. In view of the Prime Ministers announcement on 30 June 2009 and the repeal of the FIC Guidelines on the acquisition of interests, mergers and take-overs by local and foreign interests of companies in Malaysia dated 1 January 2008, PEC Malaysia expects to be notified by the Economic Planning Unit of the Prime Ministers Department whether the 30.0% Bumiputera equity conditions imposed by the FIC will be waived. In the event that the aforesaid equity conditions are not waived, then PEC Malaysia must comply with the 30.0% Bumiputera equity condition before 30 June 2010. If PEC Malaysia fails to comply with such condition within the timeframe stipulated by the FIC, PEC Malaysia may face difficulties in obtaining approvals for or renewal of permits or licences from certain government bodies in Malaysia. In addition, once the condition imposed by the FIC is complied with, the shareholding level of our Company in PEC Malaysia will be diluted to 70.0% and will affect the financial contribution from PEC Malaysia. Further details on the FIC Guidelines are set out in the section entitled "Government Regulations" in this Prospectus.
We are exposed to foreign exchange risks

Currently, our revenue, purchases and operating costs are denominated in various currencies, including US$, AED, Baht, RMB, RM and S$. In particular our contracts relating to our operations in the Middle East are generally denominated in US$. For FY2006, FY2007, FY2008 and HY2009, 6.5%, 26.1%, 15.5% and 33.0% of our Groups revenue and 4.2%, 25.5%, 13.1% and 33.1% of our Groups total material purchases and sub-contractor charges were denominated in US$ respectively. To the extent that our revenue, purchases and operating costs are not sufficiently matched in the same currency and to the extent that there are timing differences between collection and payments, we will be exposed to any adverse fluctuations in the exchange rates between the various foreign currencies and S$. In addition, as our reporting currency is in S$, the financial statements of our foreign subsidiaries will need to be translated to S$ for consolidation purposes. As such, any material fluctuations in foreign exchange rates will result in translation gains or losses on consolidation. Any such translation gains or losses will be recorded as translation reserves or deficits as part of our Shareholders equity. More information about our foreign exchange exposure is set out in the section entitled Foreign Exchange in this Prospectus.
Foreign exchange controls may limit our ability to utilise our cash effectively and affect our ability to receive dividends and other payments from our foreign Group Companies
We have a business presence in Indonesia, Malaysia, the PRC, Thailand, Vietnam and the UAE. Our foreign Group Companies accounted in aggregate for approximately 5.5%, 5.6%, 5.2% and 2.4% of our Groups total revenue in FY2006, FY2007, FY2008 and HY2009 respectively. Our foreign Group Companies are subject to the rules and regulations on currency conversion in the countries they operate in. Please refer to the section entitled Exchange Controls in this Prospectus for more details on the foreign exchange controls applicable to our foreign Group Companies. The ability of our foreign Group Companies to pay dividends or make other distributions to us may be restricted by foreign exchange control restrictions. We also cannot assure you that the relevant regulations will not be amended to the disadvantage of our Group or Shareholders and that the ability of our foreign Group Companies to distribute dividends and other payments to us will not be adversely affected as a result. 29
RISKS RELATING TO INVESTMENT IN OUR SHARES
Future sale of our Shares could adversely affect the price of our Shares
Any future sale or availability of our Shares can have a downward pressure on the price of our Shares. The sale of a significant amount of our Shares in the public market after the Invitation, or the perception that such sales may occur, could materially affect the market price of our Shares. These factors also affect our ability to sell additional equity securities. Except as otherwise described in the section entitled Moratorium in this Prospectus, there will be no restriction on the ability of the Substantial Shareholders to sell their Shares either on the SGX-ST or otherwise.
Our Share price may fluctuate following the Invitation

The market price of our Shares may fluctuate significantly and rapidly as a result of, among others, the following factors, some of which are beyond our control: variations of our operating results; changes in securities analysts estimates of our financial performance; announcements by us of significant acquisitions, strategic alliances or joint-ventures; success or failure of our efforts in implementing business and growth strategies; additions or departures of key personnel; fluctuations in stock market prices and volume; our involvement in litigation; and changes in conditions affecting our industries, the general economic and stock market conditions.
There has been no prior market for our Shares and the Invitation may not result in an active or liquid market for our Shares
Prior to the Invitation, there has been no public market for our Shares. Therefore, we cannot assure investors that an active public market will develop or be sustained after the Invitation. There is also no assurance that the market price for our Shares will not decline below the Issue Price. The market price of our Shares could be subject to significant fluctuations due to various external factors and events including the liquidity of our Shares in the market, difference between our actual financial or operating results and those expected by investors and analysts, the general market conditions and broad market fluctuations.
Control by existing Shareholders may limit your ability to influence the outcome of decisions requiring the approval of Shareholders
Upon the completion of the Invitation, our Groups Directors and Substantial Shareholders and their associates will beneficially own an aggregate of approximately 73.5% of our enlarged share capital (excluding any Reserved Shares that may be subscribed by our Directors). As a result, these persons, if they act together, will be able to exercise significant influence over all matters requiring Shareholders approval, including the election of directors and the approval of significant corporate transactions. These persons will also have veto power, if they act together, with respect to any shareholder action or approval requiring a majority vote except where they are required by the rules of the Listing Manual to abstain from voting. Such concentration of ownership may also have the effect of delaying, preventing or deterring a change in control of our Group which may benefit our Shareholders.
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THE INVITATION
Issue Size : 63,000,000 New Shares (excluding the Additional Shares) by way of public offer and placement. The New Shares will, upon issue and allotment, rank pari passu in all respects with the existing issued Shares. S$0.40 for each New Share. Our Directors believe that the listing of our Company and the quotation of our Shares on the SGX-ST will enhance the public image of our Group locally and overseas and enable us to tap the capital markets for the expansion of our operations. The Invitation will also provide members of the public, our management, employees and business associates as well as those who have contributed to our success with an opportunity to participate in the equity of our Company. The Offer : The Offer comprises an invitation by our Company to the public in Singapore to subscribe for the 2,000,000 Offer Shares at the Issue Price, subject to and on the terms and conditions of this Prospectus. The Placement comprises a placement of 61,000,000 Placement Shares (including 2,700,000 Reserved Shares and 300,000 Internet Placement Shares) at the Issue Price, subject to and on the terms and conditions of this Prospectus. Out of the 61,000,000 Placement Shares, 2,700,000 Reserved Shares will be reserved for subscription by our directors, employees, business associates 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 be made available to satisfy excess applications for the Placement Shares or, in the event of an under-subscription for the Placement Shares, to satisfy excess applications from members of the public for the Offer Shares. Our Company has granted the Issue Manager the Over-allotment Option which is exercisable in full or in part, within 30 days from the commencement of trading of our Shares on the SGX-ST, to subscribe for up to an aggregate of 12,600,000 Additional Shares (representing not more than 20.0% of the New Shares) at the Issue Price, solely to cover the over-allotment (if any) made in connection with the Invitation. Unless we indicate otherwise, all information in this Prospectus assumes that the Issue Manager does not exercise the Over-allotment Option. Prior to the Invitation, there has been no market for our Shares. Our Shares will be quoted on the Official List of the SGX-ST in Singapore dollars, subject to admission of our Company to the Official List of the SGX-ST and permission for dealing in, and for quotation of, our Shares being granted by the SGX-ST. Investing in our Shares involves risks which are described in the section entitled Risk Factors in this Prospectus.
Issue Price Purpose of the Invitation
: :
The Placement
Reserved Shares
Over-allotment Option
Listing Status
Risk Factors
31
USE OF PROCEEDS AND INVITATION EXPENSES

USE OF PROCEEDS We will receive gross proceeds of approximately S$25.2 million from the Invitation. The estimated net proceeds from the issue of the New Shares (after deducting estimated expenses incurred in relation to the Invitation of approximately S$4.0 million) is approximately S$21.2 million. We intend to use such proceeds in the following manner:
As a percentage of gross proceeds from the Invitation (%)
S$000 Use of proceeds To construct a new fabrication facility in the Middle East To acquire or repay bank borrowings for the acquisition of new construction equipment and machinery To fund our expansion by way of strategic alliances and/or joint-ventures, acquisitions of, and investments in, related businesses Working capital and general corporate purposes 8,000 5,000
31.7 19.8
7,000
27.7
1,200
4.7
For more details on the above, please refer to the section entitled Strategy and Future Plans in this Prospectus. Pending the deployment of the net proceeds from the issue of the New Shares as aforesaid, we may place the funds in deposits with banks or financial institutions or invest in short-term money market instruments as our Directors may, in their absolute discretion, deem fit. In the opinion of our Directors, no minimum amount must be raised from the Invitation. If the Over-allotment Option is exercised in full, the additional net proceeds (after the payment of the fees, commissions and other expenses related to the subscription of the Additional Shares) which we will receive is approximately S$4.9 million. Such net proceeds will be used for working capital and general corporate purposes.
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INVITATION EXPENSES The estimated amount of Invitation expenses including underwriting and placement commissions, brokerage, management fees, audit and legal fees, and all other incidental expenses in relation to this Invitation is approximately S$4.0 million. Such expenses will be borne by us and deducted from the gross proceeds from the issue of the New Shares. The following table sets out the breakdown of these estimated expenses:
As a percentage of gross proceeds from the Invitation (%)
S$000 Expenses Listing fees Professional fees Underwriting and placement commissions and brokerage(1) Miscellaneous expenses Total
70 2,790 693 481 4,034
0.3 11.1 2.8 1.9 16.1
Note: (1) Please refer to the section entitled Management, Underwriting and Placement Arrangements in this Prospectus for more details.
In the event that the estimated expenses listed above are in excess of the actual expenses incurred in connection with the Invitation, such excess will be used as our working capital.
33
MANAGEMENT, UNDERWRITING AND PLACEMENT ARRANGEMENTS

Pursuant to the Management and Underwriting Agreement, our Company appointed the Issue Manager to manage the Invitation, and the Underwriter to underwrite the Offer Shares. The Underwriter may, in its absolute discretion, appoint one or more sub-underwriters to sub-underwrite the Offer Shares. The Issue Manager will receive a management fee from our Company for its services rendered in connection with the Invitation. Pursuant to the Management and Underwriting Agreement, the Underwriter agreed to underwrite the Offer Shares for a commission of 2.75% of the Issue Price for each Share, payable by our Company. Payment of the underwriting commission shall be made whether or not any allotment or issue of the Offer Shares is made to the Underwriter or its nominees, and whether or not any portion of the Offer Shares has been applied to satisfy excess applications for Placement Shares. Brokerage will be paid by our Company to members of the SGX-ST, merchant banks and members of the Association of Banks in Singapore in respect of accepted applications made on Application Forms bearing their respective stamps, or to Participating Banks in respect of successful applications made through Electronic Applications at the rate of 0.25% of the Issue Price for each Offer Share. Pursuant to the Placement Agreement, the Placement Agent agreed to subscribe or procure subscribers for the Placement Shares for a placement commission of 2.75% of the Issue Price for each Placement Share, payable by our Company. Payment of the placement commission shall be made whether or not any allotment or issue of the Placement Shares is made to the Placement Agent or its nominees, and whether or not any portion of the Placement Shares has been applied to satisfy excess applications for Offer Shares. Subject to any applicable laws and regulations, the Placement Agent may, in its absolute discretion and at its own expense, appoint one or more sub-placement agents for the Placement Shares. Subscribers of Placement Shares may be required to pay a brokerage of up to 1.0% of the Issue Price for each Placement Share, in addition to the Issue Price and subject to criteria to be agreed between the Company and the Underwriter. A discretionary fee of up to 0.25% of the aggregate proceeds of the Invitation (including those relating to any over-allotment) is payable to the Underwriter at the sole discretion of our Company. Save as aforesaid, no commission, discount or brokerage, has been paid or other special terms granted within the two years preceding the Latest Practicable Date or is payable to any Director, promoter, expert, or any other person for subscribing or agreeing to subscribe or procuring or agreeing to procure subscriptions for any Shares or debentures in our Company. The Management and Underwriting Agreement may be terminated by the Issue Manager and/or the Underwriter at any time before the commencement of trading of our Shares on the SGX-ST on the occurrence of certain events including, inter alia: (1) any breach of the warranties or undertakings given by our Company in the Management and Underwriting Agreement; any occurrence of an event occurring after the date of the Management and Underwriting Agreement, which if it had occurred before the date of the Management and Underwriting Agreement, would have rendered any of the warranties in the Management and Underwriting Agreement untrue or incorrect in any respect which comes to the knowledge of the Issue Manager or the Underwriter; any adverse change or any development involving a prospective adverse change, in the condition (financial or otherwise) or prospects of our Group;
(2)
(3)
34
(4)
any introduction or prospective introduction of or any change or prospective change in any legislation, regulation, order, notice, policy, rule, guideline or directive (whether or not having the force of law and including, without limitation, any directive, notice or request issued by the Authority, the Securities Industry Council of Singapore or the SGX-ST) or in the interpretation or application thereof by any court, government body, regulatory authority or other competent authority in Singapore; any change or any development involving a prospective change, or any crisis in local, national or international financial (including stock market, foreign exchange market, inter-bank markets or interest rates or money markets), political, industrial, economic, legal or monetary conditions, taxation or exchange controls; any imminent threat or occurence of any local, national or international outbreak or escalation of hostilities whether war has been declared or not, insurrection, terrorist attacks or armed conflict (whether or not involving financial markets); the issue of a stop order by the Authority in accordance with Section 242 of the Securities and Futures Act; or any other occurrence of any nature whatsoever;
(5)
(6)
(7)
(8)
which event or events shall, in the reasonable opinion of the Issue Manager or the Underwriter (exercised in good faith): (a) result or be likely to result in a material adverse fluctuation or material adverse conditions in the stock market in Singapore or elsewhere; be likely to prejudice the success of the offer, subscription or sale of the New Shares (whether in the primary market or in respect of dealings in the secondary market); make it impracticable, inadvisable or inexpedient to proceed with any of the transactions contemplated in the Management and Underwriting Agreement; be likely to have a material adverse effect on the business, trading position, operations or prospects of our Company or of our Group as a whole; be such that no reasonable underwriter would have entered into the Management and Underwriting Agreement; or makes it uncommercial or otherwise contrary to or outside the usual commercial practices of underwriting in Singapore for the Underwriter to observe or perform or be obliged to observe or perform the terms of the Management and Underwriting Agreement.
(b)
(c)
(d)
(e)
(f)
The Placement Agreement is conditional upon the Management and Underwriting Agreement not having been terminated or rescinded pursuant to the relevant provisions of the Management and Underwriting Agreement. DBS Bank engages in transactions with and performs services for us in the ordinary course of business and have engaged, and may in the future engage, in commercial banking and/or investment banking transactions with our Group, for which it has received, and may in future, receive customary fees. DBS Bank is also our Receiving Bank. Save as disclosed above, we do not have any material relationship with the Issue Manager, Underwriter and Placement Agent.
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PLAN OF DISTRIBUTION
The Issue Price is determined by us, in consultation with the Issue Manager, based on market conditions and estimated market demand for our Shares determined through a book-building process. The Issue Price is the same for all New Shares and is payable in full on application. Investors may apply to subscribe for any number of New Shares in integral multiples of 1,000 Shares. In order to ensure a reasonable spread of Shareholders, we have the absolute discretion to prescribe a limit to the number of New Shares to be allotted to any single applicant and/or to allot New Shares above or under such prescribed limit as we shall deem fit. Offer Shares The Offer Shares are made available to the members of the public in Singapore for subscription at the Issue Price. The terms and conditions and procedures for application and acceptance are described in Appendix H of this Prospectus. In the event of an under-subscription for the Offer Shares as at the close of the Application List, that number of Offer Shares not subscribed for shall be made available to satisfy excess applications for the Placement Shares to the extent there is an over-subscription for the Placement Shares as at the close of the Application List. In the event of an over-subscription for the Offer Shares as at the close of the Application List and/or the Placement Shares are fully subscribed for or over-subscribed as at the close of the Application List, the successful applications for the Offer Shares will be determined by ballot or otherwise as determined by our Directors and approved by the SGX-ST. Pursuant to the terms and conditions contained in the Management and Underwriting Agreement, the Issue Manager has agreed to manage the Invitation and the Underwriter has agreed to underwrite our Offer Shares. Placement Shares (excluding Reserved Shares) Application for the Placement Shares (excluding Internet Placement Shares and Reserved Shares) may be made by way of Application Form or such other forms of application as the Issue Manager deems appropriate. Application for the Internet Placement Shares is to be made through the Internet website of DBS Vickers. The terms and conditions and procedures for application and acceptance are described in Appendix H of this Prospectus. Pursuant to the terms and conditions of the Placement Agreement, the Placement Agent has agreed to subscribe for and/or procure subscribers for the Placement Shares at the Issue Price. The Placement Agent may, at its absolute discretion, appoint one or more sub-placement agents for the Placement Shares. In the event of an under-subscription for the Placement Shares as at the close of the Application List, that number of Placement Shares not subscribed for shall be made available to satisfy excess applications for the Offer Shares to the extent that there is an over-subscription for the Offer Shares as at the close of the Application List. In the event of an under-subscription for the Internet Placement Shares as at the close of the Application List, that number of Internet Placement Shares not subscribed for shall be made available to satisfy applications for the Placement Shares by way of Placement Shares Application Forms (or such other forms of application as the Issue Manager may deem appropriate) to the extent that there is an oversubscription for such Placement Shares (not including the Internet Placement Shares) as at the close of the Application List or to satisfy excess applications for the Offer Shares to the extent that there is an over-subscription for the Offer Shares as at the close of the Application List.
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Reserved Shares To recognise contributions to our Company, we have reserved 2,700,000 Placement Shares for subscription by our directors, employees, business associates and those who have contributed to the success of our Group at the Issue Price. These Reserved Shares are not subject to any moratorium and may be disposed of after the admission of our Company to the Official List of the SGX-ST. In the event that any of the Reserved Shares are not subscribed for, they will be made available to satisfy excess applications for the Placement Shares to the extent there is an over-subscription for the Placement Shares as at the close of the Application List or, in the event of an under-subscription for the Placement Shares as at the close of the Application List, to satisfy excess applications made by members of the public for the Offer Shares to the extent there is an over-subscription for the Offer Shares as at the close of the Application List. Over-allotment and Stabilisation In connection with the Invitation, our Company has granted the Issue Manager an Over-allotment Option, exercisable in full or in part within 30 days from the commencement of trading of our Shares on the SGXST, to subscribe for up to an aggregate of 12,600,000 Additional Shares (which in aggregate represents not more than 20.0% of the New Shares) at the Issue Price solely to cover the over-allotment (if any) made in connection with the Invitation. In the event that the Over-allotment Option is exercised, we will pay a commission of 2.75% of the Issue Price for each Additional Share subscribed by the Issue Manager. In connection with the Invitation, the Issue Manager may, in its discretion but subject always to applicable laws and regulations in Singapore, over-allot or effect transactions which stabilise or maintain the market price of the Shares at levels which might not otherwise prevail in the open market. Such transactions may be effected on the SGX-ST and in all jurisdictions where it is permissible to do so, in each case, in compliance with all applicable laws and regulatory requirements. Such stabilisation activities, if commenced, may be discontinued by the Issue Manager at any time at the Issue Managers discretion in accordance with the laws of Singapore and shall not be effected after the earlier of (a) the date falling 30 days from the date of commencement of trading of our Shares on the SGX-ST, or (b) the date when the over-allotment of Shares which are subject to the Over-allotment Option has been fully covered (either through the purchase of our Shares on the SGX-ST or the exercise of the Over-allotment Option by the Issue Manager, or through both). We will publicly announce the total number of Additional Shares which is subject to the Over-allotment Option, through a SGXNET announcement to be posted on the Internet at the SGX-ST website http://www.sgx.com, not later than the day immediately following the close of the Application List. Neither our Company nor DBS Bank makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our Shares. In addition, neither our Company nor DBS Bank makes any representation that DBS Bank or any person acting for it will engage in such transactions or that such transactions, once commenced, will not be discontinued without notice (unless such notice is required by law). The Issue Manager, being the manager effecting the stabilising activities, will be required to make an announcement through the SGXST on the cessation of stabilising activities and the amount of the Over-allotment Option that has been exercised. Share Lending In connection with the over-allotment and stabilisation, the Issue Manager has entered into a share lending agreement (the Share Lending Agreement) with our Executive Chairman, Ms Edna Ko Poh Thim, pursuant to which the Issue Manager may borrow up to 12,600,000 Shares from Ms Edna Ko for the purpose of effecting the over-allotment or price stabilisation activities in connection with the Invitation. Save for up to 12,600,000 Shares that may be lent to the Issue Manager pursuant to the over-allotment and price stabilisation activities effected in connection with the Invitation, the Shares of Ms Edna Ko are subject to moratorium undertakings. Please refer to the section entitled Moratorium in this Prospectus for more details as to these moratorium undertakings. At the conclusion of the price stabilisation activities and in the event that the Over-allotment Option is not exercised in full, the Shares which are returned to Ms Edna Ko will be subject to her moratorium undertaking.
37
None of our Directors or Executive Officers or employees intends to subscribe for more than 5.0% of the New Shares. We are not aware of any person who intends to subscribe for more than 5.0% of our Shares in the Invitation. However, through a book-building process to assess market demand for our Shares, there may be person(s) who may indicate his interest to subscribe for more than 5.0% of the New Shares. Further, no Shares shall be allocated or allotted on the basis of this Prospectus later than six months after the date of registration of this Prospectus.
38
CLEARANCE AND SETTLEMENT

Upon listing and quotation on SGX-ST, our Shares will be traded under the book-entry settlement system of CDP, and all dealings in and transactions of our Shares through SGX-ST will be effected in accordance with the terms and conditions for the operation of Securities Accounts with CDP, as amended from time to time. Our Shares will be registered in the name of CDP or its nominee and held by CDP for and on behalf of persons who maintain, either directly or through Depository Agents, Securities Accounts with CDP. Persons named as direct securities account holders and depository agents in the depository register maintained by CDP, rather than CDP itself, will be treated under our Articles and the Companies Act as members of our Company in respect of the number of Shares credited to their respective Securities Accounts. Persons holding our Shares in Securities Account with CDP may withdraw the number of Shares they own from the book-entry settlement system in the form of physical share certificates. Such share certificates will, however, not be valid for delivery pursuant to trades transacted on SGX-ST, although they will be prima facie evidence of title and may be transferred in accordance with our Articles. A fee of S$10.00 for each withdrawal of 1,000 Shares or less and a fee of S$25.00 for each withdrawal of more than 1,000 Shares is payable upon withdrawing our Shares from the book-entry settlement system and obtaining physical share certificates. In addition, a fee of S$2.00 or such other amount as our Directors may decide, is payable to the share registrar for each share certificate issued and a stamp duty of S$10.00 is also payable where our Shares are withdrawn in the name of the person withdrawing our Shares or S$0.20 per S$100 or part thereof of the last-transacted price where it is withdrawn in the name of a third party. Persons holding physical share certificates who wish to trade on SGX-ST must deposit with CDP their share certificates together with the duly executed and stamped instruments of transfer in favour of CDP, and have their respective Securities Accounts credited with the number of Shares deposited before they can effect the desired trades. A fee of S$20.00 is payable upon the deposit of each instrument of transfer with CDP. The above fee may be subject to such changes as may be in accordance with CDPs prevailing policies or the current tax policies that may be in force in Singapore from time to time. Transactions in our Shares under the book-entry settlement system will be reflected by the sellers Securities Account being debited with the number of Shares sold and the buyers Securities Account being credited with the number of Shares acquired. No transfer of stamp duty is currently payable for the Shares that are settled on a book-entry basis. A Singapore clearing fee for trades in our Shares on the SGX-ST is payable at the rate of 0.04% of the transaction value subject to a maximum of S$600.00 per transaction. The clearing fee, instrument of transfer deposit fee and share withdrawal fee may be subject to Singapore Goods and Services Tax of 7.0% (or such other rate prevailing from time to time). Dealings of our Shares will be carried out in Singapore dollars and will be effected for settlement on CDP on a scripless basis. Settlement of trades on a normal ready basis on the SGX-ST generally takes place on the third Market Day following the transaction date, and payment for the securities is generally settled on the following business day. CDP holds securities on behalf of investors in Securities Accounts. An investor may open a direct account with CDP or a sub-account with a Depository Agent. The Depository Agent may be a member company of the SGX-ST, bank, merchant bank or trust company.
39
SELECTED FINANCIAL INFORMATION

The following selected financial information should be read in conjunction with the full text of this Prospectus, including the section entitled Managements Discussion and Analysis of Financial Condition and Results of Operations, the Audited Consolidated Financial Statements of PEC Ltd. and its Subsidiaries for the years ended 30 June 2006, 2007 and 2008 and the Unaudited Condensed Consolidated Financial Statements of PEC Ltd. and its Subsidiaries for the financial period from 1 July 2008 to 31 December 2008 as set out in Appendix A and Appendix B respectively of this Prospectus. OPERATING RESULTS OF OUR GROUP
S$000 Revenue Cost of sales Gross profit Other operating income Administrative expenses Other operating expenses Finance expenses Profit from operations Share of associates results Share of joint-venture results Profit before tax Income tax expense Profit after tax FY2006 149,327 (117,418) 31,909 1,257 (10,304) (12,394) (295) 10,173 170 10,343 (2,041) 8,302 Audited FY2007 236,592 (175,966) 60,626 5,621 (15,995) (19,331) (125) 30,796 242 31,038 (4,829) 26,209 FY2008 314,647 (233,819) 80,828 3,199 (23,286) (26,849) (749) 33,143 360 61 33,564 (6,560) 27,004 Unaudited HY2008 HY2009 117,135 (84,963) 32,172 1,651 (9,088) (11,471) (302) 12,962 418 (17) 13,363 (1,902) 11,461 220,257 (171,157) 49,100 848 (12,359) (21,162) (230) 16,197 (680) (24) 15,493 (3,075) 12,418
Attributable to: Shareholders of the Company Minority interest EPS(1) (pre-Invitation) (cents) EPS(2) (post-Invitation) (cents)
Notes: (1)
7,608 694 4.35 3.20
25,378 831 14.50 10.66
25,098 1,906 14.34 10.55
10,733 728 6.13 4.51
10,903 1,515 6.23 4.58
For comparative purposes, the EPS (pre-Invitation) is computed using the profit attributable to Shareholders of our Company divided by our pre-Invitation share capital of 175,000,000 Shares. For comparative purposes, the EPS (post-Invitation) is computed using the profit attributable to Shareholders of our Company divided by our post-Invitation share capital of 238,000,000 Shares.
(2)
40
FINANCIAL POSITION OF OUR GROUP

Audited as at 30 June 2008 S$000 Non current assets Property, plant & equipment Available for sale quoted investments Investment in joint-venture Investment in associates Intangibles Land use rights Unaudited as at 31 December 2008 S$000
42,146 195 111 1,442 235 1,031 45,160
50,834 98 87 762 235 1,082 53,098 62 17,691 51,702 3,590 2 9,921 23 62,978 145,969 199,067 24,494 350 43 52,916 213 5,624 83,640 62,329
Current assets Inventories Contracts in progress (net of progress billings) Trade receivables Trade receivables from associates Trade receivables from related parties Other receivables, deposits and prepayment Derivative financial assets Cash and cash equivalents
21 15,040 55,912 9,143 1,456 12,680 424 48,944 143,620
Total assets Current liabilities Trade payables Trade payables to associates Trade payables to related parties Other payables and accruals Derivative financial liabilities Amount due to minority interest Short term financing loan Current portion of non-current borrowings, secured Provision for tax
188,780 27,342 273 3,756 47,349 33 396 1,638 232 5,452 86,471
Net current assets Non-current liabilities Non-current borrowings, secured Deferred tax liabilities
57,149
141 2,619 2,760
42 2,278 2,320 85,960 113,107
Total liabilities Net assets Share capital and reserves Issued and paid-up capital Statutory reserves Fair value reserves Retained earnings Foreign currency translation reserves Total equity Minority interests
89,231 99,549
5,000 392 171 90,276 (609) 95,230 4,319 99,549
5,000 444 73 97,857 43 103,417 9,690 113,107 59.1
NAV per Share(1) (cents)

Note: (1)
54.4
The NAV per Share is computed by dividing our NAV (which is net assets contributable to Shareholders of our Company) by our pre-Invitation share capital of 175,000,000 Shares.
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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our Groups financial position and results of operations should be read in conjunction with the Audited Consolidated Financial Statements of PEC Ltd. and its Subsidiaries for the years ended 30 June 2006, 2007 and 2008 and the Unaudited Condensed Consolidated Financial Statements of PEC Ltd. and its Subsidiaries for the financial period from 1 July 2008 to 31 December 2008 as set out in Appendix A and Appendix B respectively of this Prospectus. This discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our Groups actual results may differ significantly for those projected in the forward-looking statements. Factors that may cause future results to differ significantly from those projected in the forward-looking statements include, but are not limited to, those discussed below and elsewhere in this Prospectus, particularly in the section entitled Risk Factors in this Prospectus. OVERVIEW We are a specialist engineering group servicing the oil and gas, petrochemical, oil and chemical terminal, and pharmaceutical industries. Our two core business activities are project works and maintenance services. Our project works are currently being carried out mainly in Singapore, Malaysia, Thailand, Indonesia, Vietnam, the PRC and the Middle East while our maintenance services are currently being carried out in Singapore and the PRC. To support our business activities, we have established fabrication facilities in Singapore, Malaysia, Indonesia, Thailand and the PRC. In addition to our two core business activities, we also carry out other ancillary business activities such as the provision of information technology services and products, heat treatment services, equipment leasing and engineering consultancy services through our Subsidiaries. Please refer to the section entitled Business in this Prospectus for more information on our business operations. REVENUE We derive our revenue primarily from the following two business segments: (a) Project works Revenue from this business segment accounted for approximately 49.7%, 60.8%, 63.6% and 76.0% of our revenue for FY2006, FY2007, FY2008 and HY2009 respectively. (b) Maintenance services Revenue from this business segment accounted for approximately 49.7%, 39.0%, 36.2% and 23.8% of our revenue for FY2006, FY2007, FY2008 and HY2009 respectively. In addition to our two core business activities, revenue from our other ancillary business activities accounted for approximately 0.6% of our revenue for FY2006 and 0.2% of our revenue for each of FY2007, FY2008 and HY2009. Revenue recognition Our Groups maintenance service contracts typically have a validity period of two to five years, and our Groups project works contracts typically vary in duration from several months up to three years. Our contracts for project works and maintenance services will normally go through various stages of tender submission and negotiations. Our revenue is recognised to the extent it is probable that the economic benefits will flow to us and the revenue can be reliably measured. Rental and interest income is recognised as the rental and interest accrues (using the effective interest method) unless collectability is in doubt. For contracts with a project completion period of more than a year, revenue is recognised
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based on the percentage of completion method, which is based on the ratio of costs incurred to date on contracts to their estimated total costs. For cost plus contracts, revenue is recognised by reference to the recoverable costs incurred during the period plus the fees earned measured in accordance with the contracts. For sale of equipment and goods, revenue is recognised upon the transfer of significant risk and rewards of ownership of the goods to the customers, which generally coincides with delivery and acceptance of the goods sold. Factors affecting our revenue The principal factors that may affect our revenue include the following: (a) Growth and development of the industries in which our customers operate Our ability to secure new and/or sizeable projects and repeat orders would depend on the general level of activities in the oil and gas, petrochemical, oil and chemical terminal, and pharmaceutical industries. Our Groups revenue grew from approximately S$149.3 million in FY2006 to approximately S$236.6 million in FY2007 and then to approximately S$314.6 million in FY2008, at a CAGR of approximately 45.2%. This growth is reflective of the growing investments in the oil and gas, petrochemical, oil and chemical terminal, and pharmaceutical industries over the last three financial years. (b) The number and value of projects secured by us The value of each project is dependent on the size, business segment and type of services and products required from our customers. For example, our project works range from the construction for a certain aspect or part of a production plant, project management consultancy, to EPC projects while our maintenance services range from maintenance works carried out on a plant equipment to single-source maintenance services for a production plant where we serve as the sole contractor responsible to the plant operator/owner to provide all aspects of the engineering works. (c) Our ability to execute our projects successfully Our ability to maintain existing contracts and/or secure new contracts from our customers will have an impact on our revenue. To ensure that we continue to secure projects from our existing or new customers, we have to ensure the timely completion of the projects while keeping within budget or with minimal cost overruns without compromising on the quality and safety of our services. If we are successful in securing more orders from existing and new customers, our revenue can be expected to increase. (d) Fluctuations in foreign currency exchange rates Our revenue is mainly denominated in US$ and S$. As our financial statements are presented in S$, any material depreciation of the US$ denominated revenue against the S$ will reduce our revenue in S$ term. Our US$ denominated revenue accounted for approximately 6.5%, 26.1%, 15.5% and 33.0% of our total revenue in FY2006, FY2007, FY2008 and HY2009 respectively. Please refer to the section entitled Foreign Exchange in this Prospectus for more details. Please refer to the sections entitled Competition, Competitive Strengths and Risk Factors in this Prospectus for more details as to the factors and risks which have or may have an impact on our business. COST OF SALES Our cost of sales consists mainly of production labour costs, sub-contractor charges and cost of materials and other direct costs. Our other direct costs comprise mainly construction equipment rental and diesel oil consumption. Our cost of sales accounted for approximately 78.6%, 74.4%, 74.3% and 77.7% of our revenue in FY2006, FY2007, FY2008 and HY2009 respectively.
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A breakdown for our cost of sales for FY2006, FY2007, FY2008, HY2008 and HY2009 is as follows:
FY2006 S$000 % FY2007 S$000 % FY2008 S$000 % HY2008 S$000 % HY2009 S$000 %
Cost of sales Production labour costs Sub-contractors charges and cost of materials Other direct cost Total
42,892
36.5
56,843
32.3
79,660
34.0
32,669
38.4
56,540
33.0
66,657 7,869
56.8 6.7
109,769 9,354
62.4 5.3
139,526 14,633 233,819
59.7 6.3 100.0
47,548 4,746 84,963
56.0 5.6
95,565 19,052
55.8 11.2
117,418 100.0
175,966 100.0
100.0 171,157 100.0
Factors affecting our cost of sales The principal factors that may affect our cost of sales include the following: (a) Production labour costs Competition for skilled labour in our industry is intense and we have to pay competitive rates to attract and retain skilled and semi-skilled workers. We have a sizeable pool of foreign employees. In the event of an increased demand for such workers, we may have to increase our salaries to attract new workers or to retain existing workers and this may result in an increase in our cost of sales. Changes in governmental and regulatory labour policies in the countries where we operate can directly affect our labour costs. In the event that there are any changes in government policy that restrict or reduce the use of such foreign workers, we may have to source for labour in other countries, thereby increasing our costs. (b) Sub-contractors charges and cost of materials We engage sub-contractors to support our business activities. There is a limited pool of reliable sub-contractors with the relevant industry expertise and at times, we may be required by our customers to engage certain nominated sub-contractors. In the event we are unable to engage these sub-contractors at a competitive price, our cost of sales will be affected. The materials required for our business activities are mainly steel plates, pipes and cement. In the event that the prices of our materials increase and we are not able to source for cheaper alternative sources, our cost of sales will increase. (c) Cost of construction equipment rental We lease construction equipment from construction equipment leasing companies. The number of construction equipment leasing companies operating in this industry is limited due to the safety requirements imposed by our customers. There is also limited supply of construction equipment available for lease and limited number of qualified operators available for hire. In the event we are unable to lease construction equipment at a competitive price, our cost of sales will be affected. (d) Costs arising from disruptions in project schedule Our business activities are generally carried out on a project basis to be completed within a specific deadline. We plan and sequence our manpower deployment, fabrication resources and construction equipment loading in accordance with the project schedule of the project. Any disruptions to the project schedule, including those caused by logistic disruptions and unanticipated construction constraints at the work site may result in additional costs which we may not be able to claim from our customers leading to the increase of our cost of sales.
44
GROSS PROFIT Our gross profit is determined after deducting our cost of sales from our revenue. Generally, project works and maintenance services with high technical content requiring specific industry know-how, integration of multiple engineering disciplines and mobilisation of a large pool of skilled labour and construction equipment, can potentially yield better gross profit margins. OTHER OPERATING INCOME Other operating income comprises mainly project incentives granted by our customers, interest income and gain from the disposal of our equipment. We also operate accredited training and testing facilities in Singapore to provide skills training and certification to external parties for a fee. These amounted to approximately 0.8%, 2.4%, 1.0% and 0.4% of our total revenue in FY2006, FY2007, FY2008 and HY2009 respectively. OTHER OPERATING EXPENSES Our other operating expenses consist mainly of accommodation costs for our foreign workers, repair and maintenance costs, depreciation expenses, insurance expenses, project incentive payments to our subcontractors and cost of personal protective equipment. These accounted for approximately 8.8%, 9.1%, 9.4% and 10.3% of our total expenses in FY2006, FY2007, FY2008 and HY2009 respectively. ADMINISTRATIVE EXPENSES Our administrative expenses consist mainly of directors and employee remuneration, consultancy fees, printing and stationery costs, telecommunication charges and utility charges. These accounted for approximately 7.3%, 7.6%, 8.2% and 6.0% of our total expenses in FY2006, FY2007, FY2008 and HY2009 respectively. FINANCE EXPENSES Finance expenses comprise mainly bank charges, hire purchase interest and interest on loans and overdrafts. SHARE OF RESULTS OF ASSOCIATES AND JOINT-VENTURE Share of results of associates represents our share of results relating to our minority shareholdings in PEI, PMC Thailand and PEC Thailand. Share of joint-venture results represents our share of results relating to our shareholdings in CTS. TAXATION The effective tax rate of our Group was approximately 19.7%, 15.6%, 19.5% and 19.8% in FY2006, FY2007, FY2008 and HY2009 respectively. Our Group Companies are taxed in accordance with the prevailing tax regulation of the countries they operate in. Huizhou Tianxin is entitled to a full exemption from EIT for the first two profit-making years and a 50.0% reduction in EIT payable for the next three financial years. It was also stated as a term in the approval obtained that Huizhou Tianxin may enjoy such tax exemptions or reductions only in the year(s) when its production business revenue exceeds 50.0% of its gross revenue. Huizhou Tianxins financial year end is 31 December. Although the first profit-making year for Huizhou Tianxin was 2005, the State Taxation Bureau approved and granted Huizhou Tianxin a deferment of the commencement of the tax exemption period from 2005 to 2006.
45
According to its investment certificate, Audex Vietnam is exempted from corporate income tax for the first two years starting on the first financial year that Audex Vietnam starts making profits. After the first two years, Audex Vietnam will enjoy a reduction of 50% of the tax payable for the subsequent two years. Audex Vietnam is also exempted from import tax for goods imported to form its fixed assets in accordance with provisions of the Decree No. 149/2005/ND-CP dated 6 December 2005 in relation to the law on import and export. Audex Vietnam was incorporated and commenced business operations in August 2007. Audex Vietnam started making profits in its first financial year ended 30 June 2008, and is thus exempted from corporate income tax for two years beginning from its first financial year. INFLATION Our business operations are based mainly in Singapore, the PRC, the Middle East, Malaysia and Thailand. Inflation in these countries did not have a material impact on our business in FY2006, FY2007, FY2008 and HY2009. REVIEW OF RESULTS OF OPERATIONS For the purposes of discussion, we have segmented our revenue, gross profit and gross profit margins by business segments. Revenue disclosed in geographical segments is based on the locations of our operating sites. Revenue by Business Segments
FY2006 S$000 % Project works Maintenance services Other operations Total 74,304 74,185 838 49.7 49.7 0.6 FY2007 S$000 % 143,819 92,296 477 60.8 39.0 0.2 FY2008 S$000 % 200,010 113,900 737 314,647 63.6 36.2 0.2 HY2008 S$000 % 67,798 49,099 238 HY2009 S$000 % 76.0 23.8 0.2
57.9 167,398 41.9 52,401 0.2 458
149,327 100.0
236,592 100.0
100.0 117,135
100.0 220,257 100.0
Gross Profit by Business Segments

FY2006 S$000 % Project works Maintenance services Other operations Total 16,316 15,442 151 51.1 48.4 0.5 FY2007 S$000 % 41,287 19,265 74 68.1 31.8 0.1 FY2008 S$000 % 55,565 25,151 112 80,828 68.7 31.1 0.2 100.0 HY2008 S$000 % 19,596 12,543 33 32,172 60.9 39.0 0.1 100.0 HY2009 S$000 % 37,611 11,432 57 76.6 23.3 0.1
31,909 100.0
60,626 100.0
49,100 100.0
Gross Profit Margin by Business Segments

FY2006 % Project works Maintenance services Other operations Total 22.0 20.8 18.0 21.4 FY2007 % 28.7 20.9 15.5 25.6 FY2008 % 27.8 22.1 15.2 25.7 HY2008 % 28.9 25.6 13.9 27.5 HY2009 % 22.5 21.8 12.4 22.3
For the last three financial years and the six months period ended 31 December 2008, our project works generated higher gross profit margin than our maintenance services, in particular for FY2007 and FY2008 due to the availability of more attractive project works opportunities.
46
Revenue by Geographical Segments

FY2006 S$000 % Singapore Middle East Asia Pacific (excluding Singapore) and Africa Total 129,781 2,869 86.9 1.9 FY2007 S$000 % 158,360 60,702 66.9 25.7 FY2008 S$000 % 240,098 49,264 76.3 15.7 HY2008 S$000 % 83,783 17,509 HY2009 S$000 % 59.5 34.4
71.5 131,035 15.0 75,670
16,677
11.2
17,530
7.4
25,285 314,647
8.0
15,843
13.5
13,552
6.1
149,327 100.0
236,592 100.0
100.0 117,135
100.0 220,257 100.0
FY2007 vs FY2006 Revenue Our revenue increased by approximately 58.5% from approximately S$149.3 million in FY2006 to approximately S$236.6 million in FY2007, mainly due to increased contributions of approximately S$69.5 million from our project works business segment which included construction works carried out in the Middle East that contributed approximately S$60.7 million revenue for FY2007. Such construction works commenced in April 2006, but a significant portion of the revenue was recognised in FY2007. Our revenue from our maintenance services business segment increased by approximately 24.4% from approximately S$74.2 million in FY2006 to approximately S$92.3 million in FY2007, mainly due to significant maintenance works requested by our customers for their oil refineries and petrochemical plants in Singapore which contributed approximately S$17.5 million increase in revenue in FY2007. Cost of sales In line with the increase in our revenue, our cost of sales increased by approximately S$58.6 million from approximately S$117.4 million in FY2006 to approximately S$176.0 million in FY2007. The increase in cost of sales in FY2007 was mainly due to a substantial increase in sub-contractors charges of approximately S$49.6 million and this was primarily attributable to the construction works carried out in the Middle East. Our Group's production labour cost had also increased by approximately S$14.0 million in FY2007 mainly due to an increase in workforce to support the aforesaid project in the Middle East and also our Group's new project work in Malaysia. The above increases were offset by a decrease in cost of materials of approximately S$6.5 million due to lesser materials required for the project works carried out in FY2007. Gross profit and gross profit margin In line with our increase in revenue, our gross profit increased by approximately S$28.7 million from approximately S$31.9 million in FY2006 to approximately S$60.6 million in FY2007. Our gross profit margin increased from approximately 21.4% in FY2006 to approximately 25.6% in FY2007, mainly due to greater contributions from our higher margin project works in Singapore and the Middle East. Other operating income Other operating income increased by approximately S$4.4 million from approximately S$1.3 million in FY2006 to approximately S$5.6 million in FY2007, mainly due to the grant of approximately S$3.7 million of project incentives in relation to the substantial completion of a project work. Administrative expenses Administrative expenses increased by approximately S$5.7 million from approximately S$10.3 million in FY2006 to approximately S$16.0 million in FY2007, mainly due to an increase in profit participation incentives payable to directors and senior management of approximately S$3.7 million and remuneration for office administrative staff of approximately S$1.6 million.
47
Other operating expenses Other operating expenses increased by approximately S$6.9 million from approximately S$12.4 million in FY2006 to approximately S$19.3 million in FY2007, mainly due to the following: (a) An increase in employee-related expenditure such as site accommodation, employees training, medical fees and personal protective equipment of approximately S$1.8 million in FY2007 as a result of an increase in the number of our employees; An increase in project incentives paid to sub-contractors of approximately S$1.8 million in FY2007 for meeting the project schedule; An increase in our depreciation charges of approximately S$1.5 million on property, plant and equipment; An increase in our provision for doubtful debts of approximately S$0.6 million; An increase in foreign exchange loss by approximately S$0.5 million in FY2007 attributable to the depreciation of the US$ against S$ as part of our revenue was denominated in US$; and An increase of approximately S$0.4 million arising from our new land lease in Malaysia and our new office lease in Singapore.
(b)
(c)
(d) (e)
(f)
Finance expenses Finance expenses decreased by approximately S$0.2 million from approximately S$0.3 million in FY2006 to approximately S$0.1 million in FY2007, mainly due to a decrease in the issuance of bank guarantees and performance bonds for projects undertaken by us, resulting in a decrease in bank charges in FY2007. Share of results of associates Our share of results of associates remained unchanged at approximately S$0.2 million in FY2007. Profit before tax Our profit before tax increased by approximately S$20.7 million from approximately S$10.3 million in FY2006 to approximately S$31.0 million in FY2007, mainly due to an increase in our gross profit and offset by a smaller increase in administrative expenses and other operating expenses. Taxation The effective tax rate of our Group decreased from 19.7% in FY2006 to 15.6% in FY2007 mainly due to a reduction in corporate tax rate in Singapore from 20.0% to 18.0% as well as the full year impact of Huizhou Tianxins tax exemption in FY2007. FY2008 vs FY2007 Revenue Our revenue increased by approximately 33.0% from approximately S$236.6 million in FY2007 to approximately S$314.6 million in FY2008, mainly due to an increase of approximately S$56.2 million in revenue from our project works business segment and approximately S$21.6 million from our maintenance services business segment. The growth in revenue from our project works business segment in FY2008 was mainly due to contributions from various project works in Singapore relating to the oil and gas, petrochemical, oil and chemical terminal industries which commenced works in FY2008 and which contributed approximately S$50.2 million of revenue for FY2008 as well as the commencement of a new EPC contract for a bulk liquid product terminal in the Middle East in FY2008 which contributed approximately S$27.6 million of revenue for FY2008.
48
The growth in revenue in FY2008 from our maintenance services business segment in FY2008 was mainly due to contributions from the completion of some significant maintenance works in Singapore relating to the oil and gas and petrochemical industries. Cost of sales In line with the increase in our revenue, our cost of sales increased by approximately S$57.8 million from approximately S$176.0 million in FY2007 to approximately S$233.8 million in FY2008. The increase in cost of sales in FY2008 was mainly due to a substantial increase in cost of materials of approximately S$31.8 million for various project works in Singapore as well as the EPC contract in the Middle East. Our Group's production labour cost had also increased by approximately S$22.8 million in FY2008 mainly due to an increase in workforce to support the aforesaid various project works in Singapore. The above increases were offset by a decrease in sub-contractors cost of approximately S$2.0 million following a substantial completion of the construction works in the Middle East. Gross profit and gross profit margin In line with the increase in our revenue, our gross profit increased by approximately S$20.2 million from approximately S$60.6 million in FY2007 to approximately S$80.8 million in FY2008. Our overall gross profit margin remained comparable at 25.6% and 25.7% in FY2007 and FY2008 respectively and there were no significant changes in gross profit margin for project works and maintenance services in both financial years. Other operating income Other operating income decreased by approximately S$2.4 million from approximately S$5.6 million in FY2007 to approximately S$3.2 million in FY2008. This was mainly due to a decrease of approximately S$2.8 million in project incentives from a major customer in relation to the substantial completion of project works in FY2007 which was offset by an increase in the write-back of provision of doubtful debts by approximately S$0.2 million and an increase in interest income of approximately S$0.2 million. Administrative expenses Administrative expenses increased by approximately S$7.3 million from approximately S$16.0 million in FY2007 to approximately S$23.3 million in FY2008, mainly due to (i) an increase in remuneration for office administrative staff of approximately S$2.7 million, (ii) an increase in directors remuneration and profit participation incentives payable to directors of our Company of approximately S$1.6 million, (iii) an increase in legal and professional fees of approximately S$1.5 million and (iv) an increase in consultancy fees of approximately S$0.5 million. Other operating expenses Other operating expenses increased by approximately S$7.5 million from approximately S$19.3 million in FY2007 to approximately S$26.8 million in FY2008, mainly due to the following: (a) An increase in accommodation expenses of approximately S$3.2 million for additional foreign workers for awarded projects; An increase in depreciation expenses of approximately S$1.7 million; An increase in insurance fees of approximately S$1.0 million for additional coverage on newly awarded projects; An increase in maintenance, upkeep and repair expenses for production facilities and equipment of approximately S$0.9 million; and An increase in the purchase of uniform and safety items of approximately S$0.5 million.
(b) (c)
(d)
(e)
49
Finance expenses Finance expenses increased by approximately S$0.6 million from approximately S$0.1 million in FY2007 to approximately S$0.7 million in FY2008, mainly due to an increase in the issuance of letters of credit, bank guarantees and performance bonds for our new projects, resulting in an increase in bank charges in FY2008. Share of results of associates and joint-venture Our share of results of associates increased by approximately S$0.2 million from approximately S$0.2 million in FY2007 to approximately S$0.4 million in FY2008, mainly due to an increase in the share of profits from PEI of approximately S$0.1 million. Profit before tax Our profit before tax increased by approximately S$2.6 million from approximately S$31.0 million in FY2007 to approximately S$33.6 million in FY2008. This was mainly due to an increase in gross profit offset by a greater increase in administrative expenses and other operating expenses. Taxation The effective tax rate of our Group increased from approximately 15.6% in FY2007 to approximately 19.5% in FY2008. This was mainly due to a higher profit contribution from PEC Malaysia in FY2008 as compared to FY2007 and the imposition of EIT payable on Huizhou Tianxin, albeit at 50.0% reduction, following the conclusion of Huizhou Tianxins full tax exemption from EIT in December 2007. HY2009 vs HY2008 Revenue Our revenue increased by approximately 88.1% from approximately S$117.1 million in HY2008 to approximately S$220.3 million in HY2009, mainly due to an increase of approximately S$99.6 million in revenue from our project works business segment and approximately S$3.3 million from our maintenance services business segment. The growth in revenue from our project works business segment in HY2009 was mainly due to (i) the EPC contract for bulk liquid product terminal in the Middle East which commenced in FY2008, and contributed approximately S$66.7 million of revenue for HY2009, as well as (ii) project works in Singapore relating to the oil and gas, petrochemical, oil and chemical terminal industries which contributed approximately S$82.2 million of revenue for HY2009. The growth in revenue from our maintenance services business segment in HY2009 was mainly attributed to increase in maintenance activities provided to existing customers in Singapore and the PRC relating to the oil and gas and petrochemical industries of approximately S$52.4 million in HY2009. Cost of sales With the increase in our revenue, our cost of sales increased by approximately S$86.2 million from approximately S$85.0 million in HY2008 to approximately S$171.2 million in HY2009. The increase in cost of sales in HY2009 was mainly due to an increase in production labour costs of approximately S$23.9 million, the sub-contractor charges and cost of materials of approximately S$48.0 million and other direct cost of approximately S$14.3 million. These increases were mainly because the EPC contract in the Middle East and some of the project works in Singapore for FY2008 commenced works only in the later part of HY2008 and hence, costs incurred for such projects were relatively low in HY2008 compared to HY2009. The other direct cost of approximately $14.3 million includes a provision for foreseeable loss of approximately S$5.4 million in HY2009. This provision arose from the additional costs projected to be incurred due to the delay/extension of a project work relating to the petrochemical industry in Singapore. The project, which commenced in July 2007 and was initially scheduled for completion in March 2009, was tentatively extended for completion in September 2009. The delay/ extension was mainly caused by the clients late hand over of site areas for our job execution. We have incurred substantial non-productive manpower cost due to such late hand over and the resultant extended completion period. 50
Gross profit and gross profit margin With the increase in our revenue, our gross profit increased by approximately S$16.9 million from approximately S$32.2 million in HY2008 to approximately S$49.1 million in HY2009. Our overall gross profit margin reduced from 27.5% in HY2008 to 22.3% in HY2009. This was mainly due to loss incurred and/or expect to incur arising from the delay/extension of a project work in HY2009. In HY2008, we also enjoyed better manpower utilisation for certain maintenance works. Other operating income Other operating income decreased by approximately S$0.9 million from approximately S$1.7 million in HY2008 to approximately S$0.8 million in HY2009. This was mainly due to a decrease of approximately S$0.7 million in project incentives from a major customer in relation to the completion of project works in FY2008. Administrative expenses Administrative expenses increased by approximately S$3.3 million from approximately S$9.1 million in HY2008 to approximately S$12.4 million in HY2009, mainly due to (i) an increase in remuneration for office administrative staff of approximately S$1.5 million, (ii) an increase in profit participation incentives payable to directors and senior management of our Company of approximately S$0.4 million, (iii) an increase in fair value revaluation adjustment of approximately S$0.4 million resulting from forward contracts entered into by our Group and (iv) an increase in legal and professional fees of approximately S$0.3 million. Other operating expenses Other operating expenses increased by approximately S$9.7 million from approximately S$11.5 million in HY2008 to approximately S$21.2 million in HY2009, mainly due to the following: (a) An increase in accommodation expenses of approximately S$2.4 million for additional foreign workers for awarded projects; An increase in depreciation expenses of approximately S$1.0 million; An increase in freight, forwarding and port handling fees of approximately S$1.0 million for the overseas project works; An increase in exchange loss of approximately S$0.9 million mainly due to depreciation of the US$ and AUD against the S$; An increase in recruitment expenses of approximately S$0.6 million; An increase in set-up costs for temporary site facilities of approximately S$0.7 million; and An increase in transport and travelling expenses of approximately S$1.4 million.
(b) (c)
(d)
(e) (f) (g)
Finance expenses Finance expenses decreased by approximately S$0.1 million from approximately S$0.3 million in HY2008 to approximately S$0.2 million in HY2009, mainly due to a decrease in the issuance of letters of credit, bank guarantees and performance bonds for project works, resulting in a decrease in bank charges in HY2009. Share of results of associates Our share of results of associates decreased by approximately S$1.1 million from a profit of approximately S$0.4 million in HY2008 to a loss of approximately S$0.7 million in HY2009. This was mainly due to (i) a share of profit from PEC Thailand of approximately S$0.5 million in HY2008 compared to a share of loss from PEC Thailand of approximately S$0.8 million in HY2009 and offset by (ii) a share of loss from PEI of approximately S$0.1 million in HY2008 compared to a share of profit from PEI of approximately S$0.1 million in HY2009. 51
Profit before tax Our profit before tax increased by approximately S$2.1 million from approximately S$13.4 million in HY2008 to approximately S$15.5 million in HY2009. This was mainly due to an increase in gross profit offset by an increase in other operating expenses and administrative expenses. Taxation The effective tax rate of our Group increased from approximately 14.2% in HY2008 to approximately 19.8% in HY2009. This was mainly due to the commencement of the 50.0% reduction in EIT payable by Huizhou Tianxin in HY2009 as compared to a full exemption from EIT in HY2008. REVIEW OF FINANCIAL POSITION Non-Current Assets As at 30 June 2008 As at 30 June 2008, our non-current assets amounted to approximately S$45.2 million representing 23.9% of our total assets, and comprised mainly the following: (a) Property, plant and equipment of approximately S$42.1 million, comprising approximately S$14.0 million of leasehold property, land and building, approximately S$19.5 million of plant machinery and site equipment, approximately S$4.7 million of motor vehicles and approximately S$3.9 million of office equipment, furniture, fittings and renovations and others; Available-for-sale quoted investments of approximately S$0.2 million; Investments in CTS and Associated Companies amounting to approximately S$1.6 million; Country club memberships of approximately S$0.2 million; and Land use rights of our property at Triangle Mountain, Aotou Central Area, the PRC of approximately S$1.0 million.
(b) (c) (d) (e)
As at 31 December 2008 Our non-current assets increased by approximately S$7.9 million from approximately S$45.2 million as at 30 June 2008 to approximately S$53.1 million as at 31 December 2008, representing 26.7% of our total assets. This was mainly due to the increase in property, plant and equipment of approximately S$8.7 million to support the increase in business operations (including the acquisition of an additional fabrication facility in Singapore for approximately S$3.0 million). This was offset by a decrease in investments in joint-venture and associates of approximately S$0.7 million mainly due to share of loss in PEC Thailand. Current Assets As at 30 June 2008 As at 30 June 2008, our current assets amounted to approximately S$143.6 million representing 76.1% of our total assets, and comprised mainly the following: (a) (b) Inventories and contracts in progress of approximately S$15.1 million; Trade receivables of approximately S$66.5 million comprising trade receivables from customers of approximately S$55.9 million, trade receivables from our Associated Companies, PEC Thailand and PEI, of approximately S$9.1 million and trade receivables from Tian San Shipping of approximately S$1.5 million (please refer to the section entitled Interested Person Transactions in this Prospectus for more details);
52
(c)
Other receivables, deposits and prepayments of approximately S$12.7 million comprising advances of approximately S$2.5 million, other receivables of approximately S$6.9 million, prepayments of approximately S$1.5 million and sundry deposits of approximately S$1.8 million. The other receivables of approximately S$6.9 million includes an amount of approximately S$6.7 million related to advances made to a business partner of our Group for a particular project in Indonesia where we assisted in the procurement of certain materials on behalf of our business partner; Financial derivatives of approximately S$0.4 million; and Cash and cash equivalents of approximately S$48.9 million which included fixed deposits of approximately S$18.1 million.
(d) (e)
As at 31 December 2008 Our current assets increased by approximately S$2.4 million from S$143.6 million as at 30 June 2008 to approximately S$146.0 million as at 31 December 2008, representing 73.3% of our total assets. This was mainly due to the following: (a) (b) (c) An increase in cash and cash equivalents of approximately S$14.0 million; An increase in contracts in progress of approximately S$2.7 million; A decrease in trade receivables from customers, Associated Companies and related parties of approximately S$11.2 million; and A decrease in other receivables, deposits and prepayments of approximately S$2.8 million was mainly due to reductions in other receivables due from a business partner.
(d)
Non-Current Liabilities As at 30 June 2008 As at 30 June 2008, our non-current liabilities amounted to approximately S$2.8 million representing 3.1% of our total liabilities, and comprised the following: (a) (b) Hire purchase creditors and bank loans of approximately S$0.2 million; and Deferred tax liabilities of approximately S$2.6 million.
As at 31 December 2008 Our non-current liabilities decreased by approximately S$0.5 million from approximately S$2.8 million as at 30 June 2008 to approximately S$2.3 million as at 31 December 2008, representing 2.7% of our total liabilities. This was mainly due to the decrease in deferred tax liabilities. Current Liabilities As at 30 June 2008 As at 30 June 2008, our current liabilities amounted to approximately S$86.5 million representing 96.9% of our total liabilities, and comprised mainly the following: (a) Trade payables of approximately S$31.4 million comprising trade payables to our suppliers and sub-contractors of approximately S$27.3 million, trade payables to our Associated Companies, PEC Thailand and PEI, of approximately S$0.3 million, trade payables to Tian San Singapore of approximately S$0.04 million and trade payables to CTS of approximately S$3.7 million. Please refer to the section entitled Interested Person Transactions in this Prospectus for more details;
53
(b)
Other payables and accruals of approximately S$47.3 million comprising mainly accrued salaries and bonuses of approximately S$18.7 million, accrued operating expenses of approximately S$18.1 million mainly in relation to goods and services provided by our suppliers and subcontractors, provision for unutilised leave of approximately S$1.3 million, profit participation incentives for directors and senior management of our Company of approximately S$6.1 million, other payables of approximately S$2.0 million and provision for reinstatement cost of approximately S$1.1 million; Hire purchase creditors, bank loans, financial derivatives and amount due to minority interest of approximately S$2.3 million; and Provision for tax of approximately S$5.5 million.
(c)
(d)
As at 31 December 2008 Our current liabilities decreased by approximately S$2.9 million from approximately S$86.5 million as at 30 June 2008 to approximately S$83.6 million as at 31 December 2008. This was mainly due to: (a) A decrease in trade payables to our suppliers and sub-contractors, Associated Companies, and related parties of approximately S$6.5 million; Repayment of a short term financing loan and settlement of amount due to minority interest of approximately S$1.6 million and S$0.4 million respectively as at 30 June 2008; and An increase in other payables and accruals of approximately S$5.6 million mainly due to higher profit participation incentives payable to directors and senior management.
(b)
(c)
Shareholders equity As at 30 June 2008 As at 30 June 2008, our Shareholders equity amounted to approximately S$95.2 million, and comprised mainly the following: (a) (b) Issued and paid up share capital of approximately S$5.0 million; and Retained earnings of approximately S$90.3 million.
As at 31 December 2008 Our Shareholders equity increased by approximately S$8.2 million from approximately S$95.2 million as at 30 June 2008 to approximately S$103.4 million as at 31 December 2008 mainly due to an increase in retained earnings of approximately S$7.6 million from the net profit attributable to our Shareholders for HY2009. Minority interest As at 30 June 2008 As at 30 June 2008, there was a minority interest of approximately S$4.3 million from the interests of minority shareholders in our Subsidiaries, Huizhou Tianxin, PES and Audex. As at 31 December 2008 Minority interest increased by approximately S$5.4 million from approximately S$4.3 million as at 30 June 2008 to approximately S$9.7 million at 31 December 2008, mainly due to improved profits from our Subsidiaries, PES and Audex in HY2009. LIQUIDITY AND CAPITAL RESOURCES Our operations have been funded through a combination of Shareholders equity, cash generated from our operations and external borrowings and credit facilities from financial institutions. The principal uses of these funds are for working capital requirements and capital expenditure.
54
As at 30 April 2009, our Shareholders equity (excluding minority interest in Subsidiaries) is approximately S$112.2 million and our total outstanding debts is approximately S$0.2 million comprising entirely hire purchases. As at 30 April 2009, we had cash and cash equivalents of approximately S$46.9 million, of which approximately S$2.0 million was pledged as security for bank facilities. Please refer to the section entitled Capitalisation and Indebtedness for our outstanding guarantees/ letters of credit, performance bond, and corporate guarantees provided in respect of projects undertaken by our Company and Subsidiaries. To the best of our Directors knowledge, we are not in breach of any of the terms and conditions or covenants associated with any credit management or bank loan which could materially affect our financial position and results, business operations or the investments of our Shareholders. Our Directors are of the opinion that as at the date of lodgment of this Prospectus, after taking into consideration our present cash position, cash generated from our operations and available banking facilities, we have sufficient working capital to meet our present requirements. The following table summarises our Groups cash flow statements for FY2006, FY2007, FY2008 and HY2009:
Audited FY2006 S$000 Net cash generated from operating activities Net cash used in investing activities Net cash generated from / (used in) financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year / period Cash and cash equivalents at the end of the financial year / period 14,933 (9,319) 1,492 7,106 14,206 21,312 Audited FY2007 S$000 28,856 (14,128) (1,155) 13,573 21,312 34,885 Audited FY2008 S$000 26,863 (15,392) 1,588 13,059 34,885 47,944 Unaudited HY2009 S$000 27,237 (11,457) (2,746) 13,034 47,944 60,978
FY2006 Cash flow from operating activities In FY2006, we generated net cash from operating activities of approximately S$14.9 million which was principally derived from our revenue from project works and maintenance services. In FY2006, our operating profit after adjusting for non-cash and non-operating items, including depreciation of fixed assets of approximately S$2.6 million, amounted to approximately S$12.1 million. Cash generated from changes in working capital was approximately S$4.6 million and was primarily due to an increase in trade and other payables of approximately S$5.6 million and a decrease in contracts in progress of approximately S$5.2 million. This was offset by an increase in trade and other receivables of approximately S$5.1 million and a decrease in trade payables to Associated Companies of approximately S$1.4 million. The increase in trade and other payables was mainly due to an increase in cost of sales and operating expenses and the decrease in contracts in progress was mainly due to an improvement of our progress billing process. The increase in trade and other receivables was mainly due to an increase in business operations. The remaining cash outflow was mainly due to income tax payments of approximately S$1.7 million. Cash flow used in investing activities In FY2006, our net cash used in investing activities was approximately S$9.3 million. This was mainly due to (i) the purchase of plant machinery and site equipment of approximately S$6.1 million, (ii) the purchase of motor vehicles of approximately S$1.1 million, (iii) the purchase of office equipment, furniture and fittings and renovation of approximately S$0.9 million, (iv) capital expenditure on our workshop, office and staff quarters of approximately S$0.4 million, (v) the acquisition of land use rights by our PRC Subsidiary, Huizhou Tianxin, of approximately S$1.1 million, and (vi) the increase in our investment in our Associated Company, PEC Thailand, of approximately S$0.2 million. These were offset by the receipt of interest from deposits of approximately S$0.5 million and proceeds from disposal of fixed assets of approximately S$0.1 million. 55
Cash flow from financing activities In FY2006, our cash generated from financing activities amounted to approximately S$1.5 million. This was mainly due to (i) an increase in bank loans of approximately S$0.2 million, (ii) the receipt of proceeds from additional investments by minority shareholders of our Subsidiaries, Huizhou Tianxin and PES, (iii) the dilution of interests in our Subsidiary, Audex, of approximately S$1.4 million, and (iv) the repayment of loan by PMC Thailand, of approximately S$0.2 million. These were offset by the payment of dividends of approximately S$0.3 million. As a result of the above, we recorded cash and cash equivalents of approximately S$21.3 million as at 30 June 2006. FY2007 Cash flow from operating activities In FY2007, we generated net cash from operating activities of approximately S$28.9 million which was principally derived from our revenue from project works and maintenance services. In FY2007, our operating profit after adjusting for non-cash and non-operating items, including depreciation of fixed assets of approximately S$4.1 million, amounted to approximately S$34.5 million. Cash used in changes in working capital was approximately S$3.5 million and was primarily due to the increase in trade and other receivables, trade receivables from Tian San Shipping and Tian San Singapore and contracts in progress of approximately S$11.5 million, approximately S$0.4 million and approximately S$8.8 million, respectively. The increase in trade and other receivables, and the increase in contracts in progress were mainly due to an increase in business operations. This was partially offset by the increase in trade and other payables of approximately S$17.2 million. The increase in trade and other payables was mainly due to an increase in cost of sales and operating expenses. The remaining cash outflow was mainly due to income tax payments of approximately S$2.1 million. Cash flow used in investing activities In FY2007, our net cash used in investing activities was approximately S$14.1 million. This was mainly due to (i) capital expenditure on leasehold property, land and buildings of approximately S$6.6 million, (ii) the purchase of plant machinery and site equipment of approximately S$5.3 million, (iii) the purchase of motor vehicles of approximately S$1.1 million, (iv) the purchase of office equipment, furniture and fittings and renovation of approximately S$1.1 million, and (v) an increase in our investment in PEC Thailand of approximately S$0.6 million. These were offset by the receipt of interests from deposits of approximately S$0.6 million and receipt of proceeds from disposal of fixed assets of approximately S$0.4 million. Cash flow from financing activities In FY2007, our cash used in financing activities amounted to approximately S$1.2 million. This was mainly due to the net repayment of bank loans and finance lease obligations of approximately S$0.5 million and the payment of dividends of approximately S$0.7 million, and offset by the receipt of proceeds from the dilution of interests in our Subsidiary, Audex, of approximately S$0.1 million. As a result of the above, there was an increase in cash and cash equivalents of approximately S$13.6 million, from approximately S$21.3 million as at 30 June 2006 to approximately S$34.9 million as at 30 June 2007. FY2008 Cash flow from operating activities In FY2008, we generated net cash from operating activities of approximately S$26.9 million, which was principally derived from our revenue from project works and maintenance services. In FY2008, our operating profit after adjusting for non-cash and non-operating items, including depreciation of fixed assets of approximately S$5.8 million, amounted to approximately S$37.9 million. Cash outflow arising from changes in working capital was approximately S$6.3 million and was primarily due to (i) the increase in trade and other receivables of approximately S$32.0 million, trade receivables
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from our Associated Companies, PEC Thailand and PEI, of approximately S$8.9 million, trade receivables from Tian San Shipping and Tian San Singapore of approximately S$1.0 million, and (ii) an increase in derivatives of approximately S$0.4 million. The increase in trade and other receivables was mainly due to an increase in business operations. This was partially offset by (i) an increase in trade payables and other payables of approximately S$27.7 million, trade payables due to CTS of approximately S$3.7 million, and (ii) the decrease in contracts in progress of approximately S$4.7 million. The increase in trade and other payables was mainly due to an increase in cost of sales and other operating expenses and the decrease in contracts in progress was mainly due to an improvement of our progress billing process. The remaining cash outflow was mainly due to income tax payments of approximately S$4.7 million. Cash flow used in investing activities In FY2008, our net cash used in investing activities was approximately S$15.4 million. This was mainly due to (i) capital expenditure on leasehold property, land and buildings of approximately S$2.6 million, (ii) the purchase of plant machinery and site equipment of approximately S$7.4 million, (iii) the purchase of motor vehicles of approximately S$2.6 million, and (iv) the purchase of office equipment, furniture and fittings and renovation of approximately S$3.4 million. These were offset by the receipt of interests from deposits of approximately S$0.8 million. Cash flow from financing activities In FY2008, our cash generated from financing activities amounted to approximately S$1.6 million. This was mainly due to an increase in short term loan of approximately S$1.6 million, and the dilution of interests in our Subsidiary, Audex, of approximately S$0.1 million. These were offset by the payment of dividends of approximately S$0.3 million. As a result of the above, there was an increase in cash and cash equivalents of approximately S$13.1 million, from approximately S$34.9 million as at 30 June 2007 to approximately S$47.9 million as at 30 June 2008. HY2009 Cash flow from operating activities In HY2009, we generated net cash from operating activities of approximately S$27.2 million, which was principally derived from our revenue from project works and maintenance services. In HY2009, our operating profit after adjusting for non-cash and non-operating items, including depreciation of fixed assets of approximately S$3.4 million and share of associates loss of approximately S$0.7 million, amounted to approximately S$19.8 million. Cash generated from changes in working capital was approximately S$10.7 million and was primarily due to (i) a decrease in trade and other receivables of approximately S$7.0 million, trade receivables from our Associated Companies of approximately S$5.6 million and trade receivables from related parties of approximately S$1.5 million, and (ii) an increase in trade and other payables of approximately S$2.7 million. The decrease in the overall trade and other receivables (including those from our Associated Companies and related parties) was mainly due to payment received from external customers, PEC Thailand and Tian San Shipping. This was partially offset by (i) a decrease in trade payables to related parties following the payment to CTS of approximately S$3.7 million, and (ii) the increase in contracts in progress of approximately S$2.7 million. The remaining cash outflow was mainly due to income tax payments of approximately S$3.2 million. Cash flow used in investing activities In HY2009, our net cash used in investing activities was approximately S$11.5 million. This was mainly due to (i) the payment of approximately S$3.0 million in connection with the acquisition of an additional fabrication facility in Singapore, (ii) the purchase of plant machinery and site equipment of approximately S$5.8 million, (iii) the purchase of motor vehicles of approximately S$0.9 million, (iv) the costs of office equipment, furniture and fittings and renovation of approximately S$0.6 million, and (v) the cost incurred for construction in progress of the fabrication facilities in the PRC of approximately S$1.5 million. These were offset by the receipt of interests from deposits of approximately S$0.3 million.
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Cash flow from financing activities In HY2009, our cash used in financing activities amounted to approximately S$2.7 million. This was mainly due to repayment of a short term loan of approximately S$1.8 million, additional fixed deposits pledged to a bank for banking facilities of approximately S$1.0 million and payment of dividends to minority shareholders of Subsidiaries of approximately S$0.4 million. These were offset by the receipt of proceeds from the dilution of interests in our Subsidiary, Audex, of approximately S$0.4 million. As a result of the above, there was an increase in cash and cash equivalents of approximately S$13.0 million, from approximately S$47.9 million as at 30 June 2008 to approximately S$61.0 million as at 31 December 2008. FOREIGN EXCHANGE As a result of our global operations, we conduct our business in various foreign currencies, principally S$, US$, RM and RMB. Besides S$, US$, RM and RMB, we transact in other currencies of the countries we operate in, namely AED, Baht and AUD. Our Groups reporting currency is in S$. Accounting treatment of foreign currencies Foreign currency transactions Our transactions in foreign currencies are measured in the respective functional currencies of our Group Companies and are recorded at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated using exchange rates ruling at the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Nonmonetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Exchange differences arising on the settlement of monetary items or on translating monetary items at the balance sheet date are recognised in the income statement except for exchange differences arising on monetary items that form part of our net investment in foreign subsidiaries, which are recognised as foreign currency translation reserve in the consolidated balance sheet and recognised in the consolidated income statement on disposal of the subsidiary. Foreign currency translation The results and financial position of our foreign operations are translated into S$ using the following procedures: (a) Assets and liabilities for each balance sheet presented are translated at the exchange rate ruling at that balance sheet date; and Income and expenses for each income statement are translated at average exchange rates for the year, which approximates the exchange rates at the dates of the transactions. All resulting exchange differences are recognised as foreign currency translation reserve. On disposal of a foreign operation, the cumulative amount of exchange differences deferred in equity relating to that foreign operation is recognised in the income statement as a component of the gain or loss on disposal.
(b)
Foreign exchange exposure Our foreign exchange risk arises mainly from the mismatch between the currency of our revenue and the currency of our sub-contractor charges and cost of materials. To the extent that our income and expenses are not naturally matched in the same currency and to the extent that there are timing differences in the collection and payments, we may be susceptible to foreign exchange exposure. Currently, our main foreign exchange exposure is the fluctuation in the exchange rate of US$ against S$ which could result in us incurring net foreign exchange gains/losses and will have a positive or adverse impact on our profitability.
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The estimated percentage of our revenue, sub-contractor charges and cost of materials denominated in various currencies for FY2006, FY2007, FY2008 and HY2009 are as follows:
As a percentage of revenue (%) S$ US$ RMB RM Others(1) Total
Note: (1) Other currencies include AUD, VND and Euro.
FY2006 87.9 6.5 4.0 1.5 0.1 100.0
FY2007 68.4 26.1 2.7 2.8 100.0
FY2008 77.7 15.5 3.2 2.0 1.6 100.0
HY2009 64.3 33.0 1.9 0.5 0.3 100.0
As a percentage of sub-contractor charges and cost of materials (%) S$ US$ RMB RM AED Others(1) Total
Note: (1) Other currencies include AUD, VND and Euro.
FY2006 88.8 4.2 0.9 4.3 1.8 100.0
FY2007 41.0 25.5 0.9 32.5 0.1 100.0
FY2008 70.3 13.1 1.4 11.5 3.1 0.6 100.0
HY2009 48.2 33.1 0.2 4.7 12.9 0.9 100.0
The increase in the percentage of our revenue, sub-contractor charges and cost of materials denominated in US$ commencing from FY2007 and its subsequent fluctuations, and the increase in the percentage of our sub-contractor charges and cost of materials denominated in AED in HY2009, was mainly due to our project works in the Middle East. The increase in the percentage of our sub-contractor charges and cost of materials denominated in RM in FY2007 and FY2008 was mainly due to the engagement of workers from Malaysia in relation to a project work in the Middle East which was completed in FY2008. Our net foreign exchange losses for FY2006, FY2007, FY2008 and HY2009 are as follows:
FY2006 Net foreign currency exchange loss (S$000) As a percentage of our revenue (%) As a percentage of our profit before tax (%) 350 0.2 3.4 FY2007 807 0.3 2.6 FY2008 869 0.3 2.6 HY2009 1,506 0.7 9.7
The exchange loss for FY2006, FY2007 and FY2008 were mainly due to the depreciation of US$ against S$. The exchange loss for HY2009 was mainly attributable to the depreciation of US$ and AUD against S$. In addition, we are subject to translation risk as our consolidated financial statements are denominated in S$ while the financial statements of some of our Subsidiaries, mainly our PRC and Malaysian Subsidiaries, are prepared in RMB and RM respectively. In the preparation of the consolidated financial statements, the financial statements of our foreign Subsidiaries are translated from their respective reporting currencies based on the prevailing exchange rates on the respective balance sheet dates except for share capital and reserves which are translated at historical exchange rates and profit and loss items which are translated at average exchange rates for the respective years. Any appreciation of the S$ against RMB and RM would lower our reported profits derived from our operations in the PRC and Malaysia respectively which would in turn adversely affect the operating results of our Group.
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Currently, we do not have a formal hedging policy with respect to our foreign exchange exposure. Any adoption of a formal hedging policy will require the approval of our Board. We will continue to monitor our foreign exchange exposure and we may selectively hedge our foreign exchange exposure by entering into foreign exchange forward or option contracts based on the following guidelines and procedures: (a) Any foreign exchange contracts or interest rate contacts used will be solely to manage our Groups exposure to foreign exchange and interest rate risks by minimising the impact of foreign exchange fluctuations and not for speculative purposes; For foreign exchange contract or interest rate hedging contract of a value up to S$100,000, it is to be approved: (i) jointly by the finance manager or Associate Finance Director and Director Finance of our Group; or jointly by the finance manager, Associate Finance Director or the Director Finance of our Group and an Executive Director;
(b)
(ii)
(c)
For foreign exchange contract or interest rate hedging contract of a value above S$100,000 and up to S$20,000,000, it must be recommended by the Director Finance of our Group and jointly approved by any two Executive Directors who are unrelated to each other; For foreign exchange contract or interest rate hedging contract of a value above S$20,000,000, it must be recommended by the Director Finance of our Group as well as be approved by all Executive Directors.
(d)
Our Executive Directors will carry out a review of records of all foreign exchange and interest rate hedging transactions at least on a monthly basis, and any other times as required. Our hedging procedures are also subject to review by and approval from our Audit Committee. As at the Latest Practicable Date, our Group has forward currency contracts, flexi forward currency contract and currency option contract to hedge our sales and purchases denominated in Euro, US$ and AED. Our Group does not apply hedge accounting. For any foreign exchange contract or interest rate hedging contract above S$20,000,000 per contract or any contracts exceeding S$20,000,000 in aggregate within the quarter from the last Audit Committee meeting, our Audit Committee should be notified upon us entering into such contracts. Our Audit Committee will carry out a review of records of all foreign exchange contracts and interest rate hedging transactions at least on a quarterly basis, and any other times as required, and monitor the implementation of the hedging procedures. CHANGES IN ACCOUNTING POLICIES Save as disclosed below, there have been no changes in our accounting policies for the last three financial years from FY2006 to FY2008 and for HY2009. Prior to FY2008, transactions with minority interests were accounted for using the parent entity extension model. This model considers that the view given in the consolidated financial statements is that of the parent company. Therefore if a parent company disposes some of its interests in a subsidiary to minority interests of that subsidiary, any gain or loss from such disposal would be recognised in the income statement of the parent company. From FY2008, transactions with minority interests are accounted for using the entity concept method. This method considers transactions with minority interests as transactions with equity holders. On acquisition of minority interests, the difference between the consideration and book value of the share of the net assets acquired is reflected as a transaction between owners and recognised directly in equity. Gain or loss on disposal to minority interests is recognized directly in equity. Our Group has applied this new accounting policy prospectively from FY2008. Had the change in accounting policy been applied retrospectively, the profit of our Group for FY2006 and FY2007 would have increased by $72,000 and $91,000 respectively. 60
Please refer to the Audited Consolidated Financial Statements of PEC Ltd. and its Subsidiaries for the years ended 30 June 2006, 2007 and 2008 and the Unaudited Condensed Consolidated Financial Statements of PEC Ltd. and its Subsidiaries for the financial period from 1 July 2008 to 31 December 2008 as set out in Appendix A and Appendix B respectively of this Prospectus for details on our Groups accounting policies. Allocation of issue expenses for the Invitation as an expense On 25 January 2008, the Institute of Certified Public Accountants of Singapore has withdrawn the Recommended Accounting Practice 9 (RAP 9) - IPO Costs. The withdrawal of RAP 9 will be effective for financial statements covering periods beginning on or after 1 January 2008. As a result of the above withdrawal, our Company would be required to allocate a portion of the professional fees and other transaction costs incurred in relation to the listing of our Companys Shares on the Main Board of the SGX-ST as an expense in its profit and loss statements for the financial year when such expenses are incurred. Our Company has decided to early adopt the above withdrawal of RAP 9 in the financial statements beginning on 1 July 2007. POSSIBLE IMPACT ON OUR FUTURE FINANCIAL RESULTS AND POSITION Our Company has adopted the ESOS and there will be a cost to our Company in granting such options. Please refer to the section entitled PEC Employee Share Option Scheme in this Prospectus for the potential impact on our financial results.
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DIVIDEND POLICY
Save as disclosed below, our Group has not paid any dividends for the last three financial years and the six months period ended 31 December 2008:
Net dividends paid FY2007 FY2008 Total Per Total Per (000) share (000) share S$205 S$0.04 S$250 S$0.05
Our Company PEC Our Subsidiaries Audex PEC Malaysia Huizhou Tianxin
FY2006 Total Per (000) share S$200 S$0.04
HY2009 Total Per (000) share
S$96
S$0.02
S$120 RM6,534.58
S$0.03 RM13.1
S$120
S$0.03
RMB6,000
N.A.
RMB5,000
N.A.
Our Company had at the annual general meeting for FY2008 held on 3 December 2008 declared a final dividend of S$250,000 (representing S$0.05 per Share of our Company based on 5,000,000 Shares of our Company prior to the Bonus Issue and Sub-Division) out of our FY2008 profits and paid the same on 6 January 2009 (the FY2008 Final Dividend). In addition, our Company had on 25 June 2009 declared an interim dividend of S$8.0 million in respect of its financial year ending 30 June 2009 and had paid the same on 17 July 2009 (the FY2009 Interim Dividend), and our Subsidiary, Audex, had on 25 June 2009 declared an interim dividend of S$2.0 million in respect of its financial year ending 30 June 2009 and had paid the same on 29 June 2009 (the Audex FY2009 Interim Dividend). As at 30 April 2009, we had cash and cash equivalents of approximately S$46.9 million and the Audex FY2009 Interim Dividend and the FY2009 Interim Dividend were funded from the same. We currently do not have a formal dividend policy. We may declare dividends by ordinary resolution of our Shareholders at a general meeting, but may not pay dividends in excess of the amount recommended by our Board. We must pay all dividends out of the profits. The amount of our past dividends is not indicative of the amount we will pay in future. The form, frequency and amount of future dividends on our Shares will depend on our earnings and financial position, our results of operations, our capital requirements, our plans for expansion and other factors as our Directors may deem appropriate. Information relating to taxes payable on dividends are set out in Appendix E in this Prospectus.
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EXCHANGE CONTROLS
Currently, no foreign exchange control restrictions exist in Singapore. The following is a description of the exchange controls that exist in the jurisdictions outside of Singapore where our Group Companies are located. INDONESIA Currently, no foreign exchange control restrictions exist in Indonesia. The Rp and foreign currency have been, and in general are, freely convertible. Bank Indonesia has introduced regulations to prohibit the movement of Rp from banks within Indonesia to banks located offshore, thereby limiting offshore trading to existing sources of liquidity. The movement of Rp to foreign parties (which include foreign citizens, foreign legal entities, foreign bodies, Indonesian citizens having permanent resident status in another country and not domiciled in Indonesia, offices of Indonesian banks and Indonesian companies located offshore) within banks in Indonesia without certain underlying trade or investment reasons is also prohibited. In addition, there is a reporting requirement to Bank Indonesia of foreign exchange transactions carried through banks or non-bank financial institutions (for example, insurance companies, securities companies, finance companies or venture capital companies) in Indonesia. The requirement is imposed on the relevant Indonesian banks or non-bank financial institutions that carry out the transactions. There is also a reporting requirement to Bank Indonesia imposed on certain activities of Indonesian companies (with total assets or annual sales of not less than Rp 100 billion) with regard to their offshore financial assets and liabilities which are not carried out through the Indonesian banking system. There are no restrictions under Indonesia law that restrict the repatriation of capital and the remittance of profits to Singapore. MALAYSIA Under the current Exchange Control Notices of Malaysia issued by Bank Negara Malaysia (Bank Negara), foreign direct investors are freely allowed to repatriate their investment including capital, profit and dividends without being subject to any levy. There are also no restrictions on the repatriation of interest and rental incomes. With effect from 1 April 2005, as part of Bank Negaras continuous effort to enhance the business environment, the foreign exchange administration rules were further relaxed with some of the changes below: (a) residents without domestic credit facilities are free to invest abroad in foreign currency, to be funded from their own foreign currency or conversion of RM funds; residents are free to open foreign currency account onshore or offshore. No specific prior permission is required; and there is no limit on the amount of foreign currency funds a resident is able to retain onshore or offshore.
(b)
(c)
However, for statistical reasons, with effect from 1 August 2007, Bank Negara requires residents making payment or remittances exceeding RM200,000.00 or its equivalent in foreign currency to a non-resident to provide certain information together with supporting documents in respect of such payments. In addition, Bank Negara announced on 28 May 2008 further liberalisation of rules on borrowing by residents wherein: (a) a resident company is free to borrow any amount in foreign currency from its non-resident nonbank parent company; a resident company is free to obtain any amount of foreign currency suppliers credit for capital goods from non-resident suppliers.
(b)
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The threshold for foreign currency borrowing of RM100 million in aggregate by a resident company on a group corporate basis shall no longer be applicable to the above financing activities. A non-resident non-bank parent company refers to: (a) (b) a non-resident company with more than 50% shareholding in a resident company; or the ultimate non-resident parent company of the resident company, which is not a bank, an investment holding company owned by a bank or a stockbroking company.
The exchange rate of the RM since 21 July 2005 has been operated in a managed float, with its value being determined by economic fundamentals. Bank Negara will monitor the exchange rate against a currency basket which is kept confidential to ensure that the exchange rate remains close to its fair value. Prior permission from the Controller of Foreign Exchange is required for dealings with the currencies and entities from Israel, Serbia and Montenegro. PRC Major reforms have been introduced on the foreign exchange control system of the PRC since 1993. The Peoples Bank of China (PBOC), with the authorisation of the State Council, issued on 28 December 1993 the Notice on the Further Reform of the Foreign Exchange Control System and on 26 March 1994 the Provisional Regulations on the Settlement, Sale and Payment of Foreign Exchange which came into effect on 1 April 1994 respectively. On 29 January 1996, the State Council promulgated the PRC Foreign Exchange Administration Regulations which took effect on 1 April 1996 and revised on 14 January 1997 and further revised on 1 August 2008. On 20 June 1996, the PBOC issued the Administration Regulations on the Settlement, Sale and Payment of Foreign Exchange , which took effect on 1 July 1996. On 25 October 1998, the PBOC and the State Administration for Foreign Exchange (SAFE) issued a Joint Announcement on Abolishment of Foreign Exchange Swap Business which stated that from 1 December 1998, all foreign exchange transactions for foreign investment enterprises may only be conducted through authorised banks. These regulations contain detailed provisions regulating the holding, sale and purchase of foreign exchange by individuals, enterprises, economic bodies and social organisations in the PRC. Under the new regulations, the previous dual exchange rate system for RMB was abolished and a unified floating exchange rate system based largely on supply and demand was introduced. The PBOC, having regard to the trading prices between RMB and major foreign currencies on the inter-bank foreign exchange market, publishes on each bank business day the RMB exchange rates against major foreign currencies. The foreign exchange earnings of domestic organisations and individuals may be remitted back to the PRC or held aboard. The provisions regarding the requirements, time limit to remit back or hold aboard shall be made by SAFE based on the balance of international payments and foreign exchange administrative requirements. The recurrent foreign exchange earnings may, in accordance with relevant provisions of the PRC, be retained or sold to the financial institutions engaged in settlement and sale of foreign exchange while the reservation or sale of capital foreign exchange earnings to the aforesaid financial institutions shall be approved by the foreign exchange administration authority unless otherwise provided by the state. At present, control on the purchase of foreign exchange is being relaxed. Enterprises which require foreign exchange for their current activities such as trading activities and payment of staff remuneration may purchase foreign exchange from designated banks, subject to the production of relevant supporting documents without the need for any prior approvals of the SAFE.
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In addition, where an enterprise requires any foreign exchange for the payment of dividends that are payable in foreign currencies under applicable regulations, such as the distribution of profits by a foreign investment enterprise to its foreign investment party, then, subject to the due payment of tax on such dividends the amount required may be withdrawn from funds in foreign exchange accounts maintained with designated banks, and where the amount of the funds in foreign exchange is insufficient, the enterprise may purchase additional foreign exchange from designated banks upon the presentation of the resolutions of the board of directors on the profit distribution plan of that enterprise. Despite the relaxation of foreign exchange control over current account transaction, the approval of the foreign exchange administration authority is still required before a PRC enterprise may borrow a loan in foreign currency or provide any foreign exchange guarantee or make any investment outside of the PRC or to enter into any other capital account transaction involving the purchase of foreign exchange. When conducting actual foreign exchange transactions, the designated banks may, based on the exchange rate published by the PBOC and subject to certain limits, freely determine the applicable exchange rate. The China Foreign Exchange Trading Centre (CFETC) was formally established and came into operation in April 1994. CFETC has set up a computerised network with sub-centres in several major cities, thereby forming an interbank market in which designated PRC banks can trade in foreign exchange and settle their foreign currency obligations. Prior to 1 December 1998, enterprises with foreign investment may at their own choice enter into exchange transactions through swap centre or through designated PRC banks. From 1 December 1998 onwards, exchange transactions will have to be conducted through designated banks. Swap centres became restricted to conducting foreign exchange transactions between authorised banks and inter-bank lending between PRC banks. THAILAND Thai foreign exchange controls are administered by the Bank of Thailand (BOT) on behalf of the Ministry of Finance, pursuant to the Exchange Control Act B.E. 2485 (1942), as amended. The BOT has granted commercial banks and certain other entities the authority to conduct foreign exchange transactions as Authorised Financial Institutions of the BOT. The BOT instituted temporary Baht speculation measures on 28 May 1997, 10 June 1997 and 2 July 1997 to restrict certain foreign exchange related transactions by domestic financial institutions with non-residents of Thailand and to safeguard against instability and speculation in the domestic currency market. Such temporary measures were lifted by the BOT on 29 January 1998 (with effect from 30 January 1998) (the 1998 Measure). However, to strengthen the measure to curb Baht speculation in response to recent Baht appreciation, the BOT issued a series of notifications on 3 November 2006 and 4 December 2006 to abrogate the 1998 Measures and replace them with new measures. The new measures incorporated the 1998 Measures as well as introduced certain new measures against Baht speculation (e.g., restrictions on commercial banks entering into transactions to sell and buy back Baht-denominated debt instruments with a non-resident). Currently, the said two notifications were revoked and replaced by the notification of 29 February 2008 as described below. The BOT has issued the Notifications of the Competent Officer on Rules and Practices Regarding Currency Exchange No. 6 dated 18 December 2006 (the Notification) which requires that with respect to any sale or exchange of foreign currencies for Baht amounting to US$20,000 or above (or its equivalent), the relevant authorised financial institution is required to withhold 30.0% of the foreign currency to be sold or exchanged in reserve for a one-year period before returning the amount withheld without any interest thereon. This Notification, however, does not apply to any sale or exchange of foreign currencies for the purposes of certain exempt transactions, such as inward remittance for the purpose of investment in business in Thailand of which the investor has shares of no less than 10% of the total shares in the invested business, or inward remittance for the purpose of real estate purchase as stated in the Notification of the Competent Officer on Rules and Practices Regarding Currency Exchange No. 10, No. 11, No. 13 and No. 16 dated 29 January 2007, 15 March 2007, 9 August 2007 and 17 December 2007 respectively. Despite the above, the said control rules have been recently revoked by the BOT on 29 February 2008.
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The inward remittance of money into Thailand for investment in securities does not require registration with the exchange control authorities. However, any resident person (excluding short-term foreign residents, foreign embassies and their staff, persons with diplomatic immunity and certain international organisations and their staff) acquiring foreign currency anywhere or bringing foreign currency into Thailand must, either (i) sell such foreign currency to an Authorised Financial Institution within 360 days from the date of inward remittance for which a specified form must be submitted to such authorised financial institution if the amount deposited is at least US$20,000 or its equivalent or (ii) deposit such foreign currency into a foreign currency account opened with an authorised financial institution in Thailand. Thai residents are allowed to maintain foreign currency account with the authorised financial institution as follows: (i) Domestic holdings of foreign currencies with funds originating from abroad are allowed without limit. Foreign currency purchased or borrowed from authorized banks can be deposited into two types of foreign currency accounts (FCD): FCD with future obligations: in an amount not exceeding such obligations and not exceeding US$1,000,000 or its equivalent for an individual or US$100,000,000 or its equivalent for a legal entity. However, the depositor may deposit foreign currencies in an amount exceeding such limits, if such person proves to the Authorised Financial Institution that he is required to make a payment of a foreign currency debt outside Thailand within 12 months from the date of such deposit. FCD without future obligations: the outstanding balances of all foreign currency accounts shall not exceed US$100,000 or its equivalent for an individual, or US$300,000 or its equivalent for a juristic entity.
(ii)
(iii)
Each depositor without a foreign exchange licence may deposit currencies in cash into a foreign currency deposit account in an amount not exceeding US$10,000 or its equivalent per day subject to certain exemptions.
The outward remittance from Thailand of dividends or the proceeds of sale (including capital gain) from the transfer of shares after payment of the applicable Thai taxes, if any, may be made without the requirement to file a specified form to the relevant authorised financial institution if the amount is less than US$20,000 or the equivalent amount in relevant currency per remittance. The outward remittance from Thailand for investment in securities is permitted, subject to specific BOTs rules and conditions. The outward remittance from Thailand for investment (or lending) purposes in an overseas business is as follows (subject to the necessary documentation): (i) Investing in or lending to affiliated business entities abroad is allowed in an aggregate amount not exceeding US$100,000,000 or its equivalent per year; Investing in or lending to parent companies abroad, which such parent company (or borrower) has shares or has an ownership of no less than 10.0% of the total shares in the investing (or lender) business; the investor (or lender) is allowed to remit a fund of not exceeding US$100,000,000 or its equivalent per year; and Companies registered with the Stock Exchange of Thailand can invest abroad according to (i) and (ii) above without limit, and can lend abroad according to (i) and (ii) in an amount, in each case, up to US$100,000,000 or its equivalent per year.
(ii)
(iii)
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As the BOT has a policy not to allow any person to remit Baht currency out of Thailand, subject to certain exemptions, dividends paid to a non-resident must be converted into foreign currency prior to the outward remittance from Thailand. If the amount is at least US$20,000 or its equivalent in the relevant currency, a specified form must be submitted to the relevant authorised financial institution together with required documents or evidence as to the particular transaction. The export of share certificates or other securities certificates from Thailand does not require prior approval from an exchange control officer. The exporter may either dispatch the certificates by mail or carry them when travelling abroad. VIETNAM Under the foreign investment laws currently in force in Vietnam, foreign investors are entitled to repatriate or remit profits, invested capital (pursuant to the dissolution of the company or an approved capital reduction), and offshore loan principal repayments as well as interest payments (subject to withholding tax being paid on the interest payments). A foreign investment, including the case of Audex Vietnam, may need to purchase foreign currency from commercial banks on an availability basis to settle offshore payments, including remittance of profits, capital, interest, when the foreign investment does not have enough in its foreign currency reserve. UAE The Central Bank of the United Arab Emirates directs, inter alia, the monetary, credit and banking policy in the UAE and supervises its implementation in accordance with Union Law No. 10 of 1980 Concerning the Central Bank, the Monetary System and Organisation of Banking. Since 1997, the United Arab Emirates Dirham (AED) has been pegged to the United States Dollar (US$) at a rate equal to AED 3.6725=US$1.00 or US$ 0.272294=AED1. There are currently no exchange controls on the remittance of profits or repatriation of capital from the UAE.
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CAPITALISATION AND INDEBTEDNESS

The following table shows the cash and cash equivalents, debt and capitalisation of our Group as at 30 April 2009: (a) (b) on an actual basis; as adjusted to give effect to the Bonus Issue, the FY2009 Interim Dividend and the Audex FY2009 Interim Dividend; and as adjusted to give effect to the Bonus Issue, the FY2009 Interim Dividend, the Audex FY2009 Interim Dividend, the issue of 63,000,000 New Shares pursuant to the Invitation and the application of the net proceeds from the Invitation.
(c)
You should read this in conjunction with the Audited Consolidated Financial Statements of PEC Ltd. and its Subsidiaries for the years ended 30 June 2006, 2007 and 2008 and the Unaudited Condensed Consolidated Financial Statements of PEC Ltd. and its Subsidiaries for the financial period from 1 July 2008 to 31 December 2008 as set out in Appendix A and Appendix B respectively of this Prospectus.
As at 30 April 2009 As Adjusted (S$000) (b) 38,477
Unaudited (S$000) (a) Cash and cash equivalents Short term debt - Secured hire-purchase 46,877
As Adjusted (S$000) (c) 61,368
164 164
164 164
164 164
Long term debt - Secured hire-purchase
19 19
19 19
19 19
Total Indebtedness Shareholders equity: - Share capital - Reserves Total Shareholders equity Total capitalisation and indebtedness
183
183
183
5,000 107,210 112,210 112,393
25,000 78,810 103,810 103,993
48,623 78,138 126,761 126,944
As at 30 April 2009, our cash and cash equivalents amounted to approximately S$46.9 million, of which approximately S$2.0 million was pledged as securities to the banks. As at 30 April 2009, our Company and Subsidiaries have total banking facilities of approximately S$80.9 million, of which approximately S$54.2 million have been utilised. Such banking facilities are granted in S$, US$ and RM and comprise mainly overdrafts, trade financing lines, bank guarantees and standby letters of credit. Our banking facilities are secured by one or several of (i) fixed deposits maintained with banks, (ii) fixed and floating charges over assets and trade receivables, (iii) corporate guarantees, and (iv) a mortgage over our property at 27 Tuas Avenue 3, Singapore 639419.
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For the overdrafts, the interest rate ranges from 0.5% to 1.0% per annum above the respective banks prime lending rate. For the trade financing lines and bank guarantees, the interest rate ranges from a fixed rate of 0.75% per annum to 1.5% per annum over the respective banks prime lending rate or prevailing cost. Certain trade financing lines are charged based on the relevant banks prevailing commissions/charges. As at 30 April 2009, we have outstanding hire purchases of approximately S$0.2 million and outstanding guarantees/letters of credit and performance bonds in respect of projects undertaken by our Company and Subsidiaries amounting to approximately S$46.7 million. In addition, our Group had also provided corporate guarantees of approximately S$77.8 million as at 30 April 2009 to customers in respect of projects undertaken by our Company and Subsidiaries. Contingent Liabilities Our Company and Subsidiaries have no contingent liabilities as at the Latest Practicable Date. Operating Lease Commitments As at the Latest Practicable Date, our Company and Subsidiaries have operating lease commitments as follows:
S$000 Within 1 year 2 to 5 years Above 5 years 6,432 4,598 3,520
Capital Commitments and Expenditures As at the Latest Practicable Date, our Company and Subsidiaries have material commitments of approximately S$1.64 million for the purchase of plant machinery and site equipment. These material commitments of approximately S$1.64 million will be funded from our Companys and Subsidiaries internal cash flow. Our material capital expenditures made by our Company and Subsidiaries for FY2006, FY2007, FY2008 and HY2009 and for the period commencing on 1 January 2009 and ending on the Latest Practicable Date are as follows:
1 January 2009 to the Latest Practicable Date S$000 7,387 3,124 10,511
FY006 S$000 Leasehold land and building Plant machinery and site equipment Others(1) Total
Notes: (1)
FY2007 S$000 6,648(2) 5,263 2,448 14,359
FY2008 S$000 2,612(3) 7,447 6,151 16,210
HY2009 S$000 3,021(4) 5,790 2,930 11,741
6,140 2,363 8,503
This relates to our purchases of motor vehicles, office equipment, furniture, fittings, renovations, workshop, office and staff quarters and construction in progress. This relates to our purchase of our leasehold land and fabrication facility at 19 Tuas Avenue 8, Singapore 639234 and the construction of fabrication facility at 19 Shipyard Road, Singapore. This relates to the refurbishment cost for our fabrication facility at 19 Tuas Avenue 8, Singapore 639234 and certain reinstatement costs for various expired leases of our Group. This relates to our purchase of a fabrication facility at 7 Tuas Basin Close, Singapore.
(2)
(3)
(4)
Save as disclosed above as well as the drawdowns and scheduled repayments of our banking facilities, changes in our retained earnings arising from the day-to-day operations in the ordinary course of our business, there have been no material change to the total capitalisation and indebtedness of our Group since 30 April 2009 to the date of this Prospectus.
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DILUTION
Dilution is the amount by which the Issue Price paid by investors of our New Shares in this Invitation exceeds our NAV per Share immediately after this Invitation. Our NAV (which is net assets attributable to Shareholders of our Company) as at 31 December 2008, adjusted for the Bonus Issue, the FY2008 Final Dividend, the FY2009 Interim Dividend and the Audex FY2009 Interim Dividend, and based on the preInvitation share capital of 175,000,000 Shares was 54.2 cents per Share. Pursuant to the Invitation in respect of 63,000,000 New Shares at an Issue Price of 40.0 cents per New Share, our NAV per Share as at 31 December 2008 after further adjusting for the estimated net proceeds from the Invitation and based on the post-Invitation share capital of 238,000,000 Shares would have been 48.7 cents. This represents an immediate decrease in NAV of 5.5 cents per Share to our existing Shareholders and an immediate increase in NAV of 8.7 cents per Share to our new investors. There is thus no dilution suffered by investors resulting from the issue of the 63,000,000 New Shares. The following table summarises the total number of Shares (as adjusted for the Bonus Issue and the SubDivision) acquired by our Directors, Substantial Shareholders and their associates during the period of three years prior to the date of lodgment of this Prospectus, the total consideration paid by them and the average price per Share paid by these Shareholders and paid by the new investors pursuant to this Invitation:
Number of Shares acquired (as adjusted for the Bonus Issue and the Sub-Division(1)) Substantial Shareholders Case C MMP Others V Investments New investors
Notes: (1) Pursuant to the Bonus Issue (as adjusted for the Sub-Division), 27,300,000, 4,200,000, 68,600,000, 10,500,000, 23,800,000 and 5,600,000 Shares were acquired by Ms Edna Ko, Mr Wong Peng, Tian San Singapore, Case C, MMP and V Investments respectively. The 13,125,000 Shares (as adjusted for the Bonus Issue and the Sub-Division) were acquired pursuant to the transfer by each of Mdm Teoh, Mr Michael Ko and Ms Elizabeth Ko of their respective Shares to Case C for an aggregate consideration of S$5,523,279 based on the audited net tangible asset value of our Shares as at 30 June 2007, which was satisfied by the allotment and issue by Case C to Mdm Teoh, Mr Michael Ko and Ms Elizabeth Ko of new shares in its share capital in substantially the same proportion as their Shares transferred to Case C. The said acquisition was completed on 22 June 2009. Following such acquisition, Case C is wholly-owned by Mdm Teoh, Mr Michael Ko and Ms Elizabeth Ko. The 29,750,000 Shares (as adjusted for the Bonus Issue and the Sub-Division) were acquired pursuant to the transfer by each of Mdm Ng, Mr Mark Ko and Ms Peony Ko of their respective Shares to MMP for an aggregate consideration of S$12,519,432 based on the audited net tangible asset value of our Shares as at 30 June 2007, which was satisfied by the allotment and issue by MMP to Mdm Ng, Mr Mark Ko and Ms Peony Ko of new shares in its share capital in substantially the same proportion as their Shares transferred to MMP. The said acquisition was completed on 22 June 2009. Following such acquisition, MMP is wholly-owned by Mdm Ng, Mr Mark Ko and Ms Peony Ko. The 7,000,000 Shares (as adjusted for the Bonus Issue and the Sub-Division) were acquired pursuant to the transfer by each of Mdm Lee, Ms Kristine Ko, Ms Patricia Ko and Mrs Kathleen Moo of their respective Shares to V Investments for an aggregate consideration of S$2,799,986 representing a discount of approximately 5% to the audited net tangible asset value of our Shares as at 30 June 2007, which was satisfied by the allotment and issue by V Investments to Mdm Lee, Ms Kristine Ko, Ms Patricia Ko and Mrs Kathleen Moo of new shares in its share capital in substantially the same proportion as their Shares transferred to V Investments. The said acquisition was completed on 22 June 2009. Following such acquisition, V Investments is wholly-owned by Mdm Lee, Ms Kristine Ko, Ms Patricia Ko and Mrs Kathleen Moo.
Total cash consideration paid (S$)
Average price per Share (S$)
13,125,000(2) 29,750,000(3)
5,523,279(2) 12,519,432(3)
0.42(2) 0.42(3)
7,000,000(4) 63,000,000
2,799,986 (4) 25,200,000
0.40(4) 0.40
(2)
(3)
(4)
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SHARE CAPITAL
Our Company (Registration No. 198200079M) was incorporated in Singapore on 8 January 1982 under the Companies Act as a private limited company under the name of Plant Engineering Construction Private Limited. As at the date of incorporation, we had an authorised and issued share capital of S$10,000,000 divided into 10,000,000 ordinary shares of S$1.00 each, and an issued and paid-up share capital of S$2.00 comprising two ordinary shares of S$1.00 each. The name of our Company was subsequently changed to PEC Pte. Ltd. on 25 June 2009. Our Company was converted into a public limited company on 3 July 2009 and in connection therewith, the name of our Company was changed to PEC Ltd. on 3 July 2009. As at the Latest Practicable Date, the issued and paid-up capital of our Company was S$5,000,000 comprising 5,000,000 ordinary shares. At an Extraordinary General Meeting held on 25 June 2009, the Shareholders of our Company approved, inter alia, the following: (a) (b) (c) (d) the adoption of a new set of Articles of our Company; the Bonus Issue; the Sub-Division; the allotment and issue of the New Shares which are the subject of the Invitation. The New Shares, when issued and fully paid-up, will rank pari passu in all respects with the existing issued and fully paid-up Shares; the allotment and issue of the Additional Shares in the event the Over-allotment Option is exercised by the Issue Manager. The Additional Shares, when issued and fully paid-up, will rank pari passu in all respects with the existing issued and fully paid-up Shares; the adoption of the ESOS; that authority be given to our Directors, pursuant to Section 161 of the Companies Act, to: (i) (aa) (bb) issue Shares whether by way of rights, bonus or otherwise; and/or make or grant offers, agreements or options (collectively, Instruments) that might or would require Shares to be issued during the continuance of this authority or thereafter, including but not limited to the creation and issue of (as well as adjustments to) warrants, debentures or other instruments convertible into Shares,
(e)
(f) (g)
at any time and upon such terms and conditions and for such purposes and to such persons as our Directors may, in their absolute discretion, deem fit; and (ii) issue Shares in pursuance of any Instruments made or granted by our Directors while such authority was in force (notwithstanding that such issue of Shares pursuant to the Instruments may occur after the expiration of the authority contained in this resolution),
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Provided that:(iii) the aggregate number of Shares issued pursuant to such authority (including the Shares to be issued in pursuance of Instruments made or granted pursuant to such authority), does not exceed 50% of the Post-Invitation Issued Share Capital, and provided further that where Shareholders with registered addresses in Singapore are not given the opportunity to participate in the same on a pro-rata basis (non pro-rata basis), then the Shares to be issued under such circumstances (including the Shares to be issued in pursuance of Instruments made or granted pursuant to such authority) shall not exceed 20.0% of the PostInvitation Issued Share Capital; the 50% limit in paragraph (iii) above may be increased to 100% for issues of Shares pursuant to this resolution by way of a renounceable rights issue where Shareholders with registered addresses in Singapore are given the opportunity to participate in the same on a pro-rata basis (Renounceable Rights Issue); and (unless revoked or varied by our Company in general meeting) the authority so conferred shall continue in force until the conclusion of the next annual general meeting of our Company or the date by which the next annual general meeting of our Company is required by law to be held, whichever is the earlier.
(iv)
(v)
For the purposes of this resolution, the Post-Invitation Issued Share Capital shall mean the total number of issued Shares of our Company (excluding treasury shares) immediately after the Invitation, after adjusting for: (i) new Shares arising from the conversion or exercise of any convertible securities; (ii) new Shares arising from exercising share options or vesting of share awards outstanding or subsisting at the time such authority is given, provided the options or awards were granted in compliance with the Listing Manual; and (iii) any subsequent bonus issue, consolidation or sub-division of Shares; and (h) that:(i) subject to and conditional upon the passing of the resolution referred to in paragraph (g) above, approval be given to our Directors at any time to issue Shares (other than on a prorata basis to Shareholders) at an issue price for each Share which shall be determined by our Directors in their absolute discretion provided that such price shall not represent a discount of more than 20% to the weighted average price of a Share for trades done on the SGX-ST (as determined in accordance with the requirements of the SGX-ST); and (unless revoked or varied by our Company in general meeting) the authority so conferred shall continue in force until the conclusion of the next annual general meeting of our Company or the date by which the next annual general meeting of our Company is required by law to be held, whichever is the earlier.
(ii)
As at the Latest Practicable Date, our Company has only one class of shares, being ordinary shares. The rights and privileges of our Shares are stated in our Articles. Save for the ESOS Shares, there are no founder, management, deferred or unissued shares reserved for the issuance for any purpose. Save for the ESOS and the Over-allotment Option, no person has been, or is entitled to be, given an option to subscribe for or purchase any securities of our Company or any of our Subsidiaries. There are no Shares that are held by or on behalf of our Company or by any of our Subsidiaries.
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There were no changes in the issued and paid-up share capital of our Company between 1 July 2007 and 30 June 2008 (being the beginning and end of our most recent completed financial year). Details of the changes in the issued and paid-up share capital of our Company since 30 June 2008, being the date of our last audited accounts and the resultant issued and paid-up share capital immediately after the Invitation are as follows:
Resultant issued and paid-up share capital Number of Shares Value 5,000,000 25,000,000 175,000,000 175,000,000 238,000,000 S$5,000,000 S$25,000,000 S$25,000,000 S$25,000,000 S$48,623,000
Purpose
Number of new Shares issued 20,000,000 63,000,000
As at 30 June 2008 Bonus Issue Sub-Division Pre-Invitation share capital New Shares to be issued pursuant to the Invitation Issued and paid-up capital immediately after the Invitation
238,000,000
S$48,623,000
Our Shareholders equity (i) as at 30 June 2008, (ii) as at 31 December 2008, (iii) after the adjustments to reflect the Bonus Issue, the FY2008 Final Dividend, the FY2009 Interim Dividend and the Audex FY2009 Interim Dividend, and (iv) after the Invitation are set forth below.
After the Bonus Issue, the FY2008 Final Dividend, the FY2009 Interim Dividend and the Audex FY2009 Interim Dividend (S$000)
As at 30 June 2008 (S$000) SHAREHOLDERS EQUITY Issued and fully paid-up share capital Total reserves Total retained earnings Total shareholders funds (excluding minority interests) 5,000 (46) 90,276
As at 31 December 2008 (S$000)
After the Invitation (S$000)
5,000 560 97,857
25,000 560 69,207
48,623 560 68,331
95,230
103,417
94,767
117,513
Save as disclosed above and in the section entitled General and Statutory Information of this Prospectus, no Shares in, or debentures of, our Company or any of our Subsidiaries have been issued, or are proposed to be issued, as fully or partly paid for cash or for a consideration other than cash, during the last two years. A summary of the provisions of our Articles relating to, inter alia, the remuneration, borrowing powers of our Directors, the voting rights and dividend rights of members of our Company are set out in Appendix C Summary of the Constitution of our Company of this Prospectus.
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SHAREHOLDERS
The Directors and Substantial Shareholders of our Company and their respective shareholdings in our Company immediately before the Invitation and immediately after the Invitation are set out as follows:
Before the Invitation Direct Interest Deemed Interest Number Number of of Shares % Shares % Directors Edna Ko Poh Thim(1), (2) Robert Dompeling(1), (3) Wong Peng(3) Dr Foo Fatt Kah(3) Chia Kim Huat(3) Ho Yew Mun(3) Substantial Shareholders (other than Directors) Tian San Singapore(2) Case C(4) Teoh Mei Shu(4) Michael Ko Peck Hoon(4) Elizabeth Ko Lu Sein(4) MMP(5) Mark Ko Teong Hoon(5) Others V Investments(6) Lee May Peng(6) Kristine Ko Poh Kheng(6) Patricia Ko Poh Cheng(6) Moo Chih Cheong Kathleen(6) Public (including Reserved Shares) TOTAL 7,000,000 4.0 7,000,000 7,000,000 7,000,000 7,000,000 4.0 4.0 4.0 4.0 7,000,000 3.0 7,000,000 7,000,000 7,000,000 7,000,000 3.0 3.0 3.0 3.0 85,750,000 13,125,000 29,750,000 49.0 7.5 13,125,000 13,125,000 13,125,000 17.0 29,750,000 7.5 7.5 7.5 17.0 85,750,000 36.0 13,125,000 5.5 29,750,000 12.5 13,125,000 5.5 13,125,000 5.5 13,125,000 5.5 29,750,000 12.5 34,125,000 5,250,000 19.5 85,750,000 3.0 49.0 34,125,000 14.3 5,250,000 2.2 85,750,000 36.0 After the Invitation Direct Interest Deemed Interest Number Number of of Shares % Shares %
63,000,000 26.5 238,000,000 100.0
175,000,000 100.0
Notes: (1) (2) Ms Edna Ko Poh Thim (Ms Edna Ko) is the spouse of Mr Robert Dompeling. Tian San Singapore is a company incorporated in Singapore, whose present principal business activity is that of an investment company. Please refer to the section entitled History in this Prospectus for more details. All the issued shares in Tian San Singapore are held by Mdm Teoh Mei Shu (Mdm Teoh), Mr Michael Ko Peck Hoon (Mr Michael Ko), Ms Elizabeth Ko Lu Sein (Ms Elizabeth Ko), Mdm Lee May Peng (Mdm Lee), Ms Edna Ko, Ms Kristine Ko Poh Kheng (Ms Kristine Ko), Ms Patricia Ko Poh Cheng (Ms Patricia Ko), Mrs Moo Chih Cheong Kathleen (Mrs Kathleen Moo), Mdm Ng Khan Tee (Mdm Ng), Mr Mark Ko Teong Hoon (Mr Mark Ko) and Ms Ko Lu Teng Peony (Ms Peony Ko). Ms Edna Ko is deemed to be interested in all the Shares held by Tian San Singapore as she holds 36.7% of the issued share capital of Tian San Singapore. (3) In connection with the Invitation, save for Ms Edna Ko, we intend to offer each Executive Director 350,000 Reserved Shares for subscription, each representing 0.15% of our post-Invitation share capital and each Independent Director 50,000 Reserved Shares for subscription, each representing 0.02% of our post-Invitation share capital. In the event any of the said Directors accept such Reserved Shares, they may hold, dispose of or transfer all or part of their shareholdings in our Company after the admission of our Company to the Official List of the SGX-ST.
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(4)
Case C is an investment holding company incorporated in Singapore. All the issued shares in Case C are held by Mdm Teoh, Mr Michael Ko and Ms Elizabeth Ko. Mr Michael Ko and Ms Elizabeth Ko are siblings of Ms Edna Ko, and Mdm Teoh is the mother of Mr Michael Ko and Ms Elizabeth Ko. Mdm Teoh, Mr Michael Ko and Ms Elizabeth Ko are each deemed to be interested in all the Shares held by Case C as they respectively hold 26.7%, 53.3% and 20.0% of the issued share capital of Case C. MMP is an investment holding company incorporated in Singapore. All the issued shares in MMP are held by Mdm Ng, Mr Mark Ko and Ms Peony Ko. Mr Mark Ko and Ms Peony Ko are siblings of Ms Edna Ko, and Mdm Ng is the mother of Mr Mark Ko and Ms Peony Ko. Mr Mark Ko is deemed to be interested in all the Shares held by MMP as he holds 79.4% of the issued share capital of MMP. V Investments is an investment holding company incorporated in Singapore. All the issued shares in V Investments are held by Mdm Lee, Ms Kristine Ko, Ms Patricia Ko and Mrs Kathleen Moo. Ms Kristine Ko, Ms Patricia Ko and Mrs Kathleen Moo are siblings of Ms Edna Ko, and Mdm Lee is the mother of Ms Kristine Ko, Ms Patricia Ko, Mrs Kathleen Moo and Ms Edna Ko. Mdm Lee, Ms Kristine Ko, Ms Patricia Ko and Mrs Kathleen Moo are each deemed to be interested in all the Shares held by V Investments as they each hold 25.0% of the issued share capital of V Investments.
(5)
(6)
Save as disclosed above, there are no other relationships between our Directors and Substantial Shareholders. Save as disclosed above, our Company is not directly or indirectly owned or controlled by another corporation, any government or other natural or legal person whether severally or jointly. To the best of their knowledge, our Directors are not aware of any arrangements, the operation of which may at a subsequent date result in a change in control of our Company. The Shares held by our Directors and Substantial Shareholders do not carry different voting rights from the New Shares which are the subject of the Invitation. Save for the following, there are no significant changes in the percentage of ownership of Shares in our Company held by our Directors and Substantial Shareholders in the last three years prior to the Latest Practicable Date are as follows:
Change in % shareholding in our Company
Date/ Event Substantial Shareholders Edna Ko Poh Thim Michael Ko Peck Hoon Case C MMP
Notes: (1) (2)
Number of Shares(1)
17 April 2009 / Acquisition of Shares(2) 17 April 2009 / Sale of Shares(2) 22 June 2009 / Acquisition of Shares(3) 22 June 2009 / Acquisition of Shares(4)
125,000 125,000 375,000 850,000
2.5% 2.5% 7.5% 17.0%
The number of Shares is not adjusted to take into account the Bonus Issue and the Sub-Division. On 3 April 2009, Ms Edna Ko acquired from Mr Michael Ko 125,000 Shares for an aggregate purchase price of S$68,750. The share transfer was registered on 17 April 2009. The 375,000 Shares were acquired pursuant to the transfer by each of Mdm Teoh, Mr Michael Ko and Ms Elizabeth Ko of their respective Shares to Case C for an aggregate consideration of S$5,523,279 based on the audited net tangible asset value of our Shares as at 30 June 2007, which was satisfied by the allotment and issue by Case C to Mdm Teoh, Mr Michael Ko and Ms Elizabeth Ko of new shares in its share capital in substantially the same proportion as their Shares transferred to Case C. The said acquisition was completed on 22 June 2009. Following such acquisition, Case C is wholly-owned by Mdm Teoh, Mr Michael Ko and Ms Elizabeth Ko. The 850,000 Shares were acquired pursuant to the transfer by each of Mdm Ng, Mr Mark Ko and Ms Peony Ko of their respective Shares to MMP for an aggregate consideration of S$12,519,432 based on the audited net tangible asset value of our Shares as at 30 June 2007, which was satisfied by the allotment and issue by MMP to Mdm Ng, Mr Mark Ko and Ms Peony Ko of new shares in its share capital in substantially the same proportion as their Shares transferred to MMP. The said acquisition was completed on 22 June 2009. Following such acquisition, MMP is wholly-owned by Mdm Ng, Mr Mark Ko and Ms Peony Ko.
(3)
(4)
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MORATORIUM
As a demonstration of their commitment to our Group, each of our Executive Chairman, Ms Edna Ko, our Managing Director, Mr Wong Peng, and our existing Shareholders, Tian San Singapore, Case C, MMP and V Investments which holds 34,125,000 Shares, 5,250,000 Shares, 85,750,000 Shares, 13,125,000 Shares, 29,750,000 Shares and 7,000,000 Shares respectively, representing 14.3%, 2.2%, 36.0%, 5.5%, 12.5% and 3.0% of our Companys post-Invitation share capital respectively, has undertaken not to sell, dispose of or transfer or enter into any agreement that will directly or indirectly constitute or will be deemed as a disposal of any part of its shareholding in our Company for a period of six months commencing from the date of admission of our Company to the Official List of the SGX-ST. Each of Mdm Teoh, Mr Michael Ko, Ms Elizabeth Ko, Mdm Lee, our Executive Chairman, Ms Edna Ko, Ms Kristine Ko, Ms Patricia Ko, Mrs Kathleen Moo, Mdm Ng, Mr Mark Ko and Ms Peony Ko, who together hold the entire issued and paid-up capital of Tian San Singapore, has undertaken not to sell, dispose of or transfer or enter into any agreement that will directly or indirectly constitute or will be deemed as a disposal of any part of his/ her respective interests in Tian San Singapore for a period of six months commencing from the date of admission of our Company to the Official List of the SGX-ST. Each of Mdm Teoh, Mr Michael Ko and Ms Elizabeth Ko who together hold the entire issued and paid-up capital of Case C, has undertaken not to sell, dispose of or transfer or enter into any agreement that will directly or indirectly constitute or will be deemed as a disposal of any part of his/ her respective interests in Case C for a period of six months commencing from the date of admission of our Company to the Official List of the SGX-ST. Each of Mdm Ng, Mr Mark Ko and Ms Peony Ko who together hold the entire issued and paid-up capital of MMP, has undertaken not to sell, dispose of or transfer or enter into any agreement that will directly or indirectly constitute or will be deemed as a disposal of any part of his/ her respective interests in MMP for a period of six months commencing from the date of admission of our Company to the Official List of the SGX-ST. Each of Mdm Lee, Ms Kristine Ko, Ms Patricia Ko and Mrs Kathleen Moo who together hold the entire issued and paid-up capital of V Investments, has undertaken not to sell, dispose of or transfer or enter into any agreement that will directly or indirectly constitute or will be deemed as a disposal of any part of his/ her respective interests in V Investments for a period of six months commencing from the date of admission of our Company to the Official List of the SGX-ST.
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GROUP STRUCTURE
Our Group structure as at the date of this Prospectus is as follows:
Our Company
80% 100% 100% 44% 60% 100% 100% 75%
60%
100%
100%
100%
Audex PCELC Huizhou PEC Malaysia PEC Indonesia PEI PECII
Huizhou Tianxin
ITR
PES
PTCS Huizhou
TIS
PGS
44.25%
100%
100%
100%
50%
4.75%
Audex Shanghai
Audex UAE
Audex Vietnam
CTS
PEC Thailand
49.0%
PMC Thailand
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As at the date of this Prospectus, save for the following companies, there are no other subsidiaries, associated companies and joint-venture companies of our Group:
Effective Equity Interest held Beneficially by our Company
Name of Company Singapore Audex(1)
Date and Country of Incorporation
Principal Place of Business
Principal Activities
Paid-Up Capital
1 March 1994, Singapore
Singapore
Engineering, procurement and construction services and project management services Sale and distribution of tank terminal related equipment Information technology and consultancy services Investment holding
S$4,000,000
80.0%
CTS(2)
9 March 2007, Singapore
Singapore
S$100,000
40.0%
ITR
1 August 1995, Singapore
Singapore
S$520,000
100.0%
PECII
12 February 2000, Singapore 17 November 1998, Singapore
Singapore company
S$1,760,000
100.0%
PEI(3)
Singapore
Engineering services and installation of electrical and scientific instruments Engineering, procurement and construction management services Blasting, painting, scaffolding, insulation, refractory and fire proofing services Heat treatment services
S$500,000
44.0%
PES(4)
29 September 2005, Singapore
Singapore
S$100,000
60.0%
PGS
20 January 2009, Singapore
Singapore
S$100,000
100.0%
TIS
16 September 1995, Singapore
Singapore
S$300,000
100.0%
Indonesia PEC Indonesia(5) 11 December 1998, Indonesia Indonesia Fabrication and engineering works US$400,000 75.0%
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Name of Company Malaysia PEC Malaysia
Paid-Up Capital
11 June 1983, Malaysia
Malaysia
Civil, mechanical and electrical engineering project services
RM500,000
100.0%
PRC Audex Shanghai(6) Huizhou Tianxin(7) 30 March 2005, PRC 11 October 2005, PRC PRC Project management Engineering design, procurement, construction and maintenance services Heavy machineries and equipment leasing services Consultancy services in respect of engineering technology, project engineering and design and management US$140,000 80.0%
PRC
RMB15,000,000
60.0%
PCELC Huizhou
6 September 2005, PRC
PRC
US$2,100,000
100.0%
PTCS Huizhou
11 June 2004, PRC
PRC
US$130,000
100.0%
Sri Lanka Audex Sri Lanka(8) Thailand PEC Thailand(9) 26 September 2005, Thailand Thailand Engineering, procurement, construction and maintenance services Engineering, procurement, construction and maintenance services Baht 20,000,000 48.1% 1 March 1994, Sri Lanka Sri Lanka Fabrication works
PMC Thailand(10)
24 May 2000, Thailand
Thailand
Baht 40,000,000
23.5%
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Name of Company The UAE Audex UAE
Paid-Up Capital
29 October 2007, UAE
UAE
Engineering, procurement, construction and project management services
AED150,000
80.0%
Vietnam Audex Vietnam 17 August 2007, Vietnam Vietnam Engineering, procurement, construction and project management services US$100,000 80.0%
Notes: (1) The remaining 20.0% shareholding of Audex is owned by four senior employees of Audex. Please refer to the sections entitled History and General and Statutory Information - Miscellaneous in this Prospectus for more details. Pursuant to a joint-venture agreement dated 28 February 2007 between our Subsidiary, Audex and CTS Cargo Transfer Systems B.V. (CTS Cargo), CTS was established as a joint-venture between Audex and CTS Cargo and is 50.0% held by Audex. CTS is engaged in the sale and distribution of tank terminal related equipments and was formed to complement our Groups engineering services to the oil and chemical terminal industry. Pursuant to the said joint-venture agreement, Audex and CTS Cargo shall not, at any time whilst it is beneficially interested in any shares of CTS or for a period of one year from the date on which Audex and/or CTS Cargo ceases to be beneficially interested in the shares of CTS, inter alia, carry on any business competing with CTS or solicit any customer, director or employee of CTS. The remaining 56.0% shareholding of PEI is owned by Yokogawa Engineering Asia Pte Ltd (YEA) (51.0%) and Mr Lim Fung Suan (5.0%), an employee of our Group. PEI is engaged in E&I services and installation of electrical and scientific instruments in Singapore. Although E&I services is a subset of the engineering services offered by our Company, PEI is a strategic joint-venture company set up between PEC and YEA to support E&I engineering and installation services offered under the scope of our Groups engineering services. The joint-venture agreement between PEC and YEA dated 1 February 1999 (the JV Agreement) to form PEI provides, inter alia, that neither PEC nor YEA shall, directly or indirectly, establish, invest or otherwise participate in a joint-venture, project or business similar to or in any way competes with the business of PEI in Singapore. The remaining 40.0% shareholding of PES is owned by our Executive Officer, Mr Fan Ming Keong. The remaining 25.0% shareholding of PEC Indonesia is owned by PT. Anugerah Bumi Bahari. Audex Shanghai is wholly-owned by our Subsidiary, Audex, in which we have an effective interest of 80.0%. The remaining 40.0% shareholding of Huizhou Tianxin is owned by the Second Construction Company of SINOPEC (30.0%) and Luoyang Petrochemical Engineering Corporation (10.0%). Audex Sri Lanka is wholly-owned by our Subsidiary, Audex, in which we have an effective interest of 80.0%. In November 2001, Audex registered its branch office, Audex Sri Lanka, to manage the installation of steel lining and hydro-mechanical parts for a project in Sri Lanka and the said branch has remained dormant since the completion of the said project in November 2003. Our Subsidiaries, PECII and Audex, hold shares representing 44.25% and 4.75% respectively in our Associated Company, PEC Thailand. The remaining 51.0% shareholding of PEC Thailand is owned by Leong San Chan Holding Co., Ltd. and four Thai individuals who are unrelated to us. PEC Thailand was set up to expand our Groups engineering business into Thailand and the business activities of PEC Thailand in Thailand is meant to complement our Groups overall business. Our Associated Company, PEC Thailand holds shares representing 49.0% in our Associated Company, PMC Thailand. The remaining 51.0% shareholding of PMC Thailand is owned by six Thai individuals who are unrelated to us. Currently, PMC Thailand does not have any ongoing business activities and is in the process of voluntary dissolution.
(2)
(3)
(4) (5) (6) (7)
(8)
(9)
(10)
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As at the date of this Prospectus, our Group consists of 11 subsidiaries and associated companies incorporated outside of Singapore, namely in Indonesia, Malaysia, the PRC, Sri Lanka, Thailand and the UAE. Our Group had established such foreign subsidiaries and associated companies primarily to better explore business opportunities in the said foreign jurisdictions and/or to facilitate the efficient management of their overseas projects in the said foreign jurisdictions. As our Group continues to pursue overseas business opportunities and expands its operations worldwide, our Directors therefore expect such number of foreign subsidiaries, associated companies and joint-ventures to increase. Each potential overseas business opportunity/project is considered on its individual merits and in assessing the nature and type of corporate vehicle our Group will establish to best carry out its future overseas expansion, our Directors take into consideration various factors, including the following: Market Site/ Location selection Facilities required Capital and operational costs Economic evaluation Business structure Organisation structure Business risks Country specific legal, tax, social and fiscal framework None of our Directors or Substantial Shareholders or any of their associates is related to or has any interest, direct or indirect, in any of the above minority shareholders in our Group Companies. None of our Group Companies is listed on any stock exchange.
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GENERAL INFORMATION ON OUR GROUP

HISTORY Our history can be traced back to 8 January 1982 when PEC was incorporated as a joint-venture company between our Groups founder Mr Tony Ko Sun Siew, his family members and certain Korean business partners. At that time, Mr Tony Ko was also the founder and major shareholder of the Tian San group of companies, comprising Tian San Singapore, Tian San Shipping, Tian San Malaysia and certain other private companies (the Tian San Group), whose principal business focused on construction and equipment leasing for the petroleum industry. PECs principal business then was to provide maintenance services to a petroleum refinery in Singapore. Around 1984, the Korean business partners equity share in PEC was bought over by Tian San Singapore. Since 1995, save for Tian San Malaysia, the Tian San Group had restructured its business to focus on the logistics and marine industries, leaving PEC to focus on its business as an engineering service provider. With the passing of Mr Tony Ko in 1992, his daughter, Ms Edna Ko Poh Thim took over the management and control of PEC. By February 1990, we had expanded our operations into Malaysia when we acquired PEC Malaysia as a wholly-owned subsidiary to construct storage tanks and associated mechanical works for a petrochemical project in Johor Bahru, Malaysia. This marked PECs first foray into project works. Since then, PEC continued to seek expansion in its project works business segment. Between 1988 and 1995, PEC successfully secured three major project works contracts for the petrochemical industry in Singapore amounting in aggregate to approximately S$90.0 million. To further expand its business, in March 1994, PEC entered into a joint-venture with Chiyoda Singapore Pte Ltd to set up Audex. PEC and Chiyoda held 40.0% and 60.0% shareholding interests in Audex respectively. Audexs core businesses are to provide EPC and EPCm services for the oil and chemical terminal industry. In June 2004, PEC bought over Chiyodas 60.0% shareholding interests in Audex. In connection with the said acquisition, the then management team of Audex, comprising four senior employees of Audex, agreed (following various subsequent amendments to the original agreement) to purchase an aggregate of 20.0% of the issued share capital of Audex over a period of time in various tranches. Such purchases have since been completed, and the said senior employees currently hold an aggregate of 20.0% of the issued share capital of Audex, with PEC holding the balance 80.0%. It is a term of the agreement that in the event of termination or cessation of the employment of any such senior employee with Audex or PEC, PEC will have a call option to purchase from such senior employee all (but not part only) of the shares in Audex held by him, at a price equivalent to the net tangible asset value per share of Audex based on the latest available audited accounts of Audex. In 1995, with a view to diversify its business, PEC incorporated the following companies in Singapore: (a) Plant Heat Treatment (S) Pte Ltd (now known as TIS), a wholly-owned subsidiary company, to carry out heat treatment services; ITR, a wholly-owned subsidiary company, to provide information technology solutions services to third parties; and Sino-PEC Engineering (Singapore) Pte Ltd (Sino-PEC), a joint-venture company, to carry out project works in Singapore. PEC and Sinopec Engineering Incorporation held 51.0% and 49.0% shareholding interests in Sino-PEC respectively. Sino-PEC was subsequently voluntarily wound up in August 2004 upon completion of the project works.
(b)
(c)
In December 1998, PEC entered into a joint-venture with PT Anugerah Bumi Bahari (PT ABB) to form PEC Indonesia to carry out fabrication activities in Batam, Indonesia. PEC held 75.0% shareholding interests in PEC Indonesia with the remaining 25.0% shareholding interests held by PT ABB. PEC Indonesia currently owns and operates a fabrication facility in Batam, Indonesia.
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In November 1998, we saw an opportunity to develop our E&I capabilities, an important engineering discipline in our industry, by setting up PEI with certain individuals to carry out E&I business in Singapore. In March 1999, Yokogawa Engineering Asia Pte Ltd (YEA) joined as a new partner in PEI and acquired 51.0% shareholding interest in PEI from PEC and the other shareholders, with PECs shareholding interests being reduced to 44.0%. Since 2000, our Group started actively exploring overseas expansion and business opportunities. In this regard, PECII was set up in February 2000 as an intermediate holding company to hold our foreign Group Companies, where practicable. However, in certain cases due to local legal requirements or commercial considerations, we entered into joint-venture arrangements or set up subsidiaries with PEC as the immediate holding company in such foreign jurisdictions. In May 2000, we expanded our operations into Thailand when PECII collaborated with a group of Thai individuals to form PMC Thailand. In September 2005, we set up PEC Thailand in collaboration with a different group of Thai partners to carry out engineering, maintenance and construction services in Thailand. As at the Latest Practicable Date, our operations in Thailand are carried out through PEC Thailand, which also holds our interest in PMC Thailand. In September 2002, we were awarded a contract to provide engineering drawings and services for a project in the PRC (the PRC IT Project). In December 2002, PEC formed a wholly-owned PRC subsidiary, Shenzhen Baojian Consulting Co., Ltd (Shenzhen PEC), to execute the PRC IT Project. The business licence of Shenzhen PEC was subsequently revoked and the said company was subsequently wound up in September 2006. In June 2004, we set up PTCS Huizhou, a wholly-owned PRC Subsidiary, to provide technology consultancy services in the PRC and to take over the PRC IT Project. Please refer to the section entitled General and Statutory Information in this Prospectus for more details. In October 2005, Huizhou Tianxin was set up as a joint-venture company between PEC (60.0%), The Second Construction Company of Sinopec (30.0%) (SCC SINOPEC) and Luoyang Petrochemical Engineering Company (LPEC) (10.0%) to provide maintenance and related services works for a petrochemical plant situated in Huizhou, Guangdong province, PRC. In the same year, our Group also incorporated a wholly-owned PRC Subsidiary, PCELC Huizhou, to provide supply and rental services of heavy construction equipment in the PRC. In June 2005, PEC was awarded a contract by Horizon Singapore Terminal Ltd to carry out the civil, mechanical, and piping works for a bulk liquid products terminal project on Jurong Island. Around September 2005, PEC entered into a joint-venture with Mr Fan Ming Keong, to set up PES, with PEC having a 60.0% shareholding interest and the remaining 40.0% shareholding interest being held by Mr Fan. PES was incorporated to focus on engineering designs for process plants, with Mr Fan as an executive director and general manager. Around March 2007, CTS was established as a joint-venture between Audex and CTS Cargo Transfer Systems B.V. to focus on the supply of equipment for terminal and tankage projects. Audex UAE was set up in October 2007 in connection with our Groups further expansion into the Middle East. In the fourth quarter of 2007, our Group was awarded two EPC contracts for an aggregate value of approximately US$120 million for the design, engineering, procurement and construction of an oil distribution terminal in Jakarta, Indonesia and a bulk liquid product terminal in the UAE. In January 2009, PGS was set up primarily to provide ancillary services such as painting and blasting, scaffolding, refractory, insulation and fire proofing services in support of our two core businesses. This is in line with our main objective of being a one-stop service provider. In March 2009, our Group was awarded a project works contract worth approximately S$60 million for the construction of a utility plant extension at a petrochemical plant site in Singapore.
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On 25 June 2009, our Company changed its name to PEC Pte. Ltd. On 3 July 2009, our Company was converted into a public limited company and the name of our Company was changed to PEC Ltd. in connection therewith. BUSINESS Overview We are a specialist engineering group servicing the oil and gas, petrochemical, oil and chemical terminal, and pharmaceutical industries. Our two core business activities are project works and maintenance services. Our project works are currently being carried out mainly in Singapore, Malaysia, Thailand, Indonesia, Vietnam, the PRC and the Middle East while our maintenance services are currently being carried out in Singapore and the PRC. To support our business activities, we have established fabrication facilities in Singapore, Malaysia, Indonesia, Thailand and the PRC. Project works The scope of our project works ranges from EPCm and EPC in respect of a terminal or a section of a plant or terminal, project management consultancy, to the construction of a certain part of a plant or terminal. In any projects works, we provide engineering, procurement and/or construction/ construction management services. For EPC projects where we are engaged to provide all three engineering, procurement and construction services, these projects are highly valued as their conceptual design and project management elements necessitate a greater degree of technical know-how and expertise. Depending on the nature, scale and complexity of the works, we usually take approximately one to two years to complete a project. The engineering services we provide include conceptual design, front-end engineering design and detailed engineering. Such services cover various engineering disciplines such as process, civil, mechanical, E&I, pressure vessel, structural and piping. Our procurement services entail material and equipment purchasing and material management. Our construction services include fabrication and installation of piping, structures and pressure vessels, installation of mechanical equipment, electrical, instrumentation and control systems, and provision of scaffolding, painting, insulation and fire proofing services. For FY2006, FY2007, FY2008 and HY2009, our project works contributed approximately 49.7%, 60.8%, 63.6% and 76.0% of our Groups total revenue respectively. Maintenance services Our maintenance services business segment covers both plant maintenance works as well as related services works and range from maintenance carried out on plant equipment to single-source maintenance services for a production plant. As a single-source maintenance services provider, we serve as the sole contractor responsible to the plant operator/owner for all elements of the contracted works. With our sub-contractors, we are able to provide all the requisite major engineering disciplines including civil, mechanical, E&I, tankage, structural, piping, painting, scaffolding, insulation, fire proofing and hydro jetting. We also provide EPCm services to plant upgrading and/or plant de-bottlenecking of an existing plant. Our maintenance works typically include tankage maintenance, static equipment maintenance, rotating equipment maintenance, electrical equipment maintenance, instrument and control equipment maintenance. We also provide other related services works such as plant turnaround, plant debottlenecking and plant upgrading services. Typically, we offer our maintenance services in the form of a long-term service contract, usually for a fixed term of two to five years, in which our various maintenance services and their relevant rates would be itemised. During the term of such a contract, our customer, the plant owner/operator, would place individual work orders with us, and we will invoice our customer according to the rates/terms set out in the contract. Please refer to the section entitled Major Customers in this Prospectus for more details as to our Groups major customers in respect of our maintenance services business segment.
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For FY2006, FY2007, FY2008 and HY2009, our maintenance services contributed approximately 49.7%, 39.0%, 36.2% and 23.8% of our Groups total revenue respectively. Other operations In addition to the above stated two core business activities, we also carry out other ancillary business activities such as the provision of information technology services and products, heat treatment services, equipment leasing and engineering consultancy services through our Subsidiaries. Revenue from our ancillary business activities accounted for approximately 0.6% of our revenue for FY2006 and 0.2% of our revenue for each of FY2007, FY2008 and HY2009. Process Flow The process flow pertaining to both of our core business activities can be illustrated diagrammatically as follows:
Stage 1 Tendering/ Negotiation
Stage 2 Contract Review and Administration
Stage 3 Project Planning
Stage 4 Procurement and Sub-Contract
Stage 5 Project Execution
Stage 6 Project Handover
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Stage 1 : Tendering/ Negotiation Typically, we will have to bid for project works as well as maintenance services. This is carried out by the tender and proposal departments in our various Group Companies. Upon receiving an invitation to bid for a project, the relevant tender and proposal departments will put together a tender team, generally comprising an Executive Director, an Executive Officer and/or another senior employee as the team leader (the Team Leader), a senior project manager/project manager and/or costing engineer(s), to prepare the tender bid. For new project works and new maintenance services, we tender for such projects mostly through closed tenders. The first step involves the review of the tender documents which contain details of the project, including drawing plans and project specifications. In this regard, we will rely on market intelligence based on our networking to better understand the requirements and needs of the potential customer so as to furnish a tender that best meets their requirements. Our technical and design personnel will prepare design specifications and technical submissions, which include temporary and permanent work designs, risk analyses and safety plans as part of the tender submissions. For project works where the design is prepared by consultants engaged by the customer, we may propose more cost-effective alternative designs to the customer. Our team will compile estimates of materials, labour, sub-contracting costs (where applicable) and machinery costs based on the resources required to carry out the project and quotations obtained from our suppliers and sub-contractors (where applicable). In arriving at the tender price, the complexity and risks associated with the project will be taken into consideration. The tender bid is reviewed and approved by the relevant Team Leader before submission. For major projects, we may seek advice from external consultants on design-related issues before submission of tender bids. Where the bid value is above S$20.0 million, the tender bid is also reviewed and approved by a tender committee comprising our Executive Directors and our Senior Director Tender and Proposal, before the submission. For our maintenance services, we usually enter into long-term contracts with our customers for two to five years. For existing maintenance services, we will commence negotiations with the plant owners/ operators for a new contract or an extension of the existing contracts six to 12 months before expiry of the contracts. The process flow for such negotiations is similar to that undertaken for new project works and new maintenance services. Occasionally, for an existing maintenance site, the customer may decide to have additional works which have not been provided for in our existing maintenance services contract with the customer. The customer will then issue a request for quotation. The site manager, usually a senior project manager/project manager, who is in charge of the maintenance services, will decide whether his maintenance team will prepare the bid proposal themselves or engage the assistance of the relevant tender and proposal department to prepare the bid proposal. The site manager is only authorised to prepare bid proposal where the value of such additional works does not exceed S$1.0 million. Stage 2 : Contract Review and Administration After the letter of award or contract is received from the customer, we will review and ensure that the project specifications and scope of work to be performed by us are clearly spelt out in these documents, and the contract terms are consistent with the tender documents submitted by us. A copy of the letter of award or project contract is then signed by the relevant Executive Director, Executive Officer or project manager, depending on the project value. For projects which are out-sourced to our sub-contractors, the project manager will prepare the letter of award or sub-contract, which will contain key terms such as the scope of work, sub-contract amount, retention sum (if any), estimated commencement and completion dates, and variation order provisions. Subject to the value of the subcontract/purchase order, the sub-contract/purchase order will be reviewed and signed by our duly authorised Executive Director, Executive Officer or the project manager, as the case may be.
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Stage 3 : Project Planning A project manager will be assigned to each project. For maintenance services, the project manager will also take on the role of the site manager. The project manager in charge will prepare a project execution plan (PEP) before work commences on the project. The PEP includes the scope of work for the project, a project programme/schedule indicating the major milestones for the project to ensure that the project is executed in a systematic and timely manner, a procurement schedule for major resources required for the project such as materials, manpower and machinery, a detailed project budget for cost monitoring, staff authorisation, documentation and data control. In this regard, we will utilise our EIS for resources allocation and planning purposes and our PECMm for technical preparation purposes. A kick-off meeting involving the relevant Executive Director and/or Executive Officer, project manager and personnel from our purchasing, engineering, contracts, quality assurance, safety and accounts departments of the relevant Group Company will be initiated by the project manager to discuss and finalise the PEP for the project. The project schedule and budget are revised and updated by the project manager as the project evolves, subject to the approval of the relevant Team Leader. Stage 4 : Procurement and Sub-Contract At this stage, purchases of products from suppliers are made upon requisition by the project manager. Our project manager will also call for quotations from our sub-contractors to supplement those types of works where we may not have sufficient resources, for example scaffolding, blasting and painting and insulation works. Purchases are made and sub-contracts are awarded based on the quality of goods/services, pricing and credit terms. To ensure consistent quality standards, our Group maintains a list of pre-qualified suppliers and sub-contractors, which are evaluated and assessed periodically based on certain criteria such as the ability to meet delivery schedules and project schedules, and the quality of products and services performed. This list is constantly updated based on feedback obtained from the relevant project personnel for the project. Stage 5 : Project Execution The project manager monitors and supervises the physical progress of the project to ensure its timely completion. He also closely monitors materials and machinery utilisation to minimise wastage and inefficiency and conducts random checks on materials upon delivery to ensure that they conform to our quality standards. In addition, he coordinates with the main contractor and sub-contractors and resolves any problems that may arise. During the course of the project, the relevant Team Leader conducts regular progress meetings with our project manager to ensure that the project is carried out based on the planned schedule in accordance with the PEP, and that project costs are kept within the project budget. Further, feedback is obtained from the relevant personnel on any problems or issues relating to the project, and actions taken to address these problems or issues. We also work closely with project owners/operators and main contractors to resolve any problems or issues that may arise.
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Stage 6 : Project Handover Upon the completion of the project, the project manager will carry out an inspection of the work done with the customer and rectify any defects identified. Thereafter, the project manager will write to the customer to formally hand over the project and obtain the relevant certificate of completion. This is followed by the commencement of the defects liability period, which is generally for a period of up to 12 months. At the end of the project, the Team Leader will conduct a feedback and review meeting with the project manager to evaluate our performance on the project in terms of both efficiency and profitability, and identify areas for improvements for future projects. QUALITY ASSURANCE We are committed to achieving high quality standards in all our projects. To this end, our Group Companies have each set up a quality assurance/quality control department. Since 2000, PEC has implemented OHSEQ and all projects carried out by PEC are required to comply with this management system. At the same time, our other Group Companies are in the process of putting in place procedures to comply with OHSEQ, to the extent possible. A brief description of the quality assurance aspect of OHSEQ is set out below. At the commencement of each project, the OHSEQ goals and objectives will be agreed upon between the customer and PEC. A project execution plan which includes a quality assurance plan or an inspection and test plan will be prepared by the project execution team for each project. The quality assurance plan is prepared with reference to OHSEQ. The quality assurance plan details the site organisation structure, the duties and responsibilities of each officer, the control measures (undertaken to ensure the goals and objectives of the project are met), the general execution procedures (descriptions on steps undertaken to carry out common tasks) and method statements (descriptions on steps taken to carry out an important task) to be adopted by the project team. After the quality plan is accepted and approved, PEC will execute the project in accordance to the plan to achieve the expected quality standards. Under the OHSEQ, we maintain a list of approved suppliers and sub-contractors from which we procure materials and services for our projects. We constantly evaluate their performance through feedback from our project personnel and quality control team. Suppliers and sub-contractors who fail to meet our performance criteria may not be considered for future PEC projects. Under the OHSEQ, we have to carry out mandatory audits to ensure compliance. Our quality audit team, comprising an Executive Officer and/or senior project manager, a project supervisor and a quality executive, conducts regular audits in accordance with the OHSEQ audit schedule and any defaults uncovered will be rectified in accordance to the quality plan prescribed by the OHSEQ. The quality audit team will conduct inspections during the course of the project to ensure that work is carried out according to our quality procedures, unnecessary wastage of materials is minimised, site housekeeping is in order and safety, health and all relevant environment issues are taken care of. Regular briefings are held onsite to promote safety, health, environment and quality. Regular checks/audits are also carried out to ensure proper site set-up and work processes. By means of regular project meetings, we gather feedback from our customers about their quality expectation, our quality performance and any changes in their quality requirements. Our Executive Directors and Executive Officers periodically meet up with our customers to obtain feedback on our services. We also hold regular meetings with our project managers to discuss and review our quality performance and improvements that needs to be put in place to enhance our standards. FABRICATION FACILITIES AND UTILISATION Our two core businesses are project works and maintenance services. For the purposes of our business, we fabricate components such as steel structures, tanks, pressure vessels (such as columns in a process plant) and fabricated pipe pieces. Such fabrication works are carried out in our fabrication facilities in Singapore, Malaysia, Thailand, Indonesia and the PRC. Our fabrication works are supportive works in nature and are accordingly dependent on our project and business demands.
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The utilisation rate of our combined fabrication facilities for the last three financial years is as follows:
FY2006 Maximum annual production capacity(1) (mt) 7,470
Notes: (1) The maximum annual production capacity of our combined fabrication facilities was measured in mt based on the number of machines and the number of production operators manning the machines as at the end of the financial year being operational for 10 hours per day for 300 days a year. The utilisation rate of our fabrication facilities in each financial year was calculated by dividing the total actual mt produced for the whole of that financial year by the maximum annual capacity.
Utilisation rate(2) (%) 71.1%
Utilisation rate(2) (%) 74.7%
Utilisation rate(2) (%) 81.4
(2)
The increase in production capacity from FY2007 to FY2008 was due to the acquisition of a fabrication facility in Singapore located at 19 Tuas Avenue 8, Singapore 639234 in FY2007, which commenced operations in July 2007. As at the Latest Practicable Date, following our acquisition of two additional fabrication facilities in Singapore and the PRC in FY2009 and including the fabrication facilities of PEC Thailand which commenced operations in FY2009, the total increase in our maximum annual production capacity contributed by these three new fabrication facilities is approximately 3,600 mt and the total combined site area of all our fabrication facilities is approximately 93,755 sq m. MARKETING AND BUSINESS DEVELOPMENT Our marketing and business development approach is based on fostering long-term and strong relationships with our customers with a focus on customer retention. For project works, we rely on our business network of government and private organisations to keep track of industry developments and opportunities. Upon identifying suitable opportunities, we will seek avenues to participate in or tender for such new projects. In the area of maintenance services, for existing customers, we focus on improving our existing level of service as well as expanding our scope of available services. For new customers, our marketing strategy is based on identifying their specific needs and developing suitable solutions to meet those needs. Our overall marketing and business development activities are spearheaded by our Groups Executive Directors. They are supported by our Executive Officers, in particular by Mr John Lim Yeu Siang who helms our business development team which explores and develops new business opportunities for our Group. Capitalising on our Executive Directors extensive experience in project works and maintenance services as well as their experience in tendering and executing projects, we are often able to propose more cost-effective alternatives to our customers specifications, thereby enhancing the competitiveness of our tender bids. The main focus of our business development team is to maintain customer contacts and to seek out new business opportunities. For our maintenance services customers, we assign a senior manager or an Executive Officer to act as the single-point of contact and responsibility between each of our customers and us. This assigned person stays in close communication with our customers to understand and provide the necessary feedback to the management of our Group. We also participate regularly in local and regional trade exhibitions, conferences, workshops, trade missions and seminars relating to engineering services for the oil and gas, petrochemical, oil and chemical terminal, and pharmaceutical industries. Some seminars and trade missions in which we participated include the ProcessCEM Asia 2008 exhibition in Singapore, organised by the Association of Process Industry and supported by amongst others, the Singapore Economic Development Board,
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SPRING Singapore and International Enterprise Singapore. Our participation in such trade missions, conferences, exhibitions and seminars allows us to keep abreast of the latest developments in the engineering services for the oil and gas, petrochemical, oil and chemical terminal, and pharmaceutical industries, exchange ideas with fellow players, promote our business and source for new customers and market opportunities. RESEARCH AND DEVELOPMENT The nature of our business does not require us to carry out extensive research and development activities. However, in order to ensure that we remain competitive, we review our internal processes and constantly keep abreast of new concepts and trends relevant to the industries in which we operate, so as to improve our engineering techniques and work processes. Our Executive Directors and Executive Officers maintain close contact with our customers and other industry players to obtain regular feedback on our services and market information. We are supported by our production engineers and technicians and quality assurance teams with input on our day-to-day operations as well as regular exchanges of ideas, information and technical know-how with our suppliers and sub-contractors so as to maximise the potential capacity of our fabrication facilities. We did not incur any material expenditure on research and development for FY2006, FY2007, FY2008 and HY2009 respectively. TRAINING Our employees are an important resource and their technical competence and knowledge are fundamental to us in maintaining our competitiveness. We aim to provide our employees with the necessary skills and knowledge relevant to their jobs as well as to improve their work efficiency and effectiveness. In our industry, having a ready pool of skilled workers is crucial towards ensuring successful and timely completion of projects. We source our workers primarily from countries including Malaysia, Bangladesh, India, the Philippines, Myanmar, the PRC and Thailand. To ensure a ready pool of skilled workers to meet our project demands, we have arrangements with manpower resource centres established in Bangladesh, India, Myanmar, the Philippines, Thailand and the PRC to assist us in sourcing for foreign workers. These manpower resource centres administer the initial screening process which includes a review of job experience, personal hygiene and health, work attitude and awareness of safety, health and environment issues. We then dispatch a recruitment team, usually comprising technical representatives and a human resource representative to interview the short-listed candidates as well as to conduct a theory and practical test to assess the competency of the said candidates. This selection exercise usually takes three to five days and ensures that the appropriate candidates with the correct work attitude and job competency are recruited. In Singapore, our Group pursues skill-sets training for our workers by conducting internal training sessions as well as sending our workers for external trainings conducted by various education institutions in Singapore. We also operate accredited training and testing facilities in Singapore to provide skills training and certification for our workers as well as workers of other companies for a fee. Our Company is qualified to provide the following training and certifications: (a) as an Accredited Ministry of Manpower Training Provider of Construction Safety Orientation Course for Workers; as a Skills Assessment Centre of Institute of Technical Education in respect of general fitting, process pipe fitting and rotating equipment skills; and as an Accredited Ministry of Manpower Training Provider of Oil/ Petrochemical Industries Safety Orientation Course for Workers.
(b)
(c)
To facilitate hands-on training, our Group has also established a mock-up plant facility at our premises at 19 Tuas Avenue 8, Singapore 639234 for our workers to learn and practice their technical skills such as pipe fitting, general fitting, structural fitting, rotating equipment fitting and machinery alignment, including laser alignment and general welding. 90
Supervisory and/or management employees of our Group, such as our engineers and project managers who are involved in the day-to-day management and operations of our projects, follow a detailed learning and development programme focused on the continuous learning of key competencies, new skills and capabilities. Typically, each supervisory and/or management employee of our Group is required to attend a training programme tailored to meet the competencies needed to perform his/her assigned job. We implement our training programme and manage training through an e-learning portal where we upload our training curriculum and maintain all training records. Our training programmes cover areas and skills relating to engineering, procurement and construction, SHE, production and corporate support. From 2002 to September 2008, our Company has been accredited the People Developer Standard by SPRING Singapore, in recognition of our commitment towards the training and development of our employees. Launched in 1998, the People Developer Standard is awarded to organisations that have achieved niche standards in implementing a total approach to managing people and achieving high performance through their people development systems. In January 2009, we were awarded the Singapore Quality Class (SQC) certification from SPRING Singapore. The SQC provides organisations with a holistic model for attaining business excellence in areas such as leadership, strategic business planning, information management, human resource and development, business processes, customer management and result stewardship. SQC companies are assessed to have attained a commendable level of excellence in all these categories. We value the SQC certification for its recognition of our excellent and vibrant business model which in turn will further enhance our credibility with existing and potential customers. INTELLECTUAL PROPERTY Our Group has registered the following trade marks:
Trade Mark Country Singapore Applicant Company Class 37(1)/ 42(2) Validity Period 29 May 2008 to 29 May 2018
Singapore
Audex
37(1)/ 42(2)
14 March 2008 to 14 March 2018
Our Group has applied to register the following trade marks:

Trade Mark Country Indonesia, Malaysia, the PRC and UAE Applicant Company Class 37(3)/ 42(4)
Indonesia, Malaysia, the PRC, Vietnam, Thailand and UAE
Audex
37(3)/ 42(4)
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Notes: (1) Class 37 covers air conditioning apparatus installation and repair; boiler cleaning and repair; bricklaying; building construction supervision; burner maintenance and repair; cabinet making (repair -); cleaning machines (rental of -); cleaning buildings (exterior surface); cleaning of buildings (interior); computer hardware (installation, maintenance and repair of -); construction; construction information; electric appliance installation and repair; factory construction; fire alarm installation and repair; freezing equipment installation and repair; furnace installation and repair; furniture maintenance; heating equipment installation and repair; lift installation and repair; machinery installation, maintenance and repair; masonry; motor vehicle maintenance and repair; office machines and equipment installation, maintenance and repair; painting, interior and exterior; pipeline construction and maintenance; plastering; plumbing; pump repair; rental of construction equipment; rental of cranes (construction equipment); rental of excavators; roofing services; scaffolding; telephone installation and repair; vehicle maintenance; warehouse construction and repair. Class 42 covers computer programming; computer rental; computer software design; computer software (updating of -); computer system design; computer system analysis; construction drafting; consultancy in the field of computer hardware; consultancy (intellectual property -); conversion of data or documents from physical to electronic media; creating and maintaining websites for others; data conversion of computer programmes and data (not physical conversion); engineering; industrial design; installation of computer software; maintenance of computer software; material testing; mechanical research; project studies (technical -); quality control; recovery of computer data; rental of computer software; research and development (for others); technical research. The goods and services covered in these jurisdictions are similar to (1) above. The goods and services covered in these jurisdictions are similar to (2) above.
(2)
(3) (4)
As with all trade mark applications, our applications to register our proposed trade marks as set out above will be open to opposition from one or more parties. In the event that we receive any opposition in respect of any of our trade mark applications, we may either defend the opposition or negotiate with the opposing party for a mutually acceptable resolution of the matter. If we are unable to resolve such opposition satisfactorily or defend the opposition successfully, we would have to cease using such marks and may have to use alternative marks. In January 2003, a suit was brought against Audex by AutoDesk, Inc. for an injunction to restrain Audex from possessing and using unauthorised copies of the AutoCAD programmes as well as for damages, interest and costs for the same. The said suit was amicably settled between parties by early March 2003. As at the Latest Practicable Date, save for the aforesaid, we are not aware of any infringements of third party intellectual property rights on our part. If any such alleged infringement is brought to our attention, it may be necessary for us to take appropriate remedial action to address such infringement. Although we are not aware of any such additional claims against us, we cannot be sure that no additional claims will be brought against us in the future. Saved as disclosed above and in the section entitled Risk Factors in this Prospectus, neither our business or profitability is dependent on nor do we have any registered trade mark, patent or licence or any other intellectual property rights. MAJOR SUPPLIERS/SUB-CONTRACTORS The principal materials required for our business activities are steel plates, pipes, cement, construction equipment and machinery. We engage specialist engineering services companies on a sub-contract basis to carry out certain aspects of our projects. We have been working with most of our sub-contractors for many years and have developed a good working relationship with them. Our fees with our sub-contractors are negotiated on a project basis. In engaging a particular supplier/sub-contractor for a specific project, we would consider various factors, including the location and size of the project, pricing, capacity and relevant expertise of the supplier/subcontractor and their ability in meeting the project schedule.
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The following table sets out our suppliers/sub-contractors who accounted for 5.0% or more of our total cost of sales excluding production labour costs for our last three financial years and the six months period ended 31 December 2008:
As a percentage of our total costs of sales excluding production labour costs (%) Suppliers / Sub-contractors Ezy Consulting Co. Ltd Sriracha Construction (1994) Co. Ltd Peter Cremer (S) GMBH ITC Contracting L.L.C. Materials supplied / Services provided Manpower consultancy Mechanical engineering Supply of steel materials Civil construction FY2006 1.5 FY2007 6.8 11.0 FY2008 2.1 HY2009 9.4 6.4
None of our Directors or Substantial Shareholders or their associates is related to or has any interest in any of our major suppliers or sub-contractors set out above. MAJOR CUSTOMERS The following table sets forth our customers who accounted for 5.0% or more of our total revenue for each of our last three financial years and the six months period ended 31 December 2008:
Customers FY2006 Project works Chiyoda Singapore Pte Ltd Horizon Singapore Terminals Pte Ltd Maintenance services ExxonMobil Asia Pacific Pte Ltd Shell Eastern Petroleum Pte Ltd FY2007 Project works Horizon Singapore Terminals Pte Ltd JGC Corporation Maintenance services ExxonMobil Asia Pacific Pte Ltd Singapore Refining Co. Pte Ltd FY2008 Project works JGC Corporation PEC Thailand(1) Fujairah Refinery Company Ltd Maintenance services ExxonMobil Asia Pacific Pte Ltd Shell Eastern Petroleum Pte Ltd Singapore Refining Co. Pte Ltd HY2009 Project works JGC Singapore Pte Ltd Shell Eastern Petroleum Pte Ltd Fujairah Refinery Company Ltd Maintenance services ExxonMobil Asia Pacific Pte Ltd Shell Eastern Petroleum Pte Ltd
Note: (1) During FY2008, our Associated Company, PEC Thailand, outsourced certain offshore engineering works to our Subsidiary, Audex.
Aggregate percentage of our total revenue (%) 23.9
28.8
37.0
20.0
21.1
31.1
42.6
13.3
For our last three financial years and the six months period ended 31 December 2008, no single major customer accounted for more than 35.0% of our Groups total revenue. 93
None of our Directors or Substantial Shareholders or their associates is related to or has any interest, direct or indirect, in any of our major customers set out above. CREDIT MANAGEMENT We invoice our customers on a monthly basis in accordance with the progress of the project. We generally provide credit terms of 30 to 45 days which may be extended by another 45 days depending on the size, service and credit-worthiness of each customer. For new customers, we will carry out discreet enquiries or review their financial statements in order to determine their credit-worthiness. Our trade receivables turnover days for our last three financial years and the six months period ended 31 December 2008 are as follows:
FY2006 Average trade receivables turnover days(1)
Note: (1) The average trade receivables turnover days are based on the average trade receivables (excluding retention monies receivable) divided by revenue multiplied by 365 days or 180 days for HY2009.
FY2007 45
FY2008 52
HY2009 44
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As most of our customers are multi-national companies with whom we have established long-term relationships, we do not make general provisions for any doubtful debts. Specific provision for certain doubtful debts will be made when we are of the view that the collectability of the outstanding debt is doubtful. It may also be written off when we are certain that the customer is unable to meet its financial obligations. As of 30 June 2009, our Group has collected approximately S$15.1 million of the approximately S$16.3 million receivables which were past due but not impaired as at 31 December 2008. The amount of provision for doubtful debts, bad debts written-off and write-back of provision for doubtful debts for our last three financial years, and the six months ended 31 December 2008 are as follows:
S$000 Provision for doubtful debts Bad debts written-off Write-back of provision for doubtful debts Net doubtful debts As a percentage of profit before taxation
Notes: (1) This includes an amount of approximately S$428,000 advanced to a third party in connection with a potential investment that did not materialise, of which an amount of approximately S$108,000 was recovered in FY2008. This includes an amount of approximately S$197,000 owing by our Associated Company, PMC Thailand.
FY2006 160 38 198 1.9%
FY2007 742(1) 11 (207) 546 1.8%

(2)
FY2008 35 6 (401)
(1)
HY2009 29 (18) 11 0.1%
(360) (1.1%)
(2)
Typical credit terms granted by our suppliers and sub-contractors range from 30 to 90 days. Our trade payables turnover days for our last three financial years and the six months period ended 31 December 2008 are as follows:
FY2006 Trade payables turnover days(1)
Note: (1) For FY2006, FY2007 and FY2008, the trade payables turnover days are based on the average trade payables divided by cost of sales less production labour costs multiplied by 365 days or 180 days for HY2009.
FY2007 41
FY2008 48
HY2009 41
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SEASONALITY Our business is not affected by any seasonality factors. 94
AWARDS AND CERTIFICATES Over the years, our Group has been accorded with a number of certificates and awards, some of which are highlighted below:
Awarding Authority/ Accrediting Body National Computer Board
Year 1998
Description of Award/ Certificate National IT Award 1998 Innovative use of IT Local Enterprise Award ISO 9001:2000 Certification in Quality Management
1999
Building Construction Authority SPRING Singapore Bureau Veritas Certification Bureau Veritas Certification
2002 2002 2002
People Developer Standard ISO 14001:2004 Certification in Environmental Management OHSAS 18001:1999 Certification in Occupational Health and Safety Management Enterprise 50 Award in Year (6th position) Annual Safety Performance Award Silver Awards for PEC Pulau Ayer Chawan and PEC Pulau Bukom Certificate of Accreditation as an Accredited Training Provider WSH Awards Performance 2008 Safety and Health Award Recognition for Projects Pulau Ayer Chawan, Pulau Bukom, Singapore Chemical Plant and Horizontal Terminals Pte Ltd, Project Site Health Promotion Board Silver Award Singapore Quality Class certification
2006 2007
Enterprise 50 Ministry of Manpower
2007 2008
Ministry of Manpower The Workplace Safety and Health Council and Ministry of Manpower
2008 2009
Health Promotion Board SPRING Singapore
Please refer to the section entitled Training in this Prospectus for more details as to our Companys receipt of the People Developer Standard award. PROPERTIES AND FIXED ASSETS Properties leased As at the date of this Prospectus, our Group leases the premises set out in Appendix G. Properties owned As at the date of this Prospectus, we own the following premises:
Tenure of the property / land use rights
Location
Approximate land area (sq m)
Use of premises
Malaysia PLO 331 Jalan Tembaga 1, 1, Kawasan Perindustrian Pasir Gudang 81700 Pasir Gudang, Johor, Malaysia 4,046.7 26 April 1986 to 25 April 2046 Office and fabrication facilities. A small area has been sub-leased to Tenaga Nasional Berhad for 30 years from 19 December 2002 to 18 December 2032
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Location
Tenure of the property / land use rights
Use of premises
Malaysia 38-A Jalan Seroja 12, Taman Johor Jaya 81100 Johor Bahru, Malaysia 143.1 Freehold Double storey shop house with the first floor rented out from 1 March 2008 to 28 February 2011 and the second floor for employee accommodation
PRC Triangle Mountain, Aotou Central Area, Daya Bay, Huizhou, PRC Down Shatian, Aotou, Dayawan, Huizhou, PRC Indonesia Jalan Sei Binti No. 51, Pelabuhan Sagulung Tg Uncang, Batam 29422, Indonesia Thailand No. 1/9 Jaroenpattana Road, Huy Pong Sub-District, Muang District, Rayong Province, Thailand
Note: (1) We are in the process of obtaining the certificate of ownership in respect of our building situated on the property, the construction of which was completed in April 2009.
20,000.0
30 April 2006 to 5 November 2053
Office and fabrication facilities(1)
176.0
1 August 2008 to 8 May 2078
Employee accommodation
37,722.0
24 December 1998 to 20 September 2028
Fabrication facilities
7,804.0
Freehold
Office premises and E&I workshop
INSURANCE Typically, we take up workmens compensation insurance (based on contract requirements, as well as the requirements under the applicable workmens compensation laws in the relevant countries) in respect of our employees. We also take up public liability insurance in connection with the relevant project. We also maintain insurance policies which cover machinery all risks, losses due to fire in respect of our office premises, and money in premises and in transit. In respect of our employees, we have also taken up policies for group life, personal accident and hospital and surgical insurance coverage. The aggregate insurance premiums incurred for such policies as a percentage of total staff costs were approximately 1.5%, 1.3%, 2.1% and 2.2% for FY2006, FY2007, FY2008 and HY2009 respectively. Our Directors believe that we have adequate insurance coverage for the purposes of our business operations and we will procure the necessary additional insurance coverage for our business operations, properties and assets as and when the need arises. However, significant disruption to our operations or damage to any of our properties, whether as a result of fire and/or other causes, may still have a material adverse impact on our results of operations or financial condition.
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GOVERNMENT REGULATIONS Save as disclosed under the section entitled Risk Factors in this Prospectus and below, to the best of our Directors knowledge, we have obtained all requisite approvals, are in compliance with all laws and regulations and have not contravened any relevant laws and regulations that would materially affect our current business operations. Our business operations in Singapore and other countries are not subject to any special legislations or regulatory controls other than those generally applicable to companies and businesses incorporated and/or operating in these countries. We have thus far not experienced any adverse effect on our business in complying with these regulations. Under Section 35 of the Factories and Machinery Act 1967 of Malaysia, PEC Malaysia, being an entity undertaking works of engineering construction, is required to serve written notice on an inspector in the prescribed form within seven days from the commencement of its operations at its fabrication facility. PEC Malaysia did not serve such notice when PEC Malaysia commenced operations in April 2002. PEC Malaysia has explored the possibility of rectifying such non-compliance but was informed by the relevant authorities that such rectification would be unusual as its fabrication facility has been operational for a few years. In addition, the relevant authorities have inspected PEC Malaysias factory premises on various occasions since 2003 and have not raised any issues with regard to such non-compliance. Notwithstanding this, if PEC Malaysia is charged under the Factories and Machinery Act 1967 of Malaysia for such non-compliance, it is likely for the offence to be compounded under the Factories and Machinery (Compoundable Offences) Regulations 1978 of Malaysia, subject to a sum not exceeding RM25,000. The UAE is a federation of seven emirates. Each emirate is subject to federal law, and also has its own local laws. Audex UAE, established in the Fujairah Free Zone, is subject to the Federal Labour Law regarding the regulation of labour relations, as supplemented with certain minimum standards outlined in the Fujairah Free Zone Authority Operational Manual 2008 (the UAE Labour Law). Audex UAE is also subject to the federal immigration laws. Under the UAE Labour Law and the UAE immigration laws, in order to work and reside in the UAE, it is mandatory for foreign workers to have a UAE residence visa and a work permit and to have entered into an employment agreement which is compliant with the UAE Labour Law. The UAE authorities may take action on companies who do not or previously did not comply with the UAE Labour Law or UAE immigration laws, including those that do not or did not meet the residence visa or work permit requirements. Such companies may be subject to, amongst others, a fine of up to AED50,000 and may face restrictions on their ability to engage additional foreign employees in the UAE. Please refer to the section entitled Risk Factors in this Prospectus for further details. Indonesia Foreign Investment Regulations Our Indonesian Subsidiary, PEC Indonesia, being a foreign investment company, is subject to Law No. 25 Year 2007 on Capital Investment (the New Investment Law) which revokes the previous Foreign and Domestic Investment Law. Although the New Investment Law is already in force, the implementing regulations have not been issued, except for the implementing regulation which deals with business sectors which are closed to or restricted for foreign investment as stipulated in Presidential Regulation No. 111 Year 2007 on Amendment of Presidential Regulation No. 77 Year 2007 on List of Business Fields that are Closed to Investment and Business Fields that are Conditionally Open to Investment. Under the New Investment Law, PEC Indonesia enjoys the same facilities as the facilities that are available to domestic investment in Indonesia. In addition, the New Investment Law contains the Governments promise that it will refrain from nationalising foreign investors ownership title unless otherwise regulated by law.
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Foreign investors wishing to invest in Indonesia are required to apply for an investment approval from the Capital Investment Coordinating Board (Badan Koordinasi Penanaman Modal or BKPM) and set up a foreign investment company or PT. PMA. PEC Indonesia holds the required investment permit or the BKPM approval under the Decree of Minister of Investment/ Chairman of BKPM No. 704/I/PMA/1998, dated 25 November 1998. The procedure of obtaining approval for the foreign investment as well as amendment to the said licences and other approvals required for foreign investment companies such as permit to utilize foreign worker and/or limited importer identification number is regulated under Decision of Head of BKPM No. 57/SK/2004, dated 2 July 2004 on Guidance and Procedure for Investment Application Established in the Framework of Domestic and Foreign Investment as lastly amended by Regulation of Head of BKPM No. 1/P/2008, dated 3 April 2008 (SK BKPM 57/2004 as amended). Further, for the carrying out of their commercial business activities, foreign investment companies must submit an application for a permanent industrial business license to the BKPM. According to the Decision of the Head of BKPM No. 66/SK/2004 dated 30 July 2004 on Procedures for the Settlement of Applications for Investment in the Framework of Domestic and Foreign Investment in the Batam Island Industrial Region, the permanent industrial business licence for the Batam Island Industrial Region is issued by the Batam Island Industrial Estate Development Authority (Batam Authority) by taking into consideration the requirements under SK BKPM 57/2004 as amended. PEC Indonesia has complied with this requirement and has already obtained its permanent industrial licence under the Permanent Industrial Business Licence No. 5/IUT/PMA/II/2006, dated 20 February 2006. Another obligation of PEC Indonesia as a foreign investment company is the divestment of their share ownership as regulated under Government Regulation No. 20 year 1994, as amended, on Ownership of Shares of Companies Established in the Framework of Foreign Investment (GR No. 20/1994). GR No. 24/1994 does not specify the amount of the shares that must be divested, and BKPM officials have verbally indicated that the company may decide on the amount itself. Under the New Investment Law, PEC Indonesia also has the obligation to submit periodical reports on its investment activities to the BKPM and it has done so for the year 2008. Manpower Regulations Under Law No. 13 Year 2003 on Manpower (Manpower Law), every employment relationship must be stipulated in a written form or in an employment agreement which substances are agreed by the employer and employee. In the event a company has more than 10 employees, the company must establish its Company Regulation. A Company Regulation has a validity of two years, at the end of which it must be renewed. PEC Indonesia has less than 10 employees, therefore the obligation mentioned above does not apply to it. Another important provision of the Manpower Law is the provision that pertains to employment agreements. The Manpower Law categorises work or employment agreements into (i) employment for an indefinite (or undefined) period and (ii) employments for a definite (or defined) period. A definite period employment agreement (in which case the employee is a non-permanent employee) has a maximum validity period of two years. A definite period employment agreement that violates this provision will automatically be transformed by law into an indefinite period employment agreement. As a consequence, in the event of the termination of the employment the employer must pay severance money to the employee. As an employer, PEC Indonesia is obliged to provide every one of its employees with health and work safety protection, as well as to abide by the principles of morality and humanity in its treatment of its employees, as required under the Manpower Law. For the employment of foreign employees, PEC Indonesia will need to obtain the approval of the Minister of Manpower. In this relation, there is also the obligation to have the foreign employees transfer their know-how to the Indonesian employees. PEC Indonesia has already obtained Decision of Minister of Manpower and Transmigration No. 5511/MEN/B/IMTA/KEK-1/2007 concerning expatriate using permit for its logistic manager.
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Batam Island Industrial Region Regulation The utilisation of land within the Batam Island Industrial Region is regulated under Decision of the Minister of Internal Affairs No. 43 Year 1977 on Management and Utilization of Land Located in the Industrial Region of the Batam Island, dated 18 February 1977 (Decision No. 43/1977). Under Decision No. 43/1977, the Government of Republic of Indonesia grants the Right to Manage/Hak Pengelolaan over the land in Batam Island to Batam Authority. The Batam Authority can give a right over the Right to Manage/Hak Pengelolaan (HPL) for a certain period to companies with Right to Build/Hak Guna Bangunan (HGB) in accordance with Law No. 5 Year 1960 on Basic Agrarian Provisions and Government Regulation No. 40 Year 1996 on Right to Cultivate, Right to Build and Right to Use upon Land. PEC Indonesia currently holds such HGB. The HGB is basically a right granted by the State to erect and construct (buildings). It can be granted for a period of up to 30 years, and is extendable for an additional period of up to 20 years. It can also be renewed for an additional period of up to 30 years, subject to the fulfilment of the requirements under the prevailing laws and regulations. The HGB may be granted to Indonesian citizens and Indonesian corporate entities which are domiciled in Indonesia. It is transferable to another party (as a result of the sale and purchase of the respective land), and it can be granted upon Right of Ownership/Hak Milik land, HPL land, or State land. The HGB may be furthermore be used as collateral to financial obligations, in the form of Security Interest (Hak Tanggungan). PEC Indonesia has obtained a HGB from the Batam Authority and has paid the compensation amount payable for it. For the transfer of this right to another party, PEC Indonesia will need the prior approval of the Batam Authority. Malaysia The FIC On 30 June 2009, the Prime Minister of Malaysia announced that the FIC Guidelines on the acquisition of interests, mergers and take-overs by local and foreign interests of companies in Malaysia dated 1 January 2008 is repealed with immediate effect. The FIC will therefore no longer process share transactions, nor impose equity conditions on such transactions with effect from 30 June 2009. However, equity conditions will be imposed on strategic sectors by the respective sector regulators. It is not defined what the strategic sectors will be but the Economic Planning Unit of the Prime Ministers Department indicated that the sectors will encompass but are not limited to medical tourism, education, information communications technology, oil and gas. For sectors that are not deemed strategic, there will no longer be any equity conditions imposed. With effect from 30 June 2009, the FIC will only process transactions involving the dilution of Bumiputera interests and/or government interests in properties valued at RM20 million and above. In 2008, we obtained FIC approval for our shareholding in PEC Malaysia, subject to the condition that PEC Malaysia must have a 30% Bumiputera equity before 30 June 2010. In view of the Prime Ministers announcement on 30 June 2009 and the repeal of the FIC Guidelines on the acquisition of interests, mergers and take-overs by local and foreign interests of companies in Malaysia dated 1 January 2008 with immediate effect, PEC Malaysia expects to be notified by the Economic Planning Unit of the Prime Ministers Department whether the 30% Bumiputera equity conditions imposed by the FIC will be waived.
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Occupational Health & Safety The Department of Occupational Health and Safety of the Human Resources Ministry of Malaysia is the government authority primarily responsible for the occupational safety, health and welfare of persons at work and carries out its obligations through the enforcement of the Factories and Machinery Act 1967 of Malaysia and the Occupational Safety and Health Act 1994 of Malaysia. PEC Malaysia is required to apply for and has obtained licences for its operations under the Factories and Machinery Act 1967 of Malaysia and the Occupational Safety and Health Act 1994 of Malaysia. Section 35 of the Factories and Machinery Act 1967 of Malaysia also requires an entity undertaking works of engineering construction to serve written notice on an inspector in the prescribed form within seven days from the commencement of its operations at its fabrication facility. As disclosed above, PEC Malaysia did not serve such notice when PEC Malaysia commenced operations in April 2002. Construction Industry Development Board The Construction Industry Development Board (CIDB) is a statutory body set up pursuant to the Lembaga Pembangunan Industri Pembinaan Malaysia Act 1994. Any entity that undertakes to carry out or carries out and completes any construction works will be required to register with the CIDB. Construction works is defined under section 2 of the Lembaga Pembangunan Industri Pembinaan Malaysia Act 1994 as the construction, extension, installation, repair, maintenance, renewal, removal, renovation, alteration, dismantling, or demolition of(a) any building, erection, edifice, structure, wall, fence or chimney, whether constructed wholly or partly above or below ground level; any road, harbour works, railway, cableway, canal or aerodrome; any drainage, irrigation or river control works; any electrical, mechanical, water, gas, petrochemical or telecommunication works; or any bridge, viaduct, dam, reservoir, earthworks, pipeline, sewer, aqueduct, culvert, drive, shaft, tunnel or reclamation works,
(b) (c) (d) (e)
and includes any works which form an integral part of, or are preparatory to or temporary for the works described in paragraphs (a) to (e), including site clearance, soil investigation and improvement, earthmoving, excavation, laying of foundation, site restoration and landscaping. As at the Latest Practicable Date, PEC Malaysia does not carry out any construction works in Malaysia. Accordingly, PEC Malaysia must register with the CIDB prior to undertaking any construction works in Malaysia.
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The PRC Foreign Invested Construction Enterprises in the PRC According to the Regulations on the Administration of Foreign-invested Construction Enterprise, or the Foreign-invested Construction Regulations, jointly enacted by the Ministry of Construction and the Ministry of Foreign Economic Cooperation (now changed to MOFCOM) on 27 September 2002 and enforced on 1 December 2002, a foreign investor that establishes foreign invested construction enterprises in China which carries on construction operations shall have to (a) obtain the approval certification of foreign investment enterprise; (b) register with the State Administration for Industry and Commerce or local administration of industry and commerce it authorises; and (c) obtain qualification certificate of construction enterprise from construction administration authorities. Pursuant to the Construction Law of the Peoples Republic of China passed by the Standing Committee of the National Peoples Congress on 1 November 1997 and enforced on 1 March 1998 and the Provisions on the Administration of Qualifications of Enterprises in Construction Industry, or the Qualification Provisions, enacted by the Ministry of Construction on 26 June 2007 and enforced on 1 September 2007 (the original Provisions on the Administration of Qualifications of Enterprises in Construction Industry, which became effective from 1 July 2001, was abolished on 1 September 2007) and the Foreign-invested Construction Regulations and other relevant regulations, the enterprises in construction industry shall be classified into different qualification classes pursuant to amount of its registered capital, net asset value, professional personnel, technical equipments and performance records of completed construction works etc. The qualifications will be classified into three categories, namely, that for undertaking the whole of a construction project, that for undertaking a specialised contract and that for undertaking a labour service by subcontract. The categories of qualifications for undertaking the whole of a construction project, undertaking a specialised contract and undertaking a labour service by subcontract are divided into several qualification types according to the nature of the project and technical features. Each qualification type is further divided into several classes according to the prescribed conditions. The construction administrative department of different levels (including the national, provincial and municipal levels) shall be responsible for the approval of the abovementioned qualification applications in accordance with their respective approval authority towards the different category, type and class. Construction enterprises including the sino-foreign equity construction jointventures shall engage in construction activities in its approved scope of their grades of qualifications after obtaining the construction qualification certificate. An enterprise with foreign investment which undertakes a project without obtaining the qualification certificate for enterprises in construction industry shall be banned, and be imposed a fine of 2.0% to 4.0% of the contractual price of the project. If it obtains any illegal proceeds, such proceeds shall be confiscated. Huizhou Tianxin is a foreign invested construction enterprise. As such, Huizhou Tianxin is subject to and has complied with the above government regulations. Thailand Exchange Control Act B.E. 2485 (1942) and Bank of Thailands Regulations Please refer to the section entitled Exchange Controls in this Prospectus. Further details can also be found on the Bank of Thailands web-site: www.bot.or.th. Employment Law and Regulations According to the Labour Protection Act B.E. 2541 (A.D. 1998), an employer who employs 10 or more employees is required to establish work rules covering work performance and other related matters, to be written in the Thai language and submitted to the competent authority. Said employer is also required to prepare an employee register in the Thai language, to include other related details and maintained at the companys office. PEC Thailand, being the Groups active and ongoing company in Thailand, complies with said legal requirements. In addition, the employer of 50 or more employees, must establish a Safety, Health and Working Environment Committee for the work place as prescribed under the competent authority. A welfare committee must also be established in such circumstances for the welfare of the employees. PEC Thailand, being the Groups active and ongoing company in Thailand, has established a Safety, Health and Working Environment Committee and a Welfare Committee. 101
Workmen Compensation Under the Worker Compensation Act B.E. 2537 (A.D. 1994), every employer must contribute annually to the Workmens Compensation Fund to be used for the benefit of any employee who suffers injury, sickness or death in the course of work, at the rates prescribed by the Ministry of Labour. Both PEC Thailand and PMC Thailand have registered with the Worker Compensation Fund and contributed funds as required by law. Social Security Fund The Social Security Act B. E. 2533 (A.D. 1990) and its amendment, require every employer to register with the Social Security Fund; a scheme that benefits any registered employee in non work-related cases such as injury or illness, disability or death, child delivery, child welfare, old age pension and unemployment. Both PEC Thailand and PMC Thailand have registered the Social Security Fund Certificate with the relevant authority. Employment of Expatriates According to the Alien Occupation Act B.E. 2521, an expatriate must obtain and work only within the scope of the work permit granted to him/her by the authorities in order to work in Thailand. Any employment of foreigner without a valid work permit (or employment outside the scope of such permit) is forbidden and shall result in fines and even imprisonment. PEC Thailand, as our Groups active and ongoing company in Thailand, has obtained work permits from the Ministry of Labour for each of its foreign expatriates working in Thailand. UAE Fujairah Free Zone in the UAE Our Subsidiary, Audex UAE, has been incorporated in the UAE as a Free Zone Establishment in the Fujairah Free Zone and is subject to, inter alia, the Fujairah Free Zone Law No. 1 of 2004. The UAE is a federation of seven emirates made up of Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al Quwain, Fujairah and Ras Al Khaimah. Each Emirate is subject to federal laws and decrees, local laws and Sharia (Islamic law). Various free zones have been established in the different Emirates including the Fujairah Free Zone in the Emirate of Fujairah. The Fujairah Free Zone has been established under Emiri Decree No. 6 of 1987 as amended by Emiri Decree No 1 of 1992. Pursuant to the Emiri Decree the Fujairah Free Zone Authority is empowered to introduce its own legislation in relation to the Fujairah Free Zone. Foreign and local investors wishing to establish a commercial presence in the Fujairah Free Zone are required to submit the prescribed application to the Fujairah Free Zone Authority. Foreign or local investors are permitted to establish single shareholder companies known as Free Zone Establishments (FZE) which are 100% held by a single foreign or local investor. Fujairah Free Zone Authority currently specifies a minimum share capital of AED150,000 to establish an FZE. Audex UAE has been incorporated as an FZE with 100% shares in Audex UAE being held by Audex in the amount of the prescribed minimum share capital. Audex UAEs incorporation is valid for a period of two years from 29 October 2007 and is automatically renewable for similar periods. There are various categories of licences issued by the Fujairah Free Zone Authority including for the activities of contracting, trading, distribution, manufacturing and assembling pursuant to which the licensee is permitted to undertake licensed activities within the Fujairah Free Zone. Audex UAE has been issued a license for contracting activities, inter alia, for construction work and engineering services within the Fujairah Free Zone limit by the Fujairah Free Zone Authority for a period until 31 December 2009. Audex UAE will need to renew its Fujairah Free Zone licence by 31 December 2009 by payment of the prescribed annual fees for renewal of a licence and by satisfying any other conditions that may be specified by the Fujairah Free Zone Authority for a renewal.
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The Fujairah Free Zone Authority currently provides for customs duties exemptions on all products imported to the Fujairah Free Zone or manufactured or processed therein. Customs duties and fees are exempt on products exported from the Fujairah Free Zone. The entities registered in the Fujairah Free Zone are currently exempted from taxes in relation to its business in the Fujairah Free Zone and are excluded from any restrictions on the repatriation of capital or profits of the business outside the Fujairah Free Zone. FZEs and other registered entities in the Fujairah Free Zone are obligated to maintain their head office in the Fujairah Free Zone. The head office of Audex UAE is a leased trading office situated in the Fujairah Free Zone from the lessor the Fujairah Free Zone Authority. The current lease expires on 28 October 2009 and is renewable for a further period of two years from that date. FZEs are obligated to maintain a reserve account and are required to transfer 10% of annual net profit to a legal reserve account which can be discontinued when the legal reserve amount is equivalent to an amount of 50% of the FZEs share capital. The UAE Federal Civil Code Audex UAEs main objects include the carrying of the trade or business of builders and contractors for construction work within the limits of the Fujairah Free Zone. Audex UAEs construction related activities will be subject to the provisions of federal laws and decrees and local laws, in principal the UAE Civil Law No. 5 of 1985, as amended by UAE Civil Law No. 2 of 1987 (the Civil Code) will be applicable to that business of Audex UAE. The Civil Codes Article 880 creates decennial liability for contractors and architects and there is strict liability to pay compensation for amongst other things, collapse of building or structure or defects threatening stability or safety. Liquidated damages and limitations and exclusions of liability in contracts can be reviewed by the UAE courts. Additionally, specialised decrees may govern contractual relations for construction related projects with UAE Government entities. Construction contracts in the UAE are commonly set out in the form of FIDIC (Federation Internationale des Ingenieurs Conseils International Federation of Consulting Engineers) contracts. COMPETITION The project works and maintenance services businesses in the oil and gas, petrochemical, oil and chemical terminal, and pharmaceutical industries are highly competitive in Singapore, the Asia Pacific region, the Middle East and in other jurisdictions where we have a business presence. We face intense competition from our existing competitors as well as new entrants to the business. We consider the following companies to be our closest competitors in view of their size, engineering, fabrication capacity and experience: Hiap Seng Engineering Limited, a company incorporated in Singapore and listed on the Main Board of the SGX-ST; Rotary Engineering Limited, a company incorporated in Singapore and listed on the Main Board of the SGX-ST; Punj Lloyd group of companies, a multi-national group of companies; ABB Limited, a company incorporated in Thailand which is part of a multi-national group of companies; and Dodsal group of companies, a multi-national group of companies. Even though we operate in a highly competitive environment, we believe that our competitive advantages will distinguish us from our competitors.
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COMPETITIVE STRENGTHS We have identified the following key competitive strengths that contribute to our ability to compete in our businesses: (a) Our ability in providing EPC project works and single-source maintenance services Currently, in respect of project works, our engineering services include conceptual design, frontend engineering design and detailed engineering. Such services cover the various engineering disciplines such as civil, mechanical, E&I, pressure vessel, structural and piping. We also have the contacts, ability and experience to successfully lead and execute EPC project works, and in the course of which we have established ourselves as one of the few local engineering firms who can carry out such an undertaking. Likewise, in the area of maintenance services, we have built up the expertise and experience to provide single-source maintenance services including civil, mechanical, E&I, tankage, structural, piping, painting, scaffolding, insulation, fire proofing and hydro jetting. We believe that through our ability to provide EPC project works and single-source maintenance services, we have distinguished ourselves from our competitors as a provider of integrated engineering solutions. (b) Our established track record and experienced management team We have a long operating history spanning over 25 years and some of our major customers have worked with us since 1982. Our Directors believe that we have established our reputation as a reliable provider of integrated engineering solutions. We have earned the trust of our customers as a result of the integrity of our management, our demonstration of reliability of our services and our technical ability to support our customers and many of them are repeat customers. Our Directors believe that having such repeat customers is a recognition of our capabilities and would be a competitive strength that we can leverage on to further increase our market share in the industries that we operate in. Our Executive Directors, Ms Edna Ko Poh Thim, Mr Robert Dompeling and Mr Wong Peng have each accumulated more than 20 years of experience in the oil and gas and/or oil and chemical terminal industries and are supported by a team of experienced Executive Officers, project managers and senior engineers, many of whom have been with our Group for more than 15 years. Our Directors believe that our long operating history and established track record and the experience of our management team provides us with a competitive advantage over other companies in our industry. (c) Our focus on staff training and development Our Directors believe that our staff training and development programme is not only crucial in developing the skills of our workforce, but is also of importance in succession planning and ensuring that our workforce is motivated. Staff training and development is one of the top priorities of our Group. From 2002 to September 2008, our Company has been accredited the People Developer Standard by SPRING Singapore, in recognition of our commitment towards the training and development of our employees. Under the People Developer Standard programme, our Company practices a comprehensive training and development programme for our staff and workers. Through this programme, we are able to equip our workers with the necessary skills to perform their duties efficiently and to deliver quality works to meet our customers project requirements. In recognition of our continual efforts to further enhance business excellence, we were awarded the Singapore Quality Class (SQC) certification from SPRING Singapore in January 2009. The SQC provides organisations with a holistic model for attaining business excellence in various areas including training and development of employees covering all elements of the People Developer Standard. Please refer to the section entitled Training in this Prospectus for more details.
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Our Directors believe that our well-trained and motivated workforce is a key asset of our Group and our focus on the development and training of our staff is one of our competitive strengths. (d) We own a large and growing fleet of construction equipment As at the Latest Practicable Date, we own approximately 2,000 pieces of construction equipment. Our fleet of construction equipment consists of cranes, generator sets, prime movers, trailers, air compressors, welding machines, bundle pullers and lorries. The size of our fleet of construction equipment provides great assurance to our customers that we have the necessary construction equipment resources on hand to perform our work efficiently and without delay. Cranes, prime movers, trailers and lorries are critical construction equipment which have a direct impact on our construction productivity. They constitute the key logistic chain where the fabricated steel pieces from our fabrication facilities are transported to the lay-down area and then to the installation site where the fabricated pieces are erected with the help of the cranes. To maximise the productivity of our workers at the installation site, it is therefore imperative that there is no delay between the transportation of the fabricated steel pieces from our fabrication facilities to our installation site. Similarly, it is equally important that construction equipment, such as cranes, air compressors and welding machines, are made available at the installation site to enable the efficient installation of the fabricated pieces. Where necessary, we also hire additional construction equipment from equipment-leasing vendors to supplement our existing fleet of construction equipment during peak construction demand. As described in the section entitled Strategy and Future Plans in this Prospectus, we intend to utilise S$5.0 million of our net proceeds from the Invitation to purchase or repay bank borrowings for the purchase of construction equipment and machineries to upgrade our equipment and machineries. Our Directors believe that our large fleet of construction equipment provides our Group with a competitive advantage in securing bigger projects due to our reliability in providing construction resources, our flexibility in cross-deploying our equipment to our various operation sites and our ability to respond more readily and efficiently to emergency or un-planned plant shutdown work. (e) Our innovative use of information communication technology We have developed our resource management solution, EIS and our project management platform, PECMm, to manage our operations. EIS is our in-house developed integrated information system providing integration and functionality for our operations. It is an enterprise collaborative resource management solution that enables us to monitor the physical aspects of our operations, such as manpower numbers, equipment usage, material purchases, inventory, man-hours and payroll, safety and quality and human resource and learning matters. Our Group received National IT Awards 1998 Innovative use of IT Local Enterprise Award award in 1998 by the then National Computer Board for the development of EIS. PECMm is our procurement, engineering, construction and maintenance management system, a project management platform deployed by our Group that is used to ensure that our projects are completed in a timely manner, safely, within budget and in accordance with quality specifications. This system is used to report on the status of the project through the internet to ensure that the progress of the project is transparent and easily accessible to the users of the system. Our Directors believe that the use of our in-house developed resource management solution and project management platform as well as our use of advanced third party software have greatly enhanced our Groups operations and productivity and enabled us to have a competitive edge over other companies in our industry.
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PROSPECTS Our Directors believe that our ability to grow our project works and maintenance services will largely depend on the growth trends and developments in the oil and gas, petrochemical, oil and chemical terminal, and pharmaceutical industries in the Asia Pacific region and the Middle East. In view of the recent weakness in the global economy, oil prices faced a large contraction between mid2008 and the first quarter of 2009, with significant volatility subsequently. This, together with fluctuations in demand and supply for oil and gas products, has had a significant impact on oil and gas and petrochemical-related investments in facilities and infrastructure. In addition, the industry has experienced postponements or cancellations of projects. However, our Directors have observed that investments in oil and gas projects in certain countries where our Group operates in have largely continued and remain active, in particular those by large multi-national or state-owned corporations. Our Directors also believe that the Middle East market, which is one of the biggest markets for oil and gas investments, remains promising. Oil and gas and petrochemical industries In terms of geographic market presence, our Group is committed to expanding our footprint in Southeast Asia and the Middle East. Singapore The oil and gas and petrochemical market of Singapore is of particular importance to our Group, as Singapore is host to one of the largest oil and gas and petrochemical complexes in Southeast Asia. Singapores petrochemical expansion is foremost based on a tighter integration of its existing oil refineries, which will allow for a wider range of feedstock to be used in the production of the products such as ethylene, propylene, aromatics and its immediate derivatives. As such, our Directors believe that the investment focus will shift towards investments in further downstream production capacity, so as to produce more specialty chemicals to capture the higher value-added product for the entire manufacturing chain. The completion of the on-going construction of two world-scale integrated ethylene cracker complexes in Singapore will give Singapore an ethylene production capacity of approximately four million tonnes per year (as compared to the current production capacity of approximately two million tonnes per year). Our Directors believe that Singapores oil and gas refineries are therefore becoming more integrated suppliers of feedstock hydrocarbons to the petrochemical industry. However, these refineries are also expected to remain important regional suppliers of oil products. Due to tighter environmental standards for oil products in the export destinations (often described as clean fuels), the refineries will therefore also be required to make substantial investments to upgrade their current processes. Such development will therefore open up business opportunities for our project works and maintenance services. However, the recent global economic downturn has resulted in the postponement of some new investments into Singapore. Nonetheless, there have been recent signs of stabilisation in this downturn, and signs of possible recovery. In addition, our Directors have, through our discussions and inquiries from potential customers, observed a renewed interest in oil and gas and petrochemical projects.
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The Middle East Our Directors understand that there are also a significant number of new developments taking place in the Middle East. Traditionally, Middle Eastern oil and gas and petrochemical projects focused on refining of crude oil and the manufacturing of basic petrochemicals. However, Middle Eastern countries are making a marked departure from this focus and are now embarking on projects which produce higher valued derivatives and functional products, similar to the development of the integrated ethylene cracker complexes in Singapore. Our Directors believe that the latest development in the Middle East is sustainable over many years to come and will offer new business opportunities for our Group to expand our project works and maintenance services business segments. Oil and chemical terminal industry Despite the global economic downturn, our Directors believe that there will be continuing demand for the design, engineering and construction of oil and chemical terminal facilities in Asia and the Middle East, an area of business in which we have built up a strong track record. The key driver behind our belief is the sustained growth in the demand for oil and chemical products, as well as increasing demand for new clean fuel products. Our Directors believe that the Middle East is moving from just an exporter of crude oil to being a major exporter of oil and chemical products. Consequently, to cater to the flow of oil and chemical products from the Middle East to global destinations, various areas in the Middle East are developing into trading, bunkering and distribution hubs, similar to Singapore. In Indonesia, Malaysia and Vietnam, a demand for transportation and liquid petroleum gas is expected in the longer term. The development and geographical spread of these countries therefore necessitate the construction and development of import and distribution oil and chemical terminals so as to sustain their growth. Such demand is likely to create new business opportunities for us. Pharmaceutical industry Singapore has a growing pharmaceutical manufacturing industry, hosting more than 50 global pharmaceutical, biotechnology and medical technology companies alongside 30 public-sector research and medical institutes. In 2008, global biomedical sciences companies invested in excess of US$500 million into Singapore. These companies are establishing higher value-added manufacturing activities, building on Singapores advanced manufacturing capabilities, its expertise in process development and automation technologies as well as its close proximity and connectivity to Asian markets. Local Singapore biotechnology and research institutes have also successfully concluded significant licensing agreements with international partners.(1) It is our expectation that the pharmaceutical industry in Singapore will further develop through the expansion of existing plants as well as the establishment of new plants in the mid to longer term. In light of the above, our Directors are of the view that more international players will be attracted to Singapore. Such developments in the pharmaceutical industry may result in new project works and business opportunities for us.
Note: (1) The information was derived from a press release by the Singapore Economic Development Board on 18 May 2009. The Singapore Economic Development Board has not consented to the inclusion of such information extracted from The Business Times for the purposes of Section 249 of the Securities and Futures Act and is therefore not liable for such information under Sections 243 and 254 of the Securities and Futures Act. While our Directors have included such information in their proper form, and context in the Prospectus, they have not verified the accuracy of such information.
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TREND INFORMATION AND ORDER BOOKS Whilst the long term prospects of the industries which we operate in remains promising, with the current global economic downturn, our Group has experienced a slowdown in business activities. Based on the projects that we have recently secured, we experienced pricing pressure as a result of the economic downturn which has affected the industries we operate in. The prices of labour and some materials such as steel plates, pipes, fittings and cement continue to fluctuate, and we will endeavour to factor such fluctuations into our tender proposals. With the slowdown in the economy, many corporations have taken a more cautious approach in rolling out or exploring the feasibility of new projects. However, we believe that there are still opportunities for new projects, and we will continue to explore and pursue business opportunities with our customers. While we expect to record an increase in our revenue for the current financial year ending 30 June 2009, we expect our gross profit margin to be lower in FY2009 mainly due to lower revenue contribution from higher margin project works and loss expected to incur due to the delay/extension of a project work relating to the petrochemical industry in Singapore. We had made provision for the expected loss arising from the delay/extension of this project in HY2009. Accordingly, our Groups profit for FY2009 is expected to be lower than FY2008. We envisage the operating environment for FY2010 to be challenging and price competition to remain keen and this may impact our gross profit margin and operating results. As at 31 December 2008, we had order book for on-going project works of approximately S$158 million. Since 1 January 2009 and up to the Latest Practicable Date, our Group had secured a further S$106 million worth of project works. A substantial part of these on-going and new project works is expected to be completed and recognised as revenue between January 2009 and June 2010. Our order book in respect of project works as at any particular date is subject to changes in our customers project schedules or cancellations of projects and may not be indicative of revenue for any succeeding period. Given the nature of our maintenance services contracts where we receive specific work orders from time to time during the duration of such contracts, we are unable to ascertain the size of the order book for this business segment. Save as disclosed above and in the sections entitled Risk Factors, Managements Discussion and Analysis of Financial Condition and Results of Operations and Prospects in this Prospectus, and barring any unforeseen circumstances, our Directors believe that there are no other recent known trends in production, sales, the costs and selling prices of our services or other known trends, uncertainties, demands, commitments, or events that are reasonably likely to have a material and adverse effect on our revenue, profitability, liquidity or capital resources, or that would cause financial information disclosed in this Prospectus to be not necessarily indicative of our future operating results or financial condition. Please also refer to the section entitled Cautionary Note Regarding Forward-Looking Statements in this Prospectus.
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STRATEGY AND FUTURE PLANS We intend to focus on a three-pronged strategy towards the future growth and expansion of our business: Expansion of our customer base In order to expand our customer base, we intend to explore and develop new business opportunities by leveraging on our existing sales and marketing network and by further enhancing our cost effectiveness and competitiveness through the streamlining of our operations. Expansion of our scope of work We intend to expand our existing scope of work by further developing our engineering works capabilities, including other related disciplines, so as to offer our customers, both existing and prospective, a more comprehensive, more integrated and higher quality engineering solution. Geographical expansion We intend to explore and develop new business opportunities in countries or regions where we currently have a business presence, as well as in countries and regions where we do not already have a business presence. We also intend to locate our fabrication facilities nearer to our customers to reduce transportation costs and to enable us to respond to our customers needs more effectively. To meet our three-pronged strategy, our future plans for the growth and expansion of our business are described below: (a) Construction of a new fabrication facility in the Middle East We intend to set up a new fabrication facility in the Middle East near our customers project sites in order to be cost effective. We are currently exploring several sites with site areas ranging from approximately 15,000 sq m to approximately 25,000 sq m. We intend to commence construction by the end of 2009 and expect this new facility to be operational by 2010. It is estimated that a new facility of 20,000 sq m would increase our Groups production area by approximately 5,000 sq m and increase our production capacity by approximately 6,000 mt per annum. As at the date of the Prospectus, no expenditure has been made in respect of the fabrication facility. We intend to invest approximately S$8.0 million of the net proceeds from the Invitation towards the setting up costs of this facility. In the event that the allocated proceeds are insufficient, we will finance such shortfall through internal cash flow and/or bank borrowings. (b) Further expansion of our on-site capabilities through the acquisition of new equipment and machineries The nature of the business we target, in particular EPC projects, are not only complex but also massive in scale, thereby necessitating the deployment of substantial construction equipment as well as other resources. While we presently have approximately 2,000 pieces of construction equipment such as cranes, generators and prime movers, we foresee that we will have to expand our fleet of construction equipment and/or continuously upgrade any existing construction equipment to ensure that we are able to successfully carry out our projects on time and in a costefficient manner without compromising on safety. The acquisition of equipment and machineries will also ensure that we do not have to rely on the availability of construction equipment sourced from external suppliers which may compromise our work schedule and/or cause our costs to overrun. We intend to use S$5.0 million of the net proceeds from the Invitation to purchase new construction equipment and machineries over a period of one year to upgrade our equipment and machineries. We may, to the extent that we need to purchase any such construction equipment and machineries during the period pending our receipt of the net proceeds from the Invitation, finance such purchases by way of bank borrowings. In such event, to the extent that we have incurred such bank borrowings, we shall utilise such portion of the S$5.0 million of the net proceeds from the Invitation intended for the purchase of such construction equipment and machineries as may be required to repay such bank borrowings, and shall continue to utilise any balance amount for the purchase of construction equipment and machineries. 109
(c)
Further expansion by way of strategic alliances and/or joint-ventures, acquisitions of, and investments in, related businesses While we intend to focus on areas in which we have a niche and a proven track record, we will continuously explore opportunities to collaborate with suitable partners in related fields of project works and maintenance services through strategic alliances, joint-ventures, acquisitions of, and investments in, particular for specialist engineering projects with high potential for design and value engineering contents which translate into higher profit margins for us. In September 2008, we signed a memorandum of understanding (MOU) with a Saudi Arabian entity to explore a possible joint-venture to provide project works and maintenance services to the oil and chemical industry in the Kingdom of Saudi Arabia. Save for the MOU, we have not identified any other prospective strategic alliances, joint-ventures, acquisitions of, and investments, in related businesses. Whilst we intend to set aside S$7.0 million of the net proceeds from the Invitation to fund any such expansion, in the event we are unable to use proceeds for this purpose, whether in part or in full, such proceeds shall be utilised for working capital and general corporate purposes.
(d)
Further expansion of our EPC and EPCm services by technological upgrading and investments EPC and EPCm projects are highly valued as their conceptual design and project management elements necessitate a greater degree of technical know-how and expertise. With the continuing development of new oil and chemical terminals in Asia and the Middle East, we aim to market our EPC capabilities to oil and chemical terminal operators/owners as we look to expand our business both geographically and in terms of our scope of work. As for maintenance services, we intend to focus on marketing our EPCm capabilities to petrochemical plant operators/ owners for plant upgrading, plant de-bottlenecking, and plant revamping. Our in-house developed integrated information and operating systems such as EIS and PECMm are integral to our ability to successfully implement our EPC and EPCm projects. To ensure our continued success, we are therefore committed to keeping up with advances in technology in order to improve our process flow, on-site management, increase overall efficiency and productivity of our fabrication facilities as well as our engineering capabilities. We intend to purchase new advanced engineering hardware and design software to ensure that we are always equipped with up-to-date EPC and EPCm technological know-how, such costs to be funded from our internal sources.
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DIRECTORS, MANAGEMENT AND STAFF
MANAGEMENT REPORTING STRUCTURE
Board of Directors
Executive Chairman Edna Ko Poh Thim
Group Chief Executive Officer Robert Dompeling
Managing Director Wong Peng
Senior Director Tender and Proposal Chee Kok Shine Director Finance Goh Eng Mui
Senior Director Projects Fan Ming Keong
Senior Director Business Development and Corporate Services John Lim Yeu Siang
Director Maintenance Gan Tong Nong
Director Construction Toh Boon Chuan
Director Quality Assurance / Quality Control Choo Eng Kuan
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DIRECTORS Our Board of Directors is entrusted with the responsibility for the overall management of our Group. Our Executive Directors are appraised of our Groups financial performance and consulted on our Groups financial matters during meetings with our Director Finance which are held at least once a month. Our Directors particulars are listed below: Name Edna Ko Poh Thim Age 50 Address 32 Nassim Hill #09-38 Nassim Mansion Singapore 258472 32 Nassim Hill #09-38 Nassim Mansion Singapore 258472 33 Hindhede Walk #04-14 Southhaven II Singapore 587968 22 Wilby Road #07-15 The Tessarina Singapore 276306 35 Sennett Road Singapore 466814 106 Lengkong Tiga #08-325 Singapore 410106 Position Executive Chairman
Robert Dompeling
51
Group Chief Executive Officer
Wong Peng
57
Managing Director
Dr Foo Fatt Kah
49
Lead Independent Director
Chia Kim Huat
42
Independent Director
Ho Yew Mun
56
Independent Director
Information on the business and working experience of our Directors is set out below: Edna Ko Poh Thim Ms Edna Ko Poh Thim is our Executive Chairman and has been with our Group for more than 20 years. She is responsible for the overall business strategy and development of our Group. She first joined our Company in February 1984 as an executive director. From August 1991 to June 2007, she was the managing director of our Company. She was responsible for the successful expansion of our Company in the local and overseas markets through the formation of strategic joint-ventures. She was appointed as our Executive Chairman in July 2007. Ms Edna Ko has also been an executive director of Tian San Singapore, whose present principal business activity is that of an investment company, and Tian San Shipping, a marine service provider, since 1983, and with effect from August 1991, she was appointed as the managing director of both companies. She has been a member of The Rotary Club of Jurong Town since 1999 and a patron of Siglap South Community Centre Management Committee since 2002. Ms Edna Ko graduated from University of Hawaii, the United States of America, with a Bachelors degree in Business Administration in 1982. Ms Ko is the spouse of our Group Chief Executive Officer, Mr Robert Dompeling. Robert Dompeling Mr Robert Dompeling is our Group Chief Executive Officer and was appointed to our Board of Directors in July 2007. He joined our Company in July 2007 as our Group Chief Executive Officer. He is responsible for the operational, commercial and financial management of our Group as well as charting the business development and expansion of our Group. He started his career with the Royal Dutch Shell Group in the Netherlands in July 1984 as a petroleum engineer. During his employment with the Royal Dutch Shell Group, he held various positions in the United Kingdom and Oman. From 1988 to 2007, he worked for the Royal Vopak group of companies, a world leading operator in independent tank storage
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terminals, holding various management positions within the group where he oversaw the growth and development of the groups Singapore business. Mr Dompeling graduated with both Bachelors and Masters degrees in Naval Architecture from University of Technology of Delft, the Netherlands, in 1983 and 1984 respectively. In 1979, he also obtained a diploma in Higher Technical Education in Nautical Studies from the Northern Nautical College of Delfzijl, the Netherlands. Mr Dompeling is the spouse of our Executive Chairman, Ms Edna Ko Poh Thim. Wong Peng Mr Wong Peng is our Managing Director and has been with our Group for more than 25 years. He is responsible for the day-to-day operations of our Group and works closely with our Executive Chairman and Group Chief Executive Officer in formulating our Groups strategies and policies. He started his career in August 1978 with Tian San Singapore, which principal business then was construction and equipment leasing for the petroleum industry, as a mechanical engineer and was responsible for assisting in project job costings and project tender submissions. In 1982, Mr Wong joined our Company as the material and equipment controller in charge of securing and procuring material and equipment for our projects. In December 1988, he was appointed as an executive director and general manager of our Company. He was subsequently appointed as our Managing Director in July 2007. Mr Wong graduated from University of Singapore with a Bachelors degree in Mechanical Engineering in 1978 and has been a member of The Institution of Engineers, Singapore since June 1991. Dr Foo Fatt Kah Dr Foo Fatt Kah is our Lead Independent Director and was appointed to our Board of Directors on 25 June 2009. Dr Foo is the founder and chief executive officer of Maida Vale Consulting Group Pte Ltd, a specialist investment and consulting firm. He is also the Asian venture partner for Aravis Ventures, a global biotechnology venture capital firm. He had a 16-year career in investment banking spanning Europe and Asia. Between 1987 and 1994, he worked in London as an equity analyst with Robert Fleming & Co, Barings Securities and Paribas Capital Markets. He was a rated analyst in the Institutional Investor and Extel European polls. Later, he returned to Asia in 1994 and has worked in both Hong Kong and Singapore with Deutsche Morgan Grenfell (now Deutsche Securities) and Societe General (SG). From 1996 to 2003, he worked for SG Securities Asia, initially as the Group Head of Equity Research and subsequently as Head of Asian Equities and Co-Head of the Asian Investment Bank, covering 10 countries. Between 2007 to early 2009, Dr Foo was an executive director with Cyber Village Holdings Limited, a company listed on SGX Sesdaq/ Catalist. Dr Foo is qualified in Medicine (M.B., B.Ch., B.A.O.) and Business Administration (MBA) from Queens University, United Kingdom. Chia Kim Huat Mr Chia Kim Huat is our Independent Director and was appointed to our Board of Directors on 25 June 2009. He is presently a partner of Rajah & Tann LLP and heads its China Practice Group. Mr Chia has more than 15 years of experience as a practising lawyer and his main areas of practice include capital market transactions, cross-border joint-ventures, private equity investments, mergers and acquisitions, corporate and banking transactions. Mr Chia was appointed as a director of Ascendas Funds Management (S) Ltd on 28 March 2008. He graduated from National University of Singapore with a Bachelor of Laws (Honours) degree in 1992 and has been a member of both the Singapore Academy of Law as well as The Law Society of Singapore. Ho Yew Mun Mr Ho Yew Mun is our Independent Director and was appointed to our Board of Directors on 25 June 2009. He is currently an executive director of Ho Yew Mun Pte Ltd, a company providing business advisory services. Between February 2001 and April 2005, he was the managing director of Investment Banking Group, Equity Capital Markets, DBS Bank Ltd. During this period, he was also the Head of Equity Capital Markets (Hong Kong) from November 2001 to November 2003. Mr Ho was Senior VicePresident and Head of Securities Market Division and was also the Listing Manager in the then Stock Exchange of Singapore during the period from June 1993 to December 2000. From August 1988 to March 1993, he was a financial management consultant with The Treasury (New Zealand) and also the
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financial controller, Government Computing Service (New Zealand). Mr Ho is a Fellow of the Association of Chartered Certified Accountants and a Fellow of the Institute of Certified Public Accountants, Singapore. In addition, Mr Ho held the office of President of the Association of Chartered Certified Accountants, Singapore Branch from 24 May 2008 to 16 May 2009. He is also a Member of the Singapore Institute of Directors. Mr Ho is currently an independent director of China Fibretech Ltd and CDW Holding Limited, both companies of which are listed on SGX-ST. He graduated from Victoria University, Wellington, with a Masters degree in Business Administration. The list of present and past directorships of each Director over the last five years, excluding those held in our Company, is set out below:
Name Edna Ko Poh Thim Present directorships Past directorships
Group Companies
Audex Audex Shanghai Audex Vietnam Huizhou Tianxin ITR PCELC Huizhou PEC Indonesia PEC Malaysia PEC Thailand PECII PEI PES PGS PTCS Huizhou TIS
Group Companies
PMC Thailand Shenzhen Baojian Consulting Co., Ltd (wound up) Singa Consolidated Engineers & Constructors Pte. Ltd. (struck off) Sino-PEC Engineering (Singapore) Pte. Ltd. (wound up)
Other Companies
Asia Chemical Plant Consultant Services Pte Ltd Tian San Singapore Tian San Shipping TS Harbour Services Pte Ltd Robert Dompeling
Other Companies
DTS Packaging & Logistics Pte Ltd (struck off)
Group Companies
Audex Audex Shanghai Audex UAE PEC Thailand PGS Audex Vietnam
Group Companies
Nil
Other Companies
Nil
Other Companies
Kertih Terminals Sdn Bhd Vopak Terminal Penjuru Pte Ltd
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Name Wong Peng
Present directorships
Past directorships
Group Companies
Audex Audex Shanghai Audex UAE Audex Vietnam Huizhou Tianxin ITR PCELC Huizhou PEC Indonesia PEC Malaysia PEI PES PGS PTCS Huizhou TIS
Group Companies
Delta Aliran (M) Sdn Bhd (wound up) Shenzhen Baojian Consulting Co., Ltd (wound up) Sino-PEC Engineering (Singapore) Pte Ltd (wound up)
Other Companies
Nil Dr Foo Fatt Kah
Other Companies
Nil
Group Companies
Nil
Group Companies
Nil
Other Companies
Hidden Jewels Offshore Fund King Wai Group Pte Ltd Luminor Capital Pte. Ltd. Luminor Pacific Fund 1 Ltd. Merge Pacific Sdn Bhd Maida Vale Associates Pte. Ltd. Maida Vale Consulting Group Pte. Ltd. The Luminor Fund (Cayman)
Other Companies
CV Distribution and Service Pte. Ltd. Cyber Village Holdings Limited Cyber Village Pte Ltd Fuels N Lubricants Pte Ltd Isis Capital Pte. Ltd. King Wai Industries (S) Private Limited Koyo International Limited Learning Sciences Pte Ltd SG Research (Singapore) Pte. Ltd. Sparkmedia Pte Ltd
Chia Kim Huat
Group Companies
Nil
Group Companies
Nil
Other Companies
Ascendas Funds Management (S) Ltd Ho Yew Mun
Other Companies
Rising Tyre Co., Ltd
Group Companies
Nil
Group Companies
Nil
Other Companies
CDW Holding Limited China Fibretech Ltd. Ho Yew Mun Pte. Ltd.
Other Companies
China KL International Pte. Ltd. David Karori Ltd DBS Asia Capital Limited Dynamax International Limited Epure International Ltd. FX153 Pte. Ltd. Oriental Century Limited
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Two of our Directors, Dr Foo Fatt Kah and Mr Ho Yew Mun, have prior experience as directors of public listed companies in Singapore, and are familiar with the roles and responsibilities of a director of a public listed company in Singapore. In addition, Mr Chia Kim Huat sits on the board of Ascendas Funds Management (S) Limited, the manager for Ascendas Real Estate Investment Trust which is listed on the SGX-ST. Our other Directors, Ms Edna Ko, Mr Robert Dompeling and Mr Wong Peng do not have prior experience as directors of public listed companies in Singapore but have received relevant training to familiarise themselves with the roles and responsibilities of a director of a public listed company in Singapore. EXECUTIVE OFFICERS The particulars of our Executive Officers are set out below: Name Chee Kok Shine Age 55 Address Block 5 Toh Yi Drive #08-227, Singapore 590005 7 Jurong East Street 32 #16-06, The Mayfair Singapore 609480 18 Chestnut Avenue Singapore 679503 Position Senior Director Tender and Proposal Senior Director Projects
Fan Ming Keong
47
John Lim Yeu Siang
52
Senior Director Business Development and Corporate Services Director Finance
Goh Eng Mui
46
Block 317, Jurong East Street 31, #06-08 Singapore 600317 12 Stirling Road, #31-13 Singapore 148955 29 Jurong West Street 41, #04-06 Singapore 649411 11 Toh Tuck Road #02-12, Singapore 596290
Gan Tong Nong
62
Director Maintenance
Toh Boon Chuan
44
Director Construction
Choo Eng Kuan
53
Director Quality Assurance/ Quality Control
Information on the business and working experience of our Executive Officers is set out below: Chee Kok Shine Mr Chee Kok Shine has been our Senior Director Tender and Proposal since January 2006 and he is responsible for the overall coordination of our Companys projects tendering preparation and costings and he sits on our Groups tender committee. He has more than 20 years of experience in project management. He started his career in November 1979 as a costing engineer with Tian San Singapore and was later, promoted to a project coordinator in February 1983 and was involved in a project in Hong Kong for two years. He joined our Company in March 1985 and has since held various appointments such as a site manager and a project manager. Mr Chee graduated with a Bachelors degree in Mechanical Engineering from the University of Singapore in 1979. He has been a member of the Institution of Engineers, Singapore since 1989.
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Fan Ming Keong Mr Fan Ming Keong has been our Senior Director Projects since July 2007 and he is responsible for leading and overseeing the execution of our Companys EPC and EPCm projects. He started his career in March 1981 and has been a designer for piping systems in various companies, namely Chiyoda Malaysia Sdn Bhd, Protek Consultant Engineers Sdn Bhd and Sime Engineering Sdn Bhd between 1981 and 1989. Thereafter from February 1989 till September 2005, he started taking on project engineering and coordination positions in companies, namely Edeleanu Asia Pte Ltd, Jacobs Engineering Singapore Pte Ltd and Stork Comprimo Singapore Pte Ltd, whereby he was in charge of project execution and coordination. Subsequently, he joined PES in November 2005 as an executive director and general manager. Mr Fan graduated from Bedford Technical College, Malaysia in 1986 with a diploma in Mechanical Engineering. He also attended the Construction Safety Course for project managers conducted by Ministry of Manpower, Singapore, in 2002 and the Project Management Course by Jacobs College, United States of America, in 2001. John Lim Yeu Siang Mr John Lim Yeu Siang joined us in January 2008 as our Senior Director Business Development and Corporate Services. He heads our Groups business development team to explore and develop new business opportunities. He is also responsible for staff recruitment, training and development. Mr Lim started his career as an engineer with Esso Singapore Pte Ltd in March 1981. From 1983 to December 1990, he worked for Exxon Chemical Singapore Pte Ltd as a unit supervisor responsible for the operations of a manufacturing unit. In January 1991, Mr Lim joined Glaxo Pharmaceutical Singapore Pte Ltd as a manufacturing section manager. He joined Exxon Chemicals Paramins Singapore Pte Ltd in May 1991 as its operations manager before assuming the position of manufacturing manager. From January 1999 to June 2006, he was with Infineum Singapore Pte Ltd. holding various positions in regional supply, marketing, strategic planning and general management. From December 2006 to January 2008, Mr Lim was the general manager of Chemical Specialities Singapore Pte Ltd, a company specialising in chemical toll processing, responsible for developing new businesses and to set up a new manufacturing facility. Mr Lim graduated from the University of Manchester Institute of Science & Technology in the United Kingdom with a Bachelors degree in Chemical Engineering. Goh Eng Mui Ms Goh Eng Mui is our Director Finance since January 2008 and is responsible for the accounting, financial, treasury and taxation functions of our Group. She has more than 20 years of experience in the accounting field. Prior to joining our Company as an accounts executive in 1990, she had since 1983 held accounting positions in various companies, namely Tanglin Trust Limited from May 1983 to April 1984, Singapore Shinei Sangyo Pte Ltd from July 1984 to October 1987, Fujikura International Management (S) Pte Ltd from October 1987 to May 1989 and Nycosa (S) Pte Ltd from May 1989 to March 1990. Ms Goh graduated from the National University of Ireland with a Master of Science (Finance) in 2000. Gan Tong Nong Mr Gan Tong Nong has been our Director Maintenance since January 2006. He is responsible for coordinating the maintenance service activities of our Company, which includes managing cost and productivity efficiency. He started his career with Tian San Singapore in October 1966 and progressed to become a site manager of the said company, where he participated in various overseas projects. Subsequently, he joined our Company in May 1985 as a site manager and was responsible for overseeing tankage, piping and equipment maintenance and other related services. Toh Boon Chuan Mr Toh Boon Chuan has been our Director Construction since January 2006 and is responsible for managing the execution of construction activities for project works. In October 1984, he started his career with Tian San Malaysia as a welding inspector. He later joined our Company in November 1988 as a construction superintendent and was responsible for organising the manpower, tools and equipment required for the execution of projects. Since then, he has been involved in the execution of our Companys construction projects and has accumulated over 20 years of experience in our industry. He graduated from Sekolah Tinggi Port Dickson, Malaysia in 1982.
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Choo Eng Kuan Mr Choo Eng Kuan has been our Director Quality Assurance/ Quality Control since January 2008 and he is responsible for overseeing the quality aspects of projects. He is in charge of developing, maintaining and implementing our Companys OSHEQ programme. He started his career in April 1976 with Vetco Singapore Pte. Ltd., a company specialising in the provision of inspection and testing services for the oil industry, as an inspector responsible for the inspection of oil related equipment. From January 1979 to January 1983, he was with Oilfield Tubular Services as a senior quality control inspector. He was with Moody International QA Services Pte. Ltd. (Moody) from January 1983 and was the area representative in Indonesia in 1995. In Moody, he was responsible for ensuring quality assurance of the said companys projects. He joined our Group in August 1996. Mr Choo has obtained professional qualifications such as the Certificate of Proficiency issued by Certification Scheme for Welding Inspection Personnel (CSWIP), United Kingdom in 1981 and attained the ASNT Central Certification Program (ACCP) Level II in 2003. He is a member of the Singapore Welding Society and is also a registered certificated QMS Lead Auditor with International Register of Certificated Auditors (IRCA), United Kingdom. Save as disclosed below, none of our Executive Officers has any present and past directorships over the past five years:
Name Chee Kok Shine Present directorships Past directorships
Group Companies
PEC Malaysia PEC Indonesia
Group Companies
Nil
Other Companies
Nil Fan Ming Keong
Other Companies
Nil
Group Companies
PES
Group Companies
Nil
Other Companies
Nil John Lim Yeu Siang
Other Companies
Nil
Group Companies
Nil
Group Companies
Nil
Other Companies
Nil
Other Companies
DesignShop Pte. Ltd. HighLube Additive Co. Ltd. Infineum Singapore Pte. Ltd. Jinex Additive Co. Ltd.
Goh Eng Mui
Group Companies
Nil
Group Companies
Nil
Other Companies
Nil Gan Tong Nong
Other Companies
Nil
Group Companies
PEC Thailand PECII
Group Companies
PMC Thailand
Other Companies
Nil
Other Companies
Nil
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Name Toh Boon Chuan
Present directorships
Past directorships
Group Companies
Nil
Group Companies
Nil
Other Companies
Nil Choo Eng Kuan
Other Companies
Nil
Group Companies
Nil
Group Companies
Nil
Other Companies
Nil
Other Companies
Nil
Save as disclosed in the sections entitled Shareholders and Directors, Management and Staff in this Prospectus, none of our Directors and Executive Officers are related to one another or to any Substantial Shareholder of our Company. To the best of our knowledge and belief, there are no arrangements or undertakings with any Substantial Shareholders, customers, suppliers or others, pursuant to which any of our Directors and Executive Officers was appointed. REMUNERATION The compensation paid to our Directors and our Executive Officers for services rendered to our Group on an individual basis and in remuneration bands during FY2007 and FY2008 and as estimated for FY2009 are as follows:
Names Directors Edna Ko Poh Thim Robert Dompeling Wong Peng Dr Foo Fatt Kah Chia Kim Huat Ho Yew Mun Executive Officers Chee Kok Shine Fan Ming Keong John Lim Yeu Siang Goh Eng Mui Gan Tong Nong Toh Boon Chuan Choo Eng Kuan
Notes: (1) Remuneration bands: Band Band Band Band Band Band Band Band (2) A means compensation of an amount between S$0 and S$249,999. B means compensation of an amount between S$250,000 and S$499,999. C means compensation of an amount between S$750,000 and S$999,999. D means compensation of an amount between S$1,000,000 and S$1,249,999. E means compensation of an amount between S$1,250,000 and S$1,499,999 F means compensation of an amount between S$2,000,000 and S$2,249,999. G means compensation of an amount between S$2,250,000 and S$2,499,999. H means compensation of an amount between S$3,250,000 and S$3,499,999.
FY2007(1)
FY2008(1)
FY2009(1), (2)
Band H Band D
(3)
(5)
Band G Band F Band E
(3) (4) (5)
Band Band Band Band Band Band
A B B A A A
Band C Band A Band A Band A Band A Band A
Band Band Band Band Band Band Band
B B A A A A A
Band Band Band Band Band Band Band
A A A A A A A
The estimated amount under FY2009 does not take into account any performance bonus due to our Executive Directors and our Executive Officers. Our Executive Directors have entered into new service agreements with our Company, which, inter alia, set out the revised performance bonus each of our Executive Directors are entitled to receive in respect of each financial year commencing from and including FY2010, further details of which are set out in the section entitled Service Agreements in this Prospectus.
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(3)
For FY2007, our Executive Chairman, Ms Edna Ko, was entitled to a performance bonus based on 10.0% of the audited profits before tax of our Company and for FY2008, her performance bonus was based on 6.0% of the audited consolidated profits before tax of our Group. For FY2008, our Executive Director, Mr Robert Dompeling, was entitled to a fixed bonus of three months from our Company and Audex and a performance bonus based on 5.0% of the audited consolidated profits before tax of our Group. For FY2007, our Executive Director, Mr Wong Peng, was entitled to a fixed bonus of three months and a performance bonus based on 3.0% of the audited profits before tax of our Company and for FY2008, he was entitled to a fixed bonus of three months and a performance bonus based on 3.0% of the audited profits before tax of our Group.
(4)
(5)
The existing employment terms of some of our Executive Officers include profit participation arrangements which are pegged to the audited profits before tax of our Company or the audited consolidated profits before tax of our Company and our Subsidiaries, as the case may be. The factors which our Company takes into consideration in entering into such profit participation arrangements include, but are not limited to, the loyalty of the Executive Officer, his/her overall contribution to our Group (including potential contribution), the experience and expertise of the Executive Officer, as well as the prevailing market demand for such Executive Officer in the industries in which our Group operates. A total amount of up to S$600,000 per financial year in respect of all such Executive Officers aggregated together may be paid under such profit participation arrangements. Upon the admission of our Company to the Official List of the SGX-ST, our Directors expect such profit participation arrangements to continue. Under Paragraph 12 of Part VII of the Fifth Schedule of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005, our Company is required to identify the Executive Officers who are party to such profit participation arrangements and to briefly describe such arrangements in this Prospectus. We have applied for and obtained a waiver from the Authority from disclosing in this Prospectus the specific details of each of the profit participation arrangements with the relevant Executive Officers as we believe that such information would be disadvantageous to our business interests, given the highly competitive conditions in the industries in which our Group operates where poaching of such Executive Officers is not unusual. Our Directors are of the opinion that such non-disclosure is not prejudicial to the interests of our Shareholders. As at the Latest Practicable Date, we have not set aside or accrued any amounts for our employees to provide for pension, retirement or similar benefits, except as required for purposes of compliance with the relevant laws of the jurisdictions in which our Group operates. Remuneration of employees/persons who are immediate family members of our Directors and Substantial Shareholders Mr Michael Ko is a non-executive director of our Subsidiary, PECII, Mr Wong Shun Ming is an administrative assistant in our Company and Ms Patricia Ko is a director of all our Groups PRC Subsidiaries (other than Audex Shanghai), a general manager of PCELC Huizhou and PTCS Huizhou, and a consultant to PEC. Mr Michael Ko and Ms Patricia Ko are siblings of our Executive Chairman, Ms Edna Ko. Mr Wong Shun Ming is the son of our Managing Director, Mr Wong Peng. Mr Michael Ko has not received any remuneration from the Group. For each of FY2007 and FY2008, the aggregate compensation paid to Mr Wong Shun Ming and Ms Patricia Ko for services rendered to our Group was less than S$150,000, amounting to less than 1.0% of our Groups profit before taxation. The basis of determining the remuneration of the aforesaid related employee is the same as the basis for determining the remuneration of other unrelated employees. The total remuneration of employees who are immediate family members of our Directors and Substantial Shareholders shall be subject to the review and approval of our Remuneration Committee to ensure that their remuneration packages are in line with our Groups staff remuneration guidelines and commensurate with the respective job scopes and levels of responsibility. The total remuneration paid to our Directors, Substantial Shareholders and our employees who are immediate family members of our Directors and Substantial Shareholders will be disclosed in our annual reports. Save as disclosed above and in the section entitled Shareholders in this Prospectus, none of the employees of our Group is an immediate family member of any Director or Substantial Shareholder.
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EMPLOYEES As at the Latest Practicable Date, our Company and Subsidiaries had a workforce of 5,716 full-time employees, inclusive of contracted workers engaged for specific projects. The functional distribution of the full-time employees of our Company and Subsidiaries as at 30 June 2006, 30 June 2007, 30 June 2008, 31 December 2008 and as at the Latest Practicable Date were as follows:
As at the Latest Practicable Date
As at 30 June 2006 Function Operations Business development/ Tender and proposal Corporate support Total 3,395 199 68 3,662
As at 30 June 2007
As at 30 June 2008
As at 31 December 2008
3,437 346 73 3,856
4,145 626 142 4,913
4,555 441 126 5,122
5,228 377 111 5,716
The geographical breakdown of the full-time employees of our Company and Subsidiaries as at 30 June 2006, 30 June 2007, 30 June 2008, 31 December 2008 and as at the Latest Practicable Date were as follows:
As at the Latest Practicable Date 5 326 5,147 237 1 5,716
As at 30 June 2006 Malaysia PRC Singapore Middle East Others(1) Total 12 219 2,989 431 11 3,662
As at 30 June 2007 82 248 3,012 513 1 3,856
As at 30 June 2008 18 236 4,468 180 11 4,913
As at 31 December 2008 6 268 4,497 348 3 5,122
Note: (1) Includes Indonesia and Vietnam.
The overall increase in the number of employees from 30 June 2006 to 31 December 2008 was in line with the expansion of our business, including but not limited to the setting up of our Subsidiaries in the PRC, the Middle East and Vietnam. The fluctuations in the employee numbers for Malaysia and the Middle East are in line with and reflect our Groups level of operational activity and on-going projects in Malaysia and the Middle East respectively. As at 31 December 2008, our Company and Subsidiaries do not employ a significant number of temporary employees. All our employees in our Company and Subsidiaries are not unionised. We consider our relationship with our employees to be good. We have not been involved in any labour disputes in the last three financial years and up to the Latest Practicable Date. Our Company and Subsidiaries have also not experienced any disruption to our operations due to any labour disputes.
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SERVICE AGREEMENTS We have entered into separate service agreements (the Service Agreements) with our Executive Directors, namely, our Executive Chairman, Ms Edna Ko Poh Thim, our Group Chief Executive Officer, Mr Robert Dompeling and our Managing Director, Mr Wong Peng for a period of two years with effect from the date of admission of our Company to the Official List of the SGX-ST (unless otherwise terminated by either party giving not less than six months notice (or such shorter period as may be mutually agreed between parties) to the other). We may also at any time forthwith terminate the Service Agreements of our Executive Directors if he or she, inter alia, shall be guilty of any dishonesty, gross misconduct or wilful neglect of duty or shall commit any continued material breach of the provisions of his/her respective Service Agreement, becomes bankrupt or persistently refuses to carry out any reasonable lawful order given to him/her in the course of his/her employment or persistently fails diligently to attend to his/her duties hereunder. The Service Agreements cover the terms of employment, and includes specifically, salaries and bonuses. Pursuant to the terms of their respective Service Agreements, Ms Edna Ko, Mr Robert Dompeling and Mr Wong Peng are entitled to a monthly salary of S$20,000, S$20,000, and S$18,500 respectively, and a fixed bonus of three months basic salary (comprising an annual wage supplement of one months basic salary and a bonus of two months basic salary), to be pro-rated accordingly if the Executive Director leaves our Company before the expiry of any calendar year. In addition, each of Ms Edna Ko, Mr Robert Dompeling and Mr Wong Peng is also entitled to a performance bonus (the Performance Bonus) in respect of each financial year commencing from and including FY2010, which is calculated based on the consolidated profit before tax and extraordinary items (PBT) (before deducting for such Performance Bonus) of our Group as follows:
Consolidated PBT of our Group attained Performance Bonus (% of Consolidated PBT) Ms Edna Ko (i) (ii) Up to and including S$5.0 million More than S$5.0 million but up to and including S$10.0 million More than S$10.0 million but up to and including S$20.0 million More than S$20.0 million 4.0 Mr Robert Dompeling 4.0 Mr Wong Peng 3.0 3.0
(iii)
4.5
4.5
3.0
(iv)
5.0
5.0
3.0
All travelling, accommodation, entertainment and other out-of-pocket expenses reasonably incurred by our Executive Directors in the process of discharging their duties on behalf of our Group will be borne by us. Each of Ms Edna Ko, Mr Robert Dompeling and Mr Wong Peng has agreed, inter alia, in his/her Service Agreement that he/she will not during his/her employment with our Company and for a period of 12 months after the cessation of his/her employment with our Company be engaged or concerned or interested, whether as a shareholder, director, employee, partner, agent or otherwise, in any business in competition with the business of the Group carried on prior to the date that he/she ceases to be an employee of the Company (other than Ms Edna Kos 10.5% shareholding interest in Tian San Malaysia and/or as a holder of not more than 5% of the total issued shares or debentures of any company listed on any recognised stock exchange provided that the said executive director does not or shall not participate in or is otherwise involved in the management of such company or solicit or attempt to solicit any customers or employees from our Group). Upon termination of their respective Service Agreement: (a) We retain the sole and final discretion to declare and/or to make payment of the Performance Bonus and may refuse to declare and/or make payment of the Performance Bonus to our Executive Director; and
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(b)
Our Executive Director is entitled to a sum of S$10,000.00 per month for the period of 12 months from the date our Executive Director ceases to be an employee of our Company in consideration of his/her agreement to comply with his/her non-competition and non-solicitation obligations in their respective Service Agreement.
Had the Service Agreements been effected for FY2008, the aggregate remuneration for our Executive Directors would have been approximately S$5.9 million (instead of approximately S$6.1 million) and our profit before tax for our Group and the profit attributable to our Shareholders in respect of FY2008 would have been approximately S$33.8 million (instead of approximately S$33.6 million) and approximately S$25.3 million (instead of approximately S$25.1 million) respectively. Save as disclosed above, there are no existing or proposed service agreements between our Company, our Group Companies and any of our Directors. Save as disclosed above, there are no existing or proposed service agreements entered or to be entered into by our Directors with our Company or any of our Group Companies which provide for benefits upon termination of employment.
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PEC EMPLOYEE SHARE OPTION SCHEME

On 25 June 2009, our Shareholders approved an employee share option scheme known as the PEC Employee Share Option Scheme (the ESOS), the rules of which are set out in Appendix F of this Prospectus. The ESOS complies with the relevant rules of Chapter 8 of the Listing Manual. The ESOS will provide eligible participants with an opportunity to participate in the equity of our Company and to motivate them towards better performance through increased dedication and loyalty. The ESOS, which forms an integral and important component of our employee compensation plan, is designed to primarily reward and retain executive directors, non-executive directors and employees of our Company and/or our subsidiaries whose services are vital to our well being and success. As at the Latest Practicable Date, no Options have been granted under the ESOS. Objectives of the ESOS The objectives of the ESOS are as follows: (a) To motivate each participant to optimise his performance standards and efficiency and to maintain a high level of contribution to our Company and/or our subsidiaries; To retain key employees and executive directors of our Company and/or our subsidiaries whose contributions are essential to the long-term growth and profitability of our Group; To instill loyalty to, and a stronger identification by the participants with the long-term prosperity of our Company and/or our subsidiaries; To attract potential employees with relevant skill to contribute to our Company and/or our subsidiaries and to create value for our Shareholders; and To align the interest of the participants with the interests of our Shareholders.
(b)
(c)
(d)
(e)
Summary of the ESOS A summary of the rules of the ESOS is set out as follows:
(1)
Participants
Under the rules of the ESOS, executive and non-executive directors (including our independent directors), employees of our Company and our subsidiaries, and Controlling Shareholders or their associates who meet the eligibility criteria set out in the rules of the ESOS, are eligible to participate in the ESOS at the absolute discretion of the Remuneration Committee. The participation by and actual number and terms of any Options to be granted to each such Controlling Shareholder or his associate and each grant of Options to any one of them may be effected only with a specific prior approval of independent Shareholders at a general meeting in separate resolutions. Our Company will at such time provide the rationale and justification for any proposal to grant the Controlling Shareholders and/or their associates any Options.
(2)
Scheme administration
The ESOS shall be administered by the Remuneration Committee with powers to determine, inter alia, the following: (a) (b) (c) persons to be granted Options; number of Options to be granted; and recommendations for modifications to the ESOS.
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As at the date of this Prospectus, our Remuneration Committee comprises of Dr Foo Fatt Kah, Mr Chia Kim Huat and Mr Ho Yew Mun. The Remuneration Committee will consist of Directors (including Directors or persons who may be participants of the ESOS). A member of the Remuneration Committee who is also a participant of the ESOS must not be involved in its deliberation in respect of Options to be granted to him.
(3)
Size of the ESOS

The aggregate number of Shares over which our Remuneration Committee may grant Options on any date, when added to the number of Shares issued and issuable in respect of (i) all Options granted under the ESOS, and (ii) all awards granted under any other share option, share incentive, performance share or restricted share plan implemented by our Company and for the time being in force, shall not exceed 15.0% of the issued Shares of our Company (excluding treasury shares) on the day immediately preceding the Offer Date. The aggregate number of Shares issued and issuable in respect of all Options granted under the ESOS available to all Controlling Shareholders and their associates must not exceed 25.0% of the Shares available under the ESOS. Separately, the number of Shares issued and issuable in respect of all Options granted under the ESOS available to each of the Controlling Shareholders or his associate must not exceed 10.0% of the Shares available under the ESOS. We believe that the 15.0% limit set by the SGX-ST gives our Company sufficient flexibility to decide the number of ESOS Shares to offer to our existing and new employees. 15.0% of the postInvitation issued shares of our Company constitutes 35,700,000 Shares. As it is intended that the ESOS shall last for 10 years, assuming that there is no change in the total issued shares of our Company, the number of Options that may be granted in a year will average approximately 3,570,000 Shares. The number of eligible participants is expected to grow over the years. Our Company, in line with its goal of ensuring sustainable growth, is constantly reviewing our position and considering the expansion of its talent pool which may involve employing new employees. The employee base, and thus the number of eligible participants will increase as a result. If the number of Options available under the ESOS is limited, our Company may only be able to grant a small number of Options to each eligible participant which may not be a sufficiently attractive incentive. Our Company is of the opinion that it should have sufficient number of Options to offer to existing employees as well as to new employees. The number of Options offered must also be significant to serve as a meaningful reward for contributions to our Company and/or our subsidiaries. However, it does not necessarily mean that our Remuneration Committee will grant Options up to the prescribed limit. The Remuneration Committee shall exercise its discretion in deciding the number of ESOS Shares to be granted to each employee which will depend on, inter alia, the performance of our Company, our Subsidiaries, the years of service and individual performance of the employee, the contribution of the employee to the success and development of our Company and/or our subsidiaries and the prevailing market conditions.
(4)
Maximum entitlements
The aggregate number of Shares comprised in any Option to be offered to a participant under the ESOS shall be determined at the absolute discretion of our Remuneration Committee, which shall take into account in respect of an employee of our Company or our subsidiaries criteria such as rank, performance, years of service and potential for future development of that participant and in respect of a non-executive director (including an independent director), his contribution to the success and development of the our Company and/or our subsidiaries.
(5)
Options, exercise period and exercise price

The Options that are granted under the ESOS may have exercise prices that are, at our Remuneration Committees discretion, set at a price (the Market Price) equal to the average of the last dealt prices for the Shares on the Official List of the SGX-ST over the five consecutive Market Days immediately preceding the date of grant of the relevant Option; or at a discount to the Market Price (subject to a maximum discount of 20.0%). Options which are fixed at the Market Price (Market Price Option) may be exercised after the first anniversary of the Offer Date of that Option while Options exercisable at a discount to the Market Price (Discounted Option) may only be exercised after the second anniversary from the Offer Date of that Option. Options granted under the ESOS will have a life span of 10 years. 125
(6)
Grant of options
Under the rules of the ESOS, there are no fixed periods for the grant of Options. As such, offers for the grant of Options may be made at any time from time to time at the discretion of our Remuneration Committee. However, no Option shall be granted during the period of 30 days immediately preceding the date of announcement of our Companys interim or final results (whichever the case may be). In addition, in the event that an announcement on any matter of an exceptional nature involving unpublished price sensitive information is made, offers to grant Options may only be made on or after the second Market Day on which such announcement is released.
(7)
Acceptance of Options
The grant of Options shall be accepted within 30 days from the Offer Date. Offers of Options made to grantees, if not accepted before the closing date, will lapse. Upon acceptance of the offer, the grantee must pay our Company a consideration of S$1.00.
(8)
Termination of Options
Special provisions in the rules of the ESOS deal with the lapse or earlier exercise of Options in circumstances which include the termination of the participants employment in our Company and/or our subsidiaries, the bankruptcy of the participant, the death of the participant, a take-over of our Company and the winding-up of our Company.
(9)
Shares issued under the ESOS

Shares arising from the exercise of Options are subject to the provisions of the Memorandum and Articles of our Company. The Shares so allotted will upon issue rank pari passu in all respects with the then existing issued Shares, save for any dividend, rights, allotments or distributions, the record date (Record Date) for which is prior to the relevant exercise date of the Option. Record Date means the date as at the close of business on which Shareholders must be registered in order to participate in any dividends, rights, allotments or other distributions (as the case may be).
(10)
Duration of the ESOS

The ESOS shall continue in operation for a maximum duration of 10 years and may be continued for any further period thereafter with the approval of our Shareholders by ordinary resolution in general meeting and of any relevant authorities which may then be required.
(11)
Abstention from voting

Shareholders who are eligible to participate in the ESOS are to abstain from voting on any resolution of Shareholders relating to the ESOS. In particular, all Shareholders who are eligible to participate in the ESOS shall abstain from voting on resolutions of the Shareholders relating to (a) the implementation of the ESOS; (b) the quantum of discount to be determined and (c) the participation by and Option grant to Controlling Shareholders and their associates. Notwithstanding the foregoing, participants of the ESOS may act as proxies, but such participants who are appointed as proxies will not vote on the aforementioned resolutions unless specific instructions have been given in the proxy instrument on how the Shareholders wish their votes to be cast for the said resolutions.
Grant of Discounted Options The ability to offer Options to participants of the ESOS with exercise prices set at a discount to the prevailing market prices of the Shares is intended, inter alia, to operate as a means to recognise the performance of participants as well as to motivate them to continue to excel while encouraging them to focus more on improving the profitability and return of our Company and/or our subsidiaries above a certain level which will benefit all Shareholders when these are eventually reflected through share price appreciation. The ESOS will also serve to recruit new employees whose contributions are important to
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the long-term growth and profitability of our Company and/or our subsidiaries. Discounted Options would be perceived in a more positive light by the participants, inspiring them to work hard and produce results in order to be offered Discounted Options as only employees who have made significant contributions to the success and development of our Company and/or our subsidiaries would be granted Discounted Options. The flexibility to grant Discounted Options is also intended to cater to situations where the market conditions are bullish and market price of our Shares are traded at high premiums. In such events, our Remuneration Committee will have absolute discretion to: (a) Grant Options set at a discount to the Market Price of a Share (subject to a maximum limit of 20%); and Determine the participants to whom, and the Options to which, such reduction in exercise prices will apply.
(b)
In determining whether to give a discount and the quantum of the discount, our Remuneration Committee shall be at liberty to take into consideration factors including but not limited to the performance of our Company and/or our subsidiaries, length of service and individual performance of the participant concerned, the contribution of the participant to the success and development of our Company and/or our subsidiaries and the prevailing market conditions. At present, our Company foresees that Discounted Options may be granted principally in the following circumstances: (a) Where it is considered more effective to reward and retain talented employees by way of a Discounted Option rather than a Market Price Option. This is to reward the outstanding performers who have contributed significantly to our Companys and/or our subsidiaries performance and the Discounted Option serves as additional incentives to such employees. Options granted by our Company on the basis of market price may not be attractive and realistic in the event of an overly buoyant market and inflated share prices. Hence during such period the ability to offer Discounted Options would allow our Company to grant Options on a more realistic and economically feasible basis. Furthermore, Discounted Options will give an opportunity to our Companys and/or our subsidiaries employees to realise some tangible benefits even if external events cause the Share price to remain largely static; Where it is more meaningful and attractive to acknowledge a participants achievements through a Discounted Option rather than paying him a cash bonus. For example, Discounted Options may be used to compensate employees and to motivate them during economic downturns when wages (including cash bonuses and annual wage supplements) are frozen or cut, or they could be used to supplement cash rewards in lieu of larger cash bonuses or annual wage supplements. Furthermore, a discretion to grant Discounted Option provides our Company and/or our subsidiaries with a means to maintain the competitiveness of our remuneration and compensation strategy. The ESOS will provide our Companys and/or our subsidiaries employees with an incentive to focus more on improving the profitability of our Company and/or our Subsidiaries thereby enhancing shareholder value when these are eventually reflected through the price appreciation of our Shares after the vesting period; and Where due to speculative forces and having regard to the historical performance of the Share price, the Market Price of the Shares at the time of the grant of the Options may not be reflective of financial performance indicators such as return on equity and/or earnings growth.
(b)
(c)
Our Remuneration Committee will have the absolute discretion to grant Discounted Options, to determine the level of discount (subject to a maximum discount of 20.0% of the Market Price) and the grantees to whom, and the Options to which, such discount in the exercise price will apply provided that our Shareholders in general meeting shall have authorised, in a separate resolution, the making of offers and grants of Options under the ESOS at a discount not exceeding the maximum discount as aforesaid.
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We may also grant Options without any discount to the Market Price. Additionally, we may, if we deem fit, impose conditions on the exercise of the Options (whether Market Price Options or Discount Options), such as restricting the number of Shares for which the Option may be exercised during the initial years following its vesting. Rationale for participation of Controlling Shareholders and their associates An employee who is a Controlling Shareholder of our Company or an associate of a Controlling Shareholder shall be eligible to participate in the ESOS if (a) his participation in the ESOS and (b) the actual number and terms of the Options to be granted to him have been approved by independent Shareholders of our Company in separate resolutions for each such person. The relevant employee is required to abstain from voting on, and (in the case of employees who are Directors) refrain from making any recommendation on, the resolutions in relation to the ESOS. One of the objectives of the ESOS is to motivate participants to optimise their performance standards and efficiency. The objectives of the ESOS apply equally to our employees who are Controlling Shareholders or associates of Controlling Shareholders. Our view is that all deserving and eligible participants should be motivated, regardless of whether they are Controlling Shareholders or associates of Controlling Shareholders. We believe that our employees should not be excluded from benefiting under the ESOS solely for the reason that they are Controlling Shareholders or associates of Controlling Shareholders. It is in our interest to ensure that our employees who are actively contributing to our progress are given the incentive to continue to remain with us and contribute towards our future progress and development. Although our Controlling Shareholders and their associates have or may already have shareholding interests in our Company, the extension of the ESOS to allow the Controlling Shareholders and their associates who meet the eligibility criteria set out in the rules of the ESOS to participate in the Scheme, will ensure that they are equally entitled, with the other employees who are not Controlling Shareholders or their associates, to take part and benefit from this system of remuneration. The ESOS is intended to be part of our Companys system of employee remuneration and our Company is of the view that employees who are Controlling Shareholders or associates of Controlling Shareholders should not be unduly discriminated against by virtue only of their shareholding in our Company. It is proposed that Ms Edna Ko Poh Thim who is a Controlling Shareholder and Mr Robert Dompeling and Ms Patricia Ko Poh Cheng who are associates of Controlling Shareholders, and who are also employees of our Company and/or our subsidiaries, be entitled to participate in the ESOS. The shareholding interests of Ms Edna Ko, Mr Robert Dompeling and Ms Patricia Ko in the issued share capital of our Company are disclosed in the section entitled Shareholders in this Prospectus.
Rationale for participation of Ms Edna Ko Poh Thim

Ms Edna Ko is the Executive Chairman of our Company, responsible for overall business strategy and development of our Group. Ms Edna Ko has been with our Group for more than 20 years and she was responsible for the successful expansion of our Company in the local and overseas markets through the formation of strategic jointventures. As our Executive Chairman, Ms Edna Ko plays a pivotal role in providing strategic leadership, business and management direction, business networks and market contacts to our Group. Our Directors believe that the potential contribution that may be made by Ms Edna Ko to our Groups future development will be substantial towards steering our Group to be one of the leading specialist engineering groups servicing the oil and gas, petrochemical oil and chemical terminal, and pharmaceutical industries in the region. Our Directors are of the view that the remuneration package of Ms Edna Ko is fair given her contributions to our Group. The extension of the ESOS to Ms Edna Ko is consistent with our Companys objectives to motivate our employees to achieve and maintain a high level of performance and contribution which is vital to the success of the Company. Although Ms Edna Ko already has a shareholding interest in the Company, the extension of the ESOS to her will ensure that she is equally entitled, with the other employees who are not Controlling Shareholders, to take part in and benefit from this system of remuneration, thereby enhancing her long-term commitment to our Company.
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Rationale for participation of Mr Robert Dompeling

Mr Robert Dompeling is our Group Chief Executive Officer, responsible for the operational, commercial and financial management of our Group as well as charting the business development and expansion of our Group. Mr Dompeling has extensive industry knowledge and experience, having been in the petrochemical industry for more than 20 years. As our Group Chief Executive Officer, he oversees the overall management of our Group, and with his wealth of experience and industry contacts, he has also been instrumental in the Groups expansion in the Middle East market. Mr Robert Dompelings expertise and contribution to our Group has been invaluable since his joining our Group in 2007 and his continuing contribution is an important factor for the further growth and success of our Group. Although Mr Robert Dompeling is the spouse of our Executive Chairman and Controlling Shareholder, Ms Edna Ko, Mr Robert Dompeling does not have any beneficial interest in the shareholding interests of Ms Edna Ko. Our Directors are of the view that the remuneration package of Mr Robert Dompeling is fair given his contributions to our Company. The extension of the ESOS to Mr Robert Dompeling is consistent with our Companys objectives to motivate our employees to achieve and maintain a high level of performance and contribution which is vital to the success of our Group. The extension of the ESOS to him will ensure that he is equally entitled, with the other employees who are not Controlling Shareholders, to take part in and benefit from this system of remuneration, thereby enhancing his long-term commitment to our Company.
Rationale for participation of Ms Patricia Ko Poh Cheng

Ms Patricia Ko is an executive director of our PRC Subsidiaries, PTCS Huizhou, PCELC Huizhou, Huizhou Tianxin and a consultant to PEC. Ms Patricia Ko is also the general manager of PTCS Huizhou and PCELC Huizhou. She is responsible for the direction and overall management of our PRC Subsidiaries. Ms Patricia Ko has been with our Group since 2004 and has played an important role in setting up the operations of PTCS Huizhou, PCELC Huizhou, Huizhou Tianxin, and in contributing to the growth of our Groups PRC operations. She continues to provide invaluable support to our Company by assisting to oversee our PRC operations and expansion plans. Our Directors consider it crucial to provide incentives which will instill a sense of commitment to our Company. Although Ms Patricia Ko is the sibling of Ms Edna Ko, she does not have any beneficial interest in the shareholding interests of Ms Edna Ko. Notwithstanding that Ms Patricia Ko already has an indirect shareholding interest in our Company, the extension of the ESOS to her will ensure that she is equally entitled, with other employees who are not Controlling Shareholders or associates of Controlling Shareholders, to take part in and benefit from this system of remuneration, thereby enhancing her long-term commitment to our Company. The participation in the ESOS by Ms Edna Ko, Mr Robert Dompeling and Ms Patricia Ko will take place only after the listing of our Company on the SGX-ST. By subscribing for the New Shares, investors shall be deemed to have acknowledged and approved the participation by each of Ms Edna Ko, Mr Robert Dompeling and Ms Patricia Ko in the ESOS. Nonetheless, under the Listing Manual, the specific grant of Options to each of Ms Edna Mr Robert Dompeling and Ms Patricia Ko and any other Controlling Shareholders or their associates will have to be approved by independent Shareholders in general meeting. Rationale for participation of directors (including our Independent Directors) and employees of our Group The extension of the ESOS to the executive and non-executive directors (including our Independent Directors and Controlling Shareholders or their associates) and employees of our Company and/or our subsidiaries allows our Company and/or our subsidiaries to have a fair and equitable system to reward directors and employees who have made and who continue to make significant contributions to the longterm growth of our Company and/or our subsidiaries.
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Non-executive directors bring to our Company and/or our subsidiaries their wealth of knowledge, business expertise and contacts in the business community. It is desirable that non-executive directors of our Group be allowed to participate in the ESOS to instill in them a greater sense of involvement and belonging to our Company and/or our subsidiaries thereby enhancing our working relationship with them. We are of the view that including the non-executive directors of our Company and/or our subsidiaries in the ESOS will show our appreciation for, and further motivate them in their contribution towards our success. Our Remuneration Committee, when deciding on the selection of the non-executive directors of our Group to participate in the ESOS and the number of Options to be offered, will take into consideration the nature and extent of their input, the assistance and expertise rendered by them to the Board and the impact thereof on the growth, success and development of our Company and/or our subsidiaries, as well as their involvement and commitment to the committees of directors on which they sit. Our Remuneration Committee may, where it considers relevant, take into account other factors such as the economic conditions and our Companys performance. Although the non-executive directors of our Company and/or our subsidiaries may be appointed as members of our Remuneration Committee, the rules of the ESOS provide that a member is not to be involved in its deliberations in respect of the grant of Options to him. We will ensure that the number of Options granted to the non-executive directors of our Company and/or our subsidiaries will be such that any conflict of interests that may potentially arise is kept minimal and that the independence of the nonexecutive directors of our Company and/or our subsidiaries are not compromised. It is our intention that all our employees whether key employees or not, should be treated equally for the purposes of the ESOS. The main purpose of the ESOS is to align the interests of our Companys and/or our subsidiaries directors and all employees who are involved in our business and prosperity with those of our own. The extension of the ESOS to all employees of our Company and/or our subsidiaries allows us a fair and equitable system to reward all employees who have made and will continue to make important contributions to our long-term growth. We believe that the ESOS will be an essential part of our strategy for recruiting and retaining capable employees. The ESOS will provide an incentive to our employees to achieve and maintain a high level of performance as well as to encourage greater dedication and loyalty by enabling our Company and/or our subsidiaries to give recognition to past contributions and services as well as to further encourage participants generally to contribute towards our long-term prosperity. We will determine the number of Options to be granted to an employee by taking into account the appointment, responsibilities, length of service, potential and performance. The level of performance of each employee will be assessed on the basis of an annual appraisal process for all employees. Disclosures in Annual Reports Details of, inter alia, the number of Options granted, the number of Options exercised and the exercise price (as well as the discounts involved, if any) will be disclosed in our annual reports. Cost of Options granted under the ESOS to our Company Any Option granted under the ESOS will have a fair value. Where such Options are granted at a consideration which is less than their fair value, there will be a cost to our Company, the amount of which will depend on whether the Options are granted at market price or at a discount. The cost to our Company of granting Options under the ESOS would be as follows: (a) The exercise of an Option at a discounted exercise price would translate into a reduction of the proceeds from the exercise of such Option, as compared to the proceeds that our Company would have received from such exercise had the exercise been made at the prevailing market price of the Shares. Such reduction of the exercise proceeds would represent the monetary costs to our Company;
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(b)
As the monetary cost of granting Options with a discounted exercise price is borne by our Company, our earnings would effectively be reduced by an amount corresponding to the reduced interest earnings that we would have received from the difference in proceeds from exercise price with no discount versus the discounted exercise price. Such reduction would, accordingly, result in the dilution of our earnings per Share; The effect of the issue of new Shares upon the exercise of Options, is that our Companys NTA per Share will increase if the exercise price is above the NTA per Share and decrease, if the exercise price is below the NTA per Share; and The grant of Options under the ESOS will have an impact on our Companys reported profit because under the Singapore Financial Reporting Standards (SFRS), share-based payment requires the recognition of an exercise in respect of Options granted under the ESOS. The expense will be based on the fair value of the Options at the date of grant (as determined by an option-pricing model) and will be recognised over the vesting period. The requirement to recognise an expense in respect of options granted to employees is set out in SFRS 102.
(c)
(d)
It should be noted that the financial effects discussed in (a), (b) and (c) above would materialise only upon the exercise of the relevant Options. The cost of granting Options discussed in (d) would only be recognised in the financial statements even if the Options are not exercised in (d). Measured against these costs would be the desirable effect of the Scheme in attracting, recruiting, retaining and motivating directors and employees which could, in the long term, yield greater returns for us and our Shareholders. Under the ESOS, each participant to whom an Option is offered pays a nominal consideration of S$1.00 to our Company on his acceptance of the offer of the Option. Insofar as such Options are granted at a consideration that is less than their fair value at the time of grant, there will be a cost to our Company (in that we will receive from the participant upon the grant of the Option to him, a consideration that is less than the fair value of the Option). The cost to our Company in granting an Option would vary depending on the number of Options granted pursuant to the ESOS, whether these Options are granted at Market Price or at a discount and the validity period of the Options. Generally, a greater discount and a longer validity period for an Option will result in a higher potential cost to our Company. If such costs were to be recognised in accordance with SFRS 102, it would have to be charged to our Companys profit and loss account over the vesting period. The issuance of new Shares under the ESOS will have a dilutive impact on our consolidated EPS. However, the impact is not expected to be material in any given financial year as the Options are likely to be exercised over several years in accordance with the pre-determined vesting schedules.
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INTERESTED PERSON TRANSACTIONS

In general, transactions between our Group and any of its interested persons (namely, the Directors or Controlling Shareholders of our Company or the associates of such Directors or Controlling Shareholders) are known as interested person transactions. The following discussion sets out our material interested person transactions during the last three financial years ended 30 June 2008 and up to the Latest Practicable Date, with the term interested persons construed accordingly. PAST INTERESTED PERSON TRANSACTIONS Insurance coverage taken by our Company for Tian San Singapore Tian San Singapore, a Controlling Shareholder of our Company, is wholly-owned by our Executive Chairman, Ms Edna Ko Poh Thim, and her associates. Ms Edna Ko is also the managing director of Tian San Singapore. Please refer to the section entitled Shareholders of this Prospectus for further details on the shareholders of Tian San Singapore. Between 1993 to 1995, Tian San Singapore was awarded various contracts to provide maintenance services to certain oil refineries in Singapore and such works were sub-contracted in their entirety to our Company. Pursuant to the sub-contract arrangement, our Company was required to obtain insurance coverage in relation to the customers worksites where such maintenance services were to be carried out. In connection therewith, our Company took up three insurance policies for public liability, workmens compensation, and burglary and housebreaking coverage, renewable on a yearly basis, with all three policies naming both our Company and Tian San Singapore as contractors and/or their nominated subcontractors as the beneficiaries. All premiums in respect of such policies were paid by our Company. Following completion of these sub-contracted works and with Tian San Singapore ceasing to operate in the petrochemical industry pursuant to an internal restructuring, our Company continued to provide maintenance services to the oil refineries directly as the approved contractor. As at the Latest Practicable Date, our Company continues to service these customers. With the assumption by our Company of the provision of maintenance services to such oil refineries as approved contractor, the said insurance policies continued to be renewed annually. However, in renewing these policies, Tian San Singapore had inadvertently continued to be named as one of the beneficiaries. The total insurance premiums paid for these three policies for each of FY2006, FY2007 and FY2008 was approximately S$214,500, S$275,700 and S$359,100 respectively and were based on the insurers prevailing policy rates. In February 2008, we notified the insurer to remove Tian San Singapore as a beneficiary under these policies and Tian San Singapore was subsequently removed as an insured party under these policies with effect from 5 February 2008. There was no reduction in the premiums payable for such policies following the removal of Tian San Singapore as a beneficiary, and Tian San Singapore had never made any claims nor had any sums been paid to Tian San Singapore under any of the policies. Our Group does not expect to enter into any such future arrangement following our admission to the Official List of the SGX-ST. Provision of legal services by Rajah & Tann LLP Our Independent Director and Chairman of our Nominating Committee, Mr Chia Kim Huat is a practising Advocate and Solicitor in Singapore and one of the partners of Rajah & Tann LLP (formerly, the partnership of Rajah & Tann), a law firm which has provided legal services to the Group and continues to do so from time to time. Rajah & Tann LLP are the Solicitors to the Invitation. Mr Chia was the partner in charge of a matter in which our Company had engaged Rajah & Tann to review its contractual documents relating to its PRC operations. The matter was concluded on 30 November 2005 and our Company paid an amount of approximately S$7,400. Mr Chia had in early 2009 also provided general corporate advice to Audex on certain PRC related matters, and a final bill for approximately S$5,000 was issued by Rajah & Tann LLP in June 2009 for the advice. The bill has been fully settled by Audex. Both matters were on an arms length basis. As at the Latest Practicable Date, save for the aforesaid matters, Mr Chia has not been involved in any matters in which Rajah & Tann LLP had acted for our Group. 132
Legal services provided by Rajah & Tann LLP to our Group would not be interested persons transactions, unless Mr Chia is one of the partners involved in the matter. Where Mr Chia is personally involved in any matter where our Group has engaged Rajah & Tann LLP to advise or act on, such transaction would be an interested person transaction, and our Group will comply with the relevant listing rules and subject the transaction to the review procedures for future interested persons transactions. As matters involving our Group are expected to be handled by other partners and associates of Rajah & Tann LLP, our Directors are of the view that the provision of such services will not interfere or be reasonably perceived to interfere with the independent judgment of Mr Chia Kim Huat in his role as Independent Director of our Company and as Chairman of our Nominating Committee. In the event that Rajah & Tann LLP handles any matter for our Group, he will adhere to the guidelines and procedures as described in the section entitled Corporate Governance in this Prospectus and abstain from reviewing and voting on that particular transaction. PRESENT AND ON-GOING INTERESTED PERSON TRANSACTIONS Transactions between Audex and Tian San Shipping Tian San Shipping is wholly-owned by our Executive Chairman, Ms Edna Ko Poh Thim, and her associates. Ms Edna Ko is also the managing director of Tian San Shipping. Around March 2007, Tian San Shipping was awarded contracts to, inter alia, supply and install two pontoons and walkways for the West Coast Ferry Terminal in Singapore and to subsequently remove such pontoons and structures in end 2009/early 2010. Tian San Shipping invited two contractors, one of whom was Audex, to tender as a sub-contractor for the project for the fabrication and installation (and subsequent removal) of the pontoons and part of the walkway. Audex was awarded the said sub-contract works for a total contract sum of approximately S$5.2 million (inclusive of variation work orders amounting to approximately S$1.3 million). Audex has since completed the fabrication and installation of the pontoons and the relevant portion of the walkway in January 2008 and has at the Latest Practicable Date been paid an amount of approximately S$4.95 million under the contract, and will, upon completion of removal of the said pontoons and structures in end 2009/early 2010, receive the final payment of approximately S$250,000 under the contract. The award of the said sub-contracted works by Tian San Shipping to Audex was on an arms length basis pursuant to negotiations between Tian San Shipping, Audex and the customer of the said project and was on normal commercial terms. Subsequent contracts between Tian San Shipping and Audex, if any, will be subject to the review procedures for future interested person transactions. Sub-lease of premises by our Group from Tian San Singapore Since August 1986, our Group has been sub-leasing part of the premises at 6 Jalan Samulun, Singapore 629123 of a land area of 90.0 sq m from Tian San Singapore, which are leased by Tian San Singapore from JTC Corporation. Our Group sub-leases the said premises to store equipment, such as welding machines and air compressors, and as a workshop for minor repair of equipment. This sub-lease is to continue for an indefinite period, subject to approval from JTC Corporation, which was last renewed in January 2008 for a period of three years from 1 January 2008 to 31 December 2010. Since June 2003, our Group has also been sub-leasing another part of the premises at 6 Jalan Samulun, Singapore 629123 of a land area of 143.0 sq m from Tian San Singapore, which are also leased by Tian San Singapore from JTC Corporation. Our Group sub-leases the said premises to conduct operations including stress relief and heat treatment services. This sub-lease is to continue for an indefinite period, subject to approval from JTC Corporation, which was last renewed in November 2008 for the period from 2 December 2008 to 31 December 2010.
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Since January 2009, our Groups sub-lease from Tian San Singapore of the premises at 6 Jalan Samulun, Singapore 629123 of a land area of 90.0 sq m referred to above was revised to include an additional part of the premises at 6 Jalan Samulun, Singapore 629123 of a land area of 2,777.0 sq m. Approval from JTC Corporation for the sub-lease of such additional area was granted on 17 June 2009 for the period 1 January 2009 to 31 December 2010. Our Group utilises such additional sub-leased area to store equipment, such as welding machines and air compressors, and as a workshop for minor repair of equipment. In addition, with effect from 1 January 2009, our Group will also pay to Tian San Singapore a sub-letting fee of approximately S$800 per month for such additional sub-leased area of 2,777.0 sq m. Accordingly, as at the Latest Practicable Date, an amount of approximately S$4,600 is payable by our Group to Tian San Singapore in respect of such sub-letting fees for the period from 1 January 2009 to 30 June 2009. The total rental paid by our Group for the said sub-leases for FY2006, FY2007, FY2008 and for the period from 1 July 2008 and up to the Latest Practicable Date are as follows:
From 1 July 2008 and up to the Latest Practicable Date (S$000) 161.6
FY2006 (S$000) Rental paid (S$) 125.6
FY2007 (S$000) 125.6
FY2008 (S$000) 125.6
Our Directors believe that the aggregate monthly rental paid by our Group for the aforesaid areas subleased from Tian San Singapore is below market rate. Our Group will continue to lease these premises from Tian San Singapore so long as it is in our interest to do so after taking into account prevailing market rates. Subsequent renewals of the lease will be subject to the review procedures for future interested person transactions. CONFLICT OF INTERESTS (1) Potential conflict of interest in relation to Tian San Malaysia
Background
Tian San Malaysia is a private company limited by shares incorporated in Malaysia. The principal business activities of Tian San Malaysia are the provision of engineering and contracting works and labour services for oil refineries and petrochemical plants. As at the Latest Practicable Date, 24.5% of the shareholding interests in Tian San Malaysia are held by our Executive Chairman, Ms Edna Ko(1), (2), (3) (10.5%) and her family members, namely Mdm Teoh(1) (2.0%), Mr Michael Ko(1) (1.5%), Ms Elizabeth Ko(1) (1.5%), Mdm Lee(2) (1.0%), Ms Kristine Ko(2) (1.0%), Ms Patricia Ko(2) (1.0%), Mrs Kathleen Moo(2) (1.0%), Mdm Ng(3) (2.0%), Mr Mark Ko(3) (1.5%) and Ms Peony Ko(3) (1.5%) (collectively, the Ko Family). The remaining 75.5% shareholding interests in Tian San Malaysia are held by other individuals and entities who are not associates of any of the aforementioned persons. A conflict of interests involving Tian San Malaysia could arise if Tian San Malaysia competes for the same project or contract as our Group. Notwithstanding the above, our Directors are of the view that any potential conflict of interests between our Group, our Directors and Controlling Shareholders is mitigated and resolved for the following reasons: (a) The directors and management of our Group and Tian San Malaysia are separate and distinct; As disclosed above, save for our Executive Chairman, Ms Edna Ko, none of the other Ko Family members individually holds more than 2.0% shareholding interests in Tian San Malaysia. Their interests in Tian San Malaysia are passive shareholdings as none of them is involved in the management and day-to-day operations of Tian San Malaysia;
(b)
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(c)
There were no transactions between Tian San Malaysia and our Group during FY2006, FY2007, FY2008 and HY2009 and our Directors do not expect any transactions with Tian San Malaysia in the near future. In addition, for FY2006, FY2007, FY2008 and HY2009, our Group did not encounter a situation where there had been competition with Tian San Malaysia for a project/contract and as such, our Directors believe that the likelihood of such competition between our Group and Tian San Malaysia in the future for the same project/ contract is remote and unlikely; Undertakings have been provided by each of our Executive Chairman, Ms Edna Ko, our Group Chief Executive Officer, Mr Robert Dompeling and Controlling Shareholders of our Company, Tian San Singapore and MMP. Details of these undertakings are as follows:
(d)
Ms Edna Ko
While Ms Edna Ko was formerly an executive director of Tian San Malaysia, she had since 2 January 1994 ceased to be a director of Tian San Malaysia and is presently not involved (directly or otherwise) in the management and day-to-day operations of Tian San Malaysia. As our Executive Chairman, Ms Edna Ko is bound by fiduciary duties to act in the interests of our Company, and must disclose any conflict of interests to our Company. In addition, Ms Edna Ko has entered into a deed of undertaking dated 25 June 2009 (the EK Deed of Undertaking) whereby she will: (i) Not be involved in the management and day-to-day operations of Tian San Malaysia or any of its related companies or any decision-making in Tian San Malaysia that will put her in a position of conflict with respect to her duties and responsibilities in any of our Group Companies; Not nominate any representative to hold any executive positions in Tian San Malaysia; If necessary, abstain, whether as a Director or Shareholder of our Company, from being involved in deliberating or voting on matters which she may be in a position of conflict by reason of her shareholding interests in Tian San Malaysia; and If necessary, abstain, as a shareholder of Tian San Malaysia, from being involved in deliberating or voting on matters at any shareholders meetings of Tian San Malaysia on which she may be in a position of conflict by reason of her directorship and/or shareholding interest in our Group.
(ii) (iii)
(iv)
The EK Deed of Undertaking will terminate upon Ms Edna Ko ceasing to be a Director or a Controlling Shareholder of our Company, whichever is the later.
Mr Robert Dompeling
Our Group Chief Executive Officer, Mr Robert Dompeling is the spouse of Ms Edna Ko. The holding of equity interests by Ms Edna Ko in Tian San Malaysia together with Mr Dompelings role as Group Chief Executive Officer of our Company could also present a conflict of interests to the extent that Tian San Malaysia competes for the same project or contract as our Group. As at the Latest Practicable Date, Mr Dompeling has never been involved (directly or otherwise) in the management and day-to-day operations of Tian San Malaysia and does not have any direct shareholding interests in Tian San Malaysia. As our Group Chief Executive Officer, Mr Dompeling is bound by fiduciary duties to act in the interests of our Company, and must disclose any conflict of interests to our Company. If necessary, he will abstain from being involved in deliberating on matters which he may be in a position of conflict.
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In addition, Mr Dompeling has entered into a deed of undertaking dated 25 June 2009 (the RD Deed of Undertaking) whereby he will: (i) Not be involved in the management and day-to-day operations of Tian San Malaysia or any of its related companies or any decision-making in Tian San Malaysia that will put him in a position of conflict with respect to his duties and responsibilities in any of our Group Companies; and If necessary, abstain, whether as a Director or Shareholder of our Company, from being involved in deliberating or voting on matters which he may be in a position of conflict by reason of Ms Edna Kos shareholding interests in Tian San Malaysia.
(ii)
The RD Deed of Undertaking will terminate upon Mr Dompeling ceasing to be a Director or Controlling Shareholder (in the event he becomes one) of our Company, whichever is later.
Tian San Singapore

Tian San Singapore is a Controlling Shareholder of our Company and is wholly-owned by Ms Edna Ko and her associates. Ms Edna Ko is deemed to be interested in all the Shares held by Tian San Singapore as she holds 36.7% of the issued share capital of Tian San Singapore. The holding of equity interests by Ms Edna Ko and her associates in Tian San Malaysia and Tian San Singapore, the latter being a Controlling Shareholder of our Company, also present a conflict of interests to the extent that Tian San Malaysia competes for the same project or contract as our Group. Tian San Singapore has entered into a deed of undertaking dated 25 June 2009 (the TSS Deed of Undertaking) whereby it will, if necessary, abstain from being involved, as a Shareholder of our Company, in voting on matters which it may be in a position of conflict involving Tian San Malaysia. The TSS Deed of Undertaking will terminate upon Tian San Singapore ceasing to be a Controlling Shareholder of our Company.
MMP
MMP is a Controlling Shareholder of our Company. MMP is wholly-owned by Mdm Ng, Mr Mark Ko and Ms Peony Ko. Mr Mark Ko is deemed to be interested in all the Shares held by MMP as he holds 79.4% of the issue share capital of MMP. The holding of equity interests by Mdm Ng, Mr Mark Ko and Ms Peony Ko in Tian San Malaysia together with their 100.0% shareholding interest in MMP, a Controlling Shareholder of our Company, present a conflict of interests to the extent that Tian San Malaysia competes for the same project or contract as our Group. Mr Mark Ko has entered into a deed of undertaking dated 25 June 2009 (the MK Deed of Undertaking) whereby he has undertaken to procure that MMP, if necessary, abstain, as a Shareholder of our Company, from being involved in voting on matters which it may be in a position of conflict involving Tian San Malaysia. The MK Deed of Undertaking will terminate upon MMP ceasing to be a Controlling Shareholder of our Company. Ms Patricia Ko is a director of all of our PRC Subsidiaries (other than Audex Shanghai), a general manager of PCELC Huizhou and PTCS Huizhou, and she is also employed by our Company as a consultant. She is also the sibling of Ms Edna Ko. As at the Latest Practicable Date, Ms Patricia Ko has never been involved (directly or otherwise) in the management and day-to-day operations of Tian San Malaysia. In these circumstances, our Directors believe that Ms Patricia Kos 1.0% shareholding interest in Tian San Malaysia does not create a conflict of interests.
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None of Mdm Teoh, Ms Elizabeth Ko, Mdm Lee, Ms Kristine Ko, Mrs Kathleen Moo, Mdm Ng and Ms Peony Ko has been involved (directly or otherwise) in the management and day-to-day operations of Tian San Malaysia or of our Group. While Mr Michael Ko is a non-executive director of PECII, he has never been employed by our Group or involved (directly or otherwise) in the management and day-to-day operations of Tian San Malaysia or of our Group. In these circumstances, our Directors believe that the holding of equity interests by each of such persons in Tian San Malaysia (each of no more than 2.0% in Tian San Malaysia) does not create a conflict of interests.
Notes: (1) Mr Michael Ko and Ms Elizabeth Ko are siblings of Ms Edna Ko, and Mdm Teoh is the mother of Mr Michael Ko and Ms Elizabeth Ko. Ms Kristine Ko, Ms Patricia Ko and Mrs Kathleen Moo are siblings of Ms Edna Ko, and Mdm Lee is the mother of Ms Kristine Ko, Ms Patricia Ko, Mrs Kathleen Moo and Ms Edna Ko. Mr Mark Ko and Ms Peony Ko are siblings of Ms Edna Ko, and Mdm Ng is the mother of Mr Mark Ko and Ms Peony Ko.
(2)
(3)
(2)
Potential conflict of interests arising from a change in business scope of Tian San Singapore and/or Tian San Shipping
Background
Tian San Singapore is a private company limited by shares incorporated in Singapore. As at the Latest Practicable Date, the principal business activity of Tian San Singapore is that of an investment company. Tian San Singapore is a Controlling Shareholder of our Company. As at the Latest Practicable Date, Tian San Singapore is wholly-owned by the Ko Family. Ms Edna Ko is deemed to be interested in all the Shares held by Tian San Singapore as she holds 36.7% of the issued share capital of Tian San Singapore. Tian San Shipping is a private company limited by shares incorporated in Singapore. The principal business activities of Tian San Shipping are in the provision of marine transportation and marine related services in Singapore, including mainly the provision of passenger ferries, high speed launches and landing craft services, management, manning and maintenance of different types of marine craft, berth mooring services, and marine environmental control services. As at the Latest Practicable Date, Tian San Shipping is wholly-owned by the Ko Family. At this point, Tian San Singapore and Tian San Shipping do not compete with the business of our Group and the holding of equity interests by the Ko Family in each of Tian San Singapore and Tian San Shipping do not present a conflict of interests. However, as Tian San Singapore and Tian San Shipping are wholly-owned by the Ko Family, a conflict of interests situation could arise if Tian San Singapore and/or Tian San Shipping change their respective business scopes to compete with our Group. Our Directors believe that any potential conflict of interests, which may arise in the event that Tian San Singapore and/or Tian San Shipping change their respective business scopes to compete with our Group, is mitigated or resolved as each of Tian San Singapore and Tian San Shipping has entered into a deed of undertaking each dated 25 June 2009 (collectively, the Tian San Deeds of Undertaking) whereby each of Tian San Singapore and Tian San Shipping has undertaken not to directly or indirectly engage in or be concerned with or be interested (whether as shareholder, director, partner, agent or otherwise) with any business competing with the business for the time being of our Group. The Tian San Deeds of Undertaking will each terminate upon (i) Ms Edna Ko ceasing to be a Director of our Company and the Ko Family ceasing to have a controlling interest in the Shares of our Company, and (ii) Ms Edna Ko ceasing to be a director of Tian San Singapore or Tian San Shipping (as the case may be) and the Ko Family ceasing to have a controlling interest in the shares of Tian San Singapore or Tian San Shipping (as the case may be), whichever is the earlier.
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(3)
Others In addition, we believe that any other potential conflicts of interests (including those arising from interested person transactions) are addressed as follows:
Non-competition undertaking by Ms Edna Ko

In addition to the EK Deed of Undertaking, Ms Edna Ko has also entered into a deed of undertaking dated 25 June 2009 whereby she has undertaken, for so long as (i) she is a Director of our Company, or (ii) she is a Controlling Shareholder of our Company, not to directly or indirectly engage in or be concerned with or be interested with any business competing with the business for the time being of our Group. However, Ms Edna Ko shall not be precluded or restricted from becoming the registered or beneficial owner of not more than 5.0% in aggregate of any class of listed securities in a competing corporation which is listed on any stock exchange.
Role of the Audit Committee

Our Board includes three Independent Directors who are members of our Audit Committee and are responsible for ensuring that good corporate governance is practiced. Our Audit Committee will review any conflict of interests of our Directors disclosed by them to our Board and the exercise of our Directors fiduciary duties in this respect. Upon disclosure of an actual or potential conflict of interests by a Director, our Audit Committee will consider whether a conflict of interest does in fact exist. A Director who is a member of our Audit Committee will not participate in any proceedings of the Audit Committee in relation to the review of a conflict of interests relating to him. Our review will include an examination of the nature of the conflict and such supporting data, as our Audit Committee may deem necessary. Until our Audit Committee has determined that no conflict of interests exists, such Directors will not participate in any proceedings of our Board, and shall in any event abstain from voting, in respect of any such contract, arrangement, proposal, transaction or matter in which the conflict of interests arises. Save as disclosed in the sections entitled Interested Person Transactions and Conflict of Interests in this Prospectus, none of our Directors or Controlling Shareholders or their associates has any material interest, direct or indirect, in: (a) (b) any company carrying out the same business or deals in similar products as our Group; any enterprise or company that is our Groups customer or supplier of goods or services; and any transaction to which we are a party.
(c)
GUIDELINES FOR FUTURE INTERESTED PERSON TRANSACTIONS We anticipate that we would, in the ordinary course of business, enter into certain transactions with interested persons. It is likely that such transactions will occur with some degree of frequency and could arise at any time and from time to time. Such transactions include, but are not limited to, the transactions described above. Our internal control procedures will ensure that all interested person transactions, including the aforementioned interested person transactions involving companies related to us are conducted on an arms length basis and on normal commercial terms. Such internal controls include the following: (a) when purchasing from or procuring services from interested persons, our Directors shall take into account the prices and terms of at least two other comparative offers from third parties (where possible), contemporaneous in time. The purchase price or procurement price, as the case may be, shall not be higher than the most competitive price of the two comparative offers from third parties; in determining the most competitive purchase price or procurement price, as the case may be, our Directors shall take into consideration the nature of the project, the cost and the experience and expertise of the supplier;
(b)
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(c)
when selling products or providing services to interested persons, our Directors shall take into account the prices and terms of at least two other successful sales to third parties (where possible), contemporaneous in time. The sale price shall not be lower than the lowest sale price of the other two successful sales to third parties; when renting from interested persons, our Directors shall take into account the rental and terms of two other comparative premises (where possible), contemporaneous in time. The rental paid shall not be higher than the most competitive rental of the two comparative premises; and should any future interested person transaction be on less preferred terms than as determined in steps (a) to (d) above, the prior approval of our Board must be obtained before such transactions can be entered into.
(d)
(e)
The considerations in paragraphs (a) to (e) above will allow for variation from prices and terms of the comparative offers or sales so long as the volume of trade, credit-worthiness of the buyer, differences in service, reliability or other relevant factors justify the variation and so long as the contemporaneous comparative offer or sale incorporates modifications that account for volatility of the market for the goods and services in question. For (a), (c) and (d) above, in the event that it is not possible for appropriate information (for comparative purposes) to be obtained, the matter will be referred to our Audit Committee and our Audit Committee will determine whether the purchase or sale price/ fees or rental fees to be paid or received are fair and reasonable and consistent with our Groups usual business practice. REVIEW PROCEDURES FOR ON-GOING AND FUTURE INTERESTED PERSON TRANSACTIONS Our Audit Committee will review and approve all interested person transactions to ensure that they are on normal commercial terms and arms length basis, that is, the transactions are transacted on terms and prices not more favourable to the interested persons than if they were transacted with a third party and are not prejudicial to the interests of our Shareholders in any way. During its periodic review or such other review deemed necessary by it, our Audit Committee will carry out a review of records of all interested person transactions to ensure that they are carried out in accordance with the following internal control procedures: (a) All interested person transactions above S$100,000 are to be approved by a Director who shall not be an interested person in respect of that particular transaction. Interested person transactions below S$100,000 do not require such approval. Any sale or purchase contracts to be made with an interested person shall not be approved unless the pricing is: (i) (ii) determined in accordance with our usual business practices and policies; consistent with the usual margin given or price received by us for the same or substantially similar type of transactions between us and unrelated third parties; and the terms are no more favourable to the interested person than those extended to or received from unrelated third parties.
(iii)
For the purpose of the above, contracts for the same or substantially similar type of transactions entered into between us and unrelated third parties, if any, will be used as a basis for comparison to determine whether the price and terms offered to or received from the interested person are no more favourable than those extended to unrelated third parties.
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(b)
In addition, we shall monitor all interested person transactions entered into by us and categorise these transactions as follows: (i) a Category 1 interested person transaction is one where the value thereof is in excess of 5.0 per cent of the NTA of our Group; and a Category 2 interested person transaction is one where the value thereof is below or equal to 5.0 per cent of the NTA of our Group.
(ii)
All Category 1 interested person transactions must be approved by our Audit Committee prior to entry whereas Category 2 interested person transactions need not be approved by our Audit Committee prior to entry but shall be reviewed on a quarterly basis by our Audit Committee. We will prepare relevant information to assist our Audit Committee in its review. Before any agreement or arrangement that is not in the ordinary course of business of our Group is transacted, prior approval must be obtained from our Audit Committee. In the event that a member of our Audit Committee is interested in any of the interested person transactions, he will abstain from reviewing that particular transaction. Our Audit Committee will also review all interested person transactions to ensure that the prevailing rules and regulations of the SGX-ST (in particular Chapter 9 of the Listing Manual) are complied with. We will also comply with the provisions in Chapter 9 of the Listing Manual in respect of all future interested person transactions, and if required under the Listing Manual or the Companies Act, we will seek our Shareholders approval (where necessary) for such transactions. We will also endeavour to comply with Code of Corporate Governance 2005 and Chapter 12 of the Listing Manual. We will disclose in our annual report the aggregate value of interested person transactions conducted during the financial year. All the Independent Directors, who are members of our Audit Committee, are of the view that the review procedures and systematic monitoring mechanism of all interested person transactions as mentioned above, are adequate in ensuring that such transactions will be on normal commercial terms and will not be prejudicial to the interests of our Shareholders in any way.
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CORPORATE GOVERNANCE
Our Articles provide that our Board will consist of not less than two directors, provided always that no independent director shall resign from the Board unless there is at least one independent director remaining on the Board after such resignation. None of our directors are appointed for any fixed terms, but one-third of our directors are required to retire at every annual general meeting of our Company. Hence, the maximum term for each director is three years. A retiring director shall be eligible to stand for re-election. Our Directors recognise the importance of corporate governance and the offering of high standards of accountability to our Shareholders. Dr Foo Fatt Kah is our Lead Independent Director. As Lead Independent Director, he is the contact person for Shareholders in situations where there are concerns or issues which communication with our Executive Directors or Director Finance has failed to resolve or where such communication is inappropriate. Nominating Committee Our Nominating Committee comprises Dr Foo Fatt Kah, Mr Chia Kim Huat and Mr Ho Yew Mun. The Chairman of our Nominating Committee is Mr Chia Kim Huat. Our Nominating Committee will be responsible for (i) re-nomination of our Directors having regard to the Directors contribution and performance, (ii) determining annually whether or not a Director is independent and (iii) deciding whether or not a Director is able to and has been adequately carrying out his duties as a director. Our Nominating Committee will decide how our Boards performance is to be evaluated and propose objective performance criteria, subject to the approval of our Board, which address how our Board has enhanced long term shareholders value. Our Board will also implement a process to be carried out by the Nominating Committee for assessing the effectiveness of our Board as a whole and for assessing the contribution by each individual Director to the effectiveness of our Board. Each member of the Nominating Committee shall abstain from voting on any resolutions in respect of the assessment of his performance or re-nomination as director. Remuneration Committee Our Remuneration Committee comprises Dr Foo Fatt Kah, Mr Chia Kim Huat and Mr Ho Yew Mun. The Chairman of our Remuneration Committee is Dr Foo Fatt Kah. Our Remuneration Committee will recommend to our Board a framework of remuneration for the Directors and key executives, and determine specific remuneration packages for each Executive Director. The recommendations of our Remuneration Committee should be submitted for endorsement by our entire Board. All aspects of remuneration, including but not limited to directors fees, salaries, allowances, bonuses, options issued under our ESOS and benefits in kind shall be covered by our Remuneration Committee. In addition, our Remuneration Committee will peform an annual review of the remuneration of employees related to our Directors and Substantial Shareholders to ensure that their remuneration packages are in line with our staff remuneration guidelines and commensurate with their respective job scope and level of responsibility. Each member of our Remuneration Committee shall abstain from voting any resolutions in respect of his remuneration package or that of employees related to him. Audit Committee Our Audit Committee comprises Dr Foo Fatt Kah, Mr Chia Kim Huat and Mr Ho Yew Mun. The Chairman of our Audit Committee is Mr Ho Yew Mun. Our Audit Committee shall meet periodically to perform the following functions: (a) review with the external auditors the audit plans, the auditors reports, their evaluation of the adequacy of our internal controls, their letter to management and the managements response thereto;
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(b)
review the financial statements and results announcement of our Company and our Group before submission to our Board for approval, focusing in particular on any significant adjustments, major risk areas, changes in accounting policies and practices, compliance with accounting standards, the Listing Manual and any other relevant statutory or regulatory requirements; review, with the internal auditor, the internal audit plan, the internal control and procedures and ensure co-ordination between the external auditors and our management, and review the assistance given by our management to the auditors, and discuss problems and concerns, if any, arising from the interim and final audits, and any matters which the auditors may wish to discuss (in the absence of our management, where necessary); commission and review the findings of internal investigations into matters where there is any suspected fraud or irregularity, or failure of internal controls, or infringement of any law, rule or regulation which has or is likely to have a material impact on our Groups operating results or financial position; consider and recommend the appointment and/or re-appointment of external auditors and matters relating to the resignation or dismissal of the auditors; review interested person transactions, falling within the scope of Chapter 9 of the Listing Manual, if any; review any potential conflict of interests; review our Groups hedging procedures/policies and activities (if any) and monitor the implementation of the hedging procedure/policies, including reviewing the instruments, processes and practices in accordance with any hedging policies approved by our Board; undertake such other reviews and projects as may be requested by our Board and report to our Board its findings from time to time on matters arising and requiring the attention of our Audit Committee; and undertake generally such other functions and duties as may be required by law or the Listing Manual, and by such amendments made thereto from time to time.
(c)
(d)
(e)
(f)
(g) (h)
(i)
(j)
Our Audit Committee have considered the qualifications and past working experience of Ms Goh Eng Mui (as described in the section entitled Directors, Management and Staff - Executive Officers of this Prospectus), as the basis for the view that Ms Goh Eng Mui is suitable for the position of Director Finance of our Group. In addition, based on interactions that our Audit Committee has had with Ms Goh Eng Mui in her capacity as Director Finance and with other members of our Groups finance team, discussions with our Groups Singapore auditors and the views of and feedback from the executive management team of our Group, our Audit Committee has not been made aware of any matter that would question Ms Goh Eng Muis suitability for the position of Director Finance. Our Audit Committee will meet, at a minimum, on a quarterly basis every year. Each member of our Audit Committee shall abstain from reviewing the particular transaction or voting any resolutions in respect of matters in which he is interested.
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GENERAL AND STATUTORY INFORMATION

INFORMATION ON DIRECTORS AND EXECUTIVE OFFICERS 1. Save as disclosed below, none of our Directors, Executive Officers or Controlling Shareholders is or was involved in any of the following events: (a) during the last 10 years, an application or a petition under any bankruptcy laws of any jurisdiction filed against him or against a partnership of which he was a partner at the time when he was a partner or at any time within two years from the date he ceased to be a partner; during the last 10 years, an application or a petition under any law of any jurisdiction filed against an entity (not being a partnership) of which he was a director or an equivalent person or a key executive, at the time when he was a director or an equivalent person or a key executive of that entity or at any time within two years from the date he ceased to be a director or an equivalent person or a key executive of that entity, for the winding-up or dissolution of that entity or, where that entity is the trustee of a business trust, that business trust, on the ground of insolvency; any unsatisfied judgments against him; a conviction of any offence, in Singapore or elsewhere, involving fraud or dishonesty which is punishable with imprisonment, or has been the subject of any criminal proceedings (including any pending criminal proceedings of which he is aware) for such purpose; a conviction of any offence, in Singapore or elsewhere, involving a breach of any law or regulatory requirement that relates to the securities or futures industry in Singapore or elsewhere, or has been the subject of any criminal proceedings (including pending criminal proceedings of which he is aware) for such breach; during the last 10 years, judgment entered against him in any civil proceeding in Singapore or elsewhere involving a breach of any law or regulatory requirement that relates to the securities or futures industry in Singapore or elsewhere, or a finding of fraud, misrepresentation or dishonesty on his part, or has been the subject of any civil proceedings (including any pending civil proceedings of which he is aware) involving an allegation of fraud, misrepresentation or dishonesty on his part; a conviction in Singapore or elsewhere of any offence in connection with the formation or management of any entity or business trust; disqualification from acting as a director or an equivalent person of any entity (including the trustee of a business trust), or from taking part directly or indirectly in the management of any entity or business trust; the subject of any order, judgment or ruling of any court, tribunal or governmental body permanently or temporarily enjoining him from engaging in any type of business practice or activity; to his knowledge, been concerned with the management or conduct, in Singapore or elsewhere, of affairs of: (i) any corporation which has been investigated for a breach of any law or regulatory requirement governing corporations in Singapore or elsewhere; any entity (not being a corporation) which has been investigated for a breach of any law or regulatory requirement governing such entities in Singapore or elsewhere;
(b)
(c) (d)
(e)
(f)
(g)
(h)
(i)
(j)
(ii)
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(iii)
any business trust which has been investigated for breach of any law or regulatory requirement governing business trusts in Singapore or elsewhere; or any entity or business trust which has been investigated for a breach of any law or regulatory requirement that relates to the securities or futures industry in Singapore or elsewhere,
(iv)
in connection with any matter occurring or arising during the period when he was so concerned with the entity or business trust; and (k) the subject of any current or past investigation or disciplinary proceedings, or has been reprimanded or issued any warning, by the Authority or any other regulatory authority, exchange, professional body or government agency, whether in Singapore or elsewhere.
Disclosures relating to Mr Wong Peng in respect of investigations by the Corrupt Practices Investigation Bureau Around October 1999, our Groups Managing Director, Mr Wong Peng, was notified by way of a telephone call to attend an interview with the Corrupt Practices Investigation Bureau (CPIB). At the said interview, Mr Wong was queried as to the background leading to our Company securing a project works contract in May 1999. Mr Wong Peng cooperated fully and since the said interview, he has not been contacted by CPIB regarding the said matter or any other matters. Disclosures relating to Ms Edna Ko and Mr Wong Peng in respect of Shenzhen Baojian Consulting Co., Ltd In December 2002, PEC set up a wholly-owned PRC subsidiary, Shenzhen Baojian Consulting Co., Ltd (Shenzhen PEC) to provide engineering drawings and services for a project in the PRC (the PRC IT Project). Our Executive Chairman, Ms Edna Ko and our Managing Director, Mr Wong Peng were the directors of Shenzhen PEC. Around early 2004, the business licence of Shenzhen PEC was revoked as it did not submit the relevant documents for its annual inspection (the Annual Inspection Lapse). In addition, Shenzhen PEC had failed to comply with various PRC taxation laws and regulations, resulting in it being fined an aggregate amount of RMB1,540 which the said company has fully paid. The directors of Shenzhen PEC were advised that it may not be possible to rectify the Annual Inspection Lapse and reinstate the business license of Shenzhen PEC. On that basis, the directors of Shenzhen PEC had to wind up Shenzhen PEC according to the relevant PRC laws and regulations. Shenzhen PEC was wound up on 26 September 2006. The PRC IT project was eventually transferred to and taken over by another of our Subsidiary, PTCS Huizhou, that our Company had set up in June 2004. 2. No option to subscribe for or purchase shares in, or debentures of, our Group Companies has been granted to, or was exercised by, any Director or Executive Officer within the last financial year. Save as disclosed in the section entitled History in this Prospectus in relation to the sale and purchase of shares in Audex from our Company to four senior employees of Audex and the Overallotment Option, no person has, or has the right to be given, an option to subscribe for or purchase any securities of our Group Companies. Save as disclosed in the section entitled Interested Person Transactions in this Prospectus, no Director or expert is (i) interested, directly or indirectly, in the promotion of, or in any assets acquired or disposed of by, or leased to, our Group Companies within two years preceding the Latest Practicable Date, or in any proposal for such acquisition or disposal or lease as aforesaid, or (ii) interested where the interest consists in being a partner in a firm or a holder of shares in or debentures of a corporation interested in the same. Save as disclosed in the section entitled Interested Person Transactions in this Prospectus, no Director has any interest in any existing contract or arrangement which is significant in relation to our business taken as a whole.
3.
4.
5.
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6. 7.
There is no shareholding qualification for directors in the Articles of our Company. No sum or benefit has been paid or has been agreed to be paid to any Director or expert who is a partner of any firm in which a Director or expert or any corporation in which such Director or expert holds shares or debentures, in cash or shares or otherwise by any person (i) (in the case of a Director) to induce him to become, or to qualify him as our Director or otherwise for the services rendered by him or such firm or corporation in connection with the promotion or formation of our Company or (ii) (in the case of an expert) for services rendered by him or such firm or corporation in connection with the promotion or formation of our Company.
SHARE CAPITAL 8. Save as disclosed below and set out in the section entitled Share Capital in this Prospectus, there were no changes in the issued and paid-up capital of our Group Companies within the three years preceding the date of lodgment of this Prospectus. Singapore
Total consideration / Issue price per share (S$)
Date of issue
Purpose of issue
Number of shares issued
Resultant issued share capital (S$)
CTS 9 March 2007 19 June 2007 Incorporation shares Increase in share capital 1/1 99,999 / 1 1 ordinary share 99,999 ordinary shares 1 100,000
ITR 21 January 2009(1) PECII 27 July 2006 Increase in share capital 168,000 / 1 168,000 ordinary shares 172,000 ordinary shares 1,588,000 Capital reduction Not applicable Not applicable 520,000
17 August 2006
Increase in share capital
172,000 / 1
1,760,000
PGS 20 January 2009 25 May 2009 Incorporation share Increase in share capital 1/1 99,999 / 1 1 ordinary share 99,999 ordinary shares 1 100,000
Note: (1) On 21 January 2009, ITR effected a capital reduction by way of cancellation of paid-up share capital that is lost or unrepresented by available assets, pursuant to which its share capital was reduced from S$800,000 to S$520,000.
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Thailand
Total consideration / Issue price per share (Baht)
Date of issue
Purpose of issue
Resultant issued share capital (Baht)
PEC Thailand 19 September 2006 Increase in share capital 15,000,000 / 5 3,000,000 ordinary shares 20,000,000
The UAE
Total consideration / Issue price per share (AED)
Date of issue
Purpose of issue
Resultant issued share capital (AED)
Audex UAE 29 October 2007 Incorporation shares 150,000 / 150 100,000 ordinary shares 150,000
Vietnam
Date Purpose of issue Investment capital contributed (US$) Resultant investment capital (US$)
Audex Vietnam 17 August 2007 Investment contribution 99,965 99,965
9.
Save as disclosed above, no shares or debentures were issued or were agreed to be issued by our Group for cash or for a consideration other than cash within the last three years preceding the date of lodgment of this Prospectus. There has been no previous issue of Shares by us or offer for sale of our Shares to the public within the two years preceding the Latest Practicable Date.
10.
LITIGATION 11. Save as disclosed below, our Group was not engaged in any legal or arbitration proceedings in the last 12 months before the date of the lodgment of this Prospectus, as plaintiff or defendant in respect of any claims or amounts which are material in the context of the Invitation and our Directors have no knowledge of any proceedings pending or threatened against our Group or any facts likely to give rise to any litigation, claims or proceedings which might materially affect the financial position or profitability of our Group. Between November 2004 and May 2007, our Associated Company, PMC Thailand, was involved in various litigation claims which were commenced before the Thai Courts. These claims were in respect of disputes arising from hire purchase/ purchase agreements or termination of employment agreements in which PMC Thailand had entered into with the plaintiffs and PMC Thailand had paid an aggregate amount of approximately Baht14.0 million (excluding interest and legal fees) for the settlement of such claims. As at the Latest Practicable Date, there are no longer any outstanding litigation claims against PMC Thailand.
146
MATERIAL CONTRACTS 12. The following contracts not being contracts entered into in the ordinary course of business have been entered into by our Group within the two years preceding the date of lodgment of this Prospectus and are or may be material: (a) The agreement dated 30 November 2004 (as amended by supplemental agreements dated 10 January 2005, 30 December 2005, 2 January 2008, 3 April 2008, 8 September 2008 and 30 September 2008 respectively) between our Company and Mr Chang Wan Kok, Mr Khoo Chu Keng, Mr Yeo Tin Shat and Mr Wong Kok Seng, Peter, who are senior employees of Audex, in respect of the sale and purchase of ordinary shares in Audex. Please refer to the section entitled History in this Prospectus for further details; and The Service Agreements of Ms Edna Ko Poh Thim, Mr Robert Dompeling and Mr Wong Peng, each dated 25 June 2009. Please refer to the section entitled Service Agreements in this Prospectus for further details.
(b)
MISCELLANEOUS 13. In May 1997, Romar Technologies Pte Ltd (Romar) awarded Audex a project for the extension of a factory belonging to a related company of Romar (Project). In 2003, Mr Kenneth Low, a director of Romar with whom Audex had been dealing with, was prosecuted for criminal breach of trust, cheating and dishonestly misappropriating monies from Romar and its related companies. Certain employees of Audex were interviewed by the relevant authorities during the investigations. Certain statements were made during the course of the trial that implicated Audex as being involved where the Project costs were inflated. Mr Kenneth Low was subsequently convicted and sentenced to jail. Since then, neither Audex nor any of its staff have been charged or prosecuted, nor to the best of the knowledge of the directors of Audex, been investigated of in connection with the matter. There has not been any public takeover offer by a third party in respect of our Shares, or by our Company in respect of shares of another corporation or units of another business trust, which has occurred during the period between 1 July 2007 and the Latest Practicable Date. No amount of cash or securities or benefit has been paid or given to any promoter within the two years preceding the Latest Practicable Date or is proposed or intended to be paid or given to any promoter at any time. No expert is employed on a contingent basis by our Company or any of our Group Companies, has a material interest, whether direct or indirect, in the shares of our Company or our Group Companies, or has a material economic interest, whether direct or indirect, in our Company, including an interest in the success of the Invitation. Save as disclosed in the sections entitled Risk Factors, Managements Discussion and Analysis of Financial Condition and Results of Operations, Capitalisation and Indebtedness, Prospects and Strategy and Future Plans in this Prospectus, the financial condition and operations of our Group are not likely to be affected by any of the following: (a) known trends or known demands, commitments, events or uncertainties that will result in or are reasonably likely to result in our Groups liquidity increasing or decreasing in any material way; material commitments for capital expenditure; unusual or infrequent events or transactions or any significant economic changes that will materially affect the amount of reported income from operations; and known trends or uncertainties that have had or that we reasonably expect to have a material favourable or unfavourable impact on revenues or operating income.
14.
15.
16.
17.
(b) (c)
(d)
147
18.
Save as disclosed in the sections entitled Risk Factors, Managements Discussion and Analysis of Financial Condition and Results of Operations, Capitalisation and Indebtedness, Trend Information and Order Books and Appendices A and B in this Prospectus, our Directors are not aware of any event which has occurred since 31 December 2008, which may have a material effect on the financial position and results provided in the Audited Consolidated Financial Statements of PEC Ltd. and its Subsidiaries for the years ended 30 June 2006, 2007 and 2008 and the Unaudited Condensed Consolidated Financial Statements of PEC Ltd. and its Subsidiaries for the financial period from 1 July 2008 to 31 December 2008 set out in Appendices A and B respectively of this Prospectus. We currently have no intention of changing our Groups present auditors after the listing of our Company on the SGX-ST. Details including the names, addresses and professional qualifications (including membership in a professional body) of the auditors of our Company for the last three financial years ended 30 June 2008 and up to the date of lodgment of this Prospectus are as follows:
Period of engagement of firm 1 February 1982 to 24 September 2007 Partner-in-charge/ Professional Qualification Tan Shou Wei, Allen / a member of the Institute of Certified Public Accountants of Singapore Max Loh Khum Whai / a member of the Institute of Certified Public Accountants of Singapore
19.
Name/ Address Tan Choon Chye & Co./ 6001 Beach Road #12-10 Golden Mile Tower Singapore 199589 Ernst & Young LLP/ One Raffles Quay, North Tower, Level 18, Singapore 048583
Professional Body Institute of Certified Public Accountants of Singapore
From 24 September 2007
Institute of Certified Public Accountants of Singapore
Note: Tan Choon Chye & Co was the statutory auditor for our Company up to FY2006. Ernst & Young LLP have been the auditors for our Company since and including FY2007.
CONSENTS 20. The Auditors and Reporting Accountants have given and have not withdrawn their written consent to the issue of this Prospectus with the inclusion herein of their reports on the Audited Consolidated Financial Statements of PEC Ltd. and its Subsidiaries for the years ended 30 June 2006, 2007 and 2008 and the Unaudited Condensed Consolidated Financial Statements of PEC Ltd. and its Subsidiaries for the financial period from 1 July 2008 to 31 December 2008 in the form and context in which they are included and references to their name in the form and context in which it appears in this Prospectus and to act in such capacity in relation to this Prospectus. Each of the Issue Manager, the Underwriter and the Placement Agent has given and has not withdrawn its written consent to the issue of this Prospectus with the inclusion herein of its name in the form and context in which it appears in this Prospectus and to act in such capacity in relation to this Prospectus. Each of the Placement Agent, the Solicitors to the Invitation, the Legal Advisers to the Company on Indonesia law, the Legal Advisers to the Company on Malaysia law, the Legal Advisers to the Company on PRC law, the Legal Advisers to the Company on Sri Lanka law, the Legal Advisers to the Company on Thai law, the Legal Adviser to the Company on UAE law, the Legal Adviser to the Company on Vietnam law, the Solicitors to the Issue Manager, Underwriter and Placement Agent, the Legal Advisers to the Issue Manager, Underwriter and Placement Agent on PRC law, the Share Registrar, the Receiving Bank and the Principal Bankers do not make, or purport to make, any statement in this Prospectus or any statement upon which a statement in this Prospectus is based and, to the maximum extent permitted by law, expressly disclaim and take no responsibility for any liability to any person which is based on, or arises out of, the statements, information or opinions in, or omission from, this Prospectus.
21.
22.
148
DOCUMENTS AVAILABLE FOR INSPECTION 23. Copies of the following documents may be inspected at the office of Rajah & Tann LLP at 4 Battery Road, #26-01, Bank of China Building, Singapore 049908 during normal business hours for a period of six months from the date of registration of this Prospectus: (a) (b) The Memorandum and Articles of Association of our Company; The Audited Consolidated Financial Statements of PEC Ltd. and its Subsidiaries for the years ended 30 June 2006, 2007 and 2008 set out in Appendix A in this Prospectus; The Unaudited Condensed Consolidated Financial Statements of PEC Ltd. and its Subsidiaries for the financial period from 1 July 2008 to 31 December 2008 set out in Appendix B in this Prospectus; The audited financial statements of each Group Company (excluding the Company) for FY2006, FY2007 and FY2008; The material contracts referred to in the section entitled General and Statutory Information in this Prospectus; The letters of consent referred to in the section entitled General and Statutory Information in this Prospectus; and The Service Agreements referred to in the section entitled Service Agreements in this Prospectus.
(c)
(d)
(e)
(f)
(g)
STATEMENT BY THE DIRECTORS OF OUR COMPANY 24. This Prospectus has been seen and approved by our Directors and they collectively and individually accept the full responsibility for the accuracy of the information given in this Prospectus and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, the facts stated and the opinions expressed herein are fair and accurate in all material respects as at the date hereof and there are no other facts the omission of which would make any statements herein misleading, and that this Prospectus constitutes full and true disclosure of all material facts about the Invitation and our Group.
149
APPENDIX A
AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF PEC LTD. AND ITS SUBSIDIARIES FOR THE YEARS ENDED 30 JUNE 2006, 2007 AND 2008
PEC Ltd. and its Subsidiaries Statement by Directors
We, Edna Ko Poh Thim and Wong Peng, being two of the Directors of PEC Ltd., do hereby state that, in the opinion of the Directors, (i) the accompanying consolidated financial statements together with notes thereto are drawn up so as to present fairly, the state of affairs of the Group as at 30 June 2006, 2007 and 2008 and the results of the business, changes in equity and cash flows of the Group for the years ended on those dates, and at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they are due.
(ii)
On behalf of the Board of Directors,
Edna Ko Poh Thim Director
Wong Peng Director
Singapore 30 July 2009
A-1
PEC Ltd. and its Subsidiaries Independent Auditors Report To the Members of PEC Ltd.
We have audited the accompanying consolidated financial statements of PEC Ltd. (the Company) and its subsidiaries (collectively the Group) set out on pages A-3 to A-51, comprising the consolidated balance sheets as at 30 June 2006, 2007 and 2008, the consolidated income statements, consolidated statements of cash flows and consolidated statements of changes in equity for each of the financial years ended 30 June 2006, 2007 and 2008, and a summary of significant accounting policies and other explanatory notes. Managements responsibility for the financial statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the Act) and Singapore Financial Reporting Standards. This responsibility includes devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair income statements and balance sheets and to maintain accountability of assets; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audits in accordance with Singapore Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. These procedures selected depend on the auditors judgement, including the assessment of the risk of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements of the Group present fairly in all material respects the state of affairs of the Group as at 30 June 2006, 2007 and 2008 and the results, changes in equity and cash flows of the Group for the years then ended in accordance with Singapore Financial Reporting Standards. This report has been prepared for inclusion in the Prospectus in connection with the Invitation by the Company in respect of the issue of 63,000,000 new ordinary shares in the share capital of the Company.
Ernst & Young LLP Public Accountants and Certified Public Accountants Singapore 30 July 2009 Partner-in-Charge : Max Loh Khum Whai
A-2
PEC Ltd. and its Subsidiaries Consolidated income statements for the years ended 30 June 2006, 2007 and 2008
Years ended 30 June Note 2006 $000 149,327 (117,418) 31,909 5 1,257 2007 $000 236,592 (175,966) 60,626 5,621 2008 $000 314,647 (233,819) 80,828 3,199
Revenue Cost of sales Gross profit Other operating income Expenses Administrative expenses Other operating expenses Financial expenses Share of results of associates Share of results of joint venture Profit before tax Taxation Profit for the year Attributable to : Shareholders of the Company Minority interest
(10,304) (12,394) 6 (295) 170 7 8 10,343 (2,041) 8,302
(15,995) (19,331) (125) 242 31,038 (4,829) 26,209
(23,286) (26,849) (749) 360 61 33,564 (6,560) 27,004
7,608 694 8,302
25,378 831 26,209 507.6
25,098 1,906 27,004 502.0
Basic and diluted earnings per share
39
152.2
The accompanying accounting policies and explanatory notes form an integral part of the consolidated financial statements.
A-3
PEC Ltd. and its Subsidiaries Consolidated Balance Sheets as at 30 June 2006, 2007 and 2008
As at 30 June Note Non-current assets Property, plant and equipment Available-for-sale unquoted investments Available-for-sale quoted investments Investment in joint venture Investment in associates Intangibles Land use rights 2006 $000 21,773 50 202 214 132 1,078 23,449 Current assets Inventories Contracts-in-progress (net of progress billings) Trade receivables Trade receivables from associates Trade receivables from related parties Other receivables, deposits and prepayments Derivative financial assets Loan due from an associate Cash and cash equivalents 16 17 18 18 18 19 20 21 22 65 10,939 23,834 73 20 1,212 42 22,312 58,497 Current liabilities Trade payables Trade payables to associates Trade payables to related parties Other payables and accruals Short term financing loan Derivative financial liabilities Current portion of non-current borrowings, secured Amount due to minority interest Provision for tax 23 23 23 24 25 20 26 8 14,094 327 28 15,614 360 276 1,986 32,685 Net current assets Non-current liabilities Non-current borrowings, secured Deferred tax liabilities 26 27 25,812 223 1,529 (1,752) 47,509 Share capital and reserves Share capital Statutory reserves Fair value reserves Retained earnings Foreign currency translation reserves Total equity Minority interests 2007 $000 31,885 378 50 1,086 193 1,073 34,665 19 19,722 34,215 267 442 2,336 42 35,885 92,928 12,803 381 40 34,150 174 4,343 51,891 41,037 146 1,912 (2,058) 73,644 2008 $000 42,146 195 111 1,442 235 1,031 45,160 21 15,040 55,912 9,143 1,456 12,680 424 48,944 143,620 27,342 273 3,756 47,349 1,638 33 232 396 5,452 86,471 57,149 141 2,619 (2,760) 99,549
9 10 12 13 14 15
28 29 30 31
5,000 129 178 40,706 (480) 45,533 1,976 47,509
5,000 231 354 65,777 (268) 71,094 2,550 73,644
5,000 392 171 90,276 (609) 95,230 4,319 99,549
A-4
PEC Ltd. and its Subsidiaries Consolidated Statements of Changes in Equity for the years ended 30 June 2006, 2007 and 2008
Attributable to equity holders of the Company Foreign currency Fair value translation reserves reserves $000 $000
Share capital $000 Group At 1 July 2005 Net change in fair value reserves Net effect of exchange differences Dilution of interest in subsidiary Net expense recognised directly in equity Profit for the year Total recognised income and expense for the year Transfer to statutory reserves Dividend on ordinary shares (Note 40) Dividend paid to minority shareholders of a subsidiary At 30 June 2006 5,000
Statutory reserves $000
Retained earnings $000
Total equity $000
Minority interest $000
Total $000
33,431 (5) (5) 7,608
117 61 61
(129) (351) (351)
38,420 61 (356) (295) 7,608
(124) 1,485 1,361 694
38,420 61 (480) 1,485 1,066 8,302
5,000
128 129
7,603 (128) (200) 40,706
61 178
(351) (480)
7,313 (200) 45,533
2,055 (79) 1,976
9,368 (200) (79) 47,509
At 1 July 2006 Net change in fair value reserves Net effect of exchange differences Dilution of interest in subsidiary Net income recognised directly in equity Profit for the year Total recognised income for the year Transfer to statutory reserves Dividend on ordinary shares (Note 40) Dividend paid to minority shareholders of a subsidiary At 30 June 2007
5,000
129
40,706 25,378
178 176 176
(480) 212 212
45,533 176 212 388 25,378
1,976 63 163 226 831
47,509 176 275 163 614 26,209
5,000
102 231
25,378 (102) (205) 65,777
176 354
212 (268)
25,766 (205) 71,094
1,057 (483) 2,550
26,823 (205) (483) 73,644
A-5
PEC Ltd. and its Subsidiaries Consolidated Statements of Changes in Equity for the years ended 30 June 2006, 2007 and 2008
Share capital $000 Group At 1 July 2007 Net change in fair value reserves Net effect of exchange differences Dilution of interest in subsidiary Net expense recognised directly in equity Profit for the year Total recognised income and expense for the year Transfer to statutory reserves Dividend on ordinary shares (Note 40) Dividend paid to minority shareholders of a subsidiary At 30 June 2008 5,000
Total equity $000
Minority interest $000
Total $000
231
65,777 (188) (188) 25,098
354 (183) (183)
(268) (341) (341)
71,094 (183) (341) (188) (712) 25,098
2,550 (34) 299 265 1,906
73,644 (183) (375) 111 (447) 27,004
5,000
161 392
24,910 (161) (250) 90,276
(183) 171
(341) (609)
24,386 (250) 95,230
2,171 (402) 4,319
26,557 (250) (402) 99,549
A-6
PEC Ltd. and its Subsidiaries Consolidated Cash Flow Statements for the years ended 30 June 2006, 2007 and 2008
Years ended 30 June 2006 $000 Cash flows from operating activities Profit before tax Adjustments for: Depreciation of fixed assets Loss on dilution of investment in subsidiary Loss on disposal of investment Gain on disposal of plant and equipment Currency realignment Amortisation of land use rights Share of results of associates Interest income Interest expense Shares of results of joint venture Operating profit before working capital changes (Increase)/decrease in inventories Increase in trade and other receivables Decrease/(increase) in trade receivables from associates Increase in trade receivables from related parties Increase in trade and other payables (Decrease)/increase in trade payables to associates (Decrease)/increase in trade payables to related parties Decrease/(increase) in contracts in progress Increase in derivative financial instruments Cash generated from operations Tax paid Interest paid Net cash generated from operating activities Cash flows from investing activities : Interest received Proceeds from disposal of fixed assets Acquisition of intangibles Acquisition of land use rights Investment in associates Investment in joint venture (Purchase of)/proceeds from disposal of available for sale asset Purchase of fixed assets Net cash used in investing activities Proceeds from borrowings Repayment of borrowings (Repayment of)/proceeds from finance lease obligations Proceeds from dilution of interest in a subsidiary Additional investments by minority shareholders of subsidiaries Decrease in loan to an associate Dividends paid to minority interest Dividends paid Cash generated from/(used in) financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year (Note 22) 10,343 2,643 72 (5) (455) 4 (170) (459) 107 12,080 (59) (5,071) 313 (1) 5,555 (1,366) (1) 5,242 16,692 (1,652) (107) 14,933 459 63 (1,082) (206) (50) (8,503) (9,319) 360 (144) (42) 108 1,305 184 (79) (200) 1,492 7,106 14,206 21,312 2007 $000 31,038 4,103 91 46 (214) 200 23 (242) (554) 37 34,528 46 (11,505) (194) (422) 17,245 54 12 (8,783) 30,981 (2,088) (37) 28,856 554 414 (61) (630) (50) 4 (14,359) (14,128) (577) 38 72 (483) (205) (1,155) 13,573 21,312 34,885 2008 $000 33,564 5,809 (55) (222) 23 (360) (795) 35 (61) 37,938 (2) (32,041) (8,876) (1,014) 27,738 (108) 3,716 4,682 (391) 31,642 (4,744) (35) 26,863 795 65 (42) (16,210) (15,392) 1,638 (79) 132 111 42 (6) (250) 1,588 13,059 34,885 47,944
A-7
PEC Ltd. and its Subsidiaries Notes to the Consolidated Financial Statements for the years ended 30 June 2006, 2007 and 2008
1.
Corporate information PEC Ltd. (the Company) is a public limited liability company which is incorporated in Singapore. With effect from 25 June 2009, the name of the Company was changed from Plant Engineering Construction Private Limited to PEC Pte. Ltd.. In connection with the conversion of the Company from a private limited company to a public limited company, the name of the Company was changed from PEC Pte. Ltd. to PEC Ltd. with effect from 3 July 2009. The Companys registered office is located at 21 Shipyard Road, Singapore 628144. The principal activities of the Company are the provision of mechanical engineering and contracting services. The principal activities of the subsidiaries are disclosed in Note 11 to the financial statements.
2. 2.1
Summary of significant accounting policies
Basis of preparation
The consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company have been prepared in accordance with Singapore Financial Reporting Standards (FRS). The financial statements have been prepared on a historical cost basis except for available-for-sale quoted investments that have been measured at their fair values and are presented in Singapore dollars (SGD or $). The accounting policies have been consistently applied by the Group and are consistent with those used in the previous financial year.
2.2
FRS and Interpretation of Financial Reporting Standard (INT FRS) not yet effective
The Group has not applied the following FRS and INT FRS that have been issued but not yet effective: Effective for annual periods beginning on or after FRS 1 : Presentation of Financial Statements Revised presentation Amendments relating to Puttable Financial Instruments and Obligations Arising on Liquidation Borrowing Costs Consolidation and Separate Financial Statements Amendments Relating to Cost of an Investment in a Subsidiary, Jointly-controlled Entity or Associate Financial Instruments: Presentation Amendments relating to Puttable Financial Instruments and Obligations Arising on Liquidation 1 January 2009
FRS 23 FRS 27
: :
1 January 2009 1 January 2009
FRS 32
1 January 2009
A-8
2. 2.2
Summary of significant accounting policies (contd)
FRS and Interpretation of Financial Reporting Standard (INT FRS) not yet effective (contd)
Effective for annual periods beginning on or after FRS 39 : Financial Instruments: Recognition and Measurement Amendments relating to eligible hedged items First-time Adoption of Financial Reporting Standards Amendments Relating to Cost of an Investment in a Subsidiary, Jointly-controlled Entity or Associate Share-based payment Vesting conditions and cancellations Operating Segments Service Concession Arrangements Customer Loyalty Programmes Hedges of a Net Investment in a Foreign Operation Distribution of Non-cash Assets to Owners 1 July 2009
FRS 101
1 January 2009
FRS 102
1 January 2009
FRS 108 INT FRS 112 INT FRS 113 INT FRS 116 INT FRS 117
: : : : :
1 January 2009 1 January 2008 1 July 2008 1 October 2008 1 July 2009
The Directors expect that the adoption of the above pronouncements will have no material impact to the financial statements in the period of initial application, except for the amendment to FRS 108 as indicated below. FRS 108 requires entities to disclose segment information based on the information reviewed by the entitys chief operating decision maker. The impact of this standard on the other segment disclosures is still to be determined. As this is a disclosure standard, it will have no impact on the financial position or financial performance of the Group when implemented in 2009. 2.3
Changes in accounting policies

(a) In the prior years, transactions with minority interests are accounted for using the parent entity extension model. This model considers that the view given in the consolidated financial statements is that of the controlling shareholder. Therefore if a parent disposes of some of its interest, a gain or loss that arises is recognised in the income statement. In the current year, transactions with minority interests are accounted for using the entity concept method, whereby, transactions with minority interests are accounted for as transactions with equity holders. On acquisition of minority interests, the difference between the consideration and book value of the share of the net assets acquired is reflected as being a transaction between owners and recognised directly in equity. Gain or loss on disposal to minority interests is recognised directly in equity. The Group has applied this new accounting policy prospectively. Had the change in accounting policy been applied retrospectively, the profit of the Group for the financial year ended 30 June 2007 would have been increased by $91,000 (2006 : $72,000).
A-9
2. 2.3
Changes in accounting policies (contd)

(b) On January 2008, the Institute of Certified Public Accountants of Singapore has withdrawn the Recommended Accounting Practice 9 (RAP 9) - IPO costs. The withdrawal of RAP 9 will be effective for financial statements covering periods beginning on or after 1 January 2008. As a result of the above withdrawal, the Group would be required to allocate a portion of the professional fees and other transaction costs as and when it is being incurred. The Group has early adopted the above withdrawal of RAP 9 in the financial statements prospectively, this resulted in the profit of the Group for the financial year ended 30 June 2008 to be reduced by $1,580,000 (2007 : Nil; 2006 : Nil).
2.4
Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the balance sheet date. The financial year of the Company and all its subsidiaries in the Group ends on 30 June except for the following subsidiaries, which have a financial year ending 31 December as required by the laws of its country of incorporation: Huizhou Tianxin Petrochemical Engineering Co., Ltd, PEC Construction Equipment Leasing Co., (Huizhou) Ltd, PEC Technology Consultancy Services (Huizhou) Ltd.; and PT PEC Anugerah Sejahtera The consolidated financial statements incorporate the results of these subsidiaries for the period from 1 July 2007 to 30 June 2008. Consistent accounting policies are applied for like transactions and events in similar circumstances. All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions that are recognised in assets, are eliminated in full. Acquisitions of subsidiaries are accounted for using the purchase method. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. Minority interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group. They are presented in the consolidated balance sheet within equity, separately from the parent shareholders equity, and are separately disclosed in the consolidated income statement.
2.5
Transactions with minority interests

Minority interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group and are presented separately in the consolidated income statement and within equity in the consolidated balance sheet, separately from parent shareholders equity. Transactions with minority interests are accounted for using the entity concept method, whereby, transactions with minority interests are accounted for as transactions with equity holders. On acquisition of minority interests, the difference between the consideration and book value of the share of the net assets acquired is reflected as being a transaction between owners and recognised directly in equity. Gain or loss on disposal of minority interests is recognised directly in equity.
A-10
2. 2.6
Foreign currency
Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Exchange differences arising on the settlement of monetary items or on translating monetary items at the balance sheet date are recognised in the income statement except for exchange differences arising on monetary items that form part of the Groups net investment in foreign subsidiaries, which are recognised initially in equity as foreign currency translation reserve in the consolidated balance sheet and recognised in the consolidated income statement on disposal of the subsidiary. The assets and liabilities of foreign operations are translated into SGD at the rate of exchange ruling at the balance sheet date and their income statements are translated at the weighted average exchange rates for the year. The exchange differences arising on the translation are taken directly to a separate component of equity as foreign currency translation reserves. On disposal of a foreign operation, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the income statement.
2.7
Property, plant and equipment

All items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Subsequent to recognition, property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets as follows: Leasehold land and buildings Plant machinery and site equipment Motor vehicles Office equipment, furniture and fittings, and renovation Workshop, office and staff quarters 9 to 50 years 3 to 15 years 4 to 10 years 3 to 10 years 26 years
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. The useful life and depreciation method are reviewed at each financial year-end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in the income statement in the year the asset is derecognised.
A-11
2. 2.8
Land use rights

Land use rights are carried at cost less accumulated amortisation. Amortisation is charged to the income statement on a straight line basis over the period of the rights, which is 47.5 years.
2.9
Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the assets recoverable amount. An assets recoverable amount is the higher of an assets or cash-generating units fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses are recognised in the income statement as other operating expenses or treated as a revaluation decrease. An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses recognised for an asset may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the assets recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Reversal of an impairment loss is recognised in the income statement unless the asset is carried at revalued amount, in which case the reversal in excess of impairment loss previously recognised through the income statement is treated as a revaluation increase. After such a reversal, the depreciation charge is adjusted in future periods to allocate the assets revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.
2.10 Impairment of non-financial assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the assets recoverable amount. An assets recoverable amount is the higher of an assets or cash-generating units fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses are recognised in the income statement as other operating expenses or treated as a revaluation decrease.
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2.
2.10 Impairment of non-financial assets (contd) An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses recognised for an asset may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the assets recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Reversal of an impairment loss is recognised in the income statement unless the asset is carried at revalued amount, in which case the reversal in excess of impairment loss previously recognised through the income statement is treated as a revaluation increase. After such a reversal, the depreciation charge is adjusted in future periods to allocate the assets revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. 2.11 Subsidiaries A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities. The Group generally has such power when it, directly or indirectly, holds more than 50% of the issued share capital, or controls more than half of the voting power, or controls the composition of the board of directors. In the Companys separate financial statements, investments in subsidiaries are accounted for at cost less any impairment losses. 2.12 Associates An associate is an entity, not being a subsidiary or a joint venture, in which the Group has significant influence. The associate is equity accounted for from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associate. The Groups investments in associates are accounted for using the equity method. Under the equity method, the investment in associate is measured in the balance sheet at cost plus post-acquisition changes in the Groups share of net assets of the associate. Goodwill relating to an associate is included in the carrying amount of the investment. Any excess of the Groups share of the net fair value of the associates identifiable assets, liabilities and contingent liabilities over the cost of the investment is deducted from the carrying amount of the investment and is recognised as income as part of the Groups share of profit or loss of the associate in the period in which the investment is acquired. When the Groups share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. The financial statements of the associate are prepared as of the same reporting date as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.
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2.
2.13 Joint venture A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control, where the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control. The Groups investment in joint venture is accounted for using the equity method. Under the equity method, the investment in joint venture is carried in the balance sheet at cost plus post-acquisition changes in the Groups share of net assets of the joint venture. The Groups share of the profit or loss of the joint venture is recognised in the consolidated income statement. Where there has been a change recognised directly in the equity of the joint venture, the Group recognises its share of such changes. The joint venture is equity accounted for from the date the Group obtains joint control until the date the Group ceases to have significant joint control over the joint venture. The most recent available audited financial statements of the joint venture are used by the Group in applying the equity method. Where the dates of the audited financial statements used are not coterminous with those of the Group, the share of results is arrived at from the last audited financial statements available and un-audited management financial statements to the end of the accounting period. Consistent accounting policies are applied for like transactions and events in similar circumstances. 2.14 Financial assets Financial assets are classified as loans and receivables, or available-for-sale financial assets, as appropriate. Financial assets are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. The Group determines the classification of its financial assets after initial recognition and, where allowed and appropriate, re-evaluates this designation at each financial year-end. (a)
Loans and receivables

Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Such assets are carried at amortised cost using the effective interest method, less impairment loss. Gains and losses are recognised in the income statement when the loans and receivables are derecognised or impaired, as well as through the amortisation process. The Group classifies the following financial assets as loans and receivables: Cash and cash equivalents Other receivables Trade receivables, including amounts due from subsidiaries, associates and related parties Loan due from subsidiaries, associates and related parties
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2.
2.14 Financial assets (contd) (b)
Available-for-sale financial assets

The Group classifies its investment securities as available-for-sale financial assets. Available-for-sale financial assets are non-derivative financial assets that are either designated in this category or not classified in any of the other categories. After initial recognition, the financial assets are recognised at fair value with gains or losses being recognised in equity until the assets are derecognised, or determined to be impaired, at which time the cumulative gain or loss previously reported in equity are transferred to the income statement. The fair value of investments that are actively traded in organised financial markets is determined by reference to the relevant Exchanges quoted market bid prices at the close of business on the balance sheet date. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less any impairment losses.
(c)
Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets classified as held for trading. Financial assets classified as held for trading are derivatives (including separated embedded derivatives) or are acquired principally for the purpose of selling or repurchasing it in the near term. Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value of the financial assets are recognised in the income statement. Net gains or net losses on financial assets at fair value through profit or loss include exchange differences, interest and dividend income.
2.15 Derecognition of financial assets A financial asset is derecognised where the contractual rights to receive cash flows from the asset have expired. On derecognition of a financial asset, the difference between the carrying amount and the sum of (a) the consideration received and (b) any cumulative gain or loss that has been recognised directly in equity is recognised in the income statement.
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2.
2.16 Impairment of financial assets The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. (a)
Assets carried at amortised cost

If there is objective evidence that an impairment loss on financial assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows discounted at the financial assets original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. The amount of the loss is recognised in the income statement. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the income statement, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.
(b)
Assets carried at cost

If there is objective evidence that an impairment loss on a financial asset carried at cost has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed in subsequent periods.
(c)
Available-for-sale financial assets

If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in the income statement, is transferred from equity to the income statement. Reversals of impairment loss in respect of equity instruments are not recognised in the income statement. Reversals of impairment losses on debt instruments are reversed through the income statement, if the increase in fair value of the instrument can be objectively related to an event occurring after the impairment loss was recognised in the income statement.
2.17 Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits. These also include bank overdrafts, which form an integral part of the Groups cash management. 2.18 Contracts-in-progress Contracts-in-progress in the balance sheet comprises actual costs and profits recognised less full provision for anticipated losses and progress billings. Contract costs include all direct material and labour costs and indirect costs related to contract performance.
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2.
2.19 Inventories Inventories are stated at the lower of cost and net realisable value. Costs incurred in bringing the inventories to their present location and conditions are accounted on a first-in, first-out basis. 2.20 Provisions Provisions are recognised when the Group has a present obligation as a result of a past event, it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be estimated reliably. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Provision for warranty

In determining the level of provision required for warranties, the Company has made judgements by taking into consideration factors such as the existence of legal/contractual agreements, past historical experience and other available information. 2.21 Financial liabilities Financial liabilities include trade payables, accrued operating expenses, amount due to minority interest, loans payable and hire purchase payables. Trade payables include payables to subsidiaries, associates and related parties which are normally settled on 30 - 90 day terms. Financial liabilities are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. Financial liabilities are initially recognised at fair value of the consideration received less directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the amortisation process. The liabilities are derecognised when the obligation under the liability is discharged or cancelled or expired. 2.22 Employee benefits (a)
Defined contribution plans

The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. In particular, the Singapore companies in the Group make contributions to the Central Provident Fund (CPF) scheme in Singapore, a defined contribution pension scheme. Contributions to national pension schemes are recognised as an expense in the period in which the related service is performed.
(b)
Employee leave entitlement

Employee entitlements to annual leave are recognised as a liability when they accrue to employees. The estimated liability for leave is recognised for services rendered by employees up to balance sheet date.
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2.
2.23 Leases Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to the income statement. Contingent rents, if any, are charged as expenses in the periods in which they are incurred. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term. Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis. 2.24 Revenue Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific criteria must also be met before revenue is recognised: (a)
Contracts
The percentage of completion method is applied to all contracts with a project completion period of more than a year. Income recognition is based on the ratio of costs incurred to date on contracts to their estimated total costs. Revenue from cost plus contracts is recognised by reference to the recoverable costs incurred during the period plus the fees earned measured in accordance with the contracts.
(b)
Sale of equipment and goods

Revenue is recognised upon the transfer of significant risk and rewards of ownership of the goods to the customer, which generally coincides with delivery and acceptance of the goods sold.
(c)
Rental and Interest income

Rental and interest income is recognised as the rental and interest accrue (using the effective interest method) unless collectibility is in doubt.
(d)
Dividend income
Dividend is recognised when the Groups right to receive the payment is established.
2.25 Income taxes (a)
Current tax
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.
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2.
2.25 Income taxes (contd) (b)
Deferred tax
Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all temporary differences, except: Where the deferred tax arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable profit or loss; and In respect of temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled by the Group and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences (other than those mentioned above), carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Income tax relating to items recognised directly in equity is recognised directly in equity. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
(c)
Sales tax
Revenues, expenses and assets are recognised net of the amount of sales tax except: Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and Receivables and payables that are stated with the amount of sales tax included. The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.
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2.
2.26 Segment reporting A business segment is a distinguishable component of the Group that is engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is a distinguishable component of the Group that is engaged in providing products or services within a particular economic environment and that is subject to risks and returns that are different from those of components operating in other economic environments. 2.27 Contingencies A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly within the control of the Group. Contingent liabilities and assets are not recognised on the balance sheet of the Group. 3. Significant accounting judgements and estimates The preparation of the Groups financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future. 3.1
Judgements made in applying accounting policies

In the process of applying the Groups accounting policies, management has made the following judgements, apart from those involving estimations, which has the most significant effect on the amounts recognised in the financial statements:
Income taxes
The Group has exposure to income taxes in numerous jurisdictions. Significant judgement is involved in determining the Group-wide provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the financial period in which such determination is made. The carrying amount of the Groups income tax payables at 30 June 2008 was $5,452,000 (2007: $4,343,000; 2006 : $1,986,000). The carrying amount of the Groups deferred tax liabilities at 30 June 2008 was $2,619,000 (2007: $1,912,000; 2006 : $1,529,000).
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3. 3.2
Significant accounting judgements and estimates (contd)
Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: (a)
Depreciation of property, plant and equipment

Property, plant and equipment are depreciated on a straight-line basis over their estimated economic useful lives. Management estimates the useful lives of these assets to be within 3 to 50 years. The carrying amount of the Groups property, plant and equipment at 30 June 2008 was $42,146,000 (2007: $31,885,000; 2006 : $21,773,000). Changes in the expected level of usage and technological developments could impact the economic useful lives of these assets, therefore future depreciation charges could be revised.
(b)
Construction contracts
The Group recognises contract revenue and contract costs using the percentage of completion method. Significant judgement is required in determining the total contract costs which affect the determination of the percentage of completion. Total contract revenue also includes estimation of variation works that are recoverable from customers. In making judgement, the Group evaluates by relying on the work of specialists.
(c)
Impairment of non-financial assets

The Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. Intangibles are tested for impairment annually and at other times when such indicators exist. Other non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable. When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows.
(d)
Impairment of loans and receivables

The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. The carrying amount of the Groups loans and receivable at the balance sheet date is disclosed in Notes 18 and 19 to the financial statements.
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4.
Revenue
Years ended 30 June 2006 $000 Contract revenue and manpower supply Revenue from heat treatment works Sales of services Sales of goods 148,449 322 161 395 149,327 2007 $000 234,415 145 1,160 872 236,592 2008 $000 313,911 198 242 296 314,647
5.
Other operating income

Years ended 30 June 2006 $000 Bad debts recovered loan due from an associate Write back of provision of doubtful debts trade Write back of provision of doubtful debt non-trade Gain on disposal of plant and equipment Insurance claims Interest income from fixed deposits Sundry income Project incentive Others 5 74 459 680 39 1,257 2007 $000 197 10 214 118 554 807 3,665 56 5,621 2008 $000 293 108 55 97 795 894 898 59 3,199
6.
Financial expenses
Years ended 30 June 2006 $000 Bank charges Hire purchase interest expense Interest expense on loans and trust receipts Interest expense on bank overdrafts Others 188 10 18 78 1 295 2007 $000 88 10 8 18 1 125 2008 $000 714 29 6 749
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7.
Profit before tax Profit before tax is stated after charging:

Years ended 30 June 2006 $000 Central Provident Fund contributions Depreciation expense Wages, salaries and bonuses Other short term employees benefits Allowance for doubtful debts trade Allowance for doubtful debts non-trade Amortisation of land use rights Exchange loss, net Lease rental of office equipment Loss on dilution of interest in a subsidiary Loss on disposal of investment Bad debt written off directly to the income statement 2,282 2,643 41,629 3,069 160 4 350 68 72 38 2007 $000 2,976 4,103 53,568 4,087 314 428 23 807 62 91 46 11 2008 $000 4,030 5,809 76,426 4,157 35 23 869 74 6
8.
Tax expense
Years ended 30 June 2006 $000 Current tax Income tax over provision in respect of prior year Deferred tax current year Deferred tax adjustment arising from change in tax rate Deferred tax under provision in respect of prior year 1,832 102 107 2,041 2007 $000 4,470 (24) 536 (153) 4,829 2008 $000 5,859 (6) 698 9 6,560
A reconciliation between the tax expense and product of accounting profit multiplied by the applicable tax rate for the years ended 30 June 2006, 2007 and 2008 is as follows:
Profit before tax Tax at statutory tax rate of 18% (2006 : 20%; 2007: 18%) Adjustments: Expenses not deductible for tax purposes Non taxable gain Differences in tax rate in other countries Under/(Over) provision of income tax in respect of prior year Effect of change in tax rate on deferred tax Tax exemption Others Income tax expense recognised in the income statement 10,343 2,068 31,038 5,587 33,564 6,042
229 (62) 158 102 (338) (116) 2,041
240 (281) 61 (24) (153) (307) (294) 4,829
940 (329) (65) 3 (45) 14 6,560
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8.
Tax expense (contd) The Group has tax losses of approximately $463,000 (2007: $652,000; 2006: $940,000) that are available for offset against future taxable profits of the companies in which the losses arose, for which no deferred tax asset is recognised due to uncertainty of its recoverability. The use of these tax losses is subject to the agreement of the tax authorities and compliance with certain provisions of the tax legislation of the respective countries in which the companies operate.
9.

At cost Office equipment, furniture and fittings, and renovation $000
Leasehold property land and buildings $000 Cost At 1 July 2005 Currency realignment Additions Disposals At 30 June 2006 Accumulated depreciation At 1 July 2005 Currency realignment Charge for the year Disposals At 30 June 2006 Net book value As at 30 June 2006 6,574 1,206 (1) 286 1,491 8,086 (21) 8,065
Plant machinery and site equipment $000
Motor vehicles $000
Workshop, office and staff quarter $000
Total $000
21,150 (15) 6,140 (119) 27,156
4,510 (1) 1,130 (184) 5,455
3,604 (4) 853 (373) 4,080
154 380 534
37,504 (41) 8,503 (676) 45,290
14,439 (12) 1,385 (114) 15,698
2,956 (1) 433 (146) 3,242
2,884 (2) 526 (358) 3,050
23 13 36
21,508 (16) 2,643 (618) 23,517
11,458
2,213
1,030
498
21,773
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9.
Property, plant and equipment (contd)

At cost Office equipment, furniture and fittings, and Construction renovation in progress $000 $000
Leasehold Plant property machinery land and and site buildings equipment $000 $000 Cost At 1 July 2006 Currency realignment Additions Disposals At 30 June 2007 Accumulated depreciation At 1 July 2006 Currency realignment Charge for the year Disposals At 30 June 2007 Net book value As at 30 June 2007 12,448 14,650 1,491 1 792 2,284 15,698 (1) 1,932 (874) 16,755 8,065 19 6,648 14,732 27,156 (20) 5,263 (994) 31,405
Motor vehicles $000
Workshop, office and staff quarter $000
Total $000
5,455 3 1,141 (511) 6,088
4,080 62 1,137 (299) 4,980
162 162
534 8 (76) 466
45,290 64 14,359 (1,880) 57,833
3,242 2 514 (511) 3,247
3,050 6 836 (295) 3,597
36 29 65
23,517 8 4,103 (1,680) 25,948
2,841
1,383
162
401
31,885
Cost At 1 July 2007 Currency realignment Additions Disposals At 30 June 2008 Accumulated depreciation At 1 July 2007 Currency realignment Charge for the year Disposals At 30 June 2008 Net book value As at 30 June 2008 14,026 19,503 4,698 3,244 298 377 42,146 2,284 (9) 988 3,263 16,755 (33) 2,523 (353) 18,892 3,247 (8) 758 (357) 3,640 3,597 (8) 1,516 (583) 4,522 65 24 89 25,948 (58) 5,809 (1,293) 30,406 14,732 (55) 2,612 17,289 31,405 (104) 7,447 (353) 38,395 6,088 (12) 2,628 (366) 8,338 4,980 (14) 3,384 (584) 7,766 162 (3) 139 298 466 466 57,833 (188) 16,210 (1,303) 72,552
Included in property, plant and equipment of the Group are motor vehicles with a net book value of $202,000 as at 30 June 2008 (2007: $255,000; 2006: $269,000) and plant and machinery and site equipment with net book value of $470,000 as at 30 June 2008 (2007: $92,000; 2006: nil) acquired under hire purchase.
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10.
Available-for-sale quoted investment

As at 30 June 2006 $000 At beginning of year, at fair value/cost Fair value gains/(losses) taken to equity At end of year 141 61 202 2007 $000 202 176 378 2008 $000 378 (183) 195
11.
Investment in subsidiaries
Country of incorporation and place of business
Name of subsidiaries
Principal activities
Effective percentage of equity held 2006 2007 2008 % % %
Held by the Company

(1)
Audex Pte Ltd
Singapore
Engineering, Procurement and Construction services and project management services Engineering design, Procurement, Construction and maintenance services Information technology and consultancy services Heavy machineries and equipment leasing services
97
95
92
(2)
Huizhou Tianxin Petrochemical Engineering Co, Ltd (HTPE) IT Re-Engineering Pte Ltd (ITR)
Peoples Republic of China
60
60
60
(1)
Singapore
100
100
100
(2)
PEC Construction Equipment Leasing Company (Huizhou) Limited (PCELC) PEC International Investments Pte Ltd (PECII) PEC (Malaysia) Sdn Bhd (PEC Malaysia)
100
100
100
(1)
Singapore
Investment holding
100
100
100
(7)
Malaysia
Civil, mechanical and electrical engineering project services Consultancy services in respect of engineering technology, project engineering and design and management
100
100
100
(2)
PEC Technology Consultancy Services (Huizhou) Ltd (PTCS Huizhou)
100
100
100
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11.
Investment in subsidiaries (contd)

Name of subsidiaries
Effective percentage of equity held 2006 2007 2008 % % %
Held by the Company

(1)
Plant Engineering Services Pte Ltd (PES)
Singapore
Engineering, Procurement and Construction management services Fabrication and engineering works
60
60
60
(3)
PT PEC Anugerah Sejahtera (PEC Indonesia) Shenzhen PEC Technology Pte Ltd (SZPEC) (Liquidated on 27 September 2006)
Indonesia
75
75
75
Development and sale of software, sale of software, technical services Heat treatment services
100
(1)
Testing Inspection & Solution Pte. Ltd. (TIS) Held through a subsidiary
Singapore
100
100
100
(4)
Audex (Shanghai) Co. Ltd.
Peoples Republic of China UAE
Project management
97
95
92
(5)
Audex Fujairah LL FZE
Engineering, procurement, construction and project management services Engineering, procurement, construction and project management services
92
(6)
Audex Engineering (Vietnam) Co. Ltd
Vietnam
92
(1)
Audited by Ernst & Young LLP, Singapore Financial year end is 31 December. Audited by Huizhou Fangzheng Certified Public Accountants for the years ended 31 December 2007 and 31 December 2006 Not required to be audited by the law of its country of incorporation Financial year end is 31 December. Audited by Shanghai Xing Zhang Certified Public Accountants for the year ended 31 December 2007 and 31 December 2006. Audited by Ernst & Young, Dubai for the year ended 30 June 2008 Audited by Auditing and Consulting Co Ltd for the year ended 30 June 2008 Audited by Ernst & Young, Malaysia
(2)
(3)
(4)
(5)
(6)
(7)
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12.
Investment in joint venture

As at 30 June 2006 $000 Unquoted shares, at cost Share of post acquisition reserves 2007 $000 50 50 2008 $000 50 61 111
Name of joint venture
Effective % of equity held 2006 2007 2008 % % %
Held through a subsidiary

(1)
CTS (Far East) Pte Ltd
Singapore
Sale and distribution of tank terminal related equipment
48
46
(1)
Audited by Ernst & Young LLP, Singapore
13.
Investment in associates
As at 30 June 2006 $000 Unquoted shares, at cost Share of post-acquisition reserves Carrying amount of investments 1,285 (1,071) 214 2007 $000 1,915 (829) 1,086 2008 $000 1,915 (473) 1,442
Name of associates
Percentage of equity held by Group 2006 2007 2008 % % %
Held by the Company

(1)
Plant Electrical Instrumentation Pte Ltd (PEI)
Singapore
Engineering services and installation of electrical and scientific instruments
44
44
44
A-28
13.
Investment in associates (contd)

Name of associates
Percentage of equity held by Group 2006 2007 2008 % % %
Held through subsidiaries

#
Plant Maintenance & Construction (Thailand) Co., Ltd (PMC Thailand) (held through PEC International Investments Pte. Ltd.) PECI-Thai Company Limited (PEC Thailand)
Thailand
Engineering, Procurement Construction and maintenance services
49
(2)
Thailand
Engineering, Procurement Construction and maintenance services Civil, mechanical and electrical engineering project services
49
49
49
Delta Aliran (M) Sdn Bhd
Malaysia
24
24
24
Held through an associate

(2)
Plant Maintenance & Construction (Thailand) Co., Ltd (PMC Thailand) (sold by PECI to PECIThai, on 1 August 2006)
Thailand
Engineering, Procurement, Construction and management services
24
24
Plant Maintenance & Construction (Thailand) Co., Ltd was 49% owned by PEC International Investments Pte Ltd in 2006, but was sold to PECI-Thai Company Limited on 1 August 2006. Dissolved and deregistered with effect from 25 June 2009. Financial year end is 31 March. Audited by PricewaterhouseCoopers, Singapore Audited by EX-CL Consulting Business Company Limited
*
(1)
(2)
A-29
13.
Investment in associates (contd) The summarised financial information of the associates is as follows:
As at 30 June 2006 $000 2007 $000 2008 $000
Assets and liabilities: Current assets Non-current assets

Total assets Current liabilities Non-current liabilities Total liabilities
5,825 995 6,820 5,492 1,073 6,565
6,866 1,821 8,687 6,668 765 7,433
9,526 2,895 12,421 9,498 854 10,352
Results: Revenue
Profit for the year
19,367 347
18,590 335
29,954 864
14.
Intangibles Intangibles comprise the following:

As at 30 June 2006 $000 2007 $000 2008 $000
Club memberships At beginning of year Additions during the year

At end of year
132 132
132 61 193
193 42 235
Club memberships are carried at cost less any accumulated impairment loss. The transferable memberships in Palm Resort Golf & Country Club, Jurong Country Club, Raffles Country Club, Warren Golf & Country Club, Poresia Country Club and Orchid Country Club are registered in the name of directors and senior managers in trust for the Company.
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15.
Land use rights

As at 30 June 2006 $000 Cost At beginning of year Addition Currency realignment At end of year Accumulated amortisation At beginning of year Charge for the year Currency realignment At end of year Net book value At end of year 1,078 1,073 1,031 4 4 4 23 27 27 23 (1) 49 1,082 1,082 1,082 18 1,100 1,100 (20) 1,080 2007 $000 2008 $000
Land use rights are carried at cost less accumulated amortization. Amortization is charged to the income statement on a straight line basis over the period of the rights, which is 47.5 years. 16. Inventories
As at 30 June 2006 $000 Finished goods at lower of cost and net realisable value 65 2007 $000 19 2008 $000 21
17.
Contract work-in-progress (net of progress billings)

As at 30 June 2006 $000 Contract work-in-progress Project costs and attributable profits Attributable losses Less: Progress billings Less: Provision for foreseeable loss 59,716 (13) (48,755) (9) 10,939 74,518 (54,796) 19,722 247,232 (232,192) 15,040 2007 $000 2008 $000
A-31
18.
Trade receivables
As at 30 June 2006 $000 Trade receivables - external parties - associates - related parties 2007 $000 2008 $000
24,013 332 20 24,365
34,648 571 442 35,661
55,947 9,445 1,456 66,848
Allowance for doubtful debts - external parties - associates
(179) (259) 23,927
(433) (304) 34,924
(35) (302) 66,511
Trade receivables are non-interest bearing and are generally on 30 - 90 days terms. They are recognised at their original invoice amounts which represents their fair values on initial recognition. Related parties refer to companies held by a majority corporate shareholder of the Company and a corporate shareholder of an associate. Foreign currency denominated trade receivables are denominated in the following currencies:
Australian Dollar Chinese Yuan Euro Malaysian Ringgit Thai Baht US Dollar 974 27 300 4,330 5,631 92 652 2,406 101 8,302 11,553 3,179 841 99 105 15,107 19,331
Receivables that are past due but not impaired

The Group has trade receivables amounting to $7,191,000 (2007: $5,808,000; 2006 : $5,978,000) that are past due at the balance sheet date but not impaired. These receivables are unsecured and the analysis of their aging at the balance sheet date is as follows:
As at 30 June 2006 $000 Trade receivables past due: Lesser than 30 days 31 to 60 days 61 to 90 days More than 90 days 2007 $000 2008 $000
3,128 1,106 546 1,198 5,978
2,901 652 87 2,168 5,808
5,695 742 187 567 7,191
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18.
Trade receivables (contd)
Receivables that are impaired

The Groups trade receivables that are impaired at the balance sheet date and the movement of the allowance accounts used to record the impairment are as follows: Individually impaired
As at 30 June 2006 $000 Trade receivables nominal amounts Less: Allowance for impairment 445 (438) 7 2007 $000 742 (737) 5 2008 $000 337 (337)
Movement in allowance accounts:

At 1 July Charge for the year Written off Written back At 30 June 278 160 438 438 314 (5) (10) 737 737 35 (142) (293) 337
Trade receivables that are individually determined to be impaired at the balance sheet date relate to debtors that are in significant financial difficulties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancements. 19. Other receivables, deposits and prepayments
As at 30 June 2006 $000 Advances Prepayments Sundry deposits Other receivables 356 146 435 275 1,212 2007 $000 478 627 1,042 189 2,336 2008 $000 2,515 1,453 1,795 6,917 12,680
Included in other receivables is an amount of $6,725,000 (2007 : Nil; 2006 : Nil) due from a business partner which is unsecured, repayable on demand and is at an interest rate of 5.3% (2007 : Nil; 2006 : Nil) per annum.
A-33
20.
Derivative financial instruments

2008 Contract notional amount $000 Forward currency contract Flexi forward currency contract Currency option contract 1,264 2,727 2,760
Assets $000 424 424
Liabilities $000 (28) (5) (33)
The Group does not apply hedge accounting. The above derivative financial instruments are used to hedge the Groups sales and purchases denominated in United States Dollar, Arab Emirates Dirham and Australian Dollar. 21. Loan due from an associate The loan to an associate is unsecured, repayable on demand and is at an interest rate of Nil (2007: 6%; 2006: 6%) per annum. 22. Cash and cash equivalents Cash and cash equivalents comprise the following amounts:
As at 30 June 2006 $000 Cash and bank balances Fixed deposits Bank overdrafts (secured) Cash and cash equivalents Less : Fixed deposits pledged to the bank for bank facilities (Note 26(b)) 6,340 16,192 (220) 22,312 (1,000) 21,312 2007 $000 8,062 27,823 35,885 (1,000) 34,885 2008 $000 30,825 18,119 48,944 (1,000) 47,944
The weighted average effective interest rate of fixed deposits ranges from approximately 0.50% to 9.28% (2007: 1.68% to 3.15%; 2006: 2.39% to 5.00%) per annum. The fixed deposits mature within 3 months (2007: within 3 months; 2006: within 1 month) from the financial year end.
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22.
Cash and cash equivalents (contd) Foreign currency denominated cash and cash equivalents are denominated in the following currencies:
As at 30 June 2006 $000 Chinese Yuan Euro Malaysian Ringgit Sri Lanka Rupee US Dollar 2,253 31 1,826 204 4,644 8,958 2007 $000 3,225 48 4,394 24 9,108 16,799 2008 $000 2,991 667 3,256 18 13,125 20,057
23.
Trade payables, including amounts payable to associates and related parties Trade payables are non-interest-bearing and are normally settled on 60-day terms. Trade payables to subsidiaries, associates and related parties are non-interest-bearing and are repayable on demand.
As at 30 June 2006 $000 2007 $000 2008 $000
Trade and other payables (current): Other payables and accruals (Note 24) Trade payables - external parties - associates - related parties
Total financial liabilities carried at amortised cost
15,614 14,094 327 28 30,063
34,150 12,803 381 40 47,374
47,349 27,342 273 3,756 78,720
Foreign currency denominated trade payables are denominated in the following currencies:
Chinese Yuan Malaysian Ringgit US Dollar Euro 795 64 130 92 1,081 676 1,095 20 1,791 57 5,676 533 6,266
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24.
Other payables and accruals

As at 30 June 2006 $000 Accrued salaries and bonuses Accrued operating expenses Provision for unutilised leave Directors fees Profit participation incentives Provision for reinstatement cost Other payables 5,054 6,959 701 39 1,365 1,496 15,614 2007 $000 12,828 13,108 890 45 4,986 2,293 34,150 2008 $000 18,704 18,068 1,275 58 6,102 1,101 2,041 47,349
Provision for reinstatement cost refers to the estimated cost of dismantling and reinstating the leasehold properties as at the end of the lease term. 25. Short term financing loan
As at 30 June 2006 $000 Short-term financing Loan 1 Short-term financing Loan 2 360 360 2007 $000 2008 $000 1,638 1,638
Short-term financing Loan 1 carried interest at 1% above prime and its effective rate was approximately 6% per annum. The loan was secured by a corporate guarantee issued by the Group. Short-term financing Loan 2 relates to 30 day trust receipts which bear interest rates ranging from 4.35% to 4.36% per annum. The trust receipts were fully settled in July 2008. 26. Non-current borrowings, secured
As at 30 June 2006 $000 Hire purchase creditors Bank loans 203 296 499 (276) 223 2007 $000 241 79 320 (174) 146 2008 $000 373 373 (232) 141
Less: Due within 12 months Due after 12 months
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26.
Non-current borrowings, secured (contd) (a)
Hire purchase creditors

The Group has finance leases for motor vehicles (Note 9). Future minimum lease payments under the finance leases together with the present value of the net minimum lease payments are as follows:
Present value of payments 2006 $000 59 144 Present value of payments 2007 $000 103 138 Present value of payments 2008 $000 232 141
Minimum payments 2006 $000 Not later than one year Later than one year but not more than five years Total minimum lease payments Less amounts representing finance charges Present value of minimum lease payments 67 165
Minimum payments 2007 $000 115 155
Minimum payments 2008 $000 248 145
232
203
270
241
393
373
(29)
(29)
(20)
203
203
241
241
373
373
(b)
Bank loans
As at 30 June 2006 $000 2007 $000 2008 $000
4.8% fixed secured loans 4.55% fixed secured loans
243 53 296 (217) 79
49 30 79 (71) 8
Less: Due within 12 months Due after 12 months
The bank facilities of the Company are secured by a registered debenture incorporating a fixed and floating charge on assets of the Company as well as a pledge of fixed deposits of $1,000,000 (2007 : $1,000,000; 2006 : $1,000,000) held by a bank.
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27.
Deferred tax liabilities Deferred income tax as at 30 June relates to the following:
As at 30 June 2006 $000 2007 $000 2008 $000
Deferred tax liabilities Differences in depreciation Less: Deferred tax assets Tax losses carried forward
1,566
1,926
2,619
(37) 1,529
(14) 1,912
2,619
An analysis of the deferred taxes is as follows:

At beginning of year Movements in deferred taxes - Current year - Arising from changes in tax rate - Under provision in respect of prior year At end of year 1,422 107 1,529 1,529 536 (153) 1,912 1,912 698 9 2,619
28.
Share capital
As at 30 June 2006 No. of shares 000 Issued and fully paid At 1 July and 30 June 5,000 5,000 5,000 5,000 5,000 5,000 No. of shares 000 2007 No. of shares 000 2008
$000
$000
$000
The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restrictions. 29. Statutory reserves In accordance with laws and regulations in the PRC, the Groups subsidiaries established in the PRC are required to appropriate not less than 10% of its profit after taxation to the reserve fund until the reserve balance reaches 50% of the registered capital. Accordingly, a portion of the profits has been transferred to the statutory reserve. The statutory reserve fund is not free for distribution as dividends but it can be used to offset losses or be capitalised as capital of the subsidiaries.
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30.
Fair value reserves Fair value reserves record the cumulative fair value changes of available-for-sale financial assets until they are de-recognised or impaired.
31.
Foreign currency translation reserves The foreign currency translation reserves are used to record exchange differences arising from the translation of the financial statements of the foreign subsidiaries and associates whose functional currencies are different from that of the Groups presentation currency.
32.
Commitments (a)
Capital commitments
As at 30 June 2006 $000 Capital commitments in respect of purchase of plant and equipment 2007 $000 2008 $000
22
755
2,418
(b)
Operating lease commitments

The Group and the Company have entered into commercial leases for properties as lessee. Operating lease payments recognised in the consolidated income statement during the year amounted to $5,158,000 (2007: $2,683,000; 2006: $1,719,000). Future minimum lease payments payable under non-cancellable operating leases as at 30 June are as follows:
Within one year After one year but not more than five years More than five years 1,858 2,023 4,399 8,280 3,599 3,806 4,693 12,098 4,449 1,812 4,517 10,778
33.
Guarantees/Letter of credit As at year end, the Groups guarantees/letter of credit are as follows: (a) The Group has provided corporate guarantees amounting to $70,896,000 (2007: $21,234,000; 2006: $12,921,000) to its customers in respect of the performance of contracts and financial institutions in relation to banking facilities. The Group has given indemnity to banks in connection with the issuance of performance bond guarantees of $14,593,000 as at 30 June 2008 (2007: $7,603,000; 2006: $7,144,000) in favour of third parties in respect of the Groups business. The Group has given indemnity to banks in connection with the issuance of shipping guarantees of $Nil as at 30 June 2008 (2007: Nil; 2006: $96,000) in favour of third parties in respect of the Groups business.
(b)
(c)
A-39
33.
Guarantees/Letter of credit (contd) (d) The Group has given indemnity to banks in connection with the issuance of immigration bond guarantees of $15,825,000 as at 30 June 2008 (2007: $11,046,000; 2006: $12,400,000) in favour of a third party in respect of the Groups business. The Group has an outstanding warranty of $Nil as at 30 June 2008 (2007: $100,000; 2006: Nil) in favour of a third party in respect of the Groups business. The Group has given indemnity to banks in connection with the issuance of advance payment guarantees of $Nil as at 30 June 2008 (2007: Nil; 2006: $2,106,000) in favour of third parties in respect of the Groups business. The Group has provided standby letter of credit and letter of credit of $22,842,000 as at 30 June 2008 (2007: $300,000; 2006: $1,376,000) in favour of third parties in respect of the Groups business.
(e)
(f)
(g)
34.
Related party disclosures (a)
Sale and purchase of goods and services

In addition to those related party information disclosed elsewhere in the financial statements, the following significant transactions between the Group and related parties took place during the year on terms agreed between the parties:
As at 30 June 2006 $000 (i) 2007 $000 2008 $000
Concluded with related parties :

Revenue from manpower supply and engineering works Revenue from IT support services Office rental expenses Sale of computer software and accessories Consultancy fees Insurance premium fees Bank charges Purchase of equipment
(10) 126 42
(13) 126 (4) (23) 57
(4,505) (13) 126 50 4
(ii)
Concluded with associates/joint venture:Sale of goods and services Revenue from IT support services Revenue from manpower supply and engineering works Revenue from office maintenance and administrative charges Revenue from office and premises rental Revenue from administrative charges Subcontractors charges and manpower charges Radiography and testing fees Purchase of materials Temporary facilities Loan interest income (53) (1,101) (20) (4) (4) 1,921 3 (14) (15) (981) (16) 2,124 (10) (32) (20,721) (7) 2,547 5,307 6
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34.
Related party disclosures (contd) (b)
Compensation of key management personnel

As at 30 June 2006 $000 Directors fees Salaries and bonuses Short-term employee benefits Central Provident Fund contributions Profit participation incentive Total compensation paid to key management personnel Comprise amounts paid to - Directors of the Company - Other key management personnel 37 1,096 (3) 69 1,289 2007 $000 45 1,356 15 67 4,986 2008 $000 57 2,193 26 121 6,102
2,488
6,469
8,499
1,381 1,107 2,488
4,552 1,917 6,469
6,180 2,319 8,499
35.
Financial risk management objectives and policies The Group is exposed to financial risks arising from its operations and the use of financial instruments. The key financial risks include credit risk, liquidity risk and foreign currency risk. The Board of directors reviews and agrees policies and procedures for the management of these risks. It is, and has been throughout the current and previous financial year the Groups policy that no derivatives shall be undertaken except for the use of hedging instruments where appropriate and cost-efficient. The Group does not apply hedge accounting. The following sections provide details regarding the Groups exposure to the above-mentioned financial risks and the objectives, policies and processes for the management of these risks. (a)
Credit risk
Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Groups exposure to credit risk arises primarily from trade and other receivables. For other financial assets (including investment securities, cash and cash equivalents and derivatives), the Group minimises credit risk by dealing exclusively with high credit rating counterparties. The Groups objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. The Group trades only with recognised and creditworthy third parties. It is the Groups policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Groups exposure to bad debts is not significant.
Exposure to credit risk

At the balance sheet date, the Groups maximum exposure to credit risk is represented by: the carrying amount of each class of financial assets recognised in the balance sheets, including derivatives with positive fair values; and
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35.
Financial risk management objectives and policies (contd) (a)
Credit risk (contd) Credit risk concentration profile

With the exception of a trade receivable owing by one customer and the loan to a business partner, there are no significant concentrations of credit risk within the Group or Company.
Financial assets that are neither past due nor impaired

Trade and other receivables that are neither past due nor impaired are creditworthy debtors with good payment record with the Group. Cash and cash equivalents, investment securities and derivatives that are neither past due nor impaired are placed with or entered into with reputable financial institutions or companies with high credit ratings and no history of default.
Financial assets that are either past due or impaired

Information regarding financial assets that are either past due or impaired is disclosed in Note 18 (Trade receivables). (b)
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting financial obligations due to shortage of funds. The Groups exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Groups objective is to maintain a balance between continuity of funding and flexibility through the use of stand-by credit facilities. The Group manages its liquidity risk by maintaining sufficient cash and marketable securities to enable them to meet their normal operating commitments. The table below summarises the maturity profile of the Groups financial liabilities at the balance sheet date based on contractual undiscounted payments.
1 year or less $000 2008 Trade payables - external parties - associates - related parties Other payables and accruals Derivative financial liabilities Short-term financing loan Hire purchase creditors Amount due to minority interests 27,342 273 3,756 47,349 33 1,638 248 396 81,035 145 145 27,342 273 3,756 47,349 33 1,638 393 396 81,180 1 to 5 years $000 Over 5 years $000 Total $000
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35.
Financial risk management objectives and policies (contd) (b)
Liquidity risk (contd)

1 year or less $000 2007 Trade payables - external parties - associates - related parties Other payables and accruals Bank loans Hire purchase creditors 12,803 381 40 34,150 74 115 47,563 2006 Trade payables - external parties - associates - related parties Other payables and accruals Short-term financing loan Bank loans Hire purchase creditors 14,094 327 28 15,614 382 255 67 30,767 83 165 248 14,094 327 28 15,614 382 338 232 31,015 8 155 163 12,803 381 40 34,150 82 270 47,726 1 to 5 years $000 Over 5 years $000 Total $000
(c)
Foreign currency risk

The Group holds cash and cash equivalents, trade receivables and trade payables denominated in foreign currencies for working capital purposes. The Group is exposed to currency translation risk arising from its net investments in foreign operations, including Malaysia, Peoples Republic of China (PRC) Thailand and Vietnam. The Groups net investments are not hedged as currency positions in ringgit and RMB are considered to be long-term in nature. Sensitivity analysis for foreign currency risk The following table demonstrates the sensitivity to a reasonably possible change in the USD, CNY and MYR exchange rates (against SGD), with all other variables held constant, of the Groups profit net of tax and equity as at balance sheet date.
Profit net of tax Years ended 30 June 2006 $000 USD CNY MYR strengthened 3% (2007: 3%) weakened 3% (2007: 3%) strengthened 3% (2007: 3%) weakened 3% (2007: 3%) strengthened 3% (2007: 3%) weakened 3% (2007: 3%) +212 -212 +58 -58 +49 -49 2007 $000 +428 -428 +79 -79 +140 -140 2008 $000 +624 -508 +94 -94 +81 -81
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36.
Financial instruments
Fair values
The fair value of a financial instrument is the amount at which the instrument could be exchanged or settled between knowledgeable and willing parties in an arms length transaction, other than in a forced or liquidation sale.
Financial instruments whose carrying amount approximate fair value

Management has determined that the carrying amounts of cash and cash equivalents, trade and other receivables (including amounts receivable from associates and related parties), loan receivable from an associate, trade and other payables (including amounts payable to associates, related parties and amount due to minority interests) based on their notional amounts, reasonably approximate their fair values because these are mostly short-term in nature or repayable on demand.
Methods and assumptions used to determine fair values

The methods and assumptions used by management to determine the fair values of financial instruments other than those whose carrying amounts reasonably approximate their fair values as mentioned earlier, are as follows: Financial assets Available-for-sale investments (quoted) Methods and assumptions Fair value has been determined based on published market prices at the balance sheet date without factoring in transaction costs.
37.
Capital management The Groups objectives when managing capital are: (1) to safeguard the entitys ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders; to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.
(2)
The Group aims to obtain an optimal capital structure by balancing capital efficiency and financial flexibility. The Group manages its capital structure in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders or issue new shares or raise funds through the debt market. As disclosed in Note 29, subsidiaries of the Group are required by the Foreign Enterprise Law of the PRC to contribute to and maintain a non-distributable statutory reserve fund whose utilisation is subject to approval by the relevant PRC authorities. This externally imposed capital requirement has been complied with by the above-mentioned subsidiaries for the relevant financial years.
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37.
Capital management (contd) Management monitors capital employed based on a gearing ratio. The gearing ratio is defined as the sum of total external borrowings divided by the sum of capital employed. Total borrowings comprise hire purchase, term loan and overdraft. Total capital employed is calculated as equity plus borrowings.
As at 30 June 2006 $000 2007 $000 2008 $000
Total borrowings Total equity Total capital employed Gearing ratio 38. Segmental information
859 45,533 46,392 1.85%
320 71,094 71,414 0.45%
2,011 95,230 97,241 2.07%
Reporting format
The primary segment reporting format is determined to be business segments as the Groups risks and rates of return are affected predominantly by differences in the services and projects carried out. Secondary information is reported geographically. The operating businesses are organised and managed separately according to the nature of the projects and services carried out, with each segment representing a strategic business unit that offers different services and serves different markets.
Business segments
The Project work segment relates to provision of engineering, procurement and construction services for certain aspects of a plant project, such as tankage and/or piping work, procurement to the Oil and Gas, Petrol-chemical, Pharmaceutical and Oil and Chemical Terminal industries. The plant maintenance and related services segment relates to a full discipline of maintenance services provided to the oil and gas, petrochemical, pharmaceutical and oil and chemical terminal industries, usually for a fixed two to five year term, under which various maintenance services and their relevant rates would be itemised. The other operations segment relates to services provided through the Company subsidiary whereby heat treatment, information technology services/products and construction equipment leasing are provided. It also relates to construction equipment leasing services provided through the Companys PRC subsidiary. For the business of the Group, unallocated assets and liabilities comprised assets and liabilities that are interchangeable amongst segments in the generation of revenue.
Geographical segments
The Groups geographical segments are based on the operational sites geographic location.
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38.
Segmental information (contd)
Allocation basis and transfer pricing

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprises tax assets and liabilities that cannot be reasonably allocated. Transfer prices between business segments are set on an arms length basis in a manner similar to transactions with third parties. Segment revenue, expenses and results include transfers between business segments. These transfers are eliminated on consolidation. (a)
Business segments
Plant maintenance and related services $000
Projects $000 2006 Revenue Inter-segment sales Total revenue 74,304 4,908 79,212
Other operations $000
Eliminations $000
Total $000
74,185 313 74,498
838 627 1,465
(5,848) (5,848)
149,327 149,327
Results: Segment results

Unallocated expenses Finance costs Share of results of associates Profit before tax Tax expense Profit for the year
16,316
15,442
151
31,909 (21,441) (295) 170 10,343 (2,041) 8,302
2007 Revenue Inter-segment sales Total revenue 143,819 2,470 146,289 92,296 2,240 94,536 477 1,690 2,167 (6,400) (6,400) 236,592 236,592

Unallocated expenses Finance costs Share of results of associates Profit before tax Tax expense Profit for the year
41,287
19,265
74
60,626 (29,705) (125) 242 31,038 (4,829) 26,209
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38.
Segmental information (contd) (a)
Business segments (contd)

Projects $000 2008 Revenue Inter-segment sales Total revenue
Eliminations $000
Total $000
200,010 4,849 204,859
113,900 2,490 116,390
737 8,415 9,152
(15,754) (15,754)
314,647 314,647

Unallocated expenses Finance costs Share of results of associates Share of results of joint venture Profit before tax Tax expense Profit for the year
55,565
25,151
112
80,828 (46,936) (749) 360 61 33,564 (6,560) 27,004
Projects $000 2006 Assets and liabilities: Segment assets Investments in associates Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities
Eliminations $000
Total $000
11,019 11,019 (3,774) (3,774)
20,827 20,827 (5,340) (5,340)
2,382 214 2,596 (205) (205)
34,228 214 47,504 81,946 (9,319) (25,118) (34,437)
Other segment information: Capital expenditure: - Tangible assets - Land use rights Depreciation and amortisation Unallocated depreciation and amortisation Impairment of nonfinancial assets
1,130
1,082 827
148
(148)
8,503 1,082 1,957 690
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38.

Projects $000 2007
Eliminations $000
Total $000
Assets and liabilities: Segment assets Investments in joint venture Investment in associates Unallocated assets
Total assets Segment liabilities Unallocated liabilities Total liabilities
26,190 26,190 (9,240) (9,240)
25,843 25,843 (7,651) (7,651)
3,525 50 1,086 4,661 (187) (187)
55,558 50 1,086 70,899 127,593 (17,078) (36,871) (53,949)
Other segment information: Capital expenditure: - Tangible assets - Intangible assets Depreciation and amortisation Unallocated depreciation and amortisation Impairment of nonfinancial assets
1,553
61 1,217
323
(323)
14,359 61 2,770 1,356
2008
Assets and liabilities: Segment assets Investments in joint venture Investment in associates Unallocated assets
Total assets Segment liabilities Unallocated liabilities Total liabilities
41,180 41,180 (4,393) (4,393)
39,557 39,557 (13,622) (13,622)
814 111 1,442 2,367 (36) (36)
81,551 111 1,442 105,676 188,780 (18,051) (71,180) (89,231)
Other segment information: Capital expenditure: - Tangible assets - Intangible assets Depreciation and amortisation Unallocated depreciation and amortisation
2,590
1,304
322
16,210 42 4,216 1,616
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38.
Segmental information (contd) (b)
Asia Pacific (other than Singapore) and Africa Eliminations $000 $000
Singapore $000 2006 Revenue Inter-segment sales Segment Revenue 2007 Revenue Inter-segment sales Segment Revenue 2008 Revenue Inter-segment sales Segment Revenue 240,098 14,790 254,888 158,360 7,829 166,189 129,781 7,296 137,077
Middle East $000
Total $000
2,869 2,869
16,677 359 17,036
(7,655) (7,655)
149,327 149,327
60,702 60,702
17,530 691 18,221
(8,520) (8,520)
236,592 236,592
49,264 49,264
25,285 964 26,249
(15,754) (15,754)
314,647 314,647
2006 Assets and liabilities: Segment assets Investment in associates Total assets Segment liabilities Unallocated liabilities Total liabilities 64,509 214 64,723 (28,301) (28,301) 2,523 2,523 (1,156) (1,156) 14,700 14,700 (1,465) (1,465) 81,732 214 81,946 (30,922) (3,515) (34,437)
Other segment information: Capital expenditure: - Tangible assets - Land use rights Depreciation and amortisation Impairment of nonfinancial assets 2,373 148 1,082 5 269 (148) 8,503 1,082 2,647
A-49
38.
Geographical segments (contd)

Singapore $000 2007 Assets and liabilities: Segment assets Investment in associates Investment in joint venture Total assets Segment liabilities Unallocated liabilities Total liabilities Other segment information: Capital expenditure: - Tangible assets - Intangible assets Depreciation and amortisation Impairment of nonfinancial assets 61 3,489 323 97,098 1,086 50 98,234 (40,836) (40,836)
Middle East $000
Total $000
10,924 10,924 (2,621) (2,621)
18,435 18,435 (4,237) (4,237)
126,457 1,086 50 127,593 (47,694) (6,255) (53,949)
637
(323)
14,359 61 4,126
2008 Assets and liabilities: Segment assets Investment in associates Investment in joint venture Total assets Segment liabilities Unallocated liabilities Total liabilities Other segment information: Capital expenditure: - Tangible assets - Intangible assets Depreciation and amortisation 42 16,210 42 160,457 1,442 111 162,010 (74,158) (74,158) 1,545 1,545 (740) (740) 25,225 25,225 (6,262) (6,262) 187,227 1,442 111 188,780 (81,160) (8,071) (89,231)
5,151
33
648
5,832
A-50
39.
Earnings per share Basic earnings per share amounts are calculated by dividing the profit after taxation attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the financial year. The following table reflects the income statement and share data used in the computation of basic and diluted earnings per share for the years ended 30 June 2006, 2007 and 2008:
Years ended 30 June 2006 $000 Net profit attributable to shareholders Weighted average number of ordinary shares for basic earnings per share computation Earnings per share (cents) - Basic and diluted 7,608 2007 $000 25,378 2008 $000 25,098
5,000
5,000
5,000
152.2
507.6
502.0
40.
Dividends
Years ended 30 June 2006 $000 Dividends on ordinary shares: Final dividend for 2007: 5 (2006: 4.1; 2005: 4.0) cents per share 2007 $000 2008 $000
200
205
250
41.
Authorisation of financial statements The financial statements for the years ended 30 June 2006, 2007 and 2008 were authorised for issue in accordance with a resolution of Directors on 30 July 2009.
A-51
APPENDIX B
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF PEC LTD. AND ITS SUBSIDIARIES FOR THE FINANCIAL PERIOD FROM 1 JULY 2008 TO 31 DECEMBER 2008
PEC Ltd. (formerly known as Plant Engineering Construction Private Limited) and its Subsidiaries Statement by Directors
We, Ko Poh Thim, Edna and Wong Peng, being two of the Directors of PEC Ltd., do hereby state that, in the opinion of the Directors : (i) the accompanying unaudited condensed consolidated financial statements together with notes thereto are drawn up so as to present fairly, the state of affairs of the Group as at 31 December 2008, and the results, changes in equity and cash flows of the Group for the financial period from 1 July 2008 to 31 December 2008, and at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.
(ii)
On behalf of the Board of Directors,
Ko Poh Thim, Edna Director
Wong Peng Director
Singapore 30 July 2009
B-1
Report from the Auditors in relation to the Review of Unaudited Condensed Consolidated Financial Statements of PEC Ltd. and its Subsidiaries for the financial period from 1 July 2008 to 31 December 2008
30 July 2009 The Board of Directors PEC Ltd. 21 Shipyard Road Singapore 628144
Dear Sirs: Introduction We have reviewed the accompanying consolidated balance sheet of PEC Ltd. as at 31 December 2008 and the related consolidated statements of income, changes in equity and cash flows for the six-month period then ended and selected explanatory notes. Management is responsible for the preparation and presentation of these condensed consolidated financial statements in accordance with Singapore Financial Reporting Standard FRS 34 Interim Financial Reporting (FRS 34). Our responsibility is to express a conclusion on these consolidated financial statements based on our review. Scope of Review We conducted our review in accordance with the Singapore Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Singapore Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated financial statements are not prepared, in all material respects, in accordance with FRS 34. This report has been prepared for inclusion in the Prospectus in connection with the Invitation by the Company in respect of the issue of 63,000,000 new ordinary shares in the share capital of the Company.
Ernst & Young LLP Public Accountants and Certified Public Accountants Singapore Partner-in-charge: Max Loh Khum Whai
B-2
PEC Ltd. and its Subsidiaries Consolidated Profit and Loss Account for the financial period from 1 July 2008 to 31 December 2008
Note
Unaudited 01.07.2008 31.12.2008 $000 220,257 (171,157) 49,100
Unaudited 01.07.2007 31.12.2007 $000 117,135 (84,963) 32,172
Revenue Cost of sales Gross profit Expenses Other operating income Administrative expenses Other operating expenses Finance expenses Share of results of associates Share of results of joint venture Profit before tax Taxation Profit for the period Attributable to Shareholders of the Company Minority interest
848 (12,359) (21,162) (230) (680) (24) 4 15,493 (3,075) 12,418
1,651 (9,088) (11,471) (302) 418 (17) 13,363 (1,902) 11,461
10,903 1,515 12,418
10,733 728 11,461
Earnings per share Basic and diluted 14
Cents 218.1
Cents 214.7
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
B-3
PEC Ltd. and its Subsidiaries Balance Sheet as at 31 December 2008
Group Note Unaudited 31.12.2008 $000 Audited 30.06.2008 $000
Non-current assets Property, plant and equipment Available-for-sale quoted investments Investment in joint venture Investment in associates Intangibles Land use rights
50,834 98 87 762 235 1,082 53,098
42,146 195 111 1,442 235 1,031 45,160
Current assets Inventories Contracts-in-progress (net of progress billings) Trade receivables Trade receivables from associates Trade receivables from related parties Other receivables, deposits and prepayments Derivative assets Cash and cash equivalents
6 7 7 7
62 17,691 51,702 3,590 2 9,921 23 62,978 145,969
21 15,040 55,912 9,143 1,456 12,680 424 48,944 143,620
Current liabilities Trade payables Trade payables to associates Trade payables to related parties Other payables and accruals Short term financing loan Derivatives financial liabilities Current portion of non-current borrowings, secured Amount due to minority interest Provision for tax
24,494 350 43 52,916 213 5,624 83,640
27,342 273 3,756 47,349 1,638 33 232 396 5,452 86,471 57,149
Net current assets Non-current liabilities Non-current borrowings, secured Deferred tax liabilities
62,329
42 2,278 (2,320) 113,107
141 2,619 (2,760) 99,549
Share capital and reserves Issued and paid up capital Statutory reserves Fair value reserves Retained earnings Foreign currency translation reserves Total equity Minority interests
5,000 444 73 97,857 43 103,417 9,690 113,107
5,000 392 171 90,276 (609) 95,230 4,319 99,549
B-4
PEC Ltd. and its Subsidiaries Statements of Changes in Equity for the financial period from 1 July 2008 to 31 December 2008
Share capital $000 Unaudited Group As at 1 July 2007 Net change in fair value reserves Net effect of exchange differences Dilution of interest in subsidiary Net expense recognised directly in equity Profit for the period Total recognised income and expense for the period Transfer to statutory reserves At 31 December 2007 5,000
Total equity $000
Minority interests $000
Total $000
231
65,849 10,733
354 (59) (59)
(340) (196) (196)
71,094 (59) (196) (255) 10,733
2,550 (43) 34 (9) 728
73,644 (59) (239) 34 (264) 11,461
5,000
93 324
10,733 (93) 76,489
(59) 295
(196) (536)
10,478 81,572
719 3,269
11,197 84,841
As at 1 July 2008 Net change in fair value reserves Net effect of exchange differences Dilution of interest in subsidiary Net income and expense recognised directly in equity Profit for the period Total recognised income and expense for the period Transfer to statutory reserves Dividend paid to minority shareholders by a subsidiary At 31 December 2008
5,000
392
90,276 (3,270) (3,270) 10,903
171 (98) (98)
(609) 652 652
95,230 (98) 652 (3,270) (2,716) 10,903
4,319 180 3,700 3,880 1,515
99,549 (98) 832 430 1,164 12,418
5,000
52 444
7,633 (52) 97,857
(98) 73
652 43
8,187 103,417
5,395 (24) 9,690
13,582 (24) 113,107
B-5
PEC Ltd. and its Subsidiaries Consolidated Cash Flow Statement for the financial period from 1 July 2008 to 31 December 2008
Unaudited 01.07.2008 31.12.2008 $000 Cash flows from operating activities: Profit before taxation Adjustments for: Depreciation of fixed assets Loss on dilution of interest in subsidiary Gain on disposal of fixed assets Currency realignment Amortisation of land use rights Share of associates loss/(profits) Share of joint venture loss Interest income Interest expense Operating profit before working capital changes Decrease in trade and other receivables Decrease/(increase) in trade receivables from associates Decrease/(increase) in trade receivables from related parties Increase/(decrease) in trade and other payables Increase/(decrease) in trade payables to associates Decrease in trade payables to related parties (Increase)/decrease in contracts in progress Increase in inventories Decrease in derivative financial instruments Cash generated from operations Tax paid Interest paid Net cash from operating activities Cash flows from investing activities: Interest received Proceeds from disposal of fixed assets Purchase of intangible asset Purchase of fixed assets Net cash used in investing activities Cash flows from financing activities: (Decrease)/increase in bank loans Proceeds from dilution of interest in a subsidiary Dividend paid to minority interest Additional fixed deposits pledged to the bank for bank facilities Cash (used in)/provided by financing activities Net increase in cash and cash equivalents Cash and cash equivalents at 1 July Cash and cash equivalents at 31 December
Unaudited 01.07.2007 31.12.2007 $000
15,493 3,368 (5) 436 12 680 24 (261) 44 19,791 6,968 5,553 1,454 2,719 77 (3,713) (2,651) (41) 368 30,525 (3,244) (44) 27,237
13,363 2,334 20 (49) (113) 11 (418) 17 (396) 16 14,785 12,665 (2,182) (312) (2,469) (20) (18) 14,819 37,268 (1,991) (16) 35,261
261 23 (11,741) (11,457)
396 51 (42) (5,637) (5,232)
(1,756) 430 (420) (1,000) (2,746) 13,034 47,944 60,978
197 14 211 30,240 34,885 65,125
B-6
PEC Ltd. and its Subsidiaries Selected Notes to the Unaudited Condensed Consolidated Financial Statements 31 December 2008
1.
Corporate information The unaudited consolidated financial statements of the Group for the six months ended 31 December 2008 were authorised for issue in accordance with a resolution of the directors on 30 July 2009. PEC Ltd. (the Company) is a public limited liability company which is incorporated in Singapore. With effect from 25 June 2009, the name of the Company was changed from Plant Engineering Construction Private Limited to PEC Pte. Ltd.. In connection with the conversion of the Company from a private limited company to a public limited company, the name of the Company was changed from PEC Pte. Ltd. to PEC Ltd. with effect from 3 July 2009. The Companys registered office is located at 21 Shipyard Road, Singapore 628144. The principal activities of the Company are the provision of mechanical engineering and contracting services. The principal activities of the subsidiaries are the provision of all aspects of the engineering, procurement and construction works, maintenance services including civil, mechanical, tankage and heat treatment services, equipment leasing and engineering consultancy services.
2. 2.1
Summary of significant accounting policies
Basis of preparation
The unaudited consolidated financial statements of the Group have been prepared in accordance with Singapore Financial Reporting Standard FRS 34, Interim Financial Reporting (FRS 34). The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Groups annual financial statements as at 30 June 2008. The financial statements have been prepared on the historical cost basis except for available-forsale quoted investments that have been measured at their fair values and are presented in Singapore dollars (SGD or $). The accounting policies have been consistently applied by the Group and the Company and are consistent with those used in the previous financial year. These accounting policies are set out in the audited consolidated financial statements of the Company and its subsidiaries for the financial year ended 30 June 2008.
B-7
3.
Revenue
Group Unaudited 01.07.2008 31.12.2008 $000 Contract revenue and manpower supply Sales of services Sales of goods Revenue from heat treatment works 219,654 334 118 151 220,257 Unaudited 01.07.2007 31.12.2007 $000 116,897 88 74 76 117,135
4.
Profit before tax Profit before tax is stated after charging/(crediting):

Group Unaudited 01.07.2008 31.12.2008 $000 Gain on disposal of plant and equipment Interest income from fixed deposits Additional/(write back of) provision for doubtful debts Central Provident Funds contributions Depreciation expense Wages, salaries, bonuses Other short term employee benefits Amortisation of land use rights Exchange differences Lease rental of office equipment (5) (261) 11 1,950 3,368 52,580 4,216 12 1,506 43 Unaudited 01.07.2007 31.12.2007 $000 (49) (396) (108) 1,534 2,334 30,865 2,545 11 595 36
B-8
5.

At cost Office equipment, furniture and fittings, and renovation $000
Group
Plant Leasehold machinery land and and site buildings equipment $000 $000
Motor vehicles $000
Workshop, office and staff quarters $000
Construction in progress $000
Total $000
Cost As at 1 July 2007 Currency realignment Additions Disposals At 30 June 2008 and 1 July 2008 Currency realignment Additions Disposals At 31 December 2008 Accumulated depreciation As at 1 July 2007 Currency realignment Charge for the year Disposals At 30 June 2008 and 1 July 2008 Currency realignment Charge for the period Disposals At 31 December 2008 Net book value As at 30 June 2007 As at 31 December 2008 14,026 19,503 4,698 3,244 376 298 42,146 2,284 (9) 988 16,755 (33) 2,523 (353) 3,247 (8) 758 (357) 3,597 (8) 1,516 (583) 65 24 25,948 (58) 5,809 (1,293) 14,732 (55) 2,612 31,405 (104) 7,447 (353) 6,088 (12) 2,628 (366) 4,980 (14) 3,384 (584) 466 162 (3) 139 57,833 (188) 16,210 (1,303)
17,289 (10) 3,021 20,300
38,395 339 5,790 (59) 44,465
8,338 27 860 (24) 9,201
7,766 20 565 (84) 8,267
466 466
298 18 1,505 1,821
72,552 394 11,741 (167) 84,520
3,263 (2) 586 3,847
18,892 54 1,489 (47) 20,387
3,640 5 432 (19) 4,058
4,522 5 849 (83) 5,293
89 12 101
30,406 62 3,368 (149) 33,686
16,453
24,078
5,143
2,974
365
1,821
50,834
Included in property, plant and equipment of the Group are motor vehicles with a net book value of $148,000 as at 31 December 2008 (30.06.2008 : $202,000) and plant and machinery and site equipment with a net book value of $452,000 as at 31 December 2008 (30.06.2008 : $470,000) acquired under hire purchase.
B-9
6.
Contract work-in-progress (net of progress billings)

Group Unaudited 31.12.2008 $000 Audited 30.06.2008 $000
Contract work in progress Project cost and attributable profits Less : Progress billings Less : Provision for foreseeable loss
304,299 (281,151) (5,457) 17,691
247,232 (232,192) 15,040
7.
Trade receivables
Group Unaudited 31.12.2008 $000 Trade receivables - external parties - associates - related parties 51,745 3,895 2 55,642 Allowance for doubtful debts - external parties - associates (43) (305) 55,294 Audited 30.06.2008 $000 55,947 9,445 1,456 66,848 (35) (302) 66,511
Trade receivables are non-interest bearing and are generally on 30 - 90 days terms. They are recognised at their original invoice amounts which represents their fair values on initial recognition. Related parties refer to companies held by a majority corporate shareholder of the Company and a corporate shareholder of an associate.
Receivables that are past due but not impaired

The Group has trade receivables amounting to $16,331,000 (2007: $7,191,000) that are past due at the balance sheet date but not impaired. These receivables are unsecured and the analysis of their aging at the balance sheet date is as follows:
Group Unaudited 31.12.2008 $000 Trade receivables past due: Lesser than 30 days 31 to 60 days 61- 90 days 91-120 days 10,088 845 1,373 4,025 16,331 Audited 30.06.2008 $000 5,695 742 187 567 7,191
B-10
7.
Trade receivables (contd) Receivables that are impaired The Groups trade receivables that are impaired at the balance sheet date and the movement of the allowance accounts used to record the impairment are as follows: Individually impaired
Group Unaudited 31.12.2008 $000 Trade receivables nominal amounts Less: Allowance for impairment 348 (348) Movement in allowance accounts: At 1 July Charge for the year Written off Written back At 31 December 2008 and 30 June 2008 Audited 30.06.2008 $000 337 (337)
337 29 (18) 348
737 35 (142) (293) 337
Trade receivables that are individually determined to be impaired at the balance sheet date relate to debtors that are in significant financial difficulties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancements. 8. Cash and cash equivalents Cash and cash equivalents comprise the following amounts:
Group Unaudited 31.12.2008 $000 Cash and bank balances Fixed deposits Cash and cash equivalents Less : Fixed deposits pledged to the bank for bank facilities 30,588 32,390 62,978 (2,000) 60,978 Audited 30.06.2008 $000 30,825 18,119 48,944 (1,000) 47,944
The average effective interest rate of fixed deposits ranges from approximately 0.11% to 1.47% (2008: 0.50% to 9.28%) per annum. The fixed deposits mature within 3 months (2008: within 3 months) from the financial year end.
B-11
9.
Other payables and accruals

Group Unaudited 31.12.2008 $000 Accrued salaries Accrued operating expenses Allowance for accumulating short term employee benefits for compensated absences Provision for reinstatement cost Directors fees Profit participation incentives Other payables 19,074 18,311 1,516 1,101 221 9,272 3,421 52,916 Audited 30.06.2008 $000 18,705 18,068 1,275 1,101 57 6,102 2,041 47,349
10.
Commitments and contingencies (a)
Capital commitments
Group Unaudited 31.12.2008 $000 Capital commitments in respect of purchase of plant and equipment 2,952 Audited 30.06.2008 $000 2,418
(b)
Operating lease commitments

The Group and the Company have entered into commercial leases for properties as lessee. Operating lease payments recognised in the consolidated profit and loss account during the year amounted to $4,515,996 (30.06.2008 : $5,157,743). Future minimum lease payments payable under non-cancellable operating leases as at 31 December 2008 (30 June 2008) are as follows:
Within one year After one year but not more than five years More than five years 5,222 1,845 5,281 12,348 4,449 1,812 4,517 10,778
B-12
11.
Guarantees/Letter of credit (a) The Group has provided corporate guarantees to customers in respect of projects amounting to $75,803,000 (30.06.2008 : $70,896,000). The Group has given indemnity to banks in connection with the issuance of performance bond guarantees of $16,380,000 as at 31 December 2008 (30.06.2008 : $14,593,000) in favour of third parties in respect of the Groups business. The Group has given indemnity to banks in connection with the issuance of immigration bond guarantees of $17,655,000 as at 31 December 2008 (30.06.2008 : $15,825,000) in favour of third parties in respect of the Groups business. The Group has an open letter of credit of $7,865,000 as at 31 December 2008 (30.06.2008 : $22,842,000) in favour of third parties in respect of the Groups business.
(b)
(c)
(d)
12.
Related party disclosures (a)
Sale and purchase of goods and services

In addition to those related party information disclosed elsewhere in the financial statements, the following significant transactions between the Group and related parties took place during the year on terms agreed between the parties:
Group Unaudited 01.07.2008 31.12.2008 $000 (i) Unaudited 01.07.2007 31.12.2007 $000
Concluded with related parties:

Office rental expenses Revenue from manpower supply and engineering works Consultancy fees 63 (11) 52 (1,832) 50
(ii)
Concluded with associates/joint venture:

Materials and consumables Revenue from IT support services Revenue from manpower supply and engineering works Revenue from office maintenance and administrative charges Subcontractors charges and manpower charges paid 3,289 (28) (1,358) (22) 1,432 (14) (1,540) (7) 1,186
(b)
Compensation of key management personnel

Directors fees Salaries and bonuses Short-term employee benefits Central Provident Fund contributions Profit participation incentive Total compensation paid to key management personnel Comprise amounts paid to - Directors of the Company - Other key management personnel 31 1,065 108 54 3,238 4,496 2,940 1,556 4,496 31 1,129 25 52 2,849 4,086 2,805 1,281 4,086
B-13
13.
Segmental information
Reporting format
The primary segment reporting format is determined to be business segments as the Groups risks and rates of return are affected predominantly by differences in the services and projects carried out. Secondary information is reported geographically. The operating businesses are organised and managed separately according to the nature of the projects and services carried out, with each segment representing a strategic business unit that offers different services and serves different markets.
Business segments
The Project work segment relates to provision of engineering, procurement and construction services for certain aspects of a plant project, such as tankage and/or piping work, Engineering, Procurement, Construction and Management (EPCm) and Engineering, Procurement and Construction (EPC) contracts to the Oil and Chemical Terminal industries. The plant maintenance and related services segment relates to a full discipline of maintenance services provided to the oil and gas, petrochemical, pharmaceutical and oil and chemical terminal industries, usually for a fixed two to five years term, under which various maintenance services and their relevant rates would be itemised. The other operations segment relates to services provided through the Company subsidiary whereby heat treatment, information technology services/products and construction equipment leasing are provided. It also relates to construction equipment leasing services provided through the Companys subsidiary in the Peoples Republic of China. For the business of the Group, unallocated assets and liabilities comprise assets and liabilities that are interchangeable amongst segments in the generation of revenue.
The Groups geographical segments are based on the country of incorporation of the company which owns the assets. Revenue disclosed in geographical segments are based on the operational sites geographic location.
Allocation basis and transfer pricing

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise tax assets and liabilities that cannot be reasonably allocated. Transfer prices between business segments are set on an arms length basis in a manner similar to transactions with third parties. Segment revenue, expenses and results include transfers between business segments. These transfers are eliminated on consolidation.
B-14
13.
Business segments
Project works $000 Unaudited 01.07.2007 - 31.12.2007 Revenue Inter-segment sales Total revenue 67,798 1,627 69,425
Eliminations $000
Total $000
49,099 1,549 50,648
238 2,418 2,656
(5,594) (5,594)
117,135 117,135

Unallocated expenses Finance costs Share of results of associates Share of results of joint venture Profit before tax Tax expense Profit for the period Unaudited 01.07.2008 - 31.12.2008 Revenue Inter-segment sales Total revenue
19,596
12,543
33
32,172 (18,908) (302) 418 (17) 13,363 (1,902) 11,461
167,398 5,005 172,403
52,401 54 52,455
458 4,452 4,910
(9,511) (9,511)
220,257 220,257

Unallocated expenses Finance costs Share of results of associates Share of results of joint venture Profit before tax Tax expense Profit for the period
37,611
11,432
57
49,100 (32,673) (230) (680) (24) 15,493 (3,075) 12,418
B-15
13.

Project works $000 Audited 30.06.2008 Assets and liabilities: Segment assets Investment in joint venture Investments in associates Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities
Eliminations $000
Total $000
41,180 41,180 (4,393) (4,393)
39,557 39,557 (13,622) (13,622)
813 111 1,442 2,366 (36) (36)
81,550 111 1,442 105,677 188,780 (18,051) (71,180) (89,231)
Other segment information: Capital expenditure: - Tangible assets - Intangible assets Depreciation and amortisation Unallocated depreciation and amortisation
Unaudited 31.12.2008 Assets and liabilities: Segment assets Investment in joint venture Investments in associates Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities
2,591
1,303
322
16,210 42 4,216 1,616
51,010 51,010 (5,711) (5,711)
18,556 18,556 (8,608) (8,608)
333 87 762 1,182 (11) (11)
69,899 87 762 128,319 199,067 (14,330) (71,630) (85,960)
Other segment information: Capital expenditure: - Tangible assets Depreciation and amortisation Unallocated depreciation and amortisation
1,010
587
170
11,741 1,767 1,613
B-16
13.
Geographical segment
Singapore $000 Unaudited 01.07.2007 - 31.12.2007 Revenue Inter-segment sales Segment Revenue 83,783 5,217 89,000
Middle East $000
Total $000
17,509 17,509
15,843 377 16,220
(5,594) (5,594)
117,135 117,135
Unaudited 01.07.2008 - 31.12.2008 Revenue Inter-segment sales Segment Revenue 131,035 9,511 140,546 75,670 75,670 13,552 13,552 (9,511) (9,511) 220,257 220,257
Unaudited 30.06.2008 Assets and liabilities: Segment assets Investment in associates Investment in joint venture Total assets Segment liabilities Unallocated liabilities Total liabilities Other segment information: Capital expenditure: - Tangible assets - Intangible assets Depreciation and amortisation 42 5,151 33 648 16,210 42 5,832 160,457 1,442 111 162,010 (74,158) (74,158) 1,545 1,545 (740) (740) 25,225 25,225 (6,262) (6,262) 187,227 1,442 111 188,780 (81,160) (8,071) (89,231)
B-17
13.
Geographical segment (contd)

Singapore $000 Unaudited 31.12.2008 Assets and liabilities: Segment assets Investment in associates Investment in joint venture Total assets Segment liabilities Unallocated liabilities Total liabilities Other segment information: Capital expenditure: - Tangible assets Depreciation and amortisation 2,845 161,314 762 87 162,163 (75,693) (75,693)
Middle East $000
Total $000
17,270 17,270 (530) (530)
19,634 19,634 (1,836) (1,836)
198,218 762 87 199,067 (78,059) (7,901) (85,960)
181
354
11,741 3,380
14.
Earnings per share Basic earnings per share amounts is calculated by dividing the profit after taxation attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the financial year. The following table reflects the profit and loss account and share data used in the computation of basic and diluted earnings per share for the periods ended 31 December 2008 and 2007:
Group Unaudited 01.07.2008 31.12.2008 $000 Net profit attributable to shareholders Weighted average number of ordinary shares for basic earnings per share computation Earnings per share (cents) - Basic and diluted 10,903 Unaudited 01.07.2007 31.12.2007 $000 10,733
5,000
5,000
218.1
214.7
B-18
15.
Financial risk management objectives and policies The Group is exposed to financial risks arising from its operations and the use of financial instruments. The key financial risks include credit risk, liquidity risk and foreign currency risk. The Board of directors reviews and agrees policies and procedures for the management of these risks. It is, and has been throughout the current and previous financial period the Groups policy that no derivatives shall be undertaken except for the use of hedging instruments where appropriate and cost-efficient. The Group does not apply hedge accounting. Please refer to Note 35 of the Groups annual financial statements as at 30 June 2008 for a detailed discussion on how management manages its key financial risks.
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APPENDIX C
SUMMARY OF THE CONSTITUTION OF OUR COMPANY

The discussion below provides information about certain provisions of our Memorandum and Articles of Association and the laws of Singapore. This description is only a summary and is qualified by reference to Singapore law and our Articles. Where portions of our Articles are reproduced below, defined terms bear the meanings ascribed to them in our Articles.
The instruments that constitute and define our Company are the Memorandum and Articles of Association of our Company. 1. Memorandum of Association and Registration Number
The registration number with which our Company was incorporated is 198200079M. Pursuant to our Memorandum of Association and Singapore law, the liability of Shareholders is limited to the amount, if any, for the time being unpaid on the Shares respectively held by them. Our Memorandum of Association also sets out the objects for which our Company was formed and the powers of our Company, including the powers set out in the Third Schedule to the Companies Act. 2. Directors
(a)
Power of Directors to hold office of profit and to contract with our Company
109) (1) Other than the office of auditor, a Director may hold any other office or place of profit in the Company and he or any firm of which he is a member or any company of which he is a Director or shareholder may act in a professional capacity for the Company in conjunction with his office of Director for such period and on such terms (as to remuneration and otherwise) as the Directors may determine. Subject to the Act, no Director or intending Director shall be disqualified by his office from contracting or entering into any arrangement with the Company whether as vendor, purchaser, lessor, lessee, mortgagor, mortgagee, manager, agent, broker or otherwise howsoever nor shall such contract or arrangement or any contract or arrangement entered into by or on behalf of the Company in which any Director shall be in any way interested whether directly or indirectly be avoided nor shall any Director so contracting or being so interested be liable to account to the Company for any profit realised by any such contract or arrangement by reason only of such Director holding that office or of the fiduciary relation thereby established. Provided Always That he has complied with the requirements of Section 156 of the Act as to disclosure. (2) Every Director shall observe the provisions of Section 156 of the Act relating to the disclosure of the interests of the Directors in contracts or proposed contracts with the Company or of any office or property held by a Director which might create duties or interests in conflict with his duties or interests as a Director. Notwithstanding such disclosure, a Director shall not vote in regard to any contract or proposed contract or arrangement in which he has directly or indirectly a personal material interest although he shall be taken into account in ascertaining whether a quorum is present.
Power of Directors to hold office of profit and to contract with Company
Directors to observe Section 156 of the Act
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Directors may exercise voting power conferred by Companys shares in another company
110) (2) Subject always to Article 109(2), the Directors may exercise the voting power conferred by the shares in any company held or owned by the Company in such manner and in all respects as the Directors think fit in the interests of the Company (including the exercise thereof in favour of any resolution appointing the Directors or any of them to be directors of such company or voting or providing for the payment of remuneration to the directors of such company) and any such director of the Company may vote in favour of the exercise of such voting powers in the manner aforesaid notwithstanding that he may be or be about to be appointed a director of such other company.
(b)
Remuneration
106) (1) The fees of the Directors shall be determined from time to time by the Company in general meetings and shall (unless such resolution otherwise provides) not be increased except pursuant to an Ordinary Resolution passed at a general meeting where notice of the proposed increase shall have been given in the notice convening the meeting. Such fees shall be divided among the Directors in such proportions and manner as they may agree and in default of agreement equally, except that in the latter event any Director who shall hold office for part only of the period in respect of which such fee is payable shall be entitled only to rank in such division for the proportion of fee related to the period during which he has held office. (2) Any Director who is appointed to any executive office or serves on any committee or who otherwise performs or renders services, which in the opinion of the Directors are outside his ordinary duties as a Director, may, subject to Section 169 of the Act, be paid such extra remuneration as the Directors may determine. (3) Notwithstanding any other Article herein, the remuneration in the case of a Director other than an Executive Director shall comprise: (i) fees which shall be a fixed sum and/or (ii) such fixed number of shares in the capital of the Company, and shall not at any time be by commission on, or percentage of, the profits or turnover, and no Director whether an Executive Director or otherwise shall be remunerated by a commission on, or percentage of turnover. 107) The Directors shall be entitled to be repaid all travelling or such reasonable expenses as may be incurred in attending and returning from meetings of the Directors or of any committee of the Directors or general meetings or otherwise howsoever in or about the business of the Company, in the course of the performance of their duties as Directors. 108) The Directors may procure the establishment and maintenance of or participate in or contribute to any non-contributory or contributory pension or superannuation fund or life assurance scheme or any other scheme whatsoever for the benefit of and pay, provide for or procure the grant of donations, gratuities, pensions, allowances, benefits or emoluments to any persons (including Directors and other officers) who are or shall have been at any time in the employment or service of the Company or of the predecessors in business of the Company or of any subsidiary company, and the wives, widows, families or dependants of any such persons. The Directors may also procure the establishment and subsidy of, or subscription and support to, any institutions, associations, clubs, funds or trusts calculated to be for the benefit of any such persons as aforesaid or otherwise to advance the interests and well-being of the
Fees for Directors
Extra remuneration
Remuneration by fixed sum
Reimbursement of expenses
Benefits for employees
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Company or of any such other company as aforesaid or of its Members and payment for or towards the insurance of any such persons as aforesaid, and subscriptions or guarantees of money for charitable or benevolent objects or for any exhibition or for any public, general or useful object.
(c)
Borrowing
125) The Directors may at their discretion exercise every borrowing power vested in the Company by its Memorandum of Association or permitted by law and may borrow or raise money from time to time for the benefit of the Company and secure the payment of such sums by mortgage, charge or hypothecation of all or any of the property or assets of the Company including any uncalled or called but unpaid capital or by the issue of debentures or otherwise as they may think fit.
Power to borrow
(d)
Retirement Age Limit and Shareholding Qualification

105) A Director need not be a Member and shall not be required to hold any share, but subject to the provisions of the Act he shall not be of or over the age of 70 years at the date of his appointment.
Qualifications
3.
Share rights and restrictions
Our Company currently has one class of shares, namely, ordinary shares.
(a)
Dividends and distribution

162) The Directors may, with the sanction of an Ordinary Resolution at a general meeting, from time to time declare dividends, but no such dividend shall (except as by the Statutes expressly authorised) be payable otherwise than out of the profits of the Company. No higher dividend shall be paid than is recommended by the Directors and a declaration by the Directors as to the amount of the profits at any time available for dividends shall be conclusive. The Directors may, if they think fit, and if in their opinion the profits of the Company justifies such payment, without any such sanction as aforesaid, from time to time declare and pay fixed preferential dividends on any class of shares carrying a fixed preferential dividend expressed to be payable on a fixed date on the half-yearly or other dates (if any) prescribed for the payment thereof by the terms of issue of the shares, and may also from time to time pay to the holders of any class of shares interim dividends of such amounts and on such dates as they may think fit. 163) With the sanction of an Ordinary Resolution at a general meeting, dividends may be paid wholly or in part in specie, and may be satisfied in whole or in part by the distribution amongst the Members in accordance with their rights of fully paid shares, stock or debentures of any other company, or of any other property suitable for distribution as aforesaid. The Directors shall have full liberty to make all such valuations, adjustments and arrangements, and to issue all such certificates or documents of title as in their opinion may be necessary or expedient. In particular, they may issue fractional certificates and fix the value for distribution of such specific assets, or any part thereof, and may determine that cash payments shall be made to any Members in terms of the value so fixed, in order to adjust the rights of all parties. The Directors may vest any such specific assets in trustees as may seem expedient to the Directors and no valuation, adjustment or arrangement so made shall be questioned by any Member.
Declaration and payment of dividends
Interim dividends
Payment of dividends in specie
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Unclaimed dividends
171) The payment by the Directors of any unclaimed dividends or other moneys payable on or in respect of a share into a separate account shall not constitute the Company a trustee in respect thereof. All dividends unclaimed after being declared may be invested or otherwise made use of by the Directors for the benefit of the Company and any dividend unclaimed after a period of six (6) years from the date of declaration of such dividend may be forfeited and if so shall revert to the Company. However, the Directors may at any time thereafter at their absolute discretion annul any such forfeiture and pay the dividend so forfeited to the person entitled thereto prior to the forfeiture. If the Depository returns any such dividend or moneys to the Company, the relevant Depositor shall not have any right or claim in respect of such dividend or moneys against the Company if a period of six (6) years has elapsed from the date of the declaration of such dividend or the date on which such other moneys are first payable. For the avoidance of doubt no Member shall be entitled to any interest, share of revenue or other benefit arising from any unclaimed dividends, howsoever and whatsoever. 198) If the Company shall be wound up, the liquidator may, with the sanction of a Special Resolution, divide among the Members in specie or kind the whole or any part of the assets of the Company, whether or not the assets shall consist of property of one kind or shall consist of properties of different kinds, and may for such purpose set such value as he deems fair upon any one or more class or classes of property to be divided as aforesaid and may determine how such division shall be carried out as between the Members or different classes of Members, but if any division is resolved otherwise than in accordance with such rights, the Members shall have the same right of dissent and consequential rights as if such resolution were a Special Resolution passed pursuant to Section 306 of the Act. A Special Resolution sanctioning a transfer or sale to another company duly passed pursuant to the said Section may in like manner authorise the distribution of any shares or other consideration receivable by the liquidator amongst the Members otherwise than in accordance with their existing rights; and any such determination shall be binding upon all the Members subject to the right of dissent and consequential rights conferred by the said Section.
Distribution of assets in specie
(b)
Rights, Preferences and Restrictions

9) (1) Preference shares may be issued subject to such limitation thereof as may be prescribed by law or by the listing rules of the Exchange. Preference shareholders shall have the same rights as ordinary shareholders as regards receiving of notices, reports and balance sheets and attending general meetings of the Company. Preference shareholders shall also have the right to vote at any meeting convened for the purpose of reducing the capital or winding up or sanctioning a sale of the undertaking of the Company or where the proposal to be submitted to the meeting directly affects their rights and privileges or when the dividend on the preference shares is more than six (6) months in arrears. (2) The Company has power to issue further preference capital ranking equally with, or in priority to, preference shares from time to time already issued or about to be issued.
Rights attached to preference shares
Issue of further preference shares
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Variation of rights of shares
10) If at any time the share capital is divided into different classes, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may, subject to the provisions of the Act, whether or not the Company is being wound up, be varied or abrogated either with the consent in writing of the holders of three-quarters of the issued shares of the class or with the sanction of a Special Resolution passed at a separate general meeting of the holders of shares of the class and to every such Special Resolution the provisions of Section 184 of the Act shall with such adaptations as are necessary apply. To every such separate general meeting, the provisions of these Articles relating to general meetings shall mutatis mutandis apply. Provided Always That: a) the necessary quorum shall be two persons at least holding or representing by proxy or by attorney one-third of the issued shares of the class and that any holder of shares of the class present in person or by proxy or by attorney may demand a poll, but where the necessary majority for such a Special Resolution is not obtained at the meeting, consent in writing if obtained from the holders of three ourths of the issued shares of the class concerned within two months of the meeting shall be as valid and effectual as a Special Resolution carried at the meeting; and where all the issued shares of the class are held by one person, the necessary quorum shall be one person and such holder of shares of the class present in person or by proxy or by attorney may demand a poll.
b)
Variation of rights of preference shareholders
11) The repayment of preference capital other than redeemable preference capital or any other alteration of preference shareholders rights, may only be made pursuant to a Special Resolution of the preference shareholders concerned. Provided Always That where the necessary majority for such a special resolution is not obtained at a meeting, consent in writing if obtained from the holders of three-fourths of the preference shares concerned within two (2) months of the meeting, shall be as valid and effectual as a Special Resolution carried at the meeting. 23) Subject to the restrictions of these Articles any Member may transfer all or any of his shares, but every instrument of transfer of the legal title in shares must be in writing and in the usual common form, or in any other form which the Directors and the Exchange may approve, and must be left at the Office for registration, accompanied by the certificate of the shares to be transferred, and such other evidence (if any) as the Directors may require to prove the title of the intending transferor, or his right to transfer the shares 25) The instrument of transfer of a share shall be signed by or on behalf of the transferor and the transferee, provided that an instrument of transfer in respect of which the transferee is the Depository shall not be ineffective. The transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the Register of Members in respect thereof; Provided Always That the Directors may dispense with the execution of the instrument of transfer by the transferee in any case in which they think fit in their discretion so to do. 27) No share shall in any circumstances be transferred to any infant, bankrupt or person of unsound mind.
Form of transfer
Transferor and transferee to execute transfer
Person under disability
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Directors power to decline to register
29) (1) Subject to these Articles, the Act or as required by the Exchange, there shall be no restriction on the transfer of fully paid up shares (except where required by law or the rules, bye-laws or listing rules of the Exchange) but the Directors may in their discretion decline to register any transfer of shares upon which the Company has a lien and in the case of shares not fully paid up may refuse to register a transfer to a transferee of whom they do not approve. 29) (2) The Directors may decline to register any instrument of transfer unless: a) a fee not exceeding S$2/- (or such other fee as the Directors may determine having regard to any limitation thereof as may be prescribed by any stock exchange upon which the shares may be listed) as the Director may from time to time require, is paid to the Company in respect thereof; the amount of proper duty (if any) with which each instrument of transfer of shares is chargeable under any law for the time being in force relating to stamp duty is paid; the instrument of transfer is deposited at the Office or such other place as the Directors may appoint and is accompanied by a certificate of payment of stamp duty (if any), the certificate of the shares to which the transfer relates and such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer, and where the instrument is executed by some other person on his behalf, the authority of the person so to do; and the instrument of transfer is in respect of only one class of shares.
Payment of fee and deposit of transfer
b)
c)
d)
All instruments of transfer which are registered may be retained by the Company, but any instrument of transfer which the Directors may decline to register shall be returned to the person depositing the same except in the case of fraud. Closure of Register of Members 31) The Register of Members and the Depository Register may be closed at such times and for such period as the Directors may from time to time determine; Provided Always That it shall not be closed for more than thirty (30) days in any year (in aggregate) and during such periods the Directors may suspend the registration of transfers. Further Provided Always That the Company shall give prior notice of such closure to the Exchange (as may be required by the listing rules of the Exchange) stating the period and purpose or purposes for which the closure is to be made. 32) Nothing in these Articles shall preclude the Directors from recognising a renunciation of the allotment of any share by the allottee in favour of some other person.
Renunciation of allotment
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Indemnity against wrongful transfer
33) Neither the Company nor its Directors nor any of its officers shall incur any liability for registering or acting upon a transfer of shares apparently made by relevant parties, although the same may, by reason of any fraud or other cause not known to the Company or its Directors or other officers, be legally inoperative or insufficient to pass the property in the shares proposed or professed to be transferred, and although the transfer may, as between the transferor and transferee, be liable to be set aside, and notwithstanding that the Company may have notice that such instrument of transfer was signed or executed and delivered by the transferor in blank as to the name of the transferee or the particulars of the shares transferred, or otherwise in defective manner. In every such case, the person registered as transferee, his executors, administrators and assigns, alone shall be entitled to be recognised as the holder of such shares and the previous holder shall, so far as the Company is concerned, be deemed to have transferred his whole title thereto. 39) The Directors may from time to time, as they think fit, make calls upon the Members in respect of any moneys unpaid on their shares or on any class of their shares and not by the conditions of the issue and allotment thereof made payable at fixed times; and each Member shall (subject to his having been given at least fourteen (14) days notice specifying the time or times and place of payment) pay to the Company at the time or times and place so specified the amount called on his shares. A call may be made payable by instalments. A call may be revoked or postponed as the Directors may determine. 40) A call shall be deemed to have been made at the time when the resolution of the Directors authorising the call was passed. 41) If before or on the day appointed for payment thereof, a call payable in respect of a share is not paid, the person from whom the amount of the call is due shall pay interest on such amount at such rate not exceeding ten per cent (10%) per annum as the Directors may determine from the day appointed for payment thereof to the time of actual payment, and shall also pay all costs, charges and expenses which the Company may have incurred or become liable for in order to procure payment of or in consequence of the non-payment of such call or instalment, but the Directors shall be at liberty to waive payment of such interest, costs, charges and expenses wholly or in part. 42) Any sum which by the terms of issue of a share is made payable upon allotment or at any fixed date, and any instalment of a call shall for all purposes of these Articles be deemed to be a call duly made and payable on the date fixed for payment and, in the case of non-payment, the provisions of these Articles as to payment of interest and expenses, forfeiture and the like and all other relevant provisions of the Statutes or of these Articles shall apply as if such sum were a call duly made and notified as hereby provided. 43) The Directors may on the issue of shares differentiate between the holders as to the amount of calls to be paid and the time of payment of such calls.
Directors may make calls on shares
Time when new call made Interest and other late payment costs
Sum due on allotment or other fixed date
Power of directors to differentiate
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(c)
General Meetings
72) The Company shall in each calendar year hold a general meeting as its annual general meeting in addition to any other meetings in that year and shall specify the meeting as such in the notices calling it. Not more than fifteen (15) months shall elapse between the date of one annual general meeting and that of the next. The annual general meeting shall be held at such time and place as the Directors shall determine. 73) All general meetings other than annual general meetings shall be called extraordinary general meetings. 74) The Directors may whenever they think fit convene an extraordinary general meeting and an extraordinary general meeting shall also be convened on such requisition by Members in accordance with the Act or in default may be convened by such requisitionist as provided for under the Act. If at any time there are not within Singapore sufficient Directors capable of action to form a quorum at a meeting of Directors, any Director may convene an extraordinary general meeting in the same manner as nearly as possible as that in which such a meeting may be convened by the Directors. 76) Any general meeting at which it is proposed to pass Special Resolutions or a resolution of which special notice has been given to the Company pursuant to the Act, shall be called by at least twenty-one (21) clear days notice in writing. An annual general meeting or any other general meeting shall be called by at least fourteen (14) clear days notice in writing. The notice must specify the place, the day and the hour of the meeting, and in the case of special business the general nature of such business. Such notice shall be given in the manner hereinafter mentioned to such persons as are under the provisions of these Articles entitled to receive notices of general meetings from the Company, but with the consent of all persons for the time being entitled as aforesaid, a meeting may be convened in such manner as such persons may approve. The notice shall be exclusive of the day on which it is served or deemed to be served and of the day for which it is given. Subject to the provisions of the Act, notwithstanding that it has been called by a shorter notice than that specified above, a general meeting shall be deemed to have been duly called if it is agreed: a) in the case of an annual general meeting by all the Members entitled to attend and vote thereat; and in the case of an extraordinary general meeting by a majority in number of the Members having a right to attend and vote thereat , being a majority together holding not less than ninety-five per cent (95%) of the total voting rights of all the Members having a right to vote at that meeting.
Annual general meetings
Extraordinary general meetings Calling for extraordinary general meetings
Length of notice
Contents of notice
Shorter notice
b)
Accidental omission
Provided also that the accidental omission to give notice of a meeting to, or the non-receipt of notice of a meeting by any person entitled to receive notice shall not invalidate the proceedings at the meeting. So long as the shares of the Company are listed on the Exchange, at least fourteen (14) days notice of every general meeting shall be given by advertisement in the daily press and in writing to the Exchange and to each stock exchange upon which the Company is listed
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All business deemed special business
79) All business shall be deemed special that is transacted at an extraordinary general meeting and also all that is transacted at an annual general meeting with the exception of the consideration of the accounts, balance sheets and reports (if any) of the Directors and Auditor of the Company, the election of Directors in place of those retiring by rotation or otherwise, the fixing of the remuneration of Directors, the declaration of dividends, and the appointment of and the fixing of the remuneration of the Auditor of the Company, which shall be deemed routine business. Any notice of a meeting called to consider special business shall be accompanied by a statement regarding the effect of any proposed resolution in respect of such special business. 80) In the case of any general meeting at which business other than routine business is to be transacted (special business), the notice shall specify the general nature of the special business, and if any resolution is to be proposed as a Special Resolution or as requiring special notice, the notice shall contain a statement to that effect 81) No business other than the appointment of a chairman shall be transacted at any general meeting unless a quorum of Members is present at the time when the meeting proceeds to business. Except as herein otherwise provided, two (2) Members present in person shall form a quorum. For the purposes of this Article, Member includes a person attending as a proxy and a corporation being a Member shall be deemed to be personally present if represented in accordance with the provisions of Section 179(3) of the Act. Provided that (i) a proxy representing more than one Member shall only count as one Member for the purpose of determining the quorum; and (ii) where a Member is represented by more than one proxy such proxies shall count as only one Member for the purpose of determining the quorum. 82) If within half an hour from the time appointed for the holding of a general meeting a quorum is not present, the meeting if convened on the requisition of Members shall be dissolved. In any other case, it shall stand adjourned to the same day in the next week at the same time and place or to such other day and at such other time and place as the Directors may determine, and if at such adjourned meeting a quorum is not present within half an hour from the time appointed for holding the meeting, the meeting shall be dissolved. 83) The Chairman of the Board or, in his absence, the Deputy Chairman (if any) shall preside as Chairman at every general meeting, but if there be no such Chairman or Deputy Chairman, or if at any meeting he shall not be present within fifteen (15) minutes after the time appointed for holding the same, or shall be unwilling to act as Chairman, the Members present shall choose some Director, or if no Director be present, or if all the Directors present decline to take the chair, one of themselves to be Chairman of the meeting. 84) The Chairman of the meeting may, with the consent of any meeting at which a quorum is present, and shall, if so directed by the meeting, adjourn the meeting from time to time and from place to place (or sine die), but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. Where a meeting is adjourned sine die, the time and place for the adjourned meeting shall be fixed by the Directors. When a meeting is adjourned for fourteen (14) days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. Save as aforesaid it shall not be necessary to give notice of an adjournment or of the business to be transacted at an adjourned meeting. C-9
Notice to specify nature of special business
Quorum
Adjournment if quorum not present
Chairman
Adjournment by chairman
Method of voting
85) At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless, subject to Article 89, a poll is demanded either before or on the declaration of the result by the show of hands: a) b) by the Chairman of the meeting; or by at least two Members present in person or by proxy (where a Member has appointed more than one proxy, any one of such proxies may represent that Member) or attorney or in the case of a corporation by a representative, and entitled to vote thereat; or by any Member or Members present in person or by proxy (where a Member has appointed more than one proxy, any one of such proxies may represent that Member) or attorney or in the case of a corporation by a representative or any number or combination of such Members, holding or representing not less than one-tenth of the total voting rights of all the Members having the right to vote at the meeting; or by any Member or Members present in person or by proxy (where a Member has appointed more than one proxy, any one of such proxies may represent that Member) or attorney or in the case of a corporation by a representative or any number or combination of such Members, holding or representing shares conferring a right to vote at the meeting, being shares on which an aggregate sum has been paid up equal to not less than ten per cent (10%) of the total sum paid up on all the shares conferring that right.
c)
d)
Unless a poll is so demanded (and the demand is not withdrawn) a declaration by the Chairman that a resolution has been carried or carried unanimously or by a particular majority or lost and an entry to that effect in the minute book shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against the resolution. A demand for a poll may be withdrawn. Equality of votes 86) In the case of an equality of votes whether on a show of hands or on a poll as aforesaid, the Chairman shall be entitled to a second or casting vote in addition to the vote or votes to which he may be entitled as a Member or as a proxy of a Member. 87) If a poll is demanded as aforesaid, it shall be taken in such manner and at such time and place as the Chairman of the meeting directs and either at once or after an interval or adjournment or otherwise and the result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. No notice need be given of a poll not taken at once. In case of any dispute as to the admission or rejection of a vote, the Chairman shall determine the same and such determination made in good faith shall be final and conclusive. 89) The demand of a poll shall not prevent the continuance of a meeting for the transaction of any business other than the question on which a poll has been demanded.
Time for taking a poll
Continuance of business
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Resolutions in writing
144) A resolution in writing signed or approved by a majority of the Directors for the time being (who are not prohibited by law or these Articles from voting on such resolutions) and constituting a quorum shall be as valid and effectual as if it had been passed at a meeting of the Directors or of a committee of Directors duly convened and held. Any such resolution may be contained in a single document or may consist of several documents all in like form each signed or approved as aforesaid provided that where a Director is not so present but has an alternate who is so present, then such resolution must also be signed by such alternate. A resolution pursuant to this Article shall be deemed to have been passed on the date when the resolution is signed or approved by the last Director constituting a simple majority of the Directors. For the purpose of this Article, in writing and signed include approval by letter, telex, facsimile, cable, telegram, email or any other form of electronic communication or telegraphic communication or means approved by the Directors for such purpose from time to time incorporating, if the Directors deem necessary, the use of security and / or identification procedures and devices approved by the Directors. All such resolutions shall be described as Directors Resolutions and shall be forwarded or otherwise delivered to the Secretary without delay, and shall be recorded by him in the Companys Minute Book. 91) If at any general meeting any votes shall be counted which ought not to have been counted or might have been rejected, the error shall not vitiate the result of the vote unless it be pointed out at the same meeting, and is in the opinion of the Chairman of sufficient magnitude to vitiate the result of the voting.
Error in counting votes
4.
Change in capital 67) (1) The Company may from time to time by Ordinary Resolution increase its capital by such sum to be divided into shares of such amounts as the resolution shall prescribe. (2) Subject to any direction to the contrary that may be given by the Company in general meeting or except as permitted under the listing rules of the Exchange, all new shares shall before issue be offered to such Members as are, at the date of the offer, entitled to receive notices from the Company of general meetings in proportion, as nearly as the circumstances admit, to the amount of the existing shares to which they are entitled or hold. The offer shall be made by notice specifying the number of shares offered, and limiting a time within which the offer, if not accepted, will be deemed to be declined, and, after the expiration of that time, or on the receipt of an intimation from the person to whom the offer is made that he declines to accept the shares offered, the Directors may dispose of those shares in such manner as they think most beneficial to the Company. The Directors may likewise so dispose of any new shares which (by reason of the ratio which the new shares bear to shares held by persons entitled to an offer of new shares), in the opinion of the Directors, cannot be conveniently offered under this Article. (3) Notwithstanding Article 67(2), the Company may by Ordinary Resolution in General Meeting give to the Directors a general authority, either unconditionally or subject to such conditions as may be specified in the Ordinary Resolution, to: a) (i) issue shares in the capital of the Company whether by way of rights, bonus or otherwise; and/or
Power to increase capital
Issue of new shares
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(ii)
make or grant offers, agreements or options (collectively, Instruments) that might or would require shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) warrants, debentures or other instruments convertible into shares; and
b)
notwithstanding that the authority conferred by the Ordinary Resolution may have ceased to be in force, the Directors may issue shares in pursuance of any Instrument made or granted while the Ordinary Resolution was in force,
provided that: (1) the aggregate number of shares to be issued pursuant to the Ordinary Resolution (including shares to be issued in pursuance of Instruments made or granted pursuant to the Ordinary Resolution) shall be subject to such limits and manner of calculation as may be prescribed by the Exchange; (2) in exercising the authority conferred by the Ordinary Resolution, the Company shall comply with the provisions of the listing rules of the Exchange for the time being in force (unless such compliance is waived by the Exchange) and these Articles; and (3) (unless revoked or varied by the Company in General Meeting) the authority conferred by the Ordinary Resolution shall not continue in force beyond the conclusion of the Annual General Meeting of the Company next following the passing of the Ordinary Resolution, or the date by which such Annual General Meeting of the Company is required by law to be held, or the expiration of such other period as may be prescribed by the Act (whichever is the earliest). Capital raised deemed original capital 69) Subject to any directions that may be given in accordance with the powers contained in the Memorandum of Association of the Company or these Articles, any capital raised by the creation of new shares shall be considered as part of the original capital and as consisting of ordinary shares and shall be subject to the same provisions with reference to the payment of calls, transfer, transmission, forfeiture, lien and otherwise as if it had been part of the original capital. 70) (1) a) b) The Company may by Ordinary Resolution: consolidate and divide all or any of its shares; subdivide its shares or any of them (subject nevertheless to the provisions of the Act) provided always that in such subdivision the proportion between the amount paid and the amount (if any) unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived; cancel any shares which, at the date of the passing of the resolution, have not been taken, or agreed to be taken, by any person and diminish the amount of its capital by the amount of the shares so cancelled; or subject to the provisions of these Articles and the Act, convert any class of shares into any other class of shares.
Power to consolidate, cancel and sub-divide shares
c)
d)
C-12
Power to purchase or acquire shares
(2) Subject to and in accordance with the provisions of the Act, the listing rules of the Exchange and any applicable legislation or regulation, the Company may authorise the Directors in general meeting to purchase or otherwise acquire ordinary shares, stocks, preference shares, options, debentures, debenture stocks, bonds, obligations, securities, and all other equity, derivative, debt and financial instruments issued by it on such terms as the Company may think fit and in the manner prescribed by the Act. The Company may deal with any such share which is so purchased or acquired by the Company in such manner as may be permitted by, and in accordance with, the Act (including without limitation, to hold such share as a treasury share). 71) The Company may reduce its share capital or any undistributable reserve in any manner, subject to any requirements and consents required by law. Without prejudice to the foregoing, upon cancellation of shares purchased or otherwise acquired by the Company pursuant to these Articles and the Act, the number of issued shares of the Company shall be diminished by the number of shares so cancelled, and where any such cancelled shares were purchased or acquired out of the capital of the Company, the amount of the share capital of the Company shall be reduced accordingly.
Reduction of share capital
5.
Limitations on shareholders regarded as non-residents of Singapore
Except as described in the sub-sections Voting Rights and Takeovers in Appendix D of this Prospectus, there are no limitations imposed by Singapore law or by our Articles on the rights of nonresident Shareholders to hold our Shares or to vote.
C-13
APPENDIX D
DESCRIPTION OF OUR SHARES

The discussion below provides information about our share capital, the main provisions of our Articles and the laws of Singapore relating to our Shares. This description is only a summary and is qualified by reference to Singapore law and our Articles.
Ordinary Shares We have only one class of shares, namely, our ordinary shares, which have identical rights in all respects and rank equally with one another. Our Articles provide that we may issue shares of a different class with preferential, qualified, special or deferred right to dividends and in the distribution of assets of our Company and with special or restricted rights, privileges or conditions as our Board may think fit and may issue preference shares which are, or at our option are, redeemable, subject to certain limitations. As at the date of this Prospectus, 175,000,000 ordinary shares are issued and fully paid. All of our Shares are in registered form. We may, subject to the provisions of the Companies Act and the rules of the SGX-ST, purchase our own Shares. However, we may not, except in circumstances permitted by the Companies Act, grant any financial assistance for the acquisition or proposed acquisition of our own Shares. New Shares New Shares may only be issued with the prior approval of our Shareholders in a general meeting. The aggregate number of shares to be issued pursuant to such approval shall be subject to such limitations as may be prescribed by the SGX-ST. The approval, if granted, will lapse at the conclusion of the annual general meeting of our Company (AGM) following the date on which the approval was granted, unless otherwise revoked or varied by our Shareholders in a general meeting. Subject to the foregoing, the provisions of the listing rules of the SGX-ST, the Companies Act and any special rights attached to any class of shares currently issued, all new Shares in the capital of our Company are under the control of our Board who may allot and issue the same with such rights and restrictions as it may think fit. Shareholders Only persons who are registered in our register of shareholders and, in cases in which the person so registered is the CDP, the persons named as the depositors in the depository register maintained by the CDP for our Shares, are recognised as our Shareholders. We will not, except as required by law, recognise any equitable, contingent, future or partial interest in any Share or other rights for any Share other than the absolute right thereto of the registered holder of the Share or of the person whose name is entered in the depository register for that Share. We may close the Register of Shareholders any time or times if we provide the Registrar of Companies and Businesses of Singapore with at least 14 days notice and the SGX-ST at least 10 clear Market Days notice. However, the Register may not be closed for more than 30 days in aggregate in any calendar year. We typically close the register to determine our Shareholders entitlement to receive dividends and other distributions. Transfer of Shares Save as disclosed in this Prospectus, there is no restriction on the transfer of our fully paid Shares except where required by law or the rules, bye-laws or existing rules of the SGX-ST. Our Board may decline to register any transfer of Shares which are not fully paid Shares or Shares on which we have a lien. Our Shares may be transferred by a duly signed instrument of transfer in a form approved by SGX-ST. Our Board may also decline to register any instrument of transfer unless, among other things, it has been duly stamped and is presented for registration together with the share certificate and such other evidence of title as they may require. We will replace lost or destroyed certificates for our Shares if we are properly notified and if the applicant pays a fee which will not exceed S$2.00 and furnishes any evidence and indemnity that our Board may require.
D-1
General Meetings of Shareholders We are required to hold an AGM every year. Our Board may convene an extraordinary general meeting of our Company whenever it thinks fit and must do so if Shareholders representing not less than 10% of the total voting rights of all Shareholders request in writing that such a meeting be held. In addition, two or more Shareholders holding not less than 10.0% of our issued share capital may call a meeting. Unless otherwise required by Singapore law or by our Articles, voting at general meetings is by ordinary resolution, requiring an affirmative vote of a simple majority of the votes cast at that meeting. An ordinary resolution suffices, for example, for the appointment of Directors. A special resolution, requiring the affirmative vote of at least 75.0% of the votes cast at the meeting, is necessary for certain matters under Singapore law, including the voluntary winding up of our Company, amendments to our Memorandum and Articles of Association, a change of our corporate name and a reduction in our share capital. We must give at least 21-days notice in writing for every general meeting convened for the 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 at all times of the convening of the meeting shall have paid all calls or other sums presenting payable by him in respect of our Shares and must set forth the place, the day and the hour of the 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. A proxy need not be a Shareholder. A person who holds Shares through the SGX-ST book-entry clearance system will only be entitled to vote at a general meeting as a Shareholder if his name appears on the depository register maintained by CDP 48 hours before the general meeting. Except as otherwise provided in our Articles, two or more Shareholders must be present in person or by proxy to constitute a quorum at any general meeting. Under our Articles, on a show of hands, every Shareholder present in person and by proxy shall have one vote (provided that in the case of a Shareholder who is represented by two proxies, only one of the two proxies as determined by that Shareholder or, failing determination, by the chairman of the meeting in his sole discretion shall be entitled to vote on a show of hands), and on a poll, every Shareholder present in person or by proxy shall have one vote for each Share held. A poll may be demanded in certain circumstances, including but not limited to the chairman of the meeting, by any Shareholder present in person or by proxy and representing not less than 10.0% of the total voting rights of all Shareholders having the right to attend and vote at the meeting, or by any two Shareholders present in person or by proxy and being entitled to vote. In the case of an equality of votes, whether on a show of hands or a poll, the chairman of the meeting shall be entitled to a casting vote. Dividends Our Directors may, with the sanction of the Shareholders by ordinary resolution, declare dividends, but we may not pay dividends in excess of the amount recommended by our Board. Any dividend we pay must be paid out of our profits. Our Directors may also declare an interim dividend. All dividends are paid pro rata among our Shareholders in proportion to the amount paid upon each Shareholders Shares, unless the rights attaching to an issue of any Share provides otherwise. Unless otherwise directed, dividends are paid by cheque or warrant sent through the post to each Shareholder at his last registered address. Notwithstanding the foregoing, payment by us to CDP of any dividend payable to a Shareholder whose name is entered in the depository register shall, to the extent of payment made to CDP, discharge us from any liability to that Shareholder in respect of that payment. Bonus and Rights Issue Our Shareholders at a general meeting may, upon the recommendation of our Director, capitalise any reserves or profits (including profit or monies carried and standing to any reserve) and distribute the same as bonus shares credited as paid up to our Shareholders in proportion to their shareholdings. Our Directors may also issue rights to take up additional Shares to Shareholders in proportion to their shareholdings. Such rights are subject to any conditions attached to such issue and the regulations of any stock exchange on which we are listed.
D-2
Takeovers The Securities and Futures Act and the Singapore Code on Take-overs and Mergers regulate the acquisition of ordinary shares of public companies and contain certain provisions that may delay, deter or prevent a future takeover or change in control of our Company. Any person acquiring an interest, either acting on his own or together with other parties acting in concert with him, in 30% or more of our voting shares must extend a takeover offer for the remaining voting shares in accordance with the provisions of the Singapore Code on Take-overs and Mergers. A mandatory takeover offer is also required to be made if a person holding, either on his own or together with parties acting in concert with him, between 30% and 50% of our voting shares acquires additional voting shares representing more than 1% of our voting shares in any six-month period. Parties acting in concert include, unless the contrary is established: (a) (i) a company, (ii) its parent company, (iii) its subsidiaries, (iv) its fellow subsidiaries, (v) associated companies of (i), (ii), (iii), or (iv), (vi) companies whose associated companies include any of (i), (ii), (iii) or (iv); and (vii) any person who has provided financial assistance (other than a bank in the ordinary course of business to any of the above for the purchase of voting rights; a company and its directors (including their close relatives and related trusts as well as companies controlled by any of the directors, their close relatives and related trusts); a company and any of its pension funds and employee share schemes; a person with any investment company, unit trust or other fund whose investment such person manages on a discretionary basis but only in respect of the investment account which such person manages; a financial adviser or other professional adviser, including a stockbroker, and its client in respect of shares held by the adviser and persons controlling, controlled by or under the same control as the adviser, all the funds which the adviser manages on a discretionary basis, where the shareholdings of the adviser and any of those funds in the client total 10% or more of the clients equity share capital; directors of a company (together with their close relatives, related trusts and companies controlled by any such directors, their close relatives and related trust) which is subject to an offer or where the directors have reason to believe a bona fide offer for their company may be imminent; partners; and an individual, his close relatives, his related trusts, any person who is accustomed to act in accordance with his instructions and companies controlled by him (or his close relatives, his related trusts or any person who is accustomed to act in accordance with his instructions) and person who has provided financial assistance (other than bank in the ordinary course of business) to any of the above for the purchase of voting rights.
(b)
(c) (d)
(e)
(f)
(g) (h)
Liquidation or Other Return of Capital If our Company is liquidated or in the event of any other return of capital, holders of our Shares will be entitled to participate in any surplus assets in proportion to their shareholdings, subject to any special rights attaching to any other class of shares then existing. Indemnity As permitted by Singapore law, our Articles provide that, subject to the Companies Act, our Board and officers shall be entitled to be indemnified by us against, amongst others, any liability incurred in defending any proceedings, whether civil or criminal, which relate to anything done or omitted to have been done as an officer or employee and in which judgment is given in their favour or in which they are acquitted or in connection with any application for relief from liability in respect thereof in which relief is granted by the court. We may not indemnify our Directors and officers against liability which by law would otherwise attach to them in respect of any negligence, wilful default, breach of duty or breach of trust of which they may be guilty in relation to us.
D-3
Minority Rights As we are a Singapore-incorporated company, the rights of our minority Shareholders are protected under Section 216 of the Companies Act, which gives the Singapore courts a general power to make any order, upon application by any of our Shareholders, as they think fit to remedy any of the following situations: if our affairs are being conducted or the powers of our Board are being exercised in a manner oppressive to, or in disregard of the interests of, one or more of our Shareholders; or if we take an action, or threaten to take an action, or our Shareholders pass a resolution, or propose to pass a resolution, which unfairly discriminates against, or is otherwise prejudicial to, one or more of our Shareholders, including the applicant. Singapore courts have wide discretion as to the relief they may grant and that relief is in no way limited to those listed in the Companies Act itself. Without prejudice to the foregoing, Singapore courts may: direct or prohibit any act or cancel or vary any transaction or resolution; regulate our affairs in the future; authorise civil proceedings to be brought in the name of, or on behalf of, our Company by a person or persons and on such terms as the court may direct; provide for the purchase of a minority shareholders shares by our other Shareholders or by our Company and, in the case of a purchase of shares by us, a corresponding reduction of our share capital; or provide that our Company be wound up.
D-4
APPENDIX E
TAXATION
SINGAPORE General
Scope of Tax
Corporate taxpayers are subject to Singapore income tax on all income accruing in or derived from Singapore or received/deemed received in Singapore (unless specifically exempt from income tax). Foreign-sourced income in the form of dividends, branch profits and services income remitted or deemed remitted to Singapore by Singapore tax resident companies are exempt from Singapore income tax if the following conditions are met: (a) the income is subject to tax of a similar character to income tax under the law of the jurisdiction from which such income is received; at the time the income is received in Singapore, the highest rate of tax of a similar character to income tax in the jurisdiction from which the income is received is at least 15%; and the Comptroller of Income Tax is satisfied that the tax exemption would be beneficial to the recipient of the foreign-sourced income.
(b)
(c)
For individuals, all foreign-sourced income received in Singapore is exempt from income tax, except for income received through a partnership in Singapore.
Rates of Tax
The prevailing corporate tax rate is 18%. The effective tax rate is lower due to the partial tax exemption on corporate taxpayers first $300,000 income chargeable to income tax at 18% (excluding Singapore franked dividends) as follows: (a) first three Years of Assessment of tax resident Singapore incorporated companies with no more than 20 individual shareholders of which at least one is an individual holding at least 10% of total number of issued ordinary shares throughout the basis period relating to the Year of Assessment of claim: _ 100% of first $100,000 chargeable income; _ 50% of next $200,000 chargeable income. (b) All other cases: _ 75% of first $10,000 chargeable income; _ 50% of next $290,000 chargeable income. During the 2009 Budget unveiled on 22 January 2009, it was announced that the corporate income tax rate will be reduced to 17% with effect from the Year of Assessment 2010. Singapore tax resident individuals are subject to tax on their taxable income based on a progressive scale. The top marginal rate for Year of Assessment 2009 (basis period calendar year 2008) is 20%. NonSingapore tax resident individuals are subject to income tax on their taxable income at a flat rate of 20%, except that their Singapore employment income is taxed at a flat rate of 15% or at tax resident rates, whichever yields a higher tax.
E-1
Tax Residency
A company is regarded as a tax resident in Singapore if the control and management of its business is exercised in Singapore (e.g. Board of Director meetings are held in Singapore). An individual is regarded as a tax resident in Singapore for a Year of Assessment if, in the preceding year, he was physically present or has exercised employment in Singapore (other than as a director of a company) for 183 or more days, or if he resides in Singapore. Dividend Distributions Singapore adopts the one-tier corporate tax system (One-Tier System) which took effect from 1 January 2003. Under the One-Tier System, the tax paid by companies on their corporate profits is final and dividends paid by Singapore tax resident companies are exempt from Singapore income tax in the hands of all Shareholders. There will be no tax credits attached to such dividends. Our Company is under the One-Tier System. Thus, our dividends will be tax exempt to all Shareholders. There is no withholding tax on dividend payments to non-resident Shareholders. Gains on Disposal of Ordinary Shares Singapore does not impose tax on capital gains. However, gains arising from the disposal of our ordinary shares that are construed to be of an income nature will be subject to tax if the gains arise from activities which the Comptroller of Income Tax considers as the carrying on of a trade or business in Singapore. Hence, any profits from the disposal of ordinary shares are not taxable in Singapore unless the seller is regarded as having derived gains of an income nature, in which case the gains on disposal of the ordinary shares would be taxable. STAMP DUTY No stamp duty is payable on the subscription and issuance of our Shares. Where existing Shares evidenced in certificated form are acquired in Singapore, stamp duty is payable on the instrument of transfer of the Shares at the rate of $2.00 for every $1,000 or any part thereof of the consideration for or market value of, the Shares, whichever is higher. The purchaser is liable for stamp duty, unless otherwise agreed. No stamp duty is payable if no instrument of transfer is executed (such as in the case of scripless shares, the transfer of which does not require instruments of transfer to be executed) or if the instrument of transfer is executed outside Singapore. However, stamp duty may be payable if the instrument of transfer which is executed outside Singapore is subsequently received in Singapore. Stamp duty is also not applicable to electronic transfers of Shares through the central depository system. ESTATE DUTY With effect from 15 February 2008, Singapore estate duty has been abolished. GOODS AND SERVICES TAX (GST) The sale of our Companys Shares by an investor belonging in Singapore through an SGX-ST member or to another person belonging in Singapore is exempt from GST. Where our Companys Shares are sold by a GST-registered investor to a person belonging outside Singapore, the sale is a taxable supply subject to GST at zero-rate if certain conditions are met. Any GST incurred by a GST-registered investor in the making of this supply in the course or furtherance of a business may be recovered from the Comptroller of GST. Services such as brokerage, handling and clearing charges rendered by a GST-registered person to an investor belonging in Singapore in connection with the investors purchase, sale or holding of shares will be subject to GST at the standard rate (currently at 7%). Similar services rendered to an investor belonging outside of Singapore may be zero-rated if certain conditions are met. E-2
APPENDIX F
RULES OF THE PEC EMPLOYEE SHARE OPTION SCHEME

1. NAME OF THE ESOS The ESOS shall be called the PEC Employee Share Option Scheme. 2. 2.1 DEFINITIONS In the ESOS, unless the context otherwise requires, the following words and expressions shall have the following meanings:
Act
The Companies Act, Chapter 50 of Singapore as amended, modified or supplemented from time to time; The Articles of Association of the Company, as amended from time to time; The auditors of the Company for the time being; The board of directors of the Company; The Central Depository (Pte) Limited; Central Provident Fund; The remuneration committee of the Company, or such other committee comprising directors of the Company duly authorised and appointed by the Board to administer this ESOS; PEC Ltd. The capacity to dominate decision making, directly or indirectly, in relation to the financial and operating policies of the Company; A shareholder exercising control over the Company and unless rebutted, a person who controls directly or indirectly 15.0% or more of the Companys issued shares (excluding treasury shares) shall be presumed to be a Controlling Shareholder of the Company; In relation to an Option, the date on which the Option is granted to a Participant pursuant to Rule 7; A person holding office as a director for the time being of the Company and/or its Subsidiaries, as the case may be; The PEC Employee Share Option Scheme, as the same may be modified or altered from time to time; A director of the Company and/or its Subsidiaries, as the case may be, who performs an executive function within the Company or the relevant Subsidiary, as the case may be; The price at which a Participant shall subscribe for each Share upon the exercise of an Option which shall be the price as determined in accordance with Rule 9, as adjusted in accordance with Rule 10;
Articles
Auditors Board CDP CPF Committee
Company control
Controlling Shareholder
Date of Grant
Director
ESOS
Executive Director
Exercise Price
F-1
Grantee Group Group Employee
A person to whom an offer of an Option is made; The Company and its Subsidiaries; Any confirmed employee of the Group (including any Executive Director) selected by the Committee to participate in the ESOS in accordance with Rule 4; A day on which the SGX-ST is open for trading in securities; A price equal to the average of the last dealt prices for the Shares on the SGX-ST over the five consecutive Trading Days immediately preceding the Date of Grant of that Option, as determined by the Committee by reference to the daily official list or any other publication published by the SGX-ST, rounded to the nearest whole cent in the event of fractional prices; A director of the Company and/or its Subsidiaries, as the case may be, other than an Executive Director but including the independent Directors of the Company; The date on which an offer to grant an Option is made pursuant to the ESOS; The person to whom an offer of an Option is made; The right to subscribe for Shares granted or to be granted to a Group Employee pursuant to the ESOS and for the time being subsisting; The period for the exercise of an Option as determined pursuant to Rule 11; The holder of an Option; The date as at the close of business on which the Shareholders must be registered in order to participate in any dividends, rights, allotments or other distributions; Rules of the PEC Employee Share Option Scheme; Singapore Dollars; The securities account maintained by a Depositor with CDP;
Market Day Market Price
Non-Executive Director
Offer Date
Offeree Option
Option Period
Participant Record Date
Rules S$ Securities Account Shareholders
Registered holders of Shares, except where the registered holder is CDP, the term Shareholders shall, in relation to such Shares, mean the Depositors whose Securities Accounts are credited with Shares; Ordinary shares in the capital of the Company; Companies which are for the time being subsidiaries of the Company as defined by Section 5 of the Act; and Subsidiary means each of them; Singapore Exchange Securities Trading Limited; and A day on which the Shares are traded on the SGX-ST.
Shares Subsidiaries
SGX-ST Trading Day
F-2
2.2
The terms Depositor, Depository Register and Depository Agent shall have the meanings ascribed to it by Section 130A of the Act and the term associate shall have the meaning ascribed to it by the Listing Manual or any other publication prescribing rules or regulations for corporations admitted to the Official List of the SGX-ST (as modified, supplemented or amended from time to time). Words importing the singular number shall, where applicable, include the plural number and vice versa. Words importing the masculine gender shall, where applicable, include the feminine and neuter gender. Any reference to a time of a day in the ESOS is a reference to Singapore time. Any reference in the ESOS to any enactment is a reference to that enactment as for the time being amended or re-enacted. Any word defined under the Act or any statutory modification thereof and used in the ESOS shall have the meaning assigned to it under the Act. OBJECTIVES OF THE ESOS The ESOS will provide an opportunity for Group Employees (including Executive and NonExecutive Directors) who have contributed significantly to the growth and performance of the Group and who satisfy the eligibility criteria as set out in Rule 4 of the ESOS, to participate in the equity of the Company. The ESOS is primarily a share incentive scheme. It recognises the fact that the services of such Group Employees are important to the success and continued well-being of the Group. Implementation of the ESOS will enable the Company to give recognition to the contributions made by such Group Employees. At the same time, it will give such Group Employees an opportunity to have a direct interest in the Company at no direct cost to its profitability and will also help to achieve the following positive objectives: (a) to motivate Participant to optimise his performance standards and efficiency and to maintain a high level of contribution to the Group; to retain key employees and Executive Directors of the Group whose contributions are essential to the long-term growth and profitability of the Group; to instil loyalty to, and a stronger identification by the Participants with the long-term prosperity of the Group; to attract potential employees with relevant skills to contribute to the Group and to create value for the Shareholders; and to align the interests of the Participants with the interests of the Shareholders.
2.3
2.4 2.5
3.
(b)
(c)
(d)
(e) 4. 4.1
ELIGIBILITY OF PARTICIPANTS Confirmed Group Employees (including Executive and Non-Executive Directors) who have attained the age of twenty-one (21) years on or prior to the relevant Offer Date and are not undischarged bankrupts and have not entered into a composition with their respective creditors, shall be eligible to participate in the ESOS at the absolute discretion of the Committee. Controlling Shareholders and their associates who meet the eligibility criteria in Rule 4.1 and who have contributed to the success and development of the Group are, subject to the absolute discretion of the Committee, eligible to participate in the ESOS provided that the participation by and actual number and terms of any Options to be granted to each such Controlling Shareholder or his associate and each grant of Options to any one of them may be effected only with a specific prior approval of independent Shareholders at a general meeting in separate resolutions. The Company will at such time provide the rationale and justification for any proposal to grant the Controlling Shareholders and/or their associates any Options.
4.2
F-3
4.3
There will be no restriction on the eligibility of any Participant to participate in any other share option or share incentive schemes implemented by the Company or any other companies within the Group. Subject to the Act and any requirement of the SGX-ST, the terms of eligibility for participation in the ESOS may be amended from time to time at the absolute discretion of the Committee, which would be exercised judiciously. MAXIMUM ENTITLEMENT Subject to Rule 4 and Rule 10, the aggregate number of Shares in respect of which Options may be offered to a Grantee for subscription in accordance with the ESOS shall be determined at the absolute discretion of the Committee who shall take into account in respect of a Group Employee, criteria such as rank, past performance, years of service and potential development of the Participant and in respect of a Non-Executive Director, his contribution to the success and development of the Group.
4.4
5.
6. 6.1
LIMITATION ON SIZE OF THE ESOS The aggregate number amount of Shares over which the Committee may grant Options on any date, when added to the number Shares issued and issuable in respect of (i) all Options granted under the ESOS and (ii) all awards granted under any other share option, share incentive, performance share or restricted share plan implemented by the Company and for the time being in force shall not exceed 15.0% of the issued shares of the Company (excluding treasury shares) on the day immediately preceding the Offer Date of the Option. The aggregate number of Shares issued and issuable in respect of all Options granted under the ESOS available to all Controlling Shareholders and their associates must not exceed 25.0% of the Shares available under the ESOS. The number of shares issued and issuable in respect of all Options granted under the ESOS available to each of the Controlling Shareholders or their associates must not exceed 10.0% of the Shares available under the ESOS. OFFER DATE The Committee may, save as provided in Rule 4, Rule 5 and Rule 6, offer to grant Options to such Grantees as it may select in its absolute discretion at any time during the period when the ESOS is in force, except that no Option shall be granted during the period of thirty (30) days immediately preceding the date of announcement of the Companys interim and/or final results (whichever the case may be). In addition, in the event that an announcement on any matter of an exceptional nature involving unpublished price sensitive information is made, offers to grant Options may only be made on or after the second Market Day on which such announcement is released. An offer to grant the Option to a Grantee shall be made by way of a letter (the Letter of Offer) in the form or substantially in the form set out in Schedule A, subject to such amendments as the Committee may determine from time to time. ACCEPTANCE OF OPTION An Option offered to a Grantee pursuant to Rule 7 may only be accepted by the Grantee within thirty (30) days after the relevant Offer Date and not later than 5.00 p.m. on the thirtieth (30th) day from such Offer Date (a) by completing, signing and returning to the Company the Acceptance Form in or substantially in the form set out in Schedule B, subject to such modification as the Committee may from time to time determine, accompanied by payment of S$1.00 as consideration and (b) if, at the date on which the Company receives from the Grantee the Acceptance Form in respect of the Option as aforesaid, he remains eligible to participate in the ESOS in accordance with these Rules.
6.2
6.3
7. 7.1
7.2
8. 8.1
F-4
8.2
If a grant of an Option is not accepted strictly in the manner as provided in this Rule 8, such offer shall, upon the expiry of the thirty (30) day period, automatically lapse and shall forthwith be deemed to be null and void and be of no effect. The Company shall be entitled to reject any purported acceptance of a grant of an Option made pursuant to this Rule 8 or Exercise Notice given pursuant to Rule 12 which does not strictly comply with the terms of the ESOS. Options are personal to the Grantees to whom they are granted and shall not be sold, mortgaged, transferred, charged, assigned, pledged or otherwise disposed of or encumbered in whole or in part or in any way whatsoever without the Committees prior written approval, but may be exercised by the Grantees duly appointed personal representative as provided in Rule 11.6 in the event of the death of such Grantee. The Grantee may accept or refuse the whole or part of the offer. If only part of the offer is accepted, the Grantee shall accept the offer in multiples of 1,000 Shares. In the event that a grant of an Option results in a contravention of any applicable law or regulation, such grant shall be null and void and be of no effect and the relevant Participant shall have no claim whatsoever against the Company. Unless the Committee determines otherwise, an Option shall automatically lapse and become null, void and of no effect and shall not be capable of acceptance if: (a) (b) (c) it is not accepted in the manner as provided in Rule 8.1 within the thirty (30) day period; or the Grantee dies prior to his acceptance of the Option; or the Grantee is adjudicated a bankrupt or enters into composition with his creditors prior to his acceptance of the Option; or the Grantee, being a Group Employee, ceases to be in the employment of the Group or (being a Director) ceases to be a Director of the Company, in each case, for any reason whatsoever prior to his acceptance of the Option; or the Company is liquidated or wound-up prior to the Grantees acceptance of the Option.
8.3
8.4
8.5
8.6
8.7
(d)
(e) 9. 9.1
EXERCISE PRICE Subject to any adjustment pursuant to Rule 10, the Exercise Price for each Share in respect of which an Option is exercisable shall be determined by the Committee, in its absolute discretion, on the Date of Grant, at: (a) (b) a price equal to the Market Price; or a price which is set at a discount to the Market Price, provided that: (i) the maximum discount shall not exceed 20.0% of the Market Price (or such other percentage or amount as may be determined by the Committee and permitted by the SGX-ST); and the Shareholders in general meeting shall have authorised, in a separate resolution, the making of offers and grants of Options under the ESOS at a discount not exceeding the maximum discount as aforesaid.
(ii)
F-5
9.2
In making any determination under Rule 9.1(b) on whether to give a discount and the quantum of such discount, the Committee shall be at liberty to take into consideration such criteria as the Committee may, at its absolute discretion, deem appropriate, including but not limited to: (a) (b) (c) the performance of the Company , the Group and/or its Subsidiaries, as the case may be; the years of service and individual performance of the eligible Group Employee or Director; the contribution of the eligible Group Employee or Director to the success and development of the Company and/or the Group; and the prevailing market conditions.
(d) 10. 10.1
ALTERATION OF CAPITAL If a variation in the issued share capital of the Company (whether by way of a capitalisation of profits or reserves or rights issue or reduction (including any reduction arising by reason of the Company purchasing or acquiring its issued Shares), subdivision, consolidation or distribution, or otherwise howsoever) should take place, then: (a) the Exercise Price in respect of the Shares, class and/or number of Shares comprised in the Options to the extent unexercised and the rights attached thereto; and/or the class and/or number of Shares in respect of which additional Options may be granted to Participants,
(b)
may, be adjusted in such manner as the Committee may determine to be appropriate including retrospective adjustments where such variation occurs after the date of exercise of an Option but the Record Date relating to such variation precedes such date of exercise and, except in relation to a capitalisation issue, upon the written confirmation of the Auditors (acting only as experts and not as arbitrators), that in their opinion, such adjustment is fair and reasonable. 10.2 Notwithstanding the provisions of Rule 10.1 above, no such adjustment shall be made (a) if as a result, the Participant receives a benefit that a Shareholder does not receive; and (b) unless the Committee after considering all relevant circumstances considers it equitable to do so. Unless the Committee considers adjustment to be appropriate: (a) the issue of securities as consideration for an acquisition or a private placement of securities by the Company; or the cancellation of issued Shares purchased or acquired by the Company by way of a market purchase of such Shares undertaken by the Company on the SGX-ST during the period when a share purchase mandate granted by the Shareholders (including any renewal of such mandate) is in force,
10.3
(b)
shall not normally be regarded as a circumstance requiring adjustment under the provisions of this Rule 10. 10.4 The restriction on the number of Shares to be offered to any Grantee under Rule 5 above, shall not apply to the number of additional Shares or Options over additional Shares issued by virtue of any adjustment to the number of Shares and/or Options pursuant to this Rule 10. Upon any adjustment required to be made, the Company shall notify each Participant (or his duly appointed personal representative(s)) in writing and deliver to him (or, where applicable, his duly appointed personal representative(s)) a statement setting forth the new Exercise Price thereafter in effect, class and/or number of Shares thereafter comprised in the Option so far as unexercised. Any adjustment shall take effect upon such written notification being given.
10.5
F-6
11. 11.1
OPTION PERIOD Options granted with the Exercise Price set at Market Price shall only be exercisable, in whole or in part (provided that an Option may be exercised in part only in respect of 1,000 Shares or any multiple thereof), at any time, by a Participant after the first anniversary of the Offer Date of that Option, Provided Always that the Options shall be exercised before the tenth anniversary of the relevant Offer Date, or such earlier date as may be determined by the Committee, failing which all unexercised Options shall immediately lapse and become null and void and a Participant shall have no claim against the Company. Options granted with the Exercise Price set at a discount to Market Price shall only be exercisable, in whole or in part (provided that an Option may be exercised in part only in respect of 1,000 Shares or any multiple thereof), at any time, by a Participant after the second anniversary from the Offer Date of that Option, Provided always that the Options shall be exercised before the tenth anniversary of the relevant Offer Date, or such earlier date as may be determined by the Committee, failing which all unexercised Options shall immediately lapse and become null and void and a Participant shall have no claim against the Company. An Option shall, to the extent unexercised, immediately lapse and become null and void and a Participant shall have no claim against the Company: (a) subject to Rules 11.4, 11.5 and 11.6, upon the Participant ceasing to be in the employment of the Company or any of the companies within the Group for any reason whatsoever; or upon a Participant, being a Non-Executive Director, ceasing to be a Director of the Company and/or the relevant Subsidiary as the case may be, for any reason whatsoever; or upon the bankruptcy of the Participant or the happening of any other event which result in his being deprived of the legal or beneficial ownership of such Option; or in the event of misconduct on the part of the Participant, as determined by the Committee in its absolute discretion.
11.2
11.3
(b)
(c)
(d)
For the purpose of Rule 11.4(a), a Participant shall be deemed to have ceased to be so employed with the Group and/or the Company as at the date the notice of termination of employment is tendered by or is given to him, unless such notice shall be withdrawn prior to its effective date. 11.4 If a Participant ceases to be employed by the Group by reason of his: (a) ill health, injury or disability, in each case, as certified by a medical practitioner approved by the Committee; redundancy; retirement at or after a normal retirement age; or retirement before that age with the consent of the Committee,
(b) (c) (d)
or for any other reason approved in writing by the Committee, he may, at the absolute discretion of the Committee exercise any unexercised Option within the relevant Option Period and upon the expiry of such period, the Option shall immediately lapse and become null and void. 11.5 If a Participant ceases to be employed by a Subsidiary: (a) by reason of the Subsidiary, by which he is principally employed ceasing to be a company within the Group or the undertaking or part of the undertaking of such Subsidiary, being transferred otherwise than to another company within the Group; or
F-7
(b)
for any other reason, provided the Committee gives its consent in writing, he may, at the absolute discretion of the Committee, exercise any unexercised Options within the relevant Option Period and upon the expiry of such period, the Option shall immediately lapse and become null and void.
11.6
If a Participant dies and at the date of his death holds any unexercised Option, such Option may, at the absolute discretion of the Committee, be exercised by the duly appointed legal personal representatives of the Participant within the relevant Option Period and upon the expiry of such period, the Option shall immediately lapse and become null and void. If a Participant, who is also an Executive Director, ceases to be a Director for any reason whatsoever, he may, at the absolute discretion of the Committee, exercise any unexercised Option within the relevant Option Period and upon the expiry of such period, the Option shall immediately lapse and become null and void. EXERCISE OF OPTIONS, ALLOTMENT AND LISTING OF SHARES An Option may be exercised, in whole or in part (provided that an Option may be exercised in part only in respect of 1,000 Shares or any multiple thereof), by a Participant giving notice in writing to the Company in or substantially in the form set out in Schedule C (the Exercise Notice), subject to such amendments as the Committee may from time to time determine. Every Exercise Notice must be accompanied by a remittance for the full amount of the aggregate Exercise Price in respect of the Shares which have been exercised under the Option, the relevant CDP charges (if any) and any other documentation the Committee may require. All payments shall be made by cheque, cashiers order, bank draft or postal order made out in favour of the Company or such other mode of payment as may be acceptable to the Company. An Option shall be deemed to be exercised upon the receipt by the Company of the abovementioned Notice duly completed and the receipt by the Company of the full amount of the aggregate Exercise Price in respect of the Shares which have been exercised under the Option. Subject to: (a) such consents or other actions required by any competent authority under any regulations or enactments for the time being in force as may be necessary (including any approvals required from the SGX-ST); and compliance with the Rules, the Memorandum and Articles of Association of the Company, the Company shall, as soon as practicable after the exercise of an Option by a Participant but in any event within ten (10) Market Days after the date of the exercise of the Option in accordance with Rule 12.1, allot the Shares in respect of which such Option has been exercised by the Participant and within five (5) Market Days from the date of such allotment, despatch the relevant share certificates to CDP for the credit of the securities account of that Participant by ordinary post or such other mode of delivery as the Committee may deem fit.
11.7
12. 12.1
12.2
(b)
12.3
The Company shall, if necessary, as soon as practicable after the exercise of an Option, apply to the SGX-ST or any other stock exchange on which the Shares are quoted or listed for permission to deal in and for quotation of the Shares which may be issued upon exercise of the Option and the Shares (if any) which may be issued to the Participant pursuant to any adjustments made in accordance with Rule 10. Shares which are all allotted on the exercise of an Option by a Participant shall be issued, as the Participant may elect, in the name of CDP to the credit of the securities account of the Participant maintained with CDP or the Participants securities sub-account with a CDP Depository Agent.
12.4
F-8
12.5
Shares allotted and issued upon the exercise of an Option shall be subject to all provisions of the Memorandum and Articles of Association of the Company and shall rank pari passu in all respects with the then existing issued Shares in the capital of the Company except for any dividends, rights, allotments or other distributions, the Record Date for which is prior to the date such Option is exercised. The Company shall keep available sufficient unissued Shares to satisfy the full exercise of all Options for the time being remaining capable of being exercised. MODIFICATIONS TO THE ESOS Any or all the provisions of the ESOS may be modified and/or altered at any time and from time to time by resolution of the Committee, except that: (a) any modification or alteration which shall alter adversely the rights attaching to any Option granted prior to such modification or alteration and which in the opinion of the Committee, materially alters the rights attaching to any Option granted prior to such modification or alteration may only be made with the consent in writing of such number of Participants who, if they exercised their Options in full, would thereby become entitled to not less than threequarters (3/4) of the aggregate number of all the Shares which would fall to be allotted upon exercise in full of all outstanding Options; any modification or alteration which would be to the advantage of Participants under the ESOS shall be subject to the prior approval of the Shareholders in general meeting; and no modification or alteration shall be made without the prior approval of the SGX-ST or (if required) any other stock exchange on which the Shares are quoted and listed, and such other regulatory authorities as may be necessary.
12.6
13. 13.1
(b)
(c)
For the purposes of Rule 13.1(a), the opinion of the Committee as to whether any modification or alteration would alter adversely the rights attaching to any Option shall be final and conclusive. 13.2 Notwithstanding anything to the contrary contained in Rule 13.1, the Committee may at any time by resolution (and without other formality, save for the prior approval of the SGX-ST) amend or alter the ESOS in any way to the extent necessary to cause the ESOS to comply with any statutory provision or the provision or the regulations of any regulatory or other relevant authority or body (including the SGX-ST). Written notice of any modification or alteration made in accordance with this Rule 13 shall be given to all Participants. DURATION OF THE ESOS The ESOS shall continue to be in force at the discretion of the Committee, subject to a maximum period of ten (10) years, commencing on the date on which the ESOS is adopted by Shareholders. Subject to compliance with any applicable laws and regulations in Singapore, the ESOS may be continued beyond the above stipulated period with the approval of the Shareholders by ordinary resolution at a general meeting and of any relevant authorities which may then be required. The ESOS may be terminated at any time by the Committee or by resolution of the Shareholders at a general meeting subject to all other relevant approvals which may be required and if the ESOS is so terminated, no further Options shall be offered by the Company hereunder. The termination, discontinuance or expiry of the ESOS shall be without prejudice to the rights accrued to Options which have been granted and accepted as provided in Rule 8, whether such Options have been exercised (whether fully or partially) or not.
13.3
14. 14.1
14.2
14.3
F-9
15. 15.1
TAKE-OVER AND WINDING UP OF THE COMPANY In the event of a take-over offer being made for the Company, Participants (including Participants holding Options which are then not exercisable pursuant to the provisions of Rules 11.1 and 11.2) holding Options as yet unexercised shall, notwithstanding Rules 11 and 12 but subject to Rule 15.5, be entitled to exercise such Options in full or in part in the period commencing on the date on which such offer is made or, if such offer is conditional, the date on which the offer becomes or is declared unconditional, as the case may be, and ending on the earlier of: (a) the expiry of six (6) months thereafter, unless prior to the expiry of such six (6) month period, at the recommendation of the offeror and with the approvals of the Committee and the SGX-ST, such expiry date is extended to a later date (being a date falling not later than the date of expiry of the Option Period relating thereto); or the date of the expiry of the Option Period relating thereto,
(b)
whereupon any Option then remaining unexercised shall immediately lapse and become null and void. Provided Always that if during such period the offeror becomes entitled or bound to exercise the rights of compulsory acquisition of the Shares under the provisions of the Act and, being entitled to do so, gives notice to the Participants that it intends to exercise such rights on a specified date, the Option shall remain exercisable by the Participants until such specified date or the expiry of the Option Period relating thereto, whichever is earlier. Any Option not so exercised by the said specified date shall lapse and become null and void. Provided that the rights of acquisition or obligation to acquire stated in the notice shall have been exercised or performed, as the case may be. If such rights of acquisition or obligations have not been exercised or performed, all Options shall, subject to Rule 11.3, remain exercisable until the expiry of the Option Period. 15.2 If, under any applicable laws, the court sanctions a compromise or arrangement proposed for the purposes of, or in connection with, a scheme for the reconstruction of the Company or its amalgamation with another company or companies, Participants (including Participants holding Options which are then not exercisable pursuant to the provisions of Rule 11.1 and 11.2) shall notwithstanding Rules 11 and 12 but subject to Rule 15.5, be entitled to exercise any Option then held by them during the period commencing on the date upon which the compromise or arrangement is sanctioned by the court and ending either on the expiry of sixty (60) days thereafter or the date upon which the compromise or arrangement becomes effective, whichever is later (but not after the expiry of the Option Period relating thereto), whereupon any unexercised Option shall lapse and become null and void, Provided always that the date of exercise of any Option shall be before the tenth anniversary of the Offer Date. If an order or an effective resolution is passed for the winding up of the Company on the basis of its insolvency, all Options, to the extent unexercised, shall lapse and become null and void. In the event a notice is given by the Company to its members to convene a general meeting for the purposes of considering and, if thought fit, approving a resolution to voluntarily wind-up the Company, the Company shall on the same date as or soon after it dispatches such notice to each member of the Company give notice thereof to all Grantees (together with a notice of the existence of the provision of this Rule 15.4) and thereupon, each Grantee (or his personal representative) shall be entitled to exercise all or any of his Options at any time not later than two business days prior to the proposed general meeting of the Company by giving notice in writing to the Company, accompanied by a remittance for the aggregate Exercise Price whereupon the Company shall as soon as possible and in any event, no later than the business day immediately prior to the date of the proposed general meeting referred to above, allot the relevant Shares to the Grantee credited as fully paid.
15.3
15.4
F-10
15.5
If in connection with the making of a general offer referred to in Rule 15.1 above or the scheme referred to in Rule 15.2 above or the winding up referred to in Rule 15.4 above, arrangements are made (which are confirmed in writing by the Auditors, acting only as experts and not as arbitrators, to be fair and reasonable) for the compensation of Participants, whether by the continuation of their Options or the payment of cash or the grant of other options or otherwise, a Participant holding an Option, which is not then exercisable, may not, at the discretion of the Committee, be permitted to exercise that Option as provided for in this Rule 15. To the extent that an Option is not exercised within the periods referred to in this Rule 15, it shall lapse and become null and void. ADMINISTRATION OF THE ESOS The ESOS shall be administered by the Committee in its absolute discretion with such powers and duties as are conferred on it by the Board. The Committee shall have the power, from time to time, to make or vary such regulations (not being inconsistent with the ESOS) for the implementation and administration of the ESOS as it thinks fit. Any decision of the Committee, made pursuant to any provision of the ESOS (other than a matter to be certified by the Auditors), shall be final and binding (including any decisions pertaining to disputes as to the interpretation of the ESOS or any rule, regulation, or procedure thereunder or as to any rights under the ESOS). A Director, Controlling Shareholder or his associate who is a member of the Committee shall not be involved in its deliberation in respect of Options to be granted to him. NOTICES Any notice given by a Participant to the Company shall be sent by post or delivered to the registered office of the Company or such other address as may be notified by the Company to the Participant in writing. Any notice or documents given by the Company to a Participant shall be sent to the Participant by hand or sent to him at his home address stated in the records of the Company or the last known address of the Participant, and if sent by post shall be deemed to have been given on the day immediately following the date of posting. TERMS OF EMPLOYMENT UNAFFECTED The ESOS or any Option shall not form part of any contract of employment between the Company or any Subsidiary (as the case may be) and any Participant and the rights and obligations of any individual under the terms of the office or employment with such company within the Group shall not be affected by his participation in the ESOS or any right which he may have to participate in it or any Option which he may hold and the ESOS or any Option shall afford such an individual no additional rights to compensation or damages in consequence of the termination of such office or employment for any reason whatsoever. The ESOS shall not confer on any person any legal or equitable rights (other than those constituting the Options themselves) against the Company and/or any Subsidiary directly or indirectly or give rise to any cause of action at law or in equity against the Company or any Subsidiary. TAXES All taxes (including income tax) arising from the exercise of any Option granted to any Participant under the ESOS shall be borne by that Participant.
15.6
16. 16.1
16.2
16.3
16.4
17. 17.1
17.2
18. 18.1
18.2
19.
F-11
20. 20.1
COSTS AND EXPENSES OF THE ESOS Each Participant shall be responsible for all fees of CDP relating to or in connection with the issue and allotment of any Shares pursuant to the exercise of any Option in CDPs name, the deposit of share certificate(s) with CDP, the Participants securities account with CDP, or the Participants securities sub-account with a Depository Agent or CPF investment account with a CPF agent bank and all taxes referred to in Rule 19 which shall be payable by the relevant Participant. Save for such costs and expenses expressly provided in the ESOS to be payable by the Participants, all fees, costs and expenses incurred by the Company in relation to the ESOS including but not limited to the fees, costs and expenses relating to the allotment and issue of Shares pursuant to the exercise of any Option shall be borne by the Company. CONDITION OF OPTION Every Option shall be subject to the condition that no Shares shall be issued pursuant to the exercise of an Option if such issue would be contrary to any law or enactment, or any rules or regulations of any legislative or non-legislative governing body for the time being in force in Singapore or any other relevant country having jurisdiction in relation to the issue of Shares hereto.
20.2
21.
22.
DISCLAIMER OF LIABILITY Notwithstanding any provisions herein contained and subject to the Act, the Board, the Committee and the Company shall not under any circumstances be held liable for any costs, losses, expenses and damages whatsoever and howsoever arising in respect of any matter under or in connection with the ESOS, including but not limited to the Companys delay in allotting and issuing the Shares or in applying for or procuring the listing of the Shares on the SGX-ST.
23.
DISCLOSURE IN ANNUAL REPORT The Company shall make the following disclosure in its annual report: (a) (b) The names of the members of the Committee; The information required in the table below for the following Participants (which for the avoidance of doubt, shall include Participants who have exercised all their Options in any particular financial year): (i) (ii) (iii) participants who are Directors of the Company; participants who are Controlling Shareholders and their associates; and participants, other than those in (i) and (ii) above who receive 5.0% or more of the total number of Options available under the ESOS. Options granted during financial year under review (including terms) Aggregate Options granted since commencement of the ESOS to end of financial year under review Aggregate Options exercised since commencement of the ESOS to end of financial year under review Aggregate Options outstanding as at end of financial year under review
Name of Participant
F-12
(c)
The number and proportion of Options granted at the following discounts to average market value of the Shares in the financial year under review: (i) (ii) Options granted at up to 10.0% discount; and Options granted at between 10.0% but not more than 20.0% discount.
24.
ABSTENTION FROM VOTING Shareholders who are eligible to participate in the ESOS are to abstain from voting on any resolution relating to the ESOS.
25.
DISPUTES Any disputes or differences of any nature arising hereunder shall be referred to the Committee and its decision shall be final and binding in all respects.
26.
GOVERNING LAW The ESOS shall be governed by, and construed in accordance with, the laws of the Republic of Singapore. The Participants, by accepting Options in accordance with the ESOS, and the Company submit to the exclusive jurisdiction of the courts of the Republic of Singapore.
F-13
Schedule A
PEC EMPLOYEE SHARE OPTION SCHEME LETTER OF OFFER

Serial No: Date:
To:
[Name] [Designation] [Address]
Private and Confidential Dear Sir/Madam, 1. We have the pleasure of informing you that, pursuant to the PEC Employee Share Option Scheme (ESOS), you have been nominated to participate in the ESOS by the Committee (the Committee) appointed by the Board of Directors of PEC Ltd. (the Company) to administer the ESOS. Terms as defined in the ESOS shall have the same meaning when used in this letter. Accordingly, in consideration of the payment of a sum of S$1.00, an offer is hereby made to grant you an option (the Option), to subscribe for and be allotted Shares at the price of S$ for each Share. The Option is personal to you and shall not be transferred, charged, pledged, assigned or otherwise disposed of by you, in whole or in part, except with the prior approval of the Committee. The Option shall be subject to the terms of the ESOS, a copy of which is available for inspection at the business address of the Company. If you wish to accept the offer of the Option on the terms of this letter, please sign and return the enclosed Acceptance Form with a sum of S$1.00 not later than 5.00 p.m. on failing which this offer will lapse.
2.
3.
4.
5.
Yours faithfully, For and on behalf of PEC Ltd.
Name:
F-14
Schedule B
PEC EMPLOYEE SHARE OPTION SCHEME ACCEPTANCE FORM

Serial No: Date:
To:
The Committee, PEC Employee Share Option Scheme PEC Ltd.
Closing Date for Acceptance of Offer: Number of Shares Offered: Exercise Price for each Share: S$ Total Amount Payable: S$ I have read your Letter of Offer dated and agree to be bound by the terms of the Letter of Offer and ESOS referred to therein. Terms defined in your Letter of Offer shall have the same meanings when used in this Acceptance Form. I hereby accept the Option to subscribe for Shares at S$ for each Share. I enclose cash for S$1.00 in payment for the purchase of the Option/I authorise my employer to deduct the sum of S$1.00 from my salary in payment for the purchase of the Option. I understand that I am not obliged to exercise the Option. I confirm that my acceptance of the Option will not result in the contravention of any applicable law or regulation in relation to the ownership of shares in the Company or options to subscribe for such shares. I agree to keep all information pertaining to the grant of the Option to me confidential. I further acknowledge that you have not made any representation to induce me to accept the offer and that the terms of the Letter of Offer and this Acceptance Form constitute the entire agreement between us relating to the offer. Please print in block letters Name in full Designation Address Nationality *NRIC/Passport No. Signature Date
Note: *
: : : : : : :
Delete accordingly
F-15
Schedule C
PEC EMPLOYEE SHARE OPTION SCHEME FORM OF EXERCISE OF OPTION

Total number of ordinary shares (the Shares) : offered at S$ for each Share (the Exercise Price) under the ESOS on (Date of Grant) Number of Shares previously allotted thereunder :
Outstanding balance of Shares to be allotted : thereunder Number of Shares now to be subscribed :
To:
The Committee, PEC Ltd. Pursuant to your Letter of Offer dated exercise the Option to subscribe for for each Share. and my acceptance thereof, I hereby Shares in PEC Ltd. (the Company) at S$
1.
2.
I enclose a *cheque/cashiers order/bankers draft/postal order no. S$ by way of subscription for the total number of the said Shares.
for
3.
I agree to subscribe for the said Shares subject to the terms of the Letter of Offer, the ESOS and the Memorandum and Articles of Association of the Company. I declare that I am subscribing for the said Shares for myself and not as a nominee for any other person. I request the Company to allot and issue the Shares in the name of The Central Depository (Pte) Limited (CDP) for credit of my *Securities Account with CDP/Sub-Account with the Depository Agent/CPF investment account with my Agent Bank specified below and I hereby agree to bear such fees or other charges as may be imposed by CDP in respect thereof.
4.
5.
F-16
Please print in block letters Name in full Designation Address Nationality *NRIC/Passport No *Direct Securities Account No. OR *Sub Account No. Name of Depository Agent OR *CPF Investment Account No. Name of Agent Bank Signature Date : : : : : : : : : : : :
Note: * Delete accordingly
F-17
APPENDIX G
PROPERTIES LEASED
Location
Lease period
Use of premises
Approximate annual rental (1)
Lessor
Singapore A0408801 Plot 9 Banyan Drive Jurong Island 600.0 1 July 2009 to 30 June 2010 Temporary site office, fabrication shed, construction materials and tools storage Temporary site office, fabrication shed, construction materials and tools storage Temporary site office, fabrication shed, construction materials and tools storage Site office S$14,000 JTC Corporation
A0408802 Plot 9 Banyan Drive Jurong Island
2,685.0
1 July 2009 to 30 June 2010
S$64,000
JTC Corporation
A0408803 Banyan Avenue Banyan Drive
9,266.0
1 July 2009 to 30 June 2010
S$199,000
JTC Corporation
No. 38 Banyan Drive Singapore 627764
31.0
22 June 2007 to 21 June 2010
S$12,000(2)
Patrick Heng Contractor Pte Ltd TG-SN Pte Ltd
22 Banyan Drive Singapore 627756
1,053.7
22 June 2007 to 21 June 2010 22 June 2007 to 21 June 2010 8 May 2009 to 7 May 2010 18 May 2009 to 17 May 2010 25 May 2009 to 24 May 2010 1 June 2009 to 31 May 2010
Worksite
S$81,000(2)
24 Banyan Drive Singapore 627757
521.6
Worksite
S$40,000(2)
TG-SN Pte Ltd
Banyan Road Jurong Island (3 occupants) Banyan Road Jurong Island (52 occupants) Banyan Road Jurong Island (45 occupants) Banyan Road Jurong Island (49 occupants)
Not applicable(3)
S$8,000(2)
Jian Yu Construction Pte Ltd Jian Yu Construction Pte Ltd Jian Yu Construction Pte Ltd Jian Yu Construction Pte Ltd
Not applicable(3)
S$140,000(2)
Not applicable(3)
S$122,000(2)
Not applicable(3)
S$132,000(2)
G-1
Location
Lease period
Use of premises
Lessor
Singapore Banyan Road Jurong Island (50 occupants) Bukit Batok Straits (2 rooms) Not applicable(3) 8 June 2009 to 7 June 2010 16 February 2009 to 15 February 2010 1 October 2008 to 30 September 2010 Employee accommodation S$135,000(2) Jian Yu Construction Pte Ltd NCL Housing Pte Ltd Yokogawa Engineering Asia Pte Ltd
66.0
S$61,000
No. 5 Bedok South Road Singapore 469270
293.0
Office premises
S$150,000(2) for the first year and S$193,000(2) for the second year S$26,000(2)
Block 268C Boon Lay Drive #04-550 Singapore 643268 Block 8 Chia Ping Road #06-11 West of Jurong River Industrial Estate Singapore 619973 Block 8 Chia Ping Road #07-01 to #07-06 West of Jurong River Industrial Estate Singapore 619973 Block 8 Chia Ping Road #07-07/08 West of Jurong River Industrial Estate Singapore 619973 Block 8 Chia Ping Road #07-13 to 18 West of Jurong River Industrial Estate Singapore 619973
122.0
5 June 2009 to 4 June 2010 24 October 2007 to 23 October 2010(4)
Zhang Xiu Feng
312.5
Engineering and designing works (support functions)
S$40,000(2)
JTC Corporation
547.2
1 January 2007 to 31 December 2009(4)
Engineering and designing works
S$69,000(2)
JTC Corporation
170.0
6 April 2009 to 5 April 2012(4)
S$21,000(2)
JTC Corporation
510.0
17 October 2007 to 16 October 2010(4)
S$66,000(2)
JTC Corporation
Block 8 201.5 Chia Ping Road #07-19/20 West of Jurong River Industrial Estate Singapore 619973
22 March 2007 to 21 March 2010(4)
S$25,000(2)
JTC Corporation
G-2
Location
Lease period
Use of premises
Lessor
Singapore Block 106 Jurong East St 13 #08-216 Singapore 600106 Block 340 Jurong East Ave 1 #04-1658 Singapore 600340 Block 230 Jurong East St 21 #21-683 Singapore 600230 Block 274B Jurong West St 25 #13-95 Singapore 642274 91.0 3 October 2007 to 2 October 2009 1 May 2008 to 30 April 2010 Employee accommodation S$19,000(2) Sun Ping Dennis and Mdm Wang Jin Roy Martin Balhetchet and Tng Siew Tee Lee Gek Hwa
138.0
S$26,000
120.0
10 June 2008 to 9 December 2009 15 May 2008 to 14 May 2010
S$28,000(2)
120.0
S$30,000(2)
Kwek Chai Choon / Kwek Chong Liap @Kwek Chong Hwei / Chua Hua Boy @ Chua Ah Lek Chen Yin Jun
Block 276D Jurong West St 25 #13-01 Singapore 644276 Block 410 Jurong West St 42 #08-893 Singapore 640410 Block 484 Jurong West Ave 1 #10-107 Singapore 640484 Block 531 Jurong West #10-405 Singapore 640531 Block 661A Jurong West St 64 #02-404 Singapore 641661 Block 662A Jurong West St 64 #05-338 Singapore 641662 Block 719 Jurong West Avenue #01-58 Singapore 640719
110.0
7 June 2009 to 6 June 2010
S$24,000
149.0
1 June 2009 to 31 March 2010
S$20,000
Tan Yeow Tien
93.0
16 June 2008 to 15 June 2010
S$25,000(2)
Tan Bock Soon
122.0
4 February 2009 to 3 February 2010 1 November 2007 to 31 October 2009 6 December 2008 to 5 December 2009 1 July 2009 to 30 June 2010
S$23,000(2)
Teo Tai Kong
105.0
S$24,000(2)
Kang Sew Yew
110.0
S$25,000(2)
Jiang Wan Yu
149.0
S$25,000
Goo Mariah
G-3
Location
Lease period
Use of premises
Lessor
Singapore Block 826 Jurong West St 81 #03-424 Singapore 640826 Block 831 Jurong West St 81 #13-256 Singapore 640831 Block 854 Jurong West St 81 #07-512 Singapore 640854 Block 986B Jurong West St 93 #06-611 Singapore 640986 Block 686C Jurong West Central 1 #11-156 Singapore 643686 6 Jalan Samulun Singapore 629123 105.0 1 June 2009 to 31 May 2010 Employee accommodation S$23,000 Mak Kuay Yock
120.0
21 June 2009 to 20 June 2010
S$28,000
Rita Maria Nathan
122.0
1 July 2009 to 30 June 2010
S$25,000(2)
Mohd Zainudin bin Shafri
93.0
15 May 2009 to 14 May 2010
S$23,000
Kan Mei Lian
111.0
20 February 2008 to 19 February 2010 Indefinite, subject to approval from JTC Corporation to Tian San Singapore for the sub-lease to our Group Indefinite, subject to approval from JTC Corporation to Tian San Singapore for the sub-lease to our Group 1 November 2008 to 31 October 2009 1 March 2008 to 28 February 2010 1 November 2007 to 31 October 2009
S$30,000(2)
Goh Kau Cheng, Clara
143.0
Stress relief and heat treatment services
S$48,000
Tian San Singapore
6 Jalan Samulun Singapore 629123
2,867.0
Storage of equipment, such as welding machines and air compressors, and minor repair works Employee accommodation
S$165,780
Tian San Singapore
9 Kian Teck Drive Rooms 301-315B Singapore 628826 (31 rooms) Block 7, No. 3 Kian Teck Lane #01-26 Singapore 627846 Block 9, No. 3 Kian Teck Lane #01-30 Singapore 627847
953.4
S$1,080,000(2)
Eng Lee Engineering Pte Ltd
70.0
S$30,000(2)
KT Mesdorm Pte Ltd
70.0
S$26,000(2)
KT Mesdorm Pte Ltd
G-4
Location
Lease period
Use of premises
Lessor
Singapore Block 9, No. 3 Kian Teck Lane #02-34 Singapore 627845 Block 9, No. 3 Kian Teck Lane #06-36 Singapore 627847 Block 11, No. 3 Kian Teck Lane #03-39, #04-38 to #04-41 Singapore 627850 Block 11, No. 3 Kian Teck Lane #04-43 and #04-44 Singapore 627848 Block 13, No. 3 Kian Teck Lane #05-45 to #05-50 Singapore 627850 Block 15, No. 3 Kian Teck Lane #02-57 to #02-64 and #03-57 to #03-64 Singapore 627840 Block 15, No. 3 Kian Teck Lane #07-60 Singapore 627850 Block 15, No. 3 Kian Teck Lane #07-61 Singapore 627846 Block 15, No. 3 Kian Teck Lane #05-63 to #05-64 Singapore 627640 Lot 1874PT and 1972PT MK34 Meranti Crescent Jurong Island 70.0 16 December 2007 to 15 December 2009 15 September 2008 to 14 September 2009 7 March 2009 to 6 March 2011 Employee accommodation S$30,000(2) KT Mesdorm Pte Ltd
65.0
S$34,000(2)
KT Mesdorm Pte Ltd
325.0
S$148,000(2)
KT Mesdorm Pte Ltd
130.0
1 April 2008 to 31 March 2010
S$59,000(2)
KT Mesdorm Pte Ltd
390.0
7 February 2009 to 6 February 2011 1 December 2008 to 30 November 2009
S$195,000(2)
KT Mesdorm Pte Ltd
1,040.0
S$537,000(2)
KT Mesdorm Pte Ltd
65.0
16 May 2009 to 15 May 2011
S$30,000(2)
KT Mesdorm Pte Ltd
70.0
1 December 2008 to 30 November 2009 7 February 2009 to 6 February 2011 1 November 2008 to 30 September 2009
S$34,000(2)
KT Mesdorm Pte Ltd
130.0
S$65,000(2)
KT Mesdorm Pte Ltd
5,250.0
Worksite / storage
S$18,000 for the duration of the lease (11 months)
Singapore Land Authority
G-5
Location
Lease period
Use of premises
Lessor
Singapore MURAI II at State Land Lot 1068X Construction PT MK 12 at 1A Murai Farmway Singapore 709154 Blk H #03-24 H#03-25 MURAI II at State Land Lot 1068X Construction PT MK 12 at 1A Murai Farmway Singapore 709154 Blk H #03-26 H#03-27 Block 34 Penjuru Place #01-40 to #01-47, #02-40 to #02-47 #03-40 to #03-47 #04-40 to #04-47 #05-40 to #05-47 #06-40 to #06-47 Singapore 608559 Block 34 Penjuru Place #05-48 to #05-59 Singapore 608559 Block 50 Penjuru Place #03-01 to #03-14, #04-02 #04-05 to #04-08 and #04-11 Singapore 608566 Block 52 Penjuru Place #04-28/29/30 Singapore 608565 Block 56 Penjuru Place #02-48 and #02-50 to #02-56 Singapore 608566 Block 56 Penjuru Place #06-64 Singapore 608566 Pulau Ular (1 dormitory room) 96.0 28 February 2009 to 27 February 2010 Employee accommodation S$46,000(2) Aik Chuan Pte Ltd
96.0
14 February 2009 to 13 February 2010
S$46,000(2)
Aik Chuan Pte Ltd
3,216.0
3 June 2009 to 2 June 2011
S$1,599,000(2)
Mini Environment Service Pte Ltd
804.0
22 April 2009 to 21 April 2011
S$400,000(2)
Mini Environment Service
1,340.0
10 June 2009 to 9 June 2011
S$666,000(2)
MES & JPD Housing Pte Ltd
210.0
15 July 2009 to 14 July 2011
S$100,000(2)
469.0
1 February 2009 to 31 January 2011 9 February 2009 to 8 February 2010 3 January 2009 to 3 July 2009(5)
S$256,000(2)
67.0
S$37,000(2)
36.0
S$7,000 for the duration of the lease (6 months)
Jian Yu Construction Pte Ltd
G-6
Location
Lease period
Use of premises
Lessor
Singapore Pulau Ular (2 dormitory rooms) 72.0 11 April 2009 to 10 October 2009 11 April 2009 to 10 October 2009 8 March 2009 to 7 September 2009 19 January 2009 to 19 July 2009(5) Employee accommodation S$14,000 for the duration of the lease (6 months) S$14,000 for the duration of the lease (6 months) S$22,000 for the duration of the lease (6 months) S$29,000 for the duration of the lease (6 months) S$36,000 for the duration of the lease (6 months) S$36,000 for the duration of the lease (6 months) S$43,000(2) Jian Yu Construction Pte Ltd
Pulau Ular (2 dormitory rooms)
72.0
108.0
144.0
180.0
26 January 2009 to 25 July 2009(5)
180.0
1 March 2009 to 30 August 2009 1 August 2008 to 31 July 2009(6)
Lot No. 3759 41 Soon Lee Road Singapore 628085 Room No. A0325 21 Soon Lee Road Singapore 628084 (4 rooms)
72.0
JYC-NCL Pte Ltd
100.0
2 February 2009 to 1 February 2010 4 March 2009 to 3 March 2010 7 January 2009 to 6 January 2010
S$86,000(2)
JYC-NCL Pte Ltd
21 Soon Lee Road Singapore 628084 (3 rooms) 31 Soon Lee Road Singapore 628087 (Soon Lee Lodge) Block C #01-01 to #01-05 Block E #04-10 to #04-14 Block E #01-04 and #01-07 to #01-08 Block F #04-02 to #04-03 Block G #04-01 to #04-06
75.0
S$65,000(2)
JYC-NCL Pte Ltd
1,008.0
S$559,000(2)
Aik Chuan Construction Pte Ltd
G-7
Location
Lease period
Use of premises
Lessor
Singapore 31 Soon Lee Road Singapore 628087 (Soon Lee Lodge) (2 rooms) 21 Soon Lee Road Singapore 628084 (39 rooms) 96.0 13 July 2009 to 12 July 2010 Employee accommodation S$53,000(2) Aik Chuan Construction Pte Ltd
975.0
1 November 2008 to 31 October 2009 1 January 2001 to 15 October 2025(7) 16 October 1995 to 15 October 2025(8)
S$842,000(2)
JYC-NCL Pte Ltd
19 Shipyard Road Singapore 628144
4,514.1
Office and fabrication facilities
S$100,000
JTC Corporation
21 Shipyard Road Singapore 628144
5,610.0
S$106,000 for year 2009. Rental rate is subject to revision on every 16 October of every year. S$67,000
JTC Corporation
19 Tuas Avenue 8 Singapore 639234
5,831.7
16 May 1990 to 15 May 2020(9) 1 November 1983 to 31 October 2013(10) 15 December 2008 to 16 October 2024 1 September 2008 to 31 August 2009/ 1 September 2009 to 31 August 2010
Office and fabrication facilities Office and fabrication facilities
JTC Corporation
27 Tuas Avenue 3 Singapore 639419
4,051.2
S$53,000
JTC Corporation
7 Tuas Basin Close Singapore 638802(11)
4,175.0
S$51,000
JTC Corporation
Block 18 55.7 Toh Guan Road East #06-34 Singapore 608591
S$26,000(2)/ S$26,000(2)
Centurion Dormitory (Westlite) Pte. Ltd. (formerly known as Duchess Dormitory Pte Ltd Centurion Dormitory (Westlite) Pte. Ltd. (formerly known as Duchess Dormitory Pte Ltd
Block 18 55.7 Toh Guan Road East #06-36 Singapore 608591
1 September 2008 to 31 August 2009/ 1 September 2009 to 31 August 2010
S$26,000(2)/ S$26,000(2)
G-8
Location
Lease period
Use of premises
Lessor
Singapore Block 20 Toh Guan Road East #06-42 Singapore 608592 55.7 1 September 2008 to 31 August 2009/ 1 September 2009 to 31 August 2010 Employee accommodation S$26,000(2)/ S$26,000(2) Centurion Dormitory (Westlite) Pte. Ltd. (formerly known as Duchess Dormitory Pte Ltd Centurion Dormitory (Westlite) Pte. Ltd. (formerly known as Duchess Dormitory Pte Ltd) Bedec Euroform Pte Ltd Bedec Euroform Pte Ltd
Block 22 Toh Guan Road East #04-59 Singapore 608593
55.7
1 July 2009 to 30 June 2011
S$26,000(2)
3B Toh Guan Road East 3rd Floor 3B Toh Guan Road East 4th Floor
90.0
13 October 2008 to 12 April 2010 27 March 2009 to 26 September 2009 16 October 2007 to 15 October 2009
S$417,000(2)
105.0
S$119,000(2) for the duration of the lease (6 months) S$22,000
No. 9E Yuan Ching Road #02-60 Lakeside Apartments Singapore 618647 Block 9A Parkview Mansion Yuan Ching Road #07-14 Singapore 618643 Block 9E Lakeside Apartment Yuan Ching Road #01-54 Singapore 618647 Block 183 Yung Sheng Road #09-63 Singapore 610183
145.0
Eng Heng Food Manufactory Pte Ltd
121.0
15 October 2008 to 14 October 2009
S$20,000
Chong Kim Fong
121.0
1 August 2007 to 31 July 2009 / 1 August 2009 to 31 July 2011 15 December 2008 to 14 December 2010
S$20,000(2) / S$22,000(2)
Sarfunnisa Ibrahim
110.0
S$23,000
Huang Yaozhi
G-9
Location
Lease period
Use of premises
Lessor
PRC Room 319 KEN Office Building 22 South 1st Section 1st Ring Road Wuhou District Chengdu City PRC(12) Shihua Road 360-2, Daya Bay Huizhou City PRC Room 302 Building 9 Yujingwan Garden Dayawan Huizhou City PRC(12) Room 202 Building 9 Yujingwan Garden Dayawan Huizhou City PRC(12) Room 501 Building 15 Yujingwan Garden Dayawan Huizhou City PRC(12) Unit 4, Building 6 Binhai Subdistrict Aotou Town Dayawan Huizhou City PRC()(13) First floor to fifth floor, Building 8 Lane 7, Xianshui Li Aotou office Dayawan Huizhou City PRC(12) Yanbei Village Aotou Town Dayawan Huizhou City PRC(13) 269.4 26 January 2009 to 25 January 2011 Engineering and designing works RMB142,000 Chengdu Zi Hua Real Estate Leasing Co., Ltd.
70.0
Not fixed
Industrial use
Nil
Huizhou Tianxin Engineering Co., Ltd. Guo Xinjie and Yuan Bingli
72.5
20 June 2009 to 20 June 2010
RMB9,000
72.5
1 January 2008 to 31 December 2009
RMB9,000
Lu Manhua
92.0
1 September 2008 to 31 August 2009
RMB8,000
Guo Xiangqing and Wang Shuquan
535
1 February 2009 to 31 July 2009
RMB30,000 for the duration of the lease (6 months)
Wang Weinan
650.1
1 April 2008 to 30 August 2009
RMB42,000
Lan Weiying
100.0
1 February 2008 to 31 January
RMB12,000
Chen Zhiyu
G-10
Location
Lease period
Use of premises
Lessor
PRC Room 705, No. 3065 Hongshen Road Minhang District Shanghai City PRC(12) 259.0 10 November 2007 to 9 November 2010 Office premises RMB217,000 for the first year of the lease (from 10 November 2007 to 9 November 2008) RMB227,000 for the second year of the lease (from 10 November 2008 to 9 November 2010) Shanghai Huabao Industry Co., Ltd
Room 1103, No. 5 Lane 1699 Longmin Road Minhang District Shanghai City PRC(12) Middle East P.O. Box 5461 Fujairah UAE
110.0
20 November 2008 to 19 November 2009
RMB54,000
Fan Cheng Chong, Cheng Hong, Fan Jiafeng, Fan Jialong
100.0
29 October 2007 to 28 October 2009/ 29 October 2009 to 31 December 2012 1 April 2009 to 31 March 2010
Office premises
AED100,000 for the first year/AED 115,000 for the second year
Fujairah Free Zone Authority, Government of Fujairah
Department of Civil Aviation Government of Fujairah, UAE (5 rooms of worker dormitories)
180.0
AED102,000
Fujairah National Catering Establishments, Department of Civil Aviation, Government of Fujairah Fujairah National Catering Establishments, Department of Civil Aviation, Government of Fujairah Jassim Mohd Bin Darwish
Department of Civil Aviation Government of Fujairah UAE (10 rooms of worker dormitories)
360.0
27 March 2009 to 31 March 2010
AED204,000
F-102 AL Faseal Plot B/33 Government of Fujairah UAE
55.0
21 July 2008 to 20 July 2009(6)
AED50,000
G-11
Location
Lease period
Use of premises
Lessor
Middle East FUJ2, Flat No. 203 Government of Fujairah UAE P.O. Box 1063 Al Hayl Industrial Area Fujairah Al Hayl, Government of Fujairah, UAE (30 rooms in labour camp) P.O. Box 4332 Merashid Fujairah Villa 1 UAE P.O. Box 4332 Merashid Fujairah Villa 2 UAE P.O. Box 4332 Merashid Fujairah Villa 3 UAE P.O. Box 4332 Merashid Fujairah Villa 4 UAE No. 204, Shamme Building, Fazil Fujairah UAE P.O. Box 38 Mershid, Fujairah UAE Vietnam 63/11 Nguyen Thi Minh Khai Street Tan Lap Ward Nha Trang City Khanh Hoa Province Vietnam 246.9 1 September 2008 to 31 August 2009 Office premises VND66,000,000 for the period beginning 1 September 2008 to 28 February 2008 and VND 45,000,000 for the period beginning 1 March 2008 to 31 August 2009 Mr Le Hong Hai and Ms Nguyen Ngoc Thuy 55.0 3 July 2009 to 2 July 2010 Employee accommodation AED55,000 Madeena Real Estate
2,000.0
3 July 2009 to 7 July 2010
AED468,000
Emad Khaid Kandakjy
150.0
AED50,000
Abdul Qader Hassan
150.0
AED45,000
Abdul Qader Hassan
150.0
AED45,000
Abdul Qader Hassan
150.0
AED45,000
Abdul Qader Hassan
65.0
1 May 2009 to 30 April 2010
AED40,000
Mohammed Ali Al-Mulla
65.0
1 May 2009 to 30 April 2010
AED50,000
Rashed Safed Al Falani
G-12
Notes: (1) (2) (3) Annual rental rounded up to the nearest thousand. This amount includes other charges such as service and conservancy charges, furniture and fittings and/or other charges. Approximate land area leased is not applicable for this property as the rental is in respect of the number of occupants staying in the workers dormitory. Lease term of three years granted by JTC Corporation to our Group with an option to renew for a further three years, subject to the terms of the respective option. These leases are renewable on a monthly basis with the agreement of the landlord and our Group upon their expiry. We are currently negotiating for renewal of these leases with the respective landlords. Lease term of 24 years and 9.5 months granted by JTC Corporation to our Group. Lease term of 30 years granted by JTC Corporation to our Group with an option to renew for a further 30 years, subject to the terms of the option. Lease term of 30 years granted by JTC Corporation which was purchased by our Group from Sin Heng Choon Metals Pte. Ltd. on 3 April 2007, with an option to renew for a further 30 years, subject to the terms of the option. Lease term of 30 years granted by JTC Corporation to our Group. Property is mortgaged in favour of Oversea-Chinese Banking Corporation Limited to secure certain credit facilities. The legal documentation for this lease is in process by JTC Corporation. These leases are valid and binding between lessor and lessee but have not been registered as required under PRC laws. The registration of a lease agreement with the competent real estate administrative authorities would enable our relevant PRC Subsidiaries to enforce their respective rights over a third party in the event of a dispute. We do not expect to have any difficulty in finding alternative premises in the event that the lease is challenged successfully by a third party (if any). We have not been provided with the certificates of ownership by the lessors in respect of these leases. However, no penalties will be imposed on us in the event that the lessors do not possess the certificate of ownership in respect of their respective premises. We do not expect to have any difficulty in finding alternative premises in the event that the lease is challenged successfully by a third party (if any).
(4)
(5) (6) (7) (8)
(9)
(10)
(11) (12)
(13)
G-13
APPENDIX H
TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION AND ACCEPTANCE

Applications are invited for the subscription of the New Shares at the Issue Price for each New Share, subject to the following terms and conditions: 1. YOUR APPLICATION MUST BE MADE IN LOTS OF 1,000 NEW SHARES OR INTEGRAL MULTIPLES THEREOF. YOUR APPLICATION FOR ANY OTHER NUMBER OF NEW SHARES WILL BE REJECTED. Your application for the Offer Shares may be made by way of the printed WHITE Offer Shares Application Forms or by way of Automated Teller Machine (ATMs) belonging to the Participating Banks (ATM Electronic Application) or the Internet Banking (IB) websites of the relevant Participating Banks (Internet Electronic Application). Application for the Placement Shares (other than the Internet Placement Shares and the Reserved Shares) may only be made by way of the printed BLUE Placement Shares Application Forms, or such other forms of application as the Issue Manager deems appropriate. Application for the Internet Placement Shares (also referred to as Internet Electronic Application) may only be made by way of an Internet Electronic Application through the website of DBS Vickers Securities (Singapore) Pte Ltd (DBS Vickers) at http://www.dbsvonline.com if you have an internet trading account with DBS Vickers. Internet Electronic Applications, both through the IB websites of the relevant Participating Banks and the internet website of DBS Vickers, shall, together with ATM Electronic Applications, be referred to as Electronic Applications. Applications for the Reserved Shares may only be made by way of the printed PINK Reserved Shares Application Forms, or such other forms of application as the Issue Manager deems appropriate. YOU MAY NOT USE YOUR CPF FUNDS TO APPLY FOR THE NEW SHARES. 3. You (not being an approved nominee company) are allowed to submit ONLY one application in your own name for: (a) the Offer Shares by any one of the following: Offer Shares Application Form; ATM Electronic Application; or Internet Electronic Application, or (b) the Placement Shares (other than the Reserved Shares) by any one of the following: Placement Shares Application Form; Internet Electronic Application; or such other forms of application as the Issue Manager deems appropriate. If more than one application is submitted for either the Offer Shares or the Placement Shares (other than the Reserved Shares), such separate applications shall be deemed to be multiple applications and shall be rejected. If you have made an application for the Placement Shares (other than the Reserved Shares), you should not make any application for the Offer Shares and vice versa. Such separate applications shall be deemed to be multiple applications and shall be rejected.
2.
H-1
Joint or multiple applications shall be rejected. Persons submitting or procuring submissions of multiple share applications (whether for the Offer Shares, the Placement Shares or both the Offer Shares and the Placement Shares) may be deemed to have committed an offence under the Penal Code (Chapter 224) of Singapore and the Securities and Futures Act (Chapter 289) of Singapore and such applications may be referred to the relevant authorities for investigation. Multiple applications or those appearing to be or suspected of being multiple applications (other than as provided herein) will be liable to be rejected at the discretion of our Company. An applicant who has made an application for the Reserved Shares using a Reserved Shares Application Form may: (a) submit one separate application for the Offer Shares in his own name either by way of an Offer Shares Application Form or through an Electronic Application; or submit one separate application for the Placement Shares (other than the Reserved Shares) by way of a Placement Shares Application Form or by way of an Internet Electronic Application through the website of DBS Vickers or such other forms of application as the Issue Manager deems appropriate,
(b)
provided he adheres to the terms and conditions of this Prospectus. Such separate applications will not be treated as multiple applications. 4. We will not accept applications from any person under the age of 18 years, undischarged bankrupts, sole-proprietorships, partnerships, non-corporate bodies, joint Securities Account holders of CDP and applicants whose addresses (furnished in their printed Application Forms or, in the case of Electronic Applications, contained in the records of the relevant Participating Banks or DBS Vickers, as the case may be) bear post office box numbers. No person acting or purporting to act on behalf of a deceased person is allowed to apply under the Securities Account with CDP in the deceaseds name at the time of application. In addition, applicants who wish to subscribe for the Placement Shares through the website of DBS Vickers: (a) (b) (c) (d) (e) (f) 5. must not be corporations, sole-proprietorships, partnerships, or any other business entities; must be over the age of 18 years; must not be undischarged bankrupts; must apply for the Placement Shares in Singapore; must have a mailing address in Singapore; and must be customers who maintain trading accounts with DBS Vickers.
We will not recognise the existence of a trust. Any application by a trustee or trustees must be made in his/their own name(s) and without qualification or, where the application is made by way of a printed Application Form by a nominee, in the name(s) of an approved nominee company or approved nominee companies, in each case, after complying with paragraph 6 below. WE WILL ONLY ACCEPT NOMINEE APPLICATIONS FROM APPROVED NOMINEE COMPANIES. Approved nominee companies are defined as banks, merchant banks, finance companies, insurance companies, licensed securities dealers in Singapore and nominee companies controlled by them. Applications made by nominees other than approved nominee companies will be rejected.
6.
H-2
7.
IF YOU ARE NOT AN APPROVED NOMINEE COMPANY, YOU MUST MAINTAIN A SECURITIES ACCOUNT WITH CDP IN YOUR OWN NAME AT THE TIME OF YOUR APPLICATION. If you do not have an existing Securities Account with CDP in your own name at the time of application, your application will be rejected (if you apply by way of an Application Form) or you will not be able to complete your Electronic Application (if you apply by way of an Electronic Application). If you have an existing Securities Account but fail to provide your Securities Account number or provide an incorrect Securities Account number in section B of the Application Form or in your Electronic Application, as the case may be, your application is liable to be rejected. Subject to paragraph 8 below, your application shall be rejected if your particulars such as name, NRIC/passport number, nationality, permanent residence status and CDP Securities Account number, provided in your Application Form, or in the case of an Electronic Application, contained in the records of the relevant Participating Bank or DBS Vickers at the time of your Electronic Application, as the case may be, differ from those particulars in your Securities Account as maintained by CDP. If you have more than one individual direct Securities Account with CDP, your application shall be rejected. If your address as stated in the Application Form or, in the case of an Electronic Application, contained in the records of the relevant Participating Bank or DBS Vickers, as the case may be, is different from the address registered with CDP, you must inform CDP of your updated address promptly, failing which the notification letter on successful allocation will be sent to your address last registered with CDP. Our Company reserves the right to reject any application which does not conform strictly to the instructions set out in the Application Forms and this Prospectus or which does not comply with the instructions for Electronic Applications or with the terms and conditions of this Prospectus or, in the case of an application by way of an Application Form, which is illegible, incomplete, incorrectly completed or which is accompanied by an improperly drawn up or improper form of remittance. Our Company further reserves the right to treat as valid any applications not completed or submitted or effected in all respects in accordance with the instructions set out in the Application Forms and this Prospectus (including the instructions set out in the Electronic Applications), and also to present for payment or other processes all remittances at any time after receipt and to have full access to all information relating to, or deriving from, such remittances or the processing thereof. Our Company reserves the right to reject or to accept, in whole or in part, or to scale down or to ballot any application, without assigning any reason therefor, and we will not entertain any enquiry and/or correspondence on our decision except in respect of applications which have been balloted but subsequently rejected where the reasons for such rejection will be provided to the Applicant. This right applies to applications made by way of Application Forms or such other forms of application as the Issue Manager deems appropriate and by way of Electronic Applications. In deciding the basis of allotment, our Company will give due consideration to the desirability of allotting the New Shares to a reasonable number of applicants with a view to establishing an adequate market for the Shares. Share certificates will be registered in the name of CDP or its nominee and will be forwarded only to CDP. It is expected that CDP will send to you, at your own risk, within 15 Market Days after the close of the Application List, a statement of account stating that your Securities Account has been credited with the number of New Shares allotted to you. This will be the only acknowledgment of application monies received and is not an acknowledgment by our Company. You irrevocably authorise CDP to complete and sign on your behalf as transferee or renouncee any instrument of transfer and/or other documents required for the issue or transfer of the New Shares allotted to you. This authorisation applies to applications made by way of printed Application Forms, or such other forms of application as the Issue Manager may deem appropriate and by way of Electronic Applications.
8.
9.
10.
11.
H-3
12.
In the event of an under-subscription for the Offer Shares as at the close of the Application List, that number of Offer Shares not subscribed for shall be made available to satisfy excess applications for the Placement Shares to the extent that there is an over-subscription for 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 of Placement Shares not subscribed for shall be made available to satisfy excess applications for Offer Shares to the extent that there is an over-subscription for the Offer Shares as at the close of the Application List. In the event of an under-subscription for the Internet Placement Shares to be applied through the website of DBS Vickers as at the close of the Application List, that number of Internet Placement Shares not subscribed for shall be made available to satisfy excess applications for the Placement Shares made by way of Placement Shares Application Forms or such other forms of application as the Issue Manager deems appropriate to the extent that there is an over-subscription for such Placement Shares (excluding the Internet Placement Shares) as at the close of the Application List or to satisfy excess applications for the Offer Shares to the extent that there is an over-subscription for the Offer Shares as at the close of the Application List. In the event of an under-subscription for the Reserved Shares as at the close of the Application List, the number of Reserved Shares not subscribed shall be made available to satisfy excess applications for the Placement Shares to the extent that there is an over-subscription for the Placement Shares as at the close of the Application List or, in the event of an under-subscription for the Placement Shares as at the close of the Application List, to satisfy excess applications made by members of the public for Offer Shares to the extent that there is an over-subscription for Offer Shares as at the close of the Application List. In the event of an over-subscription for the Offer Shares as at the close of the Application List and/or the Placement Shares (including Internet Placement Shares and Reserved Shares) are fully subscribed or over-subscribed as at the close of the Application List, the successful applications for the Offer Shares will be determined by ballot or otherwise as determined by our Directors, in consultation with the Issue Manager, and approved by the SGX-ST.
13.
You irrevocably authorise CDP to disclose the outcome of your application, including the number of New Shares allotted to you pursuant to your application, to our Company, the Issue Manager, the Underwriter, the Placement Agent, DBS Vickers and any other parties so authorised by CDP, our Company, the Issue Manager, the Underwriter and/or the Placement Agent. By completing and delivering an Application Form and, in the case of an ATM Electronic Application, by pressing the Enter or OK or Confirm or Yes key or any other relevant key on the ATM or in the case of an Internet Electronic Application, by clicking Submit or Continue or Yes or Confirm or any other button on the IB website of the relevant Participating Bank or the website of DBS Vickers in accordance with the provisions herein, you: (a) irrevocably offer, agree and undertake to subscribe for the number of New Shares specified in your application (or such smaller number for which the application is accepted) at the Issue Price for each New Share and agree that you will accept such New Shares as may be allotted to you, in each case on the terms of, and subject to the conditions set out in, this Prospectus and the Memorandum and Articles of Association of the Company; agree that in the event of any inconsistency between the terms and conditions for application set out in this Prospectus and those set out in the website of DBS Vickers, or the IB websites or ATMs of the Participating Banks, the terms and conditions set out in this Prospectus shall prevail; agree that the aggregate Issue Price for the New Shares applied for is due and payable to the Company upon application;
14.
(b)
(c)
H-4
(d)
warrant the truth and accuracy of the information contained, and representations and declarations made, in your application, and acknowledge and agree that such information, representations and declarations will be relied on by our Company in determining whether to accept your application and/or whether to allot any New Shares to you; and agree and warrant that if the laws of any jurisdictions outside Singapore are applicable to your application, you have complied with all such laws and none of our Company, the Issue Manager, the Underwriter and the Placement Agent will infringe any such laws as a result of the acceptance of your application.
(e)
15.
Our acceptance of applications will be conditional upon, inter alia, our Company being satisfied that: (a) permission has been granted by the SGX-ST to deal in, and for quotation of, all our existing issued Shares and the New Shares on the Official List of the SGX-ST; the Management and Underwriting Agreement and the Placement Agreement referred to in the section entitled Management, Underwriting and Placement Arrangements in this Prospectus have become unconditional and have not been terminated; and the Monetary Authority of Singapore (the Authority) has not served a stop order which directs that no or no further shares to which this Prospectus relates be allotted or issued (Stop Order).
(b)
(c)
16.
In the event that a Stop Order in respect of the New Shares is served by the Authority or other competent authority, and: (a) the New Shares have not been issued, we will (as required by law) deem all applications to have been withdrawn and cancelled and our Company shall refund the application monies (without interest or any share of revenue or other benefit arising therefrom and at your own risk) to you within 14 days of the date of the Stop Order; or if the New Shares have already been issued but trading has not commenced, the issue will (as required by law) be deemed void and we will refund your payment for the New Shares (without interest or any share of revenue or other benefit arising therefrom and at your own risk) to you within 14 days from the date of the Stop Order.
(b)
This shall not apply where only an interim Stop Order has been served. 17. In the event that an interim Stop Order in respect of the New Shares is served by the Authority or other competent authority, no New Shares shall be issued to you until the Authority revokes the interim Stop Order. The Authority is not able to serve a Stop Order in respect of the New Shares if the New Shares have been issued and listed on the SGX-ST and trading in them has commenced. We will not hold any application in reserve. We will not allot or allocate any Shares on the basis of this Prospectus later than six months after the date of registration of this Prospectus by the Authority. Additional terms and conditions for applications by way of Application Forms are set out in the section entitled Additional Terms and Conditions for Applications Using Printed Application Forms on pages H-6 to H-10 of this Prospectus.
18.
19. 20.
21.
H-5
22.
Additional terms and conditions for applications by way of Electronic Applications are set out in the section entitled Additional Terms and Conditions for Electronic Applications on pages H-10 to H19 of this Prospectus. Any reference to you or the Applicant in this section shall include an individual, a corporation, an approved nominee company and trustee applying for the Offer Shares by way of an Offer Shares Application Form or by way of an Electronic Application, a person applying for the Placement Shares by way of a Placement Shares Application Form or by way of an Electronic Application or such other forms of application as the Issue Manager deems appropriate and a person applying for the Reserved Shares by way of a Reserved Shares Application Form.
23.
ADDITIONAL TERMS AND CONDITIONS FOR APPLICATIONS USING PRINTED APPLICATION FORMS Applications by way of Application Forms shall be made on and subject to the terms and conditions of this Prospectus, including but not limited to the terms and conditions appearing below as well as those set out under the section entitled TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION AND ACCEPTANCE on pages H-1 to H-19 of this Prospectus, as well as the Memorandum and Articles of Association of our Company. 1. Your application for the Offer Shares must be made using the WHITE Offer Shares Application Forms and WHITE official envelopes A and B, accompanying and forming part of this Prospectus. Applications for the Placement Shares (other than the Internet Placement Shares and the Reserved Shares) by way of Application Forms must be made using the BLUE Placement Shares Application Forms accompanying and forming part of this Prospectus or such other forms of application as the Issue Manager may deem appropriate. Applications for the Reserved Shares must be made using the PINK Reserved Shares Application Forms, or any other form of application as may be deemed appropriate by the Issue Manager. Without prejudice to the rights of the Company, the Issue Manager has been authorised to accept, for and on behalf of the Company, such other forms of applications as the Issue Manager deems appropriate. We draw your attention to the detailed instructions contained in the respective Application Forms and this Prospectus for the completion of the Application Forms which must be carefully followed. Our Company reserves the right to reject applications which do not conform strictly to the instructions set out in the Application Forms and this Prospectus or to the terms and conditions of this Prospectus or which are illegible, incomplete, incorrectly completed or which are accompanied by improperly drawn remittances. 2. You must complete your Application Forms in English. Please type or write clearly in ink using BLOCK LETTERS. You must complete all spaces in your Application Forms except those under the heading FOR OFFICIAL USE ONLY and you must write the words NOT APPLICABLE or N.A. in any space that is not applicable. Individuals, corporations, approved nominee companies and trustees must give their names in full. If you are an individual, you must make your application using your full name as it appears in your identity card (if you have such an identification document) or in your passport and, in the case of corporations, in your full names as registered with a competent authority. If you are not an individual, you must complete the Application Form under the hand of an official who must state the name and capacity in which he signs the Application Form. If you are a corporation completing the Application Form, you are required to affix your Common Seal (if any) in accordance with your memorandum and articles of association or equivalent constitutive documents. If you are a corporate Applicant and your application is successful, a copy of your memorandum and articles of association or equivalent constitutive documents must be lodged with our Companys Share Registrar and Share Transfer Office. Our Company reserves the right to require you to produce documentary proof of identification for verification purposes. H-6
3.
4.
5.
(a) (b)
You must complete Sections A and B and sign page 1 of the Application Form. You are required to delete either paragraph 7(a) or 7(b) on page 1 of the Application Form. Where paragraph 7(a) is deleted, you must also complete Section C of the Application Form with particulars of the beneficial owner(s). If you fail to make the required declaration in paragraph 7(a) or 7(b), as the case may be, on page 1 of the Application Form, your application is liable to be rejected.
(c)
6.
You (whether an individual or corporate Applicant, whether incorporated or unincorporated and wherever incorporated or constituted) will be required to declare whether you are a citizen or permanent resident of Singapore or a corporation in which citizens or permanent residents of Singapore or any body corporate constituted under any statute of Singapore having an interest in the aggregate of more than 50.0% of the issued share capital of or interests in such corporations. If you are an approved nominee company, you are required to declare whether the beneficial owner of the New Shares is a citizen or permanent resident of Singapore or a corporation, whether incorporated or unincorporated and wherever incorporated or constituted, in which citizens or permanent residents of Singapore or any body corporate incorporated or constituted under any statute of Singapore have an interest in the aggregate of more than 50.0% of the issued share capital of or interests in such corporation. You may apply for the New Shares using only cash. Each application must be accompanied by a cash remittance in Singapore currency for the full amount payable, in respect of the number of New Shares applied for, in the form of a BANKERS DRAFT or CASHIERS ORDER drawn on a bank in Singapore, made out in favour of PEC SHARE ISSUE ACCOUNT crossed A/C PAYEE ONLY with your name and address written clearly on the reverse side. Applications not accompanied by any payment or accompanied by any other form of payment will not be accepted. Remittances bearing Not Transferable or Non Transferable crossings will be rejected. No acknowledgement of receipt will be issued by the Company or the Issue Manager for applications or application monies received.
7.
8.
Monies paid in respect of unsuccessful applications are expected to be returned (without interest or any share of revenue or other benefit arising therefrom) to you within 24 hours of the balloting at your own risk. Where your application is rejected or accepted in part only, the full amount or the balance of the application monies, as the case may be, will be refunded (without interest or any share of revenue or other benefit arising therefrom) to you by ordinary post at your own risk within 14 Market Days after the close of the Application List, provided that the remittance accompanying such application which has been presented for payment or other processes has been honoured and the application monies have been received in the designated share issue account. Capitalised terms used in the Application Forms and defined in this Prospectus shall bear the meanings assigned to them in this Prospectus. By completing and delivering the Application Form, you agree that: (a) in consideration of our Company having distributed the Application Form to you and agreeing to close the Application List at 12:00 noon on 5 August 2009 or such other time or date as our Directors may, in consultation with the Issue Manager, decide and by completing and delivering this Application Form: (i) (ii) your application is irrevocable; and your remittance will be honoured on first presentation and that any monies returnable may be held pending clearance of your payment without interest or any share of revenue or other benefit arising therefrom;
9.
10.
(b)
all applications, acceptances or contracts resulting therefrom under the Invitation shall be governed by and construed in accordance with the laws of Singapore and that you irrevocably submit to the non-exclusive jurisdiction of the Singapore courts; H-7
(c)
in respect of the New Shares for which your application has been received and not rejected, acceptance of your application shall be constituted by written notification by or on behalf of our Company and not otherwise, notwithstanding any remittance being presented for payment by or on behalf of our Company; you will not be entitled to exercise any remedy of rescission for misrepresentation at any time after acceptance of your application; reliance is placed solely on information contained in this Prospectus and that none of our Company, the Issue Manager, the Underwriter and the Placement Agent or any other person involved in the Invitation shall have any liability for any information not so contained; you consent to the disclosure of your name, NRIC/passport number, address, nationality, permanent residence status, CDP Securities Account number, and share application amount to our Share Registrar, SGX-ST, CDP, SCCS, our Company, the Issue Manager, the Underwriter and the Placement Agent; you irrevocably agree and undertake to subscribe for the number of New Shares applied for as stated in the Application Form or any smaller number of such New Shares that may be allotted to you in respect of your application. In the event that our Company decides to allot any smaller number of New Shares or not to allot any New Shares to you, you agree to accept such decision as final; and you irrevocably authorise CDP to complete and sign on your behalf as transferee or renouncee any instrument of transfer and/or other documents required for the issue or transfer of the New Shares that may be allotted to you.
(d)
(e)
(f)
(g)
(h)
Applications for the Offer Shares 1. Your application for the Offer Shares MUST be made using the WHITE Offer Shares Application Forms and WHITE official envelopes A and B. You must: (a) enclose the WHITE Offer Shares Application Form, duly completed and signed, together with your correct remittance in accordance with the terms and conditions of this Prospectus, in the WHITE official envelope A provided; in appropriate spaces on the WHITE official envelope A: (i) (ii) (iii) (c) (d) write your name and address; state the number of Offer Shares applied for; and affix adequate Singapore postage if despatching by ordinary post;
2.
(b)
SEAL THE WHITE OFFICIAL ENVELOPE A; write, in the special box provided on the larger WHITE official envelope B addressed to DBS Bank Ltd, Equity Capital Markets, 6 Shenton Way, #36-01 DBS Building Tower One, Singapore 068809, the number of Offer Shares you have applied for; and insert WHITE official envelope A into WHITE official envelope B, seal WHITE official envelope B, affix adequate Singapore postage on WHITE official envelope B (if despatching by ordinary post) and thereafter DESPATCH BY ORDINARY POST OR DELIVER BY HAND the documents at your own risk to DBS Bank Ltd, Equity Capital Markets, 6 Shenton Way, #36-01 DBS Building Tower One, Singapore 068809, so as to arrive by 12:00 noon on 5 August 2009 or such other time or date as our Directors may, in
(e)
H-8
consultation with the Issue Manager, decide. Local Urgent Mail or Registered Post must NOT be used. No acknowledgement of receipt will be issued for any application or remittance received. 3. Applications that are illegible, incomplete or incorrectly completed or accompanied by improperly drawn remittances or which are not honoured upon their first presentation are liable to be rejected. ONLY ONE APPLICATION should be enclosed in each envelope.
4.
Applications for the Placement Shares (other than the Internet Placement Shares and the Reserved Shares) 1. Your application for the Placement Shares (other than the Internet Placement Shares and the Reserved Shares) must be made using the BLUE Placement Shares Application Forms or such other forms of application as the Issue Manager deems appropriate. The completed and signed BLUE Placement Shares Application Form and your remittance, in accordance with the terms and conditions of the Prospectus, for the full amount payable in respect of the number of Placement Shares applied for with your name, CDP Securities Account number and address written clearly on the reverse side, must be enclosed and sealed in an envelope to be provided by you. You must affix adequate Singapore postage on the envelope (if despatching by ordinary post) and thereafter the sealed envelope must be DESPATCHED BY ORDINARY POST OR DELIVERED BY HAND at your own risk to DBS Bank Ltd, Equity Capital Markets, 6 Shenton Way, #36-01 DBS Building Tower One, Singapore 068809 to arrive by 12:00 noon on 5 August 2009 or such other time or date as our Directors may, in consultation with the Issue Manager, decide. Local Urgent Mail or Registered Post must NOT be used. No acknowledgement of receipt will be issued for any application or remittance received. Applications that are illegible, incomplete or incorrectly completed or accompanied by improperly drawn remittances or which are not honoured upon their first presentation may be rejected. ONLY ONE APPLICATION should be enclosed in each envelope. Alternatively, you may remit your application monies by electronic transfer to the account of DBS Bank Ltd, Shenton Way Branch, Current Account No. 003-710378-0 in favour of PEC SHARE ISSUE ACCOUNT for the number of Placement Shares applied for by 12.00 noon on 5 August 2009. Applicants who remit their application monies via electronic transfer should send a copy of the telegraphic transfer advice slip to DBS Bank Ltd, Equity Capital Markets, 6 Shenton Way #36-01, DBS Building Tower One, Singapore 068809 to arrive by 12.00 noon on 5 August 2009, or such other time or date as our Directors may, in consultation with the Issue Manager, decide.
2.
3.
4. 5.
Applications for the Reserved Shares 1. Your application for the Reserved Shares must be made using the PINK Reserved Shares Application Forms. The completed and signed PINK Reserved Shares Application Form and your remittance, in accordance with the terms and conditions of the Prospectus, for the full amount payable in respect of the number of Reserved Shares applied for with your name, CDP Securities Account number and address written clearly on the reverse side, must be enclosed and sealed in an envelope to be provided by you. You must affix adequate Singapore postage on the envelope (if despatching by ordinary post) and thereafter the sealed envelope must be DESPATCHED BY ORDINARY POST OR DELIVERED BY HAND at your own risk to 21 Shipyard Road Singapore 628144, to arrive by 12:00 noon on 5 August 2009 or such other time or date as our Directors may, in consultation with the Issue Manager, decide. Local Urgent Mail or Registered Post must NOT be used. No acknowledgement of receipt will be issued for any application or remittance received. Applications that are illegible, incomplete or incorrectly completed or accompanied by improperly drawn remittances or which are not honoured upon their first presentation may be rejected.
2.
3.
H-9
4.
ONLY ONE APPLICATION should be enclosed in each envelope.
ADDITIONAL TERMS AND CONDITIONS FOR ELECTRONIC APPLICATIONS The procedures for Electronic Applications are set out on the ATM screens (in the case of ATM Electronic Applications) and in the case of Internet Electronic Applications on the IB website screens of the relevant Participating Banks and the website screen of DBS Vickers (the Steps). Currently, DBS Bank and UOB Group are the only Participating Banks through which the Internet Electronic Applications may be made. For illustration purposes, the procedures for Electronic Applications for Offer Shares through ATMs, the IB website of DBS Bank are set out in the sections entitled Steps for ATM Electronic Applications for the Offer Shares through ATMs of DBS Bank (including POSB), Steps for Internet Electronic Applications for the Offer Shares through the IB website of DBS Bank and the Steps for Internet Electronic Applications for the Placement Shares through the website of DBS Vickers appearing on pages H-15 to H-19 of this Prospectus. Please read carefully the terms of this Prospectus, the Steps and the terms and conditions for Electronic Applications set out below before making an Electronic Application. Any reference to you or the Applicant in the Additional Terms and Conditions for Electronic Applications, and the Steps shall refer to you making an application for the Offer Shares through an ATM or the IB website of a relevant Participating Bank, or an application for the Placement Shares through the website of DBS Vickers. The Steps set out the actions that you must take at ATMs or the IB website of DBS Bank or the website of DBS Vickers to complete an Electronic Application. The actions that you must take at the ATMs or the IB websites of the other Participating Banks are set out on the ATM screens or the IB website screens of the relevant Participating Banks. If you are making an ATM Electronic Application, you must have an existing bank account with and be an ATM cardholder of the relevant Participating Banks before you can make an Electronic Application at the ATMs of the relevant Participating Banks. An ATM card issued by one Participating Bank cannot be used to apply for the Offer Shares at an ATM belonging to other Participating Banks. Upon the completion of your ATM Electronic Application transaction, you will receive an ATM transaction slip (Transaction Record), confirming the details of your ATM Electronic Application. The Transaction Record is for your retention and should not be submitted with any printed Application Form. You must ensure that you enter your own CDP Securities Account Number when using the ATM card issued to you in your own name. If you fail to use your own ATM card or do not key in your own CDP Securities Account number, your application will be rejected. If you operate a joint bank account with any of the Participating Banks, you must ensure that you enter your own CDP Securities Account number when using the ATM card issued to you in your own name. Using your own CDP Securities Account number with an ATM card which is not issued to you in your own name will render your Electronic Application liable to be rejected. If you are making an Internet Electronic Application, you must have a bank account with and/or a User Identification (User ID) and a Personal Identification Number (PIN) given by the relevant participating Banks or DBS Vickers, in the case of you applying for the Placement Shares through the website of DBS Vickers. If you are making an Internet Electronic Application, you must ensure that the mailing address of your account selected for the application is in Singapore and you must declare that the application is being made in Singapore. Otherwise, your application is liable to be rejected. In this connection, you will be asked to declare that you are in Singapore at the time when you make the application. Upon completion of your Internet Electronic Application through the IB website of DBS, there will be an on-screen confirmation (Confirmation Screen) of the application which can be printed out by you for your record. This printed record of the Confirmation Screen is for your retention and should not be submitted with any printed Application Form.
H-10
Your Electronic Application shall be made on the terms and subject to the conditions of this Prospectus, including but not limited to, the terms and conditions appearing below and those set out under the section on TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION AND ACCEPTANCE on pages H1 to H-19 of this Prospectus, as well as the Memorandum and Articles of Association of our Company. 1. In connection with your Electronic Application for the Offer Shares or the Placement Shares in the case of you applying for the Placement Shares through the website of DBS Vickers, you are required to confirm statements to the following effect in the course of activating the Electronic Application: (a) that you have received a copy of this Prospectus (in the case of ATM Electronic Applications only) and have read, understood and agreed to all the terms and conditions of application for the Offer Shares or the Placement Shares and this Prospectus prior to effecting the Electronic Application and agree to be bound by the same; that you consent to the disclosure of your name, NRIC/passport number, address, nationality, permanent residence status, CDP Securities Account number, and share application amount (the Relevant Particulars) from your account with the relevant Participating Bank or DBS Vickers, as the case may be, to our Share Registrar, SGX-ST, CDP, SCCS, our Company, the Issue Manager, the Underwriter and the Placement Agent (the Relevant Parties); and that this is your only application for the Offer Shares or the Placement Shares (other than the Reserved Shares), as the case may be, and it is made in your name and at your own risk.
(b)
(c)
Your application will not be successfully completed and cannot be recorded as a completed transaction unless you press the Enter or OK or Confirm or Yes or any other relevant key in the ATM or click Confirm or OK or Submit or Continue or Yes or any other relevant button on the Internet screen. By doing so, you shall be treated as signifying your confirmation of each of the above three statements. In respect of statement 1(b) above, your confirmation, by pressing the Enter or OK or Confirm or Yes or any other relevant key or by clicking Confirm or OK or Submit or Continue or Yes or any other relevant button, shall signify and shall be treated as your written permission, given in accordance with the relevant laws of Singapore, including Section 47(2) of the Banking Act (Chapter 19) of Singapore, to the disclosure by that Participating Bank or DBS Vickers, as the case may be, of the Relevant Particulars of your account(s) with that Participating Bank or DBS Vickers to the Relevant Parties. 2. By making an Electronic Application you confirm that you are not applying for the Offer Shares or the Placement Shares as a nominee of any other person and that any Electronic Application that you make is the only application made by you as the beneficial owner. You shall make only one Electronic Application and shall not make any other application for the Offer Shares or the Placement Shares (other than the Reserved Shares) whether at the ATMs of any Participating Bank or the IB websites of the relevant Participating Banks or the website of DBS Vickers, as the case may be, or on the Application Forms. Where you have made an application for New Shares on an Application Form, you shall not make an Electronic Application for New Shares and vice versa. You must have sufficient funds in your bank account with your Participating Bank at the time you make your Electronic Application at the ATM or IB website of the relevant Participating Bank, failing which such Electronic Application will not be completed. Any Electronic Application made at the ATM or IB website of the relevant Participating Bank which does not conform strictly to the instructions set out in this Prospectus or on the screens of the ATM or IB website of the relevant Participating Bank through which your Electronic Application is being made shall be rejected.
3.
H-11
For the Offer Shares, you may make an ATM Electronic Application at the ATM of any Participating Bank or an Internet Electronic Application at the IB websites of the relevant Participating Banks, using only cash by authorising such Participating Bank to deduct the full amount payable from your account with such Participating Bank. If you make an application to subscribe for the Placement Shares through the website of DBS Vickers, you must have sufficient funds in your nominated automatic payment account with an automatic payment facility (direct debit/credit authorisation or GIRO) with DBS Vickers. Your application will be rejected if there are insufficient funds in your account for DBS Vickers to deduct the full amount payable from your account for your application. 4. You irrevocably agree and undertake to subscribe for and to accept the number of Offer Shares or Placement Shares, as the case may be, applied for as stated on the Transaction Record or the Confirmation Screen or any lesser number of such Offer Shares or Placement Shares that may be allotted to you in respect of your Electronic Application. In the event that our Company decides to allot any lesser number of such Offer Shares or Placement Shares or not to allot any Offer Shares or Placement Shares to you, you agree to accept such decision as final. If your Electronic Application is successful, your confirmation (by your action of pressing the Enter or OK or Confirm or Yes or any other relevant key on the ATM or clicking Confirm or OK or Submit or Continue or Yes or any other relevant button on the Internet screen) of the number of Offer Shares or Placement Shares applied for shall signify and shall be treated as your acceptance of the number of Offer Shares or Placement Shares that may be allotted to you and your agreement to be bound by the Memorandum and Articles of Association of our Company. You also irrevocably authorise CDP to complete and sign on your behalf as transferee or renouncee any instrument of transfer and/or other documents required for the issue or transfer of the New Shares that may be allotted to you. We will not keep any application in reserve. Where your Electronic Application is unsuccessful, the full amount of the application monies will be refunded (without interest or any share of revenue or other benefit arising therefrom) to you by being automatically credited to your account with your Participating Bank or if you have applied for the Placement Shares through DBS Vickers, by ordinary post or such other means as DBS Vickers may agree with you, at your own risk within 24 hours of the balloting provided that the remittance in respect of such application which has been presented for payment or other processes has been honoured and the application monies have been received in the designated share issue account. Where your Electronic Application is rejected or accepted in part only, the full amount or the balance of the application monies, as the case may be, will be refunded (without interest or any share of revenue or other benefit arising therefrom) to you by being automatically credited to your account with your Participating Bank or if you have applied for the Placement Shares through DBS Vickers, by ordinary post or such other means as DBS Vickers may agree with you, at your own risk, within 14 Market Days after the close of the Application List provided that the remittance in respect of such application which has been presented for payment or other processes has been honoured and the application monies have been received in the designated share issue account. Responsibility for timely refund of application monies from unsuccessful or partially successful Electronic Applications lies solely with the respective Participating Banks and with DBS Vickers (as the case may be). Therefore, you are strongly advised to consult your Participating Bank or DBS Vickers as to the status of your Electronic Application and/or the refund of any money to you from unsuccessful or partially successful Electronic Application, to determine the exact number of Shares allotted to you before trading the Shares on the SGX-ST. None of the SGX-ST, the CDP, the SCCS, the Participating Banks, DBS Vickers, our Company, the Issue Manager, the Underwriter and the Placement Agent assume any responsibility for any loss that may be incurred as a result of you having to cover any net sell positions or from buy-in procedures activated by the SGX-ST. If your Electronic Application is unsuccessful, no notification will be sent by the relevant Participating Bank or DBS Vickers.
5.
H-12
It is expected that successful applicants who applied for the Internet Placement Shares through the website of DBS Vickers will be notified of the results of their application through the website of DBS Vickers no later than the evening of the day immediately prior to the commencement of trading of the Shares on the SGX-ST. 6. Applicants who make ATM Electronic Applications for the Offer Shares through the ATMs of the following banks may check the provisional results of their ATM Electronic Applications as follows:
Service expected from Evening of the balloting day
Bank DBS Bank
Telephone 1800-339 6666 (for POSB account holders) 1800-111 1111 (for DBS account holders)
Other Channels Internet Banking http://www.dbs.com(1)
Operating Hours 24 hours
OCBC Bank
1800-363 3333
ATM/Internet Banking/ Phonebanking(2) ATM (Other Transactions IPO Enquiry) http://www.uobgroup.com(1) , (3)
24 hours
Evening of the balloting day Evening of the balloting day
UOB Group
1800-222 2121
24 hours
Notes: (1) If you have made your Internet Electronic Application through the IB websites of DBS Bank or UOB Group, you may check the results of your application through the same channels listed in the table above in relation to ATM Electronic Application made at the ATMs of DBS Bank or UOB Group. If you have made your Electronic Application through the ATM of OCBC Bank, you may check the results of your application through OCBC ATMs, OCBC Personal Internet Banking or OCBC Phone Banking services. If you have made your Electronic Application through the ATM or the IB website of the UOB Group, you may check the results of your application through UOB Personal Internet Banking, UOB Group ATMs or UOB Phone Banking services.
(2)
(3)
7.
Electronic Applications shall close at 12:00 noon on 5 August 2009, or such other time and date as our Directors may, in consultation with the Issue Manager, decide. Subject to paragraph 9 below, all Internet Electronic Applications are deemed to be received when they enter the designated information system of the relevant Participating Bank or DBS Vickers, as the case may be. You are deemed to have irrevocably requested and authorised our Company to: (a) register the Offer Shares or the Placement Shares, as the case may be, allotted to you in the name of CDP for deposit into your Securities Account; send the relevant Share certificate(s) to CDP; return or refund (without interest or any share of revenue or other benefit arising therefrom) the application monies, should your Electronic Application be unsuccessful, by automatically crediting your bank account with your Participating Bank or if you have applied for the Placement Shares through DBS Vickers, by ordinary post or such other means as DBS Vickers may agree with you, at your risk, within 24 hours of the balloting PROVIDED THAT the remittance in respect of such application which has been presented for payment or such other processes has been honoured and application monies received in the designated shares issue account; and
8.
(b) (c)
H-13
(d)
return or refund (without interest or any share of revenue or other benefit arising therefrom) the balance of the application monies, should your Electronic Application be accepted in part only, by automatically crediting your bank account with your Participating Bank or if you have applied for the Placement Shares through DBS Vickers, by ordinary post or such other means as DBS Vickers may agree with you, at your risk, within 14 Market Days after the close of the Application List PROVIDED THAT the remittance in respect of such application which has been presented for payment or such other processes have been honoured and application monies received in the designated shares issue account.
9.
You irrevocably agree and acknowledge that your Electronic Application is subject to risks of electrical, electronic, technical and computer-related faults and breakdown, fires, acts of God and other events beyond the control of the Participating Banks, DBS Vickers, our Company, the Issue Manager, the Underwriter, the Placement Agent and CDP, and in any such event our Company, the Issue Manager, DBS Vickers, the relevant Participating Bank and/or CDP do not receive your Electronic Application, or data relating to your Electronic Application or the tape or any other devices containing such data is lost, corrupted or not otherwise accessible, whether wholly or partially for whatever reason, you shall be deemed not to have made an Electronic Application and you shall have no claim whatsoever against our Company, the Issue Manager, the Underwriter, the Placement Agent, DBS Vickers, the relevant Participating Bank and/or CDP for the Offer Shares or the Placement Shares, as the case may be, applied for or for any compensation, loss or damage. We do not recognise the existence of a trust. Any Electronic Application by a trustee must be made in his own name and without qualification. Our Company will reject any application by any person acting as nominee (other than approved nominee companies). All your particulars in the records of your Participating Bank or DBS Vickers at the time you make your Electronic Application shall be deemed to be true and correct and your Participating Bank, DBS Vickers and any other Relevant Parties shall be entitled to rely on the accuracy thereof. If there has been any change in your particulars after making your Electronic Application, you shall promptly notify your Participating Bank or DBS Vickers (as the case may be). You should ensure that your personal particulars as recorded by both CDP and the relevant Participating Bank or DBS Vickers (as the case may be) are correct and identical, otherwise, your Electronic Application is liable to be rejected. You should promptly inform CDP of any change in address, failing which the notification letter on successful allotment will be sent to your address last registered with CDP. By making and completing an Electronic Application, you are deemed to have agreed that: (a) in consideration of our Company making available the Electronic Application facility, through the Participating Banks and DBS Vickers acting as agents of our Company, at the ATMs and the IB websites of the relevant Participating Banks (if any) and at the website of DBS Vickers: (i) (ii) your Electronic Application is irrevocable; and your Electronic Application, the acceptance by our Company and the contract resulting therefrom under the Invitation shall be governed by and construed in accordance with the laws of Singapore and you irrevocably submit to the non-exclusive jurisdiction of the Singapore courts;
10.
11.
12.
13.
(b)
none of our Company, the Issue Manager, the Underwriter, the Placement Agent, the Participating Banks, DBS Vickers or CDP shall be liable for any delays, failures or inaccuracies in the recording, storage or in the transmission or delivery of data relating to your Electronic Application to our Company or CDP due to breakdowns or failure of transmission, delivery or communication facilities or any risks referred to in paragraph 9 above or to any cause beyond their respective controls;
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(c)
in respect of the Offer Shares or the Placement Shares, as the case may be, for which your Electronic Application has been successfully completed and not rejected, acceptance of your Electronic Application shall be constituted by written notification by or on behalf of our Company and not otherwise, notwithstanding any payment received by or on behalf of our Company; you will not be entitled to exercise any remedy of rescission for misrepresentation at any time after acceptance of your application; and reliance is placed solely on information contained in this Prospectus and that none of our Company, the Issue Manager, the Underwriter, the Placement Agent nor any other person involved in the Invitation shall have any liability for any information not so contained.
(d)
(e)
Steps for ATM Electronic Applications for the Offer Shares through ATMs of DBS Bank (Including POSB ATMs) Instructions for ATM Electronic Applications will appear on the ATM screens of the Participating Banks. For illustration purposes, the steps for making an ATM Electronic Application through a DBS Bank ATM (including POSB ATM) are shown below. Certain words appearing on the screen are in abbreviated form (A/c, amt, appln, &, I/C, SGX and No. refer to Account, amount, application, and, NRIC, SGX-ST and Number respectively. Instructions for ATM Electronic Applications on the ATM screens of Participating Banks (other than DBS Bank (including POSB ATMs)), may differ slightly from those represented below. Steps 1. 2. 3. 4. 5. 6. 7. Insert your personal DBS Bank or POSB ATM Card Enter your Personal Identification Number Select More Services Select Language (for customers using multi-language card) Select ESA-IPO Share/SGS/Investments Select Electronic Security Appln (IPOs/Bond/ST-Notes/Securities) Read and understand the following statements which will appear on the screen: (IN THE CASE OF SECURITIES OFFERING THAT IS SUBJECT TO A PROSPECTUS REGISTERED WITH THE MONETARY AUTHORITY OF SINGAPORE) THE OFFER OF SECURITIES (OR UNITS OF SECURITIES) WILL BE MADE IN, OR ACCOMPANIED BY A COPY OF THE PROSPECTUS/DOCUMENT OR PROFILE STATEMENT (AND IF APPLICABLE, A COPY OF THE REPLACEMENT OR SUPPLEMENTARY PROSPECTUS/DOCUMENT OR PROFILE STATEMENT) WHICH CAN BE OBTAINED FROM ANY DBS/POSB BRANCH IN SINGAPORE AND, WHERE APPLICABLE, THE VARIOUS PARTICIPATING BANKS DURING BANKING HOURS, SUBJECT TO AVAILABILITY. (IN THE CASE OF SECURITIES OFFERING THAT IS SUBJECT TO A PROSPECTUS REGISTERED WITH THE MONETARY AUTHORITY OF SINGAPORE) ANYONE WISHING TO ACQUIRE THESE SECURITIES (OR UNITS OF SECURITIES) SHOULD READ THE PROSPECTUS/DOCUMENT OR PROFILE STATEMENT (AS SUPPLEMENTED OR REPLACED, IF APPLICABLE) BEFORE SUBMITTING HIS APPLICATION WHICH WILL NEED TO BE MADE IN THE MANNER SET OUT IN THE PROSPECTUS/DOCUMENT OR PROFILE STATEMENT (AS SUPPLEMENTED OR REPLACED, IF APPLICABLE). A COPY OF THE PROSPECTUS/ DOCUMENT OR PROFILE STATEMENT, AND IF APPLICABLE, A
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COPY OF THE REPLACEMENT OR SUPPLEMENTARY PROSPECTUS/DOCUMENT OR PROFILE STATEMENT HAS BEEN LODGED WITH AND REGISTERED BY THE MONETARY AUTHORITY OF SINGAPORE WHO ASSUMES NO RESPONSIBILITY FOR ITS OR THEIR CONTENTS. (IN THE CASE OF A SECURITIES OFFERING THAT DOES NOT REQUIRE A PROSPECTUS TO BE REGISTERED WITH THE MONETARY AUTHORITY OF SINGAPORE) THE OFFER OF SECURITIES (OR UNITS OF SECURITIES) MAY BE MADE IN A NOTICE PUBLISHED IN A NEWSPAPER AND/OR A CIRCULAR/ DOCUMENT DISTRIBUTED TO SECURITY HOLDERS. ANYONE WISHING TO ACQUIRE SUCH SECURITIES (OR UNITS OF SECURITIES) SHOULD READ THE NOTICE/ CIRCULAR/DOCUMENTS BEFORE SUBMITTING HIS APPLICATION, WHICH WILL NEED TO BE MADE IN THE MANNER SET OUT IN THE NOTICE/CIRUCLAR/DOCUMENT. Press the ENTER key to confirm that you have read and understood. 8. 9. Select PEC to display details. Press the ENTER key to acknowledge: YOU HAVE READ, UNDERSTOOD AND AGREED TO ALL TERMS OF THE APPLICATION AND (WHERE APPLICABLE) PROSPECTUS, DOCUMENT OR PROFILE STATEMENT, AND IF APPLICABLE, THE REPLACEMENT OR SUPPLEMENTARY PROSPECTUS/ DOCUMENT/ PROFILE STATEMENT, NOTICE AND/OR CIRCULAR. YOU CONSENT TO DISCLOSE YOUR NAME, NRIC/PASSPORT NO., ADDRESS, NATIONALITY, CDP SECURITIES A/C NO., CPF INVESTMENT A/C NO. AND SECURITY APPLN AMOUNT FROM YOUR BANK A/C(S) TO SHARE AND SHARE APPLN AMOUNT FROM YOUR BANK A/C(S) TO SHARE REGISTRARS, SGX, SCCS, CDP, CPF, ISSUER/VENDOR(S). FOR FIXED AND MAX PRICE SECURITIES APPLICATION, THIS IS YOUR ONLY APPLICATION AND IT IS MADE IN YOUR OWN NAME AND AT YOUR OWN RISK. THE MAXIMUM PRICE FOR EACH SHARE IS PAYABLE IN FULL ON APPLICATION AND SUBJECT TO REFUND IF THE FINAL PRICE IS LOWER. FOR TENDER SECURITIES APPLICATION, THIS IS YOUR ONLY APPLICATION AT THE SELECTED TENDER PRICE AND IS MADE IN YOUR OWN NAME AND AT YOUR OWN RISK. YOU ARE NOT A U.S. PERSON AS REFERRED TO IN (WHERE APPLICABLE) THE PROSPECTUS, DOCUMENT, PROFILE STATEMENT, REPLACEMENT OR SUPPLEMENTARY PROSPECTUS/DOCUMENT, PROFILE STATEMENT, NOTICE AND/OR CIRCULAR. THERE MAY BE A LIMIT ON THE MAXIMUM NUMBER OF SECURITIES THAT YOU CAN APPLY FOR SUBJECT TO AVAILABILITY, YOU MAY BE ALLOCATED A SMALLER NUMBER OF SECURITIES THAN YOU APPLIED FOR OR (IN THE CASE OF AN EARLIER CLOSURE UPON FULL SUBSCRIPTION) YOUR APPLICATION MAY BE REJECTED IF ALL THE AVAILABLE SECURITIES HAVE BEEN FULLY ALLOCATED TO EARLIER APPLICANTS. 10. 11. Select your nationality. Select your payment method (i.e. by cash, CPF Funds, or a combination of cash and CPF Funds).
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12.
Select the DBS Bank account (Autosave/Current/Savings/Savings Plus) or the POSB account (Current/Savings) from which to debit your application monies. Enter the number of securities you wish to apply for using cash. Enter the number of securities you wish to apply for using CPF Funds (if applicable). Enter or confirm (if your CDP Securities Account number has already been stored in DBS Banks records) your own 12-digit CDP Securities Account number (Note: This step will be omitted automatically if your Securities Account number has already been stored in DBS Banks records). Check the details of your securities application, your NRIC or passport number, CDP Securities Account number, number of securities and application amount on the screen and press the ENTER key to confirm your application. Remove the Transaction Record for your reference and retention only.
13. 14. 15.
16.
17.
Steps for Internet Electronic Application for the Offer Shares through the IB website of DBS Bank For illustrative purposes, the steps for making an Internet Electronic Application through the DBS Bank IB website is shown below. Certain words appearing on the screen are in abbreviated form (A/c, amt, &, I/C, SGX and No. refer to Account, amount, and, NRIC, SGX-ST and Number respectively). Steps 1. 2. 3. 4. 5. Click on to DBS Bank website at http://www.dbs.com. Login to Internet banking. Enter your User ID and PIN. Select Electronic Security Application (ESA). Click Yes to proceed and to warrant, inter alia, that you are currently in Singapore, you have observed and complied with all applicable laws and regulations and that your mailing address for DBS Internet Banking is in Singapore and that you are not a U.S. person (as such term is defined in Regulation S under the United Securities Act of 1933 as amended). Select your country of residence and click I confirm. Click on PEC and click the Submit button. Click I Confirm to confirm, inter alia: (a) You have read, understood and agreed to all terms of application and the Prospectus/Document or Profile Statement and if applicable, the Supplementary or Replacement Prospectus/Document or Profile Statement. You consent to disclose your name, I/C or passport number, address, nationality, CDP Securities Account number, CPF Investment Account number (if applicable) and securities application amount from your DBS/POSB Account(s) to registrars of securities, SGX, SCCS, CDP, CPF Board and issuer/vendor(s). You are not a U.S. Person (as such term is defined in Regulation S under the United States Securities Act of 1933, as amended).
6. 7. 8.
(b)
(c)
H-17
(d)
You understand that the securities mentioned herein have not been and will not be registered under the United States Securities Act of 1933 as amended (the US Securities Act) or the securities laws of any state of the United States and may not be offered or sold in the United States or to, or for the account or benefit of any U.S. person (as defined in Regulation S under the US Securities Act) except pursuant to an exemption from or in a transaction subject to, the registration requirements of the US Securities Act and applicable state securities laws. These will be no public offer of the securities mentioned herein in the United States. Any failure to comply with this restriction may constitute a violation of the United States securities laws. This application is made in your own name and at your own risk. For FIXED/MAX price securities application, this is your only application. For TENDER price securities application, this is your only application at the selected tender price. FOR FOREIGN CURRENCY Securities, subject to the terms of the issue, please note the following: the application monies will be debited from your bank account in S$, based on the Banks prevailing board rates at the time of application. Any refund monies will be credited in S$ based on the Banks prevailing board rates at the time of refund. The different prevailing board rates at the time of application and the time of refund of application monies may result in either a foreign exchange profit or loss or application monies may be debited and refund credited in S$ at the same exchange rate. FOR 1ST-COME-1ST-SERVE securities, the number of securities applied for may be reduced, subject to availability at the point of application.
(e) (f)
(g)
9. 10.
Fill in details for share application and click I Confirm. Check the details of your share application, your I/C/Passport No. and click OK to confirm your application. Print Confirmation Screen (optional) for your reference & retention only.
11.
Steps for Internet Electronic Application for the Placement Shares through the website of DBS Vickers For illustrative purposes, the steps for making an application through the website of DBS Vickers is shown below: Steps 1. 2. 3. 4. 5. Access the website at http://www.dbsvonline.com. Login with user ID and password. Select Trading and click on IPO hyperlink to go to the IPO Section. Select PEC Ltd. and click on Apply now. Click Yes to represent and warrant that, inter alia, that you are in Singapore, you have observed and complied with all applicable laws and regulations, you have a mailing address in Singapore, you have read, understood and agreed to the APPLICATION TERMS AND CONDITIONS and the GENERAL TERMS AND DISCLAIMERS and you are not a U.S. Person (as such term is defined in Regulation S under the United States Securities Act of 1933, as amended). Confirm the IPO applying for and its details by clicking on the Next button.
6.
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7.
Click Yes, I have read the above terms and conditions and wish to subscribe and click Submit to confirm, inter alia: (a) You have read, understood and agreed to the terms and conditions set out in the Prospectus/Document or Profile Statement including the notes and instructions for the completion of this Application Form and that this application has been made in accordance with the Prospectus/Document or Profile Statement and such notes and instructions. Capitalised terms used in this Application Form shall bear the meanings assigned to them in the Prospectus/Document or Profile Statement. You have read and understood the disclaimers. You have read, understood and agreed to the APPLICATION TERMS AND CONDITIONS and the GENERAL TERMS AND DISCLAIMERS. You consent to the disclosure of your name, NRIC or passport number, address, nationality and permanent resident status, CDP Securities A/C No., CPF Investment A/C No. (if applicable) and securities application amount from your account with DBS Vickers to the Issuer and the Manager, registrars of securities, SGX, SCCS, CDP and CPF (as applicable). This application is made in your own name and at your own risk. You understand that these are not deposits or other obligations of or guaranteed or insured by DBS Vickers and are subject to investment risks, including the possible loss of the principal amount invested. You declare that (a) you are not under 18 years of age, (b) you are not a corporation, soleproprietorship, partnership or any other business entity, (c) you are not an undisclosed bankrupt, (d) you are in Singapore, (e) you have a mailing address in Singapore and (f) you are not a U.S. person (within the meaning of Regulation S under the US Securities Act of 1933, as amended).
(b) (c)
(d)
(e) (f)
(g)
8. 9. 10. 11. 12.
Fill in amount of share applied for and preferred payment mode, then click Submit Check and verify details of your share application and your Trading Account Number on the screen. Enter your password and click Submit to continue. Click on Application Status to check your IPO application details. Print page for your reference and retention only.
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21 Shipyard Road, Singapore 628144 Tel: +65.6268.9788 | Fax: +65.6268.9488

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PEC Prospectus

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PROSPECTUS DATED 30 JULY 2009

(Registered by the Monetary Authority of Singapore on 30 July 2009)

(Incorporated in Singapore on 8 January 1982) (Company Registration No: 198200079M)

PEC Fabrication & Maintenance Facilities/Support

PLANT AND TE R MI NAL E NGI NE E R I NG SPE C I ALI ST

OUR FINA NCIAL HIGHLIGHTS

PROFIT AFTER TAXATION

We own a large and growing fleet of construction equipment

O ur es t a b lis hed t r a c k rec o rd a nd ex p er ienc ed management team

Our innovative use of information communication technology

Our focus on staff training and development

Oil and gas and petrochemical industries

Oil and chemical terminal industry

STR ATEGY A ND FUTURE PLANS

INDICAT IVE T IMETABLE

82 84 88 88 89 90 90 91 92 93 94 94 95 95 96 97 103 104 106 108 109

111 112 116 119 121 122

132 133 134 138 139 141

143 145 146 147 147 148 149 149

JOINT COMPANY SECRETARIES

ISSUE MANAGER, UNDERWRITER AND PLACEMENT AGENT

SOLICITORS TO THE INVITATION

SOLICITORS TO THE ISSUE MANAGER, UNDERWRITER AND PLACEMENT AGENT

LEGAL ADVISERS TO THE COMPANY AS TO INDONESIA LAW

LEGAL ADVISERS TO THE COMPANY AS TO MALAYSIA LAW

LEGAL ADVISERS TO THE COMPANY AS TO PRC LAW

LEGAL ADVISERS TO THE COMPANY AS TO SRI LANKA LAW

LEGAL ADVISERS TO THE COMPANY AS TO THAILAND LAW

LEGAL ADVISERS TO THE COMPANY AS TO UAE LAW

LEGAL ADVISERS TO THE COMPANY AS TO VIETNAM LAW

AUDITORS AND REPORTING ACCOUNTANTS

Our Group Companies Associated Companies

Audex Audex Shanghai

Audex Sri Lanka Audex UAE

ITR PCELC Huizhou

PEC Indonesia PEC Malaysia PEC Thailand PECII

SCCS SGX-ST Tian San Malaysia Tian San Shipping

Tian San Singapore V Investments General Additional Shares

Companies Act CAGR

Directors EIT Electronic Applications

entity EPS ESOS ESOS Shares

Executive Directors Executive Officers FY FY2008 Final Dividend

FY2009 Interim Dividend :

Internet Placement Shares

Latest Practicable Date

Listing Manual Management and Underwriting Agreement

Market Day Memorandum NAV New Shares

Offer Shares Option

Remuneration Committee : Reserved Shares

Securities Account Securities and Futures Act Service Agreements

Share Lending Agreement Shareholders

UAE Currencies AED AUD Baht Euro RM RMB Rp S$ or $ and cents

GLOSSARY OF TECHNICAL TERMS

EPC EPCm E&I ISO

tank terminal vessel

DETAILS OF THE INVITATION

7 August 2009 at 9.00 a.m. 13 August 2009

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Selected items on the financial position of our Group

We are dependent on our major customers

We face the risk of any significant increase in prices or shortage of materials

We require various licences and permits to operate our business

We may be adversely affected by cost overruns