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Transcript of Journey of ExcellencE - listed companyezion.listedcompany.com/misc/ar2010.pdf · specialises in the...
Journey of
ExcellencE
ANNUAL REPORT 2010
Ezion Holdings Limited
The ability to recognise opportunities is important, but
it is even more vital for us to maximise the value of such
opportunities. Since our strategic move into the marine and
offshore industry, Ezion has grown by leaps and bounds.
The Group is now 29-vessel strong, and is equipped with
extensive expertise and experience. Our growing presence in
the Asia Pacific – having made recent inroads into Australia
– also keeps us on track in our journey of excellence.
Recognise +
Maximise
2 FinancialHighlights
3 CorporateProfile
4 LettertoShareholders
8 OperationsReview
10 CorporateStructure
12 BoardofDirectors
14 KeyExecutives
15 CorporateInformation
16 CorporateGovernanceand
FinancialContents
CONTENTS
Revenue (S$’000) Net Profit (S$’000)
Shareholders’ Funds (S$’000)
Earnings per Share (cents)
NAV per Share (cents)
FINANCIAL HIGHLIGHTS
02 EZION HOLDINGS LIMITED | Annual Report 2010
07
13,505
08
31,074
09
73,613
10
151,200
07
4,111
08
8,038
09
17,122
10
51,913
07
0.72
08
1.25
09
2.52
10
7.28
07
111,462
08
120,928
09
177,563
10
271,073
07
17.31
08
18.80
09
24.89
10
38.00
EzionHoldingsLimited(“Ezion”andtogetherwithitssubsidiariesthe“Group”)has2mainbusinessdivisionsthat
specialisesinthedevelopment,ownershipandcharteringofstrategicoffshoreassetsandtheprovisionofoffshore
marinelogisticsandsupportservicestotheoffshoreoilandgasindustries.
TheGroupistheownerofoneofthelargestandmostsophisticatedclassofMulti-PurposeSelf-PropelledJack-upRigs
(“Liftboats”)intheworldandoneofthefirsttopromotetheusageofLiftboatsinAsia&MiddleEast.Ezion’sLiftboats
areusedmainly forwell-servicing,commissioning,maintenanceanddecommissioningofoffshoreplatforms.The
Grouphasafleetof4Liftboatsthatareexpectedtocomeintoserviceinthecurrentfinancialyear.
TheGroupisalsotheownerofafleetof29vessels,consistingoftugs,ballastablebarges,offshoresupportvesseland
self-propelledbargethatareusedintheprovisionofoffshoremarinelogisticsandsupportservicestotheoffshore
oilandgasindustries.TheGroup’sfleetofballastablebarges,oneofthelargestintheregion,hasbeenspecially
reinforcedandmodifiedtocarrytheprefabricatedmodulesintheconstructionofLNGextractionfacilitiesandjackets
fortheoffshoreoilandgasindustries.TheGroupalsoco-ownsaMulti-PurposeVesseltoprovidelogisticssupportof
equipmentfromAmericatoAustraliaandPapuaNewGuinea.
TheGroup’soperatingcompaniesalsooffersarangeofservicestoincludemarineconsultingrelatedtothedevelopment
&constructionandmarinelogisticssolutionsformarineoffshorefacilities.
BranchofficesinKorea,TheUnitedStatesofAmerica,andAustraliaprovidelogistics,supercargo,engineeringand
freightforwardingtocomplementexistingoperations.
CORPORATE PROFILE
Annual Report 2010 | EZION HOLDINGS LIMITED 03
LETTER TO SHAREHOLDERS
04 EZION HOLDINGS LIMITED | Annual Report 2010
On behalf of the Board of Directors, we are pleased to present to you the annual report for Ezion Holdings Limited for the financial year ended 31 December 2010 (“FY2010”).
A YEAR OF BLESSINGFY2010wasayearwecontinuetoreceiveblessing.Onthebackofstrongcontributionfromthecharteringofour
multi-purposeself-propelled jack-uprigs (“liftboats”), revenue increasedby105.4%, from$73.6million inFY2009
to$151.2million inFY2010.Thisgrowthwasalsoattributable to thedeploymentofvessels toour jointventure
company inAustralia in support of theGorgongas field inAustralia, aswell as the increase inmarine services.
Correspondingtotheincreaseinrevenue,grossprofitroseby$28.4millionor96.8%,fromS$29.3millioninFY2009
to$57.7millioninFY2010.
THE JOuRNEYTheGroupsawthesuccessfulcompletionanddeploymentofthreeofitsfirstsixliftboats.Thefirstunitwasusedby
ExxonMobilinWestAfrica.AtthesametimeinFebruary2010,theGroupenteredintoanagreementwithaprivate
equityfundtosell51%ofthesharesofTerasConquest1PteLtd,theassetholdingcompanyofthefirstliftboat.The
fundsraisedenabledtheGrouptocommittothefifthunitofliftboat.Thisunitwillhaveenhancedcapabilitiesto
allowittoservicetheoffshorewindfarmsintheSouthernNorthSea.Inordertoraisefundstobuildadditionalunits
tomeetdemandfromclientsforcharter,theGroupacceptedanofferforthepurchaseofanotherofitsunitofliftboat
forUS$78millioninthesameyear.TheGroupalsocontractedoutitsremainingworkingunitofliftboatwithaMiddle
EasternclientduringFY2010.
In August, our Australian operations were boosted with a letter of intent from a multi-national oil major, for an
estimatedA$70millionofmarinelogisticswork.ThisprojectwillbethesecondmajorprojectinAustraliaforthe
Group.Itisexpectedtobeoverafour-yearperiod,withasignificantamountofworktobecarriedoutbetween2011
and2014.
Furthermore,theyearsawtheGroupsecuringtwostrategicsitesinAustraliaformarinesupplybases.Thisisexpected
tofurtherenhancetheGroup’sabilitytomeetthelogisticssupportservicesrequirementoftheoilmajors’operations
inthevicinity.Inconjunctionwiththisdevelopment,theGroupraisedapproximatelyS$51millionthroughtheissuance
ofRedeemableExchangeablePreferenceSharesthroughawhollyownedsubsidiaryoftheGroup.
Aspartofoureffortstostrengthenourlogisticsupportcapabilitiestomeetthedemandofourclients,weformeda
jointventurewithBBCCharteringandLogisticGMBH&Co.KG(“BBC”)thatisbasedinGermanyfortheownershipof
amulti-purposevessel.Inconjunctionwiththis,wehavealsosecuredaUS$28millionchartercontractovera6year
periodforthehaulageofcargotomainlyAustraliaandPapuaNewGuineafromtheUnitedStatesofAmerica.
Annual Report 2010 | EZION HOLDINGS LIMITED 05
PATH AHEADDrivenbydevelopingAsiannationsandtherecoveringNorthAmericaneconomyaccordingtotheInternationalEnergy
Agency(“IEA”),worldwideoilconsumptionisexpectedtogrowby1.7%or1.5millionbarrelsadayto89.3million
barrelsadayin2011.Alongsidethisincreaseinoilconsumption,theIEAhasraisedtheforecastforglobaloildemand
forthenearfuture,reachinganestimated93.4millionbarrelsadayin2015.Thistranslatesintoagreaterneedfor
offshorelogisticssupportservices.
Inaddition,theannualWorldEnergyOutlookreleasedinNovember2010bytheIEAhasforecastedthatnaturalgas
issettoplayacentralroleinmeetingtheworld’senergyneedsforatleastthenext25years.Australia,wherethe
Grouphassignificantoperationsisexpectedtobenefitgreatlyfromit.
Withmorethan60%oftheapproximately3300platformsinSoutheastAsia,MiddleEastandWestAfricaagedmore
than 20 years old, the requirement for the repair, maintenance, upgrades and decommissioning of these aging
platformsinthecomingyears isgreat.Ourliftboatsarewellsuitedtocarryouttheseworksandthedemandfor
liftboatsisexpectedtoincrease.
TheGroup,withitsstrongtechnicalcapabilities,trackrecordandbusinessnetworks,iswellpositionedtocapture
thebusinessopportunitiesgeneratedfromtheabove.Withthecapitalraisedfromthesaleofoneofitsliftboat,the
issuanceofRedeemableExchangeablePreferenceSharesandtheprofitsgeneratedintheyear,theGroupisexpected
tocommitfurther inthecurrentfinancialyeartoadditionalstrategicassetstocapitaliseontheabovementioned
situationtomaintainitsgrowth.
PROPOSED DIvIDENDSTheDirectorshaverecommendedafinaltax-exemptdividendof0.1Singaporecentsperordinaryshare,pending
approvalattheforthcomingAnnualGeneralMeeting.
IN APPRECIATIONWithgreathumility,wethankGodforHisgraceandpeaceduringtheyear.Wewouldliketoexpressheartfeltgratitude
tothedirectors,ourmanagementandstafffortheiradvice,effortandenduringcommitment.Withmuchgratitude,
wethankourbusinessassociates,partnersandbankersfortheircontinuedsupportandtrust.Lastbutnotleast,we
thankyouforkeepingfaithinusandwelookforwardtoyourcontinuoussupport.
Wewillcontinuetodoourbestfortheshareholders.
Lee Kian Soo Chew Thiam KengChairman ChiefExecutiveOfficer
LETTER TO SHAREHOLDERS (cont’d)
06 EZION HOLDINGS LIMITED | Annual Report 2010
Foundation +
STRUCTUREOur experience and expertise in the development of strategic offshore assets puts the
Group ahead of the industry with a greater foothold in the region.
Annual Report 2010 | EZION HOLDINGS LIMITED 07
OPERATIONS REvIEW
A YEAR OF ROBuST GROWTHGrouprevenuegrew105%,from$73.6millioninFY2009to$151.2
millioninFY2010.Thiswaslargelyduetothecontributionfromthe
chartering of the Group’s multi-purpose self-propelled jack-up rigs
(“liftboats”),thedeploymentofvesselsinsupportoftheGorgongas
fieldprojectinAustralia,andtheincreaseincontributionfrommarine
services.
Intandemwithrevenueincrease,grossprofitrose97%,from$29.3
millioninFY2009to$57.7millioninFY2010.
Profitfortheyearregisteredgrowthof203%,from$17.1millionin
FY2009to$51.9millioninFY2010.
Onaper sharebasis, dilutedearningsper sharegrew186%, from
2.52centsinFY2009to7.21centsinFY2010.NetAssetValueper
sharewas38centsasof31December2010,comparedto25cents
inthepreviousyear.
Administrative expenses increased 137%, due to the increase in
businessactivitiesandthemanpowerboostinseniormanagement,
tobetterpositiontheGroupforgreaterexpansion.
Therise inother incomewasattributedmainly to thegainderived
fromthedivestmentofa51%interestinasubsidiarywhichownsthe
Group’sfirstunitofliftboatandtherecognitionoffairvaluegainin
theinvestmentinajointventurethatownstheGroup’sfirstunitof
liftboatinlinewiththerevisedaccountingstandard.
The267%increaseinshareofprofitofjointventurecompaniesfrom
$2.4million in FY2009 to$8.8million in FY2010,wasmainlydue
tothepositivecontributionfromtheGroup’sjointventuresinboth
AustraliaandtheGroup’sfirstunitofliftboat.
Revenue from our chartering and offshore support services segment grew 93%, while marine services also saw expansion, growing 168%.
08 EZION HOLDINGS LIMITED | Annual Report 2010
Charter incomederived fromSingapore flaggedvesselsareexempted fromtaxunderSection13Aof the Income
TaxActofSingapore.Currentyear incometaxexpenseof$3.8million relates to thecorporate taxexpenseand
withholdingtaxexpenseincurredbyvesselsoperatingincertainoverseaswaters.Thehigherincometaxexpenseon
thewholewasmainlyduetothehigherprovisionforwithholdingtax.
Charteringandoffshoresupportservicesreportedrevenueof$118.0millioninFY2010,contributingto78%oftotal
revenue.Thiswasa93%increasefrom$61.2millioninFY2009.Meanwhile,revenuefrommarineservicesgrew168%
from$12.4millioninFY2009to$33.2millioninFY2010.Marineservicescontributedto22%ofGrouprevenue.
In termsofgeographical segment,Australiawas the year’s highest contributor at$50.6million,makingup33%
oftotalrevenueascomparedto17%inFY2009.Onthewhole,Singapore,Australia,FarEastandASEANcountries
recordedrevenuegrowthascomparedtothepreviousyear.
TheGrouphasraisedanetproceedsofS$51.3millionthroughtheissuanceofRedeemableExchangeablePreference
SharesthroughawhollyownedsubsidiaryoftheGroupofwhichtheGrouphasutilisedS$5.7millionmainlyforthe
acquisitionofoffshoreandmarineassetsaswellasthegeneralworkingcapitalofthemarinesupplybusinessofthe
subsidiary.
Annual Report 2010 | EZION HOLDINGS LIMITED 09
CORPORATE STRuCTuRE
10 EZION HOLDINGS LIMITED | Annual Report 2010
EZION HOLDINGS LIMITED
100%Teras Offshore Pte Ltd
100%Teras Transporter Pte Ltd
100%Teras Transporter 2 Pte Ltd
100%Teras 281 Pte Ltd
100%Teras 331 Pte Ltd
100%Teras 335 Pte Ltd
100%Teras 336 Pte Ltd
100%Teras 338 Pte Ltd
100%Teras 339 Pte Ltd
100%Teras 333 Pte Ltd*
100%Teras Conquest 2 Pte Ltd
100%Teras Conquest 3 Pte Ltd
100%Teras Conquest 4 Pte Ltd
100%Teras Conquest 5 Pte Ltd
100%Teras Pacific Pte Ltd
100%Teras Atlantic Pte Ltd
100%Teras Australia Pty Ltd
100%Teras Harta Maritime Limited
100%Teras Cargo Logistics Limited
100%Teras Oilfield Support Limited
100%Teras Centurion Pte Ltd
100%Ezion Investments Pte Ltd
50%OMSA Ningaui Pte Ltd
100%Ezion Offshore Logistics Hub Pte Ltd
33.33%Offshore Marine Services Alliance Pty Ltd
100%Ezion Offshore Logistics Hub (Exmouth) Pty Ltd
100%Ezion Offshore Logistics Hub (Tiwi) Pty Ltd
50%Eminent Offshore Logistics Pte Ltd 100%Eminent 237 Pte Ltd
100%Eminent 1 Pte Ltd
100%Eminent 2 Pte Ltd
100%Eminent 3 Pte Ltd
100%Eminent 4 Pte Ltd
100%Eminent 5 Pte Ltd
100%Eminent 6 Pte Ltd
100%Ezion Maritime Pte Ltd
100%Meridian Maritime Pte Ltd
100%Teras Progress Pte Ltd
100%Teras Wallaby Pte Ltd
100%Teras Pegasus Pte Ltd
50%EG Marine Pte Ltd
50%Teras BBC Houston (BVI) Limited
49%Teras Conquest 1 Pte Ltd
50%TeraSea Pte Ltd*Formerly known as Teras 3652 Pte Ltd
Annual Report 2010 | EZION HOLDINGS LIMITED 11
Steer +
DELIVERWith the successful completion and delivery of more liftboats and the award of
a second major Australian project, shareholder value is expected to rise with the
increased number of vessels deployed, enabling us to grow the intrinsic value of the
Group and deliver enduring returns to shareholders.
MR LEE KIAN SOO
BOARD OF DIRECTORS
MR LEE KIAN SOO | Non-ExecutiveChairmanandNon-ExecutiveDirector
AppointedtheNon-ExecutiveChairmanandNon-ExecutiveDirectorsince1June2007,
Mr Lee Kian Soo is also the founder of the Ezra Group of Companies (“Ezra”) with
30 years of experience in the shipping and offshore support service industry. Prior
tofoundingEzra,MrLeehasworkedinvariousestablishedcompanieswhichinclude
Jurong Shipyard, Sembawang Shipyard and Offshore Supply Association. Mr Lee has
beenresponsibleforthestrategicplanning,businessdevelopmentandmarketingof
Ezrasinceitsinceptionin1992.
MR CHEW THIAM KENG | ChiefExecutiveOfficerandExecutiveDirector
MrChewThiamKengwasappointedtheExecutiveDirectoron1stMarch2007,and
wasappointedastheChiefExecutiveOfficeron1stJuneinthesameyear.MrChewis
responsiblefortheGroup’soperationsinstrategicplanning,corporatemanagementand
businessdevelopment.BeforejoiningtheGroup,MrChewwastheManagingDirector/
CEOofKSEnergyServicesLimitedforabout5yearsandwastheExecutiveDirectorof
KianAnnEngineeringLtd.between1996andNovember2001.Beforethat,MrChewwas
withtheDevelopmentBankofSingaporeLimitedfornineyearsworkingintheareasof
bankingsuchascorporatefinanceandretailbanking.MrChewholdsaMasterDegree
inBusinessAdministrationfromtheUniversityofHullandaBachelorDegree(Honours)
inMechanicalEngineeringfromtheNationalUniversityofSingapore.
CAPTAIN LARRY GLENN JOHNSON | ChiefOperatingOfficerandExecutiveDirector
CaptainLarryGlennJohnsonwasappointedanExecutiveDirectorcumChiefOperating
OfficeroftheGroupsince13February2008.HeisaseasonedMarineProfessionalwith
over32yearsofexperienceinthemaritimeindustry.HeholdsavalidUSCGMasters
License with 20 years of management experience, which include 13 years of P&L
responsibilities.He alsohad theopportunity toworkwith ExxonMobilDevelopment
Corporation,Chevron,AkerKvaerner,ConocoPhillips,BatelleCorp.MARADandUSCG
asamarineconsultantforanumberofoilandgasprojects.BeforejoiningtheGroup,
CaptainJohnsonworkedatFossMaritimeCompanyfor24years,withhislastposition
as the Director International Operations. He also retired as Senior Vice President of
America Transport with responsibilities for operations in the Gulf of Mexico, Asia,
Africa,AustraliaandtheMiddleEast.
12 EZION HOLDINGS LIMITED | Annual Report 2010
MR CHEW THIAM KENG
CApTAIN LARRy GLENN
JOHNSON
DR WANG KAI YuEN | IndependentNon-ExecutiveDirector
DrWangKaiYuenisanIndependentNon-ExecutiveDirectorappointedon28July2000.
He currently also serves as the Chairman of the Audit Committee and is a member
of both the Remuneration and Nominating Committees. Dr Wang sits on the Board
of Superbowl Holdings Ltd, Xpress Holdings Ltd, Asian Micro Holdings Ltd, COSCO
Corporation (Singapore) Limited, Hiap Hoe Ltd, ComfortDelGro Corporation Limited,
CAO (Singapore) Corporation Ltd, Matex International Ltd, HLH Corp, EOC Ltd and
A-SonicAerospaceLtd.DrWangretiredfromFujiXeroxSingaporeSoftwareCentrein
December2009astheCentreManager.DrWangservedasaMemberofParliamentfor
theBukitTimahConstituencyfromDecember1984tillApril2006.HewastheChairman
ofFeedbackunitfrom2002tillhisretirementfrompolitics.DrWanggraduatedfrom
theNationalUniversityofSingaporewithaBachelorinEngineering(FirstClassHonours
inElectricalandElectronics).HealsoholdsaMasterofScienceinElectricalEngineering
and a PhD in Engineering from Stanford University. He received a Friend of Labour
Awardin1988forhiscontributionstotheSingaporelabourmovement.
MR LIM THEAN EE |IndependentNon-ExecutiveDirector
MrLimTheanEeisanIndependentNon-ExecutiveDirectorappointedon28July2000.
HehasbeenappointedtheChairmanoftheRemunerationCommitteewitheffectfrom
18July2008andisamemberofboththeAuditandNominatingCommittees.Heserves
as theManagingDirectorofCoastalNavigationPte Ltdand is also theChairmanof
DepotEstateBusinessesAssociationandTelokBlangahCommunityClubManagement
Committee;theVice-ChairmanofTelokBlangahCitizens’ConsultativeCommittee.
MR TAN WOON HuM | IndependentNon-ExecutiveDirector
MrTanWoonHumisanIndependentNon-ExecutiveDirectorappointedsince21March
2007.HeisamemberoftheAuditCommittee,theRemunerationCommitteeandthe
NominatingCommittee.MrTanhasbeenappointedasChairmanof theNominating
Committeewitheffectfrom1June2007.MrTanisapartnerinthecorporatefinance
and international finance practice of Shook Lin & Bok LLP. He has been practicing
lawformorethan15yearsandhisareasofexpertiseincludeREITs,fundsandM&A.
He also advises on licensing and regulatory matters in the financial sector and has
previously advised on a wide range of corporate finance transactions, particularly
crossbordermergersandacquisitions,jointventures,strategicinvestmentsandlisted
companymatters.Hehasbeeninvolvedin21ofthe22listedS-REITs(asatMarch2011)
transactionsofvariousstructures,magnitudeandcomplexity.MrTanalsositsonthe
BoardofAPOilInternationalLtdandYongXinInternationalHoldingsLtd.
Annual Report 2010 | EZION HOLDINGS LIMITED 13
DR WANG KAI yUEN
MR LIM THEAN EE
MR TAN WOON HUM
MR LEE KON MENG (PETER) |Director,GroupBusinessDevelopment&Operations
Mr Lee Kon Meng, Peter joined the Company in May 2010 and is responsible for developing and nurturing new
businessesandoverseeingthegroupfleetoperations.HeholdsaMasterMarinerClass1certificationwith13yearsin
themerchantnavyand20yearsintheoffshoreindustryrelatedmanagementexperience.BeforejoiningtheGroup,
MrLeeservedasaDirectorofPOSHSemcoPteLtd,specialisinginturnkeymajortransportationandFPSOtowage,
installationprojectsintheoffshoreoilandgasindustryandsalvage.
MR POH LEONG CHING (DAvID) |ChiefCommercialOfficer
MrPohLeongChing,David is responsible for themarketingof theGroup’sentire fleetofvesselswhich includes
tugs,ballastablevessels,offshoresupportvesselsandmulti-purposeself-propelledjack-ups(“Liftboats”).Underhis
credentialsareover15yearsofexperienceinthesalesandoperationsofvesselsandcranes.MrPohwastheMarketing
ManagerofTiongWoonMarinePteLtdandTatHongHoldingsGroupbeforejoiningtheGroup.
MR CHEAH BOON PIN | ChiefFinancialOfficer
MrCheahBoonPinisresponsibleforallaccounting,financialandtaxationmatters.HejoinedtheGroupinJune2007
bringingwithhimover10yearsofexperienceinauditingandcommercialaccounting.BeforejoiningtheCompany,
MrCheahhadservedinfinancialmanagementpositionsin2SingaporeExchangeMainBoardlistedcompanies.He
holdsanACCAaccountingqualificationandisamemberoftheInstituteofCertifiedPublicAccountantofSingapore.
MR PETER COLIN BREuER |CEOofsubsidiary-EzionOffshoreLogisticsHubPteLtd
MrPeterBreuerjoinedourwhollyownedsubsidiary,EzionOffshoreLogisticsHubPteLtd(“EOLH”)inOctober2010
andisresponsibleforEOLH’soperationsinsettingup,operatingandmanagingtheSupplyBasesintheMarineSupply
BaseBusiness.BeforejoiningtheGroup,MrBreuerservesasaDirectorofCargoManagementatOffshoreMarine
ServicesandalsoastheGeneralDirectorofSP-SSAInternationalContainerServices.
MR DERRICK CHING |SeniorManager–Commercial
MrDerrickChingjoinedtheGroupinMarch2008andisresponsibleformarketingoftheGroup’sfleetofJack-upsand
vessels.MrChinghasmorethan10yearsofexperienceintheoilandgasindustryandhassuccessfullycompleted
severalupgradingandrefurbishmentofoffshoredrillingrigs.Ontopof that,he isalsoexperienced inheavy lift
accommodationbarges,seismicvesselsandpipelayers.
MR MARK ORTEGA |LegalCounsel
MrMarkOrtega joinedtheGroup inFebruary2011andoverseesall legalaspectsof theGroup’soperations. Mr
OrtegaobtainedhislawdegreefromUniversityofLondonin1994andbringswithhim15yearsofexperiencein
shippinglawincluding10yearsasapractisinglawyer.PriortojoiningtheGroup,MrOrtegawasaPartneratAllen
andGledhill,oneofSingapore’stoplawfirms,aswellasLegalCounseltoPacificCarriersLimited.
KEY EXECuTIvES
14 EZION HOLDINGS LIMITED | Annual Report 2010
Annual Report 2010 | EZION HOLDINGS LIMITED 15
BOARD OF DIRECTORSLeeKianSoo
ChewThiamKeng
CaptainLarryGlennJohnson
DrWangKaiYuen
LimTheanEe
TanWoonHum
AuDIT COMMITTEEDrWangKaiYuen–Chairman
LimTheanEe
TanWoonHum
REMuNERATION COMMITTEELimTheanEe–Chairman
DrWangKaiYuen
TanWoonHum
NOMINATING COMMITTEETanWoonHum–Chairman
DrWangKaiYuen
LimTheanEe
CORPORATE INFORMATION
REGISTERED ADDRESS15HoeChiangRoad#12-05
TowerFifteen
Singapore089316
Telephone6563090555
Facsimile6562227848
Website:www.ezionholdings.com
Email:[email protected]
PRINCIPLE BANKERSOVERSEA-CHINESEBANKING
CORPORATIONLIMITED
65ChuliaStreet
OCBCCentre
Singapore049513
DBSBANKLTD
6ShentonWay
DBSBuildingTowerOne
Singapore068809
MALAYANBANKINGBHD
2BatteryRoad
MaybankTower
Singapore049907
UNITEDOVERSEASBANKLIMITED
80RafflesPlaceUOBPlaza
Singapore048624
AuDITORSKPMGLLP
Partner-in-charge–TanHuayLim
(Appointedsince10December
2007)
16RafflesQuay
#22-00HongLeongBuilding
Singapore048581
SHARE REGISTRARM&CSERVICESPRIVATELIMITED
138RobinsonRoad#17-00
TheCorporateOffice
Singapore068906
COMPANY SECRETARIESLimKaBee
CheahBoonPin
17 CorporateGovernanceReport
25 Directors’Report
30 StatementbyDirectors
31 IndependentAuditors’Report
32 StatementofFinancialPosition
33 ConsolidatedIncomeStatement
34 ConsolidatedStatementof
ComprehensiveIncome
35 ConsolidatedStatementofChangesinEquity
36 ConsolidatedStatementofCashFlows
37 NotestoFinancialStatements
89 Shareholders’Information
91 NoticeofAnnualGeneralMeeting
96 NoticeofBooksClosure
ProxyForm
AND FINANCIAL CONTENTSCORPORATE GOvERNANCE
Annual Report 2010 | EZION HOLDINGS LIMITED 17
CORPORATE GOVERNANCE REPORT
Ezion Holdings Limited (“Ezion” or the “Company”) observes high standards of corporate governance in line with the principles and guidelines of the Code of Corporate Governance 2005 (“Code”) so as to ensure greater transparency, accountability and protections of shareholders’ interest.
The Company’s corporate governance practices on each of the principles of the Code are outlined in the following sections.
BOARD MATTERSBOARD MATTERS
Principle 1 Board’s Conduct of its AffairsPrinciple 1 Board’s Conduct of its Affairs
The Board oversees the business of Company and assumes responsibility for the overall strategic plans, key operational initiatives, major investment and funding proposals, fi nancial performance reviews and corporate governance practices. The Board provides the direction and goals for the management and monitors the performance of these goals to enhance the shareholders’ value. The Company has in place fi nancial authorisation and approval limits for operating and capital expenditure, procurement of goods and services, acquisitions and disposal of investments and treasury transactions. Within these guidelines, the Board approves transactions above certain thresholds. The Board also approves the fi nancial results for release to the Singapore Exchange Securities Trading Limited (“SGX-ST”)
The Board is supported in its tasks by Board Committees, namely, the Audit Committee, Nominating Committee and Remuneration Committee, which have been established to assist in the execution of its responsibilities.
The Board conducts regular scheduled meetings at least four times a year. Ad-hoc meetings are convened as and when warranted by particular circumstances. The Company’s Articles of Association provide for meetings to be held via telephone conference. The attendance of the Directors at meetings of the Board and Board Committees, as well as frequency of such meetings, is disclosed in this report.
Principle 2 Board Composition And GuidancePrinciple 2 Board Composition And Guidance
The size and composition of the Board are reviewed from time to time by the Nominating Committee, which strives to ensure that the size of the Board is conducive to effective discussions and decision-making and that the Board has an appropriate balance of independent directors.
The majority of our directors are non-executive and independent directors. The Nominating Committee reviews the independence of each director on an annual basis and it considers a director as independent if he has no relationship with the Group or its offi cers that could interfere, or reasonably perceived to interfere, with the exercise of the director’s independent business judgement with a view to the best interest of the Company.
The Board currently comprises the following members:
(i) Mr Lee Kian Soo Non-Executive Chairman
(ii) Mr Chew Thiam Keng Executive Director and CEO
(iii) Captain Larry Glenn Johnson Executive Director and COO
(iv) Dr Wang Kai Yuen Independent Director
(v) Mr Lim Thean Ee Independent Director
(vi) Mr Tan Woon Hum Independent Director
As a group, the Directors bring with them a broad range of industry knowledge, expertise and experience in areas such as fi nance, legal, business and management. The diversity of the directors’ experience allows for the useful exchange of ideas and view as well as provide for effective decision-making. The profi le of each Board member is set out on pages 12 & 13 of this Annual Report. The Board considers the present size appropriate for the current nature and scope of the Group’s operations.
18 EZION HOLDINGS LIMITED | Annual Report 2010
CORPORATE GOVERNANCE REPORT
Principle 3 Chairman And Chief Executive Offi cerPrinciple 3 Chairman And Chief Executive Offi cer
There is a clear separation of the roles and responsibilities of the Chairman and the Chief Executive Offi cer (CEO). This is to ensure appropriate balance of power and authority, accountability and decision-making.
Mr Lee Kian Soo, who is the Non-Executive Chairman, and Mr Chew Thiam Keng, the CEO of the Company are not related to each other. The CEO is responsible for the day-to-day management of the affairs of the Company and the Group. He plays a leading role in developing and expanding the businesses of the Group and ensures that the Board is kept updated and informed of the Group’s business.
The Chairman’s responsibilities include:
1) scheduling meetings and leading the Board to ensure its effectiveness and approves the agenda of Board meetings in consultation with the CEO;
2) reviewing key proposals and board papers before they are presented to the Board and ensures that Board members are provided with accurate and timely information;
3) ensuring that Board members engage Management in constructive debate on various matters including strategic issues and business planning processes; and
4) promoting high standards of corporate governance.
Principle 4 Board MembershipPrinciple 4 Board Membership
NOMINATING COMMITTEENOMINATING COMMITTEE
The Nominating Committee (“NC”) comprises three Directors, all of whom, including the Chairman are independent. The NC members are:
Mr Tan Woon Hum (Chairman)Dr Wang Kai Yuen Mr Lim Thean Ee
The NC’s responsibilities include the following:
• review and assess all candidates for directorships before making recommendation to the Board for appointment of directors;
• review and recommend to the Board the retirement and re-election of directors in accordance with the Company’s Articles of Association at each Annual General Meeting (“AGM”);
• review the independence of directors annually;
• review the composition of the Board annually to ensure that the Board has appropriate balance of independent directors and to ensure an appropriate balance of expertise, skills, attributes and ability among the directors; and
• evaluate the performance and effectiveness of the Board as a whole.
The NC reviews and assesses candidates for directorship before making recommendations to the Board. In recommending new directors to the Board, the NC takes into consideration the skills and experience and the current composition of the Board, and strives to ensure that the Board has an appropriate balance of independent directors as well as directors with the right profi le of expertise, skills, attributes and ability.
In evaluating a director’s contribution and performance for the purposes of re-nomination, the NC takes into consideration a variety of factors such as attendance, preparedness, participation and candour. The NC makes recommendation for new directors and retirement of directors.
Annual Report 2010 | EZION HOLDINGS LIMITED 19
CORPORATE GOVERNANCE REPORT
The Directors submit themselves for re-nomination and re-election at regular intervals of at least once every three years. The Company’s Articles of Association provides that one third of the Board, or the number nearest to one third is to retire by rotation at every AGM. In addition, the Company’s Articles of Association also provides that newly appointed Directors are required to submit themselves for re-nomination and re-election at the next AGM of the Company.
Principle 5 Board PerformancePrinciple 5 Board Performance
The NC has established a formal assessment process to assess the effectiveness of the Board as a whole. The performance criteria for Board evaluation are based on fi nancial and non-fi nancial indicators such as an evaluation of the size and composition of the board, the Board’s access to information, board processes, strategy and planning, risk management, accountability, board performance in relation to discharging its principal functions, communication with senior management and standards of conduct of the directors.
The Board and Management have strived to ensure that directors appointed to the Board possess the experience, knowledge and skills critical to the Group’s business to enable the Board to make sound and well-considered decisions.
Principle 6 Access To InformationPrinciple 6 Access To Information
The Board members are provided with adequate and timely information prior to Board meetings and on an ongoing basis. The Board has separate and independent access to the Group’s senior management and the advice and services of the Company Secretaries who are responsible to the Board for ensuring board procedures are followed and the relevant statutory rules and regulations are complied with. Under the Articles of Association of the Company, the decision to appoint or remove the Company Secretaries can only be taken by the board as a whole. At least one of the Company Secretaries will be present at board meetings.
The Board may also take independent professional advice as and when necessary to enable it to discharge its responsibilities effectively at the expense of the Company. The Board is updated on the regulations of the SGX-ST, Companies Act, corporate governance policies and other statutory requirements.
Attendance at Board and Board Committees’ meetings held during the year 2010 is as set out below:
Type of MeetingsType of Meetings BoardBoard Audit CommitteeAudit CommitteeNominating Nominating CommitteeCommittee
Remuneration Remuneration CommitteeCommittee
Total No. Held 4 4 1 1
AttendanceAttendance
Lee Kian Soo 4 N/A N/A N/A
Chew Thiam Keng 4 N/A N/A N/A
Larry Glenn Johnson 4 N/A N/A N/A
Dr Wang Kai Yuen 4 4 1 1
Lim Thean Ee 4 4 1 1
Tan Woon Hum 4 4 1 1
N/A: Not Applicable
20 EZION HOLDINGS LIMITED | Annual Report 2010
CORPORATE GOVERNANCE REPORT
REMUNERATION MATTERSREMUNERATION MATTERS
Principle 7 Procedures for Developing Remuneration PoliciesPrinciple 7 Procedures for Developing Remuneration PoliciesPrinciple 8 Level and Mix of RemunerationPrinciple 8 Level and Mix of RemunerationPrinciple 9 Disclosure of RemunerationPrinciple 9 Disclosure of Remuneration
The Remuneration Committee (“RC”) comprises three Directors, all of whom including the Chairman are independent. The RC members are as follows:
Mr Lim Thean Ee (Chairman)Dr Wang Kai Yuen Mr Tan Woon Hum
The RC’s responsibilities include the following:
• review and recommend to the Board an appropriate and competitive framework of remuneration for the Directors and key executives of the Group;
• recommend to the Board specifi c remuneration packages for each Executive Director, taking into account factors including remuneration packages of Executive Directors in comparable industries as well as the performance of the Company and that of the Executive Directors;
• review and make recommendation on the fees of Independent Non-Executive Directors for approval by the Board;
• ensure the remuneration policies and systems of the Group support the Group’s objectives and strategies; and
• administration of the Ezion Employee Share Plan and the Ezion Employee Option Scheme.
The remuneration package adopted for each of the Executive Directors is as per the service contract entered into between the respective Director and the Company. The RC will review and recommend the specifi c remuneration package for each Executive Director upon recruitment. Thereafter, the RC reviews subsequent increments, bonuses and allowances where these payments are discretionary. No Director or member of the RC is involved in deciding his own remuneration.
Non-Executive Directors do not have any service contracts with the Company. Save for Directors’ fees, Non-Executive Directors do not receive any remuneration from the Company.
Directors’ fees are set in accordance with a remuneration framework comprising basic fees and additional fees for serving on any of the committees. Directors’ fees are subject to approval of shareholders of the Company as a lump sum payment at the AGM of the Company.
No immediate family members of a Director or CEO have remuneration exceeding S$150,000 during the year.
Remuneration of Directors and Key Executives Remuneration of Directors and Key Executives
A breakdown showing the level and mix of each individual director’s remuneration paid and payable for FY2010.
No. of Directors in remuneration bandNo. of Directors in remuneration band
Remuneration BandRemuneration Band 20092009 20102010
$500,000 and above 1 2
$250,000 to below $500,000 1 –
Below $250,000 4 4
Total 6 6
Annual Report 2010 | EZION HOLDINGS LIMITED 21
CORPORATE GOVERNANCE REPORT
Details of Directors’ remunerationsDetails of Directors’ remunerations
DirectorsDirectors FeesFees%
Salary & CPFSalary & CPF%
Bonus & CPFBonus & CPF%
Other Benefi tsOther Benefi ts%
TotalTotal%
$500,000 and above$500,000 and above
Chew Thiam Keng – 56 42 2 100
Larry Glenn Johnson – 63 25 12 100
Below $250,000Below $250,000
Lee Kian Soo – – – – –
Dr Wang Kai Yuen 100 – – – 100
Lim Thean Ee 100 – – – 100
Tan Woon Hum 100 – – – 100
Remuneration of the key executives Remuneration of the key executives
Remuneration BandRemuneration Band 20092009 20102010
$250,000 to below $500,000 – 3
Below $250,000 5 3
Total 5 6
Principle 10 AccountabilityPrinciple 10 Accountability
The Company keeps the shareholders updated on the Group’s fi nancial performance, positions and prospects through quarterly fi nancial results announcements and annual fi nancial reports. The Company also issues announcements on developments in the Group’s business on an on-going and timely basis.
Management provides the Board with the relevant information such as management accounts on the performance of the Group on a timely and on going basis in order that the Board may effectively discharge its duties.
AUDITAUDIT
Principle 11 Audit CommitteePrinciple 11 Audit CommitteePrinciple 12 Internal ControlPrinciple 12 Internal ControlPrinciple 13 Internal Audit Principle 13 Internal Audit
The Audit Committee (“AC”) comprises three Directors, all of whom including the Chairman are independent. The AC members are:
Dr Wang Kai Yuen (Chairman)Mr Lim Thean Ee Mr Tan Woon Hum
The AC performs the following functions:
a) review with the external auditors, their audit plan, evaluation of the accounting controls, audit reports and any matters which the external auditors wish to discuss;
b) review with the internal auditors, their audit plan, the adequacy of the internal audit procedures and their evaluation of the effectiveness of the overall internal control systems, including fi nancial, operational and compliance controls and risk management;
c) review the quarterly and annual fi nancial statements, including announcements to shareholders and the SGX-ST prior to submission to the Board so as to ensure the integrity of the Company’s fi nancial statements;
22 EZION HOLDINGS LIMITED | Annual Report 2010
CORPORATE GOVERNANCE REPORT
d) review any signifi cant fi ndings and recommendations of the external and internal auditors and related management response and assistance given by the management to auditors;
e) review interested person transactions to ensure that internal control procedures approved by the shareholders are adhered to; and
f) conduct annual review of the independence and objectivity of the external auditors, including the volume of non-audit services provided by the external auditors, to satisfy itself that the nature and extent of such services will not prejudice the independence and objectivity of the external auditors before confi rming their re-nomination.
The AC has full access to and receives full co-operation from Management, and has full discretion to invite members of Management to attend its meetings and has been given reasonable resources to enable it to discharge its functions. The external auditors have direct and unrestricted access to the AC, which is empowered to conduct or authorise investigations into any matters within its terms of reference.
The AC has reviewed the overall scope of the external audits and the assistance given by the Company’s offi cers to the auditors. It met with the Company’s external auditors to discuss the results of their respective examinations and their evaluation of the Company’s system of internal accounting controls. The AC has also met with the auditors, without the presence of management.
The AC has reviewed the quarterly and annual fi nancial statements of the Company and the Group for the fi nancial year ended 31 December 2010 as well as the independent auditors’ report thereon. The AC has also reviewed interested person transactions of the Group in the fi nancial year.
The Group maintains a system of internal controls for all companies within the Group, but recognises that no internal control system will preclude all errors and irregularities. The system is designed to manage rather than to eliminate the risk of failure to achieve business objectives. The controls are to provide reasonable, but not absolute, assurance to safeguard shareholders' investments and the Group's assets.
The AC and the Board of Directors reviews the effectiveness of the key internal controls, including fi nancial, operational and compliance controls, and risk management on an on-going basis. There are formal procedures in place for the external auditors to report independently their fi ndings and recommendations to the AC. The Company has in FY2010 outsourced its internal audit function to Yang Lee & Associates, a fi rm of certifi ed public accountants.
The internal auditors report directly to the AC and make recommendations on their fi ndings.
The Group’s external auditors also contribute an independent perspective on the internal control systems arising from their audit and annually report their fi ndings to the AC.
In line with the Code, the AC have incorporated a “whistle blowing policy” into the Company’s internal control procedures to provide a channel for staff to raise in good faith and in confi dence, without fear of reprisals, concerns about possible improprieties in fi nancial reporting or other matters. The objective of such a policy is to ensure independent investigation of such matters and for appropriate follow-up action.
The AC has conducted an annual review of all non-audit services by the auditors to satisfy itself that the nature and extent of such services will not prejudice the independence and objectivity of the auditors.
The Board is kept informed of the AC’s activities.
Annual Report 2010 | EZION HOLDINGS LIMITED 23
CORPORATE GOVERNANCE REPORT
COMMUNICATION WITH SHAREHOLDERSCOMMUNICATION WITH SHAREHOLDERS
Principle 14 Communication with ShareholdersPrinciple 14 Communication with ShareholdersPrinciple 15 Greater Shareholder ParticipationPrinciple 15 Greater Shareholder Participation
The Company believes in engaging in regular, effective and fair communication with shareholders and is committed to conveying pertinent information to shareholders on a timely basis. All material and price sensitive information as well as information on the Company’s new initiatives are publicly released via SGXNET on a timely basis. In addition, the Company also responds to enquiries from investors, analysts, fund managers and the press.
At the general meetings of the Company, shareholders are given the opportunity to air their views and ask questions regarding the Company and the Group. The Articles of Association of the Company allow shareholders to appoint one or two proxies to attend and vote in their stead.
Each item of special business included in the notice of the general meetings is accompanied, where appropriate, by an explanation for the proposed resolution. Separate resolutions are proposed for substantially separate issues at the meeting. The Chairman of the Audit, Remuneration and Nominating Committees are normally available at the meeting to answer those questions relating to the work of these committees. The external auditors are also present to assist the Directors in addressing any relevant queries by shareholders.
In preparation for the annual general meeting, shareholders are encouraged to refer to SGX’s investor guides, namely 'An Investor's Guide To Reading Annual Reports' and 'An Investor's Guide To Preparing For Annual General Meetings'. The guides, in both English and Chinese versions are available at the SGX website.
DEALINGS IN SECURITIESDEALINGS IN SECURITIES
The Company has adopted an internal code with regards to dealings in securities to provide guidance for its directors and offi cers.
The Company’s code provides that Directors and employees are prohibited from dealing in the securities of the Company whilst in possession of unpublished material price-sensitive information and during the period commencing two weeks before the quarterly results announcement and one month before the full year results announcement and ending on the date of the announcements of the relevant results.
Directors and executive offi cers are also required to observe insider trading laws at all times even when dealing in securities within the permitted trading period. In addition, the Directors and executive offi cers are expected not to deal in the Company’s securities for short-term considerations.
INTERESTED PERSON TRANSACTIONS (“IPTs”) POLICYINTERESTED PERSON TRANSACTIONS (“IPTs”) POLICY
The Company has adopted an internal policy in respect of any transactions with interested persons and has set out the procedures for review and approval of the Company’s interested persons transactions with Ezra Holdings Limited, its subsidiaries and associated companies, which are covered by a Shareholders’ Mandate renewed at the Annual General Meeting of the Company held on 28 April 2010 (“Shareholders’ Mandate”).
The AC reviews the Shareholders’ Mandate at regular intervals, and is satisfi ed that the review procedures for IPTs and the reviews to be made periodically by the AC in relation thereto are adequate to ensure that the IPTs will be transacted on normal terms and will not be prejudicial to the interests of the Company and its minority shareholders.
24 EZION HOLDINGS LIMITED | Annual Report 2010
CORPORATE GOVERNANCE REPORT
Interested Person Transactions for FY2010Interested Person Transactions for FY2010
Name of Interested PersonName of Interested Person
Aggregate value of all interested Aggregate value of all interested person transactions during the person transactions during the financial year under review financial year under review (excluding transactions less (excluding transactions less than $100,000 and transactions than $100,000 and transactions conducted under shareholders’ conducted under shareholders’ mandate pursuant to Rule 920)mandate pursuant to Rule 920)
Aggregate value of all interested Aggregate value of all interested person transactions conducted person transactions conducted during the fi nancial year under during the fi nancial year under review under shareholders’ review under shareholders’ mandate pursuant to Rule 920 mandate pursuant to Rule 920 (excluding transactions less than (excluding transactions less than $100,000)$100,000)
S$’000S$’000 S$’000S$’000
(A) Purchases
Emas Offshore Pte Ltd – 4,692
Jit Sun Investments Pte Ltd 408 –
(B) Sales
Fodemas Pte Ltd – 21,494
Ezra Marine Services Pte Ltd – 792
MATERIAL CONTRACTSMATERIAL CONTRACTS
There were no material contracts entered into by the Company and its subsidiaries involving the interests of its CEO, Directors or Controlling Shareholders.
DIRECTORS' REPORT
Annual Report 2010 | EZION HOLDINGS LIMITED 25
We are pleased to submit this annual report to the members of the Company together with the audited fi nancial statements for the fi nancial year ended 31 December 2010.
DirectorsDirectors
The directors in offi ce at the date of this report are as follows:
Lee Kian Soo
Chew Thiam Keng
Captain Larry Glenn Johnson
Dr Wang Kai Yuen
Lim Thean Ee
Tan Woon Hum
Directors’ interestsDirectors’ interests
According to the register kept by the Company for the purposes of Section 164 of the Singapore Companies Act, Chapter 50 (the “Act”), particulars of interests of directors who held offi ce at the end of the fi nancial year (including those held by their spouses and infant children) in shares, debentures, warrants and share options in the Company and in related corporations (other than wholly-owned subsidiaries) are as follows:
DirectDirect DeemedDeemed
Name of director and corporation Name of director and corporation in which interests are heldin which interests are held
Holdings at Holdings at beginningbeginningof the yearof the year
HoldingsHoldingsat end ofat end ofthe yearthe year
Holdings at Holdings at beginningbeginningof the yearof the year
HoldingsHoldingsat end ofat end ofthe yearthe year
The CompanyThe CompanyDr Wang Kai Yuen 150,000 150,000 – –Lim Thean Ee 1,146,000 1,200,000 – –Chew Thiam Keng 35,155,000 34,090,000 142,000,000 142,000,000Lee Kian Soo – – 100,000,000 100,000,000
By virtue of Section 7 of the Act, Chew Thiam Keng, is deemed to have interests in the subsidiaries of the Company, which are wholly-owned, at the beginning and at the end of the fi nancial year.
Except as disclosed in this report, no director who held offi ce at the end of the fi nancial year had interests in shares, debentures, warrants or share options of the Company, or of related corporations, either at the beginning of the fi nancial year, or at the end of the fi nancial year.
There were no changes in any of the above mentioned interests in the Company between the end of the fi nancial year and 21 January 2011, except for Chew Thiam Keng who has direct interests of 34,010,000 shares in the Company as at 21 January 2011.
Except as disclosed under the “Share Options” Section of this report, neither at the end of, nor at any time during the fi nancial year, was the Company a party to any arrangement whose objects are, or one of whose objects is, to enable the directors of the Company to acquire benefi ts by means of the acquisition of shares in or debentures of the Company or any other body corporate.
During the fi nancial year, the Company and its related corporations have in the normal course of business entered into transactions with companies including a joint venture in which a director of the Company has fi nancial interest. Such transactions comprised lease of offi ce and charter of vessels carried out on normal commercial terms as set out in note 28 to the fi nancial statements. The director has neither received nor become entitled to receive any benefi t arising out of these transactions other than those to which he is ordinarily entitled to as shareholder of these companies.
DIRECTORS' REPORT
26 EZION HOLDINGS LIMITED | Annual Report 2010
Except for the transactions disclosed in the preceding paragraph and short-term employee benefi ts as disclosed in note 28 to the fi nancial statements, since the end of the last fi nancial year, no director has received or become entitled to receive a benefi t by reason of a contract made by the Company or a related corporation with the director, or with a fi rm of which he is a member, or with a company in which he has a substantial fi nancial interest.
Share optionsShare options
Director Option and Executive Option Agreements Director Option and Executive Option Agreements
The grant of share options to Captain Larry Glenn Johnson under the Director Option Agreement (“Agreement”) and to 2 key executives under the Executive Option Agreements was approved by its members at an Extraordinary General Meeting held on 23 November 2009 (the “Vesting Reference Date”).
Other information regarding the above share options granted is set out below:
The exercise price of each option is fi xed at $0.45.
The share options shall be exercised, in whole or in part, in accordance with the following schedule:
i. 25% of the share options shall vest 12 months after the Vesting Reference Date; and
ii. an additional 25% of the share options shall vest on each anniversary of the Vesting Reference Date thereafter.
All options are settled by physical delivery of shares.
The options granted expire after 5 years or upon cessation of the employment of Captain Larry Glenn Johnson or the 2 key executives.
At the end of the fi nancial year, details of the options granted under the Agreement and the Executive Option Agreements on the unissued ordinary shares of the Company are as follows:
Date ofDate ofgrant ofgrant ofoptionsoptions
ExerciseExercisepriceprice
per shareper share
OptionsOptionsoutstanding outstanding at 1 January at 1 January
20102010Options Options grantedgranted
OptionsOptionsexercisedexercised
OptionsOptionsforfeitedforfeited
OptionsOptionsoutstandingoutstanding
at 31 at 31 December December
2010 2010
NumberNumberof optionof optionholders holders at 31 at 31
December December 20102010
ExerciseExerciseperiodperiod
23/11/2009 $0.45 9,000,000 – – (4,000,000) 5,000,000 2
23/11/2010 to
23/11/2014
On 4 October 2010, a key executive ceased to be an employee of the Group. Accordingly, the share options granted to him under the Executive Option Agreement had been forfeited.
Details of options granted to the director of the Company are as follows:
Name of directorName of director
Options granted Options granted for fi nancial for fi nancial
year ended 31 year ended 31 December 2010December 2010
Aggregate options Aggregate options granted since granted since
commencement of commencement of Agreement to 31 Agreement to 31 December 2010December 2010
Aggregate optionsAggregate optionsexercised since exercised since
commencement of commencement of Agreement to 31 Agreement to 31 December 2010December 2010
Aggregate options Aggregate options outstanding as outstanding as at 31 December at 31 December
20102010
Captain Larry Glenn Johnson – 4,000,000 – 4,000,000
DIRECTORS' REPORT
Annual Report 2010 | EZION HOLDINGS LIMITED 27
Ezion Employee Share Option SchemeEzion Employee Share Option Scheme
The Ezion Employee Share Option Scheme (the “Scheme”) was approved and adopted by its members at an Extraordinary General Meeting held on 23 November 2009. The Scheme is administered by the Company’s Remuneration Committee, comprising three directors, Lim Thean Ee, Dr Wang Kai Yuen and Tan Woon Hum.
Other information regarding the Scheme is set out below:
Option granted on 18 January 2010 (“Grant Date 1”)Option granted on 18 January 2010 (“Grant Date 1”)
The exercise price of each option is fi xed at $0.70.
The share option shall be exercised, in whole or in part, in accordance with the following schedule:
i. 50% of the options shall vest after the end of second anniversary of Grant Date 1, and
ii. the remaining 50% of the options shall vest after the end of third anniversary of Grant Date 1.
All options are settled by physical delivery of shares.
The options granted expire after 10 years or upon cessation of the employment of employees.
The options include 700,000 shares granted to each director, Chew Thiam Keng and Captain Larry Glenn Johnson.
Option granted on 5 May 2010 (“Grant Date 2”)Option granted on 5 May 2010 (“Grant Date 2”)
The exercise price of each option is fi xed at $0.63.
The share option shall be exercised, in whole or in part, in accordance with the following schedule:
i. 32% of the options shall vest after the end of second anniversary of Grant Date 2;
ii. 34% of the options shall vest after the end of third anniversary of Grant Date 2; and
iii. 34% of the options shall vest after the end of fourth anniversary of Grant Date 2.
All options are settled by physical delivery of shares.
The options granted expire after 10 years or upon cessation of the employment of employees.
At the end of the fi nancial year, details of the options granted under the Scheme on unissued ordinary shares of the Company are as follows:
Date ofDate ofgrant ofgrant ofoptionsoptions
ExerciseExercisepriceprice
per shareper shareOptionsOptionsgrantedgranted
OptionsOptionsexercisedexercised
OptionsOptionsforfeitedforfeited
Options Options outstandingoutstanding
at 31 at 31 December December
20102010
NumberNumberof optionof option
holders at 31 holders at 31 December December
20102010ExerciseExerciseperiodperiod
18/1/2010 $0.70 3,920,000 – (555,000) 3,365,000 2318/1/2012
to 17/1/2020
5/5/2010 $0.63 500,000 – – 500,000 15/5/2012
to 3/5/2020
4,420,000 – (555,000) 3,865,000
DIRECTORS' REPORT
28 EZION HOLDINGS LIMITED | Annual Report 2010
Details of options granted to the directors of the Company are as follows:
Name of directorName of director
Options granted Options granted for fi nancial for fi nancial
year ended 31 year ended 31 December 2010December 2010
Aggregate options Aggregate options granted since granted since
commencement commencement of Scheme to 31 of Scheme to 31 December 2010December 2010
Aggregate optionsAggregate optionsexercised since exercised since commencement commencement of Scheme to 31 of Scheme to 31 December 2010December 2010
Aggregate options Aggregate options outstanding outstanding
as at 31 as at 31 December 2010December 2010
Chew Thiam Keng 700,000 700,000 – 700,000
Captain Larry Glenn Johnson 700,000 700,000 – 700,000
Share option granted to a director of a subsidiaryShare option granted to a director of a subsidiary
On 22 March 2009, the Company granted an option to a director of a subsidiary to purchase 30% interest in the subsidiary from the Company at cost upon satisfaction of certain conditions.
On 4 October 2010, the director of subsidiary ceased to be an employee of the Group. Accordingly, the share option granted to him had been forfeited.
Except as disclosed above, there were no unissued shares of the Company or its subsidiaries under options granted by the Company or its subsidiaries as at the end of the fi nancial year.
Employee Share PlanEmployee Share Plan
The Employee Share Plan (the “Plan”) was approved and adopted by members of the Company at the Extraordinary General Meeting held on 29 April 2008. The Plan is administered by a committee comprising of the directors of the Company. In 2009, 230,000 treasury shares had been awarded to certain employees pursuant to the Plan. During the fi nancial year, no treasury shares had been awarded to employees under the Plan.
Audit CommitteeAudit Committee
The members of the Audit Committee during the year and at the date of this report are:
Dr Wang Kai Yuen (Chairman and independent director)Lim Thean Ee (Independent director)Tan Woon Hum (Independent director)
The Audit Committee performs the functions specifi ed in Section 201B of the Act, the SGX Listing Manual and the Code of Corporate Governance.
The Audit Committee has held 4 meetings since the last directors’ report. In performing its functions, the Audit Committee met with the Company’s external and internal auditors to discuss the scope of their work, the results of their examination and evaluation of the Company’s internal accounting control system.
The Audit Committee also reviewed the following:
assistance provided by the Company’s offi cers to the internal and external auditors;
quarterly fi nancial information and annual fi nancial statements of the Group and the Company prior to their submission to the directors of the Company for adoption; and
interested person transactions (as defi ned in Chapter 9 of the SGX Listing Manual).
The Audit Committee has full access to management and is given the resources required for it to discharge its functions. It has full authority and the discretion to invite any director or executive offi cer to attend its meetings. The Audit Committee also recommends the appointment of the external auditors and reviews the level of audit and non-audit fees.
DIRECTORS' REPORT
Annual Report 2010 | EZION HOLDINGS LIMITED 29
The Audit Committee is satisfi ed with the independence and objectivity of the external auditors and has recommended to the Board of Directors that the auditors, KPMG LLP, be nominated for re-appointment as auditors at the forthcoming Annual General Meeting of the Company.
AuditorsAuditors
The auditors, KPMG LLP, have indicated their willingness to accept re-appointment.
On behalf of the Board of Directors
Chew Thiam KengChew Thiam KengDirector
Captain Larry Glenn JohnsonCaptain Larry Glenn JohnsonDirector
SingaporeSingapore24 March 2011
STATEMENT BY DIRECTORS
30 EZION HOLDINGS LIMITED | Annual Report 2010
In our opinion:
(a) the fi nancial statements set out on pages 32 to 88 are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2010 and the results, changes in equity and cash fl ows of the Group for the year ended on that date in accordance with the provisions of the Singapore Companies Act, Chapter 50 and Singapore Financial Reporting Standards; and
(b) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.
The Board of Directors has, on the date of this statement, authorised these fi nancial statements for issue.
On behalf of the Board of Directors
Chew Thiam KengChew Thiam KengDirector
Captain Larry Glenn JohnsonCaptain Larry Glenn JohnsonDirector
SingaporeSingapore24 March 2011
INDEPENDENT AUDITORS’ REPORTMembers of the Company
Ezion Holdings Limited
Annual Report 2010 | EZION HOLDINGS LIMITED 31
Report on the fi nancial statementsReport on the fi nancial statements
We have audited the accompanying fi nancial statements of Ezion Holdings Limited (the “Company”) and its subsidiaries (the “Group”), which comprise the statement of fi nancial position of the Group and the Company as at 31 December 2010, the income statement, statement of comprehensive income, statement of changes in equity and statement of cash fl ows of the Group for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, as set out on pages 32 to 88.
Management’s responsibility for the fi nancial statementsManagement’s responsibility for the fi nancial statements
Management is responsible for the preparation of fi nancial statements that give a true and fair view in accordance with the provisions of the Singapore Companies Act, Chapter 50 (the “Act”) and Singapore Financial Reporting Standards, and for devising and maintaining a system of internal accounting controls suffi cient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profi t and loss accounts and statement of fi nancial position and to maintain accountability of assets.
Auditors’ responsibilityAuditors’ responsibility
Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the fi nancial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
OpinionOpinion
In our opinion, the consolidated fi nancial statements of the Group and the statement of fi nancial position of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards to give a true and fair view of the statement of affairs of the Group and of the Company as at 31 December 2010 and the results, changes in equity and cash fl ows of the Group for the year ended on that date.
Report on other legal and regulatory requirementsReport on other legal and regulatory requirements
In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.
KPMG LLPKPMG LLPPublic Accountants andCertified Public Accountants
SingaporeSingapore24 March 2011
STATEMENT OF FINANCIAL POSITIONAs at 31 December 2010
32 EZION HOLDINGS LIMITED | Annual Report 2010
The accompanying notes form an integral part of these fi nancial statements.
GroupGroup CompanyCompany
NoteNote 20102010 20092009 20102010 20092009$’000$’000 $’000$’000 $’000$’000 $’000$’000
Non-current assetsNon-current assets
Plant and equipment 4 194,763 260,060 905 489
Subsidiaries 5 – – 152,527 140,973
Joint ventures 6 56,643 10,056 44,069 6,017
Other investment 7 – – – –
Other assets 8 5,341 192 3,448 4,825
256,747 270,308 200,949 152,304
Current assetsCurrent assets
Inventories 9 936 1,019 – –
Trade receivables 10 46,976 24,195 3,799 4,315
Other assets 8 40,258 28,801 15,069 9,719
Asset held for sale 11 70,520 – – –
Cash and cash equivalents 12 97,546 40,284 13,172 12,528
256,236 94,299 32,040 26,562
Total assetsTotal assets 512,983 364,607 232,989 178,866
Equity attributable to owners of the CompanyEquity attributable to owners of the Company
Share capital 13 160,270 160,270 160,270 160,270
Redeemable exchangeable preference shares 14 51,415 – – –
Reserves 15 (14,453) (3,254) (139) (139)
Retained earnings/(Accumulated losses) 73,841 20,547 21,147 (5,858)
Total equityTotal equity 271,073 177,563 181,278 154,273
Non-current liabilitiesNon-current liabilities
Other payables 16 2,583 2,811 – –
Financial liabilities 17 76,700 122,757 21,320 16,319
79,283 125,568 21,320 16,319
Current liabilitiesCurrent liabilities
Trade payables 18 39,639 15,663 5,915 19
Other payables 16 27,423 12,200 9,556 4,045
Financial liabilities 17 91,869 32,903 12,527 3,893
Current tax payable 3,696 710 2,393 317
162,627 61,476 30,391 8,274
Total liabilitiesTotal liabilities 241,910 187,044 51,711 24,593
Total equity and liabilities Total equity and liabilities 512,983 364,607 232,989 178,866
CONSOLIDATED INCOME STATEMENTFor the year ended 31 December 2010
Annual Report 2010 | EZION HOLDINGS LIMITED 33
The accompanying notes form an integral part of these fi nancial statements.
NoteNote 20102010 20092009$’000$’000 $’000$’000
Revenue 20 151,200 73,613
Cost of sales (93,475) (44,284)
Gross profi tGross profi t 57,725 29,329
Other income 14,384 1,609
Administrative expenses (16,971) (7,154)
Other expenses (5,358) (5,876)
Results from operating activitiesResults from operating activities 49,780 17,908
Finance income 504 266
Finance costs (3,350) (2,509)
Net fi nance costsNet fi nance costs 22 (2,846) (2,243)
Share of results of joint ventures, net of tax 8,822 2,421
Profi t before income taxProfi t before income tax 21 55,756 18,086
Income tax expense 23 (3,843) (964)
Profi t for the yearProfi t for the year 51,913 17,122
Profi t attributable to:Profi t attributable to:
Owners of the Company 51,913 17,122
Profi t for the yearProfi t for the year 51,913 17,122
Earnings per shareEarnings per share
Basic earnings per share (cents) 24 7.28 2.52
Diluted earnings per share (cents) 24 7.21 2.52
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFor the year ended 31 December 2010
34 EZION HOLDINGS LIMITED | Annual Report 2010
The accompanying notes form an integral part of these fi nancial statements.
20102010 20092009$’000$’000 $’000$’000
Profi t for the yearProfi t for the year 51,913 17,122
Other comprehensive incomeOther comprehensive income
Translation differences relating to fi nancial statements of foreign operations (2,934) (680)
Exchange differences on monetary items forming part of net investment in foreign operations (8,265) (2,149)
Other comprehensive income for the year, net of taxOther comprehensive income for the year, net of tax (11,199) (2,829)
Total comprehensive income for the yearTotal comprehensive income for the year 40,714 14,293
Total comprehensive income attributable to:Total comprehensive income attributable to:
Owners of the Company 40,714 14,293
Total comprehensive income for the yearTotal comprehensive income for the year 40,714 14,293
CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the year ended 31 December 2010
Annual Report 2010 | EZION HOLDINGS LIMITED 35
The accompanying notes form an integral part of these fi nancial statements.
Share Share capitalcapital
Redeemable Redeemable exchangeable exchangeable
preference preference sharesshares
Treasury Treasury sharesshares
Foreign Foreign currency currency
translation translation reservereserve
Statutory Statutory reservereserve
Retained Retained earningsearnings
TotalTotalequityequity
$’000$’000 $’000$’000 $’000$’000 $’000$’000 $’000$’000 $’000$’000 $’000$’000GroupGroupAt 1 January 2009 117,926 – (186) (286) – 3,474 120,928Total comprehensive income for Total comprehensive income for the year the yearProfi t for the year – – – – – 17,122 17,122
Other comprehensive incomeOther comprehensive income
Translation differences relating to fi nancial statements of foreign operations – – – (680) – – (680)Exchange differences on monetary items forming part of net investment in foreign operations – – – (2,149) – – (2,149)Total comprehensive income for the year – – – (2,829) – 17,122 14,293
Transactions with owners of the Company, Transactions with owners of the Company, recognised directly in equity recognised directly in equityContributions by and distribution to owners Contributions by and distribution to owners of the Company of the Company Issue of shares 43,400 – – – – – 43,400Share issue expenses (1,056) – – – – – (1,056)Dividends paid – – – – – (386) (386)Treasury shares transferred – – 54 – (7) – 47Share-based payment transactions – – – – – 337 337At 31 December 2009 160,270 – (132) (3,115) (7) 20,547 177,563
At 1 January 2010 160,270 – (132) (3,115) (7) 20,547 177,563Total comprehensive income for the yearTotal comprehensive income for the yearProfi t for the year – – – – – 51,913 51,913Other comprehensive incomeOther comprehensive incomeTranslation differences relating to fi nancial statements of foreign operations – – – (2,934) – – (2,934)Exchange differences on monetary items forming part of net investment in foreign
operations – – – (8,265) – – (8,265)Total comprehensive income for the year – – – (11,199) – 51,913 40,714
Transactions with owners of the Company, Transactions with owners of the Company, recognised directly in equity recognised directly in equityContributions by and distribution to owners Contributions by and distribution to owners of the Company of the Company Issue of redeemable exchangeable preference shares, net of issue expenses of
S$1,585,000 – 51,415 – – – – 51,415Dividends paid – – – – – (428) (428)Share-based payment transactions – – – – – 1,809 1,809At 31 December 2010 160,270 51,415 (132) (14,314) (7) 73,841 271,073
CONSOLIDATED STATEMENT OF CASH FLOWSFor the year ended 31 December 2010
36 EZION HOLDINGS LIMITED | Annual Report 2010
The accompanying notes form an integral part of these fi nancial statements.
NoteNote 20102010 20092009$’000$’000 $’000$’000
Cash fl ows from operating activitiesCash fl ows from operating activitiesProfi t for the year 51,913 17,122Adjustments for:Adjustments for:Income tax expense 3,843 964Depreciation expense 4 11,797 8,477Gain on disposal of plant and equipment (671) (1,283)Gain on disposal of subsidiaries (6,139) – Fair value gain on investment in a joint venture (6,606) –Financial guarantee income provided to joint ventures (866) –Finance income (504) (266)Finance costs 3,350 2,509Impairment loss on plant and equipment 3,038 3,799Impairment loss on other investment 27 –Impairment loss on trade receivables 1,046 1,177Write-off of fi nance lease receivables 82 –Equity-settled share-based payment transactions 1,809 384Share of results of joint ventures (8,822) (2,421)Operating profi t before changes in working capital Operating profi t before changes in working capital 53,297 30,462Changes in working capital:Changes in working capital:Trade receivables and other assets (33,144) (25,024)Trade and other payables 38,629 5,151Cash generated from operating activities 58,782 10,589Income taxes paid (785) (493)Net cash from operating activitiesNet cash from operating activities 57,997 10,096
Cash fl ows from investing activitiesCash fl ows from investing activitiesAdvance payments for purchase of plant and equipment (13,938) (17,995)Interest received 490 212Investments in joint ventures (14,426) (1,275)Proceeds from disposal of plant and equipment 21,737 9,465Proceeds from disposal of subsidiaries, net of cash disposed of 25 23,168 –Purchase of plant and equipment (149,486) (126,647)Net cash used in investing activitiesNet cash used in investing activities (132,455) (136,240)
Cash fl ows from fi nancing activitiesCash fl ows from fi nancing activitiesInterest paid (3,324) (2,559)Net proceeds from issue of new shares – 42,344Net proceeds from issue of redeemable exchangeable preference shares 51,415 –Dividends paid (428) (386)Proceeds from borrowings 112,111 113,850Repayment of borrowings (30,000) (21,874)Deposits pledged (4,747) (4,817)Net cash from fi nancing activitiesNet cash from fi nancing activities 125,027 126,558
Net increase in cash and cash equivalentsNet increase in cash and cash equivalents 50,569 414Cash and cash equivalents at 1 January 35,467 34,697Effect of exchange rate fl uctuations on cash held 1,946 356Cash and cash equivalents at 31 DecemberCash and cash equivalents at 31 December 12 87,982 35,467
NOTES TO THE FINANCIAL STATEMENTS
Annual Report 2010 | EZION HOLDINGS LIMITED 37
These notes form an integral part of the fi nancial statements.
The fi nancial statements were authorised for issue by the Board of Directors on 24 March 2011.
1 Domicile and activities1 Domicile and activities
Ezion Holdings Limited (the “Company”) is incorporated in Singapore. The address of the Company’s registered offi ce is 15 Hoe Chiang Road, #12-05 Tower Fifteen, Singapore 089316.
The fi nancial statements of the Company as at and for the year ended 31 December 2010 comprise the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”) and the Group’s interests in joint ventures.
The principal activities of the Company are those of an investment holding company and provision of management services to its subsidiaries. The principal activities of the subsidiaries are set out in note 5 to the fi nancial statements.
2 Basis of preparation2 Basis of preparation
(a) Statement of compliance(a) Statement of compliance The fi nancial statements have been prepared in accordance with Singapore Financial Reporting Standards
(“FRS”).
(b) Basis of measurement(b) Basis of measurement
The fi nancial statements have been prepared on the historical cost basis, except as disclosed in the accounting policies set out in note 3.
(c) Functional and presentation currency(c) Functional and presentation currency
These fi nancial statements are presented in Singapore dollars, which is the Company’s functional currency. All fi nancial information presented in Singapore dollars has been rounded to the nearest thousand, unless otherwise stated.
(d) Use of estimates and judgements(d) Use of estimates and judgements
The preparation of fi nancial statements in conformity with FRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
Judgement made by management in the application of FRSs, and accounting policies that have the most signifi cant effect on the amounts recognised in the fi nancial statements and that have a signifi cant risk of resulting in a material adjustment within the next fi nancial year are discussed in note 29.
NOTES TO THE FINANCIAL STATEMENTS
38 EZION HOLDINGS LIMITED | Annual Report 2010
2 Basis of preparation (cont’d)2 Basis of preparation (cont’d) (e) Changes in accounting policies(e) Changes in accounting policies
Changes Changes in ownership interests in ownership interests
From 1 January 2010, the Group has applied FRS 27 Consolidated and Separate Financial Statements (2009) to re-measure any interest retained in the former subsidiary at the fair value at the date when control is lost (See note 3(a)(iii)).
Previously, any interest retained in the former subsidiary is measured at cost at the date when control is lost. The change in accounting policy has been applied prospectively to new changes in ownership interests occurring on or after 1 January 2010 and has no material impact on earnings per share.
3 Signifi cant accounting policies3 Signifi cant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these fi nancial statements, and have been applied consistently by Group entities, except as explained in note 2(e), which addresses changes in accounting policies.
(a) Basis of consolidation(a) Basis of consolidation
(i) Business combinations (i) Business combinations
Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to govern the fi nancial and operating policies of an entity so as to obtain benefi ts from its activities. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profi t or loss.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.
Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classifi ed as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profi t or loss.
(ii) Subsidiaries (ii) Subsidiaries
Subsidiaries are entities controlled by the Group. The fi nancial statements of subsidiaries are included in the consolidated fi nancial statements from the date that control commences until the date that control ceases.
The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group.
NOTES TO THE FINANCIAL STATEMENTS
Annual Report 2010 | EZION HOLDINGS LIMITED 39
3 Signifi cant accounting policies (cont’d)3 Signifi cant accounting policies (cont’d)
(a) Basis of consolidation (cont’d)(a) Basis of consolidation (cont’d)
(iii) Loss of control(iii) Loss of control
Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or defi cit arising on the loss of control is recognised in profi t or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an equity-accounted investee or as an available-for-sale fi nancial asset depending on the level of infl uence retained.
(iv) Investment in joint ventures (iv) Investment in joint ventures
Joint ventures are those entities over whose activities the Group has joint control, established by contractual agreement and requiring unanimous consent for strategic fi nancial and operating decisions.
Investments in joint ventures are accounted for using the equity method and are recognised initially at cost. The cost of the investments includes transaction costs.
The consolidated fi nancial statements include the Group’s share of the profi t or loss and other comprehensive income of the joint ventures, after adjustments to align the accounting policies of the joint ventures with those of the Group, from the date that signifi cant infl uence or joint control commences until the date that signifi cant infl uence or joint control ceases.
When the Group’s share of losses exceeds its interest in a joint venture, the carrying amount of that interest, including any long-term investments, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.
(v) Transactions eliminated on consolidation (v) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated fi nancial statements. Unrealised gains arising from transactions with joint ventures are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
(vi) Accounting for subsidiaries and joint ventures (vi) Accounting for subsidiaries and joint ventures
Investments in subsidiaries and joint ventures are stated in the Company’s statement of fi nancial position at cost less accumulated impairment losses.
(b) Foreign currency(b) Foreign currency
(i) Foreign currency transactions (i) Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at the exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the end of the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in foreign currency translated at the exchange rate at the end of the year.
NOTES TO THE FINANCIAL STATEMENTS
40 EZION HOLDINGS LIMITED | Annual Report 2010
3 Signifi cant accounting policies (cont’d)3 Signifi cant accounting policies (cont’d) (b) Foreign currency (cont’d)(b) Foreign currency (cont’d)
(i) Foreign currency transactions (cont’d) (i) Foreign currency transactions (cont’d)
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured in terms of historical cost are translated using the exchange rate at the date of the transaction. Foreign currency differences arising on retranslation are recognised in profi t or loss, except for differences arising on the retranslation of available-for-sale equity instruments and retranslation of monetary items that in substance form part of the Group’s net investment in foreign operations (see below), which are recognised in other comprehensive income.
(ii) Foreign operations (ii) Foreign operations
The assets and liabilities of foreign operations are translated to Singapore dollars at exchange rates at the end of the reporting period. The income and expenses of foreign operations are translated to Singapore dollars at exchange rates at the dates of the transactions.
Foreign currency differences are recognised in other comprehensive income. When a foreign operation is disposed of, in part or in full, the relevant amount in the foreign currency translation reserve is transferred to profi t or loss as part of the profi t or loss on disposal.
(iii) Net investment in foreign operations (iii) Net investment in foreign operations
Exchange differences arising from monetary items that in substance form part of the Company’s net investment in a foreign operation are recognised in the Company’s profi t or loss. Such exchange differences are reclassifi ed to other comprehensive income in the consolidated fi nancial statements. When the foreign operation is disposed of, the cumulative amount in equity is transferred to profi t or loss as an adjustment to the profi t or loss arising on disposal.
(c) Plant and equipment(c) Plant and equipment
(i) Recognition and measurement (i) Recognition and measurement
Items of plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset.
When parts of an item of plant and equipment have different useful lives, they are accounted for as separate items (major components) of plant and equipment.
The gain or loss on disposal of an item of plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of plant and equipment, and is recognised net within other income/other expenses in profi t or loss.
(ii) Subsequent costs (ii) Subsequent costs
The cost of replacing a component of an item of plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefi ts embodied within the component will fl ow to the Group, and its cost can be measured reliably. The carrying amount of the replaced component is derecognised. The costs of the day-to-day servicing of plant and equipment are recognised in profi t or loss as incurred.
NOTES TO THE FINANCIAL STATEMENTS
Annual Report 2010 | EZION HOLDINGS LIMITED 41
3 Signifi cant accounting policies (cont’d)3 Signifi cant accounting policies (cont’d) (c) Plant and equipment (cont’d)(c) Plant and equipment (cont’d) (ii) Subsequent costs (cont’d) (ii) Subsequent costs (cont’d)
Costs incurred on subsequent dry-docking of vessels are capitalised and depreciated over the shorter of period to next estimated dry-docking and fi ve years. When signifi cant dry-docking costs are incurred prior to the expiry of the depreciation period, the remaining costs of the previous dry-docking are written off in the month of the next dry-docking.
(iii) Depreciation (iii) Depreciation
Depreciation is based on the cost of an asset less its residual value. Signifi cant components of individual assets are assessed and if a component has a useful life that is different from the remainder of that asset, that component is depreciated separately.
Depreciation is recognised in profi t or loss on a straight-line basis over the estimated useful lives of each component of an item of plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term.
The estimated useful lives for the current and comparative years are as follows:
Vessels 8 – 25 years Assets on board the vessels 3 – 10 years Dry-docking expenditure 5 years Rig and other oil and gas related assets 10 – 15 years Renovation, furniture, fi ttings and offi ce equipment 2 years Motor vehicles 5 – 7 years
Depreciation methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted if appropriate.
No depreciation is provided on vessels under construction.
(d) Financial instruments(d) Financial instruments
(i) Non-derivative fi nancial assets (i) Non-derivative fi nancial assets
The Group initially recognises loans and receivables and deposits on the date that they are originated. All other fi nancial assets (including assets designated at fair value through profi t or loss) are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a fi nancial asset when the contractual rights to the cash fl ows from the asset expire, or it transfers the rights to receive the contractual cash fl ows on the fi nancial asset in a transaction in which substantially all the risks and rewards of ownership of the fi nancial asset are transferred. Any interest in transferred fi nancial assets that is created or retained by the Group is recognised as a separate asset or liability.
Financial assets and liabilities are offset and the net amount presented in the statement of fi nancial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
The Group classifi es non-derivative fi nancial assets into the following categories: loans and receivables, and available-for-sale fi nancial assets.
NOTES TO THE FINANCIAL STATEMENTS
42 EZION HOLDINGS LIMITED | Annual Report 2010
3 Signifi cant accounting policies (cont’d)3 Signifi cant accounting policies (cont’d) (d) Financial instruments (cont’d)(d) Financial instruments (cont’d)
(i) Non-derivative fi nancial assets (cont’d) (i) Non-derivative fi nancial assets (cont’d)
Loans and receivablesLoans and receivables
Loans and receivables are fi nancial assets with fi xed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest rate method, less any impairment losses.
Loans and receivables comprise trade receivables, other assets, and cash and cash equivalents.
Cash and cash equivalents comprise cash balances and bank deposits.
Available-for-sale fi nancial assets Available-for-sale fi nancial assets
Available-for-sale fi nancial assets are non-derivative fi nancial assets that are designated as available for sale or are not classifi ed in any of the above categories of fi nancial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses (see note 3(g)(i)) and foreign currency differences on available-for-sale equity instruments (see note 3(b)(i)), are recognised in other comprehensive income and presented in the fair value reserve in equity. When an investment is derecognised, the gain or loss accumulated in equity is reclassifi ed to profi t or loss.
Available-for-sale fi nancial assets comprise equity securities.
(ii) Non-derivative fi nancial liabilities (ii) Non-derivative fi nancial liabilities
The Group initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other fi nancial liabilities (including liabilities designated at fair value through profi t or loss) are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a fi nancial liability when its contractual obligations are discharged, cancelled or expire.
Financial assets and liabilities are offset and the net amount presented in the statement of fi nancial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
The Group classifi es non-derivative fi nancial liabilities into the other fi nancial liabilities category. Such fi nancial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these fi nancial liabilities are measured at amortised cost using the effective interest rate method.
Other fi nancial liabilities comprise loans and borrowings, and trade and other payables.
NOTES TO THE FINANCIAL STATEMENTS
Annual Report 2010 | EZION HOLDINGS LIMITED 43
3 Signifi cant accounting policies (cont’d)3 Signifi cant accounting policies (cont’d) (d) Financial instruments (cont’d)(d) Financial instruments (cont’d)
(iii) Share capital (iii) Share capital
Ordinary shares Ordinary shares
Ordinary shares are classifi ed as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.
Preference share capital Preference share capital
Preference share capital is classifi ed as equity if it is non-redeemable, or redeemable only at the Company’s option.
Preference share capital is classifi ed as a fi nancial liability if it is redeemable on a specifi c date or at the option of the shareholders.
Repurchase of share capital (treasury shares) Repurchase of share capital (treasury shares)
When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are classifi ed as treasury shares and are presented in the reserve for own share account. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or defi cit on the transaction is presented in non-distributable capital reserve.
(iv) Financial guarantees (iv) Financial guarantees
Financial guarantees are fi nancial instruments issued by the Group that require the issuer to make specifi ed payments to reimburse the holder for the loss it incurs because a specifi ed debtor fails to meet payment when due in accordance with the original or modifi ed terms of a debt instrument.
Financial guarantees are recognised initially at fair value and are classifi ed as fi nancial liabilities. Subsequent to initial measurement, the fi nancial guarantees are stated at the higher of the initial fair value less cumulative amortisation and the amount that would be recognised if they were accounted for as contingent liabilities. When fi nancial guarantees are terminated before their original expiry date, the carrying amount of the fi nancial guarantees is transferred to profi t or loss.
(e) Leases(e) Leases
(i) When entities within the Group are lessees of a fi nance lease (i) When entities within the Group are lessees of a fi nance lease
Leased assets in which the Group assumes substantially all the risks and rewards of ownership are classifi ed as fi nance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Leased assets are depreciated over the shorter of the lease term and their estimated useful lives. Lease payments are apportioned between fi nance expense and reduction of the lease liability. The fi nance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confi rmed.
NOTES TO THE FINANCIAL STATEMENTS
44 EZION HOLDINGS LIMITED | Annual Report 2010
3 Signifi cant accounting policies (cont’d)3 Signifi cant accounting policies (cont’d)
(e) Leases (cont’d)(e) Leases (cont’d)
(i) When entities within the Group are lessees of a fi nance lease (cont’d) (i) When entities within the Group are lessees of a fi nance lease (cont’d) At inception, an arrangement that contains a lease is accounted for as such based on the terms and
conditions even though the arrangement is not in the legal form of a lease.
(ii) When entities within the Group are lessees of an operating lease (ii) When entities within the Group are lessees of an operating lease
Where the Group has the use of assets under operating leases, payments made under the leases are recognised in profi t or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in profi t or loss as an integral part of the total lease payments made. Contingent rentals are charged to profi t or loss in the accounting period in which they are incurred.
(iii) When entities within the Group are lessors of a fi nance lease (iii) When entities within the Group are lessors of a fi nance lease
When entities within the Group are lessor of the fi nance lease, the amounts due under the leases, after deduction of unearned charges, are included in “Finance lease receivables” as appropriate. The difference between the gross receivable and present value of the receivable is recognised as unearned interest. Interest receivable is recognised over the periods of the leases so as to give a constant rate of return on the net investment in the leases.
(iv) When entities within the Group are lessors of an operating lease (iv) When entities within the Group are lessors of an operating lease
Where the Group leases out assets under operating leases, the leased assets are included in statement of fi nancial position according to their nature and, where applicable, are depreciated in accordance with Group’s depreciation policies. Revenue arising from operating leases is recognised in accordance with the Group’s revenue recognition policies.
(f) Inter-company loans(f) Inter-company loans
In the Company’s fi nancial statements, inter-company loans to subsidiaries are stated at fair value at inception. The difference between the fair value and the loan amount at inception is recognised as additional investments in subsidiaries in the Company’s fi nancial statements. Subsequently, these loans are measured at amortised cost using the effective interest rate method. The unwinding of the difference is recognised as interest income in profi t or loss over the expected repayment period.
Inter-company loans, where settlement is neither planned nor likely to occur in the foreseeable future, are in substance, part of the holding company’s net investment in the entities and are stated at cost less accumulated impairment losses.
Such balances are eliminated in full in the Group’s consolidated fi nancial statements.
(g) Impairment (g) Impairment
(i) Non-derivative fi nancial assets (i) Non-derivative fi nancial assets
A fi nancial asset not carried at fair value through profi t or loss is assessed at the end of each reporting period to determine whether there is objective evidence that it is impaired. A fi nancial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash fl ows of that asset that can be estimated reliably.
NOTES TO THE FINANCIAL STATEMENTS
Annual Report 2010 | EZION HOLDINGS LIMITED 45
3 Signifi cant accounting policies (cont’d)3 Signifi cant accounting policies (cont’d)
(g) Impairment (cont’d)(g) Impairment (cont’d)
(i) Non-derivative fi nancial assets (cont’d) (i) Non-derivative fi nancial assets (cont’d)
Objective evidence that fi nancial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers in the Group, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a signifi cant or prolonged decline in its fair value below its cost is objective evidence of impairment.
Loans and receivables Loans and receivables
The Group considers evidence of impairment for loans and receivables at both a specifi c asset and collective level. All individually signifi cant loans and receivables are assessed for specifi c impairment. All individually signifi cant receivables found not to be specifi cally impaired are then collectively assessed for any impairment that has been incurred but not yet identifi ed. Loans and receivables that are not individually signifi cant are collectively assessed for impairment by grouping together loans and receivables with similar risk characteristics.
In assessing collective impairment, the Group uses historical trends of the probability of default, the timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.
An impairment loss in respect of a fi nancial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash fl ows, discounted at the asset’s original effective interest rate. Losses are recognised in profi t or loss and refl ected in an allowance account against loans and receivables. Interest on the impaired asset continues to be recognised. When a subsequent event (e.g. repayment by a debtor) causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profi t or loss.
Available-for-sale fi nancial assets Available-for-sale fi nancial assets
Impairment losses on available-for-sale financial assets are recognised by reclassifying the losses accumulated in the fair value reserve in equity to profi t or loss. The cumulative loss that is reclassifi ed from equity to profi t or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss recognised previously in profi t or loss. Changes in impairment provisions attributable to application of the effective interest method are refl ected as a component of interest income. If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be related objectively to an event occurring after the impairment loss was recognised in profi t or loss, then the impairment loss is reversed. The amount of the reversal recognised in profi t or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income.
(ii) Non-fi nancial assets (ii) Non-fi nancial assets
The carrying amounts of the Group’s non-fi nancial assets, other than inventories, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, the recoverable amount is estimated each year at the same time. An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit (“CGU”) exceeds its estimated recoverable amount.
NOTES TO THE FINANCIAL STATEMENTS
46 EZION HOLDINGS LIMITED | Annual Report 2010
3 Signifi cant accounting policies (cont’d)3 Signifi cant accounting policies (cont’d)
(g) Impairment (cont’d)(g) Impairment (cont’d) (ii) Non-fi nancial assets (cont’d) (ii) Non-fi nancial assets (cont’d) The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less
costs to sell. In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset or CGU. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash infl ows from continuing use that are largely independent of the cash infl ows of other assets or CGU. Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment is tested refl ects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefi t from the synergies of the combination.
The Group’s corporate assets do not generate separate cash infl ows and are utilised by more than one CGU. Corporate assets are allocated to CGUs on a reasonable and consistent basis and tested for impairment as part of the testing of the CGU to which the corporate asset is allocated.
Impairment losses are recognised in profi t or loss. Impairment losses recognised in respect of CGUs are allocated fi rst to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
(h) Inventories(h) Inventories
Inventories are stated at the lower of cost and net realisable value. The cost of inventories is based on the fi rst-in-fi rst-out principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. When inventories are consumed, the carrying amount of those inventories is recognised in profi t or loss in the year in which the consumption occurs.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
(i) Non-current assets held for sale(i) Non-current assets held for sale
Non-current assets that are expected to be recovered primarily through sale rather than through continuing use, are classifi ed as held for sale. Immediately before classifi cation as held for sale, the assets are remeasured in accordance with the Group’s accounting policies. Thereafter, the assets are generally measured at the lower of their carrying amount and fair value less costs to sell. Impairment losses on initial classifi cation as held for sale and subsequent gains or losses on remeasurement are recognised in profi t or loss. Gains are not recognised in excess of any cumulative impairment loss.
Plant and equipment once classifi ed as held for sale are not depreciated.
NOTES TO THE FINANCIAL STATEMENTS
Annual Report 2010 | EZION HOLDINGS LIMITED 47
3 Signifi cant accounting policies (cont’d)3 Signifi cant accounting policies (cont’d)
(j) Employee benefi ts(j) Employee benefi ts
(i) Defi ned contribution plans (i) Defi ned contribution plans
A defi ned contribution plan is a post-employment benefi t plan under which an entity pays fi xed contributions into a separate entity and will have no legal or constructive obligations to pay further amounts. Obligations for contributions to defi ned contribution plans are recognised as an employee expense in profi t or loss in the periods during which services are rendered by employees.
(ii) Short-term employee benefi ts (ii) Short-term employee benefi ts
Short-term employee benefi t obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profi t-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
(iii) Share-based payment transactions (iii) Share-based payment transactions
The grant date fair value of share-based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognised as an expense is adjusted to refl ect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to refl ect such conditions and there is no true-up for differences between expected and actual outcomes.
(k) Provisions(k) Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outfl ow of economic benefi ts will be required to settle the obligation. Provisions are determined by discounting the expected future cash fl ows at a pre-tax rate that refl ects current market assessments of the time value of money and the risks specifi c to the liability.
(l) Revenue recognition(l) Revenue recognition
(i) Chartering and offshore support services (i) Chartering and offshore support services
Revenue from chartering and offshore support services relates to chartering of vessels and is recognised in profi t or loss on a straight-line basis over the respective term of the charter, net of trade discounts.
(ii) Rendering of marine services (ii) Rendering of marine services
Revenue from rendering of marine services is recognised when the related services have been rendered.
NOTES TO THE FINANCIAL STATEMENTS
48 EZION HOLDINGS LIMITED | Annual Report 2010
3 Signifi cant accounting policies (cont’d)3 Signifi cant accounting policies (cont’d)
(l) Revenue recognition (cont’d)(l) Revenue recognition (cont’d)
(iii) Sale of goods (iii) Sale of goods
Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognised when the signifi cant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably.
(iv) Management services fees (iv) Management services fees
Management services fees are recognised when the related services are rendered.
(v) Dividend income (v) Dividend income
Dividend income is recognised in profi t or loss when the shareholders’ right to receive payment is established.
(m) Finance income and costs(m) Finance income and costs
Finance income comprises interest income on bank deposits and fi nance leases. Interest income is recognised as it accrues in profi t or loss, using the effective interest method.
Finance costs comprise interest expense on borrowings are recognised in profi t or loss.
Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profi t or loss using the effective interest method.
(n) Government grants – Jobs Credit Scheme(n) Government grants – Jobs Credit Scheme
Cash grants received from the government in relation to the Jobs Credit Scheme are recognised upon receipt. Such grants are provided to defray the wage costs incurred by the Group and are offset against staff costs in the fi nancial statements.
(o) Income tax expense(o) Income tax expense
Income tax expense comprises current and deferred tax. Current tax and deferred tax is recognised in profi t or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable or receivable in respect of previous years.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for fi nancial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:
• temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profi t or loss;
• temporary differences related to investments in subsidiaries and joint ventures to the extent that it is probable that they will not reverse in the foreseeable future; and
• taxable temporary differences arising on the initial recognition of goodwill.
NOTES TO THE FINANCIAL STATEMENTS
Annual Report 2010 | EZION HOLDINGS LIMITED 49
3 Signifi cant accounting policies (cont’d)3 Signifi cant accounting policies (cont’d) (o) Income tax expense (cont’d)(o) Income tax expense (cont’d)
Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profi ts will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefi t will be realised.
(p) Earnings per share(p) Earnings per share
The Group presents basic and diluted earnings per share (“EPS”) data for its ordinary shares. Basic EPS is calculated by dividing the profi t or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year, adjusted for own shares held. Diluted EPS is determined by adjusting the profi t or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise redeemable exchangeable preference shares and share options granted to employees.
(q) Segment reporting(q) Segment reporting
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the Group’s top level management to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete fi nancial information is available.
Segment results that are reported to the top level management include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
Segment capital expenditure is the total cost incurred during the year to acquire plant and equipment.
(r) New standards and interpretations not adopted(r) New standards and interpretations not adopted
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2010, and have not been applied in preparing these fi nancial statements. None of these are expected to have a signifi cant effect on the fi nancial statements of the Group.
NOTES TO THE FINANCIAL STATEMENTS
50 EZION HOLDINGS LIMITED | Annual Report 20104
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Cost
At
1 J
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95
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Tran
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iffe
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At
31
Dec
ember
20
09
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5,5
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posa
ls–
(21
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––
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7)
(21
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–(8
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26
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––
––
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(70
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––
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–(8
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At
31
Dec
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20
10
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13
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At
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32
62
55
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57
At
31
Dec
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20
09
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5,5
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62
12
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66
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32
75
63
81
94
,76
3
NOTES TO THE FINANCIAL STATEMENTS
Annual Report 2010 | EZION HOLDINGS LIMITED 51
4 Plant and equipment (cont’d)4 Plant and equipment (cont’d)
CompanyCompany
Renovation, Renovation, furniture, furniture, fi ttings fi ttings
and offi ce and offi ce equipmentequipment
Motor Motor vehiclesvehicles Total Total
$’000$’000 $’000$’000 $’000$’000
CostCost
At 1 January 2009 391 347 738
Additions 84 113 197
At 31 December 2009 475 460 935
Additions 299 534 833
Disposals – (167) (167)
At 31 December 2010 774 827 1,601
Accumulated depreciation and impairment lossesAccumulated depreciation and impairment losses
At 1 January 2009 66 92 158
Depreciation charge for the year 209 79 288
At 31 December 2009 275 171 446
Depreciation charge for the year 232 112 344
Disposals – (94) (94)
At 31 December 2010 507 189 696
Carrying amountCarrying amount
At 1 January 2009 325 255 580
At 31 December 2009 200 289 489
At 31 December 2010 267 638 905
Impairment loss Impairment loss
During the year ended 31 December 2010, the Group recognised an impairment loss of $3,038,000 (2009: $3,799,000) with respect to certain vessels.
SecuritySecurity
The vessels and rig are pledged to secure the term loan facilities granted by fi nancial institutions (note 17).
The depreciation charge of the Group is recognised in the following line items of profi t or loss:
GroupGroup
20102010 20092009$’000$’000 $’000$’000
Cost of sales 11,441 8,185
Administrative expenses 356 292
11,797 8,477
NOTES TO THE FINANCIAL STATEMENTS
52 EZION HOLDINGS LIMITED | Annual Report 2010
5 Subsidiaries5 Subsidiaries
CompanyCompany20102010 20092009$’000$’000 $’000$’000
Equity investments, at cost 23,685 15,389
Impairment losses (200) (200)
23,485 15,189
Loans to subsidiaries 129,042 125,784
152,527 140,973
The loans to subsidiaries are interest-free, except for amounts of $21,449,000 (2009: $Nil) which bear interest from 5% to 8% per annum. The loans to subsidiaries are unsecured and settlement is neither planned nor likely to occur in the foreseeable future. As the amounts are, in substance, a part of the Company’s net investments in the subsidiaries, they are stated at cost.
Details of the subsidiaries are as follows:
Name of subsidiaryName of subsidiary Principal activitiesPrincipal activitiesCountry of Country of
incorporationincorporationEquity held by Equity held by
the Groupthe Group
20102010 20092009
% %
Teras Transporter Pte Ltd 1 Ship owner and provision of ship chartering services
Singapore 100 100
Teras Transporter 2 Pte Ltd 1 Ship owner and provision of ship chartering services
Singapore 100 100
Teras Centurion Pte Ltd (formerly known as Northern Offshore Pte
Ltd) 1
Shipping agent and provision of ship chartering services, ship management services and engineering works
Singapore 100 100
Teras Offshore Pte Ltd 1 Shipping agent and provision of ship chartering services, ship management services and engineering works
Singapore 100 100
Teras 281 Pte Ltd 1 Ship owner and provision of ship chartering services
Singapore 100 100
Teras 331 Pte Ltd 1 Ship owner and provision of ship chartering services
Singapore 100 100
Teras 335 Pte Ltd 1 Ship owner and provision of ship chartering services
Singapore 100 100
Teras 336 Pte Ltd 1 Ship owner and provision of ship chartering services
Singapore 100 100
Teras 338 Pte Ltd 1 Ship owner and provision of ship chartering services
Singapore 100 100
NOTES TO THE FINANCIAL STATEMENTS
Annual Report 2010 | EZION HOLDINGS LIMITED 53
5 Subsidiaries (cont’d)5 Subsidiaries (cont’d)
Details of the subsidiaries are as follows: (cont’d)
Name of subsidiaryName of subsidiary Principal activitiesPrincipal activitiesCountry of Country of
incorporationincorporationEquity held by Equity held by
the Groupthe Group
20102010 20092009
% %
Teras 339 Pte Ltd 1 Ship owner and provision of ship chartering services
Singapore 100 100
Teras 3652 Pte Ltd 1 Ship owner and provision of ship chartering services
Singapore 100 100
Teras Conquest 1 Pte Ltd (“Teras Conquest 1”) 1, 4
Ship owner and provision of ship chartering services
Singapore 49 100
Teras Conquest 2 Pte Ltd 1 Ship owner and provision of ship chartering services
Singapore 100 100
Teras Conquest 3 Pte Ltd 1 Ship owner and provision of ship chartering services
Singapore 100 100
Teras Conquest 4 Pte Ltd 1 Ship owner and provision of ship chartering services
Singapore 100 100
Teras Conquest 5 Pte Ltd 1 Ship owner and provision of ship chartering services
Singapore 100 –
Teras Atlantic Pte Ltd 1 Ship owner and provision of ship chartering services
Singapore 100 100
Teras Pacifi c Pte Ltd 1 Ship owner and provision of ship chartering services
Singapore 100 100
Teras Progress Pte Ltd 1 Ship owner and provision of ship chartering services
Singapore 100 100
Meridian Maritime Pte Ltd 1 Ship owner and provision of ship chartering services
Singapore 100 100
Teras Wallaby Pte Ltd (formerly known as Teras 250 Pte Ltd) 1
Ship owner and provision of ship chartering services
Singapore 100 100
Teras Pegasus Pte Ltd 1 Ship owner and provision of ship chartering services
Singapore 100 100
Ezion Maritime Pte Ltd 1 Ship owner and provision of ship chartering services
Singapore 100 100
Ezion Investments Pte Ltd 1 Investment holding Singapore 100 100
Ezion Offshore Logistics Hub Pte Ltd 1 and its subsidiaries
Investment holding Singapore 100 –
Ezion Offshore Logistics Hub (Exmouth) Pty Ltd 2
Marine supply base Australia 100 –
NOTES TO THE FINANCIAL STATEMENTS
54 EZION HOLDINGS LIMITED | Annual Report 2010
5 Subsidiaries (cont’d)5 Subsidiaries (cont’d)
Details of the subsidiaries are as follows: (cont’d)
Name of subsidiaryName of subsidiary Principal activitiesPrincipal activitiesCountry of Country of
incorporationincorporationEquity held by Equity held by
the Groupthe Group
20102010 20092009
% %
Ezion Offshore Logistics Hub (Tiwi) Pty Ltd 2
Marine supply base Australia 100 –
Teras Australia Pty Ltd 2 Ship owner and provision of ship chartering services
Australia 100 –
Teras Oilfi eld Support Ltd 2 Rig and other related equipment owner and provision of rig chartering and related services
BritishVirginIslands
100 100
Teras Cargo Logistics Ltd 2 Ship owner, provision of ship chartering services and cargo transportation
BritishVirginIslands
100 100
Teras Harta Maritime Ltd 2 Ship owner and provision of ship chartering services
Bahamas 100 100
Teras Cargo Transport Pte Ltd 5
(“Teras Cargo Transport”) and its subsidiaries:
Cargo transportation Singapore 19.9 100
Teras Seaprojects Pte Ltd 5 Cargo transportation Singapore 19.9 100
Teras America LLC 5 and its subsidiary:
Cargo transportation UnitedStates of America
19.9 100
Teras Cargo Transport (America) LLC 5
Cargo transportation UnitedStates of America
19.9 100
Meridian Maritime Cargo Logistics LLC (“Meridian
Maritime Cargo Logistics”) 3
Cargo transportation UnitedStates of America
– 100
1 Audited by KPMG LLP.
2 Not required to be audited in accordance with the law of the country of incorporation.
3 Meridian Maritime Cargo Logistics was de-registered during the year.
4 During the year, Teras Conquest 1 ceased to be a subsidiary of the Company and became a 49% owned joint venture following the sale of 51% equity interest by the Company.
5 During the year, Teras Cargo Transport ceased to be a subsidiary of the Company and became a 19.9% owned other investment following the sale of 80.1% equity interest by the Company.
NOTES TO THE FINANCIAL STATEMENTS
Annual Report 2010 | EZION HOLDINGS LIMITED 55
6 Joint ventures6 Joint ventures
GroupGroup CompanyCompany20102010 20092009 20102010 20092009$’000$’000 $’000$’000 $’000$’000 $’000$’000
Investment in joint ventures 34,089 3,615 21,515 725
Loans to joint ventures 22,554 6,441 22,554 5,292
56,643 10,056 44,069 6,017
The loans to joint ventures are interest-free, except for amounts of $3,555,000 (2009: $Nil) which bear interest from 6% to 8% per annum. The loans to joint ventures are unsecured and settlement is neither planned nor likely to occur in the foreseeable future. As the amounts are, in substance, a part of the Company’s net investments in the joint ventures, they are stated at cost.
Details of joint ventures are as follows:
Name of joint venturesName of joint venturesCountry ofCountry of
incorporationincorporationEquity held Equity held
by the Groupby the Group
20102010 20092009
% %
Eminent Offshore Logistics Pte Ltd 1, 4 and its subsidiaries: Singapore 50 50
Eminent 237 Pte Ltd 1 Singapore 50 50
Eminent 1 Pte Ltd 1 Singapore 50 50
Eminent 2 Pte Ltd 1 Singapore 50 50
Eminent 3 Pte Ltd 1 Singapore 50 50
Eminent 4 Pte Ltd 1 Singapore 50 50
Eminent 5 Pte Ltd 1 Singapore 50 50
Eminent 6 Pte Ltd 1 Singapore 50 50
Offshore Marine Services Alliance Pty Ltd 2 Australia 33 33
OMSA Ningaui Pte Ltd 1 Singapore 50 50
Teras Conquest 1 Pte Ltd (“Teras Conquest 1”) 1, 5 Singapore 49 100
EG Marine Pte Ltd 1 Singapore 50 –
Teras BBC Houston (BVI) Limited 3 British Virgin Islands
50 –
1 Audited by KPMG LLP.
2 Audited by Deloitte Touche Tohmatsu, Australia.
3 Not required to be audited in accordance with the law of the country of incorporation.
4 A director of the Company has indirect fi nancial interests in the joint venture.
5 During the year, Teras Conquest 1 ceased to be a subsidiary of the Company and became a 49% owned joint venture following the sale of 51% equity interest by the Company.
NOTES TO THE FINANCIAL STATEMENTS
56 EZION HOLDINGS LIMITED | Annual Report 2010
6 Joint ventures (cont’d)6 Joint ventures (cont’d)
The summarised fi nancial information of the joint ventures representing the Group’s share are as follows:
20102010 20092009$’000$’000 $’000$’000
Assets and liabilitiesAssets and liabilities
Current assets 34,430 9,723
Non-current assets 67,067 14,889
Total assets 101,497 24,612
Current liabilities 37,603 10,506
Non-current liabilities 41,806 10,494
Total liabilities 79,409 21,000
ResultsResults
Revenue 75,225 19,908
Expenses (66,403) (17,487)
Profi t after taxation 8,822 2,421
In 2010, the Group receives dividend of $517,000 (2009: $Nil) from its investment in joint venture.
There were no capital commitments and contingent liabilities as at 31 December 2010 and 2009.
7 Other investment7 Other investment
GroupGroup CompanyCompany20102010 20092009 20102010 20092009$’000$’000 $’000$’000 $’000$’000 $’000$’000
Available-for-sale fi nancial asset - equity securities 27 – 27 –
Impairment loss (27) – (27) –
– – – –
8 Other assets8 Other assets
GroupGroup CompanyCompany20102010 20092009 20102010 20092009$’000$’000 $’000$’000 $’000$’000 $’000$’000
Non-currentNon-current
Non-trade amount due from a subsidiary – – 3,448 4,825
Prepayments 169 – – –
Finance lease receivables 5,172 192 – –
5,341 192 3,448 4,825
NOTES TO THE FINANCIAL STATEMENTS
Annual Report 2010 | EZION HOLDINGS LIMITED 57
8 Other assets (cont’d)8 Other assets (cont’d)
GroupGroup CompanyCompany20102010 20092009 20102010 20092009$’000$’000 $’000$’000 $’000$’000 $’000$’000
CurrentCurrent
Advances to suppliers:
- trade 6,392 8,243 – –
- non-trade 27,646 17,492 3 10
Deposits to suppliers 396 146 109 143
Deferred expenditure 43 771 – –
Finance lease receivable 1,756 43 – –
Prepayments 660 422 22 18
Non-trade amounts due from:
- subsidiaries – – 11,092 9,097
- joint ventures 656 1,630 643 397
Interest receivables 68 54 567 54
Other receivables 2,641 – 2,633 –
40,258 28,801 15,069 9,719
Total 45,599 28,993 18,517 14,544
The non-trade amounts due from a subsidiary amounting to $4,433,000 (2009: $5,896,000) are unsecured, interest-free and repayable by 2015 (2009: 2015). The remaining outstanding balances due from subsidiaries are unsecured, interest-free and repayable on demand.
Outstanding balances with joint ventures are unsecured, interest-free and repayable on demand.
There is no allowance for doubtful debts arising from outstanding balances with related parties.
Future minimum lease receipts under fi nance leases together with the present value of the net minimum lease receipts for the Group are as follows:
Total future Total future minimum minimum
lease lease receiptsreceipts
Unearned Unearned interestinterest
Present Present valuevalue
$’000$’000 $’000$’000 $’000$’000
At 31 December 2010At 31 December 2010Within 1 year 2,263 (507) 1,756After 1 year but within 5 years 5,441 (269) 5,172
7,704 (776) 6,928
At 31 December 2009At 31 December 2009Within 1 year 133 (90) 43After 1 year but within 5 years 296 (104) 192
429 (194) 235
The weighted average effective interest rate for fi nance lease receivables is 8.37% (2009: 41.25%) per annum.
NOTES TO THE FINANCIAL STATEMENTS
58 EZION HOLDINGS LIMITED | Annual Report 2010
9 Inventories9 Inventories
Inventories relate to marine equipment held for resale and are stated at cost.
10 Trade receivables 10 Trade receivables
GroupGroup CompanyCompany20102010 20092009 20102010 20092009$’000$’000 $’000$’000 $’000$’000 $’000$’000
Trade receivables – third parties 40,525 25,498 – –
Impairment losses (2,389) (1,562) – –
Net trade receivables – third parties 38,136 23,936 – –
Trade amounts due from:
- affi liates 1,966 400 – –
- joint ventures 6,874 – 197 –
- subsidiaries – – 3,602 4,315
8,840 400 3,799 4,315
Impairment losses – (141) – –
8,840 259 3,799 4,315
Total trade receivables 46,976 24,195 3,799 4,315
An affi liate is a company in which a director of the Company has fi nancial interest or is a director.
Outstanding balances with affi liates, joint ventures and subsidiaries are unsecured, interest-free and repayable on demand.
The Group’s primary exposure to credit risk relating to trade receivables arising mainly from the chartering income by the subsidiaries. These customers are internationally dispersed, and are engaged in a wide spectrum of offshore activities. Management believes that no additional credit risk beyond amounts provided for collection losses is inherent in the Group’s trade receivables.
The maximum exposure to credit risk for trade receivables due from third parties at the reporting date (by type of customer) was:
GroupGroup CompanyCompany20102010 20092009 20102010 20092009$’000$’000 $’000$’000 $’000$’000 $’000$’000
Multi-national companies 20,394 20,935 – –
Small-medium enterprises 17,423 2,976 – –
Government related entities 319 25 – –
38,136 23,936 – –
NOTES TO THE FINANCIAL STATEMENTS
Annual Report 2010 | EZION HOLDINGS LIMITED 59
10 Trade receivables 10 Trade receivables
Impairment losses Impairment losses
The ageing of trade receivables due from third parties at the reporting date was:
GrossGrossImpairment Impairment
losseslosses GrossGrossImpairment Impairment
losseslosses
20102010 20102010 20092009 20092009
$’000$’000 $’000$’000 $’000$’000 $’000$’000
GroupGroup
Not past due or less than 60 days overdue 11,233 – 9,518 (350)
Past due 61 – 120 days 4,450 – 5,819 (176)
Past due more than 120 days 24,842 (2,389) 10,161 (1,036)
40,525 (2,389) 25,498 (1,562)
The change in impairment loss in respect of trade receivables due from third parties during the year was as follows:
GroupGroup20102010 20092009$’000$’000 $’000$’000
At 1 January 1,562 551
Impairment loss 1,476 1,031
Amount reversed (468) –
Translation differences on consolidation (181) (20)
At 31 December 2,389 1,562
Based on historical default rates, the Group believes that no additional impairment allowance is necessary in respect of trade receivables not past due or past due up to 120 days, except for those identifi ed as impaired by the Group. These receivables are mainly arising from customers that have a good record with the Group.
11 Asset classifi ed as held for sale11 Asset classifi ed as held for sale
During the year, the Group entered into Memorandum of Agreement to sell a self-propelled jack-up rig to a third party. Accordingly, the carrying amount of the self-propelled jack-up rig was presented as asset held for sale. The sale has been completed in March 2011.
NOTES TO THE FINANCIAL STATEMENTS
60 EZION HOLDINGS LIMITED | Annual Report 2010
12 Cash and cash equivalents12 Cash and cash equivalents
GroupGroup CompanyCompany20102010 20092009 20102010 20092009$’000$’000 $’000$’000 $’000$’000 $’000$’000
Cash at bank and in hand 78,493 29,284 5,172 1,528
Fixed deposits 19,053 11,000 8,000 11,000
Cash and cash equivalents 97,546 40,284 13,172 12,528
Deposits pledged (9,564) (4,817)
Cash and cash equivalents in the consolidated statement of cash fl ows 87,982 35,467
The interest rates for cash at bank and fi xed deposits for the Group and the Company ranges between 0.06% to 3.80% per annum, receivable from daily to quarterly basis (2009: 0.03% to 0.75% per annum, receivable from daily to quarterly basis).
The deposits were pledged as security to obtain credit facilities (note 17).
13 Share capital13 Share capital
Group and CompanyGroup and Company20102010 20092009
No. of sharesNo. of shares No. of sharesNo. of shares’000’000 $’000$’000 ’000’000 $’000$’000
Fully paid ordinary shares, with no par value:Fully paid ordinary shares, with no par value:
At 1 January 713,978 160,270 643,978 117,926
Shares issued during the year – – 70,000 42,344
At 31 December 713,978 160,270 713,978 160,270
Issuance of ordinary shares Issuance of ordinary shares
On 26 June 2009, the Company issued 70,000,000 shares at $0.62 per share amounting to $42,344,000 (net of transaction costs of $1,056,000). There was no issuance of ordinary shares in 2010. All issued shares are fully paid.
Capital management Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefi ts for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may issue new shares, buy back issued shares, obtain new borrowings or reduce its borrowings.
The Group monitors capital based on gearing ratio. The gearing ratio is calculated as net debt divided by total equity. Net debt is calculated as fi nancial liabilities, less cash and cash equivalents. Total equity includes equity attributable to owners of the Company, redeemable exchangeable preference shares, reserves and retained earnings.
NOTES TO THE FINANCIAL STATEMENTS
Annual Report 2010 | EZION HOLDINGS LIMITED 61
13 Share capital (cont’d)13 Share capital (cont’d)
GroupGroup20102010 20092009$’000$’000 $’000$’000
Financial liabilities 168,569 155,660
Less: Cash and cash equivalents (97,546) (40,284)
Net debt 71,023 115,376
Total equity 271,073 177,563
Gearing ratio (times) 0.26 0.65
There were no changes in the Group’s approach to capital management during the year.
The vessels-owning companies are required to have a minimum share capital of S$50,000 as required by the Maritime and Port Authority of Singapore.
Except for the above, the Company and its subsidiaries are not subject to externally imposed capital requirements.
14 Redeemable exchangeable preference shares14 Redeemable exchangeable preference shares
GroupGroup20102010$’000$’000
Proceeds from issue of redeemable exchangeable preference shares (“REPS”) 53,000
Transaction costs (1,585)
Carrying amount at 31 December 2010 51,415
During the year, 53,000,000 REPS were issued by a subsidiary of the Company at an issue price of $1 per share. All issued shares are fully paid. The main terms and conditions of the agreement are as follows:
(a) The REPS are convertible into certain number of ordinary shares in the share capital of the Company based on the exchange price of $0.6589 (“Exchange Price”). The conversion ratio will be subject to the usual anti-dilution adjustments.
(b) The holders of REPS shall have the right to convert:
(i) the fi rst 35% of their holdings of the REPS into ordinary shares of the Company (“Exchange Shares”) at the Exchange Price at any time beginning from the fi rst anniversary of the date of issuance of REPS (“Issue Date”) and up to the fourth anniversary of the Issue Date (“Maturity Date”);
(ii) the next 35% of their holdings of REPS into Exchange Shares at the Exchange Price at any time beginning from the second anniversary of the Issue Date and up to the Maturity Date; and
(iii) the remaining 30% of their holdings of REPS into Exchange Shares at the Exchange Price from the third anniversary of the Issue Date and up to the Maturity Date.
NOTES TO THE FINANCIAL STATEMENTS
62 EZION HOLDINGS LIMITED | Annual Report 2010
14 Redeemable exchangeable preference shares (cont’d)14 Redeemable exchangeable preference shares (cont’d) (c) Each holder of REPS shall have the right to exchange all of its holdings of REPS into Exchange Shares
upon the occurrence of any of the following events prior to the Maturity Date:
(i) a merger or consolidation of the subsidiary with or into another entity (except a merger or consolidation in which the Company continues to hold at least 50% of the voting power of the capital of the surviving or acquiring entity);
(ii) a change in control in which in excess of 50% of the outstanding voting power of the
subsidiary is transferred; or
(iii) a voluntary liquidation, major corporate restructuring, or sale or disposal of all or substantially all of the assets of the subsidiary.
Such number of Exchange Shares is to be determined in accordance with the exchange formula.
(d) Within 5 business days immediately after the Maturity Date, the subsidiary has the option to redeem such number of REPS not exchanged into Exchange Shares (“Redemption Shares”) at or prior to the Maturity Date at $1.45 for each Redemption Share (“Redemption Price”).
Upon the subsidiary’s exercise of its option to redeem the Redemption Shares, the Company shall unconditionally and irrevocably guarantee the payment of all moneys payable by the subsidiary to the holders of REPS.
In the event that the subsidiary does not exercise its option to redeem in part or in whole the Redemption Shares, such Redemption Shares shall be exchanged as soon as practicable into such number of Exchange Shares to be determined by the redemption exchange formula. The holders of REPS do not have the right to redeem the REPS for cash.
15 Reserves15 Reserves
GroupGroup CompanyCompany20102010 20092009 20102010 20092009$’000$’000 $’000$’000 $’000$’000 $’000$’000
Treasury shares (132) (132) (132) (132)
Foreign currency translation reserve (14,314) (3,115) – –
Statutory reserve (7) (7) (7) (7)
(14,453) (3,254) (139) (139)
Treasury shares Treasury shares
Treasury shares comprise the cost of the Company’s shares held by the Group. At 31 December 2010, the Group held 570,000 (2009: 570,000) of the Company’s shares.
Foreign currency translation reserve Foreign currency translation reserve
The foreign currency translation reserve comprises:
(a) foreign exchange differences arising from the translation of the fi nancial statements of subsidiaries whose functional currencies are different from the functional currency of the Company;
(b) the exchange differences on monetary items which form part of the Group’s net investment in foreign operations, provided certain conditions are met.
NOTES TO THE FINANCIAL STATEMENTS
Annual Report 2010 | EZION HOLDINGS LIMITED 63
15 Reserves15 Reserves
Statutory reserve Statutory reserve
The statutory reserve comprises the difference between the fair value and the cost of treasury shares issued to certain employees pursuant to the Employee Share Plan.
Dividends Dividends
Subject to the approval by the shareholders at the next Annual General Meeting, the directors have proposed a fi nal (one-tier) dividend of 0.1 cents (2009: 0.06 cents) per share, amounting to a net dividend of $713,000 (2009: $428,000) in respect of the fi nancial year ended 31 December 2010 based on the share capital as at that date. The proposed dividend has not been included as a liability in the fi nancial statements.
16 Other payables16 Other payables
GroupGroup CompanyCompany20102010 20092009 20102010 20092009$’000$’000 $’000$’000 $’000$’000 $’000$’000
Non-currentNon-current
Deposits from a supplier 2,583 2,811 – –
CurrentCurrent
Payables to other suppliers 1,835 1,225 – –
Downpayments and advances from customers 15,338 8,274 – 201
Non-trade amounts due to:
- joint ventures 505 – 356 –
- subsidiaries – – 3,620 1,632
Accrued interest payable 130 104 15 20
Accrued expenses 4,763 1,722 4,468 1,647
Employee benefi ts 145 124 145 108
Other payables 4,707 751 952 437
27,423 12,200 9,556 4,045
Total 30,006 15,011 9,556 4,045
Non-trade amounts due to subsidiaries and joint ventures are unsecured, interest-free and repayable on demand.
NOTES TO THE FINANCIAL STATEMENTS
64 EZION HOLDINGS LIMITED | Annual Report 2010
17 Financial liabilities17 Financial liabilities
GroupGroup CompanyCompany20102010 20092009 20102010 20092009$’000$’000 $’000$’000 $’000$’000 $’000$’000
Non-currentNon-current
Secured bank loans 71,283 116,789 3,448 4,824
Unsecured bank loans 2,947 5,898 2,206 3,444
Finance lease liabilities 438 70 438 70
Financial guarantees 2,032 – 15,228 7,981
76,700 122,757 21,320 16,319
CurrentCurrent
Secured bank loans 82,483 30,081 986 1,072
Unsecured bank loans 2,952 2,809 1,238 1,177
Trust receipts 5,808 – 5,808 –
Finance lease liabilities 86 13 86 13
Financial guarantees 540 – 4,409 1,631
91,869 32,903 12,527 3,893
Total fi nancial liabilitiesTotal fi nancial liabilities 168,569 155,660 33,847 20,212
Secured bank loans Secured bank loans
All the bank loans were secured by corporate guarantees from the Company, fi rst legal charge on the Group’s vessels, legal assignment of the rental proceeds from the Group’s vessels, assignment of insurances in respect of vessels in bank’s favour and all monies standing to the credit of the Group’s receiving operating account in respect of the vessels maintained by the Group with the bank.
The corporate guarantee expires when the bank loans are fully settled.
The bank loans are secured on vessels and rig with a carrying amount of $165,069,000 (2009: $111,144,000).
NOTES TO THE FINANCIAL STATEMENTS
Annual Report 2010 | EZION HOLDINGS LIMITED 65
17 Financial liabilities (cont’d)17 Financial liabilities (cont’d)
Terms and debt repayment schedule Terms and debt repayment schedule
Terms and conditions of outstanding loans and borrowings are as follows:
NominalNominal Year ofYear of Carrying amountCarrying amount
interest rateinterest rate maturitymaturity 20102010 20092009
% $’000$’000 $’000$’000
GroupGroup
US$ fl oating rate loans 1.75 - 3.73 2011 - 2015 153,766 146,870
S$ fi xed rate loans 5.00 2012 - 2013 5,899 8,707
US$ trust receipts 1.83 - 2.40 2011 5,808 –
Finance lease liabilities 2.20 - 2.80 2016 - 2017 524 83
165,997 155,660
CompanyCompany
US$ fl oating rate loans 2.23 - 2.83 2015 4,434 5,896
S$ fi xed rate loans 5.00 2013 3,444 4,621
US$ trust receipts 1.83 - 2.40 2011 5,808 –
Finance lease liabilities 2.20 - 2.80 2016 - 2017 524 83
14,210 10,600
Finance lease liabilities Finance lease liabilities
At the reporting dates, the Group and the Company have obligations under fi nance leases that are payable as follows:
2010 2010 2009 2009 PrincipalPrincipal InterestInterest PaymentsPayments PrincipalPrincipal InterestInterest PaymentsPayments
$’000$’000 $’000$’000 $’000$’000 $’000$’000 $’000$’000 $’000$’000
Group and CompanyGroup and Company
Payable:
Within 1 year 86 14 100 13 3 16
After 1 year but within 5 years 344 55 399 52 10 62
After 5 years 94 15 109 18 4 22
Total 524 84 608 83 17 100
NOTES TO THE FINANCIAL STATEMENTS
66 EZION HOLDINGS LIMITED | Annual Report 2010
17 Financial liabilities (cont’d)17 Financial liabilities (cont’d)
Finance lease liabilities (cont’d) Finance lease liabilities (cont’d)
The following are the expected contractual undiscounted cash outfl ows of fi nancial liabilities, including interest payments and excluding the impact of netting agreements:
Carrying Carrying amountamount
Cash fl owsCash fl owsContractual Contractual cash fl owscash fl ows
Within 1 Within 1 yearyear
Within 2 to Within 2 to 5 years5 years
After After 5 years5 years
$’000$’000 $’000$’000 $’000$’000 $’000$’000 $’000$’000
GroupGroup20102010Financial liabilitiesFinancial liabilitiesSecured bank loans 153,766 (159,560) (85,582) (73,978) –Unsecured bank loans 5,899 (6,247) (3,193) (3,054) –Trust receipts 5,808 (5,808) (5,808) – –Finance lease liabilities 524 (608) (100) (400) (108)Trade payables 39,639 (39,639) (39,639) – –Other payables1 14,668 (14,668) (12,085) (2,583) –
220,304 (226,530) (146,407) (80,015) (108)
20092009Financial liabilitiesFinancial liabilitiesSecured bank loans 146,870 (157,253) (34,798) (120,750) (1,705)Unsecured bank loans 8,707 (9,422) (3,185) (6,237) –Finance lease liabilities 83 (100) (16) (62) (22)Trade payables 15,663 (15,663) (15,663) – –Other payables1 6,737 (6,737) (3,926) (2,811) –
178,060 (189,175) (57,588) (129,860) (1,727)
CompanyCompany20102010Financial liabilitiesFinancial liabilitiesSecured bank loans 4,434 (4,693) (1,087) (3,606) –Unsecured bank loans 3,444 (3,698) (1,393) (2,305) –Trust receipts 5,808 (5,808) (5,808) – –Finance lease liabilities 524 (608) (100) (400) (108)Trade payables 5,915 (5,915) (5,915) – –Other payables1 9,556 (9,556) (9,556) – –
29,681 (30,278) (23,859) (6,311) (108)
20092009Financial liabilitiesFinancial liabilitiesSecured bank loans 5,896 (6,340) (1,218) (4,582) (540)Unsecured bank loans 4,621 (5,073) (1,384) (3,689) –Finance lease liabilities 83 (100) (16) (62) (22)Trade payables 19 (19) (19) – –Other payables1 3,844 (3,844) (3,844) – –
14,463 (15,376) (6,481) (8,333) (562)
1 Excludes downpayments and advances from customers
NOTES TO THE FINANCIAL STATEMENTS
Annual Report 2010 | EZION HOLDINGS LIMITED 67
17 Financial liabilities (cont’d)17 Financial liabilities (cont’d)
Finance lease liabilities (cont’d) Finance lease liabilities (cont’d)
Financial guarantees granted by the Group and the Company amounting to $34,310,000 (2009: $Nil) and $221,180,000 (2009: $140,973,000) respectively, were not included in the expected contractual undiscounted cash outfl ows of fi nancial liabilities at the end of the fi nancial year as it was not probable that the counterparties to the fi nancial guarantee contracts will claim under the contracts. These amounts represent the maximum exposure that the Group and the Company could be liable to settle under the fi nancial guarantee contracts within one year, before taking into consideration of sales proceeds arising from the disposal of vessels by the counterparties to the fi nancial guarantee contracts.
18 Trade payables18 Trade payables
GroupGroup CompanyCompany20102010 20092009 20102010 20092009$’000$’000 $’000$’000 $’000$’000 $’000$’000
Trade payables 34,476 13,068 5,915 19
Trade amounts due to:
- joint ventures 3,475 748 – –
- affi liates 1,688 1,847 – –
39,639 15,663 5,915 19
Outstanding balances with joint ventures and affi liates are unsecured, interest-free and repayable on demand.
19 Share-based payments19 Share-based payments
At 31 December 2010, the Group has the following share-based payment arrangements: (a) Director Option and Executive Option Agreements (equity-settled) (a) Director Option and Executive Option Agreements (equity-settled)
On 23 November 2009 (the “Vesting Reference Date”), the Group granted share options to a director and 2 key executives pursuant to the Director Option Agreement and the Executive Option Agreements respectively.
Other information regarding the above share options granted is set out below:
The exercise price of each option is fi xed at $0.45.
The share options shall be exercised, in whole or in part, in accordance with the following schedule:
i. 25% of the share options shall vest 12 months after the grant; and
ii. an additional 25% of the share options shall vest on each anniversary of the Vesting Reference Date thereafter.
All options are settled by physical delivery of shares.
The options granted expire after 5 years or upon cessation of the employment of the director or the 2 key executives.
NOTES TO THE FINANCIAL STATEMENTS
68 EZION HOLDINGS LIMITED | Annual Report 2010
19 Share-based payments (cont’d)19 Share-based payments (cont’d)
(a) Director Option and Executive Option Agreements (equity-settled) (cont’d) (a) Director Option and Executive Option Agreements (equity-settled) (cont’d)
At the end of the fi nancial year, details of the options granted under the Director Option Agreement and the Executive Option Agreements on the unissued ordinary shares of the Company are as follows:
Date ofDate ofgrant ofgrant ofoptionsoptions
ExerciseExercisepriceprice
per shareper share
OptionsOptionsoutstanding outstanding at 1 January at 1 January
20102010Options Options grantedgranted
OptionsOptionsexercisedexercised
OptionsOptionsforfeitedforfeited
OptionsOptionsoutstandingoutstanding
at 31 at 31 December December
2010 2010
NumberNumberof optionof optionholders holders at 31 at 31
December December 20102010
ExerciseExerciseperiodperiod
23/11/2009 $0.45 9,000,000 – – (4,000,000) 5,000,000 2
23/11/2010 to
23/11/2014 On 4 October 2010, a key executive ceased to be an employee of the Group. Accordingly, the share
options granted to him under the Executive Option Agreement had been forfeited.
No options were exercised during the fi nancial year ended 31 December 2010.
Fair value of share options and assumptions
The grant date fair value of share options granted was measured based on the Black-Scholes option-pricing model. Expected volatility is estimated by considering historic average share price volatility. The inputs used in the measurement of the fair values at grant date of the share-based payment plan are as follows:
Tranche ATranche A Tranche BTranche B Tranche CTranche C Tranche DTranche D
Fair value at grant date ($) 0.42 0.52 0.57 0.61
Share price at grant date ($) 0.77 0.77 0.77 0.77
Exercise price ($) 0.45 0.45 0.45 0.45
Expected volatility 95% 109% 107% 107%
Option life 5 years 5 years 5 years 5 years
Expected dividends (cents) 0.15 0.15 0.15 0.15
Risk-free interest rate 0.50% 0.65% 0.82% 1.15%
There are no market conditions associated with the share option grants.
Employee expenses Employee expenses
GroupGroup20102010 20092009$’000$’000 $’000$’000
Total expense recognised as employee costs 1,181 153
NOTES TO THE FINANCIAL STATEMENTS
Annual Report 2010 | EZION HOLDINGS LIMITED 69
19 Share-based payments (cont’d)19 Share-based payments (cont’d)
(b) Ezion Employee Share Option Scheme (equity-settled) (b) Ezion Employee Share Option Scheme (equity-settled)
The Ezion Employee Share Option Scheme (the “Scheme”) was approved and adopted by its members at an Extraordinary General Meeting held on 23 November 2009 and subsequently renewed at the Annual General Meeting on 28 April 2010. The Scheme is administered by the Company’s Remuneration Committee. The Executive Directors and Employees of the Group shall be eligible to participate in the Scheme.
Other information regarding the Scheme is set out below: Option granted on 18 January 2010 (“Grant Date 1”)Option granted on 18 January 2010 (“Grant Date 1”)
The exercise price of each option is fi xed at $0.70.
The share option shall be exercised, in whole or in part, in accordance with the following schedule:
i. 50% of the options shall vest after the end of second anniversary of Grant Date 1; and
ii. the remaining 50% of the options shall vest after the end of third anniversary of Grant Date 1.
All options are settled by physical delivery of shares.
The options granted expire after 10 years or upon cessation of the employment of employees.
The options include 700,000 shares granted to each director, Chew Thiam Keng and Captain Larry Glenn Johnson.
Option granted on 5 May 2010 (“Grant Date 2”)Option granted on 5 May 2010 (“Grant Date 2”)
The exercise price of each option is fi xed at $0.63.
The share option shall be exercised, in whole or in part, in accordance with the following schedule:
i. 32% of the options shall vest after the end of second anniversary of Grant Date 2; and
ii. 34% of the options shall vest after the end of third anniversary of Grant Date 2; and
iii. 34% of the options shall vest after the end of fourth anniversary of Grant Date 2.
All options are settled by physical delivery of shares.
The options granted expire after 10 years or upon cessation of the employment of employees.
At the end of the fi nancial year, details of the options granted under the Scheme on unissued ordinary shares of the Company are as follows:
Date of grant Date of grant of optionsof options
ExerciseExerciseprice per price per
shareshareOptionsOptionsgrantedgranted
OptionsOptionsexercisedexercised
OptionsOptionsforfeitedforfeited
OptionsOptionsoutstandingoutstanding
at 31 at 31 December December
2010 2010
NumberNumberof optionof optionholders holders at 31 at 31
December December 20102010
ExerciseExerciseperiodperiod
18/1/2010 $0.70 3,920,000 – (555,000) 3,365,000 23 18/1/2012 to 17/1/2020
5/5/2010 $0.63 500,000 – – 500,000 1 5/5/2012 to 3/5/2020
4,420,000 – (555,000) 3,865,000 No options were exercisable during the fi nancial year ended 31 December 2010.
NOTES TO THE FINANCIAL STATEMENTS
70 EZION HOLDINGS LIMITED | Annual Report 2010
19 Share-based payments (cont’d)19 Share-based payments (cont’d)
(b) Ezion Employee Share Option Scheme (equity-settled) (b) Ezion Employee Share Option Scheme (equity-settled)
Fair value of share options and assumptions
The grant date fair value of share options granted was measured based on the Black-Scholes option-pricing model formula. Expected volatility is estimated by considering historic average share price volatility. The inputs used in the measurement of the fair values at grant date of the share-based payment plan are as follows:
Option granted on 18 January 2010Option granted on 18 January 2010
Tranche ATranche A Tranche BTranche B
Fair value at grant date ($) 0.47 0.57
Share price at grant date ($) 0.84 0.84
Exercise price ($) 0.70 0.70
Expected volatility 98% 107%
Option life 10 years 10 years
Expected dividends (cents) –* –*
Risk-free interest rate 0.69% 0.80% Option granted on 5 May 2010Option granted on 5 May 2010
Tranche ATranche A Tranche BTranche B Tranche CTranche C
Fair value at grant date ($) 0.30 0.41 0.54
Share price at grant date ($) 0.65 0.65 0.65
Exercise price ($) 0.63 0.63 0.63
Expected volatility 84% 103% 134%
Option life 10 years 10 years 10 years
Expected dividends (cents) –* –* –*
Risk-free interest rate 0.49% 0.61% 0.77%
* - denotes less than 0.01 cents
There are no market conditions associated with the share option grants. Employee expenses Employee expenses
GroupGroup20102010 20092009$’000$’000 $’000$’000
Total expense recognised as employee costs 812 –
NOTES TO THE FINANCIAL STATEMENTS
Annual Report 2010 | EZION HOLDINGS LIMITED 71
19 Share-based payments (cont’d)19 Share-based payments (cont’d)
(c) Share option granted to director of subsidiary (equity-settled) (c) Share option granted to director of subsidiary (equity-settled)
On 22 March 2009, the Company granted an option to a director of a subsidiary to purchase 30% interest in the subsidiary from the Company at cost upon satisfaction of either of the following events:
that within a period of 24 months, the accumulated audited net profi t of the Subsidiary Group exceeds the sum of US$1.5 million; or
that within a period of 36 months, the accumulated audited net profi t of the Subsidiary Group exceeds US$2 million; or
as may be mutually agreed by the Parties.
Fair value of share option and assumptions
The grant date fair value of the option is measured based on the projected net tangible assets of the Subsidiary Group as at the expected vesting date.
Employee expensesEmployee expenses
GroupGroup20102010 20092009$’000$’000 $’000$’000
Total expense recognised as employee costs (184) 184
On 4 October 2010, the director of subsidiary ceased to be an employee of the Group. Accordingly, the share option granted to him had been forfeited.
(d) Employee Share Plan (equity-settled) (d) Employee Share Plan (equity-settled)
The Employee Share Plan (the “Plan”) was approved and adopted by members of the Company at the Extraordinary General Meeting held on 29 April 2008 and subsequently renewed at the Annual General Meeting on 29 April 2009 and 28 April 2010. The Plan is administered by a committee comprising of the directors of the Company. The Executive Directors and Employees of the Group shall be eligible to participate in the Plan.
In 2009, 230,000 treasury shares have been awarded to certain employees pursuant to the Plan. During the year, no treasury shares had been awarded to employees under the Plan.
Employee expenses Employee expenses
GroupGroup20102010 20092009$’000$’000 $’000$’000
Total expense recognised as employee costs – 47
NOTES TO THE FINANCIAL STATEMENTS
72 EZION HOLDINGS LIMITED | Annual Report 2010
20 Revenue20 Revenue
GroupGroup20102010 20092009
$’000$’000 $’000$’000
Chartering and offshore support services 118,044 61,187
Marine services 33,156 12,426
Total revenue 151,200 73,613
21 Profi t before income tax21 Profi t before income tax
The following items have been included in arriving at profi t before income tax:
GroupGroupNoteNote 20102010 20092009
$’000$’000 $’000$’000
Foreign exchange gain (1,395) (489)
Fair value gain on investment in a joint venture (a) (6,606) –
Gain on disposal of plant and equipment (671) (1,283)
Gain on disposal of subsidiaries 25 (6,139) –
Impairment loss on plant and equipment 3,038 3,799
Impairment loss on other investment 27 –
Impairment loss on trade receivables 1,046 1,177
Non-audit fees paid to auditors of the Company 86 94
Operating lease expense 20,782 4,724
Staff costs 10,908 4,362
Contributions to defi ned contribution plans, included in staff costs 309 88
Equity-settled share-based payment transactions, included in staff costs 1,809 384
Staff costs include key management personnel compensation as disclosed in note 28.
During the year, the Group received $15,000 (2009: $61,000) of government grants in relation to the Jobs Credit Scheme which were offset against staff costs.
Note:
(a) During the year, the Group disposed of 51% equity interest in Tera Conquest 1. Accordingly, Teras Conquest 1 ceased to be a wholly owned subsidiary of the Group and became a 49% owned joint venture. The disposal of 51% equity interest resulted in a fair value gain amounting to $6,606,000 as the Group is required to measure its 49% interest in the joint venture at fair value at the date that control is lost (note 3(a)(iii)).
NOTES TO THE FINANCIAL STATEMENTS
Annual Report 2010 | EZION HOLDINGS LIMITED 73
22 Finance income and costs22 Finance income and costs
GroupGroup20102010 20092009$’000$’000 $’000$’000
Finance lease income 215 108
Interest income:
- banks 114 104
- related corporations 175 54
Finance incomeFinance income 504 266
Interest expense on bank loans (3,350) (2,509)
Finance costsFinance costs (3,350) (2,509)
Net fi nance cost recognised in profi t or loss (2,846) (2,243)
23 Income tax expense23 Income tax expense
GroupGroup20102010 20092009$’000$’000 $’000$’000
Current tax expenseCurrent tax expense
Current year 1,054 396
Over provision in respect of prior years (54) (27)
Foreign tax suffered 2,843 595
3,843 964
Reconciliation of effective tax rateReconciliation of effective tax rate
Profi t before income tax 55,756 18,086
Share of results of joint ventures (net of tax) (8,822) (2,421)
Profi t before income tax excluding share of results of joint ventures 46,934 15,665
Tax calculated using Singapore tax rate of 17% (2009: 17%) 7,979 2,663
Effect of different tax rates in other countries (1) (13)
Income not subject to tax (1,692) (2,467)
Net tax exempt income under Section 13A of Income Tax Act (8,601) (1,830)
Expenses not deductible for tax purposes 3,000 1,718
Foreign tax suffered 2,843 595
Over provision in respect of prior years (54) (27)
Unrecognised deferred tax assets during the year 320 368
Others 49 (43)
3,843 964
For the fi nancial year ended 31 December 2010, the effective applicable tax rate is lower than 17% (2009: 17%) as no provision is made for taxation for certain income in view of the exempt profi ts earned by the Group under Section 13A of the Income Tax Act during the year.
NOTES TO THE FINANCIAL STATEMENTS
74 EZION HOLDINGS LIMITED | Annual Report 2010
23 Income tax expense (cont’d)23 Income tax expense (cont’d)
Unrecognised deferred tax liabilities Unrecognised deferred tax liabilities
At 31 December 2010, deferred tax liabilities of $1,139,000 (2009: $1,509,000) for temporary differences of $6,703,000 (2009: $8,878,000) related to investments in subsidiaries were not recognised because the Company controls whether the liability will be incurred and it is satisfi ed that it will not be incurred in the foreseeable future.
Unrecognised deferred tax assets Unrecognised deferred tax assets The Group has unutilised tax losses of approximately $1,883,000 (2009: $2,884,000) that are available for
offset against future taxable profi ts, subject to the agreement of the tax authorities and compliance with relevant provisions of the tax legislation of the respective countries in which the subsidiaries operate.
Deferred tax assets have not been recognised in respect of these items as it is not probable that future taxable profi t will be available against which the Group can utilise the benefi ts.
24 Earnings per share24 Earnings per share
Basic earnings per share Basic earnings per share
The calculation of basic earnings per share at 31 December 2010 was based on the profi t attributable to ordinary shareholders of $51,913,000 (2009: $17,122,000) and a weighted average number of ordinary shares outstanding of 713,408,000 (2009: 679,571,000), calculated as follows:
GroupGroup20102010 20092009$’000$’000 $’000$’000
Profi t attributable to ordinary shareholders 51,913 17,122
Weighted average number of ordinary shares Weighted average number of ordinary shares
20102010 20092009’000’000 ’000’000
Issued ordinary shares at 1 January 713,408 643,178
Effect of new shares issued – 36,247
Effect of issue of own shares repurchased – 146
Weighted average number of ordinary shares at 31 December 713,408 679,571
NOTES TO THE FINANCIAL STATEMENTS
Annual Report 2010 | EZION HOLDINGS LIMITED 75
24 Earnings per share (cont’d)24 Earnings per share (cont’d)
Diluted earnings per share Diluted earnings per share
The calculation of diluted earnings per share at 31 December 2010 was based on the profi t attributable to ordinary shareholders of $51,913,000 (2009: $17,122,000) and a weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares of 719,799,000 (2009: 679,571,000), calculated as follows:
GroupGroup20102010 20092009$’000$’000 $’000$’000
Profi t attributable to ordinary shareholders (diluted) 51,913 17,122
Weighted average number of ordinary shares (diluted) Weighted average number of ordinary shares (diluted)
20102010 20092009’000’000 ’000’000
Issued ordinary shares at 1 January 713,408 643,178
Effect of new shares issued – 36,247
Effect of issue of own shares repurchased – 146
Effect of issue of redeemable exchangeable preference shares 6,391 –
Weighted average number of ordinary shares at 31 December 719,799 679,571
The share options granted under the Director Option Agreement, Executive Option Agreements and Ezion Employee Share Option Scheme were not included in the computation of diluted earnings per share as the share options are anti-dilutive.
25 Disposal of interests in subsidiaries25 Disposal of interests in subsidiaries
During the fi nancial year ended 31 December 2010, the Group disposed of 51% and 80.1% interests in Teras Conquest 1 and Teras Cargo Transport, respectively for a total consideration of $23,361,000.
Effective Effective interest interest
disposeddisposed
%
Teras Conquest 1 51.0
Teras Cargo Transport 80.1
NOTES TO THE FINANCIAL STATEMENTS
76 EZION HOLDINGS LIMITED | Annual Report 2010
25 Disposal of interests in subsidiaries (cont’d)25 Disposal of interests in subsidiaries (cont’d)
The effects of the disposal of interests in the subsidiaries are set out below:
NoteNote 20102010
$’000$’000
Property, plant and equipment 4 86,252
Trade and other receivables 7,323
Cash and cash equivalents 193
Secured bank loan (60,630)
Trade and other payables (3,719)
Net identifi able assets 29,419
Less:
Equity interests retained as:
- joint venture (13,308)
- other investment (27)
Net assets disposed 16,084
Realisation of foreign currency translation reserve 1,138
Gain on disposal 21 6,139
Sale consideration 23,361
Net cash and cash equivalents disposed (193)
Net cash infl ow 23,168
26 Operating segments26 Operating segments
The Group has two reportable segments, as described below, which are the Group’s strategic business units. The strategic business units offer different products and services, and are managed separately because they require different technology and marketing strategies. For each of the strategic business units, the Group’s top level management reviews internal management reports on at least a quarterly basis. The following summary describes the operations in each of the Group’s reportable segments:
(a) Chartering and offshore support services: engaged in vessel and oil and gas related assets chartering; and
(b) Marine services: engaged in procurement of equipment and provision of management and engineering services.
The accounting policies of the reportable segments are the same as described in note 3.
Information regarding the results of each reportable segment is included below. Performance is measured based on segment profi t before income tax, as included in the internal management reports that are reviewed by the Group’s top level management. Segment profi t is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Inter-segment pricing is determined on an arm’s length basis.
NOTES TO THE FINANCIAL STATEMENTS
Annual Report 2010 | EZION HOLDINGS LIMITED 77
26 Operating segments (cont’d)26 Operating segments (cont’d)
Business segments Business segments
CharteringChartering and and
offshore offshore support support servicesservices
Marine Marine servicesservices
Total Total operationsoperations
$’000$’000 $’000$’000 $’000$’000
Year ended 31 December 2010Year ended 31 December 2010
External revenue 118,044 33,156 151,200
Reportable segment results from operating activities 56,199 3,498 59,697
Share of results of joint ventures, net of tax 8,822 – 8,822
Finance income 479 25 504
Finance costs (3,319) (31) (3,350)
Unallocated expenses (9,917)
Profi t before income tax 55,756
Income tax expense (3,843)
Profi t for the year 51,913
Reportable segment assets 428,905 9,184 438,089
Investment in joint ventures 56,643 – 56,643
Unallocated assets 18,251
Total assets 512,983
Reportable segment liabilities 211,065 14,774 225,839
Unallocated liabilities 16,071
Total liabilities 241,910
Capital expenditure 152,934 2,465 155,399
Unallocated capital expenditure 833
Total capital expenditure 156,232
Other material non-cash items:
Depreciation 11,373 80 11,453
Unallocated depreciation 344
Total depreciation 11,797
Gain on disposal of plant and equipment 671 – 671
Gain on disposal of subsidiaries 6,139 – 6,139
Fair value gain on investment in a joint venture 6,606 – 6,606
Impairment loss on plant and equipment 3,038 – 3,038
Impairment loss on other investment 27 – 27
Impairment loss on trade receivables 1,046 – 1,046
NOTES TO THE FINANCIAL STATEMENTS
78 EZION HOLDINGS LIMITED | Annual Report 2010
26 Operating segments (cont’d)26 Operating segments (cont’d)
Business segments Business segments
CharteringChartering and and
offshore offshore support support servicesservices
Marine Marine servicesservices
Total Total operationsoperations
$’000$’000 $’000$’000 $’000$’000
Year ended 31 December 2009Year ended 31 December 2009
External revenue 61,187 12,426 73,613
Reportable segment results from operating activities 17,408 3,577 20,985
Share of results of joint ventures, net of tax 2,421 – 2,421
Finance income 248 18 266
Finance costs (2,509) – (2,509)
Unallocated expenses (3,077)
Profi t before income tax 18,086
Income tax expense (964)
Profi t for the year 17,122
Reportable segment assets 313,348 9,055 322,403
Investment in joint ventures 10,056 – 10,056
Unallocated assets 32,148
Total assets 364,607
Reportable segment liabilities 175,366 2,757 178,123
Unallocated liabilities 8,921
Total liabilities 187,044
Capital expenditure 143,578 – 143,578
Unallocated capital expenditure 197
Total capital expenditure 143,775
Other material non-cash items:
Depreciation 8,189 – 8,189
Unallocated depreciation 288
Total depreciation 8,477
Gain on disposal of plant and equipment 1,283 – 1,283
Impairment loss on plant and equipment 3,799 – 3,799
Impairment loss on trade receivables 1,177 – 1,177
NOTES TO THE FINANCIAL STATEMENTS
Annual Report 2010 | EZION HOLDINGS LIMITED 79
26 Operating segments (cont’d)26 Operating segments (cont’d)
Geographical segments Geographical segments
The businesses of the Group are operated in four principal geographical areas, namely, Singapore, Australia, Far East and ASEAN countries and others. In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets are based on the geographical location of the assets.
SingaporeSingapore AustraliaAustraliaFar East andFar East and
ASEAN countriesASEAN countries Other countriesOther countriesTotalTotal
operationsoperations
20102010 20092009 20102010 20092009 20102010 20092009 20102010 20092009 20102010 20092009
$’000$’000 $’000$’000 $’000$’000 $’000$’000 $’000$’000 $’000$’000 $’000$’000 $’000$’000 $’000$’000 $’000$’000
Revenue fromexternal customers 30,481 14,159 50,609 12,476 42,488 14,830 27,622 32,148 151,200 73,613
Non-current assets 208,663 238,026 22,334 4,348 – – 25,750 27,934 256,747 270,308
Major customers Major customers
During the fi nancial years ended 31 December 2010 and 2009, there are certain customers of the Group’s chartering and offshore support services and marine services segments that individually contributed 10 percent or more of the Group’s revenue. The details of these customers are as follows:
GroupGroup20102010 20092009$’000$’000 $’000$’000
Customer A 40,926 4,959
Customer B 21,494 –
Customer C 18,029 –
Customer D 17,773 –
Customer E 5,802 24,685
Customer F 210 8,605
Total 104,234 38,249
27 Commitments27 Commitments
(a) Capital commitment (a) Capital commitment
GroupGroup20102010 20092009$’000$’000 $’000$’000
Contracted but not provided for 214,654 271,073
NOTES TO THE FINANCIAL STATEMENTS
80 EZION HOLDINGS LIMITED | Annual Report 2010
27 Commitments (cont’d)27 Commitments (cont’d)
(b) Operating lease commitments (as lessee) (b) Operating lease commitments (as lessee)
At the reporting dates, the Group has commitments for future minimum lease payments under non-cancellable operating leases as follows:
GroupGroup20102010 20092009$’000$’000 $’000$’000
Within 1 year 18,586 8,140
After 1 year but within 5 years 16,774 1,999
35,360 10,139 Operating lease payments for the fi nancial year ended 31 December 2010 represent rentals payable
by the Group for its offi ce space and vessel charters. The leases from offi ce rental and vessel charter are for a period ranging from 1 to 4 years from 1 January 2010 to 31 December 2013.
(c) Operating lease income commitments (as lessor) (c) Operating lease income commitments (as lessor)
The Group charters out its vessels. At the reporting dates, the total future minimum lease receivables under non-cancellable operating lease rentals are as follows:
GroupGroup20102010 20092009$’000$’000 $’000$’000
Within 1 year 85,095 76,264
After 1 year but within 5 years 92,746 109,970
177,841 186,234 Operating lease income represents rentals receivable from customer on the Group’s vessels charter.
The lease terms are negotiated on fi xed terms till expiry of the lease.
(d) Finance lease income commitments (as lessor) (d) Finance lease income commitments (as lessor)
At the reporting dates, the total future minimum lease receivables under non-cancellable fi nance lease rentals are as follows:
GroupGroup20102010 20092009$’000$’000 $’000$’000
Within 1 year 507 90
After 1 year but within 5 years 269 104
776 194 Finance lease income represents rentals receivable from customer on the Group’s vessel charter. The
lease term is negotiated on fi xed terms till expiry of the lease.
NOTES TO THE FINANCIAL STATEMENTS
Annual Report 2010 | EZION HOLDINGS LIMITED 81
28 Related parties28 Related parties
For the purposes of these fi nancial statements, parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise signifi cant infl uence over the party in making fi nancial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common signifi cant infl uence. Related parties may be individuals or other entities.
Other than disclosed elsewhere in the fi nancial statements, the transactions with related parties are as follows:
Directors and key management personnel compensationDirectors and key management personnel compensation
The key management personnel compensation is as follows: The key management personnel compensation is as follows:
GroupGroup20102010 20092009$’000$’000 $’000$’000
Short-term employee benefi ts (including directors’ compensation) 3,010 2,101
Share-based payments 1,743 365
Details of options granted to directors under the Scheme are described in note 19. The above amounts are included under staff costs.
The directors’ compensation is as follows: The directors’ compensation is as follows:
GroupGroup20102010 20092009$’000$’000 $’000$’000
Directors’ fees 119 114
Directors’ remuneration 1,470 1,036
Other related party transactionsOther related party transactions
GroupGroup20102010 20092009$’000$’000 $’000$’000
Transactions with affi liatesTransactions with affi liates
Chartering and marine service income received and receivable 22,286 249
Chartering and marine service cost paid and payable 4,692 3,281
Rental expense paid and payable 408 360
Transactions with joint ventures Transactions with joint ventures
Interest income received and receivable 174 54
Chartering and marine service income received and receivable 40,926 6,079
Chartering and marine service cost paid and payable 16,175 774
Management fee income from joint ventures 993 961
Recharge of expenses to a joint venture 397 504
NOTES TO THE FINANCIAL STATEMENTS
82 EZION HOLDINGS LIMITED | Annual Report 2010
29 Accounting estimates and judgements29 Accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The selection of critical accounting policies, the judgements and other uncertainties affecting application of those policies and the sensitivity of reported results to changes in condition and assumptions are factors to be considered when reviewing the fi nancial statements. The accounting policies are set forth in note 3. The Group believes the following critical accounting policies involve the most signifi cant judgements and estimates used in the preparation of the fi nancial statements.
Useful lives and depreciation of vessels and vessel component costsUseful lives and depreciation of vessels and vessel component costs
The cost of the Group’s vessels is depreciated on a straight-line basis over the vessels’ useful lives. Management estimates the economic useful life of the Group’s vessels to be 8 to 25 years based on their age and condition, with a new vessel estimated to have a useful life of a maximum of 25 years. This is a common life expectancy applied in the shipping industry. Changes in the expected level of use of the assets and market factors could impact the economic useful lives of the vessels, therefore future depreciation charges could be revised.
The residual values of the vessels are based on the amount that the vessels are expected to fetch as scrap metal upon decommissioning of the vessels. Metal prices are subject to volatile market conditions over time. Future changes in these prices could impact the estimates of residual value used in calculating depreciation expense.
The Group estimates the useful life of its vessel component costs by reference to the average historical periods between two dry-dockings of vessels of similar age, and expected usage of the vessel until its next dry-docking.
Any changes in the economic useful lives of the vessels and the vessel component costs would impact the depreciation charges and consequently affect the Group’s results.
Impairment of plant and equipmentImpairment of plant and equipment
The Group assesses the impairment of plant and equipment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors considered important that could trigger an impairment review include the following:
Extended periods of idle time;
Inability to contract specifi c assets or groups of assets; and
Signifi cant negative industry or economic trends.
The complexity of the estimation process and issues related to the assumptions, risks and uncertainties inherent in the application of the Group’s accounting estimates in relation to plant and equipment affect the amounts reported in the fi nancial statements, especially the estimates of the expected useful economic lives and the carrying values of those assets. If business conditions were different, or if different assumptions were used in the application of this and other accounting estimates, it is likely that materially different amounts could be reported in the Group’s fi nancial statements.
Management had assessed the recoverable amount of the vessels based on their value in use using cash fl ow forecast or fair value less cost to sell. Based on the cash fl ow forecast, management determined that no impairment to the vessels is considered necessary, other than the impairment loss of $3,038,000 (2009: $3,799,000) recognised on certain vessels (note 4).
NOTES TO THE FINANCIAL STATEMENTS
Annual Report 2010 | EZION HOLDINGS LIMITED 83
29 Accounting estimates and judgements (cont’d)29 Accounting estimates and judgements (cont’d)
Impairment of trade receivablesImpairment of trade receivables
Trade receivables are recorded at the invoiced amount and do not bear interest. The allowance for doubtful receivables is the Group’s best estimate of the amount of probable credit losses in the Group’s existing trade receivables.
Management uses judgement to determine the allowance for doubtful receivables which are supported by historical write-off, credit history of the customers and repayment records. The Group reviews its allowance for doubtful receivables monthly. Balances which are past due for more than 120 days are reviewed individually for collectibility. Accounts balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Actual results could differ from estimates.
30 Financial risk management30 Financial risk management
Overview Overview
Risk management is integral to the whole business of the Group. The Group has a system of controls in place to create an acceptable balance between the cost of risks occurring and the cost of managing the risks. The management continually monitors the Group’s risk management process to ensure that an appropriate balance between risk and control is achieved. Risk management policies and systems are reviewed regularly to refl ect changes in market conditions and the Group’s activities.
The Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.
The Group’s principal fi nancial instruments comprise cash and cash equivalents and bank loans. The main purpose of these fi nancial instruments is to fi nance the Group’s operations. The other fi nancial instruments such as trade and other payables are directly from its operations.
Credit risk Credit risk
The Group’s maximum exposure to credit risk are carrying amounts of amounts due from joint ventures, other assets, trade receivables, and cash and cash equivalents.
The Group has a credit policy in place which establishes credit limits for customers and monitors their balances on an ongoing basis. Therefore, the Group does not expect to incur material credit losses. Cash and cash equivalents are placed with regulated fi nancial institutions. Hence, minimal credit risk exists with respect to these assets.
The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specifi c loss component that relates to individually signifi cant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identifi ed. The collective loss allowance is determined based on historical data of payment statistics for similar fi nancial assets.
The allowance account in respect of trade receivables is used to record impairment losses unless the Group is satisfi ed that no recovery of the amount owing is possible. At that point, the fi nancial asset is considered irrecoverable and the amount charged to the allowance account is written off against the carrying amount of the impaired fi nancial asset.
The Group’s top three (2009: three) most signifi cant customers account for 64% (2009: 78%) of trade receivables due from third parties at 31 December 2010.
NOTES TO THE FINANCIAL STATEMENTS
84 EZION HOLDINGS LIMITED | Annual Report 2010
30 Financial risk management (cont’d)30 Financial risk management (cont’d)
Financial guarantees Financial guarantees
The credit risk represents the loss that would be recognised upon a default by the parties to which the guarantees were given on behalf of. To mitigate these risks, management continually monitors the risks and has established processes including performing credit evaluations of the parties it is providing the guarantee on behalf of. Guarantees are only given to its subsidiaries and joint ventures.
There are no terms and conditions attached to the guarantee contracts that would have a material effect on the amount, timing and uncertainty of the Company’s future cash fl ows.
Financial guarantees provided by the Company to its subsidiaries are eliminated in preparing the consolidated financial statements. Estimates of the Company’s obligations arising from financial guarantee contracts may be affected by future events, which cannot be predicted with any certainty. The assumptions may well vary from actual experience so that the actual liability may vary considerably from the best estimates.
Financial guarantees comprise guarantees granted by the Company to banks in respect of banking facilities amounting to $221,180,000 (2009: $140,973,000).
Liquidity risk Liquidity risk
The Group monitors its liquidity risk and maintains a level of cash and cash equivalents deemed adequate by management to fi nance the Group’s operations and to mitigate the effects of fl uctuations in cash fl ows. Typically the Group ensures that it has suffi cient cash on demand to meet expected operational expenses for a period of 60 days, including the servicing of fi nancial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.
The Group’s funding is obtained from the issue of redeemable exchangeable preference shares, funds generated from operations and bank loans. As at 31 December 2010, the Group has undrawn banking facilities amounting to $99,960,000 (2009: $50,723,000).
Market risk Market risk
Market risk is the risk that changes in market prices, such as interest rates, foreign exchange rates and equity prices will affect the Group’s income or the value of its holdings of fi nancial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.
Interest rate risk Interest rate risk
The Group’s interest rate exposure relates primarily to its long-term debt obligations as they are subject to fl uctuating interest rates that reset according to market rates change. Surplus funds are placed in fi xed deposits accounts with regulated banks that interest rate varies according to market rates.
Sensitivity analysis
For the variable rate fi nancial assets and liabilities, a change of 100 basis point (“bp”) in interest rate at the reporting date would increase/(decrease) profi t or loss by the pre-tax amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.
NOTES TO THE FINANCIAL STATEMENTS
Annual Report 2010 | EZION HOLDINGS LIMITED 85
30 Financial risk management (cont’d)30 Financial risk management (cont’d)
Sensitivity analysis (cont’d)
Profi t or lossProfi t or loss
100 bp100 bp 100 bp100 bp
increaseincrease decreasedecrease
$’000$’000 $’000$’000
GroupGroup31 December 201031 December 2010Interest-bearing loans (1,596) 1,596Fixed deposits 191 (191)
31 December 200931 December 2009Interest-bearing loans (1,469) 1,469Fixed deposits 110 (110)
Foreign currency risk Foreign currency risk
The Group is exposed to currency risk through transactions in foreign currencies and through its investments on foreign operations. The Group’s main operations are denominated in United States (“US”) dollars and the functional currencies of these operations are in US dollars. The currency in which the Group presents its consolidated fi nancial statements is affected by movements in the exchange rates of US dollars against Singapore dollars.
In respect of other monetary assets and liabilities held in currencies other than the functional currencies of respective entities, the Group ensures that the net exposure is kept to an acceptable level by buying currencies at spot rates, where necessary, to address short term imbalances.
Balances are denominated in the following currencies:
Singapore Singapore dollardollar
US US dollardollar
Australian Australian dollardollar OthersOthers TotalTotal
$’000$’000 $’000$’000 $’000$’000 $’000$’000 $’000$’000
GroupGroup31 December 201031 December 2010Loans to joint ventures – 10,036 12,518 – 22,554Trade receivables 129 39,250 6,320 1,277 46,976Other assets 767 44,452 380 – 45,599Cash and cash equivalents 62,391 29,539 5,615 1 97,546Trade and other payables (12,051) (54,932) (2,582) (80) (69,645)Financial liabilities (6,423) (162,146) – – (168,569)
44,813 (93,801) 22,251 1,198 (25,539)
31 December 200931 December 2009Loans to joint ventures – 5,292 1,149 – 6,441Trade receivables 153 23,591 451 – 24,195Other assets 321 27,195 1,477 – 28,993Cash and cash equivalents 14,979 24,390 915 – 40,284Trade and other payables (4,203) (26,321) – (150) (30,674)Financial liabilities (8,790) (146,870) – – (155,660)
2,460 (92,723) 3,992 (150) (86,421)
NOTES TO THE FINANCIAL STATEMENTS
86 EZION HOLDINGS LIMITED | Annual Report 2010
30 Financial risk management (cont’d)30 Financial risk management (cont’d)
Foreign currency risk (cont’d) Foreign currency risk (cont’d)
Singapore Singapore dollardollar
US US dollardollar
Australian Australian dollardollar TotalTotal
$’000$’000 $’000$’000 $’000$’000 $’000$’000
CompanyCompany31 December 201031 December 2010Loans to subsidiaries 126,762 – 2,280 129,042Loans to joint ventures – 10,036 12,518 22,554Trade receivables 3,601 – 198 3,799 Other assets 1,347 17,107 63 18,517Cash and cash equivalents 10,636 2,535 1 13,172Trade and other payables (9,992) (5,356) (123) (15,471)Financial liabilities (3,968) (29,879) – (33,847)
128,386 (5,557) 14,937 137,766
31 December 200931 December 2009Loans to subsidiaries 125,784 – – 125,784Loans to joint ventures – 5,292 – 5,292Trade receivables 2,347 1,968 – 4,315Other assets 8,347 5,896 301 14,544Cash and cash equivalents 12,367 161 – 12,528Trade and other payables (3,625) (439) – (4,064)Financial liabilities (4,704) (15,508) – (20,212)
140,516 (2,630) 301 138,187
Exposure to currency risk - Sensitivity analysis
The following table indicates the approximate change in the Group’s profi t before tax and equity in response to a 10% change in the foreign exchange rates to which the Group has signifi cant exposure at the reporting date. The sensitivity analysis includes balances between group entities where the denomination of the balances is in a currency other than the functional currencies of the lender or the borrower.
A 10% strengthening of Singapore dollar against the following currencies at the reporting date would increase/(decrease) equity and profi t or loss by the pre-tax amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.
GroupGroup CompanyCompanyEquityEquity Profi t or lossProfi t or loss EquityEquity Profi t or lossProfi t or loss$’000$’000 $’000$’000 $’000$’000 $’000$’000
31 December 201031 December 2010Singapore dollar (12,676) (142) – –US dollar – 296 – 556Australian dollar – (1,266) – (1,494)
31 December 200931 December 2009Singapore dollar (12,578) (1,227) – –US dollar – (698) – (698)Australian dollar – (399) – (30)Others – 15 – –
NOTES TO THE FINANCIAL STATEMENTS
Annual Report 2010 | EZION HOLDINGS LIMITED 87
30 Financial risk management (cont’d)30 Financial risk management (cont’d)
Exposure to currency risk - Sensitivity analysis A 10% weakening of Singapore dollar against the above currencies would have had the equal but opposite
effect on the above currencies to the pre-tax amounts shown above, on the basis that all other variables remain constant.
Estimation of fair values Estimation of fair values
The following summarises the signifi cant methods and assumptions used in estimating the fair values of fi nancial instruments of the Group and Company.
Non-derivative financial liabilities
Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash fl ows, discounted at the market rate of interest at the reporting date. For fi nance leases, the market rate of interest is determined by reference to similar lease agreements.
Financial guarantees
The value of fi nancial guarantees provided by the Company to its subsidiaries and joint ventures is determined by reference to the difference in the interest rates, by comparing the actual rates charged by the bank with these guarantees made available, with the estimated rates that the banks would have charged had these guarantees not been available.
Other financial assets and liabilities
The carrying amounts of fi nancial assets and liabilities with a maturity of less than one year (including trade and other receivables, cash and cash equivalents, and trade and other payables) are assumed to approximate their fair values because of the short period to maturity. All other fi nancial assets and liabilities are discounted to determine their fair values.
Carrying amount of fi nancial assets and liabilities Carrying amount of fi nancial assets and liabilities
The following sets out a comparison by category of carrying amounts of all the Group’s and the Company’s fi nancial instruments that are carried in the fi nancial statements.
NoteNote
Loans Loans and and
receivablesreceivables
Liabilities Liabilities atat
amortised amortised costcost
$’000$’000 $’000$’000
GroupGroup
31 December 201031 December 2010
Assets
Other assets1 8 10,732 –
Trade receivables 10 46,976 –
Cash and cash equivalents 12 97,546 –
LiabilitiesLiabilities
Other payables2 16 – (14,668)
Trade payables 18 – (39,639)
Financial liabilities 17 – (168,569)
NOTES TO THE FINANCIAL STATEMENTS
88 EZION HOLDINGS LIMITED | Annual Report 2010
30 Financial risk management (cont’d)30 Financial risk management (cont’d)
Carrying amount of fi nancial assets and liabilities (cont’d) Carrying amount of fi nancial assets and liabilities (cont’d)
NoteNote
Loans Loans and and
receivablesreceivables
Liabilities Liabilities atat
amortised amortised costcost
$’000$’000 $’000$’000
GroupGroup
31 December 200931 December 2009
Assets
Other assets1 8 2,836 –
Trade receivables 10 24,195 –
Cash and cash equivalents 12 40,284 –
LiabilitiesLiabilities
Other payables2 16 – (6,737)
Trade payables 18 – (15,663)
Financial liabilities 17 – (155,660)
CompanyCompany
31 December 201031 December 2010
Assets
Other assets1 8 18,492 –
Trade receivables 10 3,799 –
Cash and cash equivalents 12 13,172 –
LiabilitiesLiabilities
Other payables2 16 – (9,556)
Trade payables 18 – (5,915)
Financial liabilities 17 – (33,847)
31 December 200931 December 2009
Assets
Other assets1 8 14,516 –
Trade receivables 10 4,315 –
Cash and cash equivalents 12 12,528 –
LiabilitiesLiabilities
Other payables2 16 – (3,844)
Trade payables 18 – (19)
Financial liabilities 17 – (20,212)
1 Excludes advances to suppliers and prepayments
2 Excludes downpayments and advances from customers
SHAREHOLDERS' INFORMATIONAs at 14 March 2011
Annual Report 2010 | EZION HOLDINGS LIMITED 89
General Information on Share CapitalGeneral Information on Share Capital
Total no. of issued shares : 713,408,000 (excluding treasury shares)Class of shares : Ordinary shareVoting rights : One vote per share (no vote for treasury shares)Number of treasury shares : 570,000 Percentage of treasury shares : 0.08% based on total number of issued shares excluding treasury shares
DISTRIBUTION OF SHAREHOLDINGS DISTRIBUTION OF SHAREHOLDINGS
Range of ShareholdingsRange of ShareholdingsNo. of No. of
ShareholdersShareholders % No. of SharesNo. of Shares %
1 - 999 3 0.05 356 0.00
1,000 - 10,000 2,784 51.65 19,982,910 2.80
10,001 - 1,000,000 2,566 47.61 120,893,000 16.93
1,000,001 and above 37 0.69 573,101,734 80.27
5,390 100.00 713,978,000 100.00
TOP 20 SHAREHOLDERS TOP 20 SHAREHOLDERS
No. Name of Shareholder No. of Shares % **
1 Chan Fooi Peng 142,000,000 19.90
2 Ezra Holdings Limited 100,000,000 14.02
3 HSBC (Singapore) Nominees Pte Ltd 60,433,500 8.47
4 Citibank Nominees Singapore Pte Ltd 45,846,326 6.43
5 Chew Thiam Keng 30,010,000 4.21
6 DBSN Services Pte Ltd 26,644,165 3.73
7 DBS Nominees Pte Ltd 21,160,733 2.97
8 Nylect Holdings Pte Ltd 15,872,000 2.22
9 Chow Joo Ming 12,000,000 1.68
10 Kim Eng Securities Pte. Ltd. 11,137,000 1.56
11 United Overseas Bank Nominees Pte Ltd 11,115,000 1.56
12 UOB Kay Hian Pte Ltd 9,189,000 1.29
13 DBS Vickers Securities (S) Pte Ltd 8,159,000 1.14
14 Er Choon Huat 7,230,000 1.01
15 Raffl es Nominees (Pte) Ltd 7,205,000 1.01
16 CIMB Securities (S) Pte Ltd 7,077,000 0.99
17 OCBC Securities Private Ltd 6,316,000 0.89
18 Royal Bank Of Canada (Asia) Ltd 6,013,000 0.84
19 Phillip Securities Pte Ltd 5,247,429 0.74
20 Lim & Tan Securities Pte Ltd 5,162,000 0.72
537,817,153 75.38
** The percentage of issued ordinary shares is calculated based on the number of issued ordinary shares of the Company as at 14 March 2011, excluding 570,000 ordinary shares held as treasury shares as at that date.
SHAREHOLDERS' INFORMATIONAs at 14 March 2011
90 EZION HOLDINGS LIMITED | Annual Report 2010
SUBSTANTIAL SHAREHOLDERSSUBSTANTIAL SHAREHOLDERS
As per Register of Substantial Shareholders:
Direct InterestDirect Interest % % 5 Deemed InterestDeemed Interest % % 5
Chan Fooi Peng 1 142,000,000 19.90 30,010,000 4.21
Ezra Holdings Limited 100,000,000 14.02 – –
Chew Thiam Keng 2 30,010,000 4.21 142,000,000 19.90
Lee Kian Soo 3 – – 100,000,000 14.02
Lee Chye Tek Lionel 4 – – 100,000,000 14.02
Notes:
1. By virtue of shares held directly by Madam Chan Fooi Peng’s spouse, Mr Chew Thiam Keng, she is deemed to be interested in the shares of the Company held by Mr Chew Thiam Keng.
2. By virtue of shares held directly by Mr Chew Thiam Keng’s spouse, Madam Chan Fooi Peng, he is deemed to be interested in the shares of the Company held by Madam Chan Fooi Peng.
3. By virtue of Mr Lee Kian Soo’s shareholding in Ezra Holdings Limited, he is deemed to be interested in the shares of the Company held by Ezra Holdings Limited.
4. By virtue of Mr Lee Chye Tek Lionel’s shareholding in Ezra Holdings Limited, he is deemed to be interested in the shares of the Company held by Ezra Holdings Limited.
5. The percentage of shareholdings is computed based on the issued and paid up share capital of the Company comprising 713,408,000 shares (excluding treasure shares) as at 14 March 2011
PERCENTAGE OF SHAREHOLDING HELD IN PUBLIC’S HANDS
Based on information made available to the Company as at 14 March 2011, approximately 61.66% of the Company’s shares (excluding treasury shares) was held in the hands of the public, and accordingly, Rule 723 of the SGX-ST Listing Manual is complied with.
NOTICE OF ANNUAL GENERAL MEETING
Annual Report 2010 | EZION HOLDINGS LIMITED 91
NOTICE IS HEREBY GIVEN that the Annual General Meeting of Ezion Holdings Limited (“the Company”) will be held at No. 87 Science Park Drive, Science Hub, Portsdown Room Level 1, Singapore Science Park I, Singapore 118260 on Thursday, 28 April 2011 at 10.00 a.m. for the following purposes:
AS ORDINARY BUSINESSAS ORDINARY BUSINESS
1. To receive and adopt the Directors’ Report and the Audited Accounts of the Company for the year ended 31 December 2010 together with the Auditors’ Report thereon. (Resolution 1)(Resolution 1)
2. To declare a fi rst and fi nal dividend of 0.1 cents per share tax exempt (one-tier) for the year ended 31
December 2010. (Resolution 2)(Resolution 2)
3. To re-elect the following Directors of the Company retiring pursuant to Article 107 of the Articles of Association of the Company:
Mr Lee Kian Soo (Resolution 3)(Resolution 3) Capt. Larry Glenn Johnson (Resolution 4)(Resolution 4)
4. To approve the payment of Directors’ fees of S$119,000 for the year ended 31 December 2010. (Resolution 5)(Resolution 5)
5. To re-appoint KPMG LLP as the Auditors of the Company and to authorise the Directors of the Company to fi x their remuneration. (Resolution 6)(Resolution 6)
AS SPECIAL BUSINESSAS SPECIAL BUSINESS
To consider and if thought fi t, to pass the following resolutions as Ordinary Resolutions, with or without any modifi cations: 6. Authority to issue shares in the capital of the Company Authority to issue shares in the capital of the Company
That pursuant to Section 161 of the Companies Act, Cap. 50 and Rule 806 of the Listing Manual of the Singapore Exchange Securities Trading Limited (“SGX-ST”), the Directors of the Company be hereby authorised and empowered to:
(a) (i) issue shares in the Company (“sharesshares”) whether by way of rights, bonus or otherwise; and/or
(ii) make or grant offers, agreements or options (collectively, “InstrumentsInstruments”) that might or would require shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) options, warrants, debentures or other instruments convertible into shares,
at any time and upon such terms and conditions and for such purposes and to such persons as the Directors of the Company may in their absolute discretion deem fi t; and
(b) (notwithstanding the authority conferred by this Resolution may have ceased to be in force) issue shares in pursuance of any Instruments made or granted by the Directors of the Company while this Resolution was in force,
provided that:
(1) the aggregate number of shares to be issued pursuant to this Resolution (including shares to be issued in pursuance of the Instruments, made or granted pursuant to this Resolution) shall not exceed fi fty per centum (50%) of the total number of issued shares (excluding treasury shares) in the capital of the Company (as calculated in accordance with sub-paragraph (2) below), of which the aggregate number of shares to be issued other than on a pro rata basis to existing shareholders of the Company shall not exceed twenty per centum (20%) of the total number of issued shares (excluding treasury shares) in the capital of the Company (as calculated in accordance with sub-paragraph (2) below);
NOTICE OF ANNUAL GENERAL MEETING
92 EZION HOLDINGS LIMITED | Annual Report 2010
(2) (subject to such calculation as may be prescribed by the SGX-ST) for the purpose of determining the aggregate number of shares that may be issued under sub-paragraph (1) above, the total number of issued shares (excluding treasury shares) shall be based on the total number of issued shares (excluding treasury shares) in the capital of the Company at the time of the passing of this Resolution, after adjusting for:
(a) new shares arising from the conversion or exercise of any convertible securities;
(b) new shares arising from exercising share options or vesting of share awards which are outstanding or subsisting at the time of the passing of this Resolution, provided the options or awards were granted in compliance with Part VIII of Chapter 8 of the Listing Manual; and
(c) any subsequent bonus issue, consolidation or subdivision of shares;
(3) in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the Listing Manual of the SGX-ST for the time being in force (unless such compliance has been waived by the SGX-ST) and the Articles of Association of the Company; and
(4) unless revoked or varied by the Company in a general meeting, such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier.
(See Explanatory Note (i)) (Resolution 7)(Resolution 7) 7. Authority to issue shares under the Ezion Employee Share PlanAuthority to issue shares under the Ezion Employee Share Plan
That the Directors of the Company be hereby authorised to offer and grant awards (“AwardsAwards”) in accordance with the provisions of the Ezion Employee Share Plan (the “PlanPlan”) and to allot and issue or deliver from time to time such number of fully-paid shares as may be required to be issued or delivered pursuant to the vesting of the Awards under the Plan, provided that:-
(i) the aggregate number of shares to be issued pursuant to the Plan shall not exceed three point-fi ve per cent (3.5%) of the total issued share capital of the Company as at 31 March 2008; and
(ii) the aggregate number of shares to be issued pursuant to the Plan, when added to the number of shares issued and issuable in respect of such Awards and other shares issued and/or issuable under other share-based incentive schemes of the Company, shall not exceed fi fteen per cent (15%) of the total number of the issued shares (excluding treasury shares) in the capital of the Company from time to time and that such authority shall, unless revoked or varied by the Company in a general meeting, continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier.
(See Explanatory Note (ii)) (Resolution 8)(Resolution 8)
8. Authority to issue shares under the Ezion Employee Share Option SchemeAuthority to issue shares under the Ezion Employee Share Option Scheme
That the Directors of the Company be hereby authorised and empowered to offer and grant options in accordance with the rules of the Ezion Employee Share Option Scheme (“the Scheme Scheme”) and to issue from time to time such number of shares in the capital of the Company as may be required to be issued pursuant to the exercise of options granted by the Company under the Scheme, whether granted during the subsistence of this authority or otherwise, provided always that the aggregate number of additional ordinary shares to be issued pursuant to the Scheme, when added to the number of shares issued and issuable in respect of such Scheme and other shares issued and/or issuable under other share-based incentive schemes of the Company, shall not exceed fi fteen per centum (15%) of the total number of issued shares (excluding treasury shares) in the capital of the Company from time to time and that such authority shall, unless revoked or varied by the Company in a general meeting, continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier.
(See Explanatory Note (iii)) (Resolution 9)(Resolution 9)
NOTICE OF ANNUAL GENERAL MEETING
Annual Report 2010 | EZION HOLDINGS LIMITED 93
9. Renewal of Shareholders’ Mandate for Interested Person TransactionsRenewal of Shareholders’ Mandate for Interested Person Transactions
That for the purposes of Chapter 9 of the Listing Manual:-
(a) the shareholders’ mandate for the Company, its subsidiaries and associated companies (the “GroupGroup”) or any of them to enter into any of the transactions falling within the types or categories of interested person transactions as described in the appendix to this Notice (the “AppendixAppendix”) with Ezra Holdings Limited, its subsidiaries and associated companies be and is hereby approved, provided that such transactions are entered into on an arm’s length basis, on normal commercial terms and in accordance with the guidelines for interested person transactions as set out in the Appendix;
(b) the aforesaid shareholders’ mandate shall, unless earlier revoked or varied by the Company in general meeting, continue in force until the next Annual General Meeting of the Company or the date by which such Annual General Meeting is required by law to be held; and
(a) the Directors of the Company and/or any of them be and are hereby authorised to complete and do all such acts and things (including, without limitation, executing all such documents and approving any amendment, alteration or modifi cation to any document) as they may consider desirable, expedient or necessary or in the interests of the Company to give effect to the aforesaid shareholders’ mandate and/or this Resolution.
(See Explanatory Note (iv)) (Resolution 10)(Resolution 10)
10. Renewal of Share Buyback MandateRenewal of Share Buyback Mandate
That:
(a) for the purposes of the Listing Manual, and pursuant to Article 52 of the Company’s Articles of Association, the Directors of the Company be hereby authorised to exercise all the powers of the Company to purchase or otherwise acquire the issued ordinary shares fully paid in the capital of the Company not exceeding in aggregate the Prescribed Limit (as hereafter defi ned) during the Relevant Period (as hereafter defi ned), at such price(s) as may be determined by the Directors of the Company from time to time up to the Maximum Price (as hereafter defi ned), whether by way of:
(i) on-market purchase(s) (“Market Purchase(s)Market Purchase(s)”), transacted on SGX-ST through Quest-ST, the trading system of the SGX-ST which replaced the Central Limit Order Book (CLOB) trading system as of 7 July 2008 or, as the case may be, any other stock exchange on which the shares may for the time being be listed and quoted, through one or more duly licensed stockbrokers appointed by the Company for the purpose; and/or
(ii) off-market purchase(s) (“Off-Market Purchase(s)Off-Market Purchase(s)”) (if effected otherwise than on the SGX-ST) in accordance with any equal access scheme(s) as may be determined or formulated by the Directors as they may consider fi t, which scheme(s) shall satisfy all the conditions prescribed by the Companies Act and the Listing Manual;
(b) unless varied or revoked by the Company in general meeting, the authority conferred on the Directors of the Company pursuant to the Share Buyback Mandate may be exercised by the Directors at any time and from time to time during the period commencing from the passing of this Resolution and expiring on the earlier of:
(i) the conclusion of the next Annual General Meeting of the Company or the date by which such
Annual General Meeting is required by law to be held;
(ii) the date on which the purchases or acquisitions of shares by the Company pursuant to the Share Buyback Mandate are carried out to the full extent mandated; or
(iii) the date on which the authority contained in the Share Buyback Mandate is varied or revoked by ordinary resolution of the Company in general meeting;
NOTICE OF ANNUAL GENERAL MEETING
94 EZION HOLDINGS LIMITED | Annual Report 2010
(c) in this Resolution:
“Prescribed LimitPrescribed Limit” means that number of issued shares representing 10% of the issued ordinary share capital of the Company as at the date of passing of this Resolution unless the Company has effected a reduction of its share capital in accordance with the applicable provisions of the Companies Act, at any time during the Relevant Period or within any one fi nancial year of the Company, whichever is the earlier, in which event the issued ordinary share capital of the Company shall be taken to be the amount of the issued ordinary share capital of the Company as altered;
“Relevant PeriodRelevant Period” means the period commencing from the date on which the Annual General Meeting is held and expiring on the date the next Annual General Meeting is held or is required by law to be held, whichever is the earlier; and
“Maximum PriceMaximum Price” in relation to a share to be purchased, means an amount (excluding brokerage, stamp duties, applicable goods and services tax and other related expenses) not exceeding:
(i) in the case of a Market Purchase: 105% of the Average Closing Price;
(ii) in the case of an Off-Market Purchase: 120% of the Highest Last Dealt Price, where:
“Average Closing PriceAverage Closing Price” means the average of the closing market prices of a share over the last fi ve market days, on which transactions in the shares were recorded, immediately preceding the day of the Market Purchase, and deemed to be adjusted for any corporate action that occurs after the relevant fi ve market-days period;
“Highest Last Dealt PriceHighest Last Dealt Price” means the highest price transacted for a share as recorded on the market day on which there were trades in the shares immediately preceding the day of the making of the offer pursuant to the Off-Market Purchase; and
“day of the making of the offerday of the making of the offer” means the day on which the Company announces its intention to make an offer for the purchase of shares from shareholders of the Company stating the purchase price (which shall not be more than the Maximum Price calculated on the foregoing basis) for each share and the relevant terms of the equal access scheme for effecting the Off-Market Purchase; and
(d) the Directors of the Company be and are hereby authorised to complete and do all such acts and things (including executing such documents as may be required) as they may consider expedient or necessary to give effect to the transactions contemplated by this Resolution.
(See Explanatory Note (v)) (Resolution 11)(Resolution 11)
11. To transact any other ordinary business which may properly be transacted at an Annual General Meeting.
By Order of the Board
Lim Ka BeeSecretarySingapore, 12 April 2011
NOTICE OF ANNUAL GENERAL MEETING
Annual Report 2010 | EZION HOLDINGS LIMITED 95
Explanatory Notes:Explanatory Notes:
(i) Ordinary Resolution 7 in item 6 above, if passed, will empower the Directors of the Company, effective until the conclusion of the next Annual General Meeting of the Company, or the date by which the next Annual General Meeting of the Company is required by law to be held or such authority is varied or revoked by the Company in a general meeting, whichever is the earlier, to issue shares, make or grant Instruments convertible into shares and to issue shares pursuant to such Instruments, up to a number not exceeding, in total, 50% of the total number of issued shares (excluding treasury shares) in the capital of the Company, of which up to 20% may be issued other than on a pro-rata basis to shareholders.
For determining the aggregate number of shares that may be issued, the total number of issued shares (excluding treasury shares) will be calculated based on the total number of issued shares (excluding treasury shares) in the capital of the Company at the time this Ordinary Resolution is passed after adjusting for new shares arising from the conversion or exercise of any convertible securities or share options or vesting of share awards which are outstanding or subsisting at the time when this Ordinary Resolution is passed and any subsequent bonus issue, consolidation or subdivision of shares.
(ii) Resolution 8 is to authorise the Directors to offer and grant Awards under the Plan and to allot and issue shares pursuant to the vesting of Awards under the Plan, provided that the number of shares issued and issuable in respect of such Awards:-
(a) shall not exceed three point-fi ve per cent (3.5%) of the total issued share capital of the Company as at 31 March 2008; and
(b) the aggregate number of shares to be issued pursuant to the Plan, when added to the number of shares issued and issuable in respect of such Awards and other shares issued and/or issuable under other share-based incentive schemes of the Company, shall not exceed fi fteen per cent (15%) of the issued shares of the Company from time to time.
Based on the issued share capital of the Company as at 31 March 2008, the total number of shares, which may be issued or issuable in respect of such Awards, is 22,539,230 shares.
(iii) Resolution 9, if passed, will empower the Directors of the Company, effective until the conclusion of the next Annual General Meeting of the Company, or the date by which the next Annual General Meeting of the Company is required by law to be held or such authority is varied or revoked by the Company in a general meeting, whichever is the earlier, to issue shares in the Company pursuant to the exercise of options granted or to be granted under the Scheme up to a number not exceeding in aggregate, when added to the number of shares issued and issuable in respect of such Awards and other shares issued and/or issuable under other share-based incentive schemes of the Company, fi fteen per centum (15%) of the total number of issued shares (excluding treasury shares) in the capital of the Company from time to time.
(iv) Resolution 10, if passed, will authorise the Group to enter into interested person transactions with certain interested persons of the Group. The interested persons transaction mandate shall, unless revoked or varied by the Company in general meeting, continue in force until the next Annual General Meeting of the Company. Further details on the interested person transactions and interested persons referred to herein are set out in the Appendix, which is enclosed with this Notice.
(v) Resolution 11 is to renew the mandate to permit the Company to purchase or acquire issued ordinary shares in the capital of the Company on the terms and subject to the conditions of the Resolution. The actual amount of funding required for the Company to purchase or acquire its ordinary shares, and the impact on the Company’s fi nancial position, cannot be ascertained as at the date of this Notice as these will depend on the number of ordinary shares purchased or acquired and the price at which such ordinary shares were purchased or acquired.
The illustrative fi nancial effects of the purchase or acquisition of such ordinary shares by the Company pursuant to the proposed Share Buyback Mandate on the audited fi nancial accounts of the Group and the Company for the fi nancial year ended 31 December 2010 are set out in greater detail in the Appendix, which is enclosed together with this Notice.
Notes:Notes:
1. A Member entitled to attend and vote at the Annual General Meeting (the “Meeting”) is entitled to appoint not more than two proxies to attend and vote in his/her stead. A proxy need not be a Member of the Company.
2. The instrument appointing a proxy must be deposited at the Registered Offi ce of the Company at 15 Hoe Chiang Road, #12-05 Tower Fifteen Singapore 089316 not less than forty-eight (48) hours before the time appointed for holding the Meeting.
NOTICE OF BOOKS CLOSURE
96 EZION HOLDINGS LIMITED | Annual Report 2010
NOTICE IS HEREBY GIVEN that the Share Transfer Books and Register of Members Of Ezion Holdings Limited (the “Company”) will be closed on 9 May 2011 for the preparation of dividend warrants of a fi rst and fi nal dividend of 0.1 cents per share tax exempt (one-tier) (the “Final Dividend”).
Duly completed registrable transfers in respect of ordinary shares in the capital of the Company together with all relevant documents of title received by the Company’s Share Registrar, M&C Services Private Limited, 138 Robinson Road #17-00 The Corporate Offi ce, Singapore 068906 up to the close of business at 5.00 p.m. on 6 May 2011 will be registered to determine shareholders’ entitlements to the Final Dividend, subject to the approval of the shareholders of the Company to the Final Dividend at the Annual General Meeting to be held on 28 April 2011.
Subject as aforesaid, shareholders whose Securities Accounts with The Central Depository (Pte) Limited are credited with ordinary shares in the capital of the Company as at 5.00 p.m. on 6 May 2011 will be entitled to the Final Dividend.
Payment of the Final Dividend, if approved by the members at the Annual General Meeting to be held on 28 April 2011 will be made on 19 May 2011.
By Order of the Board
Lim Ka BeeSecretarySingapore, 12 April 2011
EZION HOLDINGS LIMITEDEZION HOLDINGS LIMITED(Company Registration No. 199904364E) (Incorporated in the Republic of Singapore)
PROXY FORMPROXY FORM(Please see notes overleaf before completing this Form)
I/We,
of
being a member/members of Ezion Holdings Limited (the “Company”), hereby appoint:
NameName NRIC/Passport No.NRIC/Passport No. Proportion of ShareholdingsProportion of Shareholdings
No. of SharesNo. of Shares %
AddressAddress
and/or (delete as appropriate)
NameName NRIC/Passport No.NRIC/Passport No. Proportion of ShareholdingsProportion of Shareholdings
No. of SharesNo. of Shares %
AddressAddress
or failing the person, or either or both of the persons, referred to above, the Chairman of the Meeting as my/our proxy/proxies to vote for me/us on my/our behalf at the Annual General Meeting (the “Meeting”) of the Company to be held at No. 87 Science Park Drive, Science Hub, Portsdown Room Level 1, Singapore Science Park I, Singapore 118260 on Thursday, 28 April 2011 at 10.00 a.m. and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the Resolutions proposed at the Meeting as indicated hereunder. If no specifi c direction as to voting is given or in the event of any other matter arising at the Meeting and at any adjournment thereof, the proxy/proxies will vote or abstain from voting at his/her discretion. The authority herein includes the right to demand or to join in demanding a poll and to vote on a poll.
(Please indicate your vote “For” or “Against” with a tick [(Please indicate your vote “For” or “Against” with a tick [√] within the box provided.)√] within the box provided.)
No.No. Resolutions relating to:Resolutions relating to: For For AgainstAgainst
1 Directors’ Report and Audited Accounts for the year ended 31 December 2010
2 Payment of fi rst & fi nal dividend
3 Re-election of Mr Lee Kian Soo as a Director
4 Re-election of Capt. Larry Glenn Johnson as a Director
5 Approval of Directors’ fees amounting to S$119,000.00
6 Re-appointment of KPMG LLP as Auditors
7 Authority to issue new shares
8 Authority to issue shares under the Ezion Employee Share Plan
9 Authority to issue shares under the Ezion Employee Share Option Scheme
10 Renewal of Shareholders’ Mandate for Interested Person Transactions
11 Renewal of Share Buyback Mandate
Dated this day of 2011
Signature of Shareholder(s) or, Common Seal of Corporate Shareholder *Delete where inapplicable
IMPORTANT:IMPORTANT:
1. For investors who have used their CPF monies to buy Ezion Holdings Limited’s shares, this Report is forwarded to them at the request of the CPF Approved Nominees and is sent solely FOR INFORMATION ONLY.
2. This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them.
3. CPF investors who wish to attend the Meeting as an observer must submit their requests through their CPF Approved Nominees within the time frame specifi ed. If they also wish to vote, they must submit their voting instructions to the CPF Approved Nominees within the time frame specifi ed to enable them to vote on their behalf.
Total number of Shares in: No. of Shares
(a) CDP Register
(b) Register of Members
Notes :Notes :
1. Please insert the total number of Shares held by you. If you have Shares entered against your name in the Depository Register (as defi ned in Section 130A of the Companies Act, Chapter 50 of Singapore), you should insert that number of Shares. If you have Shares registered in your name in the Register of Members, you should insert that number of Shares. If you have Shares entered against your name in the Depository Register and Shares registered in your name in the Register of Members, you should insert the aggregate number of Shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing 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 two proxies 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 specifi es the proportion of his/her shareholding (expressed as a percentage of the whole) to be represented by each proxy.
4. Completion and return of this instrument appointing a proxy shall not preclude a member from attending and voting at the Meeting. Any appointment of a proxy or proxies shall be deemed to be revoked if a member attends the meeting in person, and in such event, the Company reserves the right to refuse to admit any person or persons appointed under the instrument of proxy to the Meeting.
2nd fold
The Company Secretary
EZION HOLDINGS LIMITEDEZION HOLDINGS LIMITED15 Hoe Chiang Road
Tower Fifteen#12-05
Singapore 089316
1st fold
5. The instrument appointing a proxy or proxies must be deposited at the registered offi ce of the Company at 15 Hoe Chiang Road, #12-05 Tower Fifteen Singapore 089316 not less than forty-eight (48) hours before the time appointed for the Meeting.
6. The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of an offi cer or attorney duly authorised. Where the instrument appointing a proxy or proxies is executed by an attorney on behalf of the appointor, the letter or power of attorney or a duly certifi ed copy thereof must be lodged with the instrument.
7. A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks fi t to act as its representative at the Meeting, in accordance with Section 179 of the Companies Act, Chapter 50 of Singapore.
General:General:
The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible, or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specifi ed in the instrument appointing a proxy or proxies. In addition, in the case of Shares entered in the Depository 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 certifi ed by The Central Depository (Pte) Limited to the Company.
AFFIX POSTAGE
STAMP
15 Hoe Chiang Road
Tower Fifteen, #12-05
Singapore 089316
Tel: (65) 6309 0555
Fax: (65) 6222 7848
Email: [email protected]
Ezion Holdings LimitedCo. Reg. No.: 199904364E
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