FEDERAL INTERNATIONAL (2000) LTDAnnual Report 2002Towards strengthand success
ContentsAbout FederalChairman’s StatementBusiness ReviewCorporate StructureCalendar of EventsBoard of DirectorsKey Executives’ ProfileFinancial HighlightsCorporate InformationCorporate Governance ReportFinancial StatementsNotice of Annual General MeetingProxy Form1 2 6 10 11 12 14 16 17 18 27 78 79
About FederalFederal International (2000) Ltd (“the Company”) is listed onthe Singapore Exchange Ltd (“SGX”) in year 2000 and engages inthe following core businesses through its subsidiaries (“the Group”):Towardsdesign, manufacture, assemble, distribution and provision offlow-line control products and servicesstrengthresearch & development, design, manufacture and distribution ofhigh pressure and temperature valves and related oilfield productsandsuccessdistribution of fire protection and detection systemsprovision of IT services and distribution of electrical productsOur motto for success is:We are committed to provide quality service.We also focus on continuous improvement in operational efficiency,strategic realignment of our business activities and expansionof our distribution network.We will continue to adopt new mindsets, conceive new ambitionsand devise winning strategies to pursue steady growth in revenue,profit and shareholder’s value. At the same time, we willcontinue to provide quality products, competitive pricing andexcellent service to our customers.
Federal International (2000) Ltd AR 20022Chairman’s Statement2002 was a good year for Federal. Notwithstandingthe weak economic climate globally, we managed to turnin a sterling set of results, riding on opportunities thatabound in the buoyant oil and gas industry.The Group registered a net profit of S$2.4 millionon the back of higher turnover of S$96.1 million for theyear ended 31 December 2002. This represents a jumpof 161.9% and 33.6% respectively over the precedingperiod. The double-digit growth in our revenue is duemainly to contributions from our Indonesianprojects as well as increased sales fromall the markets, especially from Europeand USA.Subject to shareholders’ approval,the Board of Directors is pleased torecommend a first and final dividendof 3% less Singapore corporate tax of22% for financial year 2002. The totalnet dividend to be distributed will beS$820,141.
REAPING THE ‘FRUITS’ OF INVESTMENTIt is heartening to note the returns on the strategicinvestments that we have made to expand our globalpresence in the last financial year.We are beginning to see promising results of ourefforts to develop and manufacture our own proprietary,specialized products for niche customers. For instance,our 60%-owned subsidiary, HP&T Products, Inc. (HP&T)based in Houston, USA, has made significant progressin securing business from most drilling and well testingcompanies, and are now on the approved vendors listof a number of oil companies. Having doubled itsrevenue in year 2002, HP&T looks set to achievebreakeven in the current financial year. Currently, it hasgarnered a core of blue-chip customers including Shelland BP. Manufacturing of HPT TM ’s specialized highpressure and temperature valves is currently outsourcedto an external manufacturer based in Houston, withplanned expansion for manufacturing in South East Asiaduring 2003.Similarly, our investments in KVC Co., Ltd in Japanand KVC (UK) Ltd in Scotland, U.K., are making someheadway as sales from North Asia and Europe have alsoincreased.PENETRATING THE PRC MARKETPRC clearly dominates the Asian oil scene in terms ofreserves and production. As the second-largestoil consumer in Asia, PRC, given its robust economicexpansion, is a market with significant growth potential.To further penetrate the PRC market, we established FederalInternational (Shanghai) Co., Ltd to undertake the tradingand procurement of specialized valves and other flowlinecontrol products within the Free Trade Zone in the PRC.We believe that the setting up of the Shanghai tradingarm is timely as it enables the Group to capitalize onthe strong growth potential in the PRC, whose economy isexpected to power ahead with 7% GDP growth this year.Such strong growth definitely translates into greater energyrequirements to fuel the engines of the economy.Besides increasing our market share in the PRC, thisShanghai subsidiary will position us to tap the businessopportunities available in North Asian markets.We expect the PRC market to be one of the key marketscontributing to our group sales.EXPANDING ASEAN OPERATIONSLast year saw strong contribution from the ASEANregion, especially from Indonesia. Our strategicpartnership with PT Gunanusa Utama Fabricators (PTG)continued to be strong and mutually beneficial as wemanaged to secure major contracts for a few EPCprojects from reputed MNCs and oil majors in Indonesia.Federal International (2000) Ltd AR 2002Chairman’s Statement 3We are optimistic about the prospects for the Group,given the robust outlook for the energy sector in the region.
Federal International (2000) Ltd AR 20024Chairman’s StatementMOVING FORWARDWe are optimistic about the prospects for the Group,given the robust outlook for the energy sector in theregion. The regional demand for energy looks set toincrease in tandem with the economic growth of Asiancountries, especially PRC. In Southeast Asia, oil and gasexploration and production activities are still showingsteady growth. As the Southeast Asian market continuesto be our key growth driver for the next few years,we will ride on the exciting growth potential of theregional energy sector to further fuel our businessexpansion.We are making firm strides in growing the brandequity of HPT TM and KVC TM trademarks. We intend toleverage on these international brands to furtherstrengthen Federal’s position in Asia, particularly in thePRC where we can build on our distribution infrastructureto market our products more aggressively.In so doing, we will be one of the few companies inAsia capable of providing a seamless value chain forenergy products and services to the booming oil andgas sector in Asia.In addition to partnering PTG in Indonesia, we arealso collaborating with other players, the most recentone being the contract clinched from PT Astinaputeraand PT Transmega Ekacipta Corp in March this year.At the same time, we will continue with our expansionthrust into the new markets of Europe, Japan andthe USA.We intend to leverage on these international brands to furtherstrengthen Federal’s position in Asia, particularly in the PRC wherewe can build on our distribution infrastructure to marketour products more aggressively.
For future long-term earnings growth, we areexploring the possibility of teaming up with ahomegrown engineering specialist to embark on anoffshore oil and gas project in Indonesia on aBuild-Own-Operate or Build-Own-Transfer basis.This project is expected to generate a stream of recurringincome for Federal for the next 10 years.BEEFING UP THE MANAGEMENT TEAMIn light of the aggressive expansion by the Grouplast year, our management and professional resourceshave been enhanced. We are happy to welcome onboardtwo senior managers - Vincent Loi, as General Managerof Federal Hardware Engineering Co Pte Ltd, andMichael Tay, as General Manager of Federal International(2000) Ltd. Mr. Tay will be responsible for overseeingthe operations and driving the profitability of Federal’soverseas subsidiaries and/or associated companies,while Mr. Loi’s key focus is to oversee the managementof Federal Hardware’s EPC projects.Given the Middle East tensions still bubbling,we expect year 2003 to be challenging in terms of theoverall business sentiment. However, given the resilientnature of the energy sector, coupled with the seedsof growth that we have sown in the past 2 years, we areconfident of achieving another year of positiveperformance in year 2003 and continuing to delivervalue to our shareholders.Federal International (2000) Ltd AR 2002Chairman’s Statement 5ACKNOWLEDGEMENTSOn behalf of the Board of Directors, I wish to recordmy sincere appreciation to our customers, shareholdersand business partners for their continued support.A note of thanks also to the management and all ourstaff for their tireless efforts and contribution in meetingthe Group’s set targets and goals. We are counting onyour continued efforts so that we can further enjoy therewards of our hard work together.Koh Kian KiongExecutive Chairman and Chief Executive Officer
Federal International (2000) Ltd AR 20026Business ReviewRiding on the vibrant growth in the regional energy sector, Federal closed thefinancial year 2002 on a positive note. The Group recorded encouraging growthin terms of revenue and net profit.PERFORMANCE BY BUSINESS SEGMENTThe ‘flow-line control products and services’ segmentcontinued to be the star performer and largestcontributor. Revenue for this segment was S$73.2million, which accounted for 76.2% of the Group’s totalrevenue, up 36.8% over S$53.5 million in financial year2001. Operating profit amounted to S$4.2 million,up 273.7% from last year. The improved performanceof this business segment was a result of new projectssecured in Indonesia, increase in sales from key Asianmarkets such as PRC and Malaysia and contributions fromnew investment in Scotland.Sales from the ‘oilfield drilling equipment’ segmentamounted to S$15.7 million, which accounted for 16.3%of total revenue, and constituted a rise of 62.7% overlast year. Even though this segment is still makingoperating losses of S$0.6 million, it is 59.2% lower thanlast year.Our US subsidiary, HP&T Products, Inc. (HP&T) hasbeen progressively building up its market positioning.Its revenue based on royalties received for research andengineering activities and commission on sales throughtheir marketing activities on sub-sea specialized valvesis on a compounded growth path. HP&T currently hasfour patent applications in place and have received onepatent for a Hydraulic Failsafe Valve Actuator for surfaceapplications. The design allows for open and closinggate valves up to 20,000psi working pressure, and canbe adapted to fit on most gate valves in the marketplace today.Revenue for the ‘flow-line control products and services’ segment wasS$73.2 million, which accounted for 76.2% of the Group’s totalrevenue, up 36.8% over S$53.5 million for financial year 2001.
Business ReviewFederal is well placed to benefit from the continuing growing trendby major oil companies to diversify their oil exploration andproduction activities beyond the Middle East into other parts ofthe world, especially the Asia Pacific region.Federal International (2000) Ltd AR 20027The ‘fire protection and suppression’ segment sawa drop in sales of 40.4% to S$4.8 million for the year inreview. This was due primarily to a general weakeningof demand from our customers in the telecom, computerdata and banking/finance sectors. In line with therevenue decline, operating profit for this segment alsofell to S$0.2 million.In August 2002, we incorporated Federal FireEngineering Pte Ltd which is intended to focus on thesupply and installation supervision of fire and protectionsystems and related products. Firematic Engineering PteLtd, which used to handle the entire gamut of activities,ranging from design, engineering, supply, andinstallation supervision, will concentrate on providingmaintenance and repair services. This division of labourbetween the two subsidiaries facilitates specialisationand sharpens business focus, while enabling us to buildup the Federal brand name so that we can better positionourselves for more aggressive marketing to newpotential clients in the oil and gas sector.
Federal International (2000) Ltd AR 20028Business ReviewPERFORMANCE BY GEOGRAPHICAL SEGMENTSIn terms of contribution to group revenue, Indonesiacontinued to be the top-performing market accountingfor 37.4% of total sales, followed by Singapore (19.7%),PRC (16.7%) and Malaysia (12%).On a year-on-year basis, PRC registered the highestrevenue growth at 102.6%, followed by Thailand (94%),Malaysia (52.6%) and Indonesia (42.8%). The growth inPRC is mainly due to our strategy in capturing the marketshare at low margin and the fact that some of the projectswhich were delayed in the previous years took off thisyear. The success in Thailand is due to our strategy ofproximity to our customers by setting up AltonInternational (Thailand) Co., Ltd. to take care of theirrequirements. In Malaysia and Indonesia, we have beenworking on strategic partnerships by project to increasethe growth of our sales.BUOYANT ENERGY DEMAND IN ASIAFederal is well placed to benefit from the continuinggrowing trend by major oil companies to diversify theiroil exploration and production activities beyond theMiddle East into other parts of the world, especially theAsia Pacific region.The discovery of natural gas reserves in Asiahas also elevated the region to become the regionalcentre for the global liquefied gas business. The risingimportance of natural gas as an alternative to oilas energy source also spells another excitinggrowth area.PRC is currently the world’s seventh largest oilimporter. Rising oil imports are needed to meet itsgrowing demand for energy to fuel its rapid economicdevelopment. Even while we have established ourOn a year-on-year basis, PRC registered the highest revenue growthat 102.6%, followed by Thailand (94%), Malaysia (52.6%) andIndonesia (42.8%).
Business ReviewThe discovery of natural gas reserves in Asia has also elevatedthe region to become the regional centre for the global liquefied gasbusiness. The rising importance of natural gas as an alternative tooil as energy source also spells another exciting growth area.Federal International (2000) Ltd AR 20029market presence in PRC since 1988, we are still workingrelentlessly to harness the exciting growth potentialof the energy sector in that market. Hence theestablishment of Federal International (Shanghai) Co.,Ltd last year to undertake the trading and procurementof specialized valves and other flowline control productswithin the Free Trade Zone in PRC is a step forward toenlarge our distribution channel.Indonesia, with its active energy exploration anddevelopment scene, will continue to be a strongholdfor Federal. In June 2002, our deemed subsidiary,PT Federal International, acquired 10% interest inPTG for a consideration of US$1.5 million. We believethat this investment in PTG would foster closer ties, andmaximize the synergies, between the two companies.Singapore, continuing to hold its own as thepetrochemical sector here, is still robust in terms ofgrowth prospects.
Federal International (2000) Ltd AR 200210Corporate Structureas at 31 December 2002PTIndoenergiPerkasa40%PT GunanusaUtamaFabricators*PT FederalInternationalFederalInternational(Shanghai)Co., LtdShanghaiKVC ValveCo LtdPT FedsinRekayasaPratamaEastern JasonFabricationServicesPte Ltd20%100%90%50%99%50%FederalInternationalKoreaFederalHardwareEngineeringCo Pte LtdFirematicEngineeringPte LtdHP&TEngineeringPrivate Ltd100%100%100%100%AltonInternational(Thailand)Co., Ltd.49%KVC(UK) Ltd70%Federal FireEngineeringPte Ltd100%AltonInternational(S) Pte LtdSyntellectTelesystemsPte LtdKVCCo., LtdHP&TProducts, Inc.100%45%50%60%FederalInternational(2000) LtdNote:* In 2002, we injected additional capital into PTFI to acquire another 10% shareholding interest in PT Gunanusa. The first 10% shareholding interest is still underthe name of Azmil Rahman.
Calendar of Events 11DECEMBER 2002 ● HP&T Products, Inc. was granted the Hydraulic Failsafe Valve Actuator patentby the Director of the United States Patent and Trademark Office.SEPTEMBER 2002 ● Incorporation of Federal International (Shanghai) Co., Ltd in Shanghai,People’s Republic of China.Federal International (2000) Ltd AR 2002AUGUST 2002 ● Incorporation of Federal Fire Engineering Pte Ltd in Singapore.JUNE 2002 ● Federal Hardware Engineering Co Pte Ltd acquired an option to purchasean additional 10% stake in PT Gunanusa Utama Fabricators.MAY 2002 ● KVC (UK) Ltd attained its EC Certificate of Conformity.APRIL 2002 ● Incorporation of Federal International Korea Pte Ltd in Seoul, Korea.JANUARY 2002 ● HP&T Products, Inc. attained its API 6A certification.DECEMBER 2001 ● KVC (UK) Ltd obtained its API 2001 Monogram.SEPTEMBER 2001 ● Incorporation of HP&T Engineering Private Ltd in Mumbai, India.(formerly known as GV Resources Private Ltd).AUGUST 2001 ● Acquisition of KVC Co., Ltd in Kyoto, Japan.JULY 2001 ● Acquisition of KVC (UK) Ltd in Scotland, U.K.●KVC (UK) Ltd obtained its FPAL-registered (UK) certification.JUNE 2001 ● HP&T Products, Inc. attained its ISO9001:2000 certification.MARCH 2001 ● Incorporation of HP&T Products, Inc. in Houston, Texas, U.S.A.FEBRUARY 2001 ● Alton International (S) Pte Ltd attained its ISO 9002 certification.JANUARY 2001 ● Federal Hardware Engineering Co Pte Ltd was ranked in the“Singapore Top 1000 Company for 2000/2001”.SEPTEMBER 2000 ● Successful Initial Public Offering of Federal International (2000) Ltd.JUNE 2000 ● Incorporation of Alton International (Thailand) Co., Ltd. in Thailand.
Federal International (2000) Ltd AR 200212Board of DirectorsMr. Koh Kian Kiong Mr. Chew Keng Keong Mr. Yeo Teck Soon, John Mr. Tan Kah ImmMr. Koh Kian Kiong (56) is the Executive Chairman and Chief Executive Officer of the Group. He is alsoa member of the Executive Committee, Remuneration Committee, Nominating Committee and Audit Committee.He is one of the three original founders of the Group and has been in the industry for more than 30 years.Mr. Koh oversees the formulation of the Group’s corporate strategies and expansion plans.Mr. Chew Keng Keong (52) is the Executive Director of the Group as well as the Managing Director ofFederal Hardware Engineering Co Pte Ltd. He is also a member of the Executive Committee. Mr. Chew is also oneof the three founders of the Group. Well equipped with over 30 years of experience in the oil and gas industry,Mr. Chew is also responsible for the expansion and execution of the Group’s business.Mr. Yeo Teck Soon, John (53) one of the three original founders of Group, is also the Executive Director.He is also a member of the Executive Committee. Mr. Yeo has more than 30 years of experience in the oil andgas industry.Mr. Tan Kah Imm (47) is the Executive Director of the Group. He joined the Group in 1986. He has more than15 years of business and operational experience in the oil and gas industry. He is also a member of the ExecutiveCommittee.Ms Koh Maggie (35) is one of the Executive Directors of the Group. She joined the Group in 1993 andhas over 11 years of working experience in the oil and gas industry. She is also a member of the ExecutiveCommittee. Maggie holds a Master of Business Administration.
Board of DirectorsFederal International (2000) Ltd AR 200213Ms Koh Maggie Mr. Iman Taufik Mr. Heng Lee Seng Mr. Hoon Tai MengMr. Iman Taufik (61) joined the Group as a Non-Executive Director in 1996. He is also the Chairman of theNominating Committee, who has resigned on 31 March 2003. He was subsequently appointed Advisor to theGroup. Mr. Taufik has more than 36 years of experience in the oil and gas industry in Indonesia and the region andalso the founder and Chairman of PT Gunanusa Utama Fabricators. He is currently the Chairman of Foreign Relationsof KADIN (Indonesian Chambers of Commerce and Industry). Since 1990, he has been on the Board of Trustee of theIndonesian Engineers Associations (PII). From 1998 to 2001, he was Chairman of the ASEAN committee, IndonesianChambers of Commerce and Industry. From 1982 until 1999, Mr. Taufik served as a member of the People’sConsultative Assembly (MPR) for 3 consecutive periods representing West Java Province. In 1999, he was inductedas a member of the APEC Business Advisory Council (ABAC). In addition, he was the appointed Special Envoy of thePresident of the Republic of Indonesia for ASEAN region from 1998 to 1999. He is a past recipient of the PresidentialAward for Development of Offshore Technology in Indonesia.Mr. Heng Lee Seng (57) was appointed as one of the two independent Directors of the Group on 22 August,2000. He is Chairman of the Audit Committee and Remuneration Committee, and a member of the NominatingCommittee of the Group. Mr. Heng is also the Chairman of the Audit Committee, and member of Remuneration andNominating Committees of Heshe Holdings Ltd. At Sinwa KS Ltd., Mr. Heng is Chairman of the Audit Committee,and member of Remuneration and Nomination Committees. He is currently a partner with Heng Lee Seng & Co anda director of HLS Corporate Services Pte Ltd. Mr. Heng is a Certified Public Accountant and has been a practicing CPAfor more than 28 years. Mr. Heng is also a member of CPA Australia, The Chartered Institute of ManagementAccountants and The Chartered Institute of Secretaries and Administrators.Mr. Hoon Tai Meng (51) was appointed as an independent Director of the Company on 22 August, 2000.He is also a member of the Audit and Remuneration Committees and was appointed Chairman of NominatingCommittee on 31 March 2003. He is a Fellow of Chartered Institute of Management Accountants (UK), a CertifiedPublic Accountant (Singapore) and a Barrister-at-Law (Middle Temple). He is an Advocate and Solicitor and is currentlypracticing as Partner in M/s T M Hoon & Co. Besides having more than 6 years experience in law practice, Mr. Hoonalso has 19 years of experience in financial planning and management, audit, tax and corporate secretarial function.Mr. Hoon holds a Bachelor of Commerce degree in accountancy and LLB (Hons).
Federal International (2000) Ltd AR 200214Key Executives’ ProfileDawne Lim (Ms Lim) joined Federal Hardware Engineering Co Pte Ltd (Federal Hardware) in 1985 as ConfidentialSecretary and was subsequently promoted as Administration Manager in 1994. She is concurrently in charge of the HRfunction as well as providing business/corporate tactical support to all departments in the company. Prior to joining thecompany, Ms Lim had garnered 10 years of working experience in an MNC oil company as Administrative Officer.Chua Thiam Yong (Mr. Chua) is the Technical Manager of the Group and his main responsibility is toprovide technical advice on products and services supporting our sales team, subsidiaries, associated companies,agents and distributors. He holds a Diploma in Mechanical Engineering. Mr. Chua has with him 8 years of processinstrumentation and control valves working experience when he joined us in 1991.Eddie Ewe Soon Ee (Mr. Ewe) serves as the Managing Director of Alton International (S) Pte Ltd (Alton).His main responsibility is to oversee the business operations of Alton and ensuring its profitability. His role includesthe exploring of new business opportunities and expanding the customers’ base. Prior to joining the Group in1992, Mr. Ewe has had 24 years of working experience in the oil and gas industry. He has served as GeneralManager for Mid-Continent Equipment Ltd. for 4 1 / 2 years as well as for Federal Hardware Engineering Co Pte Ltdfor the following 2 1 / 2 years. His experience in serving in senior positions in both sales and purchasing amongmajor players in the industry has equipped him with established contacts, market intelligence and market trendassessment in the Asia Pacific region.Anthony Lim Tek Hua (Mr. Lim) is the Managing Director of Firematic Engineering Pte Ltd (Firematic).He is responsible for the overall business operations of Firematic. Mr. Lim holds a Diploma in Production Engineeringand has 15 years in the fire protection industry. In 1984, he joined Hart Engineering Pte Ltd. as a site engineer.He left Hart 2 years later to join Thorn Security (S) Pte Ltd. as a project engineer. Subsequently, he was promoted tothe position of project manager, followed by contract manager position. In 1992, he joined W.H. Brennan &Co. Pte Ltd. (WHB) as the division manager for its fire division. Mr. Lim left WHB to establish Firematic with FederalHardware in 1993.Cliff Teo Yew Teck (Mr. Teo) is the Managing Director of Federal Fire Engineering Pte Ltd (FFE), and also oneof the founders of Firematic. He is responsible for the business operations and the profitability of FFE. He is alsoactively involved in the strategic planning and exploring of new business opportunities in Brunei Darussalam,Thailand, Indonesia and East Malaysia. Mr. Teo holds a City & Guilds London Electrical Engineering Practise Certificate.He is equipped with 23 years of extensive experience in the marine, special hazard and oil & gas fire protectionindustries. In 1981, he joined Thorn Security (S) Pte Ltd. as Marine and Offshore Division Manger until 1992.The following year, he joined Kidde International (Kidde) Singapore as Application & Sales Manager. In 1993, he leftKidde to set up Firematic with Mr. Anthony Lim Tek Hua and Federal Hardware.George Deng Guan Qun (Mr. Deng) joined Federal Hardware Engineering Co Pte Ltd in 1995, as Managerof Marine Division. In 2001, he was promoted to the position of General Manager, Marine Division. Mr. Deng is alsothe Managing Director of Federal International (Shanghai) Co., Ltd and a holder of Master in Mechanical Engineeringfrom the Shanghai Jiao Tong University.Chng Geok (Ms Chng) was appointed Chief Financial Officer of the Company on September 1, 2000. She is incharge of the financial, accounting and management information system aspects of the Group. She first joined oneof the subsidiary companies, Federal Hardware in December 1995, as Finance Manager. She is also the appointedCompany Secretary. In addition, Ms Chng was appointed as Director in KVC (UK) Ltd and HP&T Products, Inc. on30 July 2001 and 3 November 2000 respectively. She is also the director of KVC Co., Ltd., since 20 December 2001.
She has 19 years of experience as Accountant, Group Accountant, F&A Manager and Financial Controller anda year’s experience in public accounting. She previously held other financial position with corporations such asThe Hour Glass Ltd. and HL Technology Systems Pte Ltd. (formerly a subsidiary of Hong Leong Corporation Ltd.).Ms Chng is a Certified Public Accountant and also holds a Bachelor of Business Administration degree from NationalUniversity of Singapore and ACCA.Federal International (2000) Ltd AR 2002Key Executives’ Profile 15George Anderson (Mr. Anderson) is the Managing Director and one of the founders of HP&T Products,Inc. located in Houston, Texas, U.S.A. He has almost 30 years of experience in the oil and gas industry including20 years with Schlumberger. He is also the Director of HP&T Engineering Private Ltd, located in Mumbai, India.Vijay Chatufale (Mr. Chatufale) is the Engineering Director and one of the founders of HP&T Products, Inc.in Houston, Texas, U.S.A. A holder of Masters in Mechanical Engineering, he has over 10 years of experience in theoil and gas industry. Currently holding responsibilities for the Engineering and Research & Development of newproducts for the company, he is also the Director of HP&T Engineering Private Ltd, located in Mumbai, India.Alan Smith (Mr. Smith) is Managing Director of KVC (UK) Ltd based in Clyderbank, Scotland. He is one of the3 founding members of the company that started production in May 2000. He has been in the valve industry foralmost 25 years and has an excellent appreciation and understanding of valves, end-use and associated engineeringaspects of the evolving market place. He has special responsibility for the procurement and production functions ofthe manufactory and is a member of the Chartered Institute of Purchase and Supply, UK.Alan Castles (Mr. Castles) is Quality Assurance Director of KVC (UK) Ltd and has the executive responsibilityof ensuring that our Quality System requirements are established, implemented and maintained in line with thelatest industry quality standards such as the API Specifications and the European Equipment Regulations. He is wellknown throughout the valve industry as a Quality Assurance Professional with over 26 years in the Petrochemicaland Marine industries. Additionally, he has the responsibility for the project management of all large customerscontracts of KVC (UK) Ltd.Vincent Loi Lik Hoo (Mr. Loi) joined Federal Hardware on October 2002 as General Manager heading theProject Engineering Division, a newly created division. Mr. Loi, who is responsible in overseeing the management ofFederal Hardware’s EPC projects, has more than 12 years experience in the oil and gas sector. He has been intenselyinvolved with the engineering, project management and business development functions of companies in theenergy sector, including companies such as Gas Services International (GSI, a Weatherford company) and SingaporeOxygen Air Liquide Pte Ltd (SOXAL). Prior to joining GSI, Mr. Loi had completed a major capital project for SOXALinvolving the engineering, construction, commissioning and operation of the electronics special gases center. InGSI, Mr. Loi handled EPC projects involving CONOCO, Chinese Petroleum Corp, Taiwan, Caltex and Shell. He holdsa Bachelor degree in Mechanical Engineering and completed a Master Program course in Composite MaterialsEngineering for the aeronautical industry from The Wichita State University, Kansas, USA.Michael Tay Hang Hee (Mr. Tay) was appointed on November 2002 as General Manager of FederalInternational (2000) Ltd. Mr. Tay, who is responsible for overseeing the operations and driving the profitability ofFederal’s overseas subsidiaries and associated companies, brings with him some 15 years of working experiencewith various oil and gas related companies. He holds an MBA from the University of South Australia, Adelaide.He has successfully managed numerous EPC projects for major oil companies.
Federal International (2000) Ltd AR 200216Financial Highlights1.00.90.80.70.6Debt/Equity Ratio0.50.4Turnover(S$ million)0.310030Net Tangible AssetsPer Share (cents)0.20.101997 1998 1999 2000 2001 2002908070605040987Profit Before Tax(S$ million)2530206520151001997 1998 1999 2000 2001 20024324.5Earning Per Share(cents)1014.0501997 1998 1999 2000 2001 20023.53.001997 1998 1999 2000 2001 20022.52.01.51.00.501997 1998 1999 2000 2001 2002RestatedFY 1997 FY 1998 FY 1999 FY 2000 FY 2001 FY 2002Net Tangible Assets Per Share (cents) 13.22 14.22 21.83 24.75 23.71 25.46Debt/Equity Ratio 1.00 0.78 0.52 0.34 0.33 0.45Turnover (S$ million) 65.17 48.00 80.33 64.28 71.94 96.08Profit Before Tax (S$ million) 3.19 2.56 8.13 4.33 0.61 3.78Earning Per Share (cents) 1.80 1.35 4.32 1.82 0.52 1.37Figures for FY 2000 are based on the Group’s restated proforma results.Certain figures for FY 2000 have been restated due to the adoption of the requirements of the new and revised accounting standards.
Corporate InformationBOARD OF DIRECTORS Mr. Koh Kian Kiong Executive Chairman and Chief Executive OfficerMr. Chew Keng Keong Executive DirectorMr. Yeo Teck Soon, John Executive DirectorMr. Tan Kah Imm Executive DirectorMs Koh MaggieExecutive DirectorMr. Iman TaufikNon-Executive Director (resigned on 31 March 2003)Mr. Heng Lee Seng Independent DirectorMr. Hoon Tai Meng Independent DirectorFederal International (2000) Ltd AR 200217AUDIT COMMITTEE Mr. Heng Lee Seng ChairmanMr. Hoon Tai MengMr. Koh Kian KiongEXECUTIVE COMMITTEE Mr. Koh Kian Kiong ChairmanMr. Chew Keng KeongMr. Yeo Teck Soon, JohnMr. Tan Kah ImmMs Koh MaggieNOMINATING COMMITTEE Mr. Hoon Tai Meng ChairmanMr. Heng Lee SengMr. Koh Kian Kiong (appointed on 31 March 2003)Mr. Iman Taufik (resigned on 31 March 2003)REMUNERATION COMMITTEE Mr. Heng Lee Seng ChairmanMr. Hoon Tai MengMr. Koh Kian KiongJOINT COMPANYSECRETARIESREGISTERED OFFICEChng Geok, CPAYvonne Choo, FCIS47 Genting RoadSingapore 349489Tel: 67478118 Fax: 67430690SHARE REGISTRAR AND Lim Associates (Pte) LtdSHARE TRANSFER OFFICE 10 Collyer Quay #19-08Ocean BuildingSingapore 049315AUDITORSPRINCIPAL BANKERSErnst & YoungCertified Public Accountants10 Collyer Quay #21-01 Ocean BuildingSingapore 049315Partner-in-charge of the audit: Tan Chian Khong (since financial year 2000)The Development Bank of Singapore Ltd6 Shenton Way, DBS Building Tower OneSingapore 068809Citibank, N.A.Temasek Avenue #14-00 Centennial TowerSingapore 039190United Overseas Bank Ltd80 Raffles Place, 8 Storey, UOB Plaza 1Singapore 048624
Federal International (2000) Ltd AR 200218Corporate Governance ReportThe Board believes that corporate governance principles and practices must remain relevant in a changing world.This will be an on going effort to remain lean, relevant and supple, as we evolve with the needs of our businessenvironment.In view of our beliefs, the Board is committed to continuously and consistently look into raising the level ofcorporate governance practices of the company over the years, in order to protect the interest of shareholders andto promote investors confidence.The Board believes that it is substantially in compliance with the code of corporate governance issued by theCorporate Governance Committee on 21 March 2001.The Board of Directors of the Company held a total of 2 board meetings during the year.BOARD OF DIRECTORSThe Company is headed by an effective Board to lead and control its operations and affairs.The Board comprises the following members:Mr. Koh Kian Kiong(Executive Chairman & CEO)Mr. Chew Keng Keong (Executive Director)Mr. Yeo Teck Soon John (Executive Director)Mr. Tan Kah Imm(Executive Director)Ms Koh Maggie(Executive Director)Mr. Iman Taufik(Non-Executive Director) (resigned on 31 March 2003)Mr. Heng Lee Seng(Independent Director)Mr. Hoon Tai Meng(Independent Director)The number of board and board committee meetings held in the year and the attendance of each director, whererelevant, are set out as follows:Board Executive AuditDirectors No. of Meetings Attendance No. of meetings Attendance No. of meetings AttendanceMr. Koh Kian Kiong 2 2 6 6 2 2Mr. Chew Keng Keong 2 2 6 6Mr. Yeo Teck Soon John 2 2 6 5Mr. Tan Kah Imm 2 2 6 5Ms Koh Maggie (*) 2 2 5 4Mr. Heng Lee Seng 2 2 2 2Mr. Hoon Tai Meng 2 2 2 2Mr. Iman Taufik2 2* Ms Koh Maggie was appointed as an Exco Committee on 20 March 2002.
Corporate Governance ReportPrinciple 1 : The Board’s Conduct of its AffairsThe principal functions of the Board are:(1) Approving the Group’s policies, strategies and financial objectives of the Company and monitoring theperformance of management;Federal International (2000) Ltd AR 200219(2) Overseeing the processes for evaluating the adequacy of internal controls, risk management, financial reportingand compliance;(3) Approving the nominations of board of directors and appointment of key personnel;(4) Approving annual budgets, major funding proposals, approving investment and divestment proposals ofmore than 5% of Group’s NTA;(5) Assuming responsibility for corporate governance and compliance with the Companies Act and the rules andrequirements of regulatory bodies.Matters, which are specifically reserved to the full Board for decision, are those involving a conflict of interest for asubstantial shareholder or a director, material acquisitions and disposal of assets, corporate or financial restructuringand share issuances and dividends. Additionally, the Board delegates certain of its function to the Executive,Nominating, Audit and Remuneration Committees.The Company’s Articles of Association (the “Articles”) allow a board meeting to be conducted by way of teleconferenceand a resolution in writing signed by the majority of directors. The attendance of the directors atmeeting of the Board and Board committees, as well as the frequency of such meetings, is found on page 18 of theAnnual Report.The Company also has an on-going training budget for the existing directors to fund the directors’ participation atindustry conferences and seminars, and to fund directors’ attendance at any course of instruction/training programmein connection with their duties as directors. The budget may be utilized by each director subject to the approval ofthe Chairman. The Company has adopted a policy that directors are also welcome to request further explanations,briefings or informal discussions on any aspects of the Company’s operations or business issues from themanagement. The Chairman/CEO will make the necessary arrangements for the briefings, informal discussions orexplanations required by the director.For the last 3 years, no new director was appointed and thus it was not necessary to conduct an orientationtrainingprogramme.Principle 2 : Board Composition and BalancePresently, the Board comprises 2 independent directors and 5 executive directors. We have not been able to complywith the recommended requirement with regard to having one third of the board composition comprising independentdirectors. The Board has reviewed its option and is satisfied that its current composition and board size areappropriate, having taken into account the nature and scope of the Group’s operations. The Board is of the viewthat to fully comply for a third of the board to be independent directors now is non-justifiable.
Federal International (2000) Ltd AR 200220Corporate Governance ReportThe independence of each director is reviewed annually by the Nominating Committee (“NC”). The NC adopts theCode’s definition of what constitutes an independent director in its review, and further, that no individual or smallgroup of individuals dominate the Board’s decision making process.Key information regarding the directors is found on page 12 to 13 of the Annual Report. The NC is of the view thatthe current Board comprised persons as a group provides core competencies necessary to meet the Company’stargets.Principle 3 : Role of Chairman and Chief Executive OfficerMr. Koh Kian Kiong is the Chairman and CEO. He is also one of the executive directors. This is not in compliancewith the Code of Corporate Governance. As Mr. Koh is responsible for the Board and has full executive responsibilitiesover the directions and operational decisions of the Group since 1974, it will take time to segregate the function.Moreover, Mr. Koh is also a substantial shareholder of the Company and he is, therefore, motivated to contribute tothe growth and profitability of the business.The Chairman ensures that board meetings are held when necessary. The Chairman reviews most board papersbefore they are presented to the Board and ensures that board members are provided with complete, adequate andtimely information. Management staff members who have prepared the papers or who can provide additionalinsight into the matters to be discussed are invited to present the paper or attend at the relevant time during theboard meeting.Principle 6 : Access to InformationIn order to ensure that the Board is able to fulfill its responsibilities, management provides the board members withthe monthly management accounts and other financial statements within 20 days after the month-end. All analysts’reports on the Company are forwarded to the directors on an on-going basis as and when received. With effect from1 April 2003, the directors have also been provided with the phone number and e-mail particulars of the Company’ssenior management and company secretary to facilitate access.Should directors, whether as a group or individually, need independent professional advice, the company secretarywill, upon direction by the Board, appoint a professional advisor selected by the group or the individual, andapproved by the Chairman, to render the advice. The cost of such professional advice will be borne by the Company.The Company Secretary attends all board meetings and is responsible for ensuring that board procedures arefollowed. The Company Secretary also ensures that all related statues and regulations applicable to the Companyare complied with.Please refer to the “Corporate Information” section of the annual report for the composition of the Company’s Boardof Directors, Board committees and the management committee.BOARD COMMITTEESThe Board is assisted by the Executive, Nominating, Audit and Remuneration Committees.
Corporate Governance ReportEXECUTIVE COMMITTEEThe Executive Committee comprises Mr. Koh Kian Kiong; Mr. Chew Keng Keong; Mr. Yeo Teck Soon, John;Mr. Tan Kah Imm and Ms Koh Maggie.The Committee meets regularly and performs the following functions:Federal International (2000) Ltd AR 200221(1) Approves investment/divestment proposals within 5% of NTA;(2) Reviews and submits the Group’s business plans to the Board;(3) Establishes guideline and approval limits for the management and operation of the Group’s businesses;(4) Reviews budget against performance of each business unit;(5) Ensures that interested person transactions are undertaken at arm’s length and on commercial terms;(6) Oversees and implements appropriate systems to manage risks.NOMINATING COMMITTEEPrinciple 4 : Board MembershipPrinciple 5 : Board PerformanceThe Nominating Committee (NC) comprises Mr. Hoon Tai Meng ; Mr. Heng Lee Seng and Mr. Koh Kian Kiong. Themajority of the members are non-executive independent directors. The NC is chaired by Mr. Hoon Tai Meng who isa non-executive independent Director.The NC oversees the composition of the Board to ensure that they meet the composition and balance requiredunder the Code.The duties of the NC are as follows :(1) To review annually the independence of each director with reference to the criteria set out in the Code.(2) To review all nominations for new appointments and re-appointments of directors and put forth theirrecommendations for approval by the Board.(3) To determine whether a director is able to and has been adequately carrying out his duties as a director of theCompany, particularly, when a Director has multiple Board representations.The NC is in the process of formulating evaluation procedures and setting the performance criteria for the assessmentof the Board’s performance.New directors are at present appointed by way of a board resolution, after the NC approves their appointments.These new directors shall submit themselves for re-election by shareholders at the next annual general meeting ofthe Company. Article 91 of the Articles requires one third of the Board to retire by rotation at every AGM.
Federal International (2000) Ltd AR 200222Corporate Governance ReportThe dates of initial appointment and last re-election of each director are set out below:Name Position Date of initial appointment Date of last re-electionMr. Koh Kian Kiong Chairman & CEO 13 Nov 1999 11 May 2001Mr. Chew Keng Keong Executive Director 13 Nov 1999 23 May 2002Mr. Yeo Teck Soon, John Executive Director 19 Jun 2000 11 May 2001Mr. Tan Kah Imm Executive Director 19 Jun 2000 11 May 2001Ms Koh Maggie Executive Director 19 Jun 2000 11 May 2001Mr. Iman Taufik# Non-independent Director 19 Jun 2000 11 May 2001Mr. Heng Lee Seng Independent Director 22 Aug 2000 23 May 2002Mr. Hoon Tai Meng Independent Director 22 Aug 2000 23 May 2002# Mr. Iman Taufik resigned on 31 March 2003 due to personal reasons.AUDIT COMMITTEEPrinciple 11 : Audit CommitteePrinciple 12 : Internal ControlsPrinciple 13 : Internal AuditThe Audit Committee (AC) comprises two non-executive directors and one executive director, the majority ofwhom, including the Chairman, are independent. In view of the cost factor, we will only appoint another nonexecutivemember to the committee when the Group’s level of activities warrants the need. All members areappropriately qualified to discharge their responsibilities, and capable of exercising sound and independent judgment.The Committee is chaired by Mr. Heng Lee Seng, a Chartered Accountant. The other members are Mr. Hoon TaiMeng and Mr. Koh Kian Kiong. Mr. Heng and Mr. Hoon have vast accounting experience and qualifications.The AC will in future be meeting at least four times a year and play a key role in assisting the Board of Directors toensure that the financial reporting and internal accounting controls of the Group meet the standards.The key responsibilities of the AC include the following :(1) to review the scope, audit plans, results and effectiveness of the external and internal auditors;(2) to review the interested person transactions in accordance with the requirements of the Listing Rules of theSGX-ST;(3) to review the announcements of the interim, quarterly and annual results prior to their submission to theBoard for approval for release to the SGX-ST;(4) to review and recommend the re-appointment of the external auditors;(5) to review the independence of the external auditors annually;(6) to review all non-audit services provided by the external auditors to determine if the provision of suchservices would affect the independence of the external auditors.
Corporate Governance ReportThe AC is empowered to investigate any matter relating to the Group’s accounting, auditing, internal controls andfinancial practices brought to its attention, with full access to records, resources and personnel, to enable it todischarge its functions properly. It has full access to and co-operation of management, including the internalauditors, and has full discretion to invite any director and executive officer to attend its meetings.The Group has an internal audit department with a primary line of reporting to the Chairman of the Audit Committee.The AC ensures that the team is adequately resourced and has the appropriate standing within the Group. It alsoreviews and approves the annual internal audit plan proposed by the internal auditor who is a certified publicaccountant. The internal auditor, like the external auditors, reports independently their findings and recommendationsto the AC.Federal International (2000) Ltd AR 200223In performing its functions, the AC reviewed the overall scope of both internal and external audits, and the assistancegiven by management to the auditors. The AC also met with the internal and external auditors, independent ofmanagement, to discuss the results of their respective audit findings and their evaluation of the Group’s system ofaccounting and internal controls.The AC has reviewed the Group’s risk assessment and, based on the audit reports and management controls inplace, is satisfied that there are adequate internal controls in the Group.The AC is also satisfied with the independence and objectivity of the external auditors and recommends to theBoard of Directors the re-appointment of Ernst & Young as the external auditors.REMUNERATION COMMITTEEPrinciple 7 : Procedures for Development of Remuneration PoliciesPrinciple 8 : Level and Mix of RemunerationPrinciple 9 : Disclosure of RemunerationThe Remuneration Committee (RC) comprises 3 members, the majority of whom, including the Chairman, are nonexecutiveindependent directors. The RC is chaired by Mr. Heng Lee Seng, a non-executive independent Director.The other members are Mr. Hoon Tai Meng and Mr. Koh Kian Kiong.The members of the RC have many years of corporate experience and are knowledgeable in the field of executivecompensation. However, the RC has access to external professional advice on remuneration matters, if required.The aim of the RC is to motivate and retain executives and ensure that the Company is able to attract talents in themarket in order to maximize shareholder value. In consultation with the Chairman, the RC will:(1) recommend to the Board a transparent framework of remuneration for executive directors of the Companyand key executives are aligned with those of shareholders and that such remuneration is appropriate toattract, motivate and retain the right talents for the Group;(2) review and recommend to the Board for their endorsement the annual remuneration package for executivedirectors of the Company, which include a variable bonus component which is performance-related;(3) decide on the early termination compensation of directors.
Federal International (2000) Ltd AR 200224Corporate Governance ReportThe Company adopts a remuneration policy for executive directors and key management staff comprising a fixedcomponent and a variable component. The fixed component is in the form of a base salary. The variable componentis in the form of a variable bonus that is linked to the Company and individual performance.Non-executive Directors’ fees are set in accordance with a remuneration framework comprising of a basic fee andincrement fixed fee for the level of responsibilities such as chairing board committees. The non-executive directors’fees proposed are subject to shareholders approval at the Annual General Meeting.There are no employees of the Group who are immediate family members of a Director or the CEO and whoseremuneration exceeds S$150,000 during the year.The existing service contracts for Executive Directors are for a period of 1 year commencing from 11 August 2000,thereafter shall automatically continue from year to year unless terminated. With effect from 2003, future servicecontracts or renewals will be subjected to the RC’s review to ensure that the terms are fair and for a reasonable period.The Company does not have a long-term incentive or share option scheme in place.The Board does not intend to present the remuneration policy at the forthcoming Annual General Meeting forapproval.The following information relates to remuneration of directors:(1) Number of Directors in Remuneration Bands:Number of DirectorsRemuneration Bands 2002 2001S$500,000 and above – –S$250,000 to S$499,999 2 1Below S$250,000 6 7Total 8 8(2) Summary compensation table for the year ended 31 December 2002:Directors of the CompanyFees Salary ^ Profit Sharing Other Benefits* Total% % % % %S$250,000 to S$499,999Mr. Koh Kian Kiong 75 20 5 100Mr. Chew Keng Keong 78 16 6 100Less than S$250,000Mr. Yeo Teck Soon, John 79 18 3 100Mr. Tan Kah Imm 78 20 2 100Ms Maggie Koh 68 24 8 100Mr. Iman Taufik100 100(resigned on March 31, 2003)Mr. Heng Lee Seng 100 100Mr. Hong Tai Meng 100 100^ Salary includes leave pay, CPF and CPF for leave pay.* Other Benefits include transport allowance, chauffeur allowance and car benefits.
Corporate Governance ReportKey Management Executives’ RemunerationIn view of the sensitive nature of the Remuneration for the Key Management Executive, the Board is of the opinionthat the name of the key executives should not be disclosed in the Annual Report.Remuneration BandsNumber of Key Management ExecutivesFederal International (2000) Ltd AR 200225S$500,000 and above –S$250,000 to S$499,999 2Below S$250,000 11Total 13COMMUNICATION WITH SHAREHOLDERSPrinciple 10 : Accountability and AuditPrinciple 14 : Communication with ShareholdersPrinciple 15 : Greater Shareholder ParticipationThe Board is mindful of the obligation to provide timely and fair disclosure of material information. The Board isaccountable to the shareholders while the Management is accountable to the Board.The Company does not practise selective disclosure. Price sensitive announcements including interim and full-yearresults are released through MASNET and news release. The Company has engaged public relation company servicesto take care of the disseminating of information to the investors and public since its listing in 2000. The Companyholds analysts briefing and road show for its 30 June 2002 results. All shareholders of the Company receive a copyof Annual Report which contains the full financial statements of the Company and the Group. The Annual Report isavailable to all shareholders at no cost upon request.At general meetings, shareholders are given the opportunity to express their views and ask questions regardingthe Group and its businesses. The Articles of Association of the Company allow shareholders of the Company toappoint one or two proxies to attend and vote on their behalf.The chairpersons of the Nominating, Audit and Remuneration Committees are present and available to addressquestions at annual general meetings. The external auditors are also present to assist the directors in addressingany relevant queries by shareholders.Dealings in SecuritiesThe Company has adopted an internal code on dealings in the shares of the Company for Director and key executivesof the Group, which is modeled after the SGX’s Best Practice Guide. The internal code has been issued to all directorsof the Company and relevant executives of the Group and they are required to confirm compliance with the internalcode annually.
Federal International (2000) Ltd AR 200226Corporate Governance ReportInterested Person TransactionsThe Company has adopted an internal policy in respect of any transactions with interested persons and has set outthe procedures for review and approval of the Company’s interested person transactions. All interested persontransactions are subject to review by the Audit Committee.The aggregate value of interested person transactions entered into during the year were as follows:-Aggregate value ofAggregate value ofinterested personall interested persontransactions during the transactions conducted underfinancial year excluding shareholders’ mandate pursuanttransactions conducted under to Rule 920 of the SingaporeName of interested person the shareholders’ mandate Exchange Listing ManualPT Gunanusa Utama Fabricators– sale of goods – 27,186,828– interest on trade overdues – 1,107,843Material ContractsNo material contracts were entered between the Company and any of its subsidiaries with any Director or controllingshareholders during the financial year ended 31 December 2002.On behalf of the Board of DirectorsKoh Kian KiongChairman & Chief Executive OfficerSingapore17 April 2003
FinancialStatementsDirectors’ ReportStatement by DirectorsAuditor’s ReportBalance SheetsProfit and Loss AccountsStatements of Changes in EquityConsolidated Statement of Cash FlowsNotes to the Financial StatementsStatistics of ShareholdingsNotice of Annual General MeetingProxy Form28 33 34 35 37 38 40 42 76 78 79
Federal International (2000) Ltd AR 2002and its Subsidiary Companies28Directors’ ReportThe Directors are pleased to present their report together with the audited financial statements of the Companyand of the Group for the year ended 31 December 2002.DIRECTORS OF THE COMPANYThe names of the Directors of the Company in office at the date of this report are :-Koh Kian KiongChew Keng KeongYeo Teck Soon, JohnTan Kah ImmKoh MaggieHeng Lee SengHoon Tai MengPRINCIPAL ACTIVITIESThe principal activity of the Company is that of an investment holding company. The principal activities of theCompany’s subsidiary companies are set out in Note 3 of the financial statements.There have been no significant changes in the nature of these activities during the year.RESULTS FOR THE FINANCIAL YEARGROUPCOMPANY$ $Profit for the year 2,403,451 7,341,257Revenue reserves brought forward 2,840,565 1,706,243Final dividend declared in respect of the previous financial year (683,451) (683,451)Revenue reserves carried forward 4,560,565 8,364,049MATERIAL MOVEMENTS IN RESERVES AND PROVISIONSThe following transfers have been made to/(from) reserves :GROUPCOMPANY$ $Revenue reservesProfit for the year 2,403,451 7,341,257Final dividend declared in respect of the previous financial year (683,451) (683,451)Foreign currency translationAdjustment arising on consolidation 242,500 –There were no other material transfers to or from reserves or provisions during the financial year except for normalamounts recognised as expenses for such items as depreciation of fixed assets, amortisation of intangible assetsand provisions for doubtful debts, stock obsolescence and income tax as shown in the financial statements.
Directors’ ReportACQUISITION AND DISPOSAL OF SUBSIDIARY COMPANIESDuring the financial year :-a) The Company incorporated a Singapore subsidiary company, Federal Fire Engineering Pte Ltd, with anauthorised share capital of $100,000 comprising 100,000 ordinary shares of $1 each. On incorporation, theCompany subscribed for 2 ordinary subscriber’s share of $1 each at par for cash. The Company furthersubscribed for 9,998 ordinary shares of $1 each at par for cash to provide additional working capital.Federal International (2000) Ltd AR 2002and its Subsidiary Companies29b) The Company incorporated a Korean subsidiary company, Federal International Korea, with an authorisedshare capital of KRW 780 million comprising 156,000 equity shares of KRW 5,000 each. On incorporation,the Company subscribed for 39,000 equity shares of KRW 5,000 each at par for cash.c) A subsidiary company incorporated a subsidiary company, Federal International (Shanghai) Co., Ltd, in thePeople’s Republic of China. The subsidiary company contributed $322,760 (USD 180,000) in share capital,representing 90% interest in Federal International (Shanghai) Co., Ltd.d) A subsidiary company extended $46,097 in loans to two individuals for the purpose of incorporating PTFederal International. These individuals have pledged their shares, granted non-expiring call options andassigned their attendant rights in respect of their shares in PT Federal International to this subsidiary company.The Company effectively controls and owns 100% interest in PT Federal International through these individuals.No subsidiary companies were acquired or disposed during the financial year.ISSUE OF SHARES AND DEBENTURESThe Company and its subsidiary companies did not issue any shares or debentures during the financial year.ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE SHARES AND DEBENTURESNeither at the end of nor at any time during the financial year was the Company a party to any arrangement whoseobject is to enable the Directors of the Company to acquire benefits by means of the acquisition of shares ordebentures of the Company or any other body corporate.
Federal International (2000) Ltd AR 2002and its Subsidiary Companies30Directors’ ReportDIRECTORS’ INTEREST IN SHARES AND DEBENTURESThe following Directors who held office at the end of the financial year had, according to the register of directors’shareholdings required to be kept under section 164 of the Singapore Companies Act, an interest in shares of theCompany as stated below :-DIRECT INTERESTDEEMED INTERESTAT AT AT AT AT ATNAME OF DIRECTOR 1.1.2002 31.12.2002 21.1.2003 1.1.2002 31.12.2002 21.1.2003Federal International (2000) Ltd(“The Company”)Ordinary shares of $0.20 eachKoh Kian Kiong 30,013,270 19,813,270 19,813,270 17,500,000 27,800,000 27,800,000Chew Keng Keong 19,338,250 12,638,250 12,638,250 18,000,000 24,700,000 24,700,000Yeo Teck Soon, John 9,457,455 5,807,455 5,807,455 9,400,000 13,000,000 13,000,000Tan Kah Imm 9,715,995 5,715,995 5,715,995 – 4,000,000 4,000,000Koh Maggie 242,580 242,580 242,580 – – –Heng Lee Seng 50,000 50,000 50,000 – – –Hoon Tai Meng 100,000 100,000 100,000 – – –Iman Taufik – – – 3,030,405 2,964,405 2,964,405(resigned on 31.3.2003)Messrs Koh Kian Kiong and Chew Keng Keong are deemed to be interested in shares of the Company’s subsidiarycompanies in proportion to its interest in the subsidiary companies by virtue of their interests in more than 20% ofthe issued capital of the Company.DIVIDENDSA first and final dividend of 0.5 cents per ordinary share (2.5%) less income tax of 22%, amounting to $683,451 waspaid during the financial year in respect of the previous financial year as proposed in the previous Directors’ report.No dividend has been paid during the year in respect of the current financial year. The Directors propose a first andfinal dividend of 0.6 cents per ordinary share (3%) less income tax of 22%, amounting to $820,141 be paid for theyear ended 31 December 2002.BAD AND DOUBTFUL DEBTSBefore the profit and loss account and the balance sheet of the Company were made out, the Directors tookreasonable steps to ascertain that proper action had been taken in relation to the writing-off of bad debts and themaking of provision for doubtful debts, and have satisfied themselves that there were no known bad debts to bewritten off and that no provision for doubtful debts was necessary.At the date of this report, the Directors are not aware of any circumstances which would render it necessary towrite-off any bad debts or the amount of provision for doubtful debts in the Group of companies inadequate to anysubstantial extent.
Directors’ ReportCURRENT ASSETSBefore the profit and loss account and the balance sheet of the Company were made out, the Directors tookreasonable steps to ascertain that any current assets which were unlikely to realise their book values in the ordinarycourse of business had been written down to their estimated realisable values or adequate provision had beenmade for the diminution in value of such current assets.Federal International (2000) Ltd AR 2002and its Subsidiary Companies31At the date of this report, the Directors are not aware of any circumstances which would render the values attributedto current assets in the consolidated financial statements misleading.CHARGES AND CONTINGENT LIABILITIESSince the end of the financial year, and up to the date of this report, no charge on the assets of the Company or anycompany in the Group has arisen which secures the liabilities of any other person. Except as disclosed in Note 33to the financial statements, since the end of the financial year, and up to the date of this report, no contingentliability has arisen.ABILITY TO MEET OBLIGATIONSNo contingent or other liability has become enforceable or is likely to become enforceable within the period oftwelve months after the end of the financial year which, in the opinion of the Directors, will or may substantiallyaffect the ability of the Company and of the Group to meet its obligations as and when they fall due.OTHER CIRCUMSTANCES AFFECTING THE FINANCIAL STATEMENTSAt the date of this report the Directors are not aware of any circumstances not otherwise dealt with in this report orin the consolidated financial statements which would render any amount stated in the financial statements of theCompany and the consolidated financial statements misleading.UNUSUAL ITEMSIn the opinion of the Directors, the results of the operations of the Company and of the Group during the financialyear have not been substantially affected by any item, transaction or event of a material and unusual nature.UNUSUAL ITEMS AFTER THE FINANCIAL YEARIn the opinion of the Directors, no item, transaction or event of a material and unusual nature has arisen in theinterval between the end of the financial year and the date of this report which would affect substantially theresults of the operations of the Company or of the Group for the financial year in which this report is made.DIRECTORS’ CONTRACTUAL BENEFITSSince the end of the previous financial year, no Director has received or has become entitled to receive a benefit byreason of a contract made by the Company or a related corporation with the Director, or with a firm of which theDirector is a member, or with a company in which the Director has a substantial financial interest.
Federal International (2000) Ltd AR 2002and its Subsidiary Companies32Directors’ ReportOPTIONSNo share option is granted at the date of this report.AUDITORSErnst & Young have expressed their willingness to accept re-appointment as auditors.On behalf of the Board,Koh Kian KiongDirectorChew Keng KeongDirectorSingapore17 April 2003
Statement by DirectorsPursuant to Section 201(15)We, Koh Kian Kiong and Chew Keng Keong, being two of the Directors of Federal International (2000) Ltd, dohereby state that, in the opinion of the Directors :-(i) the accompanying balance sheets, profit and loss accounts, statements of changes in equity and consolidatedstatement of cash flows together with the notes thereto, set out on pages 35 to 75, are drawn up so as togive a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2002, theresults of the business and changes in equity of the Company and of the Group and the cash flows of theGroup for the year then ended; andFederal International (2000) Ltd AR 2002and its Subsidiary Companies33(ii)at the date of this statement there are reasonable grounds to believe that the Company will be able to pay itsdebts as and when they fall due.On behalf of the Board,Koh Kian KiongDirectorChew Keng KeongDirectorSingapore17 April 2003
Federal International (2000) Ltd AR 2002and its Subsidiary Companies34Auditor’s Reportto the Members of Federal International (2000) LtdWe have audited the financial statements of Federal International (2000) Ltd set out on pages 35 to 75. Thesefinancial statements comprise the balance sheets of the Company and of the Group as at 31 December 2002, theprofit and loss accounts and statements of changes in equity of the Company and of the Group and cash flows ofthe Group for the year ended 31 December 2002, and notes thereto. These financial statements are the responsibilityof the Company’s Directors. Our responsibility is to express an opinion on these financial statements based on ouraudit.We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we planand perform the audit to obtain reasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements. An audit also includes assessing the accounting principles used and significant estimatesmade by the Directors, as well as evaluating the overall financial statement presentation. We believe that our auditprovides a reasonable basis for our opinion.In our opinion,(a)the financial statements are properly drawn up in accordance with the provisions of the Singapore CompaniesAct (Act) and Singapore Statements of Accounting Standard and so as to give a true and fair view of:-(i)(ii)the state of affairs of the Company and of the Group as at 31 December 2002, the results andchanges in equity of the Company and of the Group and cash flows of the Group for the year thenended; andthe other matters required by section 201 of the Act to be dealt with in the financial statements;(b)the accounting and other records, and the registers required by the Act to be kept by the Company and bythose subsidiary companies incorporated in Singapore of which we are the auditors have been properly keptin accordance with the provisions of the Act.We have considered the financial statements of the subsidiary companies whose financial statements have beenincluded in the consolidated financial statements for which we have not acted as auditors and the auditors’ reportson those subsidiary companies. These subsidiary companies and other subsidiary companies which are not requiredto be audited in their respective countries of incorporation are stated in Note 3 to the financial statements.We are satisfied that the financial statements of the subsidiary companies that have been consolidated with thefinancial statements of the Company are in form and content appropriate and proper for the purposes of thepreparation of the consolidated financial statements, and we have received satisfactory information and explanationsas required by us for those purposes.The auditors’ reports on the financial statements of the subsidiary companies were not subject to any qualificationand in respect of subsidiary companies incorporated in Singapore did not include any comment made under section207(3) of the Act.ERNST & YOUNGCertified Public AccountantsSingapore17 April 2003
Balance Sheetsas at 31 December 2002Long-term assetsGROUPCOMPANYNOTES 2002 2001 2002 2001$ $ $ $Fixed assets 4 11,465,663 12,137,702 440,933 587,911Subsidiary companies 5 – – 17,638,520 29,299,584Associated companies 6 5,376,164 764,793 1,015,866 1,015,866Intangible assets 7 776,965 1,900,062 – –Other investments 8 20,000 406,601 – –Trade debtor 9 472,663 1,145,725 – –Other debtors 10 423,778 482,139 – –Amounts due from subsidiarycompanies 11 – – 26,555,469 2,672,880Deferred tax assets 12 215,616 189,935 11,480 34,735Federal International (2000) Ltd AR 2002and its Subsidiary Companies3518,750,849 17,026,957 45,662,268 33,610,976Current assetsStocks and work-in-progress 13 21,810,277 22,208,653 – –Trade debtors 14 17,784,776 15,257,504 – –Other debtors 15 802,218 1,309,962 838 27,912Amounts due from subsidiarycompanies 16 – – 1,983,820 5,981,451Amounts due from associatedcompanies 17 20,190,411 1,413,138 74,128 393,069Amounts due from relatedparties 18 586,838 16,269,124 1,735 1,853Fixed deposits 154,824 1,159,153 – 1,000,000Cash and bank balances 948,688 2,167,747 4,252 48,79862,278,032 59,785,281 2,064,773 7,453,083Current liabilitiesTrade creditors and accruals 9,411,409 13,415,683 494,010 342,331Other creditors 19 597,149 597,507 57,639 105,792Amount due to associatedcompanies 20 302,713 116,282 – –Amounts due to relatedparties 21 7,234 20,596 – –Amounts due to bankers 22 21,133,201 16,271,599 6,213 –Term loans 23 1,821,488 111,165 – –Hire purchase creditors 24 219,995 216,690 101,626 97,242Provision for taxation 1,477,952 1,165,357 56,278 63,60034,971,141 31,914,879 715,766 608,965Net current assets 27,306,891 27,870,402 1,349,007 6,844,118
Federal International (2000) Ltd AR 2002and its Subsidiary Companies36Balance SheetsLong-term liabilitiesGROUPCOMPANYNOTES 2002 2001 2002 2001$ $ $ $Term loans 23 – 596,586 – –Hire purchase creditors 24 418,264 654,084 235,235 336,860418,264 1,250,670 235,235 336,860Net assets 45,639,476 43,646,689 46,776,040 40,118,234EquityShare capital 25 35,048,775 35,048,775 35,048,775 35,048,775Share premium 26 3,363,216 3,363,216 3,363,216 3,363,216Revaluation reserve 2,398,534 2,398,534 – –Foreign currency translation 233,509 (8,991) – –Revenue reserves 4,560,565 2,840,565 8,364,049 1,706,243Total equity 45,604,599 43,642,099 46,776,040 40,118,234Minority interests 34,877 4,590 – –45,639,476 43,646,689 46,776,040 40,118,234The accounting policies and explanatory notes on pages 42 through 75 form an integral part of the financial statements.
Profit and Loss Accountsfor the year ended 31 December 2002GROUPCOMPANYNOTES 2002 2001 2002 2001$ $ $ $Revenue 27 96,077,859 71,938,211 11,198,237 3,414,000Cost of sales (77,473,297) (58,353,145) – –Federal International (2000) Ltd AR 2002and its Subsidiary Companies37Gross profit 18,604,562 13,585,066 11,198,237 3,414,000Other income 28 1,678,910 1,865,859 1,614 9,870Selling and distribution costs 28 (9,126,710) (8,204,266) (1,347,856) (1,092,956)Administrative and general costs 28 (6,409,838) (5,489,408) (381,075) (493,582)Operating profit 4,746,924 1,757,251 9,470,920 1,837,332Finance costs 28 (1,298,492) (1,038,303) (17,935) (18,783)Share of results of associates 325,221 (112,102) – –Profit before taxation andminority interest 3,773,653 606,846 9,452,985 1,818,549Tax expense 29 (1,381,092) (264,415) (2,111,728) (461,248)Minority interest, net of tax 10,890 575,270 – –Profit for the year 2,403,451 917,701 7,341,257 1,357,301Basic earnings per share (cents) 30- based on weighted averagenumber of shares of175,243,875 (2001 :175,243,875) shares of$0.20 each 1.37 0.52Diluted earnings per share (cents) 30- based on weighted averagenumber of shares of175,243,875 (2001 :175,243,875) shares of$0.20 each 1.37 0.52The accounting policies and explanatory notes on pages 42 through 75 form an integral part of the financial statements.
Federal International (2000) Ltd AR 2002and its Subsidiary Companies38Statements of Changes in Equityfor the year ended 31 December 2002GROUPCOMPANY2002 2001 2002 2001$ $ $ $Authorised capital275,000,000 ordinary sharesof $0.20 eachBalance at beginning and end of year 55,000,000 55,000,000 55,000,000 55,000,000Issued and fully paid capital (1)175,243,875 ordinary sharesof $0.20 eachBalance at beginning and end of year 35,048,775 35,048,775 35,048,775 35,048,775Share premiumBalance at beginning and end of year 3,363,216 3,363,216 3,363,216 3,363,216Revaluation reserveBalance at beginning and end of year 2,398,534 2,398,534 – –Foreign currency translationBalance at beginning of year(as previously reported) (8,991) (20,510)Cumulative effect of changein accounting policy – (2)Balance at beginning of year(as restated) (8,991) (20,512)Foreign currency translation adjustment 242,500 11,521Balance at end of year 233,509 (8,991)
Statements of Changes in EquityGROUPCOMPANY2002 2001 2002 2001$ $ $ $Revenue reservesBalance at beginning of yearas previously reported 2,840,565 2,199,262 1,706,243 348,942Cumulative effect of changein accounting policies – 385,148 – 661,546Federal International (2000) Ltd AR 2002and its Subsidiary Companies39Balance at beginning of yearafter cumulative effectof change in accounting policies 2.840,565 2,584,410 1,706,243 1,010,488Final dividend declared in respectof previous financial year (683,451) (661,546) (683,451) (661,546)2,157,114 1,922,864 1,022,792 348,942Profit for the year 2,403,451 917,701 7,341,257 (2) 1,357,301Balance at end of year 4,560,565 2,840,565 8,364,049 1,706,243Total equity andshares outstanding 45,604,599 43,642,099 46,776,040 40,118,234(1)The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinaryshares carry one vote per share without restriction.(2)The Company’s profit for the year is stated net of the elimination for the net dividend income received of $11,944,373from subsidiary companies in respect of the pre-acquisition profits. The corresponding adjustment has been madeagainst the cost of investment in subsidiary companies (Note 3).The accounting policies and explanatory notes on pages 42 through 75 form an integral part of the financial statements.
Federal International (2000) Ltd AR 2002and its Subsidiary Companies40Consolidated Statement of Cash Flowsfor the year ended 31 December 20022002 2001$ $Cash flows from operating activities :Operating profit before taxation 3,773,653 606,846Adjustments for :Amortisation of goodwill 211,118 211,118Amortisation of negative goodwill (111,891) –Amortisation of development costs 24,343 –Currency realignment (3,266) (20,982)Depreciation of fixed assets 895,312 874,439Gain on disposal of an associated company – (4,445)Loss on disposal of other investment 5,050 –Gain on disposal of fixed assets (15,652) (1,521)Interest income (1,197,428) (831,127)Interest expense 1,016,091 790,976Provision for doubtful debts 694,811 262,939Provision for stock obsolescence 227,004 206,361Share of associated companies’ (profits)/losses (325,221) 112,102Stock loss 52,105 –Write-down of stock to net realisable value 65,252 55,836Operating income before reinvestment in working capital 5,311,281 2,262,542Decrease/(increase) in stocks 54,015 (3,415,758)Increase in trade debtors (2,391,075) (376,593)Decrease in other debtors 564,771 382,014Increase in amounts due from associated companies (18,877,273) (1,200,865)Decrease/(increase) in amounts due from related parties 15,682,286 (4,787,756)(Decrease)/increase in trade creditors (4,004,274) 4,535,084Increase in other creditors (358) 545,033Increase in amounts due to associated companies 186,431 21,399Decrease in amounts due to related parties (13,362) (272,597)Cash used in operations (3,487,558) (2,307,497)Income taxes paid (940,764) (1,374,466)Interest received 1,140,816 831,127Interest paid (1,016,091) (790,976)Net cash used in operating activities (4,303,597) (3,641,812)
Consolidated Statement of Cash Flows2002 2001$ $Cash flows from investing activities :Purchase of fixed assets (375,762) (1,107,681)Proceeds from sale of an associated company – 36,465Proceeds from sale of fixed assets 71,330 44,431Purchase of intangible assets (21,332) –Investment in associated companies (2,653,400) (868,452)Net cash and cash equivalents from acquisition of subsidiary companies – 104,266Federal International (2000) Ltd AR 2002and its Subsidiary Companies41Net cash used in investing activities (2,979,164) (1,790,971)Cash flows from financing activities :Dividend payment in respect of prior year (683,451) (661,546)Increase in bank overdrafts and trust receipts 4,861,602 4,792,622Principal repayment of hire purchase financing (232,515) (178,718)Proceeds from additional term loans 1,113,737 707,751Proceeds from issuance of shares to minority interest – 569,748Net cash provided by financing activities 5,059,373 5,229,857Net decrease in cash and cash equivalents* (2,223,388) (202,926)Cash and cash equivalents at beginning of year (Note 31) 3,326,900 3,529,826Cash and cash equivalents at end of year (Note 31) 1,103,512 3,326,900* Had bank overdrafts been included as cash and cash equivalent, the consolidated statement of cash flowswill be as follows:-Net decrease in cash and cash equivalents as above (2,223,388) (202,926)Adjustment for bank overdrafts (4,635,391) (143,951)Net decrease in cash and cash equivalents as adjusted (6,858,779) (346,877)Cash and cash equivalents at beginning of year as adjusted 870,401 1,217,278Cash and cash equivalents at end of year as adjusted (5,988,378) 870,401The accounting policies and explanatory notes on pages 42 through 75 form an integral part of the financial statements.
Federal International (2000) Ltd AR 2002and its Subsidiary Companies42Notes to the Financial Statements31 December 20021. CORPORATE INFORMATIONThe financial statements of Federal International (2000) Ltd (“the Company”) for the year ended 31 December2002 were authorised for issue in accordance with a resolution of the Directors on 17 April 2003. TheCompany is a limited liability company which is incorporated in Singapore.The registered office of the Company is located at 47 Genting Road, Singapore 349489.Related parties refer to companies in which certain Directors of the Company are also the shareholders, andcompanies which have common Directors with the Company.The principal activity of the Company is that of an investment holding company. The subsidiary companies’principal activities are set out in Note 3 of the financial statements. There have been no significant changesin the nature of these activities during the financial year.The Group and Company operate in 10 (2001: 9) and 1 (2001: 1) countries respectively. The Group andCompany employed 178 (2001: 140) and 9 (2001: 9) employees respectively as at 31 December 2002.2. SIGNIFICANT ACCOUNTING POLICIES(a) Basis of preparationThe financial statements of the Company and of the Group, which are expressed in Singapore dollars,are prepared in accordance with Singapore Statements of Accounting Standards (SAS) and applicablerequirements of the Singapore law.The financial statements have been prepared on a historical cost basis, modified by revaluation ofcertain fixed assets. The accounting policies have been consistently applied by the Company and,except for changes in accounting policies discussed below, are consistent with those used in theprevious year.(b)Changes in accounting policiesIn 2002, the Company adopted the following new or revised accounting standard:* SAS 12 (Revised 2001) Income Taxes;The adoption of this standard involved the change in accounting policy described below :In accordance with SAS 12, a deferred tax liability is recognised for all taxable temporary differences.Previously, a deferred tax liability was recognised for timing differences only to the extent that a taxliability was expected to materialise in the foreseeable future. There is no financial effect of thischange in accounting policy on the Group and Companies’ results of the current and previous financialyear.
Notes to the Financial Statements2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)(c) Principles of consolidationThe consolidated financial statements comprise the financial statements of Federal International (2000)Ltd and its controlled subsidiary companies, after the elimination of all material intercompanytransactions. The equity and net profit attributable to minority shareholders’ interests are shownseparately in the consolidated balance sheet and consolidated profit and loss account, respectively.Federal International (2000) Ltd AR 2002and its Subsidiary Companies43Subsidiary companies are consolidated from the date the parent obtains control until such time ascontrol ceases. Acquisitions of subsidiary companies are accounted for using the purchase methodof accounting.The financial statements of subsidiary companies are prepared for the same reporting period as theparent company, using consistent accounting policies. Adjustments are made to conform any dissimilarmaterial accounting policies that may exist. Where the audited financial statements (HP&T EngineeringPrivate Ltd whose financial year ends on 31 March) are not co-terminous with those of the Group,consolidation is performed based on the last audited financial statements available and unauditedmanagement financial statements to the end of the accounting period.(d)Subsidiary companiesA subsidiary is a company in which the Group, directly or indirectly, holds more than 50% of theissued share capital, or controls more than half of the voting power, or controls the composition ofthe Board of Directors.Shares in subsidiary companies are stated at cost, less provision for impairment losses. An assessmentof investments in subsidiary companies is performed when there is indication that the asset has beenimpaired or the impairment losses recognised in the prior years no longer exist.(e)Associated companiesAn associated company is defined as a company, not being a subsidiary, in which the Group has along-term interest of not less than 20% nor more than 50% of the equity and in whose financial andoperating policy decisions the Group exercises significant influence.The Group’s investments in associated companies are accounted for under the equity method.Investments in associated companies are carried in the balance sheet at cost plus post-acquisitionchanges in the Group’s share of net assets of associated companies, less any impairment loss. TheGroup’s investments in associated companies include goodwill and negative goodwill on acquisition,which has been separately capitalised as intangible assets and treated in accordance with the accountingpolicy for goodwill and negative goodwill stated in paragraph (f).When the Group’s share of losses exceeds the carrying amount of the investment, the investment isreported at nil value and recognition of losses is discontinued except to the extent of the Group’scommitment.
Federal International (2000) Ltd AR 2002and its Subsidiary Companies44Notes to the Financial Statements2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)(e) Associated companies (cont’d)Intercompany balances and transactions, including intercompany profits and unrealised profits andlosses are eliminated. Unrealised gains arising from transactions with associated companies areeliminated to the extent of the Group’s interest in the associate, against the investment in the associate.Unrealised losses are eliminated similarly but only to the extent that there is no evidence of impairmentof the asset transferred.The Group’s share of the results of associated companies is included in the consolidated profit andloss account. Where the audited financial statements are not co-terminous with those of the Group,the share of profits is arrived at from the last audited financial statements available and unauditedmanagement financial statements to the end of the accounting period.Investments in associated companies are stated at cost less any impairment loss in the Company’sbalance sheet. An assessment of investments in associated companies is performed when there isindication that the asset has been impaired or the impairment losses recognised in the prior years nolonger exist.Dividend income is accrued on the basis of dividends declared by the investee companies up to theend of the financial year.(f)Intangible assetsGoodwillGoodwill represents the excess of the cost of the acquisition over the fair value of identifiable netassets of a subsidiary company, associated company or joint venture at the date of acquisition.Goodwill is amortised using the straight-line basis over a period of 10 years that benefits are expectedto be received. The estimated useful life is revised for impairment when events or changes incircumstances indicate that the carrying amount may not be recoverable. Goodwill is stated at costless accumulated amortisation and any impairment.Negative goodwillNegative goodwill arising on acquisition represents the excess of the fair value of the identifiable netassets acquired over the cost of acquisition.To the extent that negative goodwill relates to an expectation of future losses and expenses that areidentified in the plan of acquisition and can be measured reliably, but which have not yet beenrecognised, it is recognised in the profit and loss account when the future losses and expenses arerecognised. Any remaining negative goodwill, but not exceeding the fair values of the non-monetaryassets acquired, is recognised in the profit and loss account over the weighted average useful life ofthose assets that are depreciable or amortisable. Negative goodwill in excess of fair values of thenon-monetary assets acquired is recognised immediately in the profit and loss account.Negative goodwill is presented in the same balance sheet classification as goodwill.
Notes to the Financial Statements2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)(f) Intangible assets (cont’d)Research and development costsResearch and development costs are expensed as incurred, except for development costs whichrelate to the design and testing of new or improved products which are recognised as an asset to theextent that it is expected that such assets will generate future economic benefits.Federal International (2000) Ltd AR 2002and its Subsidiary Companies45Deferred development costs are amortised from the date of commercial production of the product.Such costs are currently being amortised on a straight-line basis over their useful lives, not exceeding5 years.The carrying values of intangible assets are reviewed for impairment when events or changes incircumstances indicate that the carrying value may not be recoverable.(g)Pre-operating expensesPre-operating expenses is written-off in the year when it is incurred.(h)InvestmentsInvestments held on a long term basis are stated at cost. Provision is made for any impairment invalues which is considered to be permanent.(i)Fixed assetsCost and valuationFixed assets are stated at cost or valuation less accumulated depreciation and any impairment invalue. Fixed assets are initially recorded at cost. Land and buildings are subsequently revalued on anasset-by-asset basis, to their fair values. Revaluations are made with sufficient regularity to ensurethat their carrying amounts do not differ materially from their fair values at the balance sheet date.The initial cost of fixed assets comprises its purchase price, including import duties and non-refundablepurchase taxes and any directly attributable costs of bringing the asset to its working condition andlocation for its intended use. Expenditures incurred after the fixed assets have been put into operation,such as repairs and maintenance and overhaul costs, are normally charged to the profit and lossaccount in the period in which the costs are incurred. In situations where it can be clearly demonstratedthat the expenditures have resulted in an increase in the future economic benefits expected to beobtained from the use of an item of fixed assets beyond its originally assessed standard of performance,the expenditures are capitalised as an additional cost of fixed assets.
Federal International (2000) Ltd AR 2002and its Subsidiary Companies46Notes to the Financial Statements2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)(i) Fixed assets (cont’d)When an asset is revalued, any increase in the carrying amount is credited directly to revaluationreserve unless it reverses a previous revaluation decrease relating to the same asset, which waspreviously recognised as an expense. In these circumstances the increase is recognised as income tothe extent of the previous write down. When an asset’s carrying amount is decreased as a result of arevaluation, the decrease is recognised as an expense unless it reverses a previous surplus relating tothat asset, in which case it is charged against any related revaluation surplus, to the extent that thedecrease does not exceed the amount held in the revaluation surplus in respect of that same asset.Any balance remaining in the revaluation surplus in respect of an asset, is transferred directly toaccumulated profits on retirement or disposal of the asset.DepreciationDepreciation is calculated on the straight line method to write off the cost of fixed assets over theirestimated useful lives. The estimated useful lives of fixed assets are as follows :-Leasehold building - 30 yearsFreehold buildings - 50 yearsOther fixed assets - 3 - 5 yearsNo depreciation is provided on freehold land.Fully depreciated assets are retained in the financial statements until they are no longer in use and nofurther charge for depreciation is made in respect of these assets.The useful life and depreciation method are reviewed periodically to ensure that the method andperiod of depreciation are consistent with the expected pattern of economic benefits from the use offixed assets. An assessment of the carrying value of fixed assets is made when there are indicationsthat the assets have been impaired or the impairment losses recognised in prior years no longerexist.(j)Stocks and work-in-progressStocks are stated at the lower of cost and net realisable value. Work-in-progress is stated at cost lessany foreseeable losses. Cost is determined on a weighted average basis. Net realisable value representsthe estimated selling price less anticipated cost of disposal and after making allowance for damaged,obsolete and slow-moving items.(k)Trade and other debtorsTrade debtors, which generally have 30 - 160 day terms, are recognised and carried at originalinvoice amount less an allowance for any uncollectible amounts. An estimate for doubtful debts ismade when collection of the full amount is no longer probable. Bad debts are written-off as incurred.Amounts due from related parties are recognised and carried at cost, less an allowance for anyuncollectible amounts.
Notes to the Financial Statements2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)(l) Cash and cash equivalentsCash and cash equivalents are defined as cash on hand, demand deposits and short-term, highlyliquid investments readily convertible to known amounts of cash and subject to insignificant risk ofchanges in value. Cash and bank balances and short-term deposits which are held to maturity arecarried at cost.Federal International (2000) Ltd AR 2002and its Subsidiary Companies47For the purposes of the Consolidated Statement of Cash Flows, cash and cash equivalents consist ofcash and bank balances and fixed deposits.The Group has changed the composition of cash and cash equivalents in the current year to excludebank overdrafts to provide a more meaningful analysis of the Group’s cash flow position. Bankoverdrafts have been reclassified in the cash flow statement as a financing activity as the amounts donot fluctuate significantly compared to prior years.Comparative figures have been reclassified to conform to current year’s presentation.(m)Trade and other creditorsLiabilities for trade and other amounts payable which are normally settled on 30-90 day terms, arecarried at cost, which is the fair value of the consideration to be paid in the future for goods andservices rendered, whether or not billed to the Company.Amounts due to related parties are carried at cost.(n)Loans and borrowingsAll loans and borrowings are initially recognised at cost, being the fair value of the considerationreceived and including acquisition charges associated with the borrowing/loan.(o)Employee benefitsAccrued employee benefitEmployee entitlements to annual leave are recognised when they accrue to employees. A provisionis made for the estimated liability for leave as a result of services rendered by employees up tobalance sheet date.Defined contribution planThe Group’s companies make contributions to independently administered defined contribution pensionschemes. Defined contributions are recognised as compensation expense in the same period as theemployment that gives rise to the contribution.
Federal International (2000) Ltd AR 2002and its Subsidiary Companies48Notes to the Financial Statements2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)(p) Deferred income taxDeferred income tax is provided, using the liability method, on all temporary differences at thebalance sheet date between the tax bases of assets and liabilities and their carrying amounts forfinancial reporting purposes. Deferred tax assets and liabilities are measured using the tax ratesexpected to apply to taxable income in the years in which those temporary differences are expectedto be recovered or settled based on tax rates enacted or substantively enacted at the balance sheetdate.Deferred tax liabilities are recognised for all taxable temporary differences associated with investmentsin subsidiary companies, associated companies and interests in joint ventures, except where thetiming of the reversal of the temporary difference can be controlled and it is probable that the temporarydifference will not reverse in the foreseeable future.At each balance sheet date, the Group re-assesses unrecognised deferred tax assets and the carryingamount of deferred tax assets. The Group recognises a previously unrecognised deferred tax assetto the extent that it has become probable that future taxable profit will allow the deferred tax assetto be recovered. The Group conversely reduces the carrying amount of a deferred tax asset to theextent that it is no longer probable that sufficient taxable profit will be available to allow the benefitof part or all of the deferred tax asset to be utilised.Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unusedtax assets and unused tax losses, to the extent that it is probable that taxable profit will be availableagainst which the deductible temporary differences, carry-forward of unused tax assets and unusedtax losses can be utilised.Current tax and deferred tax are charged or credited directly to equity if the tax relates to items thatare credited or charged, in the same or a different period, directly to equity.(q)LeasesFinance leasesFinance leases, which effectively transfer to the Group substantially all the risks and benefits incidentalto ownership of the leased item, are capitalised at the present value of the minimum lease paymentsat the inception of the lease term and disclosed as leased fixed assets. Lease payments are apportionedbetween the finance charges and reduction of the lease liability so as to achieve a constant rate ofinterest on the remaining balance of the liability. Finance charges are charged directly against income.Operating leasesLeases where the lessor effectively retains substantially all the risks and benefits of ownership of theleased term, are classified as operating leases. Operating lease payments are recognised as an expensein the profit and loss account on a straight-line basis over the lease term.
Notes to the Financial Statements2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)(r) Revenue recognitionRevenue is recognised to the extent that it is probable that the economic benefits will flow to theGroup and the revenue can be reliably measured. The following specific recognition criteria must alsobe met before revenue is recognised:Federal International (2000) Ltd AR 2002and its Subsidiary Companies49i) Revenue from the sale of goods is recognised upon the passage of title to the customer, whichgenerally coincides with their delivery and acceptance.ii)Revenues from the provision of service and maintenance, technical and consultancy and designand engineering services are recognised upon performance of the services to the customer.iii)iv)(v)Rental income from rental of leasehold building space is recognised based on the period of rentalduring the financial year.Revenue from royalties is recognised upon external sales made by the Group’s strategic alliancepartners.Revenue from commissions is recognised upon external sales made by the Group’s agencyprincipals.(vi) Dividend income is recognised in the profit and loss account of the Company as and whendeclared by subsidiary companies up to the end of the financial year. Dividend income fromunquoted investments is recognised upon receipt.(vii) Interest income is recognised as the interest accrues on a day-to-day basis, unless collectibility isin doubt.(s)Borrowing costsBorrowing costs are recognised as expenses in the period in which they are incurred.(t)Foreign currency transactionsForeign currency transactions are recorded by applying to the foreign currency amount the exchangerate at the date of transaction.At each balance sheet date, foreign currency monetary items are reported using the rate on that dateand non-monetary items are carried and reported using the exchange rate at the date of transaction.Exchange differences arising on the settlement of monetary items or on reporting monetary items atrates different from those at which they were initially recorded during the period or reported in theprevious financial statements are recognised as income or expenses in the year in which they arise.For inclusion in the consolidated financial statements, all assets and liabilities of foreign subsidiarycompanies are translated into Singapore dollars at the exchange rates ruling at the balance sheetdate and the results of foreign subsidiary companies are translated into Singapore dollars at theweighted average exchange rates. Exchange differences due to such currency translations are includedin the foreign currency translation reserve.
Federal International (2000) Ltd AR 2002and its Subsidiary Companies50Notes to the Financial Statements2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)(u) Derivative financial instrumentsThe Group uses derivative financial instruments such as foreign exchange forward contracts to hedgeits risks associated primarily with foreign currency fluctuations. Details of the Group’s financial riskmanagement objective and policies are set out in Note 35.The derivative financial instruments are not recognised on the balance sheet. The gains or lossesrelating to derivative financial instruments are taken directly to the profit and loss account when theforward contracts are realised.(v)Impairment of assetsThe carrying amounts of the Group’s assets are reviewed at each balance sheet date to determinewhether there is any indication of impairment. If any such indication exists, the asset’s recoverableamount is estimated.An impairment loss is recognised whenever the carrying amount of an asset or its cash-generatingunit exceeds its recoverable amount. An impairment loss in respect of assets carried at revaluedamount is recognised in the same way as a revaluation decrease. All other impairment losses arerecognised in the profit and loss account.Reversal of impairment lossAn impairment loss is reversed if there has been a change in the estimates used to determine therecoverable amount. An impairment loss is reversed only to the extent that the asset’s carryingamount does not exceed the carrying amount that would have been determined, net of depreciationor amortisation, if no impairment loss had been recognised. A reversal of an impairment loss inrespect of assets carried at revalued amount is recognised in the same way as a revaluation increase.All other reversals of impairment are recognised in the profit and loss account.
3. GROUP COMPANIESDetails of the subsidiary and associated companies as at 31 December are :-Notes to the Financial StatementsNAME OF COMPANYPERCENTAGE(COUNTRY OF PRINCIPAL ACTIVITIES OF EQUITY HELDINCORPORATION) (PLACE OF BUSINESS) COST BY THE GROUP2002 2001 2002 2001$ $ % %Federal International (2000) Ltd AR 2002and its Subsidiary Companies51Subsidiary companiesHeld by the CompanyFederal Hardware Dealer in flowline control 14,608,338 + 25,534,809 100 100Engineeringmaterial and servicesCo Pte Ltd (1)and investment holding(Singapore)(Singapore)Alton International (S) Dealer in hardware & 929,496 929,496 100 100Pte Ltd (1)oilfield engineering(Singapore)materials(Singapore)Firematic Engineering Design and supply of 410,026 + 1,427,928 100 100Pte Ltd (1)fire detection and(Singapore)protection systems(Singapore)KVC (UK) Ltd (2) Design, manufacture and 552,728 552,728 70 70(United Kingdom)assembly of valves(United Kingdom)* HP&T Products, Inc. Research, development, 854,623 854,623 60 60(United States ofdesign and manufactureAmerica)of high pressure andtemperature valves andrelated oilfield products(United States of America)Federal Fire Engineering Supply and installation 10,000 – 100 –Pte Ltd (1)supervision of fire detection(Singapore)and protection systems andrelated products(Singapore)* Federal International Trading and procurement 273,309 – 100 –Koreaof specialised valves and(Korea)other flowline controlproducts(Korea)17,638,520 29,299,584
Federal International (2000) Ltd AR 2002and its Subsidiary Companies52Notes to the Financial Statements3. GROUP COMPANIES (cont’d)NAME OF COMPANYPERCENTAGE(COUNTRY OF PRINCIPAL ACTIVITIES OF EQUITY HELDINCORPORATION) (PLACE OF BUSINESS) COST BY THE GROUP2002 2001 2002 2001$ $ % %Held by subsidiary companies* PT Fedsin Rekayasa Hardware merchant 170,062 170,062 99 99Pratamaand investment(Indonesia)holding(Indonesia)HP&T Engineering (3) Dealer and manufacturer 7,892 7,892 100 100Private Ltdof oilfied related components(India)(India)* PT Federal International Investment holding 46,097 – #100 –(Indonesia)(Indonesia)Federal International Trader and agent of flowline 322,760 – 90 –(Shanghai) Co., Ltd (4) control products in China(People’s Republic of (People’s Republic ofChina)China)546,811 177,954Associated companies :-Held by the CompanySyntellect Telesystems Information systems 147,414 147,414 45 45Pte Ltd (5)solution provider and(Singapore)supply of relatedinformation technologyequipment(Singapore)* KVC Co., Ltd Manufacture and export 868,452 868,452 50 50(Japan)of valves(Japan)1,015,866 1,015,866
Notes to the Financial Statements3. GROUP COMPANIES (cont’d)NAME OF COMPANYPERCENTAGE(COUNTRY OF PRINCIPAL ACTIVITIES OF EQUITY HELDINCORPORATION) (PLACE OF BUSINESS) COST BY THE GROUP2002 2001 2002 2001$ $ % %Held by subsidiary companiesAlton International Dealer in hardware and 105,654 105,654 49 49(Thailand) Co., Ltd. (6) oilfield engineering(Thailand)materials(Thailand)Federal International (2000) Ltd AR 2002and its Subsidiary Companies53Eastern Jason Fabrication Engineering, fabrication 225,000 225,000 50 50Services Pte Ltd (5)and sandblasting services(Singapore)(Singapore)* PT Indoenergi Perkasa Sale and distribution 29,358 29,358 40 40(Indonesia)of Ingersoll Rand aircompressorsand relatedservices(Indonesia)Shanghai KVC Valve Manufacture and 2,435,195 2,435,195 50 50Co Ltd (7)export of valves under(People’s Republic of OEM arrangementChina)(People’s Republic ofChina)PT Gunanusa Utama Production and maintenance 3,034,951 – 20 –Fabricators (8)of tools and equipment of(Indonesia )ship, and drilling tools ofoil and gas, doing businessand general workshop,contracting and trade(Indonesia)5,830,158 2,795,207* Not required to be audited under the laws of the respective countries of incorporation.(1)Audited by Ernst & Young, Singapore(2)Audited by Mazars Neville Russell, United Kingdom(3)Audited by Kulkarni & Deshpande Chartered Accountants, India(4)Audited by Glass Radcliffe Chan, Hong Kong(5)Audited by B L Ong & Co, Singapore(6)Audited by Certified Professional Associates Co., Ltd, Thailand(7)Audited by Shanghai Da Gong Da Tong, People’s Republic of China(8)Audited by Drs. Theo Kusnawara, AK, Indonesia# A subsidiary company extended $46,097 in loans to two individuals for the purpose of incorporating PT FederalInternational. These individuals have pledged their shares, granted non-expiring call options and assigned theirattendant rights in respect of their shares in PT Federal International to this subsidiary company. The Companyeffectively controls and owns 100% interest in PT Federal International through these individuals.+Cost of investment in Federal Hardware Engineering Co Pte Ltd and Firematic Engineering Pte Ltd has decreased by$10,926,471 and $1,017,902 respectively due to receipt of dividends out pre-acquisition revenue reserves.
Federal International (2000) Ltd AR 2002and its Subsidiary Companies54Notes to the Financial Statements4. FIXED ASSETSFURNITUREPLANT & FITTINGSFREEHOLD FREEHOLD LEASEHOLD AND AND OFFICE MOTORLAND BUILDINGS BUILDING MACHINERY EQUIPMENT VEHICLES TOTALGROUP $ $ $ $ $ $ $Cost/ValuationAt beginningof year 7,350,000 1,450,000 2,245,505 818,855 3,267,389 2,277,557 17,409,306Reclassification tointangible assets – – – (108,488) – – (108,488)Additions – – – 55,986 215,650 104,126 375,762Disposals – – – – (15,972) (151,158) (167,130)Currencyrealignment – – – 7,338 (2,651) (3,846) 841At end of year 7,350,000 1,450,000 2,245,505 773,691 3,464,416 2,226,679 17,510,291Representing :-Cost – – 2,245,505 773,691 3,464,416 2,226,679 8,710,291Valuation 7,350,000 1,450,000 – – – – 8,800,000At end of year 7,350,000 1,450,000 2,245,505 773,691 3,464,416 2,226,679 17,510,291AccumulateddepreciationAt beginningof year – 86,720 1,104,392 428,276 2,491,830 1,160,386 5,271,604Reclassification tointangible assets – – – (9,657) – – (9,657)Charge for the year – 43,360 103,738 48,435 275,221 424,558 895,312Disposals – – – – (11,965) (99,487) (111,452)Currencyrealignment – – – 559 (170) (1,568) (1,179)At end of year – 130,080 1,208,130 467,613 2,754,916 1,483,889 6,044,628Charge for 2001 – 43,360 103,737 39,481 258,984 428,877 874,439Net book valueAt end of year 7,350,000 1,319,920 1,037,375 306,078 709,500 742,790 11,465,663At beginningof year 7,350,000 1,363,280 1,141,113 390,579 775,559 1,117,171 12,137,702Net book value ofassets had costmethod been usedAt end of year 2,561,933 1,312,000 1,037,375 306,078 709,500 742,790 6,669,676At beginningof year 2,561,933 1,355,000 1,141,113 390,579 775,559 1,117,171 7,341,355
Notes to the Financial Statements4. FIXED ASSETS (cont’d)Group (cont’d)Freehold land and buildings relate to 2 and 3-storey terrace factories situated at 47 and 49 Genting Road onfreehold land of 810.9 square metres. The valuation was made by the Directors based on professionalappraisals by Colliers Jardine on 1 March 2000. The valuation was made on the basis of market value forexisting use.Federal International (2000) Ltd AR 2002and its Subsidiary Companies55Leasehold building relates to a single storey factory situated at 11 Tuas Avenue 1 on a leasehold land area of4701.4 square metres. The lease tenure of the leasehold land is 30 years with effect from 16 November1982.As at 31 December 2002, the net book value of fixed assets acquired under hire purchase plans amounts to$633,290 (2001 : $1,013,400).The leasehold building with net book value amounting to $1,037,375 (2001 : $1,141,113) is mortgaged assecurities for banking facilities (Notes 22 and 23). Freehold land and building which were also mortgagedas securities for banking facilities in the previous year, have been discharged in the current year.FURNITURE &FITTINGS ANDMOTOROFFICE EQUIPMENT VEHICLES TOTALCOMPANY $ $ $CostBalance at beginning and end of year 1,500 733,389 734,889Accumulated depreciationBalance at beginning of year 300 146,678 146,978Charge for the year 300 146,678 146,978Balance at end of year 600 293,356 293,956Charge for 2001 300 146,678 146,978Net book valueAt end of year 900 440,033 440,933At beginning of year 1,200 586,711 587,911As at 31 December 2002, the net book value of motor vehicles acquired under hire purchase plans amountsto $440,033 (2001 : $586,711).
Federal International (2000) Ltd AR 2002and its Subsidiary Companies56Notes to the Financial Statements5. SUBSIDIARY COMPANIESCOMPANY2002 2001$ $Unquoted shares, at cost 17,638,520 29,299,5846. ASSOCIATED COMPANIESGROUPCOMPANY2002 2001 2002 2001$ $ $ $Unquoted shares, at cost 6,846,024 3,811,073 1,015,866 1,015,866Less : Goodwill on acquisition 260,991 (857,918) – –7,107,015 2,953,155 1,015,866 1,015,866Share of losses- post-acquisition losses (2,063,135) (2,234,942) – –Currency realignment 332,284 46,580 – –5,376,164 764,793 1,015,866 1,015,8667. INTANGIBLE ASSETSNEGATIVE DEVELOPMENTGOODWILL GOODWILL COSTS TOTALGROUP $ $ $ $CostAt beginning of year 2,111,180 – – 2,111,180Acquisition through purchaseof associated company – (1,118,909) – (1,118,909)Reclassification from fixed assets – – 108,488 108,488Internally developed – – 21,332 21,332At end of year 2,111,180 (1,118,909) 129,820 1,122,091Accumulated amortisationAt beginning of year 211,118 – – 211,118Charge for the year 211,118 (111,891) 24,343 123,570Reclassification from fixed assets – – 9,657 9,657Currency realignment – – 781 781At end of year 422,236 (111,891) 34,781 345,126Charge for 2001 211,118 – – 211,118Carrying amountAt end of year 1,688,944 (1,007,018) 95,039 776,965At beginning of year 1,900,062 – – 1,900,062
8. OTHER INVESTMENTSNotes to the Financial StatementsGROUP2002 2001$ $Investment in partnership 20,000 20,000Unquoted shares, at cost – 386,601Federal International (2000) Ltd AR 2002and its Subsidiary Companies5720,000 406,6019. TRADE DEBTOR (LONG-TERM)GROUP2002 2001$ $Trade debtor is stated after deductingprovision for doubtful debt of : 700,000 200,000Analysis of provision for doubtful debt :-Balance at beginning of year 200,000 –Provision during the year 500,000 200,000Balance at end of year 700,000 200,00010. OTHER DEBTORS (LONG-TERM)GROUP2002 2001$ $Amounts due from subsidiary companies’ shareholders 377,126 535,498Less : Amounts due within 12 months (Note 15) (60,456) (53,359)Amounts due after 12 months 316,670 482,139Amount due from an associated company’s shareholder 107,108 –423,778 482,139Included in amounts due from subsidiary companies’ shareholders, who are also directors of the subsidiarycompanies, is an amount of $366,631 which relates to the directors’ subscription of a subsidiary company’sshares by way of promissory notes. Amount due is secured by way of their shares in the subsidiary company,interest-free and repayable by consecutive monthly instalments equal to 10% of these directors’ monthlygross salaries (Note 15).The shareholder of the associated company is also a director of the associated company. The amount isnon-trade related, unsecured, interest-free and not expected to be received within the next twelve months.11. AMOUNTS DUE FROM SUBSIDIARY COMPANIES (LONG-TERM)Amounts due from subsidiary companies are non-trade in nature, unsecured, interest-free and not expectedto be repaid within the next twelve months.
Federal International (2000) Ltd AR 2002and its Subsidiary Companies58Notes to the Financial Statements12. DEFERRED TAX ASSETSGROUPCOMPANY2002 2001 2002 2001$ $ $ $Balance at beginning of year 189,935 (139,000) 34,735 –(Over)/under-recognition ofdeferred tax asset in respectof prior years (27,750) 286,840 (19,273) 17,516Recognition/(write-back) oftax credits during the year 53,431 42,095 (3,982) 17,219Balance at end of year 215,616 189,935 11,480 34,735Components of deferred taxDeferred tax assetsGeneral provisions 283,040 228,865 10,442 35,985Unutilised tax losses 47,942 81,436 – –Others 12,449 24,851 1,236 –343,431 335,152 11,678 35,985Deferred tax liabilitiesDifference in depreciation 84,151 81,998 198 294Others 43,664 63,219 – 956127,815 145,217 198 1,250Net deferred tax assets 215,616 189,935 11,480 34,735Tax effect of temporary differencesfor which no deferred taxis recognised:-Unutilised tax losses (1,160,612) (884,275) – –The unutilised tax losses available for offset against future taxable profits of the companies in which lossesarose. The use of these tax losses is subject to the agreement of the tax authorities and compliance withcertain provisions of the tax legislation.No deferred tax assets have been recognised for the above temporary differences because of the uncertaintyof its recoverability.
13. STOCKS AND WORK-IN-PROGRESSNotes to the Financial StatementsGROUP2002 2001$ $At costTrading stocks 20,831,607 21,574,598Stocks-in-transit 570,060 196,065Work-in-progress 252,791 166,989Consignment stocks 82,648 103,494Federal International (2000) Ltd AR 2002and its Subsidiary Companies5921,737,106 22,041,146At net realisable valueTrading stocks 73,171 167,50721,810,277 22,208,653Stocks are stated after deductingprovision for stock obsolescence of : 833,365 606,361Analysis of provision for stock obsolescence :-Balance at beginning of year 606,361 400,000Provision during the year 227,004 206,361Balance at end of year 833,365 606,36114. TRADE DEBTORSGROUP2002 2001$ $Trade debtors are stated after deductingprovision for doubtful debts of : 268,653 238,115Analysis of provision for doubtful debts :-Balance at beginning of year 238,115 175,176Provision during the year 93,477 62,939Bad debts written-off (62,939) –Balance at end of year 268,653 238,115
Federal International (2000) Ltd AR 2002and its Subsidiary Companies60Notes to the Financial Statements15. OTHER DEBTORSGROUPCOMPANY2002 2001 2002 2001$ $ $ $Amount due from a subsidiarycompany’s shareholders (Note 10) 60,456 53,359 – –Deposits 59,889 41,189 – –Prepayments 427,115 282,575 838 759Staff loans 880 14,691 – –Sundry debtors 253,878 918,148 – 27,153802,218 1,309,962 838 27,912Other debtors are stated after deductingprovision for doubtful debts of: 1,334 – – –Staff loans are unsecured, interest-free and expected to be repaid within the next twelve months.16. AMOUNTS DUE FROM SUBSIDIARY COMPANIESAmounts are non-trade related, unsecured, interest-free and expected to be received within the next twelvemonths.17. AMOUNTS DUE FROM ASSOCIATED COMPANIESGROUPCOMPANY2002 2001 2002 2001$ $ $ $Trade 19,825,406 865,724 – –Non-trade 365,005 547,414 74,128 393,06920,190,411 1,413,138 74,128 393,069Amounts are unsecured and expected to be received within the next twelve months. Trade balances bearinterest at 12% (2001: 12%) per annum. Non-trade balances are interest-free.GROUPCOMPANY2002 2001 2002 2001$ $ $ $Amounts due from associated companies(non-trade) are stated after deductingprovision for doubtful debts of: 100,000 – – –18. AMOUNTS DUE FROM RELATED PARTIESGROUPCOMPANY2002 2001 2002 2001$ $ $ $Trade 413,707 16,269,124 – –Non-trade 173,131 – 1,735 1,853586,838 16,269,124 1,735 1,853Amounts due from related parties are unsecured, interest-free and expected to be repaid within the nexttwelve months.
19. OTHER CREDITORSNotes to the Financial StatementsGROUPCOMPANY2002 2001 2002 2001$ $ $ $Advance from customers 198,071 194,399 – –Social security tax payable 113,789 30,960 – –Sundry creditors 285,289 372,148 57,639 105,792Federal International (2000) Ltd AR 2002and its Subsidiary Companies61597,149 597,507 57,639 105,79220. AMOUNTS DUE TO ASSOCIATED COMPANIESAmounts due to associated companies are trade related, unsecured, interest-free and expected to be repaidwithin the next twelve months.21. AMOUNTS DUE TO RELATED PARTIESGROUP2002 2001$ $Trade 3,142 20,596Non-trade 4,092 –7,234 20,596Amounts due to related parties are unsecured, interest-free and expected to be repaid within the nexttwelve months.22. AMOUNTS DUE TO BANKERSGROUPCOMPANY2002 2001 2002 2001$ $ $ $Bank overdrafts, secured 4,554,934 – – –Bank overdrafts, unsecured 2,536,956 2,456,499 6,213 –Trust receipts andbills payable, secured 14,041,311 13,815,100 – –21,133,201 16,271,599 6,213 –Amounts due to bankers bear interest between 2.0% and 6.5% (2001: 2.0% and 9.8%) per annum. Thesecured bank overdrafts, trust receipts and bill payable are secured by a legal mortgage on the Group’sleasehold building (Note 4). Some subsidiary companies’ facilities are covered by corporate guarantee ofthe Company (Note 33).
Federal International (2000) Ltd AR 2002and its Subsidiary Companies62Notes to the Financial Statements23. TERM LOANSGROUP2002 2001$ $Amounts repayable within twelve months- secured 1,387,800 111,165- unsecured 433,688 –1,821,488 111,165Amounts repayable after twelve months- secured – 596,586Term loans bear interest between 2.4% to 5.75% (2001 : 6.38%) per annum. The secured term loan is securedby a legal mortgage on the Group’s leasehold building (Note 4). Some subsidiary companies’ facilities arecovered by corporate guarantee of the Company (Note 33).24. HIRE PURCHASE CREDITORSThe effective interest rates of these leases range between 4.4% and 12.5% (2001 : 4.4% and 12.5%) perannum.PRESENTPRESENTMINIMUM VALUE OF MINIMUM VALUE OFPAYMENTS PAYMENTS PAYMENTS PAYMENTS2002 2002 2001 2001$ $ $ $GroupWithin one year 254,200 219,995 267,582 216,690After one year but not morethan five years 444,998 417,166 719,936 654,084More than five years 1,106 1,098 – –Total minimum lease payments 700,304 638,259 987,518 870,774Less: amounts representing interest (62,045) – (116,744) –Present value of minimum payments 638,259 638,259 870,774 870,774CompanyWithin one year 114,455 101,626 114,455 97,242After one year but not morethan five years 247,110 235,235 361,565 336,860Total minimum lease payments 361,565 336,861 476,020 434,102Less: amounts representing interest (24,704) – (41,918) –Present value of minimum payments 336,861 336,861 434,102 434,102
25. SHARE CAPITALNotes to the Financial StatementsGROUP AND COMPANY2002 2001$ $Authorised capital275,000,000 ordinary shares of $0.20 eachBalance at beginning and end of year 55,000,000 55,000,000Federal International (2000) Ltd AR 2002and its Subsidiary Companies63Issued and fully paid capital175,243,875 ordinary shares of $0.20 eachBalance at beginning and end of year 35,048,775 35,048,77526. SHARE PREMIUMGROUP AND COMPANY2002 2001$ $Balance at beginning and end of year 3,363,216 3,363,21627. REVENUERevenue is analysed as follows :-GROUPCOMPANY2002 2001 2002 2001$ $ $ $Sale of products and installation 94,939,433 71,555,508 – –Service and maintenance 424,162 75,028 – –Design and engineering 195,031 114,987 – –Commission 233,087 152,355 – –Royalties 286,146 40,333 – –Gross dividend income fromsubsidiary companies – – 9,237,477* 1,800,000Management fee income – – 1,960,760 1,614,00096,077,859 71,938,211 11,198,237 3,414,000* Amount has been stated net of the elimination for the gross dividend income received from subsidiarycompanies in respect of the pre-acquisition profits of $15,313,299.
Federal International (2000) Ltd AR 2002and its Subsidiary Companies64Notes to the Financial Statements28. OTHER INCOME AND EXPENSESOther income, selling and distribution costs, administrative and general costs and finance costs includedthe following for the financial years ended 31 December :-GROUPCOMPANY2002 2001 2002 2001$ $ $ $Other incomeAmortisation of negative goodwill 111,891 – – –Commission 282,491 49,444 – –Gross dividend income fromunquoted shares – 338 – –Share of profits from partnership 209,176 99,954 – –Sub-lease rental 13,661 – – –Gain on disposal of anassociated company – 4,445 – –Gain on disposal of fixed assets 15,652 1,521 – –Interest on bank accounts 20,987 65,608 1,614 9,863Interest on trade overdues 1,176,441 765,519 – –Technical & consultancy fees (189,302) 505,096 – –Selling & distribution costsDepreciation of fixed assets 401,457 406,648 146,678 146,678Directors’ remuneration– salaries and other emoluments 1,760,445 1,578,446 1,133,164 916,234– defined pension contributions 59,141 92,951 46,663 67,626Loss/(gain) on exchange difference- realised 126,685 (139,160) 41,863 (809)- unrealised (12,643) (120,079) 15,068 (46,785)Provision for doubtful trade debts 593,477 262,939 – –Provision for stock obsolescence 227,004 206,361 – –Research and development costs – 46,545 – –Staff costs- salaries and other emoluments 2,289,473 2,153,667 – –- defined pension contributions 331,798 328,036 – –Stock loss 52,105 – – –Write-down of stocks to netrealisable value 65,252 55,836 – –
28. OTHER INCOME AND EXPENSES (cont’d)Notes to the Financial StatementsGROUPCOMPANY2002 2001 2002 2001$ $ $ $Administrative & general costsAmortisation of goodwill 211,118 211,118 – –Amortisatiion of development cost 24,343 – – –Auditors’ remunerationAuditors of the Company :Audit and related fees- current year 83,000 78,000 30,000 30,000- over-provision in prior year (5,000) – (5,000) –Other fees 31,800 41,240 – 4,250Other auditors :Audit and related fees- current year 16,090 4,306 – –Other fees 658 1,631 – –Depreciation of fixed assets 493,855 467,791 300 300Directors’ fees 120,000 120,000 120,000 120,000Directors’ remuneration- salaries and other emoluments 473,560 300,089 – –- defined pension contributions 35,761 12,818 – –Fees paid to a Director - related firm 5,716 4,800 – –Loss on disposal of investments 5,050 – – –Pre-operating expenses written off 33,775 – – –Provision for doubtful non-trade debts- associated companies 100,000 – – –- other debtors 1,334 – – –Staff costs- salaries and other emoluments 2,564,056 2,245,035 164,004 90,439- defined pension contributions 239,745 268,221 16,896 9,939Federal International (2000) Ltd AR 2002and its Subsidiary Companies65Finance costsInterest on :-- Bank overdrafts 282,054 115,450 – –- Hire purchase 48,433 86,063 17,214 17,698- Term loans 100,769 8,031 – –- Trust receipts 584,835 581,432 – –
Federal International (2000) Ltd AR 2002and its Subsidiary Companies66Notes to the Financial Statements29. TAX EXPENSEGROUPCOMPANY2002 2001 2002 2001$ $ $ $Income tax on the profit for the year :Current tax 1,258,775 976,024 2,088,522 504,600Deferred tax (53,431) (42,095) 3,982 (17,219)1,205,344 933,929 2,092,504 487,381Share of associated companies’ tax 153,414 – – –Income tax in respect of prior years :Current tax (5,416) (382,674) (49) (8,617)Deferred tax 27,750 (286,840) 19,273 (17,516)1,381,092 264,415 2,111,728 461,248GROUPCOMPANY2002 2001 2002 2001% % % %Reconciliation of statutorytax rate to effective tax rateStatutory tax rate 22.0 24.5 22.0 24.5Adjustments :Expenses not deductible fortax purposes 6.7 53.3 0.2 3.8Income not subject to tax (2.1) (1.9) – (0.6)Unrecognised deferred tax assets 7.3 71.1 – –Statutory stepped income exemption (1.0) (6.4) (0.1) (0.7)Tax rebate – (8.5) – (0.2)Effects of different tax ratesin other countries 0.9 17.6 – –Effect of difference inassociated companies’ tax rate 2.2 4.5 – –Income tax in respect of prior years 0.6 (110.3) 0.2 (1.4)Others – (0.3) – –36.6 43.6 22.3 25.4
Notes to the Financial Statements30. EARNINGS PER SHAREBasic and diluted earnings per share is calculated by dividing the net profit for the year attributable toordinary shareholders by the weighted average number of ordinary shares in issue during the year.The following reflects the net income and share data used in the basic and diluted earnings per sharecomputations for the years ended 31 December :-Federal International (2000) Ltd AR 2002and its Subsidiary Companies67Net profit attributable to ordinaryGROUP2002 2001$ $shareholders for basic and diluted earnings per share 2,403,451 917,701Weighted average number of ordinaryshares in issue applicable to basic and diluted earnings per share 175,243,875 175,243,87531. CASH AND CASH EQUIVALENTSCash and cash equivalents included in the consolidated statement of cash flows comprise the followingbalance sheet amounts:GROUP2002 2001$ $Cash and bank balances 948,688 2,167,747Fixed deposits 154,824 1,159,1531,103,512 3,326,90032. DIVIDENDAfter the balance sheet date, the Directors propose a first and final dividend of 0.6 cents per ordinary share(3%) less income tax of 22%, amounting to $820,141 be paid for the year ended 31 December 2002.33. COMMITMENTS AND CONTINGENCIESOperating lease commitmentsThe Group leases certain properties and fixed assets under lease agreements that are non-cancellable withina year. Operating lease expenses incurred for the current financial year amounted to $269,098 (2001 :$163,435).Future minimum lease payments for all non-cancellable leases with initial or remaining terms of one year ormore are as follows :-GROUP2002 2001$ $Within one year 222,766 140,665After one year but not more than five years 425,585 403,054648,351 543,719
Federal International (2000) Ltd AR 2002and its Subsidiary Companies68Notes to the Financial Statements33. COMMITMENTS AND CONTINGENCIES (cont’d)Future commitmentsAs at balance sheet date, the Group had outstanding forward contracts to purchase and sell foreign currenciesamounting to $478,488 (2001 : $761,019) and $1,339,375 (2001 : Nil) respectively. The net unrealisedexchange gain/(loss) arising from these forward contracts commitments as at 31 December 2002 and 31December 2001 amount to $43,524 and ($3,123) respectively, have not been recognised in the profit andloss account.Contingent liabilitiesGROUPCOMPANY2002 2001 2002 2001$ $ $ $(a)Contingent liabilities not providedfor in the financial statements :-Bankers guarantees andperformance bonds 1,217,321 3,454,062 – –Corporate guaranteesgiven to banks :- in favour of subsidiarycompanies – – 80,652,293 59,473,700- in favour of a third party – 282,020 – –- in favour of associatedcompanies 800,000 – – –Discounted receivables 883,045 – – –2,900,366 3,736,082 80,652,293 59,473,700(b)(c)After the balance sheet date and as at the date of the Auditor’s Report, the Group incurred furthercontingent liabilities through the issuance of bankers guarantees amounting to $232,755 (2001 :$72,425) and became fully discharged of its contingent liability in respect of $883,045 in discountedreceivables.A third party claimed against a subsidiary company and its minority shareholders, who are also itsexecutive directors, for alleged infringement of intellectual property rights. The subsidiary companyand its minority shareholders have denied the allegations and have instructed their lawyers to defendand counterclaim.No provision has been made for these claims as the Directors do not expect any material loss toresult from this action.34. SUBSEQUENT EVENT(a) On 15 April 2003, the Company subscribed for 12,000,000 additional new ordinary shares of $1each at par in its wholly-owned subsdiary company, Federal Hardware Engineering Co Pte Ltd, throughthe capitalisation of $12,000,000 in amount due from the subsdiary company.(b)Subsequent to year-end, a third party served a legal notice to inform a subsidiary company that itwould commence legal action against the subsidiary company for negligently contaminating its telecommunicationequipment during the course of the subsidiary company’s maintenance service.No provision has been made for the liability that may arise from the potential suit as the Directors donot expect any material loss to result from this action.
Notes to the Financial Statements35. FINANCIAL INSTRUMENTSFinancial risksThe Group’s exposure to risks as defined in SAS 32 Financial Instruments : Disclosure and Presentation,arising from the Group’s financial instruments are summarised below :Federal International (2000) Ltd AR 2002and its Subsidiary Companies69Interest rate riskThe Group’s exposure to market risk for changes in interest rates relates to the Group’s long-term receivablesand long-term debt obligations. The Group does not use derivative financial instruments to hedge itsexposure to interest rate fluctuations. However, it is the Group’s policy to obtain the most favourableinterest rates available whenever the Group obtains additional financing through bank borrowings or leasingarrangements.The Group’s other financial instruments are short-term in nature. Carrying amounts of these financialinstruments reported on the balance sheet approximate their fair values, hence there is no interest rate riskexposure in relation to these instruments.Foreign currency riskThe Group incurs foreign currency risk on its multi-currency transactions. In addition to this, the Group isalso exposed to foreign exchange movements on its investment in foreign subsidiary and associatedcompanies.The Group does not use derivative financial instruments to protect against the volatility associated with itsforeign currency investments. Multi-currency transactions are covered by natural hedge. The Group alsoenters into foreign exchange forward contracts on an ad-hoc basis to protect against the volatility associatedwith the excess foreign currency transactions and other financial assets and liabilities created in the ordinarycourse of business.Credit riskConcentrations of credit risk exist when changes in the economic, industry or geographic factors similarlyaffect groups of counterparties whose aggregate credit exposure is significant in relation to the Group’s totalcredit exposure. As the majority of the Group’s debtors are from the petrochemical sector, this may give riseto a concentration of credit risk. It is the Group’s policy to enter into transactions with a diversity of creditworthycounterparties so as to mitigate any significant concentration of credit risk.The carrying amounts of the Group’s trade and other debtors represent the Group’s maximum exposure tocredit risk. No other financial assets carry a significant exposure to credit risk.Liquidity riskThe Group is not exposed to significant liquidity risk. It has surplus funds deposited with various banks andthe Group does not anticipate any problems in obtaining external funding in the foreseeable future if theneed arises.Derivative financial instrumentsThe Group does not recognise derivatives on the balance sheet. The gains or losses relating to derivativefinancial instruments are taken directly to the profit and loss account in the year when the forward contractsare realised.The Group has certain off-balance-sheet derivative financial instruments relating to foreign exchange forwardcontracts which are outstanding as of 31 December 2002. These are set out in Note 33.
Federal International (2000) Ltd AR 2002and its Subsidiary Companies70Notes to the Financial Statements35. FINANCIAL INSTRUMENTS (cont’d)Fair valueThe carrying values of the Group’s current financial instruments approximate their fair values due to theirshort-term nature. Long-term financial instruments are carried at cost. It is not practicable to determine thefair value of the long-term receivables and payables as a result of the inability to estimate the repaymentstreams reliably.Fair value estimates are made at a specific point in time and based on relevant market information about thefinancial instruments. These estimates are subjective in nature, involve uncertainties and matters of significantjudgment and therefore cannot be determined with precision. Changes in assumptions could significantlyaffect the estimates.36. RELATED PARTY TRANSACTIONSThe following significant related party transactions took place during the year on terms agreed between theGroup and the Company and the respective parties :-GROUPCOMPANY2002 2001 2002 2001$ $ $ $Subsidiary companiesGross dividend income – – (9,237,477) (1,800,000)Management fee received – – (1,960,760) (1,614,000)Associated companiesManagement fee received – (51,250) – –Sales (28,242,264) (559,599) – –Loans 35,000 110,000 – –Purchases 129,703 30,927 – –Royalties 150,191 41,558 – –Interest received (1,113,403) – – –Certification charges 122,217 – – –Related companiesSales (1,320,186) (21,863,128) – –Technical & consultancy fees (36,446) (136,685) – –Interest received – (671,909) – –Purchases – 528,105 – –Secretarial fees paid to aDirector-related firm 5,716 4,800 – –Commission paid 4,300 – – –
Notes to the Financial Statements37. SEGMENT INFORMATIONThe following tables present revenue and profit information regarding business segments and certain assetand liability information regarding industry segments as at 31 December 2002 and 31 December 2001.The Group’s operating businesses are organised and managed separately according to the nature of productsand services provided, with each segment representing a strategic business unit that offers different productsand serves different markets. The Group accounts for intersegment sales and transfers as if the sales ortransfers were to third parties at current market prices.Federal International (2000) Ltd AR 2002and its Subsidiary Companies71The various segments are in the following businesses:Flowline Control :Design, manufacture, assembly and distribution of flowline control products. In these respects, it offersproducts and related services in the areas of oil and gas, power, petrochemical and pharmaceutical industries.Oilfield Drilling :Research, development, design and manufacture of high pressure and temperature valves and related oilfieldproducts, as well as the distribution of oilfield drilling equipment for use on onshore and offshore rigs anddrilling platforms.Fire Protection :Provision of complete fire protection and detection systems for the industrial, marine, oil and gas sectors.Corporate and Other :Distribution of electrical products, provision of information technology related services and general corporateincome and expense items.
Federal International (2000) Ltd AR 2002and its Subsidiary Companies72Notes to the Financial Statements37. SEGMENT INFORMATION (cont’d)Business segmentsFLOWLINEOILFIELDCONTROLDRILLING2002 2001 2002 2001$ $ $ $Segment revenueSales to external customers 73,230,632 53,522,296 15,667,464 9,631,933Intersegment sales 1,454,235 171,013 72,857 360,286Total revenue 74,684,867 53,693,309 15,740,321 9,992,219Segment result 3,028,130 310,548 (561,503) (1,375,422)Interest income 1,189,968 812,411 3,308 7,297(Loss)/gain on disposal of investment (5,050) 4,445 – –Finance costs (1,046,356) (651,974) (168,196) (101,947)Share of profits/(losses) ofunconsolidated associates 296,717 (90,293) 62,112 2,439Profit before taxationTax expenseMinority interestNet profitSegment assets 67,819,297 59,363,976 5,933,621 6,251,190Investment in associates 2,495,489 557,221 118,571 116,628Unallocated corporate assets – – – –Total assetsSegment liabilities 52,554,219 29,039,005 6,297,454 5,961,270Unallocated corporate liabilities – – – –Total liabilitiesOther segment information:Capital expenditure 239,295 666,614 87,561 376,631Depreciation of fixed assets 513,255 464,955 101,908 128,670Amortisation of intangible assets 37,778 125,326 – –Other non-cash expense 807,256 400,000 150,349 62,197
Notes to the Financial StatementsFIRECORPORATEPROTECTION AND OTHERS ELIMINATIONS CONSOLIDATED2002 2001 2002 2001 2002 2001 2002 2001$ $ $ $ $ $ $ $Federal International (2000) Ltd AR 2002and its Subsidiary Companies734,809,093 8,062,989 2,370,670 720,993 – – 96,077,859 71,938,21112,850 2,710 11,198,237 3,414,000 (12,738,179) (3,948,009) – –4,821,943 8,065,699 13,568,907 4,134,993 (12,738,179) (3,948,009) 96,077,859 71,938,211187,332 314,145 25,321,484 2,017,091 (24,420,897) (344,683) 3,554,546 921,67995 651 4,057 10,768 – – 1,197,428 831,127– – – – – – (5,050) 4,445(60,817) (182,598) (23,123) (101,784) – – (1,298,492) (1,038,303)– – (33,608) (24,248) – – 325,221 (112,102)3,773,653 606,846(1,381,092) (264,415)10,890 575,2702,403,451 917,7013,839,850 6,356,049 58,787,878 10,803,484 (60,943,545) (6,961,535) 75,437,101 75,813,164– – 2,762,104 135,290 – – 5,376,164 809,139– – – – – – 215,616 189,93581,028,881 76,812,2383,423,322 4,987,148 3,549,932 882,261 (31,913,474) (8,869,492) 33,911,453 32,000,192– – – – – – 1,477,952 1,165,35735,389,405 33,165,54948,906 47,562 2,653,400 1,603,341 3,029,162 2,694,148126,617 122,315 153,532 158,499 895,312 874,439– – 85,792 85,792 123,570 211,11881,566 124,623 – – 1,039,171 586,820
Federal International (2000) Ltd AR 2002and its Subsidiary Companies74Notes to the Financial Statements37. SEGMENT INFORMATION (cont’d)Geographical segmentsCHINA INDONESIA MALAYSIA SINGAPORE2002 2002 2002 2002$ $ $ $Segment revenueSales to external customers 16,060,344 35,960,789 11,577,753 18,938,407Intersegment sales 6,421 – – 7,566,956Total revenue 16,066,765 35,960,789 11,577,753 26,505,363Other geographical information:Segment assets 421,680 143,809 – 77,155,346Segment liabilities 79,874 2,655,208 – 29,311,958Capital expenditure 16,953 2,653,400 – 231,633CHINA INDONESIA MALAYSIA SINGAPORE2001 2001 2001 2001$ $ $ $Segment revenueSales to external customers 7,929,019 25,183,720 7,587,042 21,242,483Intersegment sales – – – 1,937,474Total revenue 7,929,019 25,183,720 7,587,042 23,179,957Other geographical information:Segment assets – 89,610 – 73,215,399Segment liabilities – 35 – 28,111,131Capital expenditure – – – 2,302,621Revenue has been allocated to the various geographical segments based on the geographical location ofthe Group’s customers. Assets and liabilities are allocated to the various geographical segments based onthe geographical locations of the entities which employ these assets and create these liabilities in the courseof their operations. The difference in allocation bases is to provide more meaningful information.38. COMPARATIVE FIGURESIn compliance to SAS 12 (2001) - Income Taxes, a reconciliation between the statutory tax rate and theGroup and Companys’ effective tax rates and additional disclosure on the amount of deferred tax assets andliabilities recognised in the balance sheet in respect of each type of temporary difference, unused tax lossesand unused tax credits have been presented in the notes to the financial statements. Comparative figureshave been reclassified to conform to current year’s presentation.
Notes to the Financial StatementsINDIA UAE THAILAND OTHERS ELIMINATIONS CONSOLIDATED2002 2002 2002 2002 2002 2002$ $ $ $ $ $Federal International (2000) Ltd AR 2002and its Subsidiary Companies751,316,441 255,251 1,918,324 10,050,549 – 96,077,859– – – 312,788 (7,886,165) –1,316,441 255,251 1,918,324 10,363,337 (7,886,165) 96,077,859113,046 – – 3,642,919 (6,039,699) 75,437,101111,586 – – 6,292,024 (4,539,197) 33,911,45339,647 – – 87,529 – 3,029,162INDIA UAE THAILAND OTHERS ELIMINATIONS CONSOLIDATED2001 2001 2001 2001 2001 2001$ $ $ $ $ $2,152,764 363,610 988,926 6,490,647 – 71,938,211– – – 70,011 (2,007,485) –2,152,764 363,610 988,926 6,560,658 (2,007,485) 71,938,211140,163 – – 3,157,073 (789,081) 75,813,164128,518 – – 4,624,022 (863,514) 32,000,1923,381 – – 388,145 – 2,694,148
Federal International (2000) Ltd AR 2002and its Subsidiary Companies76Statistics of Shareholdingsas at 17th April 2003DISTRIBUTION OF SHAREHOLDINGSAuthorised Share Capital : $55,000,000Issued and Fully Paid : $35,048,775Total No. of Shares : 175,243,875 Ordinary Shares of $0.20Voting Rights : 1 vote per shareSIZE OF SHAREHOLDINGS NO. OF SHAREHOLDERS % NO. OF SHARES %1- 999 2 0.09 1,130 0.001,001 - 10,000 1,637 76.86 6,064,000 3.4610,001 - 1,000,000 468 21.97 26,424,267 15.081,000,001 and above 23 1.08 142,754,478 81.46Total 2,130 100.00 175,243,875 100.00TWENTY LARGEST SHAREHOLDERSN0. NAME NO. OF SHARES %1 Koh Kian Kiong 19,813,270 11.312 SBS Nominees Pte Ltd 17,400,000 9.933 United Overseas Bank Nominees Pte Ltd 17,327,000 9.894 Chew Keng Keong 12,638,250 7.215 HL Bank Nominees (S) Pte Ltd 11,808,000 6.746 Hong Leong Finance Nominees Pte Ltd 9,270,000 5.297 Citibank Consumer Nominees Pte Ltd 8,748,403 4.998 RHB Bank Nominees Pte Ltd 8,000,000 4.579 Yeo Teck Soon, John 5,807,455 3.3110 Tan Kah Imm 5,715,995 3.2611 Citibank Nominees Singapore Pte Ltd 4,487,000 2.5612 UOB Kay Hian Pte Ltd 4,115,000 2.3513 Kim Eng Ong Asia Securities Pte Ltd 2,575,000 1.4714 Chang Chou Hwa-Ying 2,481,000 1.4215 Mayban Nominees (S) Pte Ltd 2,400,000 1.3716 Chan Lay Ho 1,500,000 0.8617 Chan Tat Soon 1,435,925 0.8218 Liew Hon Min 1,290,000 0.7419 Chien Mao Lin 1,270,000 0.7220 OCBC Securities Private Ltd 1,237,000 0.71Total 139,319,298 79.52
SHAREHOLDINGS OF THE SUBSTANTIAL SHAREHOLDERS as at 17th April 2003Statistics of ShareholdingsName Registered in the name of % Shareholdings in which %substantial shareholderssubstantial shareholders aredeemed to have an interest *Mr. Koh Kian Kiong 19,813,270 11.31 27,800,000 15.86Federal International (2000) Ltd AR 2002and its Subsidiary Companies77Mr. Chew Keng Keong 12,638,250 7.21 24,700,000 14.09Mr. Yeo Teck Soon, John 5,807,455 3.31 13,000,000 7.42Mr. Tan Kah Imm 5,715,995 3.26 4,000,000 2.28* Shares are registered in the name of various nominees where directors have beneficial interest.PERCENTAGE OF SHAREHOLDING IN PUBLIC’S HANDS30.9% of the Company’s shares are held in the hands of public. Accordingly, the Company has complied with Rule723 of the Listing Manual of the SGX-ST.
Federal International (2000) Ltd AR 2002and its Subsidiary Companies78Notice of Annual General MeetingFEDERAL INTERNATIONAL (2000) LTD (Incorporated In Singapore)NOTICE IS HEREBY GIVEN that the Annual General Meeting of FEDERAL INTERNATIONAL (2000) LTD (“the Company”)will be held at The Conference Room, 47 Genting Road, Singapore 349489 on Thursday, 29 May 2003 at 10.00 amfor the following purposes:AS ORDINARY BUSINESS1. To receive and adopt the Directors’ Report and Audited Accounts of the Company for the year ended 31December 2002 together with the Auditors’ Report thereon. (Resolution 1)2. To declare a first and final dividend of 0.6 cents per share less income tax for the year ended 31 December 2002(2001: 0.5 cents) (Resolution 2)3. To re-elect the following Directors retiring pursuant to Article 91 of the Company’s Articles of Association:Mr. Tan Kah Imm (Resolution 3)Mr. Yeo Teck Soon, John (Resolution 4)Ms Koh Maggie (Resolution 5)4. To approve the payment of Directors’ fees of S$120,000 for the year ended 31 December 2002 (2001:S$120,000). (Resolution 6)5. To re-appoint Messrs Ernst & Young as the Company’s Auditors and to authorise the Directors to fix theirremuneration. (Resolution 7)6. To transact any other ordinary business which may properly be transacted at an Annual General Meeting.AS SPECIAL BUSINESSTo consider and if thought fit, to pass the following resolutions as Ordinary Resolutions, with or without anymodifications:7. Authority to allot and issue shares up to 50 per centum (50%) of the issued capital of the CompanyThat pursuant to Section 161 of the Companies Act, Cap. 50 and the provisions of Rule 806 of the ListingManual of the Singapore Exchange Securities Trading Limited (“SGX-ST”), the Directors be empowered toallot and issue shares in the capital of the Company at any time and upon such terms and conditions and forsuch purposes as the Directors may, in their absolute discretion, deem fit provided that the aggregatenumber of shares to be allotted and issued pursuant to this Resolution shall not exceed fifty per centum(50%) of the issued share capital of the Company at the time of the passing of this resolution of which theaggregate number of shares to be issued other than on a pro rata basis to all shareholders of the Companyshall not exceed twenty per centum (20%) of the issued capital of the Company and that such authority shall,unless revoked or varied by the Company in general meeting, continue in force until the conclusion of theCompany’s next Annual General Meeting or the date by which the next Annual General Meeting of theCompany is required by law to be held, whichever is earlier. [See Explanatory Note (i)] (Resolution 8)By Order of the BoardChng GeokYvonne ChooCompany SecretariesSingapore, 13 May 2003Explanatory Notes:(i) The Ordinary Resolution 8 proposed in item 7 above, if passed, will empower the Directors from the date of the above Meeting until the date of the next AnnualGeneral Meeting, or the date by which the next Annual General Meeting is required by law to be held or when varied or revoked by the Company in generalmeeting, whichever is the earlier, to allot and issue shares in the Company. The number of shares that the Directors may allot and issue under this Resolutionwould not exceed fifty per centum (50%) of the issued capital of the Company at the time of the passing of this resolution. For issue of shares other than on a prorata basis to all shareholders, the aggregate number of shares to be issued shall not exceed twenty per centum (20%) of the issued capital of the Company.For the purpose of this resolution, the percentage of issued capital is based on the Company’s issued capital at the time this proposed Ordinary Resolution ispassed after adjusting for (a) new shares arising from the employee share options on issue when this proposed Ordinary Resolution is passed and (b) anysubsequent consolidation or subdivision of shares.Notes:1. A Member entitled to attend and vote at the Meeting is entitled to appoint one or two proxies to attend and vote instead of him. A proxy need not be a Memberof the Company.2. If the appointor is a corporation, the proxy must be executed under seal or the hand of its duly authorised officer or attorney.3. The instrument appointing a proxy must be deposited at the Registered Office of the Company at 47 Genting Road, Singapore 349489 not less than forty-eight(48) hours before the time for holding the meeting.
Proxy FormPlease see notes overleafbefore completing this form.FEDERAL INTERNATIONAL (2000) LTD(Incorporated In Singapore)I/We, __________________________________________________________________________________________________________________of ______________________________________________________________________________________________________________________being a member/members of FEDERAL INTERNATIONAL (2000) LTD (the “Company”), hereby appointNAME NRIC/PASSPORT NO. PROPORTION OF SHAREHOLDINGSNO. OF SHARES (%)ADDRESSand/or (delete as appropriate)NAME NRIC/PASSPORT NO. PROPORTION OF SHAREHOLDINGSNO. OF SHARES (%)ADDRESSor failing him/her, the Chairman of the Meeting as my/our proxy/proxies to vote for me/us on my/our behalf at theAnnual General Meeting (the “Meeting”) of the Company to be held on Thursday, 29 May at 10.00 am and at anyadjournment thereof. I/We direct my/our proxy/proxies to vote for or against the Resolutions proposed at theMeeting as indicated hereunder. If no specific direction as to voting is given or in the event of any other matterarising at the Meeting and at any adjournment thereof, the proxy/proxies will vote or abstain from voting at his/her discretion.(Please indicate your vote “For” or “Against” with a tick [✓] within the box provided.)NO. RESOLUTIONS RELATING TO: FOR AGAINST1 Directors’ Report and Account for the year ended 31 December 20022 Payment of proposed first and final dividend3 Re-election of Mr. Tan Kah Imm as a Director4 Re-election of Mr. Yeo Teck Soon, John, as a Director5 Re-election of Ms Maggie Koh as a Director6 Approval of Directors’ fees amounting to S$120,0007 Re-appointment of Messrs Ernst & Young as Auditors8 Authority to allot and issue new sharesDated this _______________ day of _______________ 2003.TOTAL NUMBER OF SHARES IN:NO. OF SHARES✄(a) CDP RegisterSignature of Shareholder(s)or Common seal of Corporate Shareholder(b) Register of Members
NOTES:1. Please insert the total number of Shares held by you. If you have Shares entered against your name in the DepositoryRegister (as defined in Section 130A of the Companies Act, Chapter 50 of Singapore), you should insert that numberof Shares. If you have Shares registered in your name in the Register of Members, you should insert that number ofShares. If you have Shares entered against your name in the Depository Register and Shares registered in your namein the Register of Members, you should insert the aggregate number of Shares entered against your name in theDepository Register and registered in your name in the Register of Members. If no number is inserted, the instrumentappointing a proxy or proxies shall be deemed to relate to all the Shares held by you.2. A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint one or twoproxies to attend and vote in his/her stead. A proxy need not be a member of the Company.3. Where a member appoints two proxies, the appointments shall be invalid unless he/she specifies the proportion ofhis/her shareholding (expressed as a percentage of the whole) to be represented by each proxy.4. The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at47 Genting Road, Singapore 349489 not less than forty-eight (48) hours before the time appointed for the Meeting.5. The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney dulyauthorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must beexecuted either under its seal or under the hand of an officer or attorney duly authorised. Where the instrumentappointing a proxy or proxies is executed by an attorney on behalf of the appointor, the letter or power of attorney ora duly certified copy thereof must be lodged with the instrument.6. A corporation which is a member may authorise by resolution of its directors or other governing body such personas it thinks fit to act as its representative at the Meeting, in accordance with Section 179 of the Companies Act,Chapter 50 of Singapore.GENERAL:The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperlycompleted or illegible or where the true intentions of the appointor are not ascertainable from the instructions of theappointor specified in the instrument appointing a proxy or proxies. In addition, in the case of Shares entered in theDepository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the member,being the appointor, is not shown to have Shares entered against his name in the Depository Register as at forty-eight (48)hours before the time appointed for holding the Meeting, as certified by The Central Depository (Pte) Limited tothe Company.
Federal International (2000) Ltd47/49 Genting Road, Singapore 349489Tel: (65) 6747 8118 Fax: (65) 6743 0690 / 6745 0048