licences and certificationshuationg.listedcompany.com/newsroom/huationg_offer... · 2014-12-03 ·...

should make the decision to invest only after careful consideration and, if appropriate, consultation with your professional adviser(s).

Neither the Authority nor the SGX-ST has examined or approved the contents of this Offer Document. Neither the Authority nor the SGX-ST assumes any responsibility for the contents of this Offer Document, including the correctness of any of the statements or opinions made or reports contained in this Offer Document. The SGX-ST does not normally review the application for admission to Catalist but relies on the Sponsor confirming that the Company is suitable to be listed and complies with the Rules of Catalist (as defined herein). Neither the Authority nor the SGX-ST has in any way considered the merits of the Shares being offered for investment.

We have not lodged this Offer Document in any other jurisdiction.

Investing in our Shares involves risks which are described in the section titled “RISK FACTORS” of this Offer Document.

After the expiration of six months from the date of registration of this Offer Document, no person shall make an offer of our Shares, or allot, issue or sell any of our Shares, on the basis of this Offer Document; and no officer or equivalent person or promoter of our Company will authorise or permit the offer of any of our Shares or the allotment, issue or sale of any of our Shares, on the basis of this Offer Document.

Issue Manager, Sponsor and Placement Agent

PRIMEPARTNERS CORPORATE FINANCE PTE. LTD.(Company Registration No.: 200207389D)(Incorporated in the Republic of Singapore)

Sub-Placement Agent

UOB KAY HIAN PRIVATE LIMITED(Company Registration No.: 197000447W)(Incorporated in the Republic of Singapore)

OFFER DOCUMENT DATED 1 DECEMBER 2014

(Registered by the Singapore Exchange Securities Trading Limited (the “SGX-ST”), acting as agent on behalf of the Monetary Authority of Singapore (the “Authority”) on 1 December 2014)

This document is important. If you are in any doubt as to the action you should take, you should consult your legal, financial, tax or other professional adviser(s).

THIS OFFER IS MADE IN OR ACCOMPANIED BY THIS OFFER DOCUMENT (THE “OFFER DOCUMENT”) THAT HAS BEEN REGISTERED BY THE SGX-ST, ACTING AS AGENT ON BEHALF OF THE AUTHORITY ON 1 DECEMBER 2014. THE REGISTRATION OF THIS OFFER DOCUMENT BY THE SGX-ST, ACTING AS AGENT ON BEHALF OF THE AUTHORITY, DOES NOT IMPLY THAT THE SECURITIES AND FUTURES ACT, CHAPTER 289 OF SINGAPORE, OR ANY OTHER LEGAL OR REGULATORY REQUIREMENTS, OR REQUIREMENTS UNDER THE SGX-ST’S LISTING RULES, HAVE BEEN COMPLIED WITH.

PrimePartners Corporate Finance Pte. Ltd. (“PPCF” or the “Sponsor”) has made an application to the SGX-ST for permission to deal in, and for quotation of, all the ordinary shares (the “Shares”) in the capital of Huationg Global Limited (the “Company”) that are already issued, including the PPCF Shares (as defined herein) and the FC Shares (as defined herein), the new Shares which are the subject of this Placement (the “Placement Shares”), and the new Shares which may be issued pursuant to the Huationg Performance Share Plan (the “Award Shares”) or upon the exercise of the options granted or to be granted under the Huationg Employee Share Option Scheme (the “Option Shares”) to be listed for quotation on Catalist (as defined herein). Acceptance of applications will be conditional upon, inter alia, issue of the Placement Shares, permission being granted by the SGX-ST for the listing and quotation of all the existing issued Shares including the PPCF Shares and the FC Shares, the Placement Shares, the Award Shares and the Option Shares on Catalist. Monies paid in respect of any application accepted will be returned if the admission and listing do not proceed. The dealing in and quotation of the Shares will be in Singapore dollars.

Companies listed on Catalist may carry higher investment risk when compared with larger or more established companies listed on the Main Board of the SGX-ST. In particular, companies may list on Catalist without a track record of profitability and there is no assurance that there will be a liquid market in the Shares traded on Catalist. You should be aware of the risks of investing in such companies and

As at the Latest Practicable Date, the

order book for our civil engineering business was

S$114.3 million which will be recognised as revenue for our Group

over the next one to three years.

This overview section is qualified in its entirety by, and should be read in conjunction with, the full text of this Offer Document. Meanings of capitalised terms used may be found in the sections titled “Definitions” and “Glossary of Technical Terms” of this Offer Document.

LICENCES AND CERTIFICATIONS CW02 Civil Engineering Grade A2 CW01 General Building Grade C2 GB1 General Builder Licence Class 1 SY01A Essential Construction Materials

Grade L6 SY01C Other Basic Construction

Materials Grade L6 ISO 9001:2008 ISO 14001:2004 OHSAS 18001:2007 bizSAFE STAR certificate

LSS PROJECTS MAJOR COMPLETED PROJECTS Singapore Marina Bayfront Bridges Singapore Sports Hub Marina Bay Sands

MAJOR ONGOING PROJECTS Sewer diversion works at Punggol Bukit Batok West Avenue 8 Underpass at Orchard Road and Somerset

Road Jurong Town Hall Parc Olympia condominium New Futura condominium

MAJOR PROJECTS

HUATIONG GLOBAL LIMITED (Company Registration No.: 201422395Z)

(Incorporated in the Republic of Singapore on 1 August 2014)



Placement of 27,500,000 Placement Shares at S$0.20 for each Placement Share, payable in full on application

HU

AT

ION

G G

LO

BA

L L

IMIT

ED

CIVIL ENGINEERING PROJECTS MAJOR COMPLETED PROJECTS

Earthworks for Stage 3 of the Downtown Line MRT project

Civil engineering works for certain Circle Line MRT stations

Earthworks and external works for Marina Coastal Expressway

Civil engineering works for Kallang-Paya Lebar Expressway

Earthworks for the construction of the Watertown Mixed Development Project at Punggol

MAJOR ONGOING PROJECTS Earthworks for the construction of Bukit

Panjang, Tampines East and Upper Changi MRT stations

Traffic diversion and road and drainage works for the Tuas West MRT line extension

Civil engineering works, operation and maintenance of a stockpile site at Tuas View Extension Area A

Earthworks, civil engineering works and ancillary building works for the proposed bus depot at Loyang

Road diversion works for the design and construction of a segmental tunnel with a 2200 mm diameter pipeline for the NEWater Infrastructure Plan Extension

Site clearance, earthworks and temporary drainage works at Tampines Neighbourhood 6 (Part 1)

Earthworks for the construction of The Tembusu condominium

Design, construction, operation and maintenance of a stockpile site

Earthworks for the construction of a proposed community hospital at 100 Yishun Central

Earthworks for the construction of a civic and community / sports and recreation development in the Tampines Planning Area

Civil engineering term contract for the eastern sector of a stockpile site at Changi East

Design, development and construction of electrical substations at Lim Chu Kang

Maintenance of foreshore structures and physical barriers for Singapore Police Force and Immigration & Checkpoints Authority of Singapore

Huationg Global Limited is principally engaged in the provision of civil engineering services for infrastructure projects and ancillary inland logistics support services. It is also involved in the sale of construction materials such as recycled concrete aggregate (“RCA”) and liquefied soil stabiliser (“LSS”).

CIVIL ENGINEERING SERVICESWe are registered with the Building and Construction Authority of Singapore (“BCA”) with a BCA grading of A2 under the category CW02 for civil engineering which allows us to tender for public sector procurement in relation to civil engineering works of values not exceeding S$90.0 million. We provide a full range of civil engineering services from earthworks, infrastructure works, external works, demolition and excavation works, site clearance, drainage works, reinforcing bar installation, formwork, concrete installation, backfill and compaction to final handover. With our comprehensive pool of construction equipment and specialist modular formwork, we are able to undertake concrete construction projects in Singapore. We have completed civil engineering works for numerous large infrastructural construction projects in Singapore and our customers in this segment include, among others, the Housing and Development Board, the Land Transport Authority (“LTA”), and Daelim Industrial Co. Ltd.. In addition, we also provide stockpile management services.

INLAND LOGISTICS SUPPORTWe provide a wide range of construction equipment including articulated dump trucks, rollers, bulldozers, wheel loaders, telescopic clamshell, breakers, tipper trucks, compactors, excavators and concrete pumps. As at the Latest Practicable Date, we have 149 tipper trucks and 388 units of other construction equipment. We also provide experienced operators who are familiar with operating the equipment.

SALE OF CONSTRUCTION MATERIALSWe recycle construction waste and aggregates at our recycling operations at Tuas South Avenue 1. The RCA produced are primarily used to support our own civil engineering activities and depending on prevailing market conditions and demand, also sold to third parties.

We also manufacture and supply LSS, a self-flowable, self-compacting and self-leveling alternative to conventional compacted fill. LSS can be used as non-structural fill for buildings and other structures and for backfill in utility and road construction. Most of the LSS is used to support our civil engineering operations though we do supply them to third parties as and when there is market demand. As we are able to adjust the liquidity and strength of LSS mixtures, we are able to provide customised solutions to meet the different needs of our customers.

COMPETITIVE STRENGTHSFull-service integrated civil engineering solutions provider

• Our integrated business segments and extensive resources enable us to meet our customer’s civil engineering needs in an efficient and cost-effective manner.

• We are also able to provide unique and tailored solutions to our customers through our ability to manufacture and supply construction materials such as LSS and RCA.

Established track record and reputation of over 30 years

• Our track record of completing our projects on time and reputation for delivering quality civil engineering works has enabled us to gain our customers’ confidence in our services which is evident from the long-standing relationships we share with our existing customers.

Experienced and dedicated management team

• Our Executive Directors, comprising our Executive Chairman, CEO and COO, have over 67 years of experience in the construction industry collectively. They are supported by a team of experienced and competent key executives.

• Members of the management team regularly update themselves on management techniques and the latest market developments relating to our business by attending training and education programmes.

Ability to keep our cost of construction materials low

• Through our capabilities to recycle construction waste and aggregates, we are able to source internally for construction materials which we would ordinarily use for our civil engineering works. This enables us to reduce our cost of construction materials and exposure to delays due to disruption in supply, allowing us to tender for projects at more competitive rates.

PROSPECTSSustained demand for civil engineering construction

• For 2015 and 2016, average construction demand is projected to be sustained between S$25b and S$34b per annum with 40% of this to come from civil engineering projects1.

Population growth in Singapore: Estimated to grow to between 6.5 and 6.9 million by 20302

• Government is expected to continue to spend on infrastructure development to overcome current strains and congestion and to accommodate a larger population. The civil engineering construction industry is envisaged to be well supported by future infrastructure and housing projects as population grows.

1 BCA Media Release – Construction Demand for 2014 to Remain Strong, dated 9 January 2014

2 Singapore’s Population White Paper – A Sustainable Population for a Dynamic Singapore issued in January 2013

3 Singapore’s Land Transport Master Plan 2013

OUR BUSINESS

BUSINESS STRATEGIES AND FUTURE PLANSTo advance our position as a service provider of civil engineering works for Singapore’s construction industry

• We intend to employ more professional and technical personnel with relevant qualifications and take steps to obtain an A1 grading with the BCA, which will allow us to tender for civil engineering related public sector projects with no tendering limit.

To expand our customer base for LSS to overseas markets while maintaining our market presence in Singapore

• We intend to promote and increase the use of LSS in our upcoming projects in Singapore and enter into strategic alliances with established players in Malaysia to market the use of LSS there.

To explore acquisitions, joint ventures and strategic alliances to expand our business

• We intend to expand our civil engineering business by entering into joint ventures with other companies and, through these joint ventures, undertake larger scale public sector works.

To focus on public sector projects

• We intend to focus on public sector projects that are typically larger in scale and which can ensure that the use of our equipment and resources will be maximised.

FINANCIAL HIGHLIGHTS (Financial year ended 31 December)

12.7 10.7 5.0 0.9

16.4 16.2 23.8

12.2

51.9 65.3

79.6

54.5

81.0

92.2108.4

67.6

FY2011 FY2012 FY2013 HY2014Civil Engineering Inland Logistics SupportSales of Construction Materials

15.0 14.5 16.5 10.3

FY2011 FY2012 FY2013 HY2014

GROSS PROFIT (S$’million)

Gross Profit Gross Margin

18.5%

15.7%15.2%

15.2%

4.5

4.0 5.0 3.0

FY2011 FY2012 FY2013 HY2014

PROFIT ATTRIBUTABLE TO OWNERS OF THE PARENT (S$’million)

Profit Attributable to Owners of the Parent Profit Margin

5.6%

4.3% 4.6% 4.4%

Pipeline of civil infrastructure projects

• Expansion of the MRT network: The MRT network is expected to double from the current 138 km to 280 km by 2020 and to approximately 360 km by around 20303.

• Road developments in Singapore: The LTA is expected to continue to expand and improve the road network with ongoing road developments in the country.

• Underground works: Based on Budget 2014, development expenditure has been allocated for the improvement of the drainage systems.

REVENUE (S$’million)

Page

CORPORATE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

GLOSSARY OF TECHNICAL TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS . . . . . . . . . . . 15

SELLING RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

DETAILS OF THE PLACEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

INDICATIVE TIMETABLE FOR LISTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

OFFER DOCUMENT SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

THE PLACEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

ISSUE STATISTICS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

RISKS RELATING TO OUR BUSINESS OR THE INDUSTRY IN WHICH WE

OPERATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

RISKS RELATING TO OUR SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

USE OF PROCEEDS AND LISTING EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

DIVIDEND POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

SHARE CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

OWNERSHIP STRUCTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

SIGNIFICANT CHANGES IN PERCENTAGE OF OWNERSHIP. . . . . . . . . . . . . . . . . . . 63

MORATORIUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

DILUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

RESTRUCTURING EXERCISE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

GROUP STRUCTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

SELECTED COMBINED FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND

FINANCIAL POSITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

CAPITALISATION AND INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

CONTENTS

i

WORKING CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

GENERAL INFORMATION ON OUR GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

HISTORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

BUSINESS OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

MAJOR CUSTOMERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

MAJOR SUPPLIERS AND SUB-CONTRACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119

PROPERTIES AND FIXED ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120

STAFF TRAINING POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

MARKETING AND BUSINESS DEVELOPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122

RESEARCH AND DEVELOPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122

INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122

GOVERNMENT REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123

LICENCES, PERMITS, APPROVALS, CERTIFICATIONS AND AWARDS . . . . . . . . . . . 135

CREDIT POLICY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139

INVENTORY MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140

COMPETITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140

COMPETITIVE STRENGTHS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141

PROSPECTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143

TREND INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148

BUSINESS STRATEGIES AND FUTURE PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149

ORDER BOOK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150

INTERESTED PERSON TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151

INTERESTED PERSON TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151

PAST INTERESTED PERSON TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151

PRESENT AND ONGOING INTERESTED PERSON TRANSACTIONS . . . . . . . . . . . . . 155

GUIDELINES AND REVIEW PROCEDURES FOR ONGOING AND FUTURE

INTERESTED PERSON TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164

POTENTIAL CONFLICTS OF INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166

DIRECTORS, EXECUTIVE OFFICERS AND EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . 169

MANAGEMENT REPORTING STRUCTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169

DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170

EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175

DIRECTORS’ AND EXECUTIVE OFFICERS’ REMUNERATION . . . . . . . . . . . . . . . . . . 177

EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177

SERVICE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179

CONTENTS

ii

CORPORATE GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181

HUATIONG EMPLOYEE SHARE OPTION SCHEME . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186

HUATIONG PERFORMANCE SHARE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193

DESCRIPTION OF OUR SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202

TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207

CLEARANCE AND SETTLEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211

GENERAL AND STATUTORY INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212

INFORMATION ON DIRECTORS AND EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . . 212

SHARE CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214

MEMORANDUM AND ARTICLES OF ASSOCIATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 214

MATERIAL CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214

LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215

MANAGEMENT AND PLACEMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 215

MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217

CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218

RESPONSIBILITY STATEMENT BY OUR DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . 218

DOCUMENTS AVAILABLE FOR INSPECTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219

APPENDIX A – INDEPENDENT AUDITOR’S REPORT AND AUDITED COMBINED

FINANCIAL STATEMENTS FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2011,

2012 AND 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

APPENDIX B – INDEPENDENT AUDITOR’S REVIEW REPORT AND UNAUDITED

INTERIM CONDENSED COMBINED FINANCIAL STATEMENTS FOR THE FINANCIAL

PERIOD FROM 1 JANUARY 2014 TO 30 JUNE 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1

APPENDIX C – INDEPENDENT AUDITOR’S ASSURANCE REPORT AND UNAUDITED

PRO FORMA COMBINED FINANCIAL INFORMATION FOR THE FINANCIAL YEAR

ENDED 31 DECEMBER 2013 AND FOR THE FINANCIAL PERIOD FROM 1 JANUARY

2014 TO 30 JUNE 2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1

APPENDIX D – SUMMARY OF SELECTED ARTICLES OF ASSOCIATION OF OUR

COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1

APPENDIX E – TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION AND

ACCEPTANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1

APPENDIX F – RULES OF THE HUATIONG EMPLOYEE SHARE OPTION SCHEME . . F-1

APPENDIX G – RULES OF THE HUATIONG PERFORMANCE SHARE PLAN . . . . . . . . G-1

CONTENTS

iii

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BOARD OF DIRECTORS : Ng Hai Liong (Executive Chairman and Executive

Director)

Ng Kian Ann Patrick (Chief Executive Officer and

Executive Director)

Ng Kian Yeow, Vincent (Chief Operating Officer and

Executive Director)

Yuen Sou Wai (Lead Independent Director)

Yen Se-Hua Stewart (Independent Director)

Wee Heng Yi, Adrian (Independent Director)

COMPANY SECRETARY : Yoo Loo Ping (ACIS, MBA)

REGISTERED OFFICE : 9 Benoi Crescent

Singapore 629972

ISSUE MANAGER, SPONSOR

AND PLACEMENT AGENT

: PrimePartners Corporate Finance Pte. Ltd.

20 Cecil Street

#21-02 Equity Plaza

Singapore 049705

SUB-PLACEMENT AGENT : UOB Kay Hian Private Limited

8 Anthony Road, #01-01

Singapore 229957

SOLICITORS TO THE

PLACEMENT AND LEGAL

ADVISERS TO OUR COMPANY

AS TO SINGAPORE LAW

: WongPartnership LLP

12 Marina Boulevard Level 28

Marina Bay Financial Centre Tower 3

Singapore 018982

INDEPENDENT AUDITOR AND

REPORTING ACCOUNTANT

: BDO LLP

21 Merchant Road, #05-01

Singapore 058267

Partner-in-charge: William Ng Wee Liang

(a practising member of the

Institute of Singapore Chartered Accountants)

SHARE REGISTRAR AND

SHARE TRANSFER AGENT

: Boardroom Corporate & Advisory Services Pte. Ltd.

50 Raffles Place

#32-01 Singapore Land Tower

Singapore 048623

CORPORATE INFORMATION

1

PRINCIPAL BANKERS : DBS Bank Ltd.

12 Marina Boulevard

Marina Bay Financial Centre Tower 3

Singapore 018982

Oversea-Chinese Banking Corporation Limited

65 Chulia Street

OCBC Centre

Singapore 049513

RECEIVING BANK : The Bank of East Asia Limited

60 Robinson Road

BEA Building

Singapore 068892

CORPORATE INFORMATION

2

In this Offer Document and the accompanying Application Forms, unless the context otherwise

requires, the following definitions apply where the context so admits:

Group Companies

“Company”, “Huationg” or

“parent”

: Huationg Global Limited

“Group” : Our Company and our subsidiaries

“HT Equipment” : HT Equipment Pte. Ltd., a subsidiary in which we own a

shareholding interest of 75.0%

“Huationg Contractor” : Huationg Contractor Pte Ltd, our wholly-owned subsidiary

“Soil Engineering” : Soil Engineering Pte. Ltd., our wholly-owned subsidiary

Other Corporations and Agencies

“ANZ” : Australia and New Zealand Banking Group Limited

“Authority” or “MAS” : The Monetary Authority of Singapore

“BCA” : The Building and Construction Authority of Singapore

“CDP” or “Depository” : The Central Depository (Pte) Ltd

“CIMB” : CIMB Bank Berhad

“Dandelion Capital” : Dandelion Capital Pte. Ltd.

“DBS” : DBS Bank Ltd.

“HDB” : The Housing and Development Board of Singapore

“Independent Auditor and

Reporting Accountant” or

“BDO”

: BDO LLP

“IRAS” : The Inland Revenue Authority of Singapore

“ISO” : The International Organisation for Standardisation

“Issue Manager”, “Sponsor”

or “Placement Agent” or

“PPCF”

: PrimePartners Corporate Finance Pte. Ltd.

“JTC” : Jurong Town Corporation

“LTA” : The Land Transport Authority of Singapore

“MBB” : Malayan Banking Berhad

DEFINITIONS

3

“MOM” : The Ministry of Manpower of Singapore

“NEA” : The National Environment Agency of Singapore

“NHL Holding” : NHL Holding Pte. Ltd.

“NHL Investment” : NHL Investment Pte. Ltd.

“OCBC” : Oversea-Chinese Banking Corporation Limited

“PUB” : The Public Utilities Board of Singapore

“Receiving Bank” or “BEA” : The Bank of East Asia Limited

“RHB” : RHB Bank Berhad

“SCB” : Standard Chartered Securities (Singapore) Pte. Limited

“SCDF” : The Singapore Civil Defence Force

“SGX-ST” : The Singapore Exchange Securities Trading Limited

“Share Registrar” : Boardroom Corporate & Advisory Services Pte. Ltd.

“Singstat” : The Singapore Department of Statistics

“SLA” : The Singapore Land Authority

“Sub-Placement Agent” or

“UOBKH”

: UOB Kay Hian Private Limited

“UOB” : United Overseas Bank Limited

“URA” : The Urban Redevelopment Authority of Singapore

“WSHC” : The Workplace Safety and Health Council of Singapore

Legislations and Regulations

“BCISP Act” : Building and Construction Industry Security of Payment Act,

Chapter 30B of Singapore, as amended or modified from time

to time

“Companies Act” : Companies Act, Chapter 50 of Singapore, as amended or

modified from time to time

“Building Control Act” : Building Control Act, Chapter 29 of Singapore, as amended or


“Building Control

(Licensing of Builders)

Regulations 2008”

: Building Control (Licensing of Builders) Regulations 2008 of

Singapore, as amended or modified from time to time

DEFINITIONS

4

“Building Control

Regulations 2003”

: Building Control Regulations of Singapore, as amended or


“EFMA” : Employment of Foreign Manpower Act, Chapter 91A of


“Employment Act” : Employment Act, Chapter 91 of Singapore, as amended and


“Environmental Pollution

Control (Control of Noise

at Construction Sites)

Regulations”

: Environmental Pollution Control (Control of Noise at

Construction Sites) Regulations of Singapore, as amended or


“Environmental Protection

and Management Act”

: Environmental Protection and Management Act, Chapter 94A

of Singapore, as amended or modified from time to time

“EPHA” : Environmental Public Health Act, Chapter 95 of Singapore, as

amended or modified from time to time

“Fire Code” : 2013 Code of Practice for Fire Precautions in Buildings

published by the SCDF, as amended, modified or

supplemented from time to time

“Fire Safety Act” : Fire Safety Act, Chapter 109A of Singapore, as amended or


“Fire Safety (Building Fire

Safety) Regulations”

: Fire Safety (Building Fire Safety) Regulations of Singapore,

as amended or modified from time to time

“Fire Safety (Petroleum

and Flammable Materials)

Regulations 2005”

: Fire Safety (Petroleum and Flammable Materials) Regulations

2005 of Singapore, as amended or modified from time to time

“Goods and Services Tax

Act”

: Goods and Services Tax Act, Chapter 117A of Singapore, as


“Immigration Act” : Immigration Act, Chapter 133 of Singapore, as amended or


“Immigration Regulations” : Immigration Regulations of Singapore, as amended or


“Income Tax Act” : Income Tax Act, Chapter 134 of Singapore, as amended or


“Listing Manual” : The provisions of Sections A and B of the listing manual of the

SGX-ST as amended, modified or supplemented from time to

time

“Road Traffic Act” : Road Traffic Act, Chapter 276 of Singapore, as amended or


DEFINITIONS

5

“Road Traffic (Motor

Vehicles, Construction

and Use) Rules”

: Road Traffic (Motor Vehicles, Construction and Use) Rules of


“Rules of Catalist” : Section B of the Listing Manual dealing with the rules of

Catalist, as from time to time amended, modified or

supplemented

“SFA” : Securities and Futures Act, Chapter 289 of Singapore, as


“SFR” : Securities and Futures (Offers of Investments) (Shares and

Debentures) Regulations 2005 of Singapore, as amended or


“WICA” : Work Injury Compensation Act, Chapter 354 of Singapore, as


“Workplace Safety and

Health Act”

: Workplace Safety and Health Act, Chapter 354A of Singapore,

as amended or modified from time to time

“WSHCR” : Workplace Safety and Health (Construction) Regulations

2007 of Singapore, as amended or modified from time to time

“WSHR” : Workplace Safety and Health (General Provisions)

Regulations of Singapore, as amended or modified from time

to time

General

“Administration Committee” : The Administration Committee comprising of members of our

Nominating Committee and Remuneration Committee of our

Company to administer the Share Option Scheme and the

Share Plan

“Application Forms” : The printed application forms to be used for the purpose of the

Placement and which form part of this Offer Document

“Application List” : The list of applications for subscription of the Placement

Shares

“Articles” or “Articles of

Association”

: The articles of association of our Company, as amended or


“associate” : (a) In relation to any director, chief executive officer,

substantial shareholder or controlling shareholder (being

an individual) means:

(i) his immediate family;

DEFINITIONS

6

(ii) the trustees, acting in their capacity as such

trustees, of any trust of which he or his immediate

family is a beneficiary or, in the case of a

discretionary trust, is a discretionary object; or

(iii) any company in which he and his immediate family

together (directly or indirectly) have an interest of

30.0% or more of the aggregate of the nominal

amount of all the voting shares;

(b) in relation to a substantial shareholder or a controlling

shareholder (being a company) means any other

company which is its subsidiary or holding company or is

a fellow subsidiary of any such holding company or one

in the equity of which it and/or such other company or

companies taken together (directly or indirectly) have an

interest of 30.0% or more

“Audit Committee” : The audit committee of our Company as at the date of this

Offer Document

“Awards” : The awards of the Shares granted or which may be granted

pursuant to the Share Plan

“Award Shares” : The Shares which are the subject of the Awards under the

Share Plan

“Bangladesh” : The People’s Republic of Bangladesh

“Board” or “Board of

Directors”

: The board of Directors of our Company as at the date of this

Offer Document

“Budget 2010” : The budget of the Singapore government for the fiscal year

ended 31 March 2011


ended 31 March 2012


ended 31 March 2013


ended 31 March 2014


ending 31 March 2015

“Catalist” : The sponsor-supervised listing platform of the SGX-ST

“CEO” : The chief executive officer of our Company

“China” or “PRC” : The People’s Republic of China

DEFINITIONS

7

“COE” : Certificate of Entitlement

“COO” : The chief operating officer of our Company

“Controlling Shareholder” : As defined in the Rules of Catalist:

(a) a person who directly or indirectly has an interest of

15.0% or more of the aggregate of the nominal amount of

all the voting Shares in our Company (unless otherwise

determined by the SGX-ST); or

(b) a person who in fact exercises control over our Company

“CPF” : The Central Provident Fund

“Directors” : The directors of our Company as at the date of this Offer

Document

“EPS” : Earnings per Share

“Executive Directors” or

“EDs”

: The executive Directors of our Company as at the date of this

Offer Document

“Executive Officers” : The executive officers of our Group as at the date of this Offer

Document

“FC Shares” : The 250,000 new Shares to be allotted and issued to our

Financial Controller, Mr Goh Tuck Peng, by our Company

“Financial Controller” : The financial controller of our Company

“FRS” : Singapore Financial Reporting Standards

“FY” or “Financial Year” : Financial year ended or, as the case may be, ending,

31 December

“GST” : Goods and Services Tax

“Hong Kong” : Hong Kong Special Administrative Region of the PRC

“HY” : Six months ended or, as the case may be, ending, 30 June

“India” : The Republic of India

“Independent Directors” : The independent Directors of our Company as at the date of

this Offer Document

“Latest Practicable Date” : 31 October 2014, being the latest practicable date for the

purposes of lodgement of this Offer Document with the

SGX-ST

“Listing” : The listing of our Company and the quotation of our Shares on

Catalist

DEFINITIONS

8

“Macau” : Macau Special Administrative Region of the PRC

“Management Agreement” : The full sponsorship and management agreement entered

into between our Company and PPCF pursuant to which

PPCF agrees to sponsor and manage the Listing as set out in

the sections titled “Plan of Distribution” and “General and

Statutory Information – Management and Placement

Arrangements” of this Offer Document

“Market Day” : A day on which the SGX-ST is open for trading in securities

“MRT” : Mass Rapid Transit

“Myanmar” : The Republic of the Union of Myanmar

“NAV” : Net asset value

“Nominating Committee” : The nominating committee of our Company as at the date of

this Offer Document

“NTA” : Net tangible assets

“Offer Document” : This offer document dated 1 December 2014 issued by us in

respect of the Placement

“Official List” : The list of issuers maintained by the SGX-ST in relation to

Catalist

“OHSMS” : Occupational Health and Safety Management System

“Options” : The share options which may be granted pursuant to the

Share Option Scheme

“Option Shares” : The new Shares which may be allotted and issued upon the

exercise of Options

“PER” : Price earnings ratio

“Period Under Review” : The period which comprises FY2011, FY2012, FY2013 and

HY2014

“Philippines” : The Republic of the Philippines

“Placement” : The placement by the Placement Agent of the Placement

Shares on behalf of our Company for subscription at the

Placement Price, subject to and on the terms and conditions

of this Offer Document

“Placement Agreement” : The placement agreement dated 1 December 2014 entered

into between our Company and PPCF as the Placement Agent

“Placement Price” : S$0.20 for each Placement Share

DEFINITIONS

9

“Placement Shares” : The 27,500,000 new Shares for which our Company invites

applicants to subscribe for pursuant to the Placement on the

terms and conditions set out in this Offer Document

“PPCF Shares” : The 1,875,000 new Shares to be allotted and issued to PPCF

by our Company as part of PPCF’s management fees as the

Issue Manager and Sponsor

“PPE” : Property, plant and equipment

“Qualified Person” : A person as defined in the Building Control Act

“Remuneration Committee” : The remuneration committee of our Company as at the date of

this Offer Document

“Restructuring Exercise” : The corporate restructuring exercise undertaken in

connection with the Placement as set out in the section titled

“Restructuring Exercise” in this Offer Document

“Securities Account” : The securities account maintained by a Depositor with CDP

“Service Agreements” : The service agreements entered into between our Company,

our Executive Directors, Mr Ng Hai Liong, Mr Ng Kian Ann

Patrick, Mr Ng Kian Yeow, Vincent and our Executive Officer,

Mr Goh Tuck Peng, as set out under the section titled

“Directors, Executive Officers and Employees – Service

Agreements” of this Offer Document

“Share Option Scheme” : The Huationg Employee Share Option Scheme

“Share Plan” : The Huationg Performance Share Plan

“Shares” : Ordinary shares in the capital of our Company

“Shareholders” : Registered holders of Shares, except where the registered

holder is CDP, the term “Shareholders” shall, in relation to

such Shares, mean the Depositors whose Securities Accounts

are credited with Shares

“SIBOR” : Singapore Interbank Offered Rates

“Singapore” : The Republic of Singapore

“SLOTS” : Singapore List of Trade Subcontractors

“South Korea” : The Republic of Korea

“Sri Lanka” : Democratic Socialist Republic of Sri Lanka

“Substantial Shareholders” : Persons who have an interest in the Shares, the nominal

amount of which is not less than 5.0% of the aggregate of the

nominal amount of all the voting shares of our Company

DEFINITIONS

10

“Taiwan” : The Republic of China

“Thailand” : The Kingdom of Thailand

“USA”, “US” or

“United States”

: The United States of America

Currencies, Units and Others

“EUR” : Euros

“km” : Kilometres

“mm” : Millimetres

“%” or “per cent.” : Per centum

“sq ft” : Square feet

“S$” or “SGD” and “cents” : Singapore dollars and cents respectively

“US$” : United States dollars

Any capitalised terms relating to the Share Option Scheme and Share Plan which are not defined

in this section of this Offer Document shall have the meanings ascribed to them as stated in

Appendices F and G of this Offer Document respectively.

The expression “subsidiary” shall have the same meaning ascribed to it as in the SFR and the

Companies Act.

The expressions “Depositor”, “Depository Agent” and “Depository Register” shall have the

meanings ascribed to them respectively in Section 130A of the Companies Act.

Words importing the singular shall, where applicable, include the plural and vice versa and words

importing the masculine gender shall, where applicable, include the feminine and neuter genders

and vice versa. References to persons shall include corporations.

Any reference in this Offer Document and the Application Forms to any statute or enactment is a

reference to that statute or enactment as for the time being amended or re-enacted. Any word

defined under the Companies Act, the SFA or any statutory modification thereof and used in this

Offer Document and the Application Forms shall, where applicable, have the meaning assigned to

it under the Companies Act, the SFA or any statutory modification thereof, as the case may be.

Any reference in this Offer Document and the Application Forms to Shares being allotted to an

applicant includes allotment to CDP for the account of that applicant.

Any reference to a time of day in this Offer Document shall be a reference to Singapore time

unless otherwise stated.

DEFINITIONS

11

References in this Offer Document to “we”, “our”, and “us” or their other grammatical variations are

a reference to our Company, our Group, or any member of our Group, as the context requires.

Any discrepancies in the tables included herein between the listed amounts and the totals thereof

are due to rounding. Accordingly, figures shown as totals in certain tables may not be an arithmetic

aggregation of the figures that precede them.

Unless we indicate otherwise, all information in this Offer Document is presented on the basis of

our Group.

DEFINITIONS

12

To facilitate a better understanding of the business of our Group, the following glossary provides

a description (which should not be treated as being definitive of their meanings) of some of the

technical terms and abbreviations used in this Offer Document relating to our business. The terms

and their assigned meanings may not correspond to standard industry meanings or usage of these

terms:

“aggregates” : Mixture of mineral materials, such as sand or stone, used in

making concrete

“CET” : Continuing education and training for BCA-registered

contractors by BCA-recognised training providers

“Contractors Registry” : A listing of the construction companies that are registered with

BCA

“design and build” : A type of procurement method for construction whereby the

developer awards a single contract to the main contractor who

is then responsible for the architectural and engineering

design and construction works of the entire building project

“I-beam” : A beam with an I-shaped cross-section

“LSS” : Liquefied soil stabiliser, a self-flowable, self-compacting, self-

levelling material consisting primarily of soil which can be

used as a backfill material, replacing conventional compacted

fill

“main contractor” : A company that contracts a project directly from the developer

or owner

“MYE” or“man-year-entitlement”

: The total quota of foreign construction workers allocated to a

main contractor for a specific construction project

“OHSAS 18000” : An international occupational health and safety management

system specification

“OHSAS 18001” : A version of OHSAS 18000 developed to help an organisation

control occupational health and safety risks

“OHSAS 18001:2007” : A version of OHSAS 18000 developed to enable an

organisation to control its occupational health and safety risks

and improve its performance. It requires an organisation to

conduct a risk assessment and manage those risks that must

include objectives to demonstrate continuous improvement

“RCA” : Recycled concrete aggregate, recycled aggregate derived

mainly from crushed concrete from demolition waste

GLOSSARY OF TECHNICAL TERMS

13

“reinforcing bar” : A steel bar or mesh of steel wires commonly used as a tension

device in reinforced concrete and reinforced masonry

structures to strengthen and hold the concrete in compression

“sub-contractor” : Any construction entity which contracts with another

construction entity to perform part of the work the latter has

already been contracted to do

“tipper truck” : A truck or lorry, the rear platform of which can be raised at the

front end to enable the load to be discharged by gravity

“TÜV SÜD PSB Pte. Ltd.Certification”

: Certification issued by TÜV SÜD PSB Pte. Ltd., a service

provider for a comprehensive and integrated suite of product

testing, inspection and certification services

“work site” : The location where our construction project is situated

GLOSSARY OF TECHNICAL TERMS

14

All statements contained in this Offer Document, statements made in press releases and oral

statements that may be made by us or our Directors, Executive Officers or employees acting on

our behalf, that are not statements of historical fact, constitute “forward-looking statements”. You

can identify some of these forward-looking statements by terms such as “expects”, “believes”,

“plans”, “intends”, “predicts”, “estimates”, “anticipates”, “may”, “will”, “would” and “could” or similar

expressions. However, you should note that these words or phrases are not the exclusive means

of identifying forward-looking statements. All statements regarding our expected financial

position, business strategies, plans and prospects are forward-looking statements.

These forward-looking statements, including without limitation, statements as to our revenue and

profitability, cost measures, planned strategy and anticipated expansion plans, expected trend in

demand and supply, expected industry prospects and trends and any other matters discussed in

this Offer Document regarding matters that are not historical fact, are only predictions. These

forward-looking statements involve known and unknown risks, uncertainties and other factors that

may cause our actual results, performance or achievements to be materially different from any

future results, performance or achievements expected, expressed or implied by these forward-

looking statements. These risks, uncertainties and other factors include, among others, the

following:

(a) changes in political, social and economic conditions, the regulatory environment, laws and

regulations and interpretation thereof in the jurisdictions where we conduct business or

expect to conduct business;

(b) the risk that we may be unable to realise our anticipated growth strategies and expected

internal growth;

(c) changes in the availability and prices of materials, technical parts and equipment which we

require to operate our business;

(d) changes in customer preferences and needs;

(e) changes in competitive conditions and our ability to compete under such conditions, locally

and internationally;

(f) changes in our future capital needs and the availability of financing and capital to fund these

needs;

(g) the ability of third parties to honour their commitments; and

(h) other factors beyond our control.

Several of these risk factors are discussed in greater detail in this Offer Document, in particular,

but not limited to, the discussions in the sections titled “Risk Factors” and “Management’s

Discussion and Analysis of Results of Operations and Financial Position” of this Offer Document.

All forward-looking statements by or attributable to us, or persons acting on our behalf, contained

in this Offer Document are expressly qualified in their entirety by such factors. These forward-

looking statements are applicable only as at the date of this Offer Document.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

15

Given the risks and uncertainties that may cause our actual future results, performance or

achievements to be materially different from that expected, expressed or implied by the

forward-looking statements in this Offer Document, undue reliance must not be placed on these

statements. None of us, the Issue Manager, Sponsor and Placement Agent, the Sub-Placement

Agent or any other person represents or warrants that our actual future results, performance or

achievements will be as discussed in those statements.

Our actual future results may differ materially from those anticipated in these forward-looking

statements as a result of the risks faced by us. We, the Issue Manager, Sponsor and Placement

Agent and the Sub-Placement Agent disclaim any responsibility to update any of those

forward-looking statements or publicly announce any revisions to those forward-looking

statements to reflect future developments, events or circumstances for any reason, even if new

information becomes available or other events occur in the future. We are, however, subject to the

provisions of the SFA and the Rules of Catalist regarding corporate disclosure.

In particular, pursuant to Section 241 of the SFA, if after the Offer Document is registered by the

SGX-ST, acting as agent on behalf of the Authority, but before the close of the Placement, we

become aware of:

(a) a false or misleading statement or matter in the Offer Document;

(b) an omission from the Offer Document of any information that should have been included in

it under Section 243 of the SFA; or

(c) a new circumstance that has arisen since the Offer Document was lodged with the SGX-ST,

acting as agent on behalf of the Authority, and would have been required by Section 243 of

the SFA to be included in the Offer Document if it had arisen before the Offer Document was

lodged,

and that is materially adverse from the point of view of an investor, we may lodge a supplementary

or replacement offer document with the SGX-ST, acting as agent on behalf of the Authority.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

16

This Offer Document does not constitute an offer, solicitation or invitation to subscribe for the

Placement Shares in any jurisdiction in which such offer, solicitation or invitation is unlawful or is

not authorised or to any person to whom it is unlawful to make such offer, solicitation or invitation.

No action has been or will be taken under the legal or regulatory requirements of any jurisdiction,

except for the lodgement and/or registration of this Offer Document in Singapore in order to permit

an offering of the Placement Shares and the public distribution of this Offer Document in

Singapore. The distribution of this Offer Document and the offering of the Placement Shares in

certain jurisdictions may be restricted by the relevant laws in such jurisdictions. Persons who may

come into possession of this Offer Document are required by us, the Issue Manager, Sponsor and

Placement Agent and the Sub-Placement Agent to inform themselves about, and to observe and

comply with, any such restrictions at their own expense and without liability to us, the Issue

Manager, Sponsor and Placement Agent and the Sub-Placement Agent. Persons to whom a copy

of this Offer Document has been issued shall not circulate to any other persons, reproduce or

otherwise distribute this Offer Document or any information herein for any purpose whatsoever nor

permit or cause the same to occur.

SELLING RESTRICTIONS

17

LISTING ON CATALIST

An application has been made to the SGX-ST for permission to deal in, and for the listing and

quotation of, all our Shares already issued, including the PPCF Shares, the FC Shares, the

Placement Shares, the Award Shares and the Option Shares, on Catalist. Such permission will be

granted when we are admitted to the Official List of Catalist. Our acceptance of applications will

be conditional upon, among others, the issue of the Placement Shares and upon permission being

granted by the SGX-ST for the listing and quotation of all of our Shares, including the Placement

Shares, the PPCF Shares, the FC Shares, the Award Shares and the Option Shares on Catalist.

Monies paid in respect of any application accepted will be returned, without interest or any share

of revenue or other benefit arising therefrom and at the applicant’s own risk, if the admission,

listing and trading of our Shares do not occur because the said permission is not granted or for

any reason, and the applicant will not have any claim against us, the Issue Manager, Sponsor and

Placement Agent and the Sub-Placement Agent. No Shares will be allotted on the basis of this

Offer Document later than six months after the date of registration of this Offer Document by the

SGX-ST, acting as agent on behalf of the Authority.

Companies listed on Catalist may carry higher investment risk when compared with larger or more

established companies listed on the Main Board of the SGX-ST. In particular, companies may list

on Catalist without a track record of profitability and we cannot assure you that there will be a

liquid market in the shares or units of shares traded on Catalist. You should be aware of the risks

of investing in such companies and should make the decision to invest only after careful

consideration and, if appropriate, consultation with your professional adviser(s).

Neither the Authority nor the SGX-ST has examined or approved the contents of this Offer

Document. Neither the Authority nor the SGX-ST assumes any responsibility for the contents of

this Offer Document, including the correctness of any of the statements or opinions made or

reports contained in this Offer Document. The SGX-ST does not normally review the application

for admission but relies on the Sponsor to confirm that we are suitable to be listed and complies

with the Rules of Catalist. Neither the Authority nor the SGX-ST has in any way considered the

merits of the Placement Shares being offered for investment.

Admission to the Official List of Catalist is not to be taken as an indication of the merits of the

Placement, our Company, our subsidiaries, our existing issued Shares including the PPCF Shares

and the FC Shares, the Placement Shares, the Award Shares or the Option Shares.

A copy of this Offer Document has been lodged with and registered by the SGX-ST, acting as an

agent on behalf of the Authority. The registration of this Offer Document by the SGX-ST does not

imply that the SFA, the SFR, the Rules of Catalist or any other legal or regulatory requirements,

have been complied with. The SGX-ST has not, in any way, considered the merits of our existing

issued Shares or the Placement Shares, as the case may be, being offered or in respect of which

the Placement is made, for investment. We have not lodged this Offer Document in any other

jurisdiction.

This Offer Document has been seen and approved by our Directors and they individually and

collectively accept full responsibility for the accuracy of the information given in this Offer

Document and confirm, having made all reasonable enquiries, that to the best of their knowledge

and belief, the facts stated and all expressions of opinion, intention and expectation in this Offer

Document are fair and accurate in all material respects as at the date of this Offer Document and

that this Offer Document constitutes full and true disclosure of all material facts about the

Placement and our Group, and that there are no material facts the omission of which would make

any statements in the Offer Document misleading.

DETAILS OF THE PLACEMENT

18

We are subject to the provisions of the SFA, the SFR and the Rules of Catalist regarding corporate

disclosure. In particular, if after the registration of this Offer Document but before the close of the

Placement, we become aware of:

(a) a false or misleading statement or matter in the Offer Document;

(b) an omission from the Offer Document of any information that should have been included in

it under the requirements of Section 243 of the SFA, the SFR or the Rules of Catalist; or

(c) a new circumstance that has arisen since the Offer Document was lodged with the SGX-ST

which would have been required under the requirements of Section 243 of the SFA, the SFR

or the Rules of Catalist to be included in the Offer Document if it had arisen before this Offer

Document was lodged,

that is materially adverse from the point of view of an investor, we may lodge a supplementary or

replacement offer document with the SGX-ST.

In the event that a supplementary or replacement offer document is lodged with the SGX-ST, the

Placement shall be kept open for at least 14 days after the lodgement of such supplementary or

replacement offer document.

Where prior to the lodgement of the supplementary or replacement offer document, applications

have been made under this Offer Document to subscribe for the Placement Shares and:

(a) where the Placement Shares have not been issued to the applicants, our Company shall

either:

(i) (A) within two days (excluding any Saturday, Sunday or public holiday) from the date of

lodgement of the supplementary or replacement offer document, give the applicants

notice in writing of how to obtain, or arrange to receive, a copy of the supplementary or

replacement offer document, as the case may be, and provide the applicants with an

option to withdraw their applications; and (B) take all reasonable steps to make

available within a reasonable period the supplementary or replacement offer document,

as the case may be, to the applicants who have indicated that they wish to obtain, or

have arranged to receive, a copy of the supplementary or replacement offer document;

(ii) within seven days from the date of lodgement of the supplementary or replacement offer

document, give the applicants the supplementary or replacement Offer Document, as

the case may be, and provide the applicants with an option to withdraw their

applications; or

(iii) (A) treat the applications as withdrawn and cancelled, in which case the applications

shall be deemed to have been withdrawn and cancelled; and (B) we shall return all

monies paid in respect of any application, without interest or any share of revenue or

other benefit arising therefrom and at the applicants’ own risk; or

(b) where the Placement Shares have been issued to the applicants, our Company shall either:

(i) (A) within two days (excluding any Saturday, Sunday or public holiday) from the date of

lodgement of the supplementary or replacement offer document, give the applicants

notice in writing of how to obtain, or arrange to receive, a copy of the supplementary or

replacement offer document, as the case may be, and provide the applicants with an


19

option to return to us the Placement Shares which they do not wish to retain title in; and

(B) take all reasonable steps to make available within a reasonable period the

supplementary or replacement offer document, as the case may be, to the applicants

who have indicated that they wish to obtain, or have arranged to receive, a copy of the

supplementary or replacement offer document;

(ii) within seven days from the date of lodgement of the supplementary or replacement offer

document, give the applicants the supplementary or replacement offer document, as the

case may be, and provide the applicants with an option to return to us the Placement

Shares which they do not wish to retain title in; or

(iii) treat the issue of the Placement Shares as void, in which case the issue shall be

deemed void and we shall return all monies paid in respect of any application, without

interest or any share of revenue or other benefit arising therefrom and at the applicants’

own risk.

Any applicant who wishes to exercise his option under paragraph (a)(i) or (a)(ii) to withdraw his

application shall, within 14 days from the date of lodgement of the supplementary or replacement

offer document, notify us of this, whereupon we shall, within seven days from the receipt of such

notification, return the application monies without interest or any share of revenue or other benefit

arising therefrom and at his own risk, and he will not have any claim against us, the Issue

Manager, Sponsor and Placement Agent or the Sub-Placement Agent.

An applicant who wishes to exercise his option under paragraph (b)(i) or (b)(ii) to return the

Placement Shares issued to him shall, within 14 days from the date of lodgement of the

supplementary or replacement offer document, notify us of this and return all documents, if any,

purporting to be evidence of title to those Placement Shares to us, whereupon we shall, within

seven days from the receipt of such notification and documents, if any, pay to him all monies paid

by him for those Shares, without interest or any share of revenue or other benefit arising therefrom

and at his own risk, and the issue of those Shares shall be deemed to be void, and he will not have

any claim against us, the Issue Manager, Sponsor and Placement Agent or the Sub-Placement

Agent.

Pursuant to Section 242 of the SFA, the Authority may, in certain circumstances issue a stop order

(the “Stop Order”) to our Company, direct that no Shares or no further Shares to which this Offer

Document relates be allotted or issued. Such circumstances will include a situation where this

Offer Document (a) contains any statement or matter which, in the Authority’s opinion, is false or

misleading, (b) omits any information that should have been included in it under the SFA, or (c)

does not, in the Authority’s opinion, comply with the requirements of the SFA, or (d) the Authority

is of the opinion that it is in the public interest to do so.

In the event that the Authority issues a Stop Order and applications to subscribe for the Placement

Shares have been made prior to the Stop Order, then:

(a) where the Placement Shares have not been issued to the applicants, the applications for the

Placement Shares shall be deemed to have been withdrawn and cancelled and our Company

shall, within 14 days from the date of the Stop Order, pay to the applicants all monies the

applicants have paid on account of their applications for the Placement Shares; or

(b) where the Placement Shares have been issued to the applicants, the issue of the Placement

Shares shall be deemed to be void and our Company shall, within 14 days from the date of

the Stop Order, pay to the applicants all monies paid by them for the Placement Shares.


20

Such monies paid in respect of an application will be returned to the applicants at their own risk,

without interest or any share of revenue or other benefit arising therefrom, and they will not have

any claims against our Company, the Issue Manager, Sponsor and Placement Agent and the

Sub-Placement Agent.

Neither us, the Issue Manager, Sponsor and Placement Agent, the Sub-Placement Agent nor any

other parties involved in the Placement is making any representation to any person regarding the

legality of an investment by such person under any investment or other laws or regulations. No

information in this Offer Document should be considered as being business, legal or tax advice

regarding an investment in our Shares. Each prospective investor should consult his own

professional or other advisers for business, legal or tax advice regarding an investment in our

Shares.

No person has been or is authorised to give any information or to make any representation not

contained in this Offer Document in connection with the Placement and, if given or made, such

information or representation must not be relied upon as having been authorised by us, the Issue

Manager, Sponsor and Placement Agent or the Sub-Placement Agent. Neither the delivery of this

Offer Document and the Application Forms nor any documents relating to the Placement, nor the

Placement shall, under any circumstances, constitute a continuing representation or create any

suggestion or implication that there has been no change or development reasonably likely to

create any change in our affairs, conditions or prospects, or the Placement Shares or in the

statements of fact or information contained in this Offer Document since the date of this Offer

Document. Where such changes occur and are material or are required to be disclosed by law, the

SGX-ST and/or any other regulatory or supervisory body or agency, we may make an

announcement of the same to the SGX-ST and the public and if required, we may lodge a

supplementary or replacement Offer Document with the SGX-ST and will comply with the

requirements of the SFA and/or any other requirements of the SGX-ST. All applicants should take

note of any such announcements and, upon the release of such an announcement, shall be

deemed to have notice of such changes.

Save as expressly stated in this Offer Document, nothing herein is, or may be relied upon as, a

promise or representation as to our future performance or policies. The Placement Shares are

offered for subscription solely on the basis of the information contained and representations made

in this Offer Document.

This Offer Document has been prepared solely for the purpose of the Placement and may not be

relied upon by any persons other than the applicants in connection with their application for the

Placement Shares or for any other purpose.

This Offer Document does not constitute an offer, solicitation or invitation of the Placement

Shares in any jurisdiction in which such offer, solicitation or invitation is unlawful or

unauthorised, nor does it constitute an offer, solicitation or invitation to any person to

whom it is unlawful to make such offer, solicitation or invitation.

Copies of this Offer Document and the Application Forms may be obtained on request, subject to

availability during office hours, from:

PrimePartners Corporate Finance Pte. Ltd.

20 Cecil Street

#21-02 Equity Plaza

Singapore 049705

UOB Kay Hian Private Limited

8 Anthony Road

#01-01

Singapore 229957

A copy of this Offer Document is also available on the SGX-ST website at http://www.sgx.com.


21

The Placement will open from 1 December 2014 to 5 December 2014.

The Application List will open immediately upon the registration of this Offer Document by

the SGX-ST, acting as agent on behalf of the Authority, on 1 December 2014 and will remain

open until 12.00 noon on 5 December 2014 or for such further period or periods as our

Directors may, in consultation with the Issue Manager, Sponsor and Placement Agent as

well as the Sub-Placement Agent, in their absolute discretion, decide, subject to any

limitation under all applicable laws and regulations. In the event a supplementary offer

document or replacement offer document is lodged with the SGX-ST, acting as agent on

behalf of the Authority, the Application List will remain open for at least 14 days after the

lodgement of the supplementary or replacement offer document.

Details of the procedures for application of the Placement Shares are set out in “Appendix

E – Terms, Conditions and Procedures for Application and Acceptance” to this Offer

Document.


22

An indicative timetable on the trading of our Shares is set out below:

Indicative date/time Event

1 December 2014 (immediately upon

registration of

this Offer Document)

Open of Placement

5 December 2014 at 12.00 noon Close of Application List

9 December 2014 at 9.00 a.m. Commence trading on a “ready” basis

12 December 2014 Settlement date for all trades done on a “ready” basis

The above timetable is only indicative as it assumes that the date of closing of the Application List

will be on 5 December 2014, the date of admission of our Company to the Official List of Catalist

will be on 9 December 2014, the shareholding spread requirement will be complied with and the

Placement Shares will be issued and fully paid-up prior to 9 December 2014. The actual date on

which our Shares will commence trading on a “ready” basis will be announced when it is confirmed

by the SGX-ST.

The above timetable and procedures may be subject to such modifications as the SGX-ST may,

in its absolute discretion, decide, including the commencement of trading on a “ready” basis.

In the event of any changes in the closure of the Application List or the time period during which

the Placement is open, we will publicly announce the same:

(a) through an SGXNET announcement to be posted on the Internet at the SGX-ST website at

http://www.sgx.com; and

(b) in a local newspaper(s) in Singapore.

We will publicly announce the level of subscription and the results of the distribution of the

Placement Shares pursuant to the Placement as soon as it is practicable after the close of the

Application List through channels in (a) and (b) above.

Investors should consult the SGX-ST’s announcement on “ready” trading date released on

the Internet (at the SGX-ST website at http://www.sgx.com), or the newspapers or check

with their brokers for the date on which trading on a “ready” basis will commence.

INDICATIVE TIMETABLE FOR LISTING

23

The Placement

The Placement is for 27,500,000 Placement Shares offered in Singapore and the Listing is

managed and sponsored by PPCF.

Prior to the Placement, there has been no public market for our Shares. The Placement Price is

determined by our Company in consultation with the Issue Manager, Sponsor and Placement

Agent as well as the Sub-Placement Agent, and after taking into consideration, among others,

prevailing market conditions and the estimated market demand for the Placement Shares

determined through a book-building process. The Placement Price is the same for all Placement

Shares and is payable in full on application.

Pursuant to the Management Agreement entered into between us and PPCF as set out in the

section titled “General and Statutory Information – Management and Placement Arrangements” of

this Offer Document, our Company has appointed PPCF and PPCF has agreed to manage and to

act as full sponsor for the Listing. The Issue Manager, Sponsor and Placement Agent will receive

a management fee for its services rendered in connection with the Placement.

The Placement Shares are made available to members of the public and institutional investors

who may apply through their brokers or financial institutions by way of the Application Forms.

Applications for the Placement Shares may only be made by way of printed Application Forms as

described in “Appendix E – Terms, Conditions and Procedures for Application and Acceptance” to

this Offer Document.

Pursuant to the Placement Agreement entered into between us and the Placement Agent as set

out in the section titled “General and Statutory Information – Management and Placement

Arrangements” of this Offer Document, our Company has appointed PPCF as the Placement

Agent and PPCF has agreed to procure subscriptions for the Placement Shares for a placement

commission of 3.5% of the Placement Price, payable by us, for the total number of Placement

Shares successfully subscribed for. Subject to any applicable laws and regulations, our Company

agrees that the Placement Agent shall be at liberty to appoint at its own expense one or more

sub-placement agents under the Placement Agreement upon such terms and conditions as the

Placement Agent may deem fit. Subscribers of the Placement Shares may be required to pay

brokerage or selling commission of 1.0% of the Placement Price (and the prevailing GST thereon,

if applicable) to the Placement Agent, the Sub-Placement Agent or any other sub-placement agent

that may be appointed by the Placement Agent.

Subscription for Placement Shares

To the best of our knowledge and belief, none of our Directors or Substantial Shareholders intends

to subscribe for the Placement Shares pursuant to the Placement. As far as we are aware, none

of our Independent Directors, the members of our Company’s management or employees intend

to subscribe for more than 5.0% of the Placement Shares in the Placement.

To the best of our knowledge and belief, as at the date of this Offer Document, we are not aware

of any person who intends to subscribe for more than 5.0% of the Placement Shares in the

Placement. However, through a book-building process to assess market demand for our Shares,

there may be person(s) who may indicate an interest to subscribe for more than 5.0% of the

Placement Shares. If such person(s) were to make an application for more than 5.0% of the

Placement Shares and are subsequently allotted and/or allocated such number of Shares, we will

PLAN OF DISTRIBUTION

24

make the necessary announcements at an appropriate time. The final allotment and allocation of

Shares will be in accordance with the shareholding spread and distribution guidelines as set out

in the Rules of Catalist.

No Shares shall be allotted, allocated and/or issued on the basis of this Offer Document later than

six months after the date of registration of this Offer Document by SGX-ST, acting as agent on

behalf of the Authority.

Interests of the Issue Manager, Sponsor and Placement Agent

In the reasonable opinion of our Directors, PPCF does not have a material relationship with our

Company save as disclosed below and in the section titled “General and Statutory Information –

Management and Placement Arrangements” of this Offer Document:

(a) PPCF is the Issue Manager, Sponsor and Placement Agent in relation to the Listing;

(b) PPCF will be the continuing Sponsor of our Company for a period of three years from the

date our Company is admitted and listed on Catalist; and

(c) pursuant to the Management Agreement and as part of PPCF’s fees as the Issue Manager

and Sponsor, our Company allotted and issued 1,875,000 new Shares at the Placement

Price to PPCF, representing 1.5% of the issued and paid-up share capital of our Company

immediately prior to the Placement. After completion of the relevant moratorium period as set

out in the section titled “Shareholders – Moratorium” of this Offer Document, PPCF may

dispose its shareholding interest in our Company at its discretion.

Interests of the Sub-Placement Agent

In the reasonable opinion of our Directors, UOBKH does not have a material relationship with our

Company save that UOBKH is the Sub-Placement Agent of the Placement as disclosed in the

section titled “General and Statutory Information – Management and Placement Arrangements” of

this Offer Document.

PLAN OF DISTRIBUTION

25

The following summary highlights certain information found in greater detail elsewhere in this

Offer Document. Terms defined elsewhere in this Offer Document have the same meaning when

used herein. In addition to this summary, we urge you to read the entire Offer Document carefully,

especially the section titled “Risk Factors” of this Offer Document, before deciding to invest in our

Shares.

OUR COMPANY

Our Company was incorporated in Singapore on 1 August 2014 under the Companies Act as a

private company limited by shares, under the name of “Huationg Global Private Limited”. Our

Company’s registration number is 201422395Z. Our Company was converted into a public limited

company and the name of our Company was changed to “Huationg Global Limited” in connection

therewith on 26 November 2014. Our Company became the holding company of our Group

following the completion of the Restructuring Exercise on 11 November 2014. For more

information, please refer to the section titled “Restructuring Exercise” of this Offer Document.

BUSINESS OVERVIEW

We are principally engaged in the provision of civil engineering services for infrastructure projects

and ancillary inland logistics support services. We are also involved in the sale of construction

material, including the manufacture and supply of LSS, which is used as non-structural fill for

buildings and other structures and for backfill in utility and road construction, as well as the sale

of RCA produced from the recycling of construction waste and aggregates.

Our Group’s businesses can be categorised into three main segments as follows:

(a) civil engineering services;

(b) inland logistics support; and

(c) sale of construction materials.

Please refer to the section titled “General Information on our Group – Business Overview” of this

Offer Document for further details.

COMPETITIVE STRENGTHS

We believe that we are able to compete effectively with the following competitive strengths:

(a) we are a full-service integrated civil engineering solutions provider;

(b) we have an established track record and reputation of more than 30 years;

(c) we have an experienced and dedicated management team; and

(d) we are able to keep the cost of construction materials low as we have the ability to recycle

construction waste and aggregates.

Please refer to the section titled “General Information on our Group – Competitive Strengths” of

this Offer Document for more details.

OFFER DOCUMENT SUMMARY

26

SUMMARY OF OUR FINANCIAL INFORMATION

The following summary financial information of our Group should be read in conjunction with the

full text of this Offer Document, including the “Independent Auditor’s Report and Audited

Combined Financial Statements for the Financial Years ended 31 December 2011, 2012 and

2013”, the “Independent Auditor’s Review Report and Unaudited Interim Condensed Combined

Financial Statements for the Financial Period from 1 January 2014 to 30 June 2014” and the

“Independent Auditor’s Assurance Report and Unaudited Pro Forma Combined Financial

Information for the Financial Year Ended 31 December 2013 and Financial Period from 1 January

2014 to 30 June 2014” as set out in Appendices A, B and C respectively to and the section titled

“Management’s Discussion and Analysis of Results of Operations and Financial Position” of this

Offer Document.

Selected Combined Statements of Comprehensive Income of Our Group

Audited Unaudited

(S$’000) FY2011 FY2012 FY2013 HY2013 HY2014

Revenue 80,984 92,213 108,475 52,831 67,609

Gross profit 14,992 14,485 16,498 8,654 10,333

Profit before income tax(1) 5,365 4,494 6,328 2,579 3,579

Profit attributable to owners of

the parent(1) 4,535 3,981 4,963 2,011 2,999

EPS (cents)(2) 3.66 3.21 4.01 1.62 2.42

Adjusted EPS (cents)(1) (3) 3.00 2.63 3.28 1.33 1.98

Notes:

(1) Had the Service Agreements (set out in the section titled “Directors, Executive Officers and Employees – Service

Agreements” of this Offer Document) been in place since 1 January 2013, our profit before income tax, profit

attributable to owners of the parent and adjusted EPS computed based on our post-Placement share capital

comprising 151,384,600 Shares for FY2013 would have been approximately S$5.4 million, S$4.2 million and 2.79

cents respectively.

(2) For comparative purposes, EPS for the Period Under Review has been computed based on the profit attributable

to owners of the parent and the pre-Placement share capital comprising 123,884,600 Shares.

(3) For comparative purposes, adjusted EPS for the Period Under Review have been computed based on the profit

attributable to owners of the parent and the post-Placement share capital comprising 151,384,600 Shares.


27

Selected Combined Statements of Financial Position of Our Group

(S$’000)

As at

31 December 2013

(Audited)

As at

30 June 2014

(Unaudited)

Current assets 56,240 72,706

Non-current assets 77,045 87,094

Total assets 133,285 159,800

Current liabilities 59,130 75,868

Non-current liabilities 36,940 44,958

Total liabilities 96,070 120,826

Total equity 37,215 38,974

Equity attributable to owners of the parent 36,902 38,635

NTA per Share (cents)(1) 29.78 25.77

Note:

(1) The NTA per Share is computed based on the pre-Placement share capital comprising 123,884,600 Shares and the

equity attributable to owners of the parent net of any intangible assets and gain on revaluation of our PPE.

OUR PROSPECTS

Our Directors believe that the prospects of the Group for the foreseeable future are encouraging

for the following reasons:

(a) Sustained Demand for Civil Engineering Construction

BCA(1) expects the civil engineering construction demand to grow between S$8.9 billion and

S$10.3 billion in 2014 and for construction demand to be sustained between S$25.0 billion

and S$34.0 billion per annum in 2015 and 2016, with 40.0% of the total demand expected to

come from civil engineering projects.

(b) Population Growth

According to Singapore’s Population White Paper 2013(2), the population of Singapore is

projected to be between 5.8 million and 6.0 million in 2020 and between 6.5 million and 6.9

million in 2030. In order to accommodate the growing population, the Singapore government

is expected to sustain its spending in expanding the capacity of Singapore’s transportation,

industrial and public housing infrastructure.


28

(c) Pipeline of Civil Infrastructure Projects

The Singapore government has unveiled plans to improve and expand the capacity of,

among others, the land transport system, the road network and underground systems such

as drainage and sewerage systems, in Singapore(3).

A detailed discussion of our prospects is set out in the section titled “General Information on our

Group – Prospects” of this Offer Document.

Notes:

(1) We have not sought the consent of BCA to the inclusion of the relevant information extracted from the relevant

website or publication and disclaim any responsibility in relation to reliance on these statistics and information. As

they have not consented to the inclusion of the above information in this Offer Document for the purposes of section

249 of the SFA, they are therefore not liable for the relevant information under section 253 and 254 of the SFA. While

reasonable actions have been taken by our Directors to ensure that the relevant statements from the relevant

information are reproduced in their proper form and context, and that the information is extracted accurately and

fairly from the relevant website or publication, all other parties and ourselves have not conducted an independent

review of the information contacted in the relevant website or publication and have not verified the accuracy of the

contents of the relevant statements.

(2) We have not sought the consent of the National Population and Talent Division to the inclusion of the relevant

information extracted from the relevant website or publication and disclaim any responsibility in relation to reliance

on these statistics and information. As they have not consented to the inclusion of the above information in this Offer

Document for the purposes of section 249 of the SFA, they are therefore not liable for the relevant information under

section 253 and 254 of the SFA. While reasonable actions have been taken by our Directors to ensure that the

relevant statements from the relevant information are reproduced in their proper form and context, and that the

information is extracted accurately and fairly from the relevant website or publication, all other parties and ourselves

have not conducted an independent review of the information contacted in the relevant website or publication and

have not verified the accuracy of the contents of the relevant statements.

(3) We have not sought the consent of LTA to the inclusion of the relevant information extracted from the relevant









BUSINESS STRATEGIES AND FUTURE PLANS

Our business strategies and future plans for the future growth and expansion of our business are

as follows:

(a) to advance our position as a service provider of civil engineering works for the construction

industry in Singapore;

(b) to expand our customer base for LSS to overseas markets while maintaining our presence

in the Singapore market;

(c) to explore acquisitions, joint ventures and strategic alliances to expand our business; and

(d) to focus on public sector projects.

Please refer to the section titled “General Information on our Group – Business Strategies and

Future Plans” of this Offer Document for further details.


29

ORDER BOOK

As at the Latest Practicable Date, our order book for our civil engineering business stood at

approximately S$114.3 million, which will be recognised as revenue for our Group over the next

one to three years.

As revenue from our inland logistics support business is mainly driven by short-term project work

requirements of our customers, our order book for inland logistics support income (in respect of

project works) as at any particular date is subject to changes in our customers’ project schedules

or cancellations of projects and may not be indicative of revenue for any succeeding period. In

relation to revenue from our sale of construction materials business, our trading customers place

orders for construction materials in accordance with their operational requirements which may

vary from time to time. In this connection, we do not have a meaningful order book for these two

business segments.

OUR CONTACT DETAILS

Our registered office and principal place of business is at 9 Benoi Crescent, Singapore 629972. The

telephone and facsimile numbers for our registered office and principal place of business are (65) 6366

5005 and (65) 6368 1391 respectively. Our internet address is http://www.huationg.com.sg. Information

contained in our website does not constitute part of this Offer Document.


30

Placement Size : 27,500,000 Placement Shares offered in Singapore

The Placement Shares, upon allotment and issue, will rank

pari passu in all respects with the existing issued Shares.

Placement Price : S$0.20 for each Placement Share, payable in full on

application.

The Placement : The Placement comprises a placement by the Placement

Agent on behalf of our Company of 27,500,000 Placement

Shares at the Placement Price by way of placement, subject

to and on the terms and conditions of this Offer Document.

Purpose of the Placement : Our Directors believe that the listing of our Company and the

quotation of our Shares on Catalist will enhance our public

image both locally and overseas and enable us to raise funds

from the capital markets to fund the expansion of our business

operations.

The Placement will also provide members of the public with an

opportunity to participate in the equity of our Company. In

addition, the proceeds from the Placement Shares will provide

us with additional capital to fund our business expansion and

to be used as general working capital of our Company.

Listing status : Prior to the Placement, there has been no public market for

our Shares. Our Shares will be quoted in Singapore dollars on

Catalist, subject to admission of our Company to the Official

List of Catalist and permission to deal in, and for quotation of,

our Shares being granted by the SGX-ST.

Risk Factors : Investing in our Shares involves risks which are described in

the section titled “Risk Factors” of this Offer Document.

Use of Proceeds : Please refer to the section titled “Use of Proceeds and Listing

Expenses” of this Offer Document for more details.

THE PLACEMENT

31

PLACEMENT PRICE 20.00 cents

NTA

NTA per Share based on the unaudited interim condensed combined

statement of financial position of our Group as at 30 June 2014 after

adjusting for the Restructuring Exercise, revaluation gain on our PPE and

the issue of the FC Shares and the PPCF Shares (the “Adjusted NTA”):

(a) before adjusting for the estimated net proceeds from the issue of the

Placement Shares and based on our pre-Placement share capital

comprising 123,884,600 Shares

26.11 cents

(b) after adjusting for the estimated net proceeds from the issue of the

Placement Shares and based on our post-Placement share capital


24.69 cents

Premium/(Discount) of Placement Price to the Adjusted NTA per Share as

at 30 June 2014:

(a) before adjusting for the estimated net proceeds from the issue of the

Placement Shares and based on our pre-Placement share capital


(23.4)%

(b) after adjusting for the estimated net proceeds from the issue of the

Placement Shares and based on our post-Placement share capital


(19.0)%

EPS

Audited EPS of our Group for FY2013 based on our Company’s post-

Placement share capital comprising 151,384,600 Shares

3.28 cents

Audited EPS of our Group for FY2013 based on our Company’s post-

Placement share capital comprising 151,384,600 Shares, assuming the

Service Agreements had been in place since 1 January 2013

2.79 cents

PER

Audited PER based on the Placement Price and the audited EPS of our

Group for FY2013

6.1 times

Audited PER based on the Placement Price and the audited EPS of our

Group for FY2013, assuming the Service Agreements had been in place

since 1 January 2013

7.2 times

ISSUE STATISTICS

32

Net Operating Cash Flow

Audited net operating cash flow per Share of our Group for FY2013 based

on our Company’s post-Placement share capital comprising 151,384,600

Shares

5.88 cents

Audited net operating cash flow per Share of our Group for FY2013 based

on our Company’s post-Placement share capital comprising 151,384,600

Shares, assuming the Service Agreements had been in place since 1

January 2013

5.28 cents

Price To Net Operating Cash Flow

Ratio of Placement Price to audited net operating cash flow per Share for

FY2013, based on our Company’s post-Placement share capital


3.4 times

Ratio of Placement Price to audited net operating cash flow per Share for

FY2013, based on our Company’s post-Placement share capital

comprising 151,384,600 Shares, assuming the Service Agreements had

been in place since 1 January 2013

3.8 times

Market Capitalisation

Market capitalisation based on the Placement Price and our Company’s

post-Placement share capital comprising 151,384,600 Shares

S$30.3 million

ISSUE STATISTICS

33

Prospective investors should consider carefully the following risk factors and all other information

contained in this Offer Document before deciding whether to invest in our Shares. Some of the

following considerations relate principally to the industry in which we operate and our business in

general. Other considerations relate principally to general social, economic, political and

regulatory conditions, the securities market and ownership of our Shares, including possible

future dilution in the value of our Shares.

You should also note that certain of the statements set forth below constitute “forward-looking

statements” that involve risks and uncertainties. If any of the following risk factors and

uncertainties develops into actual events, our business, financial position, results of operations or

cash flows may be adversely affected. The risks described below are not the only ones that we

face. Additional risks not presently known to us or that we currently deem immaterial may also

impair our business operations. The trading price of our Shares could decline due to any of these

risks and you may lose all or part of your investment. To the best of our Directors’ belief and

knowledge, all the risk factors that are material to investors in making an informed judgement have

been set out below.

RISKS RELATING TO OUR BUSINESS OR THE INDUSTRY IN WHICH WE OPERATE

Our business is largely dependent on the level of the government’s spending on civil

infrastructure projects

Our business largely depends on continued spending by the relevant Singapore government

agencies on civil infrastructure projects such as public transportation infrastructure.

Various factors would affect, among others, the nature, scale, location and timing of the Singapore

government’s public investment plans in the civil infrastructure of Singapore. These factors

include the government’s policy and priorities regarding different regional economies across

Singapore, deregulation to encourage private sector participation in the civil infrastructure sector

and the general condition and prospects of the overall economy of Singapore. Any significant

reduction in the Singapore government’s budget relating to infrastructure spending, particularly

the transportation infrastructure sector, will lead to a decline in revenue arising from a smaller

number of projects, lower contract value for our projects and/or a decline in profit margin due to

increased competition for available projects. This could have a material and adverse effect on our

business, financial position and results of operations.

We may be unable to secure new projects or there may be standstills in or cancellations of

secured projects

As our business is undertaken on a project basis and such projects are non-recurring, it is critical

that we continuously and consistently secure new projects. We cannot assure you that we will be

able to do so. Accordingly, our historical performance may not be an indication of our future

performance. In the event that we are not able to secure new projects of similar value, size and

margins, there would be an adverse impact on our financial performance.

Standstills or cancellations of secured projects due to factors such as changes in market

conditions or changes in the government’s plans or budget may lead to idle or excess capacity and

may adversely affect us if we are not able to secure replacement projects on a timely basis or on

terms which are not unfavourable to us. In addition, there may be a lapse of time between the

completion of our projects and the commencement of subsequent projects. As such, our business,

financial position and results of operations during such periods may be adversely affected.

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34

We face a risk of disputes with and claims by our customers and/or our suppliers or

sub-contractors

Disputes and claims may arise, from time to time, between our Group and our customers and/or

sub-contractors or suppliers for various reasons such as delays, defective workmanship,

materials used and non-compliance with specifications.

In particular, it is not uncommon for our customers to request for changes in design which require

additional works. However, as a result of such changes in design, we may have to incur additional

time and cost and accordingly, submit claims to the main contractors in the form of variation

orders. Due to the nature of our industry, work on variation orders are generally commenced or are

executed prior to the variation orders being approved due to, among others, time specified by our

customers for completion of the project. In the event that there are such disputes and we are

required to bear part of the variation costs due to lower final value of such variation costs as

certified by the project consultant, our Group’s business, financial position and results of

operations, may be adversely affected.

We are exposed to general fluctuations in raw material and fuel prices

Our civil engineering business requires fuel and raw materials including, but not limited to,

reinforcing bars, sand and concrete for our operations. The costs of fuel and raw materials

accounted for approximately 30.9%, 26.7%, 32.4% and 26.1% of our Group’s revenue in FY2011,

FY2012, FY2013 and HY2014 respectively.

We generally obtain our supplies of fuel based on short-term contracts, and raw materials on a

case-by-case basis according to the requirements of each project. We are unable to assure you

that we will be able to pass on any future increase in raw material and fuel prices to our customers

or offset the effects of any future increase in prices. Any significant increase in raw material and

fuel prices globally will result in a direct increase in our operational costs, adversely affecting our

business and results of operations.

We are liable for delays in the completion of projects

Delays in the completion of a project may occur from time to time due to several factors, including,

but not limited to, adverse weather conditions, shortages of labour, breakdown of equipment, lack

of construction materials, welding defects, the occurrence of natural disasters, labour disputes,

disputes with suppliers and sub-contractors and industrial accidents.

A contract between ourselves and the main contractor would normally provide for the payment of

liquidated damages by us in the event the project is completed after the date of completion

stipulated in the contract. As such, in the event of any delay in the completion of the project

attributable to us, although we may re-allocate resources to speed up progress for such project,

if we are unable to complete the project within the term stipulated in the contract, we may

nevertheless be liable to pay liquidated damages under the contract, and this will adversely affect

our earnings and reduce our profit margin for the project. In such an event, our results of

operations may be adversely affected.

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We are exposed to project cost overruns

In the preparation for a tender submission for projects, internal costing and estimates of labour

and material costs are compiled by the project managers. The contract value quoted in the tender

submission is determined after the evaluation of the scope of work and all related costs, including

indicative prices of suppliers and sub-contractors. However, unforeseen circumstances such as

unanticipated price fluctuations in equipment and manpower costs, damages and errors in

estimation may arise during the course of the project.

As these circumstances may require us to incur additional costs and work which are not factored

into the contract value, they may lead to cost overruns which may reduce our profit margin for the

project and have an adverse impact on our overall profitability. This is particularly so if the contract

is a long-term contract. In the event that we are unable to recover our costs fully, our results of

operations may be adversely affected.

We do not have any long-term fixed price agreements with our suppliers

We do not have any long-term fixed price agreements with any of our suppliers for raw materials,

equipment, tools and other products required in connection with the supply of our products or

services. Generally, we obtain our supplies of raw materials on a case-by-case basis according to

the requirements of each project, and we are generally able to pass on the costs to our customers.

We cannot assure you that we will be able to continue sourcing these products from suppliers at

prices which are favourable to us. In the event that our suppliers terminate or withhold the supply

of their products, we may not be able to seek alternative sources in a timely manner and/or at

reasonable prices, or at all. This may adversely affect our ability to meet our customers’ orders

and thereby affect our business and results of operations.

We may be affected by competition from existing and new industry players

As a substantial number of our projects are secured through open tenders, an increase in the

number of qualified competitors would increase competition. In the event that our competitors are

more competitive or respond to changes in market conditions more swiftly or effectively than we

do, this may result in the loss of tender bids or the lowering of our profit margin in order to maintain

our competitiveness. Failure to keep abreast of technological advancements and design

improvements, resulting in failure to provide services as cost-effective and efficient as our

competitors, may render us less competitive. Our business and results of operations may be

adversely affected if competition intensifies.

We cannot assure you that we will be able to compete effectively with our existing and future

competitors and adapt quickly to changing market conditions and trends. Any failure by us to

remain competitive will adversely affect our business, results of operations and financial position.

For a list of our main competitors, please refer to the section titled “General Information on our

Group – Competition”.

We are exposed to disruptions of the supply of raw materials

We are dependent on our suppliers for timely delivery of raw materials and we are unable to

assure you that our suppliers will be able to deliver the necessary raw materials on time. In

addition, we do not maintain a large inventory of raw materials and usually place orders for

acquiring raw materials one month in advance before the commencement of any project. In the

event our suppliers default on their contractual obligations or in the event of a disruption to the

RISK FACTORS

36

supply of our raw materials, we may be unable to source raw materials from alternative suppliers

in a timely manner and at competitive prices, or at all, and our contractual obligations to our

customers will in turn be affected. In such an event, our business and results of operations may

be adversely affected.

While we try to minimise the disruptions to our supply of raw materials by procuring from our

regular suppliers and taking into consideration the delivery time for raw materials when planning

each project’s schedule, we are unable to provide any assurance that we will at all times be able

to find a supplier that is able to supply the raw materials of a quality, quantity, price and/or delivery

time acceptable to us, taking into account the project schedule. We also try to minimise exposure

to disruption in supply of raw materials by recycling construction waste and aggregates for our

own consumption. However, we cannot assure you that we will be able to produce sufficient

recycling output in order for us to complete our works in a timely fashion in the event of a

disruption in supply from external sources.

Should there be a disruption to our supply of raw materials, our ability to complete a project in time

may be affected, which may have an adverse effect on our business and results of operations.

Our Group may be adversely affected by the uncertain global economic outlook

Our business is susceptible to the general economic conditions in Singapore. Factors such as

gross domestic product growth, disposable income and unemployment rates will affect the

demand for construction and therefore civil engineering activities, which may directly or indirectly

affect our business and results of operations.

Given the uncertainties of the future economic outlook, we cannot assure you that we will be able

to maintain or continue the growth of our business, or that we will be able to react promptly to any

changes in economic conditions. In the event that we fail to react promptly to the changing

economic conditions, our financial position and results of operations could be adversely affected.

We cannot assure you that the factors which have contributed to the success of our Group during

the past few years will continue to occur in the future. Our business, financial position and results

of operations may be adversely affected if these conditions deteriorate in the future.

We face non-payment risks

For the majority of our projects, there is a time lag between any expenditure incurred and actual

receipt of payment from our customers. The first progress payment may be received two to three

months after the commencement of work or purchase of raw materials. The remaining payments

will be payable upon completion of each phase of the project and will be received progressively

during the course of the project, which may take up to five years to complete. Typically, invoices

to customers are issued only upon the certification by our project manager and the project

manager of the main contractor of each project for the works completed, which may take one and

a half months to two months after the completion of works by our Group. As at 31 December 2011,

31 December 2012, 31 December 2013 and 30 June 2014, the gross amount due from our

customers for contracts that are work-in-progress amounted to approximately S$4.0 million, S$9.3

million, S$11.1 million and S$9.9 million respectively.

Several of our customers may default on their payments to us, owing to events or circumstances

that are difficult to anticipate or detect and that would have an impact on our customers’ ability to

make timely payments. As such, we would have to make provisions for doubtful debts, or incur

RISK FACTORS

37

write-offs, which may have an adverse effect on our operating results and profitability. For more

details, please refer to section titled “General Information on our Company Group – Credit Policy”

of this Offer Document.

Further, we occupy land lots which are licensed by the main contractors of the projects in which

we are involved. As part of the contractual arrangement, we will usually pay the full sum of the

licence fees and security deposit to the main contractor. However, as the licence arrangements

are usually entered into only between the main contractor and the relevant authority granting the

licence for the use of the land lot, the security deposit will usually be returned to the main

contractor upon the expiry of the licence, and we may not be able to recover the security deposit

in the event that the main contractor fails to pay us due to insolvency or any other reason.

We may be involved in legal and other proceedings from time to time

Due to the nature of our business, we may be involved in disputes with various parties, such as

our customers, other transportation companies or logistics operators, from time to time. These

disputes may result in legal or other proceedings which may cause disruption and delays to our

business, in addition to the additional costs that may be incurred in the settlement or resolution

of such disputes. We may also have disagreements with regulatory bodies in the course of our

operations, where we may be subject to administrative proceedings and/or unfavourable orders,

directives or decrees that may result in financial losses. In the event we are unable to resolve such

disputes or proceedings in a timely manner or at all, our business and results of operations will

be adversely affected. Please refer to the section titled “General and Statutory Information –

Litigation” of this Offer Document for further details.

We may be affected by accidents at our civil engineering sites and our storage yard

Due to the nature of our business, accidents or mishaps may occur at the civil engineering sites

for our projects or at our storage yard even though we have put in place the appropriate safety

measures. Such accidents or mishaps may occur as a result of the actions or defaults of our

employees or of those of our sub-contractors, which may severely disrupt our operations and lead

to a delay in the completion of a project and in the event of such delay, we could be liable to pay

liquidated damages under the contract with the main contractor or developer. In such event, our

business, financial performance and financial condition may be materially and adversely affected.

Further, such accidents or mishaps may lead to third party claims and any significant claims which

are not covered by our insurance policies may materially and adversely affect our results of

operations and financial condition. In addition, any accidents or mishaps resulting in significant

damage to our storage yard, equipment or inventory may require capital expenditure to make good

the damage and to the extent that the expenditure is not recoverable from our existing insurance

coverage, such expenditure would have a material adverse effect on our business, results of

operations and financial position.

Furthermore, under the debarment scheme for contractors with bad safety records introduced by

MOM, if we are found to have violated safety requirements at our work sites, we will be given

demerit points, which may result in debarment. Once debarred, MOM will freeze the man-year

entitlement that has been issued to us for a period of 12 months and MOM will also make a

recommendation to the Standing Committee on Debarment, Ministry of Finance, to bar us from

tendering for public projects in Singapore.

In addition, in the event that our work sites contravene the requisite safety standards imposed by

the regulatory authorities, we could be issued stop-work orders in respect of the particular work

site. The issuance of such stop-work orders may severely disrupt our operations and lead to a

RISK FACTORS

38

delay in the completion of a project. These circumstances would not only generate negative

publicity and adversely affect our market reputation, but would also have a material adverse

impact on our business, results of operations and financial condition. In September 2014, a fatal

accident took place between a tipper truck driven by a third party contractor’s employee and our

worker. MOM issued a stop-work order which was lifted after 10 days. MOM and the Singapore

Police Force are still in the process of conducting their investigations and although no penalty has

been imposed on us as at the Latest Practicable Date, we are unable to provide any assurance

that penalties such as fines will not be imposed on us in the future.

Our business may be dependent on the services of our sub-contractors

We may engage sub-contractors to provide various services for several of our projects, including,

among others, labour and transportation. These sub-contractors are selected based on, among

others, our past working experience with them, their competitiveness in terms of their pricing and

their past performance. However, we are unable to provide any assurance that the services

rendered by these sub-contractors will be satisfactory, that they will meet our requirements and/or

that they will deliver in a timely manner. In particular, sub-contractors providing transport services

may, during times of an increase in demand for transport services, default on the performance of

their services at the last minute in order to perform services for main contractors which offer higher

fees. In the event of any loss or damage which arises from the default of the sub-contractors

engaged by us, we may nevertheless be liable for our sub-contractors’ default. Thus, these

sub-contractors’ inability to carry out the work that they were engaged for may cause delays in the

completion of our construction projects, resulting in additional costs to us or exposure to the risk

of having to pay liquidated damages.

We are unable to provide any assurance that we will be able to continue sourcing these services

from our major sub-contractors at prices that are not unfavourable to us. In the event that our

major sub-contractors terminate the supply of their services to us, we may not be able to seek

alternative sources in a timely manner and/or at reasonable prices, or at all. Under such

circumstances, our projects may be subject to delays or cost overruns which could have a material

adverse effect on our financial position and results of operations.

In addition, our sub-contractors may also employ foreign workers to work on our work sites. In the

event any of these foreign workers have not been employed in accordance with the EFMA and are

permitted to enter or remain at our work site, as a main contractor who has control of access to

the work site, we may be liable on conviction, to (a) a fine not exceeding S$15,000 or to

imprisonment for a term not exceeding 12 months or to both; and (b) on a second or subsequent

conviction, to a fine not exceeding S$30,000 or to imprisonment for a term not exceeding two

years or both.

We require various licences, permits and accreditations to operate our business and we are

exposed to a risk of non-renewal, non-granting or suspension of our licences, permits and

accreditations

We are required to obtain various licences, permits and accreditations for the operation of our

business. Details of these licences, permits and accreditations are described in the sections titled

“General Information on our Group – Government Regulations” and “General Information on our

Group – Licences, Permits, Approvals, Certifications and Awards” of this Offer Document.

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39

Our licences, permits and accreditations are generally subject to conditions stipulated by the

relevant issuing authorities or bodies and/or relevant laws or regulations under which such

licences, permits and accreditations are issued. Accordingly, we are required to constantly assess

and review our processes and operations to ensure that we are in compliance with the relevant

conditions, laws and regulations.

Failure to comply with such conditions, laws or regulations could result in the revocation,

non-renewal or downgrade of the relevant licence, permit or accreditation or imposition of fines or

other penalties. In addition, any changes to the existing legislation and regulations may require us

to apply for new licences, permits and accreditations and we cannot assure you that we will be

able to obtain these new licences, permits and accreditations. In such an event, our business,

results of operations and financial position will be adversely affected.

We have experienced and may continue to experience negative working capital

We had negative working capital of S$7.1 million, S$7.6 million, S$2.9 million and S$3.2 million

as at the end of FY2011, FY2012, FY2013 and HY2014 respectively. The negative working capital

position was mainly due to (i) the purchase of certain equipment and the renewal of COEs for our

fleet of vehicles using cash, (ii) a general mismatch between the shorter tenor of the credit

facilities taken to fund the acquisitions of our fixed assets such as trucks and vehicles which have

longer useful lives; and (iii) dividends paid and payable to Shareholders. There was no breach of

loan covenants as at the end of FY2011, FY2012, FY2013, HY2014 and as at the Latest

Practicable Date.

We are subject to the risk that our current assets will be insufficient to meet our obligations under

the current liabilities. In such event, additional capital, debt or other forms of financing may be

required to fund our working capital. If any of the aforesaid events occur and we are unable, for

any reason, to raise additional capital, debt or other financing for our working capital

requirements, our business, results of operations, liquidity and financial position will be adversely

affected. Please refer to the sections titled “Management’s Discussion and Analysis of Results of

Operations and Financial Position – Review of Financial Position” and “Working Capital” of this

Offer Document for more information.

Our workers may work overtime in excess of permitted limits

Due to frequent tight deadlines for our contracted projects and the nature of the construction or

civil engineering industry, our workers often put in overtime hours. We currently have in place a

system to monitor the overtime hours of our workers as well as potential breaches of regulatory

thresholds for overtime work. Nonetheless, there may be instances where some of our workers

inadvertently exceed 72 hours a month of overtime work which is the monthly overtime limit

permitted under the Employment Act, especially during peak periods of our projects.

In the event that disciplinary proceedings are undertaken by the relevant regulatory authorities in

Singapore or elsewhere in relation to our use of labour in excess of the permitted overtime limits,

or if any penalties (financial or otherwise) are levied on us by the relevant regulatory authorities

in Singapore or elsewhere, our results of operations may be adversely affected.

LSS produced by us may not meet compressive strength requirements

The Unconfined Compressive Strength Test (the “UCS Test”) may be conducted upon request by

our customers in order to obtain a measure of the compressive strength of the LSS produced by

us. A sample of the batch of the LSS which had been used in construction is extracted and tested

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using a compression device which will conduct a range of tensile and compression tests on the

sample. As the process of manufacturing LSS requires extensive mixing and careful calibration of

the composition of the mixtures, and we may sometimes be required to modify the liquidity and

strength of the mixtures according to varying needs, we are subject to the risk that the composition

of the mixture or the degree of mixing is inadequate, and that the LSS mixture fails to meet the

compressive strength requirements as a result. In such event, we will have to incur additional cost

and manpower to remove and replace the batch of LSS which had been installed but which failed

the UCS Test.

We are dependent on our ability to obtain adequate financing to fund our operations

The contract sums for our projects are payable by our customers to us progressively, according

to the stage of completion of the work carried out for the relevant project. To complete our projects,

we will require adequate funding either from internal resources or external borrowings to fund the

working capital of our projects, which is utilised to, among others, purchase raw materials from our

suppliers for our civil engineering works or engage other sub-contractors for certain works to be

completed in order to meet the requirements and specifications of our projects. In the event that

we are unable to obtain such financing, our operations may be severely disrupted, which may

affect our ability to complete the projects on time, or at all. Should we be liable to pay liquidated

damages as a result, our results of operations and financial position may be materially and

adversely affected.

We may face uncertainties associated with the expansion of our business

In order to grow our business, we may also explore joint ventures, strategic alliances, acquisitions

or investment opportunities in businesses that are complementary to our business to gain access

to markets overseas. Overseas expansion involves numerous risks, including but not limited to the

financial costs of setting up overseas operations and working capital requirements. We cannot

assure you that our overseas operations will achieve a sufficient level of revenue which will cover

our operational costs and if we fail to manage such costs, our results of operations and financial

position may be adversely affected.

Participation in strategic alliances, acquisitions, or investments similarly involves numerous risks,

including but not limited to difficulties in the assimilation of the management, operations, services,

products and personnel and the possible diversion of management’s attention from other business

concerns. The successful implementation of our growth strategies depends on, among others, our

ability to identify suitable partners and the successful integration of their operations with ours. We

cannot assure you that we will be able to execute such growth strategies successfully and as

such, the performance of any strategic alliances, acquisitions or investments could fall short of

expectations.

We are dependent on our electronic management systems

We are dependent on our electronic management systems for our vehicle tracking system. Our

electronic management systems are susceptible to system failures, network and power

disruptions or other factors beyond our control. Although we update our software and conduct

systems checks regularly, we cannot assure you that we will be able to rectify or resolve system

failures or disruptions in a timely and cost effective manner. In such an event, our business

operations will be adversely affected.

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We are subject to a number of operating risks

Our operations are subject to various risks inherent in our industry such as, among others, fires,

natural disasters, outbreaks of diseases, explosions, encountering formations with abnormal

pressures and blowouts. A number of these risks could have severe consequences, including loss

of life or serious injury, significant damage to our suppliers and/or our clients’ assets and

equipment, environmental pollution, personal injury litigation, political consequences such as

conflicts with local or regional governmental authorities and damage to our reputation. Such

events may expose us to substantial financial and other liabilities including, but not limited to

expenses incurred for environmental clean-up.

Our operations are exposed to the risk of equipment failure, failure by our employees to followprocedures and protocols, as well as risks inherent in operating equipment and machinery. Amajor operational failure arising out of such risks could result in substantial loss of life and/orserious injury, damage to or loss of the machines, equipment or facilities and protracted legal orpolitical disputes and damage to our reputation. Further, our contracts provide that our clients cansuspend or refuse services in the event that their operations are affected by events of forcemajeure. In the event of operational or equipment failure, we may be forced to cease part of ouroperations and we may be subject to any penalty or incur extra costs or expenses in any disputethat result from such operational or equipment failure which may materially and adversely affectour results of operations and financial position.

Our results of operations may be adversely affected if we fail to effectively manage our

growth

We intend to use most of the proceeds from the Placement for our current and future development,including but not limited to exploration of opportunities in mergers and acquisitions, joint venturesand strategic alliances and purchase of equipment to increase our LSS production. Please see thesection titled “General Information on our Group – Business Strategies and Future Plans” for moredetails on our expansion plans. We cannot assure you that the implementation and execution ofsuch business strategies and future plans will be successful as they involve a number of risks anduncertainties.

Our expansion plans will also require substantial management attention and significant companyresources and may put significant demands on our personnel, management and other resources.The success of any of our future acquisitions and investments depends on a number of factors,including but not limited to:

(a) our ability to identify suitable opportunities for investment or acquisition;

(b) whether we are able to reach an acquisition or investment agreement on terms that aresatisfactory to us;

(c) the extent to which we are able to exercise control over the acquired business or asset;

(d) the economic, business or other strategic objectives and goals of the acquired business orasset compared to those of our Group; and

(e) our ability to successfully integrate the acquired business or asset with us.

However, we cannot assure you that our acquisitions and investments will be successful. As such,if we do not continue or are unable to maintain and improve our operations to keep pace with thegrowth of our business, or if we fail to effectively manage our future acquisitions or investments,our results of operations and financial position may be adversely affected.

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We are dependent on our continued ability to retain our key management personnel for our

operations and profitability

Our continued success is highly dependent on our ability to retain our key management personnel,including our Executive Directors, Mr Ng Kian Ann Patrick and Mr Ng Kian Yeow, Vincent.Together, our Board and Executive Officers are responsible for formulating and implementing ourgrowth, corporate development and overall business strategies. Any loss of the services of any ofour key management personnel without a suitable and timely replacement could materially andadversely affect our business, results of operations and financial position.

We may not have sufficient insurance coverage against risks of loss and liability

We maintain insurance policies to provide insurance coverage for our various businesses. The

nature of our business operations entails inherent risks such as mechanical or vehicular failure.

In addition, our civil engineering services may also be subject to the risk of fire, theft and property

loss. Although our Directors believe we have sufficient insurance coverage in accordance with

industry standards and business practices and although we may be required to increase our

insurance coverage when necessary, we cannot assure you that our existing insurance coverage

will be sufficient to indemnify us against all of such losses.

We are subject to laws and regulations imposed by various government and regulatory

authorities

We are subject to extensive laws and regulations. Any changes in government legislation,

regulations or policies affecting the industries relevant to our business operations could have a

negative effect on our business. The compliance with any changes or new government legislation,

regulations or policies may also increase our costs and any significant increase in compliance

costs arising from such amended or new government legislation, regulations or policies may

adversely affect our results of operations and financial position.

Furthermore, in the event of a breach of certain regulatory guidelines and regulations imposed by

any regulatory authorities, this may result in the cancellation of our present contracts, us not being

awarded new contracts or regulatory authorities imposing fines, penalties or sanctions on us or

prohibiting us from continuing our operations, each of which could have an adverse effect on our

business operations, financial condition and results of operations. In 2014, we were required to

pay a composition fine of S$800 to the Comptroller of GST for incorrect GST returns filed for the

period ended 30 September 2013. In addition, we were also required to pay a composition fine of

S$26,000 to the Comptroller of Income Tax for submitting incorrect income tax returns for the

years of assessment 2006 to 2012.

Under the Workplace Safety and Health Act, we are required to take reasonably practicable

measures to ensure the safety and health of workers at the work sites. In the event that the work

sites contravene the requisite safety and health standards imposed by the regulatory authorities,

we could be fined by the regulatory authorities or issued partial or full stop-work orders. In

addition, in the event that the work sites of the main contractors in the projects that we are

involved in contravene the requisite safety and health standards imposed by the regulatory

authorities, the operators of these work sites may be issued with partial or full stop-work orders.

The issuance of such stop-work orders may severely disrupt our operations and result in a delay

in the completion of projects.

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In August 2013, Huationg Contractor was issued a stop-work order for creating conditions

favourable for mosquito-breeding at our work site. The stop-work order was lifted after 10 days

after we had complied with the requirements of the order. In September 2014, Huationg Contractor

was issued a stop-work order following a fatal accident involving a tipper truck and our worker at

a work site. The stop-work order was lifted after 10 days. Save for the foregoing, we have not

received any stop-work order from the relevant authorities due to any breach of health, safety and

environmental regulations in the last three financial years up to the Latest Practicable Date and

there is no other subsisting stop-work order at any of our work sites as at the Latest Practicable

Date.

A failure to maintain health, safety and environmental standards could also result in injuries,

death, damage to the environment, liability, or damage to our reputation.

Please see the section titled “General Information on our Group – Government Regulations” for

more details on the health, safety and environmental standards applicable to our operations.

We may be subject to fines imposed by the LTA for overloading our tipper trucks beyond

their maximum laden weight

Our civil engineering works and stockpile management services involve transportation of soil and

aggregates. The Road Traffic Act stipulates that the load carried by motor vehicles shall not be in

excess of its maximum laden weight.

Under Section 131 of the Road Traffic Act, any person who causes the load carried by the tipper

trucks to be in excess of their maximum laden weight shall be guilty of an offence and shall be

liable, upon conviction, in the case of a first offence, to a fine not exceeding S$1,000 or to

imprisonment for a term not exceeding three months, and in the case of a second or subsequent

offence, to a fine not exceeding S$2,000 or to imprisonment for a term not exceeding 6 months.

Section 131B(1) of the Road Traffic Act prescribes that where an offence committed by a body

corporate is proved to have been committed with the consent or connivance of an officer or to be

attributable to any act or default on his part, the officer, meaning any director, member of the

committee of management, chief executive officer, manager, secretary or other similar officer,

including any person purporting to act in any such capacity, shall be guilty of an offence and shall

be liable to be proceeded against and punished accordingly.

LTA has in the past imposed fines on both our tipper truck drivers and Huationg Contractor. In

2013 and the first six months of 2014, LTA imposed fines amounting to approximately S$321,100

and S$114,440, respectively, for the overloading of our tipper trucks with aggregates or soil in

excess of the maximum laden weight of 28 metric tonnes. A large proportion of the fines paid by

us were in relation to the transportation of soil by our tipper trucks. Although we have established

guidelines in terms of the number of buckets of soil and aggregates that may be loaded onto the

tipper trucks, as the weight of the soil may vary depending on its composition, density or moisture,

our tipper trucks may exceed their maximum laden weight even if the guideline for the number of

buckets of soil loaded is adhered to. In addition to the fines imposed on us, we will usually

undertake to pay the fines imposed on our tipper truck drivers for the transportation of soil. On the

other hand, as the weight of aggregates, unlike soil, does not vary substantially, and our tipper

trucks are unlikely to exceed the maximum laden weight if the loading guidelines are adhered to,

we will usually recover from the tipper truck drivers any amount of fine imposed on the drivers

which we pay on their behalf.

RISK FACTORS

44

Although we have implemented additional procedures to avoid further incidents of overloading,

including conducting fortnightly briefings with our workers on loading guidelines and safety

procedures, installing weighbridges at all job sites controlled by us, raising our clients’ awareness

by highlighting the relevant guidelines and penalties that may be imposed by LTA, and adopting

the policy of terminating the services of drivers who have been found guilty of overloading our

tipper trucks with aggregates or soil on three or more instances within a period of three months,

these procedures may not be effective and instances of our tipper trucks being overloaded beyond

their maximum laden weight may still occur.

Please see the section titled “General Information on our Group – Government Regulations” for

more details on the regulations on the administration of carriage of goods by motor vehicles.

The licences for the land lots which we occupy may not be renewed

Our Group occupies various state land lots which are either licensed by us or the main contractors

of the projects in which we are involved. These land lots are typically located in the proximity of

the relevant project work sites and are used to store construction equipment and materials which

are not permitted to be left at the work sites.

In the event that the term of a licence expires before the completion of a project, our Group or the

main contractor of the project, as the case may be, will typically submit an application to SLA for

the renewal or extension of such licence. However, there is no assurance that SLA will approve

the application for renewal or extension. In the event that the application is rejected or not

renewed, and we are required to vacate the land lot, we may have to incur substantial time and

resources in securing an alternative land lot and in transporting our construction equipment and

materials to the new land lot. Furthermore, we may not be able to secure alternative licences or

sub-licences on terms and conditions which are no less favourable than those on which we had

licensed the previous land lot.

In May 2014, the licence granted to the main contractor, an unrelated third party, for the use of a

state land lot situated at Jalan Gali Batu (the “Gali Batu Plot”) expired. The licence was not

renewed and SLA granted a six-month extension period for the purposes of carrying out

reinstatement works at the Gali Batu Plot. We are in the process of carrying out the reinstatement

works. Until the reinstatement works have been undertaken to SLA’s satisfaction, we will have to

continue paying rental to the main contractor for the occupation of the Gali Batu Plot.

We may not be able to reinstate the condition of the land lots which we occupy to the

satisfaction of the relevant authorities

According to the terms and conditions in the state land licences granted in respect of the land lots

we occupy, prior to the termination, cancellation, revocation or expiry of the licences, we are

required to carry out works at our own expense to clear and reinstate the condition of the land lots

which we occupy to the satisfaction of the relevant authorities. However, we cannot assure you

that we will be able to clear and reinstate the condition of the land lots within the time specified

by, and to the satisfaction of, the relevant authorities. In such an event, the relevant authority will

have the right to carry out the works and all costs incurred in connection with such works may be

deducted from the deposit paid pursuant to the licences. If the cost of such works exceed that of

the sum of the deposit, we may be required to compensate the relevant authority the difference

between the said deposit and the amount claimed by the relevant authority.

RISK FACTORS

45

On 31 December 2012, the licence granted to us for the use of a state land lot situated at Marina

East expired and has since been renewed on a monthly basis. In March 2014, we began

undertaking reinstatement works and continue to be in the process of undertaking such

reinstatement works as SLA did not consider that the condition of the land had been reinstated to

their satisfaction. In the event that we do not reinstate the land to the satisfaction of the SLA, SLA

may choose to undertake the reinstatement works itself and claim from us all related costs

incurred by them.

RISKS RELATING TO OUR SHARES

The validity of certain issuances and transfers of shares in our subsidiary, Huationg

Contractor, may be challenged

In the course of the due diligence exercise on our Group in preparation for the Listing, it was notedthat certain issuances of Shares (the “Relevant Issuances”) and transfers of Shares (the“Relevant Transfers”) in our subsidiary, Huationg Contractor, were not carried out in compliancewith the requirements of the Companies Act and its Articles of Association. The Shares which aresubject of the Relevant Issuances and Relevant Transfers (the “Relevant Shares”) amount up to3,040,000 shares in Huationg Contractor, representing 0.01% of the issued and paid-up sharecapital of Huationg Contractor. The equity interest in the Relevant Shares accounted forapproximately 0.01% of the consolidated revenue and profit after tax of our Group for FY2013 and0.01% of our Group’s net asset value as at 30 June 2014.

Under Section 161 of the Companies Act, the directors of a company shall not, without the priorapproval of the company in general meeting, exercise any power of the company to issue shares.The prior approval of the company in general meeting was not obtained in respect of the RelevantIssuances effected in November 1983. As such, it is not possible to state in absolute certain termsthat the Relevant Issuances effected in November 1983 were duly effected, and it is possible thatshould the issue of validity arise in a Singapore court, the issuances may be considered void.

Further, since 31 May 1994, Huationg Contractor’s Articles of Association have provided thatevery application for and transfer of shares in the company shall be made in writing in a formapproved by the company and accompanied by a statutory declaration stating specified detailsincluding the declaration that the transferee is a Singaporean citizen. Such statutory declarationsin respect of the Relevant Issuances effected on 21 June 2000 as well as all the RelevantIssuances to Mr Ng Kian Peng Albert and Mr Ng Kian Yeow, Vincent between 23 September 2010and 23 July 2012, were not sighted. As such, it is not possible to state in absolute certain termsthat the Relevant Issuances have been duly made, and it is possible that the validity of theRelevant Issuances may be challenged in a court in Singapore by the individuals who wereshareholders of Huationg Contractor at the time of each of the Relevant Issuances.

Under Section 126 of the Companies Act, a company shall not register a transfer of shares ordebentures unless a proper instrument of transfer has been delivered to a company. AlthoughHuationg Contractor’s Register of Members and Register of Transfers contain entries evidencingthe registration of the transfers, and directors’ resolutions were passed to authorise the transfer,because there are no records of the relevant share transfer deeds, it is not possible to state inabsolute certain terms that the Relevant Transfers effected on 10 June 1985 and 17 October 1994have been duly effected.

In addition, Huationg Contractor’s Articles of Association provide that the following procedures arerequired to be complied with when a member of Huationg Contractor wishes to sell his shares inHuationg Contractor to a person who is a not a member of Huationg Contractor:

RISK FACTORS

46

(a) the selling member (the “Selling Member”) shall first serve a written notice to HuationgContractor that he desires to sell his shares in Huationg Contractor (the “Sale Notice”);

(b) upon receipt of the Sale Notice, Huationg Contractor shall within three months find a memberwho is willing to buy any share comprised in the Sale Notice (the “Purchasing Member”).Huationg Contractor shall then serve a notice to the Selling Member stating that suchmember desires to purchase the shares comprised in the Sale Notice (the “Purchase

Notice”) and that the Selling Member shall complete the purchase within seven days afterreceipt of the Purchase Notice; and

(c) if Huationg Contractor fails to find a Purchasing Member within three months upon receipt of

the Sale Notice, or, through no default of the Selling Member, the purchase is not completed

within 21 days after the Purchase Notice is served on the Selling Member, the Selling

Member will be at liberty to sell and transfer his shares to any person.

In respect of the Relevant Transfers between 10 June 1985 and 19 April 2006, no Sale Notices

were given by any Selling Member. As such, it is not possible to state in absolute certain terms

that the Relevant Transfers have been duly effected, and it is possible that the validity of the

Relevant Transfers may be challenged in a court in Singapore by individuals who were

shareholders of Huationg Contractor at the relevant time of each of the Relevant Transfer.

In the event legal proceedings or claims are commenced against our Group in relation to the

Relevant Issuances, the Relevant Transfers, and the Relevant Shares, we may have to incur

substantial time and resources to defend those proceedings and those proceedings may also

require significant attention of our management that would otherwise be available for attending to

the ongoing development of our business. In the event that we are unsuccessful in defending such

claims, we may have to compensate the claimant for damages. Further, in the event a claimant

successfully challenges the validity of the Relevant Shares and is able to produce proof of his

legal entitlement over the Relevant Shares, the claimant could potentially claim for his legal

entitlement to these Relevant Shares, which represents approximately 0.01% of the issued and

paid-up capital of Huationg Contractor. Should such a scenario materialise, we may be required

to divest the Relevant Shares and our equity interest in Huationg Contractor as represented by the

Relevant Shares may accordingly be reduced.

If the foregoing events should occur, our results of operations and financial position will be

adversely affected to the extent that any loss suffered by us is not adequately addressed by the

Indemnity (as defined herein).

The Indemnity provided to support our Group in respect of the Relevant Issuances,

Relevant Transfers and Relevant Shares is subject to certain conditions and limitations

In relation to the Relevant Issuances and Relevant Transfers, our Executive Chairman and

Executive Director, Mr Ng Hai Liong, who is also our Controlling Shareholder (the “Indemnifier”),

has undertaken pursuant to a Deed of Indemnity dated 5 November 2014 (the “Indemnity”), to

indemnify our Company and Huationg Contractor (collectively the “Indemnified Entities”) against

all actions, claims, damages, costs, charges and expenses (including without limitation

reasonable legal costs) arising out of or in connection with claims (“Relevant Claims”) directly

made against the Indemnified Entities by any person who may have a right of claim or an interest

in the Relevant Shares, due to non-compliance with the relevant corporate secretarial procedures

pursuant to, among others, the Companies Act or Huationg Contractor’s Articles of Association,

RISK FACTORS

47

which the Indemnified Entities actually (and not potentially) suffer. Please see the section titled

“Risk Factors – Risks Relating to our Shares – The validity of certain issuances and transfers of

shares in our subsidiary, Huationg Contractor, may be challenged” for more details.

The Indemnity is subject to the following conditions and limitations:

(a) the Indemnity takes effect upon the listing of our Company on Catalist (“Indemnity Effective

Date”) and shall expire on the date of privatisation of our Company (whether by way of a

scheme of arrangement pursuant to Section 210 of the Companies Act, compulsory

acquisition of shares pursuant to Section 215 of the Companies Act, (or otherwise)) whereby

there would not be any minority interest in our Company;

(b) the Indemnity only indemnifies the Indemnified Entities against all actions, claims, damages,

costs, charges and expenses (including without limitation reasonable legal costs) (“Relevant

Loss”) directly made against the relevant Indemnified Entities by any person arising out of

or in connection with the Relevant Claims, which the Indemnified Entities actually (and not

potentially) suffer; and

(c) as the extent of a Relevant Loss cannot presently be quantified as the nature of a claim

cannot presently be identified, the extent to which an Indemnified Entity will be compensated

for a Relevant Loss pursuant to the Indemnity is also dependent on the ability of the

Indemnifiers to compensate for such Relevant Loss.

To the extent that any Relevant Loss suffered by any of the Indemnified Entities is not adequately

addressed by the Indemnity due to the conditions or limitations to the Indemnity set out above or

otherwise, our results of operations and financial position will be adversely affected.

Investments in securities quoted on Catalist involve a higher degree of risk and can be less

liquid than shares quoted on the Main Board of the SGX-ST

An application has been made for our Shares to be listed for quotation on Catalist, a listing

platform designed primarily for fast-growing and emerging or smaller companies to which a higher

investment risk tends to be attached as compared to larger or more established companies. An

investment in shares quoted on Catalist may carry a higher risk than an investment in shares

quoted on the Main Board of the SGX-ST. Catalist was newly formed in December 2007 and the

future success and liquidity in the market of our Shares cannot be guaranteed.

An active trading market for our Shares may not develop and could affect the trading price

of our Shares

Prior to the Placement, there has been no public market for our Shares. Although an application

has been made to the SGX-ST for the listing and quotation of our Shares on Catalist, we cannot

assure you that there will be a liquid public market for our Shares after the Placement. If an active

public market for our Shares does not develop after the Placement, the market price and liquidity

of our Shares may be adversely affected.

The rules of the Listing Manual require that companies applying for the listing of their equity

securities on Catalist meet certain minimum shareholding spread and distribution requirements.

While we will need to meet these requirements in order to list our Shares on Catalist, these

requirements are only minimum requirements and our shareholding distribution in the Placement

and our post-Placement shareholding spread may not substantially exceed these limits or may

even fall below these limits after the Placement. In the case where the percentage of our

RISK FACTORS

48

post-Placement share capital held by public shareholders is less than 10.0%, the SGX-ST may

suspend trading of our Shares. As a result, the liquidity of our Shares can be materially curtailed

and there may be no or limited trading in our Shares, and you may not be able to acquire Shares

or sell your Shares in our Company, either at a favourable price or at all. In addition, if shares,

such as our Shares, have only limited liquidity, the price of such shares can fluctuate significantly

as a result of only one or a small number of trades in these shares.

Our share price may fluctuate significantly in future and you may lose all or part of your

investment, and litigation may be brought against us

We cannot assure you that the market price for our Shares will not decline below the Placement

Price. The Placement Price was determined after consultation between our Company, the Issue

Manager, Sponsor and Placement Agent and the Sub-Placement Agent after taking into

consideration, among others, market conditions and estimated market demand for our Shares.

The Placement Price may not necessarily be indicative of the market price for our Shares after the

completion of the Placement. Investors may not be able to sell their Shares at or above the

Placement Price. The prices at which our Shares will trade after the Placement may fluctuate

significantly and rapidly as a result of, among others, the following factors, some of which are

beyond our control:

(a) variation in our results of operations;

(b) perceived prospects and future plans for our business and the general outlook of our

industry;

(c) changes in securities analysts’ estimates of our results of operations and recommendations;

(d) announcements by us of significant contracts, acquisitions, strategic alliances or joint

ventures or capital commitments;

(e) the valuation of publicly-traded companies that are engaged in business activities similar to

ours;

(f) additions or departures of key personnel;

(g) fluctuations in stock market prices and volume;

(h) involvement in litigation;

(i) general economic and stock market conditions; and

(j) discrepancies between our actual operating results and those expected by investors and

securities analysts.

The stock markets have from time to time experienced significant price and volume fluctuations

that have affected the market prices of securities. These fluctuations often have been unrelated

or disproportionate to the operating performance of publicly-traded companies. In the past,

following periods of volatility in the market price of a particular company’s securities, an investor

may lose all or part of his investment and litigation has sometimes been brought against that

company. If similar litigation is instituted against us, it could result in substantial costs and divert

management’s attention and resources away from our core business.

RISK FACTORS

49

Future issuance of Shares by us and sale of Shares by our existing Shareholders may

adversely affect the price of our Shares

In the event we issue or our Shareholders sell substantial amounts of our Shares in the public

market following this Placement, the price of our Shares may be adversely affected. Such issues

or sales may also make it difficult for us to issue new Shares and raise the necessary funds in the

future at a time and price that we deem appropriate.

Except as otherwise described in the section titled “Shareholders – Moratorium” of this Offer

Document, there will be no restriction on the ability of our Shareholders to sell their Shares either

on Catalist or elsewhere.

We may require additional funding in the form of equity or debt for our future growth which

will cause dilution in Shareholders’ equity interests

We may pursue opportunities to grow our business through joint ventures, strategic alliances,

acquisitions or investment opportunities, following the Placement. However, we cannot assure you

that we will be able to obtain additional funding on terms that are acceptable to us or at all. If we

are unable to do so, our future plans and growth may be adversely affected.

An issue of Shares or other securities to raise funds will dilute Shareholders’ equity interests and

may, in the case of a rights issue, require additional investments by Shareholders. Further, an

issue of Shares below the then prevailing market price will also affect the value of Shares then

held by investors.

Dilution in Shareholders’ equity interests may occur even if the issue of Shares is at a premium

to the market price. In addition, any additional debt funding may restrict our freedom to operate

our business as it may have conditions that:

(a) limit our ability to pay dividends or require us to seek consents for the payment of dividends;

(b) increase our vulnerability to general adverse economic and industry conditions;

(c) require us to dedicate a portion of our cash flow from operations to repayments of our debt,

thereby reducing the availability of our cash flow for capital expenditures, working capital and

other general corporate purposes; and

(d) limit our flexibility in planning for, or reacting to, changes in our business and our industry.

The current disruptions, volatility or uncertainty of the credit markets could limit our ability to

borrow funds or cause our borrowings to be more expensive. As such, we may be forced to pay

unattractive interest rates if we are required to take on additional debt financing, thereby

increasing our interest expense, decreasing our profitability and reducing our financial flexibility.

Investors may not be able to participate in future issues or certain other equity issues of

our Shares

In the event that we issue new Shares, we will be under no obligation to offer those Shares to our

existing Shareholders at the time of issue, except where we elect to conduct a rights issue.

However, in electing to conduct a rights issue or certain other equity issues, we will have the

discretion and may also be subject to certain regulations as to the procedures to be followed in

RISK FACTORS

50

making such rights available to Shareholders or in disposing of such rights for the benefit of such

Shareholders and making the net proceeds available to them. In addition, we may not offer such

rights to our existing Shareholders having an address in jurisdictions outside of Singapore.

Accordingly, certain Shareholders may be unable to participate in future equity offerings by us and

may experience dilution in their shareholdings as a result.

Certain transactions may dilute the ownership of holders of our Shares

As a result of adjustments from rights offerings, certain issuances of new Shares and certain other

actions we may take to modify our capital structure, Shareholders may experience a dilution in

their ownership of our Shares. We cannot assure you that we will not take any of the foregoing

actions, and such actions in the future may adversely affect the market price of our Shares.

Negative publicity which includes those relating to any of our Directors, Executive Officers

or Controlling Shareholders may adversely affect our Share price

Negative publicity or announcements relating to any of our Directors, Executive Officers or

Controlling Shareholder may adversely affect the market perception of our Group or the

performance of the price of our Shares, whether or not it is justified. For instance, such negative

publicity may arise from unsuccessful attempts in joint ventures, acquisitions or take-overs, or

involvement in insolvency proceedings.

Control by our Controlling Shareholder of our share capital after the Placement may limit

your ability to influence the outcome of decisions requiring the approval of Shareholders

After the completion of the Placement, our Controlling Shareholder, Dandelion Capital, will hold

in aggregate approximately 80.4% of our issued share capital of our Company. As a result, the

Controlling Shareholder will be able to significantly influence our corporate actions such as

mergers or take-over attempts in a manner which may not be in line with the interests of our public

Shareholders. It will also have veto power in relation to any shareholder action or approval

requiring a majority vote except in situations where they are required by the Rules of Catalist, the

SGX-ST or undertakings given by them and their associates to abstain from voting. Such

concentration of ownership may also have the effect of delaying, preventing or deterring a change

in control of our Group which may not benefit our Shareholders.

We may not be able to pay dividends in the future

Our ability to declare dividends to our Shareholders in the future will be contingent on our future

financial performance and distributable reserves of our Company. This is in turn dependent on our

ability to implement our future plans, and on regulatory, competitive, technical and other factors

such as general economic conditions, demand for and selling prices of our products and services

and other factors exclusive to the construction and civil engineering industry. Deterioration in any

of these factors could have a material adverse effect on our business, financial position and

results of operations, and hence we cannot assure you that we will be able to pay dividends to our

Shareholders after the completion of the Placement.

Further, in the event that we are required to enter into any loan arrangements with any financial

institutions, covenants in the loan agreements may also limit when and how much dividends we

can declare and pay out.

RISK FACTORS

51

Singapore take-over laws contain provisions which may vary from those in other

jurisdictions, and which could adversely affect the market price of the Shares

The Singapore Code on Take-Overs and Mergers (the “Take-Over Code”) contains certain

provisions that may possibly delay, deter or prevent a future take-over or change in control. Under

the Take-Over Code, except with the consent of the Securities Industry Council of Singapore, any

person acquiring an interest, whether by a series of transactions over a period of time or not,

either on his own or together with parties acting in concert with him, in 30.0% or more of the voting

shares, is required to extend a take-over offer for the remaining voting shares in accordance with

the Take-Over Code. Except with the consent of the Securities Industry Council of Singapore,

such a take-over offer is also required to be made if a person holding between 30.0% and 50.0%

(both inclusive) of the voting shares, either on his own or together with parties acting in concert

with him, acquires additional voting shares representing more than 1.0% of the voting shares in

any six-month period. While the Take-Over Code seeks to ensure an equality of treatment among

shareholders, its provisions could substantially impede the ability of the Shareholders to benefit

from a change of control and, as a result, may adversely affect the market price of the Shares and

the ability to realise any benefits from a potential change of control.

RISK FACTORS

52

Based on the Placement Price, our estimated net proceeds from the issue of the Placement

Shares, after deducting the estimated cash expenses, including the placement commission and

other estimated expenses payable in relation to the Placement (estimated to be approximately

S$1.4 million), will be approximately S$4.1 million.

We intend to use the gross proceeds from the issue of the Placement Shares for the following

purposes:

Use of Proceeds

Amount in

aggregate

(S$’000)

Estimated amount

allocated for each

dollar of the gross

proceeds to be

raised from the

issue of the

Placement Shares

(cents)

To explore opportunities in mergers and

acquisitions, joint ventures and strategic alliances 1,500 27.3

To increase LSS production 1,000 18.2

General working capital purposes 1,611 29.3

Net proceeds 4,111 74.8

Listing expenses to be borne by us(1)

Listing and application fees 57 1.0

Professional fees(2) 1,068 19.4

Placement commission(3) 193 3.5

Miscellaneous expenses 71 1.3

Gross proceeds 5,500 100.0

Notes:

(1) Of the total estimated listing expenses to be borne by our Company, approximately S$0.5 million will be capitalised

against share capital and the balance of the estimated listing expenses will be charged to the profit and loss account

of our Company.

(2) The professional fees refer to cash expenses and excludes the management fee of approximately S$0.4 million

payable to the Sponsor and Issue Manager pursuant to the Management Agreement which has been satisfied in full

by the allotment and issue of 1,875,000 new Shares.

(3) The amount of placement commission per Placement Share, agreed upon between the Placement Agent and our

Company is 3.5% of the Placement Price payable for each Placement Share successfully subscribed for. Please

refer to the section titled “General and Statutory Information – Management and Placement Arrangements” of this

Offer Document for more details.

Further details of our use of proceeds may be found in the section titled “General Information on

our Group – Business Strategies and Future Plans” of this Offer Document.

USE OF PROCEEDS AND LISTING EXPENSES

53

The foregoing discussion represents our best estimate of our listing expenses and allocation of

the net proceeds of the Placement based on our current plans and estimates regarding our

anticipated expenditures. Actual expenditures may vary from these estimates and we may find it

necessary or advisable to reallocate the net proceeds within the categories described above or to

use portions of the net proceeds for other purposes. In the event that we decide to reallocate the

net proceeds of the Placement for other purposes, we will publicly announce our intention to do

so through a SGXNET announcement to be posted on the internet at the SGX-ST’s website,

http://www.sgx.com. In addition, our Company will make periodic announcements on the use of

the proceeds from the Placement as and when the proceeds from the Placement are materially

disbursed, and provide a status report on the use of the proceeds from the Placement in our

annual reports.

Pending the deployment of the net proceeds from the issue of Placement Shares as aforesaid, the

funds will be placed in short-term deposits or money market instruments, as our Directors may, in

their absolute discretion, deem fit.

There is no minimum amount which, in the reasonable opinion of our Directors, must be raised by

the Placement.

None of the proceeds of the Placement will be used to discharge, reduce or retire any

indebtedness of our Group.

Subscribers of the Placement Shares may be required to pay brokerage or selling commission of

up to 1.0% of the Placement Price (and the prevailing GST thereon, if applicable) to the Placement

Agent, the Sub-Placement Agent or any other sub-placement agent that may be appointed by the

Placement Agent.

USE OF PROCEEDS AND LISTING EXPENSES

54

Our Company was incorporated on 1 August 2014 and has not distributed any cash dividend on

our Shares since incorporation. Save as disclosed below, none of our subsidiaries has declared

or paid any dividends in respect of each of the last three financial years ended 31 December 2011,

2012 and 2013 and the period from 1 January 2014 to the Latest Practicable Date:

Dividends (S$) declared in respect of:

FY2011 FY2012 FY2013

1 January 2014 to

the Latest

Practicable Date

Subsidiary Total

Per

share Total

Per

share Total

Per

share Total

Per

share

Huationg

Contractor 3,000,000(1) 1.00 500,000(1) 1.00 – – 7,995,000(2) 1.23

Soil

Engineering – – – – 1,000,000(2) 1.00 – –

Notes:

(1) Dividends declared have been fully paid to the then shareholders of Huationg Contractor during the respective

financial periods.

(2) As at 30 June 2014, of the S$1,000,000 declared dividends in respect of Soil Engineering, S$500,000 has been paid

out. Accordingly, as at 30 June 2014, S$8,495,000 in dividends remains payable to the then shareholders of

Huationg Contractor and Soil Engineering (the “Relevant Dividends”). As at the Latest Practicable Date,

S$5,000,000 out of the Relevant Dividends has been paid and S$3,495,000 of the Relevant Dividends remains

outstanding and accrued as a non-current payable to the then shareholders of Huationg Contractor and Soil

Engineering. Please refer to the section titled “Interested Person Transactions” for further details.

We do not have a fixed dividend policy. The form, frequency and amount of future dividends on

our Shares that our Directors may recommend or declare in respect of any particular financial year

or period will be subject to the factors outlined below as well as any other factors deemed relevant

by our Directors:

(a) the level of our cash and retained earnings;

(b) our actual and projected financial performance;

(c) our projected levels of capital expenditure and other investment plans;

(d) our working capital requirements and general financing conditions; and

(e) restrictions on payment of dividends imposed on us by our financing arrangements (if any).

Subject to our Articles of Association and in accordance with the Companies Act, our Company

may declare an annual dividend subject to the approval of our Shareholders in a general meeting,

but no dividend or distribution shall be declared in excess of the amount recommended by our

Directors. Subject to our Articles of Association and in accordance with the Companies Act, our

Directors may also from time to time declare an interim dividend without the approval of our

Shareholders. Our Company may pay all dividends out of our profits. For information relating to

taxes payable on dividends, please refer to the section titled “Taxation” in this Offer Document.

DIVIDEND POLICY

55

All dividends are paid pro-rata among the Shareholders in proportion to the amount paid up on

each Shareholder’s Shares, unless the rights attaching to an issue of any Share provide

otherwise. Notwithstanding the foregoing, the payment by our Company to CDP of any dividend

payable to a Shareholder whose name is entered in the Depository Register shall, to the extent

of payment made to CDP, discharge our Company from any liability to that Shareholder in respect

of that payment.

The amount of dividends declared and paid by us should not be taken as an indication of the

dividends payable in the future. No inference shall or can be made from any of the foregoing

statements as to our actual future profitability or ability to pay dividends in any of the periods

discussed. We cannot assure you that dividends will be paid in the future or of the amount or

timing of any dividends that will be paid in the future.

DIVIDEND POLICY

56

Our Company (Company Registration Number: 201422395Z) was incorporated in Singapore on 1

August 2014 under the Companies Act as a private company limited by shares, under the name

of “Huationg Global Private Limited”. Our Company was converted into a public limited company

and the name of our Company changed to “Huationg Global Limited” in connection therewith on

26 November 2014.

As at the date of incorporation, our issued and paid-up ordinary share capital was S$2 comprising

two shares. As at the date of this Offer Document, our issued and paid-up ordinary share capital

is $33,660,386 comprising 123,884,600 Shares.

At an extraordinary general meeting held on 18 November 2014, our Shareholders approved,

among others, the following:

(a) the conversion of our Company into a public limited company and the change of our name

to “Huationg Global Limited”;

(b) the adoption of a new set of Articles of Association;

(c) the allotment and issue of the Placement Shares which are the subject of the Placement, on

the basis that the Placement Shares, when allotted, issued and fully-paid, will rank pari

passu in all respects with the existing Shares;

(d) the allotment and issue of the PPCF Shares to PPCF in satisfaction of their management fee

as Sponsor and Issue Manager, which when allotted, issued and fully-paid, will rank pari

passu in all respects with the existing issued Shares;

(e) the allotment and issue of the FC Shares to our Financial Controller, Mr Goh Tuck Peng,

which when allotted, issued and fully-paid, will rank pari passu in all respects with the

existing issued Shares;

(f) the adoption of the Share Option Scheme and the Share Plan (details of which are set in the

sections titled “Huationg Employee Share Option Scheme” and “Huationg Performance

Share Plan” of this Offer Document, and also in “Appendix F – Rules of the Huationg

Employee Share Option Scheme” and “Appendix G – Rules of the Huationg Performance

Share Plan” to this Offer Document) and the authorisation of our Directors, pursuant to

Section 161 of the Companies Act, to allot and issue Shares upon the exercise of Options

granted under the Share Option Scheme and upon the granting of Awards under the Share

Plan;

(g) the listing and quotation of all the issued Shares (including the Placement Shares to be

allotted and issued pursuant to the Placement, the FC Shares and the PPCF Shares) on

Catalist;

(h) the authorisation to our Directors, pursuant to Section 161 of the Companies Act and by way

of ordinary resolution in a general meeting, to:

(A) (i) issue Shares whether by way of rights, bonus or otherwise; and/or

(ii) make or grant offers, agreements or options (each an “Instrument” and

collectively, “Instruments”) that might or would require Shares to be issued during

the continuance of this authority or thereafter, including but not limited to the

creation and issue of (as well as adjustments to) warrants, debentures, convertible

securities or other instruments convertible into Shares; and/or

SHARE CAPITAL

57

(iii) notwithstanding that such authority may have ceased to be in force at the time that

Instruments are to be issued, issue additional Instruments arising from

adjustments made to the number of Instruments previously issued in the event of

rights, bonus or other capitalisation issues,

at any time and upon such terms and conditions and for such purposes and to such

persons as our Directors may in their absolute discretion deem fit; and

(B) issue Shares in pursuance of any Instrument made or granted by our Directors pursuant

to (A)(ii) and/or (A)(iii) above, while such authority was in force (notwithstanding that

such issue of Shares pursuant to the Instruments may occur after the expiration of the

authority contained in this resolution), provided that:

(i) the aggregate number of Shares to be issued pursuant to such authority (including

the Shares to be issued in pursuance of Instruments made or granted pursuant to

this authority but excluding Shares which may be issued pursuant to any

adjustments (“Adjustments”) effected under any relevant Instrument, where such

Adjustments shall be made in compliance with the provisions of the Rules of

Catalist for the time being in force (unless such compliance has been waived by

the SGX-ST)) does not exceed 100.0% of the post-Placement issued share capital

excluding treasury shares, and provided further that the aggregate number of

Shares to be issued other than on a pro-rata basis to Shareholders (including

Shares to be issued in pursuance of Instruments made or granted pursuant to such

authority but excluding Shares which may be issued pursuant to any Adjustments

effected under any relevant Instrument) shall not exceed 50.0% of the post-

Placement issued share capital excluding treasury shares;

(ii) in exercising such authority, our Company shall comply with the provisions of the

Rules of Catalist for the time being in force (unless such compliance has been

waived by the SGX-ST) and the Articles of Association for the time being of our

Company; and

(iii) unless revoked or varied by our Company in general meeting by ordinary

resolution, the authority so conferred shall continue in force until the conclusion of

the next annual general meeting of our Company or the date by which the next

annual general meeting of our Company is required by law to be held, whichever

is the earlier; and

For the purpose of this resolution, the “post-Placement issued share capital” shall mean the

total number of issued Shares of our Company (excluding treasury shares) immediately after

the Placement, after adjusting for (i) new Shares arising from the conversion or exercise of

any convertible securities; (ii) new Shares arising from exercising share options or vesting of

share awards outstanding or subsisting at the time such authority is given, provided the

options or share awards were granted in compliance with the Rules of Catalist; and (iii) any

subsequent bonus issue, consolidation or sub-division of Shares.

(i) without prejudice to the generality of, and pursuant and subject to the approval of the general

mandate to issue Shares set out in paragraph (h) above, authorisation of our Directors,

pursuant to Section 161 of the Companies Act, to issue Shares other than on a pro-rata

basis, at a discount to the weighted average price of the Shares for trades done on the

SGX-ST for the full market day on which the placement or subscription agreement is signed

(or if not available, the weighted average price based on trades done on the preceding

SHARE CAPITAL

58

market day), of not more than 10.0%, at any time and upon such terms and conditions and

for such purposes and to such persons as our Directors may in their absolute discretion

deem fit, provided that (unless revoked or varied by our Company in general meeting) the

authority so conferred in this paragraph (i) shall continue in force until the conclusion of the

next annual general meeting of our Company or the date by which the next annual general

meeting of our Company is required by law to be held, whichever is earlier.

As at the date of this Offer Document, there is only one class of shares in the capital of our

Company, being the Shares. A summary of our Articles of Association relating to, among others,

the voting rights of our Shareholders is set out under “Appendix D – Summary of Selected Articles

of Association of our Company” to this Offer Document.

There is no founder, management, deferred or unissued Shares reserved for issuance for any

purpose. The Placement Shares shall have the same interest and voting rights as our existing

Shares that were issued prior to this Placement and there are no restrictions to the free

transferability of our Shares. Save for the share options which may be granted under the Share

Option Scheme, no person has been, or is permitted to be, given an option to subscribe for any

securities of our Company or any of our subsidiaries. In addition, no participant has been identified

and/or granted an Award for any Award Shares by our Administration Committee pursuant to the

Share Plan.

As at the date of this Offer Document, the issued and paid-up share capital of our Company is

S$33,660,386 comprising 123,884,600 Shares. Upon the allotment and issue of the Placement

Shares, the resultant issued and paid-up share capital of our Company will be increased to

S$38,693,040 comprising 151,384,600 Shares.

Details of changes in our issued and paid-up ordinary share capital since incorporation and the

resultant issued and paid-up share capital immediately after the Placement are as follows:

Number ofShares

Issued andpaid-up Share

capital(S$)

Issued and fully paid Shares as at incorporation of ourCompany 2 2

Issue of new Shares pursuant to the Restructuring Exercise(1) 121,759,598 33,235,384

Issued and paid-up share capital immediately after theRestructuring Exercise 121,759,600 33,235,386

Issue of FC Shares 250,000 50,000

Issue of PPCF Shares 1,875,000 375,000

Issued and paid-up share capital immediately before thePlacement 123,884,600 33,660,386

Placement Shares issued pursuant to the Placement 27,500,000 5,032,654(2)

Post-Placement issued and paid-up share capital 151,384,600 38,693,040

Notes:

(1) Please refer to the section titled “Restructuring Exercise” of this Offer Document for further details.

(2) This includes a set-off of our Company’s estimated listing expenses of approximately S$0.5 million against our share

capital, which excludes the remaining estimated listing expenses of approximately S$1.3 million will be charged

directly to the income statement of our Group.

SHARE CAPITAL

59

The issued share capital and the shareholders’ equity of our Company as at the date of its

incorporation and as at 30 June 2014, after adjustments to reflect the Restructuring Exercise, the

issue of the FC Shares, PPCF Shares and the Placement Shares pursuant to the Placement are

set out below. This should be read in conjunction with the “Independent Auditor’s Report and

Audited Combined Financial Statements for the Financial Years ended 31 December 2011, 2012

and 2013”, “Independent Auditor’s Review Report and Unaudited Interim Condensed Combined

Financial Statements for the Financial Period from 1 January 2014 to 30 June 2014” and the

“Independent Auditor’s Assurance Report and Unaudited Pro Forma Combined Financial

Information for the Financial Year ended 31 December 2013 and Financial Period from 1 January

2014 to 30 June 2014” as set out in Appendices A, B and C to this Offer Document respectively.

As at

incorporation

As at 30 June 2014

after the Restructuring

Exercise and issue of

FC Shares and

PPCF Shares

After the

Placement

Issued and fully paid-up shares

(number of shares) 2 123,884,600 151,384,600

Issued and fully paid-up share

capital (S$) 2 33,660,386 38,693,040(1)

Accumulated profits (S$) – 24,831,376 23,535,222(2)

Merger reserve (S$) – (26,160,384) (26,160,384)

Other reserves (S$) – 6,728,924 6,728,924

Equity attributable to owners

of the parent (S$) 2 39,060,302 42,796,802

Equity attributable to owners

of the parent (net of gain on

revaluation of PPE) (S$) 2 32,362,249 36,098,749

Notes:

(1) This includes a set-off of our Company’s estimated issue expenses of approximately S$0.5 million against our share

capital.

(2) This takes into account our Company’s estimated issue expenses of approximately S$1.3 million to be charged

directly to the income statement

Save as disclosed above, there were no changes in the issued and paid-up ordinary share capital

of our Company since incorporation.

SHARE CAPITAL

60

Save as set out in this section and in the following table, there was no change in the

issued/registered share capital or the number and classes of shares of our Company and/or our

subsidiaries within the last three years preceding the Latest Practicable Date:

OUR COMPANY

Date of issue

Number of

Share(s) issued

Subscription

price/

consideration

Purpose of

issue

Resultant

issued Share

capital

1 August 2014 2 S$2 Incorporation S$2

SUBSIDIARIES

HT Equipment

Date of issue

Number of

Share(s) issued

Subscription

price/

consideration

Purpose of

issue

Resultant

issued Share

capital

18 October 2012 1 S$1 Incorporation S$1

29 August 2013 499,999 S$499,999 Increase in the

issued and

paid-up capital

S$500,000

Huationg Contractor

Date of issue

Number of

Share(s) issued

Subscription

price/

consideration

Purpose of

issue

Resultant

issued Share

capital

20 July 2012 3,000,000 S$3,000,000 Increase in the

issued and

paid-up capital

S$6,000,000

23 July 2012 500,000 S$500,000 Increase in the

issued and

paid-up capital

S$6,500,000

Note:

(1) Please refer to the section titled “Group Structure – Our Subsidiaries” of this Offer Document for more details.

Save as disclosed in this section, no share in or debenture of our Company or our subsidiaries has

been issued, or is proposed to be issued, as fully or partly paid-up for cash, or for a consideration

other than cash, within the three years preceding the Latest Practicable Date.

SHARE CAPITAL

61

OWNERSHIP STRUCTURE

Our Directors, Substantial Shareholders and other Shareholders and their respective

shareholdings immediately before the Placement (as at the date of this Offer Document) and

immediately after the Placement are set out as follows:

Before the Placement After the Placement

Direct interest Deemed interest Direct interest Deemed interest

Number of

Shares %

Number of

Shares %

Number of

Shares %

Number of

Shares %

Directors

Ng Hai Liong(1) – – 121,759,600 98.3 – – 121,759,600 80.4

Ng Kian Ann Patrick(2) – – 121,759,600 98.3 – – 121,759,600 80.4

Ng Kian Yeow, Vincent(2) – – 121,759,600 98.3 – – 121,759,600 80.4

Yuen Sou Wai – – – – – – – –

Yen Se-Hua Stewart – – – – – – – –

Wee Heng Yi, Adrian – – – – – – – –

Substantial Shareholder

Dandelion Capital(3) 121,759,600 98.3 – – 121,759,600 80.4 – –

Other Shareholders

Goh Tuck Peng(4) 250,000 0.2 – – 250,000 0.2 – –

PPCF(5) 1,875,000 1.5 – – 1,875,000 1.2 – –

Public – – – – 27,500,000 18.2 – –

Total 123,884,600 100.0 151,384,600 100.0

Notes:

(1) Mr Ng Hai Liong holds 17.0% of the shares in Dandelion Capital. Mr Ng Hai Liong and his family members (who are

not Directors or key Executive Officers), namely Ms Lee Swee Chu, Mr Ng Kian Peng Albert, Mr Ng Kian Haw

Douglas and Ms Ng Hwee Min Josephine, hold an aggregate of 52.0% of the shares in Dandelion Capital, a

Controlling Shareholder of our Company. Mr Ng Kian Ann Patrick and Mr Ng Kian Yeow, Vincent hold 25.0% and

23.0% of the shares in Dandelion Capital respectively.

(2) Mr Ng Kian Ann Patrick and Mr Ng Kian Yeow, Vincent hold 25.0% and 23.0% of the shares in Dandelion Capital

respectively and are deemed interested in our Shares held by Dandelion Capital, by virtue of Section 4 of the SFA.

(3) Mr Ng Hai Liong, Mr Ng Kian Ann Patrick, Mr Ng Kian Yeow, Vincent and members of their family hold an aggregate

of 100.0% of the shares in Dandelion Capital and have entered into a shareholders’ agreement to govern their

relationship as shareholders of Dandelion Capital inter se. Ms Lee Swee Chu, Mr Ng Hai Liong’s spouse, holds 5.0%

of the shares in Dandelion Capital, and Mr Ng Kian Peng Albert, Mr Ng Kian Haw Douglas and Ms Ng Hwee Min

Josephine, Mr Ng Hai Liong’s children, each holds 10.0% of the shares in Dandelion Capital.

(4) Mr Goh Tuck Peng is the Financial Controller of our Company. Pursuant to the terms of the service agreement

entered into between our Company and Mr Goh Tuck Peng, Mr Goh Tuck Peng is entitled to an incentive fee of

S$50,000, payable in Shares. The reference price for the issuance of the FC Shares is the Placement Price. Please

refer to the section titled “Share Capital” of this Offer Document for further details.

(5) Pursuant to the Management Agreement and as part of PPCF’s management fees as the Sponsor and Issue

Manager, our Company allotted and issued to PPCF 1,875,000 PPCF Shares, representing 1.5% of the issued share

capital of our Company prior to the Placement, at the Placement Price for each Share. After the expiry of the relevant

moratorium period as set out in the section titled “Shareholders – Moratorium” of this Offer Document, PPCF may

dispose its shareholding interests in our Company at its discretion.

Save as disclosed above and in the section titled “Directors, Executive Officers and Employees”,

there are no relationships among our Directors, Substantial Shareholders and Executive Officers.

SHAREHOLDERS

62

Save as disclosed above, to the best of the knowledge of our Directors, we are not directly or

indirectly owned or controlled, whether severally or jointly, by any other corporation, any

government or other natural or legal person.

The Shares held by our Directors and Substantial Shareholders do not carry different voting rights

from the Placement Shares, which are the subject of the Placement.

As at the Latest Practicable Date, our Company has only one class of shares. There is no

restriction on the transfer of fully paid Shares in scripless form, except where required by law or

the Rules of Catalist.

There has been no public takeover offer by a third party in respect of our Shares or by our

Company in respect of the shares of another corporation or units of business trust which has

occurred between the date of the incorporation of our Company to the Latest Practicable Date.

There are no Shares in our Company that are held by or on behalf of our Company or by the

subsidiaries of our Company.

Our Directors are not aware of any arrangement the operation of which may, at a subsequent date,

result in a change in control of our Company.

SIGNIFICANT CHANGES IN PERCENTAGE OF OWNERSHIP

The significant changes in the percentage of ownership of our Company held by our Directors and

Substantial Shareholders since the date of incorporation are as follows:

As at the date of

incorporation

After the

Restructuring

Exercise

As at the date of

this Offer Document,

after the issuance of

the FC Shares and

PPCF Shares

Name

Number of

Shares (%)

Number of

Shares (%)

Number of

Shares (%)

Directors

Mr Ng Hai Liong(1) 1 50.0 – – – –

Mr Ng Kian Ann Patrick(1) 1 50.0 – – – –

Mr Ng Kian Yeow, Vincent – – – – – –

Mr Yuen Sou Wai – – – – – –

Mr Yen Se-Hua Stewart – – – – – –

Mr Wee Heng Yi, Adrian – – – – – –

Substantial

Shareholders

Dandelion Capital – – 121,759,600 100.0 121,759,600 98.3

Note:

(1) Mr Ng Hai Liong and Mr Ng Kian Ann Patrick have transferred their shares in the Share capital in our Company to

Dandelion Capital.

SHAREHOLDERS

63

MORATORIUM

Controlling Shareholder – Dandelion Capital

As a demonstration of commitment to our Group, our Controlling Shareholder, Dandelion Capital,

which holds 121,759,600 Shares (representing approximately 80.4% of our Company’s post-

Placement share capital) of our Company’s enlarged issued and paid-up share capital

immediately after the Placement, has undertaken not to, inter alia, sell, transfer, assign, dispose

of, or realise or enter into any agreement that will directly or indirectly constitute or will be deemed

as a disposal of any part of its shareholdings in our Company immediately after the Placement for

a period of six months commencing from our Company’s date of admission to Catalist, and for a

period of six months thereafter not to sell, transfer, assign, dispose of, realise or enter into any

agreement that directly or indirectly constitute or will be deemed as a disposal of any part of its

shareholding interests in our Company to below 50.0% of its original shareholdings in our

Company.

Directors (who are also Controlling Shareholders)

In addition, Mr Ng Hai Liong, Mr Ng Kian Ann Patrick and Mr Ng Kian Yeow, Vincent, who

collectively hold 65 shares representing 65.0% of the issued and paid-up share capital of

Dandelion Capital, have each undertaken not to, amongst others, sell, contract to sell, realise,

assign, transfer, pledge, grant any option to, dispose of or enter into any agreement that will

directly or indirectly constitute or will be deemed as a disposal of any part of their interests in

Dandelion Capital for a period of 12 months commencing from the date of our admission to the

Catalist.

PPCF

Pursuant to the Management Agreement and as part of PPCF’s fees as the Sponsor and Issue

Manager, our Company allotted and issued to PPCF 1,875,000 new Shares, representing 1.2% of

our Company’s post-Placement Share capital, at the Placement Price. PPCF has undertaken not

to, among others, sell, contract to sell, transfer, assign, pledge, dispose of, realise, grant any

option to or enter into any agreement that will directly or indirectly constitute or will be deemed as

a disposal of any part of its shareholding interest in our Company immediately after the Placement

for a period of three months commencing from the date of our admission to Catalist. Upon

completion of the aforesaid relevant moratorium period, PPCF may dispose its shareholding

interest in our Company at its own discretion.

SHAREHOLDERS

64

Dilution is the amount by which the Placement Price paid by the subscribers of our Shares in thisPlacement exceeds our NTA per Share immediately after the Placement. However, there will beno dilution in our NTA per Share to new public investors immediately after the Placement.

Our Adjusted NTA per Share as at 30 June 2014 after adjusting for the Restructuring Exercise,revaluation gain on our PPE, the FC Shares and PPCF Shares but before adjusting for theestimated net proceeds due to us from the Placement was 26.11 cents per Share.

Pursuant to the Placement in respect of 27,500,000 Placement Shares at the Placement Price, ourAdjusted NTA per Share as at 30 June 2014 after adjusting for the Restructuring Exercise,revaluation gain on our PPE, the FC Shares, PPCF Shares and the estimated net proceeds dueto us from the Placement would have been 24.69 cents. This represents an immediate decreasein NTA per Share of 1.42 cents to our existing Shareholders and an immediate increase in NTAper Share of 4.69 cents or approximately 23.5% to our new public investors.

The following table illustrates the increase in NTA per Share based on the Placement Price of20.00 cents per Share:

Cents

Placement Price per Share 20.00

Adjusted NTA per Share based on the pre-Placement ordinary share capital

comprising 123,884,600 Shares 26.11

Decrease in NTA per Share attributable to existing shareholders 1.42

Adjusted NTA per Share after the issue of Placement Shares and based on

the post-Placement share capital comprising 151,384,600 Shares 24.69

Increase in NTA per Share to new public investors 4.69

Percentage increase in NTA per Share to new public investors 23.5%

The following table summarises the total number of Shares acquired by our existing Shareholderssince our incorporation to the date of lodgement of this Offer Document, the total considerationpaid by them and the effective cash cost per Share to them, and to the new public Shareholderswho subscribe for the Placement Shares at the Placement Price pursuant to the Placement:

Number of

Shares

Total

consideration

(S$)

Effective cash

cost per Share

(cents)

Existing Shareholders

Dandelion Capital(1) 121,759,600 33,235,386 27.3

Goh Tuck Peng 250,000 50,000 20.0

PPCF 1,875,000 375,000 20.0

New public Shareholders 27,500,000 5,500,000 20.0

Note:

(1) Mr Ng Hai Liong and Mr Ng Kian Ann Patrick, transferred two Shares to Dandelion Capital at a consideration of S$2.

In connection with the Restructuring Exercise (as more particularly described in the section titled “Restructuring

Exercise”), Mr Ng Hai Liong, Ms Lee Swee Chu, Mr Ng Kian Ann Patrick, Mr Ng Kian Yeow, Vincent and Mr Ng Kian

Peng Albert transferred their respective shareholding interests in Huationg Contractor, Soil Engineering and HT

Equipment for an aggregate consideration of S$33,235,384, which was satisfied by the allotment and issue of an

aggregate of 121,759,598 shares in our Company to Dandelion Capital.

DILUTION

65

Pursuant to a restructuring exercise to rationalise the structure of our Company and its

subsidiaries in preparation for the proposed Listing, our Company became the holding company

of our Group. The Restructuring Exercise involved the following:

(a) Incorporation of Our Company

Our Company was incorporated on 1 August 2014 in Singapore under the Companies Act as

a private limited company. We are the investment holding company of the Group. At the time

of incorporation, we had an issued and paid-up share capital of S$2 comprising 2 shares held

by Mr Ng Hai Liong and Mr Ng Kian Ann Patrick in the proportion of 50.0% and 50.0%

respectively.

(b) Acquisition of Huationg Contractor

On 11 November 2014, we entered into a sale and purchase agreement with Mr Ng Hai

Liong, Ms Lee Swee Chu, Mr Ng Kian Peng Albert, Mr Ng Kian Ann Patrick and Mr Ng Kian

Yeow, Vincent for the acquisition of the entire issued share capital of Huationg Contractor for

a consideration of S$22,516,497, based on the NTA of Huationg Contractor and adjusted for

revaluation reserves as at 30 June 2014. The consideration was satisfied by the allotment

and issue of 111,864,000 Shares in our Company. The acquisition was completed on 11

November 2014.

(c) Acquisition of HT Equipment

On 11 November 2014, we entered into a sale and purchase agreement with Mr Ng Kian Ann

Patrick and Mr Ng Kian Yeow, Vincent for the acquisition of their 75.0% shareholding

interests in the issued share capital of HT Equipment for a consideration of S$1,015,821,

based on 75.0% of the NTA of HT Equipment as at 30 June 2014. The consideration was

satisfied by the allotment and issue of 6,453,600 Shares in our Company. The acquisition

was completed on 11 November 2014.

(d) Acquisition of Soil Engineering

On 11 November 2014, we entered into a sale and purchase agreement with Mr Ng Hai

Liong, Mr Ng Kian Ann Patrick and Mr Ng Kian Yeow, Vincent for the acquisition of the entire

issued share capital of Soil Engineering for a consideration of S$9,703,066, based on the

NTA of Soil Engineering as at 30 June 2014. The consideration was satisfied by the allotment

and issue of 3,441,998 Shares in our Company. The acquisition was completed on 11

November 2014.

RESTRUCTURING EXERCISE

66

Our Group structure following the Restructuring Exercise and as at the date of this Offer

Document is as follows:

100.0% 100.0%75.0%

Huationg Global

Limited

HT Equipment(1) Soil EngineeringHuationg Contractor

Note:

(1) The minority shareholders of HT Equipment are (i) Mr Ng Swee Seng, the nephew of Mr Ng Hai Liong and cousin

of Mr Ng Kian Ann Patrick and Mr Ng Kian Yeow, Vincent; and (ii) Mr Ong Pee Wee, a current employee of the Group

who is an independent third party and not related to any of the Controlling Shareholders. Mr Ng Swee Seng and Mr

Ong Pee Wee hold 50,000 shares and 75,000 shares respectively in HT Equipment, representing 10.0% and 15.0%

of the issued and paid-up share capital of the company.

Our Subsidiaries

The details of our subsidiaries as at the date of this Offer Document are as follows:

Name of company

Date and place of

incorporation

Principal business/

Principal country

of business

Paid-up

capital

(S$)

Effective

ownership

(%)

HT Equipment 18 October 2012/

Singapore

Provision of industrial

machinery and equipment

rental services/Singapore

500,000 75.0

Huationg Contractor 6 September 1983/

Singapore

Provision of civil engineering

services and inland

construction logistics

support/Singapore

6,500,001 100.0

Soil Engineering 30 December 2003/

Singapore

Supply of construction

materials/Singapore

200,000 100.0

None of the above subsidiaries is listed on any stock exchange in any jurisdiction.

GROUP STRUCTURE

67

The following financial information of our Group should be read in conjunction with the full text of

this Offer Document, including the “Independent Auditor’s Report and Audited Combined Financial

Statements for the Financial Years ended 31 December 2011, 2012 and 2013” the “Independent

Auditor’s Review Report and Unaudited Interim Condensed Combined Financial Statements for

the Financial Period from 1 January 2014 to 30 June 2014” and the “Independent Auditor’s

Assurance Report and Unaudited Pro Forma Combined Financial Information for the Financial

Year Ended 31 December 2013 and Financial Period from 1 January 2014 to 30 June 2014” as set

out in Appendices A, B and C respectively to and the section titled “Management’s Discussion and

Analysis of Results of Operations and Financial Position” of this Offer Document.

A summary of the audited financial information of our Group in respect of the financial years ended

31 December 2011, 2012 and 2013, and the unaudited interim consolidated financial statements

of our Group for the six months financial period ended 30 June 2013 and 2014 are set out below:

Results of Operations of our Group

Audited Unaudited

(S$’000) FY2011 FY2012 FY2013 HY2013 HY2014

Revenue 80,984 92,213 108,475 52,831 67,609

Cost of sales and services (65,992) (77,728) (91,977) (44,177) (57,276)

Gross profit 14,992 14,485 16,498 8,654 10,333

Other income 1,413 2,758 3,965 1,345 1,856

Less:

– Administrative expenses (9,249) (10,711) (11,879) (5,954) (7,051)

– Other expenses (664) (1,057) (1,088) (1,001) (855)

– Finance costs (1,127) (981) (1,168) (465) (704)

Profit before income tax(1) 5,365 4,494 6,328 2,579 3,579

Income tax expense (830) (513) (1,177) (445) (554)

Profit for the financial period 4,535 3,981 5,151 2,134 3,025

Profit attributable to:

– Owners of the parent(1) 4,535 3,981 4,963 2,011 2,999

– Non-controlling interests – – 188 123 26

4,535 3,981 5,151 2,134 3,025

EPS (cents)(2) 3.66 3.21 4.01 1.62 2.42

Adjusted EPS (cents)(1)(3) 3.00 2.63 3.28 1.33 1.98

Notes:

(1) Had the Service Agreements (set out in the section titled “Directors, Executive Officers and Employees – Service

Agreements” of this Offer Document) been in place since 1 January 2013, our profit before tax, profit attributable

to owners of the parent and adjusted EPS computed based on our post-Placement share capital comprising

151,384,600 Shares for FY2013 would have been approximately S$5.4 million, S$4.2 million and 2.79 cents

respectively.

(2) For comparative purposes, EPS for the Period Under Review have been computed based on the profit attributable

to owners of the parent and the pre-Placement share capital comprising 123,884,600 Shares.

(3) For comparative purposes, adjusted EPS for the Period Under Review have been computed based on the profit

attributable to owners of the parent and the post-Placement share capital comprising 151,384,600 Shares.

SELECTED COMBINED FINANCIAL INFORMATION

68

Financial Position of our Group

(S$’000)

As at31 December 2013

(Audited)

As at30 June 2014(Unaudited)

ASSETSCurrent assetsAmount due from contract customers 11,096 9,949Available-for-sale financial assets – 1,285Trade and other receivables 32,197 34,984Prepayments 411 671Cash and bank balances 12,536 22,317

56,240 69,206Non-current asset held for sale – 3,500

Total current assets 56,240 72,706

Non-current assetsProperty, plant and equipment 73,234 84,770Investment property 3,800 –Available-for-sale financial assets – 1,925Prepayment – 388Intangible asset 11 11

Total non-current assets 77,045 87,094

Total assets 133,285 159,800

EQUITYShare capital 7,075 7,075Accumulated profits 29,827 24,831Other reserves – 6,729

Equity attributable to owners of the parent 36,902 38,635Non-controlling interest 313 339

Total equity 37,215 38,974

LIABILITIESCurrent liabilitiesAmounts due to contract customers 6,399 10,289Trade and other payables 27,981 31,561Finance lease payables 9,147 10,711Bank borrowings 14,866 22,067Current income tax payable 737 1,240

Total current liabilities 59,130 75,868

Non-current liabilitiesOther payables 533 3,828Finance lease payables 21,605 24,125Bank borrowings 10,835 13,109Deferred tax liabilities 3,967 3,896

Total non-current liabilities 36,940 44,958

Total liabilities 96,070 120,826

Total equities and liabilities 133,285 159,800

NTA per Share (cent)(1) 29.78 25.77

Note:

(1) The NTA per Share is computed based pre-Placement share capital comprising 123,884,600 Shares and the equity

attributable to owners of the parent net of any intangible assets and gain on revaluation of our PPE.

SELECTED COMBINED FINANCIAL INFORMATION

69

The following discussion of our results of operations and financial position should be read in

conjunction with the full text of this Offer Document, including the “Independent Auditor’s Report

and Audited Combined Financial Statements for the Financial Years ended 31 December 2011,

2012 and 2013”, the “Independent Auditor’s Review Report and Unaudited Interim Condensed

Combined Financial Statements for the Financial Period from 1 January 2014 to 30 June 2014”

and the “Independent Auditor’s Assurance Report and Unaudited Pro Forma Combined Financial

Information for the Financial Year Ended 31 December 2013 and Financial Period from 1 January

2014 to 30 June 2014” as set out in Appendices A, B and C to this Offer Document respectively.

OVERVIEW



materials. As at the Latest Practicable Date, our business operations are based solely in

Singapore.

Revenue

As at the Latest Practicable Date, we are principally engaged in three key business segments as

follows:

(a) Civil Engineering Services for construction projects in relation to, among others,

earthworks, infrastructure works, external works, drainage works, road diversions as well as

the operation and management of stockpile sites;

(b) Inland Logistics Support which involves the rental of construction equipment including, but

not limited to, tipper trucks, compactors, excavators and concrete pumps; and

(c) Sale of Construction Materials which includes LSS, a non-structural fill for buildings and

other structures and backfill in utility and road construction, as well as RCA, which is

produced from the recycling of construction waste and aggregates.

The breakdown of our revenue by business segments for the Period Under Review is presented

below:

FY2011 FY2012 FY2013 HY2013 HY2014

(S$’000) % (S$’000) % (S$’000) % (S$’000) % (S$’000) %

Civil Engineering

Services 51,893 64.1 65,257 70.8 79,613 73.4 37,676 71.3 54,486 80.6

Inland Logistics

Support 16,439 20.3 16,208 17.6 23,824 22.0 13,641 25.8 12,239 18.1

Sale of Construction

Materials 12,652 15.6 10,748 11.6 5,038 4.6 1,514 2.9 884 1.3

Total revenue 80,984 100.0 92,213 100.0 108,475 100.0 52,831 100.0 67,609 100.0

MANAGEMENT’S DISCUSSION AND ANALYSISOF RESULTS OF OPERATIONS AND FINANCIAL POSITION

70

Civil Engineering Services

Civil engineering services form the bulk and focus of our business currently. We have the

capability to undertake a range of civil engineering services, including earthworks, infrastructure

works, external works and drainage works. We also operate and manage stockpile sites for our

customers. Our customers in this segment include government agencies such as HDB and LTA as

well as other construction main contractors such as Daelim Industrial Co. Ltd..

Where the outcome of a construction contract can be estimated reliably, revenue is recognised by

the percentage-of-completion method with reference to the stage of completion of the contract

activity at the end of the financial year. The stage of completion is based on the proportion of

contract costs incurred to date compared to expected total contract costs. Where the outcome of

a construction contract cannot be estimated reliably, contract revenue is recognised to the extent

of contract costs incurred that are likely to be recoverable. Our revenue from Civil Engineering

Services has been recognised largely based on the percentage-of-completion method over the

Period Under Review.

Total contract revenue also includes an estimation of the variation works that are recoverable from

the customers. Variations in contract work, claims and incentive payments are recognised to the

extent that they have been agreed with the customer.

Inland Logistics Support

We provide a wide range of construction equipment, including articulated dump trucks, rollers,

bulldozers, wheel loaders, telescopic clamshell, breakers, tipper trucks, compactors, excavators

and concrete pumps. Our customers in this segment include HL Building Materials Pte. Ltd., CS

Bored Pile System Pte Ltd and Zhan Chang Holdings Pte Ltd.

The equipment are typically rented on a per hour, per day, per trip, per cubic metre or per ton basis

based on the prevailing market rates. Transportation and rental fees are recognised upon

completion of services.

Sale of Construction Materials

We recycle construction waste and aggregates to produce RCA, which is typically used for

ready-mixed concrete and graded stones. We also manufacture and supply LSS, which is a

material that can be used as non-structural backfill material, replacing conventional compacted

fill. Most of the RCA and LSS we produce are used to support our own civil engineering activities,

although we do, depending on prevailing market conditions and demand, sell our products to third

parties. Our customers in this segment include Alliance Concrete Singapore Pte. Ltd., Star

Ready-Mix Pte. Ltd., Sinmix Pte. Ltd., Samsung C&T Corporation, Penta-Ocean Construction

Company Limited and SsangYong Engineering & Construction Co Ltd.

The RCA is typically sold on a per tonne rate while LSS is sold on a per cubic metre rate based

on the prevailing market rates. Revenue from sale of construction materials is recognised when

the materials are delivered to and accepted by our customers.

In general, our revenue may fluctuate in future due to the following factors:

(a) Level of government spending on public infrastructure;


71

(b) Our continued ability to secure new projects and the non-cancellation of secured projects;

(c) Our ability to expand our capacity and resources in order to secure more projects;

(d) The size, complexity and duration of our secured contracts;

(e) Our ability to compete effectively with existing and new industry players including foreign

companies entering the Singapore market;

(f) Approval of variation orders by our customers, arising from additional works which are not

included in the original specifications of the contracts;

(g) Our ability to attract and retain experienced and qualified engineers, project managers and

other key personnel to meet the demands of our customers;

(h) The stage of completion of our civil engineering contracts during the financial period;

(i) Our ability to maintain the relevant licences, registrations, permits, approvals or exemptions

necessary for our business; and

(j) Changes in the economic, political, social and legal environment in Singapore.

Please refer to the section titled “Risk Factors” of this Offer Document for other factors which may

affect our revenue.

Cost of sales and services

The principal components of our cost of sales and services are direct costs in relation to employee

benefits expenses, direct material and fuel costs, sub-contract costs in relation to transportation

and labour, operating lease expense on rental of trucks and equipment, costs of repair and

maintenance of trucks and equipment and depreciation charges on income-generating fixed

assets. Our cost of sales and services amounted to approximately 81.5%, 84.3%, 84.8%, 83.6%

and 84.7% of our revenue for FY2011, FY2012, FY2013, HY2013 and HY2014, respectively. The

major components of our cost of sales and services in absolute terms and expressed as a

percentage of total revenue are set out below:

FY2011 FY2012 FY2013 HY2013 HY2014

(S$’000) % (S$’000) % (S$’000) % (S$’000) % (S$’000) %

Diesel/fuel andmaterial costs 25,048 30.9 24,709 26.8 35,124 32.4 16,863 31.9 17,636 26.1

Employee benefitsexpense 12,953 16.0 14,914 16.2 16,610 15.3 7,955 15.1 9,893 14.6

Sub-contract costs 8,047 9.9 14,116 15.3 16,094 14.8 8,452 16.0 16,068 23.8

Repair andmaintenance 7,990 9.9 8,992 9.8 8,186 7.5 3,688 7.0 4,252 6.3

Depreciation of PPE 6,054 7.5 7,168 7.8 8,654 8.0 4,296 8.1 4,912 7.3


72

FY2011 FY2012 FY2013 HY2013 HY2014

(S$’000) % (S$’000) % (S$’000) % (S$’000) % (S$’000) %

Operating leaseexpense 4,233 5.2 4,549 4.9 4,928 4.6 1,796 3.4 2,721 4.0

Provision forforeseeable losses Nil – 1,505 1.6 Nil – Nil – Nil –

Others 1,667 2.1 1,775 1.9 2,381 2.2 1,127 2.1 1,794 2.6

Total cost of sales 65,992 81.5 77,728 84.3 91,978 84.8 44,177 83.6 57,276 84.7

Costs are recognised as expenses in the period in which they are incurred. Our management

reviews our Group’s work-in-progress for projects to determine whether there is any indication of

foreseeable losses. Identified foreseeable losses are recognised immediately when it is probable

that total contract costs will exceed total contract revenue. Our cost of sales and services is mainly

dependent on the following factors:

(a) Fluctuations in the price of raw materials if we are not able to pass on increases to our

customers;

(b) Shortages in the supply of the materials required may result in an increase in costs of such

materials or a delay in the completion of our projects;

(c) Our ability to control the efficiency in the utilisation of raw materials;

(d) Changes in our remuneration packages in order to attract new skilled workers or to retain

existing skilled workers;

(e) Our ability to complete projects within the time frame and costs that have been agreed upon,

as we may be contractually liable to pay liquidated damages and consequential cost

overruns in the event of project delays;

(f) Changes in variation orders;

(g) Our ability to engage suitable sub-contractors at competitive prices; and

(h) Changes in government regulations and requirements.

Please refer to the section titled “Risk Factors” of this Offer Document for other factors which may

affect our cost of sales and services.

Gross profit

The margins that we record may vary over the life of a project and as such, this could result in

variation to the gross profit margin in that particular financial year or period.


73

Additionally, as our projects vary in terms of engineering specifications, duration, complexity and

scale and we face different competitive conditions at the time of bidding, our ability to accurately

and reasonably estimate resources and time required for each specific project quoted under

fixed-price and fixed-time engagement will affect the project margins.

Our gross profit margin may also be affected by variation orders to our ongoing contracts. From

time to time, our customers may require additional works to be performed which are not included

in the original specifications of the contract at the tender stage. As the final account for a project

is generally settled after the completion of a project, we may continue to receive revenues from

projects which have been completed as a result of outstanding certifications under the contract for

the project and certifications for variation orders or claims which are generally subject to

negotiation after the completion of the project. The unforeseen difficulties that we encounter

during the execution of our projects such as weather, soil conditions and change in technical

requirements of a project, will also affect our gross profit margin.

Other Income

Other income was approximately S$1.4 million, S$2.8 million, S$4.0 million, S$1.3 million and

S$1.9 million, representing approximately 1.7%, 3.0%, 3.7%, 2.5% and 2.7% of our total revenue

for FY2011, FY2012, FY2013, HY2013 and HY2014 respectively.

Our other items of income consists of mainly (i) operating lease income from the sub-lease of our

leasehold industrial properties, freehold residential investment property and leasehold operating

facilities, (ii) fair value gain on our freehold investment property as assessed by an independent

professional valuation firm, (iii) gain on disposal of plant and equipment, (iv) insurance claim

monies received, (v) government grants namely pursuant to the Mechanisation Credit Scheme,

Productivity Improvement Project Scheme and the Production Innovation Credit Scheme and (vi)

other sundry income.

Administrative expenses

Our administrative expenses consist of mainly (i) salaries, wages and other benefits for our

administrative and corporate personnel, (ii) operating lease expense on our occupancy of

construction sites and other operating facilities, (iii) directors’ remuneration, and (iv) depreciation

charges on our non-income generating assets such as computers, office equipment and electrical

fittings.

Our administrative expenses were approximately S$9.2 million, S$10.7 million, S$11.9 million,

S$6.0 million and S$7.1 million, accounting for approximately 11.4%, 11.6%, 11.0%, 11.3% and

10.4% of our total revenue for FY2011, FY2012, FY2013, HY2013 and HY2014 respectively.

Other expenses

Our other expenses consist primarily of (i) allowance for impairment of trade receivables and (ii)

penalties and fines largely incurred in the course of providing our civil engineering and inland

logistics services. Please refer to the section titled “General Information on Our Group –

Government Regulations” for more details on the regulations on the administration of carriage of

goods by motor vehicles.


74

Our other expenses were S$0.7 million, S$1.1 million, S$1.1 million, S$1.0 million and S$0.9

million, representing approximately 0.8%, 1.1%, 1.0%, 1.9% and 1.3% of our total revenue for

FY2011, FY2012, FY2013, HY2013 and HY2014 respectively.

Finance costs

Our finance costs amounted to S$1.1 million, S$1.0 million, S$1.2 million, S$0.5 million and S$0.7

million, accounting for approximately 1.4%, 1.1%, 1.1%, 0.9% and 1.0% of our total revenue in

FY2011, FY2012, FY2013, HY2013 and HY2014 respectively.

Our finance costs comprised primarily interest expenses incurred on our finance leases and bank

borrowings. Finance leases refer to hire purchases typically used for our purchases of trucks and

vehicles while our bank borrowings consist of trust receipts, revolving loans and term loans taken

for the purposes of managing cash flows, working capital and financing for our leasehold

properties.

Income tax expense

Our income tax expenses for FY2011, FY2012, FY2013, HY2013 and HY2014 comprise current

taxes and deferred taxes.

Current tax is the expected tax payable on the taxable profit for a particular financial year, using

tax rates enacted or substantively enacted at the relevant balance sheet dates, and any

adjustment to income tax payable in respect of previous financial years. Deferred tax is

recognised on all temporary differences between the carrying amounts of assets and liabilities in

the combined financial statements and the corresponding tax bases used in the computation of

taxable profit, and is accounted for using the balance sheet liability method. Deferred tax is

calculated at the tax rates that are expected to apply in the period when the liability is settled

based on the tax rates (and tax laws) that have been enacted or substantively enacted by the end

of the financial year.

Our overall effective tax rate was 15.5%, 11.4%, 18.6%, 17.3% and 15.4% for FY2011, FY2012,

FY2013, HY2013 and HY2014 respectively. The Singapore statutory corporate tax rate over the

Period Under Review was 17.0%.

Our effective tax rates for FY2011, FY2012 and HY2014 were lower than the Singapore statutory

corporate tax rate mainly due to tax rebates and enhanced allowances pursuant to the

government grants. Our effective tax rates for FY2013 was higher than the Singapore statutory

corporate tax rates mainly due to the under provision of income tax and deferred tax in prior

financial years.


75

REVIEW OF PAST PERFORMANCE

FY2012 compared to FY2011

Revenue

Our revenue increased by S$11.2 million or 13.9%, from S$81.0 million in FY2011 to S$92.2

million in FY2012. The increase was largely due to an increase in revenue from our civil

engineering business segment, which was partially offset by a decrease in revenue from our

inland logistics services and sale of construction materials.

The increase in revenue from our civil engineering works of approximately S$13.4 million or 25.8%

from S$51.9 million in FY2011 to S$65.3 million in FY2012 was mainly attributable to an increase

in civil engineering services contracted in FY2012 and the recognition of a substantial amount of

work done in the same year.

Revenue from inland logistics support services decreased marginally by approximately S$0.2

million or 1.4% from S$16.4 million in FY2011 to S$16.2 million in FY2012.

The decrease in sale of construction materials of approximately S$2.0 million or 15.0% from

S$12.7 million in FY2011 to S$10.7 million in FY2012 was largely due to the weaker demand for

LSS, as some of our customers’ projects reached stages of construction which do not require

filling material in FY2012. In addition, the emergence of competitors producing LSS or materials

similar to the LSS in FY2012 also contributed to the fall in demand for our LSS.


Cost of sales and services increased by S$11.7 million or 17.8%, from S$66.0 million in FY2011

to S$77.7 million in FY2012 mainly due to the increase in sub-contract costs, direct employee

benefits expenses, repair and maintenance expense and depreciation charges, which were

partially offset by a decrease of S$0.3 million in direct materials and fuel costs.

Sub-contract costs increased by S$6.1 million or 75.4% from S$8.0 million in FY2011 to S$14.1

million in FY2012. We engage sub-contractors for transportation as well as labour services as and

when we require additional resources in order to meet the delivery schedule of our civil

engineering projects. The increase in sub-contract costs was more than proportional to the

increase in revenue largely due to the concurrent delivery of several of our civil engineering

contracts in FY2012. As a result, we engaged substantial third-party resources in order to meet

the contractual obligations for our projects. In addition, as the volume of construction projects in

Singapore was generally higher in FY2012, the demand for transportation services was higher and

therefore, the sub-contract rates increased as well.

Our direct costs from employee salaries and benefits also increased by S$1.9 million or 15.1%,

from S$13.0 million in FY2011 to S$14.9 million in FY2012 as we increased our technical, project

operations and inland logistics headcount from 565 to 697 in order to meet the demands of a

higher order book achieved during FY2012. Average salaries of the employees were higher as

well in order to attract and retain staff.


76

With the increase in our order books, we also acquired additional plant and equipment for our civil

engineering projects in FY2012, leading to the increase of S$1.1 million in our depreciation costs,

or 18.4% from S$6.1 million in FY2011 to S$7.2 million in FY2012. Repair and maintenance

expenses also increased by S$1.0 million or 12.5% from S$8.0 million in FY2011 to S$9.0 million

in FY2012.

In addition, approximately S$1.5 million was recognised as provision for foreseeable losses in

FY2012 when it became probable, based on our management’s review and estimation, that total

contract costs would exceed total contract revenue during the year.

Gross profit

As a result of the foregoing, our gross profit decreased by S$0.5 million, or 3.4% from S$15.0

million in FY2011 to S$14.5 million in FY2012 and gross profit margin decreased from

approximately 18.5% in FY2011 to approximately 15.7% in FY2012. The decrease in gross profit

and gross profit margin was largely due to the substantial increase in sub-contract costs which

outpaced the increase in revenue. The additional third-party resources were necessary as the

schedules of our civil engineering projects coincided due to unforeseen circumstances and

required deployment of additional resources in order for us to keep to the schedule. Such

additional sub-contract costs were not priced in our contracts. Therefore, we were not able to pass

on the increase in costs to our clients.

Other income

Other items of income increased by S$1.4 million, or 95.2% from S$1.4 million in FY2011 to S$2.8

million in FY2012 mainly due to the increase in operating lease income of S$0.9 million and

increase in gain on disposal of plant and equipment of S$0.5 million which were partially offset by

a decrease of S$0.1 million in insurance claim monies received. The increase in operating lease

income was mainly because the sub-lease of one of our leasehold industrial properties

commenced only halfway in FY2011.


Our administrative expenses increased by S$1.5 million or 15.8%, from S$9.2 million in FY2011

to S$10.7 million in FY2012 mainly due to the increase in salaries and benefits of our

administrative and corporate personnel of S$0.1 million, increase in lease expense on

construction sites and operating facilities of S$0.4 million, and higher depreciation charges on

office equipment of S$0.2 million. The increments were partially offset by a decrease in directors’

remuneration of S$0.6 million in FY2012 due to lower directors’ fees paid.

The increase in salaries and benefits of our administrative and corporate personnel was mainly

due to the increase in foreign workers levy rates in 2012. The higher operating lease expense on

construction sites and facilities in FY2012 was a result of the increase in contracted works in the

same year.

Other expenses

Our other expenses increased by S$0.4 million or 59.0%, from S$0.7 million in FY2011 to S$1.1

million in FY2012 primarily due to an increase in allowance for doubtful debts of S$0.2 million in

FY2012.


77

Finance costs

Our finance costs decreased by S$0.1 million, or 13.0%, from S$1.1 million in FY2011 to S$1.0

million in FY2012, primarily due to a decrease of S$0.2 million in interest expenses on hire

purchase and term loans which was partially offset by an increase of S$0.1 million in interest

expenses on trust receipts in FY2012. This is in line with our paring down of term loans in FY2012

while securing additional financing for our accounts payable via trust receipts during the same

year.

Profit before income tax

Our profit before income tax decreased by S$0.9 million, or 16.2%, from S$5.4 million in FY2011

to S$4.5 million in FY2012 and profit before tax margin decreased from 6.6% in FY2011 to 4.9%

in FY2012. This is largely in line with the decrease in gross profit and gross profit margin as the

costs of sales increased at a faster pace than revenue.

Income tax expenses

Income tax expense decreased by S$0.3 million from S$0.8 million in FY2011 to S$0.5 million in

FY2012, mainly in line with the decrease in profit before income tax and due to an increase in tax

rebates and enhanced allowance during FY2012.

Profit attributable to owners of the parent

As a result of the above, our profit attributable to owners of the parent decreased by S$0.5 million,

or 12.2%, from S$4.5 million in FY2011 to S$4.0 million in FY2012 and profit after tax margin

decreased from 5.6% in FY2011 to 4.3% in FY2012.

FY2013 compared to FY2012

Revenue

Our revenue increased by S$16.3 million or 17.6%, from S$92.2 million in FY2012 to S$108.5

million in FY2013, mainly due to an increase in revenue from our civil engineering services and

inland logistics services, but was partially offset by a decrease in revenue from sale of

construction materials in FY2013.

The increase in revenue from our civil engineering services of approximately S$14.3 million or

22.0% from S$65.3 million in FY2012 to S$79.6 million in FY2013 was largely due to the

recognition of revenue from external works contracts, such as road diversion and construction,

which generally have higher contract values. In particular, substantial work was completed and

recognized for our earthworks and external works contract for the design, construction and

completion of Marina Coastal Expressway, which was a material contract in FY2012.

Revenue from our inland logistics segment increased by approximately S$7.6 million or 47.0%

from S$16.2 million in FY2012 to S$23.8 million in FY2013 mainly as a result of an increase in

demand for aggregates in the construction industry which in turn drove the demand for our inland

logistics support services to transport the aggregates. In addition, the demand for our concrete

pumps rose as the industry demand for concrete was generally higher in FY2013.


78

The decrease in sale of construction materials of approximately S$5.7 million or 53.1% from

S$10.7 million in FY2012 to S$5.0 million in FY2013 was due to lower demand, as more of our

customers’ projects reached stages which do not require filling material in FY2013. There were

also few construction projects in the industry which were at the relevant stages that would require

LSS for filling or backfilling purposes.


Cost of sales increased by S$14.3 million, or 18.3%, from S$77.7 million in FY2012 to S$92.0

million in FY2013, mainly due to the increase in direct fuel and material costs, direct employee

benefits costs, subcontract costs and depreciation expenses.

Our direct material and fuel costs increased by S$10.4 million or 42.2% from S$24.7 million in

FY2012 to S$35.1 million in FY2013 largely due to the substantial work done for external works

contracts such as road diversions and construction in FY2013, which required a larger volume of

materials than other civil engineering contracts.

Our direct employee salaries and benefits costs increased by S$1.7 million or 11.4%, from S$14.9

million in FY2012 to S$16.6 million in FY2013 as we increased our technical, project operations

and inland logistics headcount from 697 to 708 during FY2013 in anticipation of increasing work

volume from a higher order book secured in FY2013.

Our sub-contract costs increased by S$2.0 million or 14.0% from S$14.1 million in FY2012 to

S$16.1 million in FY2013, largely in line with the increase in our civil engineering works for

FY2013.

Depreciation expenses on our income-generating assets also increased by S$1.5 million or 20.7%

from S$7.2 million in FY2012 to S$8.7 million in FY2013 due to the purchases of additional plant

and equipment during the year.

Gross profit

As a result of the foregoing, our gross profit increased by S$2.0 million or 13.9% from S$14.5

million in FY2012 to S$16.5 million in FY2013. However, gross profit margin decreased marginally

from 15.7% in FY2012 to 15.2% in FY2013 largely due to the increase in direct material costs

which outpaced the increase in revenue. The revenue recognised in FY2013 was largely from the

external works contract on the Marina Coastal Expressway which commanded a higher value but

lower profit margin due to the substantial volume of materials required.

Other income

Our other income increased by S$1.2 million, or 43.8%, from S$2.8 million in FY2012 to S$4.0

million in FY2013. The increase was mainly due to an increase in operating lease income of S$0.6

million, an increase in fair value gain on our residential investment property of S$0.4 million and

an increase in government grants of S$0.3 million, which were partially offset by a decrease in

gain on disposal of plant and equipment of S$0.2 million.


79


Our administrative expenses increased by S$1.2 million, or 10.9%, from S$10.7 million in FY2012

to S$11.9 million in FY2013. The increase was mainly due to an increase in the salaries and

benefits of our administrative and corporate personnel of S$1.6 million and lease expense on

construction sites of S$0.2 million, which were partially offset by a decrease in directors’ fee of

S$0.4 million. The increase in the salaries and benefits of our administrative and corporate

personnel is in line with the increase in our administration headcount from 39 to 51 during FY2013.

Other expenses

Our other expenses increased marginally by S$0.03 million, or 2.9%, from S$1.06 million in

FY2012 to S$1.09 million in FY2013. The increase was primarily due to an increase in allowance

for doubtful debts of S$0.1 million which was partially offset by a decrease in transportation

expense of S$0.05 million.

Finance costs

Our finance costs increased by S$0.2 million, or 19.1%, from S$1.0 million in FY2012 to S$1.2

million in FY2013 primarily due to an increase in interest expenses from the higher amounts of

trust receipts and revolving loans utilised in FY2013.


Our profit before income tax increased by S$1.8 million, or 40.8%, from S$4.5 million in FY2012

to S$6.3 million in FY2013 and profit before tax margin improved from 4.9% in FY2012 to 5.8%

in FY2013 as other items of income increased at a faster pace while administrative and other

expenses increased less than proportionally to the increase in gross profit.

Income tax expenses

Income tax expense increased by S$0.7 million or 129.0% from S$0.5 million in FY2012 to S$1.2

million in FY2013 due to an increase in profit before tax and under provisions for income tax and

deferred tax in prior financial years.

Non-controlling interests

Non-controlling interests refers to the interests of minority shareholders in one of our subsidiaries,

HT Equipment, in which we have a shareholding interest of 75.0%. HT Equipment was

incorporated in October 2012 and was consolidated as part of our Group for FY2013. Non-

controlling interest amounted to S$0.3 million in FY2013, which represents the minority

shareholders’ interests in the profits of HT Equipment in FY2013.


As a result of the foregoing, our profit after tax attributable to owners of the parent increased by

S$1.0 million, or 24.7%, from S$4.0 million in FY2012 to S$5.0 million in FY2013 and profit after

tax margin improved from 4.3% in FY2012 to 4.6% in FY2013.


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HY2014 compared to HY2013

Revenue

Our revenue increased by S$14.8 million, or 28.0%, from S$52.8 million in HY2013 to S$67.6

million in HY2014. The increase was largely due to an increase in revenue from civil engineering

services which was partially offset by a decrease in revenue from inland logistics support services

and sale of construction materials.

The increase in revenue from our civil engineering services of approximately S$16.8 million or

44.6% from S$37.7 million in HY2013 to S$54.5 million in HY2014 was mainly due to the

completion of several projects in HY2014 and accordingly, more revenue from our order book

being recognized in HY2014.

Revenue from inland logistics support services decreased by approximately S$1.4 million, or

10.3%, from S$13.6 million in HY2013 to S$12.2 million in HY2014 as the demand for

transportation of construction aggregates decreased.

The decrease in sale of construction materials by approximately S$0.6 million or 41.6% from

S$1.5 million in HY2013 to S$0.9 million in HY2014 was largely due to the halt in our sales of RCA

during the relocation of our RCA production facilities in HY2014 and lower demand for LSS from

our customers as their projects reached stages that do not require filling or backfilling material.

Most of the projects in the industry which would require the use of LSS also had not reached the

relevant stage in HY2014. Please refer to the sections titled “General Information on our Group

– Prospects” and “General Information on our Group – Business Strategies and Future Plans” for

information on our plans to expand the sales of LSS.


Cost of sales increased by S$13.1 million, or 29.7%, from S$44.2 million in HY2013 to S$57.3

million in HY2014. The increase was mainly due to the increase in subcontract costs, direct labour

costs and operating lease expense on trucks and equipment.

Our subcontract costs increased by S$7.6 million, or 90.1%, from S$8.5 million in HY2013 to

S$16.1 million in HY2014 mainly due to the concurrent delivery of several of our civil engineering

contracts in HY2014 and we had to engage substantial third-party transportation and labour

resources in order to meet the contractual obligations for our projects.

Direct labour costs increased by S$1.9 million, or 24.4%, from S$8.0 million in HY2013 to S$9.9

million in HY2014 as we increased our technical, project operations and inland logistics headcount

from 708 to 824 during HY2014 in order to undertake the increasing volume of civil engineering

works.

Lease expense on trucks and equipment increased by S$0.9 million, or 51.5%, from S$1.8 million

in HY2013 to S$2.7 million in HY2014 as we required additional trucks and equipment in order to

meet the concurrent delivery schedules of several of our civil engineering contracts in HY2014.


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Gross profit

As a result of the foregoing, our gross profit increased by S$1.6 million, or 19.4%, from S$8.7

million in HY2013 to S$10.3 million in HY2014. However, gross profit margin decreased from

16.4% in HY2013 to 15.3% in HY2014. The decrease in gross profit margin was largely due to the

substantial increase in sub-contract costs which were not fully passed on to our clients and

therefore outpaced the increase in revenue. The sub-contract expenses were necessary for us to

meet the concurrent delivery of several of our civil engineering contracts in HY2014.

Other income

Our other income increased by S$0.5 million, or 38.0%, from S$1.3 million in HY2013 to S$1.8

million in HY2014. The increase was mainly due to an increase in operating lease income of S$0.6

million which was partially offset by a decrease in fair value gain on our residential investment

property of S$0.2 million. There was no fair value gain recorded on our investment property during

HY2014 as it was reclassified as a non-current asset held for sale during the financial period.

Pursuant to SLA requirements, the Company is required to divest the residential property prior to

the Listing. Accordingly, as at the date of the Offer Document, the Company has sold and

transferred the legal title to the property to Mr Ng Kian Haw Douglas, the son of Mr Ng Hai Liong

and brother of Mr Ng Kian Ann Patrick and Mr Ng Kian Yeow, Vincent, for a consideration of S$3.5

million.


Our administrative expenses increased by S$1.1 million, or 18.4%, from S$6.0 million in HY2013

to S$7.1 million in HY2014. The increase was mainly due to an increase in expenses on salaries

and benefits of our administrative and corporate personnel of S$0.7 million and increase in

operating lease expense on construction sites and operating facilities of S$0.2 million in HY2014.

Other expenses

Our other expenses decreased by S$0.1 million, or 14.6%, from S$1.0 million in HY2013 to S$0.9

million in HY2014. The decrease was primarily because there was no loss on disposal of PPE

recorded in HY2014 as compared to S$0.5 million recorded in HY2013. The decrease in loss on

disposal of PPE was partially offset by an increase in allowance for impairment of trade

receivables of S$0.2 million in HY2014 and impairment loss of non-current asset held for sale of

S$0.3 million.

Finance costs

Our finance costs increased by S$0.2 million, or 51.4%, from S$0.5 million in HY2013 to S$0.7

million in HY2014. The increase was primarily due to an increase in interest expenses from

additional term loan, revolving loan and trust receipts borrowings utilized in HY2014 mainly for the

purpose of financing the purchase of materials for a material contract.


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Our profit before income tax increased by S$1.0 million, or 38.7%, from S$2.6 million in HY2013

to S$3.6 million in HY2014 and profit before income tax margin improved from 4.9% in HY2013

to 5.3% in HY2014. The increase was largely in line with the increase in gross profits and gross

profit margin improved due to the increase in other income and the less than proportional increase

in administrative and other expenses.

Income tax expenses

Income tax expense increased by S$0.2 million, or 24.5%, from S$0.4 million in HY2013 to S$0.6

million in HY2014 in line with the increase in profit before income tax and was lower than the

corporate tax rate due to the government grants received during HY2014.

Profit-attributable to non-controlling interests

Profit attributable to non-controlling interests decreased from S$0.1 million in HY2013 to S$0.03

million in HY2014 due to the decrease in profitability of HT Equipment in HY2014.


As a result of the foregoing, our profit after tax attributable to owners of the parent increased by

S$1.0 million, or 49.0%, from S$2.0 million in HY2013 to S$3.0 million in HY2014 and profit after

tax margin improved from 4.0% in HY2013 to 4.5% in HY2014.

REVIEW OF FINANCIAL POSITION

Non-current assets

Our non-current assets consist of:

(a) Property, plant and equipment comprising leasehold properties (2 industrial buildings),

computers, container offices, office equipment and electrical fittings, plant and machineries,

work site equipment and trucks and vehicles;

(b) An investment property (a freehold residential property);

(c) Available-for-sale financial assets which relates to investment in life insurance;

(d) Prepaid insurance premium in relation to item (c); and

(e) Intangible asset in the form of a country club membership.

As at 31 December 2013

As at 31 December 2013, our non-current assets of S$77.0 million accounted for approximately

57.8% of our total assets. Property, plant and equipment made up approximately 95.1% of the

total non-current assets, amounting to approximately S$73.2 million. The remaining 4.9% is

attributable to our investment property worth approximately S$3.8 million as at 31 December

2013. Our investment property was valued by an independent valuation firm in accordance with


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International Valuation Standards. Our intangible asset in respect of the country club membership

is measured at cost less allowance for impairment and stood at S$11,000 as at 31 December

2013.

As at 30 June 2014

Our non-current assets increased by S$10.1 million from S$77.0 million as at 31 December 2013

to S$87.1 million as at 30 June 2014. The increase is attributable to increase in available-for-sale

financial assets of S$1.9 million which was taken up in HY2014, an increase in prepayment of

S$0.4 million, and the increase in value of our PPE due to the revaluation gain on two of our

leasehold properties of S$6.7 million and net additions of PPE of S$4.9 million. The increase is

offset partially by a decrease of S$3.8 million due to the reclassification of our investment property

to current assets as our Company is not permitted to hold residential properties upon the Listing.

The investment property has been sold and transferred as at the date of the Offer Document. As

at 30 June 2014, our non-current assets comprised mainly PPE which amounted to S$84.8 million,

available-for-sale financial assets of S$1.9 million and prepayment of S$0.4 million, representing

97.3% and 2.2% and 0.5% of our total non-current assets respectively. Our intangible asset in

respect of the country club membership remained at S$11,000.

Current assets

Our current assets consist of:

(a) Amounts due from contract customers arising from aggregated amounts of costs incurred

and recognised profits (less recognised losses) in excess of progress billings on each

contract as at the end of the financial period;

(b) Trade and other receivables which include primarily progress billings and retention sums on

construction contracts payable by customers as at the end of the financial period;

(c) Available-for-sale financial assets which refers to our investments in quoted debt instruments

denominated in S$ and US$, with coupon rates of between 3.75% and 5.2%. The fair values

of such debt instruments as at the end of the financial period is based on the closing quoted

market price on the last market day of the financial period;

(d) Non-current asset held for sale refers to the freehold residential property which was

reclassified as a current asset as at 30 June 2014;

(e) Prepayments; and

(f) Cash and bank balances.


As at 31 December 2013, our current assets of S$56.2 million accounted for 42.2% of our total

assets. These consist of amounts due from contract customers of S$11.1 million, trade and other

receivables of S$32.2 million, prepayments of S$0.4 million and cash and bank balances of

S$12.5 million which represent approximately 19.7%, 57.3%, 0.7% and 22.3% of the total current

assets as at 31 December 2013 respectively.


84

As at 30 June 2014

Our current assets increased by S$16.5 million from S$56.2 million as at 31 December 2013 to

S$72.7 million as at 30 June 2014. This was a result of an increase in trade and other receivables

of S$2.8 million, increase in prepayment of S$0.1 million, increase in cash and bank balances of

S$9.8 million, and the additions of available-for-sale financial assets of S$1.3 million and

non-current asset held for sale of S$3.5 million during HY2014. The increase was partially offset

by a decrease of S$1.1 million in amounts due from contract customers as progress billings

increased. As at 30 June 2014, current assets comprised trade and other receivables of S$35.0

million, cash and bank balances of S$22.3 million, amounts due from contract customers of S$9.9

million, non-current asset held for sale of S$3.5 million, available-for-sale financial assets of

S$1.3 million and prepayments of S$0.7 million which represent approximately 48.1%, 30.7%,

13.7%, 4.8%, 1.8% and 0.9% of the total current assets respectively.

Non-current liabilities

Our non-current liabilities consist of:

(a) The non-current portion of our finance lease payables;

(b) The non-current portion of our long term bank borrowings which comprise term loans;

(c) Deferred tax liabilities recognised on taxable temporary differences arising from our

subsidiaries; and

(d) Other payables which comprise non-current dividends payable and advance rental receipts

that represent part of the consideration for the purchase of our leasehold property from its

previous owner which became our lessee. Part of the consideration was used as a prepaid

rent and amortised over the next five years from the commencement of the lease.


As at 31 December 2013, our non-current liabilities of S$36.9 million accounted for 38.4% of our

total liabilities or 27.7% of our total assets. These consist of finance lease liabilities of S$21.6

million, bank borrowings of S$10.8 million, deferred tax liabilities of S$4.0 million and other

payables of S$0.5 million non-refundable deposit, which represented approximately 58.5%,

29.3%, 10.8% and 1.4% of the total non-current liabilities as at 31 December 2013 respectively.

As at 30 June 2014

Our non-current liabilities increased by S$8.1 million from S$36.9 million as at 31 December 2013

to S$45.0 million as at 30 June 2014, mainly due to an increase in other payables of S$3.5 million

of non-current dividends payable, an increase in finance lease payables of S$2.5 million and an

increase in bank borrowings of S$2.3 million, offset by advance rental receipt utilized of S$0.2

million. The increase in finance leases and bank borrowings were largely for the purposes of

financing capital expenditures and the purchases of materials required for a material civil

engineering contract in HY2014. As at 30 June 2014, non-current liabilities consist of finance

lease liabilities of S$24.1 million, bank borrowings of S$13.1 million, other payables of S$3.8

million and deferred tax liabilities of S$3.9 million, which represented approximately 53.7%,

29.2%, 8.5% and 8.6% of the total non-current liabilities as at 30 June 2014 respectively.


85

Current liabilities

Our current liabilities consist of:

(a) Trade and other payables which include primarily trade payables and retention sums payable

to sub-contractors, as well as non-trade payables to directors;

(b) Amounts due to contract customers arising from aggregated amounts of progress billings in

excess of costs incurred and recognised profits (less recognised losses) on each contract as

at the end of the financial period;

(c) Current portion of our bank borrowings which comprise trust receipts, revolving loans and

term loans;

(d) Current portion of our finance lease liabilities; and

(e) Current income tax payable.


As at 31 December 2013, our current liabilities of S$59.1 million accounted for 61.5% of our total

liabilities or 44.4% of our total assets. These consist of trade and other payables of S$28.0 million,

bank borrowings of S$14.9 million, finance lease liabilities of S$9.1 million, amounts due to

contract customers of S$6.4 million and current income tax payable of S$0.7 million which

represented approximately 47.3%, 25.1%, 15.5%, 10.9% and 1.2% of the total current liabilities

as at 31 December 2013 respectively.

As at 30 June 2014

Our current liabilities increased by S$16.8 million from S$59.1 million as at 31 December 2013 to

S$75.9 million as at 30 June 2014 due to an increase in bank borrowings of S$7.2 million, an

increase in amounts due to contract customers of S$3.9 million, an increase in trade and other

payables of S$3.6 million, an increase in finance lease payables of S$1.6 million and an increase

in current income tax payable of S$0.5 million in HY2014. The substantial increase in bank

borrowings was largely for the purposes of financing the purchases of materials required for a

material civil engineering contract in HY2014 and an increase in the revolving loan amounting to

S$2.4 million used for the insurance premium paid in relation to the investment in life insurance.

As at 30 June 2014, current liabilities consist of trade and other payables of S$31.6 million, bank

borrowings of S$22.1 million, finance lease payables of S$10.7 million, amounts due to contract

customers of S$10.3 million and current income tax liabilities of S$1.2 million, which represented

approximately 41.6%, 29.1%, 14.1%, 13.6% and 1.6% of the total current liabilities as at 30 June

2014 respectively.

Shareholders’ equity

Our total equity consists of equity attributable to owners of the parent and non-controlling

interests. Equity attributable to owners of the parent comprise share capital, accumulated profits

and other reserves in respect of gain on revaluation of PPE and fair value gain on our investments

in available-for-sale financial assets.


86


As at 31 December 2013, total equity attributable to owners of the parent amounted to S$36.9

million, which represents 27.7% of our total assets, comprising issued and fully paid share capital

of S$7.1 million and accumulated profits of S$29.8 million. Non-controlling interests, which relate

to the minority shareholders’ interest in our subsidiary, HT Equipment, in which we hold 75.0% of

the issued share capital, amounted to S$0.3 million as at 31 December 2013.

As at 30 June 2014

Equity attributable to owners of the parent increased by S$1.7 million to S$38.6 million as at 30

June 2014 largely due to the recognition of other reserves of S$6.7 million in HY2014, which was

partially offset by the decrease in accumulated profits of S$5.0 million. The other reserves arose

due to gain on revaluation of our PPE and fair value gain on our investments in available-for-sale

financial assets. Accumulated profits decreased in HY2014 largely due to the S$8.0 million

dividends declared in respect of HY2014, partially offset by the earnings made during the financial

period. Non-controlling interests amounted to S$0.3 million as at 30 June 2014. Equity attributable

to owners of the parent represents approximately 24.2% of our total assets as at 30 June 2014.

LIQUIDITY AND CAPITAL RESOURCES

We finance our operations through a combination of internal and external sources. Our internal

sources of funds comprise cash generated from our Group’s operating activities. Our external

sources of funds comprise mainly credit facilities from various financial institutions and credit

granted by our suppliers. Our principal uses of cash are mainly for the financing of working capital,

capital expenditures as well as repayment of credit facilities and interest expense.

The following table sets out a summary of our cash flows for the Period Under Review:

Audited Unaudited

(S$’000) FY2011 FY2012 FY2013 HY2014

Net cash from operating activities 12,831 7,248 8,906 10,478

Net cash (used in)/from investing

activities (6,188) (1,359) 436 (2,404)

Net cash (used in)/from financing

activities (6,302) (8,060) (1,973) 1,707

Net increase/(decrease) in cash and

bank balances 341 (2,171) 7,369 9,781

Cash and bank balances at the

beginning of year/period 6,997 7,338 5,167 12,536

Cash and bank balances at end of

year/period 7,338 5,167 12,536 22,317


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FY2011

In FY2011, we recorded a net cash inflow from operating activities of S$12.8 million, which was

a result of cash generated from operating activities before working capital changes of

approximately S$12.4 million and working capital inflow of S$1.2 million and offset by income tax

paid of S$0.8 million.

The increase in cash flow from working capital changes was mainly due to:

(a) a decrease in trade and other receivables of S$1.2 million; and

(b) an increase in trade and other payables of S$4.6 million,

which were partially offset by a decrease in amounts due to contract customers of S$4.7 million.

Net cash used in investing activities was S$6.2 million, which was mainly due to the purchase of

plant and equipment of S$6.4 million and partially offset by the proceeds from disposals of plant

and equipment of S$0.2 million.

Net cash used in financing activities was S$6.3 million which was mainly attributable to the

repayment of trust receipts of S$18.0 million, repayment of term loans of S$2.1 million, repayment

of finance lease payables of S$8.1 million, interest paid of S$1.0 million, advances to related

parties of S$0.2 million and dividends paid of S$3.0 million, which were partially offset by

advances from directors of S$4.5 million and proceeds from trust receipts of S$21.6 million.

Cash and bank balances increased by S$0.3 million in FY2011, amounting to S$7.3 million as at

31 December 2011.

FY2012

In FY2012, we recorded a net cash inflow from operating activities of S$7.2 million, which was a

result of cash generated from operating activities before working capital changes of approximately

S$14.0 million and partially offset by the working capital outflow of S$6.5 million and income tax


The decrease in cash flows from working capital changes was mainly due to an increase in trade

and other receivables of S$14.0 million, which was partially offset by:

(a) an increase in amounts due to contract customers of S$3.1 million; and

(b) an increase in trade and other payables of S$4.4 million.

In FY2012, the net cash used in investing activities of S$1.4 million was mainly due to the

purchase of plant and equipment of S$2.8 million, which was offset by the proceeds from disposal

of plant and equipment of S$1.4 million.

In FY2012, a net cash used in financing activities of S$8.1 million was mainly due to the

repayment of trust receipts of S$25.3 million, advances to related parties of S$1.7 million,

repayment of finance lease payables of S$7.1 million, repayment to directors of S$2.5 million,

repayment of term loans of S$2.1 million, payment of interests of S$0.9 million and payment of


88

dividends of S$0.5 million, which were partially offset by proceeds from trust receipts of S$28.4

million, proceeds from issuance of new shares of S$3.5 million and repayment from related parties

of S$0.1 million.

As at 31 December 2012, our cash and bank balances amounted to S$5.2 million after taking into

account the net decrease in cash and cash equivalents of S$2.2 million in FY2012.

FY2013

In FY2013, we recorded a net cash from operating activities of S$8.9 million, which was a result

of cash generated from operating activities before working capital changes of approximately

S$15.7 million and partially offset by the working capital outflow of S$6.4 million and income tax


The decrease in cash flow from working capital changes was mainly due to a decrease in amounts

due to contract customers of S$15.0 million which was partially offset by:

(a) a decrease in trade and other receivables of S$7.5 million; and

(b) a increase in trade and other payables of S$1.1 million.

A net cash of S$0.4 million was derived from investing activities due to the proceeds from

disposals of plant and equipment of S$0.8 million, which was offset by the purchase of plant and

equipment of S$0.4 million.

Net cash used in financing activities of S$2.0 million was mainly due to the repayment of trust

receipts of S$40.6 million, advances to related parties of S$0.2 million, repayment of finance lease

payables of S$5.9 million, repayment of term loans of S$1.4 million and interest paid of S$0.9

million, which were partially offset by proceeds from trust receipts of S$44.6 million, proceeds

from term loans of S$1.5 million, advances from directors and related parties of S$0.4 million, and

proceeds from issuance of new shares of S$0.5 million.

Cash and bank balances increased by S$7.4 million in FY2013, amounting to S$12.5 million as

at 31 December 2013.

HY2014

In HY2014, we recorded a net cash flow from operating activities of S$10.5 million, which was a

result of cash generated from operating activities before working capital changes of approximately

S$9.9 million, working capital inflow of S$0.7 million and partially offset by the income tax paid of

S$0.1 million.

The increase in cash flow from working capital changes was mainly due to an increase in the net

amount due to contract customers of S$5.0 million which was partially offset by:

(a) an increase in trade and other receivables of S$4.0 million;

(b) a decrease in trade and other payables of S$0.1 million; and

(c) an increase in prepayments of S$0.2 million.


89

In HY2014, a net cash of S$2.4 million was used in investing activities mainly due to the purchase

of PPE of S$1.5 million and purchase of available-for-sale investments of S$1.2 million, partially

offset by the proceeds from disposal of PPE of S$0.3 million.

In HY2014, a net cash of S$1.7 million from financing activities, was mainly due to proceeds from

trust receipts of S$30.8 million, repayment from related parties of S$1.2 million, and proceeds

from term loans of S$5.0 million which were partially offset by the repayment of trust receipts of

S$28.4 million, repayment of term loans of S$0.3 million, repayment of finance lease payables of

S$5.3 million, advances to related parties of S$0.2 million, dividends paid of S$0.5 million and

interest paid of S$0.6 million.

As at 30 June 2014, our cash and bank balances amounted to S$22.3 million after accounting for

a net increase in cash and cash equivalents of S$9.8 million during HY2014.

SEASONALITY

Due to the project-based nature of our business, we have not observed any significant seasonal

trends during the period under review. Our Directors believe that there is no apparent seasonality

factor which affects our industry. However, our business may be affected by policies which may

be introduced by the government from time to time and fluctuations in demand in the construction

industry.

INFLATION

Our financial performance for the Period Under Review was not materially affected by inflation.

CAPITAL EXPENDITURES AND DIVESTMENTS

Save as disclosed in the section titled “Restructuring Exercise” of this Offer Document, the capital

expenditures and divestments made by our Group for FY2011, FY2012, FY2013, HY2014 and for

the period from 1 July 2014 up to the Latest Practicable Date were as follows:

(S$’000) FY2011 FY2012 FY2013 HY2014

1 July 2014

up to the Latest

Practicable Date

Expenditures

Leasehold properties 17,129 1 3 – –

Computers 7 21 7 4 17

Container offices 35 55 10 10 31

Office equipment 121 37 105 23 3

Plant and machineries 8,698 7,226 5,276 9,109 2,815

Work site equipment 333 120 527 312 51

Trucks and vehicles 2,388 12,176 7,511 933 366

Total 28,711 19,636 13,439 10,391 3,283


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(S$’000) FY2011 FY2012 FY2013 HY2014

1 July 2014

up to the Latest

Practicable Date

Divestments

Plant and machineries 252 1,357 993 – 348

Work site equipment – 17 – – –

Trucks and vehicles 260 4,672 1,777 1,339 359

Total 512 6,046 2,770 1,339 707

The above capital expenditures were primarily financed by internally generated cash resources,

finance leases or bank borrowings.

EXPOSURE TO MARKET RISKS

Foreign Exchange Risks Management

As at the Latest Practicable Date, our business operations are wholly based in Singapore. Our

sales, purchases of raw materials and operating expenses are denominated mainly in SGD

although we also purchase machinery and equipment in other currencies such as EUR and US$

occasionally.

As our Group’s transactions are majority denominated in its functional currency, SGD, our Group

is not exposed to financial risks of changes in foreign currency exchange rates.

Interest Rates Risks Management

Our Group’s results may be affected by changes in interest rates due to the impact of such

changes on interest expenses from bank loans and trust receipts which are at floating interest

rates. If the interest rate increases or decreases by 0.5%, our Group’s net profits will decrease or

increase by approximately S$12,607, S$14,096 and S$24,230 as at 31 December 2011, 2012 and

2013 respectively, arising mainly as a result of higher or lower interest on floating rates for bank

borrowings.

It is our Group’s policy to obtain quotes from banks to ensure that the most favourable rates are

made available to the Group.

SIGNIFICANT ACCOUNTING POLICY CHANGES

Save as disclosed in the “Independent Auditor’s Report and Audited Combined Financial

Statements for the Financial Years Ended 31 December 2011, 2012 And 2013” and the

“Independent Auditor’s Review Report and Unaudited Interim Condensed Combined Financial

Statements for the Financial Period from 1 January 2014 To 30 June 2014” as set out in

Appendices A and B to this Offer Document respectively, we have not made any significant

changes in our accounting policies during the Period Under Review.


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During the financial years ended 31 December 2011, 2012 and 2013, our Group adopted the new

or revised Singapore Financial Reporting Standards and Interpretations of FRS (“INT FRS”) that

are relevant to its operations and effective for each annual period respectively. Changes to our

Group’s accounting policies have been made as required, in accordance with the relevant

transitional provisions in the respective FRS and INT FRS. The adoption of the new or revised

FRS and INT FRS did not result in any substantial changes to our Group’s accounting policies and

has no material effect on the amounts reported for the current and prior financial years, except as

disclosed as follows.

FRS 113 – Fair Value Measurement

FRS 113 provides a single source of guidance on fair value measurement and fair value disclosure

requirements when fair value measurement and/or disclosure is required by other FRSs. It also

provides a common fair value definition and hierarchy applicable to the fair value measurement

of assets, liabilities, and an entity’s own equity instruments within its scope.

The adoption of FRS 113 does not have any material impact on any of the Group’s fair value

measurements, therefore there has been no material impact on the financial position or financial

performance of the Company. FRS 113 has been adopted prospectively from 1 January 2013 and

therefore comparative information has not been presented for the new disclosure requirements.

Standards and interpretations issued, but not yet effective, up to the date of issuance of our

Group’s financial statements are listed below. Our Group intends to adopt these standards, if

applicable, when they become effective. The impact of adoption of these standards and

interpretations has been assessed by our Group and our Group evaluates that they will not have

a material impact on our combined financial statements in the period of initial adoption.

Effective date

(annual periods

beginning

on or after)

FRS 19 : Amendments to FRS 19: Defined Benefit Plans:

Employee Contributions

1 July 2014

FRS 16, 38 : Amendments to FRS 16 and 38: Clarification of

Acceptable Methods of Depreciation and

Amortisation

1 January 2016

FRS 16, 41 : Amendments to FRS 16 and FRS 41: Agriculture:

Bearer Plants

1 January 2016

FRS 27 : Amendments to FRS 27 – Equity Method in

Separate Financial Statements

1 January 2016

FRS 111 : Amendments to FRS 111: Accounting for

Acquisitions of Interests in Joint Operations

1 January 2016

FRS 114 : Regulatory Deferral Accounts 1 January 2016

Improvements to FRSs (2014) 1 July 2014


92

The following table shows the cash and cash equivalents, capitalisation and indebtedness of ourGroup:

(a) as at 30 June 2014 based on the Independent Auditor’s Review Report and UnauditedInterim Condensed Combined Financial Statements for the Financial Period from 1 January2014 to 30 June 2014;

(b) as at 30 September 2014, based on our unaudited consolidated management accounts; and

(c) as adjusted to give effect to the Restructuring Exercise, FC Shares and PPCF Shares andapplication of the net proceeds from the Placement, after deducting estimated listingexpenses related to the Placement.

You should read this table in conjunction with the “Independent Auditor’s Report and AuditedCombined Financial Statements for the Financial Years ended 31 December 2011, 2012 and2013”, the “Independent Auditor’s Review Report and Unaudited Interim Condensed CombinedFinancial Statements for the Financial Period from 1 January 2014 to 30 June 2014” and the“Independent Auditor’s Assurance Report and Unaudited Pro Forma Combined FinancialInformation for the Financial Year Ended 31 December 2013 and Financial Period from 1 January2014 to 30 June 2014” as set out in Appendices A, B and C to this Offer Document respectivelyand the section titled “Management’s Discussion and Analysis of Results of Operations andFinancial Position” of this Offer Document.

(S$’000)As at

30 June 2014

As at30 September

2014

As adjustedfor the

RestructuringExercise, the

issuance of theFC Shares andPPCF Shares,

and netproceeds fromthe Placement

Cash and bank balances 22,317 23,127 27,238

Short-term debtTrust receipts 15,076 21,115 21,115Revolving loans 4,936 6,917 6,917Current portion of term loans 2,056 1,993 1,993Current portion of finance leases 10,711 11,137 11,137

32,779 41,162 41,162

Long-term debtNon-current portion of term loans 13,109 12,673 12,673Non-current portion of finance leases 24,125 22,765 22,765

37,234 35,438 35,438

Total indebtedness 70,013 76,600 76,600

Equity attributable to ownersof the parent 38,635 38,941 42,797

Total capitalisation andindebtedness 108,648 115,541 119,397

Total capitalisation andindebtedness (excluding gainon revaluation of our PPE) 101,950 108,843 112,699

CAPITALISATION AND INDEBTEDNESS

93

Save for (i) the changes in working capital, (ii) the scheduled monthly repayments on our

borrowings and finance leases and (iii) changes in our shareholders’ equity and reserves arising

from the day-to-day operations in the ordinary course of our business, there were no material

changes in our total capitalisation and indebtedness from 30 September 2014 to the Latest

Practicable Date.

We review our capital structure to ensure that our Group is able to service any debt obligations

(including principal repayment and interest) based on our operating cash flows. Upon review, we

will balance our overall capital structure through new share issues and the issue of new debt or

the redemption of existing debt, if necessary. Our Group’s overall capital management strategy

remains unchanged during the Period Under Review.

Credit Facilities

As at the Latest Practicable Date, we have total banking facilities of approximately S$150.9

million, of which approximately S$47.8 million remains unutilised. Such banking facilities are

granted in S$ or US$ and comprise mainly trust receipts, bank guarantees, hire purchases and

term loans. Our banking facilities are secured by one or several of (i) our leasehold properties, (ii)

trucks and vehicles, (iii) negative pledge on trade receivables and (iv) personal guarantees.

As at the Latest Practicable Date, our total credit facilities (utilised and unutilised) were as follows:

Bank Nature of facility

Facilities

granted

(S$’000)

Utilised

amount

(S$’000)

Unutilised

amount

(S$’000) Interest rate Securities

DBS Letter of

credit/Trust receipt

(120 days)

7,000 3,544 3,456 Cost of funds +

1.5%

Mortgage over leasehold

property, assignment of

insurance policies, personal

guarantees by EDs

Letter of


(120 days)

800 274 526 Cost of funds +

1.5%

Personal guarantees by EDs

Foreign exchange

(spot and forward

contract)

2,000 – 2,000 Not applicable Personal guarantees by EDs

Fixed advance

facility

1,000 1,000 – SIBOR + 1.5% Mortgage over leasehold



guarantees by EDs

Revolving credit

facility

2,786(1) 2,466(1) 320(1) Prevailing 3 month

cost of funds +

1.0%




guarantees by EDs

Revolving credit

facility

2,530(1) – 2,530(1) Prevailing 3 month

cost of funds +

1.0%




guarantees by EDs


94


Facilities

granted

(S$’000)

Utilised

amount

(S$’000)

Unutilised

amount


Term loan 13,200 13,200 – 1st year –

Enterprise

Financing Rate

(“EFR”) – 3.45%

2nd year – EFR –

3.05%

3rd year – EFR –

2.65%

Subsequent years

– prevailing

3-month SIBOR +

3.0%




guarantees by EDs

Non-revolving hire

purchase

1,500 1,500 – 1.48% per annum Personal guarantees by EDs

Non-revolving hire

purchase


Non-revolving hire

purchase


Non-revolving hire

purchase


Non-revolving hire

purchase


Non-revolving hire

purchase

2,000 2,000 – 1.85% per annum

and changes

every 3 months


Commercial credit

card

800 435 365 Not applicable Ng Kian Ann Patrick and Ng

Kian Yeow, Vincent are jointly

and severally liable for

amounts owing under the

facility

UOB Overdraft 300 – 300 5% per annum Personal guarantees by EDs

and negative pledge on trade

receivables

Overdraft 800 – 800 5% per annum Mortgage over leasehold

property, personal guarantees

by EDs and negative pledge

on trade receivables

Letter of


4,000 3,080 920 Cost of funds +

1.25%

Performance

bonds

2,000 751 1,249 0.75% per annum

on the full amount

Performance

guarantees

6,160 6,118 42 0.75% per annum

on the full amount



receivables

Credit card line 120 3 117 Not applicable –


95


Facilities

granted

(S$’000)

Utilised

amount

(S$’000)

Unutilised

amount


Hire purchase 431 431 – Prevailing 3-month

cost of funds +

1.25%



receivables

Hire purchase 7,085 2,845 4,240 Prevailing 3-month

cost of funds

+ 1.25%



receivables

Hire purchase –

vehicle

3,000 – 3,000 Cost of funds +

1.25%



receivables

Hire purchase –

equipment

3,000 – 3,000 Cost of funds +

1.25%



receivables

Money market

loan

5,022(1) – 5,022(1) Cost of funds +

1.00%



receivables

Foreign exchange

contracts

4,000 – 4,000 Not applicable Personal guarantees by EDs


receivables

OCBC Letter of


(120 days)

4,000 3,113 887 SIBOR + 1.25% Personal guarantees by EDs

Foreign exchange

(forward contract)

2,000 – 2,000 Not applicable

Specific advance

facility

500 – 500 SIBOR + 2.0%

Hire purchase 21,700 21,700 – SIBOR + 1.0%

CIMB Letter of


(120 days) and/or

revolving credit

facility

4,500 4,114 386 Cost of funds +

1.5%


Revolving loan 1,500 1,500 – Cost of funds +

1.5%

Foreign exchange

(spot and forward

contract)

5,000 – 5,000 Not applicable

RHB Letter of


(120 days)

2,000 – 2,000 Cost of funds +

1.25%


Revolving credit 1,500 – 1,500 Cost of funds +

1.40%


96


Facilities

granted

(S$’000)

Utilised

amount

(S$’000)

Unutilised

amount


Banker’s

guarantee

1,000 891 109 Not applicable

ANZ Trade facilities –

trust receipt

5,000 4,009 991 Prevailing market

rate


SCB Trade facilities –

trust receipts,

performance

bonds

4,500 4,500 – Cost of funds +

1.5%


BEA Term loan 4,000 4,000 – SIBOR + 2.75% Personal guarantees by EDs

MBB Letter of


(120 days) and/or

shipping

guarantee

1,500 – 1,500 Cost of funds +

1.5%


Hire purchase 2,000 2,000 – 2.05% – 2.10%

per annum

Revolving loan 1,000 – 1,000 Cost of funds +

1.5%

Total 150,934 103,174 47,760

Note:

(1) Converted from US$ based on the exchange rate of S$1:US$1.2779 as at 31 October 2014 as obtained from

www.oanda.com. We have not sought the consent of Oanda Corporation to the inclusion of the relevant information

extracted from the relevant website or publication and disclaim any responsibility in relation to reliance on these

statistics and information. As they have not consented to the inclusion of the above information in this Offer

Document for the purposes of section 249 of the SFA, they are therefore not liable for the relevant information under

section 253 and 254 of the SFA. While reasonable actions have been taken by our Directors to ensure that the

relevant statements from the relevant information are reproduced in their proper form and context, and that the

information is extracted accurately and fairly from the relevant website or publication, all other parties and ourselves

have not conducted an independent review of the information contacted in the relevant website or publication and

have not verified the accuracy of the contents of the relevant statements.

The tenure of the above facilities ranges up to 20 years, save for overdraft facilities which are

repayable on demand. The interest rates of the above credit facilities may be varied by the

respective financial institutions from time to time in accordance with the relevant terms of the

facilities.

As at the Latest Practicable Date, to the best of our Directors’ knowledge, we are not in breach

of any terms and conditions or covenants associated with any credit arrangement or bank loan

which could materially affect our Group’s financial position and results of business operations, or

the investments of our Shareholders.

Contingent Liabilities

As at the Latest Practicable Date, our Group does not have any contingent liabilities.


97

Capital Commitments

As at the Latest Practicable Date, we have made an aggregate capital commitment of

approximately S$3.6 million in connection with our purchase of three mixer trucks and 24 units of

tipper trucks which will be funded by operating cash flows generated internally. Save as disclosed,

our Group does not have any material capital commitments.

Operating Lease Commitments

As at 30 June 2014 and the Latest Practicable Date, we have the following operating lease

payment commitments relating to non-cancellable operating leases in respect of construction

sites and other operating facilities as disclosed in the section titled “General Information on our

Group – Properties and Fixed Assets” of this Offer Document. The leases are negotiated for an

average term of two to three years and rentals are fixed for the term of the lease with no provisions

for contingent rent or revision of rent based on market price indices. We intend to finance the

operating lease commitments below with internally generated funds.

(S$’000)

As at

30 June 2014

As at

the Latest

Practicable

Date

Within one year 934 1,178

After one year but within five years 492 830

1,426 2,008


98

Our Group financed its operations through both internal and external sources. Our internal

sources of funds comprise cash generated from our Group’s operating activities. Our external

sources of funds comprise mainly borrowings from financial institutions and credit granted by

suppliers. Our principal uses of cash are for the financing of working capital, capital expenditures

as well as repayment of credit facilities and interest expense.

Our Group had cash and bank balances of S$7.3 million, S$5.2 million, S$12.5 million and S$22.3

million as at 31 December 2011, 31 December 2012, 31 December 2013 and 30 June 2014

respectively. As at the Latest Practicable Date, our cash and cash equivalent balance was S$16.6

million.

We generated positive operating cash flows of S$12.8 million, S$7.2 million, S$8.9 million and

S$10.5 million in FY2011, FY2012, FY2013 and HY2014 respectively. However, we recorded

negative working capital (i.e. current liabilities exceeded current assets) of approximately S$7.1

million, S$7.6 million, S$2.9 million and S$3.2 million as at 31 December 2011, 2012 and 2013 and

30 June 2014 respectively. The negative working capital position was mainly due to the following:

(a) Our Group has been generating positive operating cash flows and maintained significant

cash balances during the Period Under Review. Therefore, we have adequate cash balances

which we used for the purchase of non-current assets primarily to avoid taking on additional

credit facilities and incurring financing costs.

Non-current assets which are purchased with cash include certain construction equipment,

machineries, container offices and second-hand vehicles. We also pay cash for the renewal

of the COE of our trucks and vehicles and the estimated useful lives of these trucks and

vehicles are usually extended upon the renewal of the 10-year tenure of the COEs. The

aforementioned expenditures amounted to approximately S$1.6 million, S$2.6 million, S$2.6

million and S$1.5 million during FY2011, FY2012, FY2013 and HY2014 respectively. These

assets are accounted for as PPE of our Group with estimated useful lives of between five to

10 years;

(b) The tenure of the finance leases taken to finance our Group’s machineries, trucks and

vehicles is shorter than the useful life of these assets. The average term of our finance

leases is four to five years whereas the machineries, trucks and vehicles are depreciated

over their estimated useful life of 10 years; and

(c) We declared significant dividends of S$3.0 million, S$0.5 million, S$1.0 million and S$8.0

million in respect of FY2011, FY2012, FY2013 and HY2014 respectively. As at 30 June 2014,

S$5.0 million worth of declared dividends were accrued as a current payable while S$3.5

million was accrued as a non-current payable to the shareholders of the relevant subsidiaries

at the time of dividends declaration. S$5.0 million of the current dividends payable has been

paid out as at the Latest Practicable Date while the non-current dividends payable of S$3.5

million (“Outstanding Dividends”) remains outstanding. The relevant shareholders entitled

to the Outstanding Dividends of S$3.5 million have undertaken that they will not demand the

payment of the Outstanding Dividends until such time as the consolidated financial

statements of our Group for the six months ending 30 June 2015 are announced and our

Audit Committee confirms that such payment would not adversely affect our Group’s working

capital and consents to such payment. Please refer to the section titled “Interested Person

Transactions” of this Offer Document for further details.

WORKING CAPITAL

99

In assessing whether we have sufficient working capital as at the date of lodgement of this Offer

Document for our present requirements and for at least 12 months after the listing of our Company

on Catalist, our Directors have considered, inter alia, the following key factors:

(a) Our business operations have been growing steadily and the revenue of our Group has been

increasing at year-on-year growth rates of between 14.0% to 18.0% during the Period Under

Review. Accordingly, the negative working capital position of our Group was not due to

financial instability such as declining sales and accounts receivables;

(b) Our Group has also demonstrated that we have been able to collect cash from the trade

receivables due from our customers and generate adequate cash for use in our operating

activities during the course of each financial period. We generated positive operating cash

flows amounting to S$12.8 million, S$7.2 million, S$8.9 million and S$10.5 million for

FY2011, FY2012, FY2013 and HY2014 respectively. In addition, the allowances made for

impairment of trade receivables were relatively insignificant during the Period Under Review,

amounting to S$0.03 million, S$0.2 million, S$0.4 million and S$0.2 million in FY2011,

FY2012, FY2013 and HY2014 respectively;

(c) Our Group has also been able to meet our current liabilities as and when they fall due with

the use of trust receipts which allows us to appropriately time the payment of our purchases

and the collection of trade receivables from our customers. Our trust receipts provide a

longer payment tenure of 90 to 120 days which helps to bridge any gap between our payment

and collection cycles. As at the Latest Practicable Date, our Group has trust receipt facilities

of S$33.3 million of which S$10.7 million remains unutilised;

(d) In the past 14 years, our Company has not defaulted on any loans and/or interest repayment

obligations and our bankers have not recalled the credit facilities extended. Our Company

has not encountered any liquidity issues that resulted in a major disruption to our operations.

As at the Latest Practicable Date, our Company has total credit facilities of S$150.9 million,

of which S$47.8 million remain unutilised. Our Directors believe that we would be able to

obtain additional bank borrowings from our principal bankers should there be a need to

supplement existing internal resources;

(e) Operationally, our Group had positive working capital as at 30 June 2014. Included in the

current liabilities of our Group as at 30 June 2014 were dividends accrued as current payable

of approximately S$5.0 million which contributed significantly to the negative working capital

position of our Group of S$3.2 million as at the end of HY2014. Excluding the dividends

payable of S$5.0 million, our operating working capital position would have been positive at

approximately S$1.8 million. We do not currently have a formal dividend policy and in

considering the level of dividend payments (if any) going forward, we will take into account

various factors such as our expected working capital requirements to support our future

growth, financial position, cash flows, and investment plans. We will manage our dividend

payouts with a view of maintaining a positive working capital position. Please refer to the

section titled “Dividend Policy” of this Offer Document for further details; and

(f) Our Executive Chairman, Mr Ng Hai Liong, has given an irrevocable undertaking in writing

dated 5 November 2014 to continue to provide or procure financial support to our Group of

up to a maximum of S$8.0 million where necessary for the next three years after the listing

of our Company on Catalist (in the form of capital injection, loans or a combination of both,

subject to compliance with the Rules of Catalist and Shareholders’ approval, if required). Any

loans advanced by him pursuant to the undertaking would be interest-free and will be due

and payable on such date as may be agreed between our Company and him, subject to

WORKING CAPITAL

100

review by our Audit Committee, which will take into account the financial position of our

Group (including the cash flow position and balance sheet of our Group) and/or any other

factors that may potentially affect the financial position of our Group. Our Audit Committee

may, after a review of the ongoing liquidity requirements of our Group, release Mr Ng Hai

Liong from the said undertaking before the expiry of the three-year period.

Taking into account the foregoing, our Directors are of the reasonable opinion that, after having

made due and careful enquiry and after taking into account our Group’s cash flows generated from

our operating activities, together with the credit facilities available to us and our existing cash and

cash equivalents, the working capital available to us as at the date of lodgement of this Offer

Document is sufficient for our present requirements and for at least 12 months after the listing of

our Company on Catalist.

The Sponsor is of the reasonable opinion that, after having made due and careful enquiry and

after taking into account the foregoing and our Group’s cash flows generated from our operating

activities, together with the credit facilities available to us and our existing cash and cash

equivalents, the working capital available to our Group as at the date of lodgement of this Offer

Document is sufficient for our present requirements and for at least 12 months after the listing of

our Company on Catalist.

WORKING CAPITAL

101

HISTORY

Our Company was incorporated in Singapore on 1 August 2014 under the Companies Act as a

private company limited by shares, under the name of “Huationg Global Private Limited”. Our

Company’s registration number is 201422395Z. Our Company was converted into a public limited

company and the name of our Company was changed to “Huationg Global Limited” in connection

therewith on 26 November 2014. We became the holding company of our Group following the

completion of the Restructuring Exercise. For more information, please refer to the section titled

“Restructuring Exercise” of this Offer Document.

On 6 September 1983, we commenced operations with another partner as a sub-contractor under

the name of Sin Choon Contractor Pte. Ltd.. We were engaged in works for various civil

infrastructure projects, in particular the construction of army camps in Singapore.

On 1 March 1990, Sin Choon Contractor Pte. Ltd. was renamed “Huationg Contractor Pte Ltd”.

We expanded our operations overseas in the 1990s. In 1990, we took part in our first overseas

project when we were engaged by P.T. Pilar Reliancetama Kontraktor, to provide civil engineering

and earthworks services for the construction of the Batamindo Industrial Park in Batam,

Indonesia.

We participated in three other overseas projects in 1994. We provided earthworks services and

inland logistics support services for the construction of the Wuxi-Singapore Industrial Park in

Wuxi, China and the China-Singapore Suzhou Industrial Park in Suzhou, China. We also

performed earthworks services for the construction of the 265-room Summit Parkview Hotel in

Yangon, Myanmar.

In 1995, we provided earthworks services for the construction of Lobam Industrial Estate in Bintan

Island, Indonesia. In the same year, we were also engaged by Bintan Industrial Estate

Management Pte Ltd to provide civil engineering services for the construction of an 18-hole golf

course, a clubhouse and villas at Bintan Lagoon Golf and Beach Resort in Bintan Island,

Indonesia. Further, we also provided earthworks and roadworks services in the construction of the

road to Simpang Lagoi.

In 1998, we entered into our first direct contract with HDB for the transport of aggregates and

sand. We began to develop our customer base after the contract with HDB ended and started

working with Hong Leong Asia Ltd. and Zhan Chang Holdings Pte Ltd.

In 2001, we secured our first major underground earthworks project when we were engaged as

sub-contractor for the construction of the first phase of the Kallang-Paya Lebar Expressway. We

began to focus on providing civil engineering services for major MRT and expressway construction

projects such as the construction of the Singapore Bras Basah MRT station, Dhoby Ghaut MRT

station, Bayfront MRT station and Marina Coastal Expressway.

In 2002, Huationg Contractor earned the BCA grading of C2 under the category of CW01 for

general building, which enables us to tender for public sector procurements in relation to general

building works of values up to S$1.4 million. In 2003, Soil Engineering was incorporated to

develop and commercialise our LSS product. The shortage in imported sand enabled us to

successfully market LSS as an alternative for the backfilling of basements and other MRT

construction projects in Singapore.

GENERAL INFORMATION ON OUR GROUP

102

Since 2004, we began recycling construction waste and aggregates and utilising RCA in our

construction works.

In 2006, in line with our plans to continually expand and diversify our business, we diversified into

the provision of inland logistics support for the construction industry. In the same year, Huationg

Contractor received the TÜV SÜD PSB Pte. Ltd. certification for OHSMS certifying that Huationg

Contractor had conformed to the requirements of OHSAS 18001: 2007 in the scope of providing

civil engineering and inland transportation services and renting or hiring of construction

equipment.

In 2008, LSS was adopted in LTA’s specifications for the construction of diaphragm walls and

cross walls at the Bayfront MRT station project. PUB also incorporated LSS into the work

specifications for the grouting of abandoned pipes. This resulted in a significant increase in

demand for LSS.

In the same year, we entered into our first direct contract with LTA to provide advance earthworks

services in the construction of the Downtown Line depot.

In 2009, we secured another major earthworks project when we were engaged as sub-contractor

in the construction of Bukit Panjang MRT station and the underground tunnels for Stage 2 of the

Downtown Line MRT. In the same year, we were engaged by Samsung C&T Corporation to provide

reclamation, seawall construction and earthworks services for the construction of the Marina

Coastal Expressway. In addition, Huationg Contractor was awarded the bizSAFE STAR certificate

for our health and safety practices. Huationg Contractor also achieved in the same year the BCA

grading of A2 under the category of CW02 for civil engineering, which enables us to tender for

public sector procurements in relation to civil engineering works of values up to S$90.0 million.

In 2010, we were certified by the Certification International (Singapore) Pte Ltd, through Huationg

Contractor, as operating a quality management system which conforms to the requirements of ISO

9001:2008 in the scope of crushing and screening of construction and demolition materials for

recycling. In the same year, Huationg Contractor was also certified as operating an environmental

management system which conforms to the requirements of ISO 14001:2004 in the scope of

providing civil engineering services.

In 2011, Huationg Contractor was named the “Best Sub-Contractor” by Samsung C&T Corporation

for our contribution to the Marina Coastal Expressway project in Singapore. We also entered into

our first major contract with HDB for the provision of site clearance, earthworks and temporary

drainage works in the construction of Yishun Town N5. In addition, we purchased the Nordberg

Primary Lokotrack Mobile Crushing Plant Model LT106 and Nordberg Secondary Lokotrack Mobile

Crushing Plant Model LT1100 manufactured by Metso to support our RCA production process.

In June 2012, we secured our first contract for the construction of a bus park with LTA. We were

engaged as the main contractor in the design and build of the proposed bus park located in

Woodlands. Later that year, we also obtained TÜV SÜD PSB Pte. Ltd. certification certifying

conformity with ISO 9001:2008 for the provision of civil engineering services and the provision of

inland transportation services and renting/hiring of construction equipment.

In April 2013, we managed to secure our second major contract with HDB when we were engaged

as the main contractor for site clearance, earthworks and temporary drainage works at Tampines

Neighbourhood 6 (Phase 1). We entered into a major contract with LTA in November the same


103

year when we were engaged as the main contractor for the construction of a bus depot in Loyang.

The contract is for the design and construction of the bus depot, including the provision of

architectural, civil engineering and structural building services.

As at the Latest Practicable Date, we had 149 tipper trucks and 388 units of other construction

equipment, including articulated dump trucks, compactors, excavators and concrete pumps.

BUSINESS OVERVIEW



material, including the manufacture and supply of LSS, which is used as non-structural fill for

buildings and other structures and for backfill in utility and road construction, as well as the sale

of RCA produced from the recycling of construction waste and aggregates.

Our Group’s businesses can be categorised into three main segments as follows:

(1) civil engineering services;

(2) inland logistics support; and

(3) sale of construction materials.

(1) Provision of civil engineering services

We provide a full range of civil engineering services from earthworks, infrastructure works,

external works, demolition and excavation works, site clearance, drainage works, reinforcing

bar installation, formwork, concrete installation, backfill and compaction to final handover.

With our comprehensive pool of construction equipment and specialist modular formwork, we

are able to undertake concrete construction projects in Singapore. In addition, by working

with third party equipment suppliers, we are able to access specialist heavy lift cranes and

other concrete handling equipment when required to support our civil engineering

operations. Our customers in this segment include HDB, LTA and Daelim Industrial Co. Ltd..

In addition, we also operate and manage entire stockpile sites for our customers, performing

collection to handling to provision of site management staff, administrative staff, operation

staff, clerical staff and all other essential manpower required to ensure continuous and daily

operation of the stockpile sites. Stockpile management reduces or eliminates the pollution of

stockpile materials such as soil, concrete, asphalt and aggregate by rainwater or air. As we

have the resources and capability to expand our stockpile management operations and

benefit from economies of scale, our customers are able to focus on their core business

activities in a cost-efficient manner by outsourcing their stockpile management needs to us.

Our fleet of tipper trucks are often used to support our civil engineering works and stockpile

management services by transporting sand and soil to and from work sites. As the Road

Traffic Act regulates the carriage of goods by motor vehicles and prohibits the carriage of

goods in excess of the maximum laden weight of a vehicle, we have imposed strict guidelines

for the loading of sand and soil on our tipper trucks and have provided the relevant training

to our tipper truck drivers in this regard. Please refer to the section titled “Government

Regulations – Singapore – Administration of Carriage of Goods by Motor Vehicles” for further

details on the relevant rules in this regard.


104

The various stages of our typical workflow for the provision of civil engineering works for our

projects are described below:

(A) Tender and Quotation Preparation

and Submission

(B) Contract Review and Administration

(C) Project Planning

(D) Procurement and Sub-contract

(E) Project Execution

(F) Project Handover

(A) Tender and Quotation Preparation and Submission

We have established a tendering team tasked to source for projects. The tendering

team sources for projects by monitoring advertisements in the newspapers, government

websites and other mass media publications. Besides sourcing for public tender

projects commissioned by government agencies such as LTA, HDB and JTC, the

tendering team also sources for projects commissioned by companies which may have

submitted tenders for certain projects and which may need to engage other sub-

contractors for the provision of a range of services to support their works. The tender

prices submitted by the companies for public tender projects are usually publicly

available and our tendering team will usually submit our quotation for the provision of

sub-contractor works to the company with the most competitive tender price. From time

to time, we also source for projects through invitations to tender and referrals from

clients for existing and past projects.

Once a decision to participate in a project has been made, we typically undertake the

following steps to ensure that we submit a suitable tender proposal or quotation:

(a) review the tender documents which contain details of the proposed project,

including drawing plans and project specifications. In the event that we are

submitting a quotation for the provision of sub-contractor works, the main

contractor will extract for our review the details relevant to the aspect of services

to be provided by us;


105

(b) based on the tender or contract requirements set out in the tender or contract

documents, our tender team will review the design, method of construction and

specifications to ensure that the quantities and the scope of work to be carried out

are adequately provided for;

(c) for design and build projects, we will work together with external consultants to

develop preliminary cost-effective designs and prepare design reports,

specifications and technical submission for our customers;

(d) compile cost estimates of materials, labour, sub-contracting costs and machinery

costs after considering the method of construction and resources required to carry

out the project as well as quotations obtained from suppliers and sub-contractors;

and

(e) derive the tender price or quotation price, with a reasonable profit margin factored

in after taking into consideration the complexity and risks associated with the

project.

The entire abovementioned process would typically take about two weeks to a few

months depending on the type and scale of the project.

(B) Contract Review and Administration

If our submitted tender price is amongst the most competitive, we may then be required

to attend tender interviews to clarify issues such as pricing and materials offered, and

to respond to any other queries relating to the tender, such as methods of construction.

There may be negotiations to finalise the terms of the contract before the contract is

awarded. Notification of a successful tender may take place within three to six months

after the close of the tender. In the event that we have submitted a quotation for the

provision of sub-contractor services, we usually expect to be notified of the result within

a month of submission of our quotation.

After the letter of award or project contract is received from the customer, our tender

team will review and ensure that the project specification and scope of work to be

performed by us are clearly set out in these documents, and the contract terms are

consistent with the tender documents or quotations submitted. We will source for a

performance bond representing a specified percentage of the contract sum that will be

submitted to our customer prior to the commencement of the project. Our tender team

will compile and hand over all relevant information including documents and drawings

to the project team (“Project Team”). The Project Team comprising our project manager

and his team members, will be in charge of carrying out the civil engineering works. The

composition of the Project Team members will depend on the size, complexity and

requirements of the awarded project.

(C) Project Planning

A Project Quality Plan (“PQP”) will be formulated by the Project Team before work

commences on the project. The PQP will specify the functions and responsibilities of all

parties involved (including the sub-contractors), project organisation chart, project

schedule, schedule of submissions, project budget, plant and equipment utilisation

plan, manpower projection plan as well as all necessary procedures and controls to

ensure that the project is executed in accordance with the contractual requirements and


106

drawings. The aim of the PQP is to ensure that the contract is executed in

environmentally-friendly conditions within the stipulated time and budgeted cost and

that the completed project meets our high quality standards.

Following the formulation of the PQP, a kick-off meeting will be held to ensure that all

staff assigned to the project are fully aware of their responsibilities and roles in the

project.

(D) Procurement and Sub-Contract

A procurement schedule will be prepared by the Project Team which will set out the

expected dates of award of the various supply contracts and sub-contracts. Regular

meetings within the Project Team are held to monitor the status of the procurement

schedule in order to ensure that the progress of the project will not be affected. We will

request for quotations from our approved list of various sub-contractors and suppliers,

in order to obtain competitive quotes. We will appoint the suppliers and the sub-

contractors as soon as we can in order to mitigate any risk arising from any adverse

changes in the cost of the materials and sub-contracting services.

The list of approved suppliers and sub-contractors is evaluated and assessed

periodically based on certain criteria such as the ability to meet delivery and project

schedules, and the quality of products and services performed. This list is updated

based on feedback obtained from the various projects.

(E) Project Execution

The project manager will manage the project in accordance with the PQP to ensure its

timely completion.

He will also closely monitor materials and machinery utilisation rates to minimise

wastage and inefficiency, and conduct random checks on materials upon delivery to

ensure that the materials conform to our quality standards. He will have regular

meetings with his team members, suppliers and sub-contractors to track the progress

of work, schedule of procurement and schedule of technical submission to ensure that

these are carried out accordingly. The Project Team will also carry out daily site

inspections to ensure that the civil engineering works are carried out in accordance with

the PQP.

During the course of the project, our management conducts regular progress meetings

with our project manager and Project Team to ensure that the project is carried out on

schedule in accordance with the PQP, and that project costs are kept under control.

(F) Project Handover

Upon the completion of the project, the Project Team will carry out an inspection with the

customer to list out and rectify any defects identified. Formal documentation of the

handing over of the project to the customer shall be done thereupon. This is followed

by the defects liability period, usually spanning between 12 months and 24 months from

the handing over of the project to the customer, during which we will be required to

rectify any defects found in the completed project. Typically, a sum not exceeding 5.0%

of the contract sum will be retained by our customers as retention monies to secure the


107

fulfilment of our obligations under the contract. In addition, our customers will continue

to retain the performance bond that was provided to them at the commencement of the

project until the expiry of the said liability period.

Upon the expiry of the said liability period, our management will conduct a feedback and

review meeting with our project manager to evaluate our performance on the project in

terms of both efficiency and profitability, and identify areas in which we can improve

ourselves for future projects.

The various stages of our typical workflow for the provision of stockpile management

services are described below:

(A) Collection of aggregates at aggregate terminals

Pulau Punggol Aggregate Terminal and Tuas Aggregate Terminal are the two aggregate

terminals which allow the unloading of aggregates imported into Singapore via flat top

barges. Wheel loaders and tipper trucks are used to unload the aggregates from the

barges and into the aggregate terminals where our tipper trucks are sent to collect the

aggregates for transportation.

(B) Dispatch of aggregates to ready-mixed concrete batching plants

Our tipper trucks are often used to transport aggregates from the aggregate terminals

to various ready-mixed concrete batching plants. As we charge our customers based on

the weight of the aggregates transported, our fully loaded tipper trucks will be weighed

at the weighbridges installed at the aggregate terminals.

(2) Inland logistics support

We provide inland logistics support through the provision of a wide range of construction

equipment, including, among others, articulated dump trucks, rollers, bulldozers, wheel

loaders, telescopic clamshell, breakers, tipper trucks, compactors, excavators and concrete

pumps. The equipment are typically rented on per hour, per day, per trip, per cubic metre or

per ton basis based on the prevailing rates at that particular point in time. We usually provide

drivers who are familiar with operating the equipment. Our customers in this segment include

HL Building Materials Pte. Ltd., CS Bored Pile System Pte Ltd and Zhan Chang Holdings Pte

Ltd.

Tipper trucks are used for aggregate and sand transportation from aggregate terminals to

stockpile sites, and from stockpile sites to ready-mixed concrete batching plants.

Compactors are used to compact earth to meet different size specifications, while excavators

are used to excavate and load loose gravel, sand, or soil.

Concrete pumps, comprising two different types of pumps, namely the “truck-mounted boom

pump” and the “stationary pump”, may be used to transfer pre-mixed concrete to designated

locations such high-rise buildings, where accuracy is required and which the alternative

method of pouring may not be able to achieve. The truck-mounted boom pump is often used

in large-scale construction projects and utilises a foldable and retractable remote controlled

arm to transfer large volumes of concrete to specified areas. It is usually used in the


108

construction of basements or buildings of up to 62 metres in height. On the other hand,

stationary pumps are used largely for the construction of high-rise buildings of more than 62

metres in height.

Figure 1: 52 metres truck-mounted boom pump

Figure 2: Stationary pump Figure 3: Stationary pump


109

Our equipment and vehicles are serviced on a regular basis to ensure that they are in good

working condition for our customers. We also conduct on-the-job training for our vehicle and

equipment operators to ensure that they are familiar with the latest equipment and vehicles.

The various stages of our typical workflow for the rental of construction equipment are

described below:

(A) Evaluation of Customer Needs and Presentation of Proposed Service Solutions

We have established an equipment rental team which is responsible for evaluating our

customers’ needs and presenting proposed service solutions based on their specific

needs. Quotations or purchase orders for the proposed service solutions will also be

provided concurrently. Our customers may also approach us for the rental of specific

equipment on an ad hoc basis.

(B) Inspection and Maintenance

In order to avoid disruptions caused by mechanical faults or breakdowns, our

maintenance service team inspects and services all equipment on a monthly basis and

prior to their mobilisation to the customers’ job sites.

In the event of a breakdown after the equipment has been mobilised, our maintenance

service team will be despatched to provide repair and maintenance services.

(C) On-site Services

We provide experienced equipment operators together with the equipment rented by

our customers. Our equipment operators are briefed on the customer’s requirements

before each assignment and will attend safety orientation courses conducted at the

respective work sites. Due to their familiarity with the equipment, our operators will help

to ensure that our equipment does not experience excessive wear and tear during the

course of construction.

(3) Sale of construction materials

(i) Sale of RCA

In 2004, we began recycling construction waste and aggregates at the Sarimbun Recycling

Park and in 2013, we relocated our recycling operations to Tuas South Avenue 1. The RCA

produced are primarily used for our own civil engineering activities, although we do,

depending on prevailing market conditions and demand, sell our products to third parties. We

currently own two crushers, the Nordberg Primary Lokotrack Mobile Crushing Plant Model

LT106 and Nordberg Secondary Lokotrack Mobile Crushing Plant Model LT1100

manufactured by Metso. They are capable of producing fine aggregates, which are used for

road construction or trench backfilling, 20 mm aggregates, which are used for ready-mixed

concrete, and graded stones, which are used in the construction of road bases. We also own

wheel loaders, excavator breakers and weighbridge systems to support our recycling

operations.

Our customers in this business segment include Alliance Concrete Singapore Pte. Ltd., Star

Ready-Mix Pte. Ltd. and Sinmix Pte. Ltd..


110

Figure 4: The Nordberg Primary Lokotrack Mobile Crushing Plant Model LT106 and

Nordberg Secondary Lokotrack Mobile Crushing Plant Model LT1100

The various stages of our typical workflow for the sale of RCA are described below:

(A) Collection of construction waste and demolition concrete

We obtain the construction waste and demolition concrete required for the production

of RCA from two main sources, namely, from our regular suppliers or from suppliers

which we approach on a one-off basis, and, alternatively, from the civil engineering

projects which we carry out.

(B) Preliminary crushing and removal of ferrous metals and foreign materials

The preliminary crushing process involves the breaking down of large blocks of

concrete and waste into smaller 300 mm to 400 mm pieces. Once the large blocks of

concrete and waste are reduced in size, the reinforcing bars which may have been

embedded within the blocks of concrete and waste can then be extracted and broken

down by the hydraulic system in the crusher. In the meantime, foreign materials such

as bricks, plastics and asphalt will also be manually removed by our workers.

(C) Further crushing and screening of the RCA

The concrete and waste will be fed into a primary crusher which breaks down the

concrete and waste to 50 mm pieces. At this point, the magnet in the primary crusher

will remove the pieces of reinforcing bars which had been broken down in the

preliminary crushing stage.

The 50 mm pieces will then be fed into the secondary core crusher which further breaks

down the concrete and waste into 20 mm pieces, fine aggregates and graded stones.


111

(ii) Manufacture and supply of LSS

We also manufacture and supply LSS, which is a self-flowable, self-compacting, self-

levelling material consisting principally of soil and cementitious materials that can be used as

a backfill material, replacing conventional compacted fill. LSS consists of soil, water and

cementitious material which have been mixed uniformly. The LSS manufacturing process

utilises soil which has been excavated in construction projects and which would otherwise be

discarded as waste.

LSS, which allows easy fill for confined spaces or excavation areas, is considered an

alternative to granular fill, which is required to be filled manually, as the former can be placed

easily without vibration or tamping. Among other applications, it can be used as non-

structural fill for buildings and other structures, as well as for backfill in utility and road

construction. Most of the LSS is used to support our civil engineering activities. As and when

there is market demand, we will also supply them to third parties. As we are capable of

monitoring and adjusting the nature of the LSS mixtures, including the liquidity and strength

of the mixtures, we are able to provide customised solutions to meet the different needs of

our customers.

LSS is normally delivered in a ready-mixed form by a mixer truck and equipment such as

chutes, buckets and concrete pumps may be used to place the material.

Our customers in this segment include Samsung C&T Corporation, Dragages Singapore Pte

Ltd, Ssangyong Engineering & Construction Co Ltd, Daelim Industrial Co., Ltd., Penta-Ocean

Construction Company Limited, Bachy Soletanche Singapore Pte. Ltd., Singapore Piling &

Civil Engineering Private Limited, Sembawang Engineers and Constructors Pte. Ltd.,

Nishimatsu Construction Co., Ltd. and Hock Lian Seng Infrastructure Pte. Ltd..

The various stages of our typical workflow for the manufacture and supply of LSS are

described below:

(A) Soil testing

We engage third party labs to conduct soil tests to determine whether the soil properties

including, among others, the soil grading and density, are suited for LSS production.

(B) Pre-mixing and thorough mixing

Once it is determined that the soil is suited for LSS production, the selected soil will be

broken down into smaller pieces and pre-mixed into a slurry. The slurry will then be

subject to further thorough mixing in our mixing plant.

(C) Quality control tests

Once mixing is complete, batches of the LSS will be subject to in-house quality control

tests. The completed LSS product should satisfy our requirement in terms of density

and segregation. In order to ensure that our LSS meets the compressive strength

requirements, our customers may sometimes also request that we commission third

party labs to conduct a UCS Test.


112

Major Completed Projects

As at the Latest Practicable Date, our Group has completed the following major projects:

Contract Contract party Duration Description of projects

Huationg Contractor

Echelon Daewoo

Engineering &

Construction

Co., Ltd.

September 2013

to September

2014

Earthworks for the construction of the

proposed condominium housing development

comprising two blocks of 43-storey residential

flats (total of 508 units) with sky terraces, a

landscape deck, three basement carparks, a

swimming pool and communal facilities on Lot

3915WMK 01 at Alexandra View (Bukit Merah

Planning Area).

Watertown Hyundai

Engineering &

Construction

Co. Ltd

June 2013 to

September 2014

Earthworks for the construction of the

Watertown Mixed Development Project at

Punggol.

C487 Daelim Industrial

Co. Ltd.

January 2009 to

June 2014

Earthworks and external works for the design,

construction and completion of Marina

Coastal Expressway.

C931 Hyundai

Engineering &

Construction

Co. Ltd

February 2012

to May 2014

Earthworks for the construction and

completion of associated tunnels for Stage 3

of the Downtown Line project.

C911 GS Engineering &

Construction –

Hock Lian Seng

Infrastructure Joint

Venture

May 2009 to

September 2013

Earthworks, construction of access road and

supply and construction of internal roads/

drains/culverts/sumps/ reinforced concrete

retaining walls/ subsoil drains/sub-ballast and

ancillary works for the design and

construction of the depot for the Downtown

Line.

euHabitat Woh Hup (Private)

Limited

June 2012 to

September 2013

Excavation works for the proposed

condominium development comprising six

blocks of three-storey strata terraces with

basement and roof terrace and 23 blocks of

five-storey residential flats (total of 748 units)

with commercial shops at first storey, one

level of basement carpark, swimming pools,

clubhouse and ancillary facilities on Lot

06879X MK23 at Jalan Eunos (Bedok

Planning Area).


113


Leedon Heights Woh Hup (Private)

Limited

May 2012 to

September 2013

Earthworks for the proposed condominium

housing development comprising 11 blocks of

12-storey residential flats (total of 381 units)

with a basement carpark, swimming pool and

communal facilities on Lot 02228V, 02229P,

02464L, 02219N, 02220A, 02222N) MK 2

Leedon Heights (Bukit Timah Planning Area).

Soil Engineering

Mixed

Development at

Thomson

Road/Irrawaddy

Road

Ryobi-Kiso (S)

Pte Ltd

November 2013

to December

2013

Backfilling of bore piles after cut-off level

D’Leedon Woh Hup (Private)

Limited

August 2012 to

December 2013

Backfilling of bored piles

C933 Penta-Ocean

Construction

Company Limited

March 2012 to

December 2013

Backfilling of bored piles after cut-off level

Singapore

Sports Hub

Dragages

Singapore Pte Ltd

November 2010

to December

2013

Backfilling of bored piles

C487 Daelim Industrial

Co. Ltd.

April 2009 to

December 2013


C906 Sembawang

Engineers &

Constructors

Pte. Ltd.

December 2007

to July 2010

Backfilling of diaphragm walls after cut-off

level and soil replacement

Eight-storey

Office at

Tampines

Grande

CS Bored Pile

System Pte Ltd

January 2008 to

May 2008

Backfilling of scan piles with I-beam

Marina Bay

Sands

Sambo Geo-Tosfoc

Co Ltd (now known

as “Sambo E&C

Co. Ltd (Singapore

Branch)”)

June 2007 to

March 2008

Backfilling of diaphragm walls during

excavation

C421 Sembawang

Engineers &

Constructors

Pte. Ltd.

June 2003 to

December 2007

Backfilling between tunnel wall and sheet

piles

Singapore

Marina Bayfront

Bridges

Sato Kogyo (S)

Pte. Ltd.

January 2007 to

July 2007

Substitution of lean concrete for lining of

temporary drain and temporary carpark


114


C424 Taisei Corporation August 2004 to

June 2007


piles

C824 Nishimatsu

Construction

Co Ltd

August 2004 to

May 2005

Backfilling abandoned tunnel (Nicoll

Highway)

C828 Nishimatsu

Construction

Co Ltd

March 2005 to

February 2006

Soil replacement and backfilling for the

removal of tunnel segments and backfilling of

bored piles after cut-off level

C821 Hock Lian Seng

Infrastructure

Pte. Ltd.

September 2005

to December

2005


piles

Major Projects Currently in Progress

As at the Latest Practicable Date, our Group is carrying out the following major projects:

Contract Contract party

Expected

duration Description of projects

Huationg Contractor

Tuas View

Extension

JTC January 2014 to

November 2014

Civil engineering works and operation and

maintenance of a stockpile site at Tuas

View Extension Area A.

C912 Lum Chang

Building

Contractors

Pte Ltd.

September 2009

to December

2014

Earthworks for the design and construction

of Bukit Panjang MRT Station and tunnels

for Stage 2 of the Downtown Line project.

C923A Shanghai Tunnel

Engineering

Co., Ltd.

January 2012 to

December 2014


completion of tunnels between Tampines

East MRT Station and Upper Changi MRT

Station for Stage 3 of the Downtown Line

project.

N6 HDB April 2013 to

December 2014

Site clearance, earthworks and temporary

drainage works at Tampines

Neighbourhood 6 (Part 1).

YCH/D/103 Kimly-Shimizu Joint

Venture

March 2014 to

February 2015

Earthworks for the construction of a

proposed 10-storey community hospital

involving two in-patient tower blocks and a

geriatric research centre tower with two

basements at 100 Yishun Central (Yishun

Planning Area).


115


Expected


Earthworks at

Tampines

Hexacon

Construction Pte

Ltd

May 2014 to

April 2015

Earthworks for the construction of a

proposed six/seven-storey civic and

community/sports and recreation

development with two basements at

Tampines Avenue 4 and 5/Tampines Street

82 (Tampines Planning Area).

C1688 Shanghai Tunnel

Engineering

Co. Ltd.

June 2012 to

May 2015

Traffic diversion and road and drainage

works for the Tuas West MRT line

extension.

RD259 LTA November 2013

to June 2015

Earthworks, civil engineering works, and

ancillary building works for the proposed

bus depot at Loyang.

C922 Samsung C&T

Corporation

November 2011

to August 2015


completion of Expo MRT Station and the

overrun tunnel for Stage 3 of the

Downtown Line project.

The Tembusu Shimizu

Corporation

September 2013

to September

2015

Earthworks for the proposed erection of

five blocks of 18-storey condominium (total

of 337 units) with one basement carpark,

swimming pools, clubhouse facilities and

one shop unit on Lot 02248M, 2250C,

02278C, 02694X, 05163K, 99440A,

99453T, 99478W MK 22 at 105 and 107

Tampines Road Singapore (Hougang

Planning Area).

C9091 LTA October 2013 to

October 2015

Design and construction and operation and

maintenance of a stockpile site as well as

operation and maintenance of the stockpile

site.

NEWater

Infrastructure Plan

Extension

Shimizu

Corporation

April 2013 to

November 2015

Road diversion works for the design and

construction of a 4m diameter segmental

tunnel with a 2200 mm diameter pipeline

from Raffles Country Club to Pioneer

Road.

Stockpile at

Changi East

HDB August 2014 to

December 2015

(a) Operation, management and

maintenance of the stockpile site at

Changi East; and

(b) Civil engineering term contract

(Eastern Sector).


116


Expected


URA/T/14/004 Urban

Redevelopment

Authority

September 2014

to July 2016

Design, development and construction of

two 22 KV electrical substations at Lim

Chu Kang.

HOMHQOEC

014000103

Ministry of Home

Affairs

April 2014 to

March 2017

Maintenance of foreshore structures and

physical barriers for Singapore Police

Force and Immigration & Checkpoints

Authority of Singapore.

Soil Engineering

Parc Olympia Koh Brothers

Building& Civil

Engineering

Contractor

(Pte.) Limited

January 2013 to

December 2014


C913 GS Engineering &

Construction –

TSC JV

May 2013 to

June 2015

Backfilling

Sewer diversion

works at Punggol

Ban Chon

Corporation &

Trading Pte Ltd

December 2013

to December

2014

Backfilling

Underpass at

Orchard Road and

Somerset Road

McConnell Dowell

South East Asia

Private Limited

January 2014 to

December 2014

Backfilling of underpass

Backfilling at

Bukit Batok

West Ave 8

Housan

Engineering &

Construction

March 2014 to

December 2014

Backfilling works

C922 Samsung C&T

Corporation

July 2011 to

June 2015

Backfilling of bore piles

Jurong Town Hall Kingview

Engineering

Pte Ltd

April 2014 to

March 2015

Backfilling

New Futura Dragages

Singapore Pte Ltd

June 2014 to

June 2015

Backfilling

C921 Ssangyong

Engineering &

Construction

Co Ltd

November 2011

to June 2015

Backfilling


117

MAJOR CUSTOMERS

The customers and principals each of which accounted for 5.0% or more of our total revenue for

FY2011, FY2012, FY2013 and HY2014 are set out below:

Customer/Principal Services supplied

Percentage of total revenue (%)

FY2011 FY2012 FY2013 HY2014

GS Engineering and Construction

– Hock Lian Seng infrastructure

Joint Venture

Civil engineering services 15.0 10.9 2.9 0.5

Daelim Industrial Co. Ltd. Civil engineering services 14.1 5.4 18.1 7.0

Zhen Hua (Singapore)

Engineering Pte. Ltd.


HDB Civil engineering services 10.3 10.2 2.8 5.8

Samsung C&T Corporation Civil engineering services 8.2 3.3 10.7 1.9

Penta-Ocean Construction

Company Limited

Civil engineering services 7.4 4.0 2.2 –

Lum Chang Building Contractors

Pte Ltd.


Jurong Primewide Pte Ltd Civil engineering services – 7.1 3.1 –

Woh Hup Private Limited Civil engineering services – 5.1 1.4 0.2

Shanghai Tunnel Engineering

Co., Ltd.


HL Building Materials Pte. Ltd. Inland logistics support – – 8.3 6.9

Hyundai Engineering &

Construction Co. Ltd

Civil engineering services – 0.1 8.3 11.0

LTA Civil engineering services 2.6 4.8 1.4 26.2

We may either be a main contractor or a sub-contractor and we receive progressive payments for

our services based on the stage of completion of our projects.

The fluctuation in revenue contribution from our customers varies from year to year as a result of

the nature of our business being conducted on a project basis and our revenue recognition

accounting method which is based on the stage of completion of a project. We may not generate

similar projects in terms of size and scope with the same customer in subsequent years.

Save as disclosed above, our business and profitability are not materially dependent on any single

customer or principal.


118

To the best of our Directors’ knowledge, we are not aware of any information or arrangements

which would lead to a cessation or termination of our current relationship with any of our major

customers or principals.

None of our Directors or Substantial Shareholders or their respective associates has any interest,

direct or indirect, in any of the above major customers or principals.

MAJOR SUPPLIERS AND SUB-CONTRACTORS

The suppliers each of which accounted for 5.0% or more of our total purchases for FY2011,

FY2012, FY2013 and HY2014 are set out below:

Supplier

Materials/services

supplied

Percentage of total purchases (%)

FY2011 FY2012 FY2013 HY2014

Highway International

Private Limited

Provision of sub-contractor

works and supply of materials

– – 12.7 4.7

Chevron International Pte. Ltd. Supply of diesel 6.1 12.6 10.6 8.3

TOA-JDN(PUT) Joint Venture Disposal of earth 1.6 5.0 6.3 5.5

Tractors Singapore Limited Supply of spare parts and

servicing of excavator/rental of

excavator

1.3 6.3 1.3 8.6

NHL Holding Pte. Ltd. Supply of rental services in

vehicles and dormitories

5.9 6.7 5.9 4.3

Shell Eastern Petroleum

(Pte) Ltd

Supply of diesel 12.4 6.9 8.6 6.3

Our purchases vary from year to year due to the project-based nature of our business as our

requirements for materials and subcontract resources vary according with the size and scope of

our projects and the stage of completion of our project for the year.

Save as disclosed above, our business and profitability are not materially dependent on any single

supplier and sub-contractors.

To the best of our Directors’ knowledge, we are not aware of any information or arrangements

which would lead to a cessation or termination of our current relationship with any of our major

suppliers and/or sub-contractors.

None of our Directors or Substantial Shareholders or their respective associates has any interest,

direct or indirect, in any of the above major suppliers and/or sub-contractors.


119

PROPERTIES AND FIXED ASSETS

As at the Latest Practicable Date, our Group, through Huationg Contractor, owns the following

properties:

Owned by

Nature anddescriptionof property Location Tenure

Grossarea

(sq ft)(1) Encumbrances Usage

HuationgContractor

Commercialoffice

9 BenoiCrescent,Singapore629972

30 yearscommencing1 January1989 and afurther term of22 years from1 January2019

123,958 Mortgaged toDBS

Officeheadquarters

HuationgContractor

Commercialoffice

3 KranjiLoop,Singapore739539

Four years andnine monthscommencing1 April 2011and a furtherterm offive years from1 January2016

42,909 Mortgaged toUOB

Easement infavour of LotMK13-1662N

Repair andmaintenance ofconstructionequipment

Note:

(1) Area stated rounded to the nearest sq ft.

As at the Latest Practicable Date, our Group has leased or licensed the following properties:

Leased/

Licensed by Location Tenure

Grossarea

(sq ft)(1)

Monthlyrental(S$) Lessor/Licensor Usage

HuationgContractor

118 Tagore Lane,Singapore 787549

1 October 2014 to30 September2017

7,045 11,000 NHL Holding Dormitory

HuationgContractor

120 Tagore Lane,Singapore 787550

1 October 2014 to30 September2017

4,359 13,000 NHL Holding Dormitory

HuationgContractor

Tanah MerahCoast Road(LotMK31-04657P-PT)

12 December2011 to31 December2015

165,764 20,951 SLA Stockpile

HuationgContractor

Loyang Way(LotMK31-04879V(PT))

15 August 2014to 31 December2015

25,188 6,294 SLA Stockpile

Notes:

(1) Area stated rounded to the nearest sq ft.


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(2) SLA granted to Huationg Contractor a licence to occupy a land plot situated at Marina East for a tenure commencing

on 3 March 2010 and expiring on 31 December 2012 for the purposes of construction access and use as a stockpile

site. The licence has been renewed on a monthly basis since its expiration in 31 December 2012. The land plot has

a gross area of 58,340.4 sq ft in respect of which we pay a monthly rental of S$3,010. We began reinstatement works

in March 2014. Until we complete the reinstatement works to SLA’s satisfaction, we are obliged to continue paying

rental to SLA for the occupation of this plot. We expect to complete the reinstatement works in the first quarter of

2015.

In addition to the above and as at the Latest Practicable Date, our Group has entered into informal

arrangements with the main contractors of various ongoing projects for the temporary occupation

of six land lots which the main contractors had licensed from SLA. These land lots are typically

situated in the proximity of the relevant project work sites and are used by our Group to store

construction equipment and materials which are not permitted to be left at the work sites. Under

these arrangements, we pay the fees and deposits for the use of these land lots to the main

contractors. The amount paid by us for the use of these land lots is not significant.

STAFF TRAINING POLICY

We believe that our employees are one of our important resources and significant assets to the

success of our business. Hence, we place emphasis on constant training of our staff to ensure that

they are equipped with the necessary skills and knowledge to serve our customers better with

improved productivity.

All new employees undergo orientation programmes to familiarise themselves with our general

working environment, corporate culture, product and service knowledge as well as quality

requirements. These programmes are conducted in-house with emphasis on matters relating to

employee conduct and discipline, quality and safety awareness. Thereafter, the employees are

directed to their respective supervisors for more specific on-the-job training.

On-the-job training is provided by the employees’ immediate supervisors. Immediate supervisors

will closely monitor individual staff and impart skills and knowledge to ensure that our employees

are equipped with the necessary skills and knowledge for their respective job functions and that

their performance meets our desired standards.

To ensure that our employees are kept abreast with the latest developments in their respective

fields, we send selected employees to participate in seminars, conferences and training courses

from time to time.

INSURANCE

As at the Latest Practicable Date, we maintain the following insurance policies to cover, among

others, our operational, human resource and fixed asset risks as required, or in accordance with

market practice:

(a) workmen’s compensation under the WICA;

(b) public liability insurance;

(c) contractors’ all risks insurance;

(d) fire insurance; and

(e) group hospitalisation and surgical insurance.


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The above insurance policies are reviewed annually to ensure that our Group has sufficient

insurance coverage. Our Directors are of the view that the insurance coverage from the above

insurance policies is sufficient for our present operations.

MARKETING AND BUSINESS DEVELOPMENT

Our approach to business development is based on fostering long-term and strong relationships

with our customers. Our strategy is based on identifying the specific needs of our prospective

customers and proposing suitable, cost-effective designs and/or technical solutions to meet those

needs.

We secure our projects primarily through referrals and recommendations from past and existing

customers as well as through open and invitational tender processes.

Our business development is mainly spearheaded by Mr Ng Kian Ann Patrick and Mr Ng Kian

Yeow, Vincent, who formulate and plan the business development and marketing activities for our

Group.

RESEARCH AND DEVELOPMENT

We do not undertake any research and development activity since it is not in the nature of our

business to engage in research and development activities.

INTELLECTUAL PROPERTY

As at the Latest Practicable Date, we have applied for registration the following trademarks:

No. Mark Country Class(es)(1)

Application

No. Filing Date Status

1. Singapore 07

12

37

417959 29 July 2014 Pending

2. Singapore 07

12

37


3. HUATIONG Singapore 07

12

37


Note:

(1) “Class” refers to the specification of services under the International Classification of Goods and Services by the

World Intellectual Property Organisation. The services classified under Class 07 that are relevant to our Company

include the provision of machinery for waste compaction and excavation. The services classified under Class 12 that

are relevant to our Company include the provision of construction vehicles for transportation. The services classified

under Class 37 that are relevant to our Company include construction and construction equipment (including rental).

The services classified under Class 42 that are relevant to our Company include industrial design and engineering.

We have not paid nor received any royalties for any licence or use of any intellectual property.


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Save as disclosed above, we do not own any other intellectual property rights and our business

and profitability are not materially dependent on any patent or grant of licences from third parties.

GOVERNMENT REGULATIONS

Our business operations are subject to certain Singapore and international guidelines, laws and

regulations. Save as disclosed below, as at the Latest Practicable Date, our business operations

in Singapore are not subject to any special legislation or regulatory controls other than those

generally applicable to companies and businesses incorporated and/or operating in Singapore.

The following is a summary of the main laws and regulations of Singapore that are relevant to our

business as at the Latest Practicable Date.

Contractors Registry

The construction industry in Singapore is regulated by BCA, whose primary role is to develop and

regulate Singapore’s building and construction industry. Currently, companies which carry on

business activities in the construction industry are not required to register with BCA. However,

registration with the Contractors Registry maintained by BCA is a pre-requisite to tender for

projects in the public sector. Presently, there are seven major categories of registration, some of

which are further sub-classified into six to seven grades, depending on the category of

registration. Registration of a contractor with BCA is dependent on the contractor fulfilling certain

requirements relating to, among others, the value of previously completed projects and personnel

resources. The grade assigned to each contractor is dependent on its minimum net worth and

paid-up capital.

Our business in Singapore is carried out by our subsidiaries Huationg Contractor, Soil Engineering

and HT Equipment. Huationg Contractor is currently registered with BCA with a BCA grading of A2

under the category CW02 for civil engineering and C2 under the category CW01 for General

Building. The A2 grading enables Huationg Contractor to tender for public sector procurement in

relation to civil engineering works of values not exceeding S$90.0 million while the C2 grading

enables Huationg Contractor to tender for public sector procurements in relation to general

building works with a tendering limit of S$1.4 million. Further, Huationg Contractor is also

registered with BCA with a BCA grading of L6 under the categories SY01A for the supply of

essential construction materials and SY01C for the supply of other basic construction materials.

The L6 grading enables Huationg Contractor to tender for public sector procurements in relation

to the supply of essential construction materials such as sand and granite aggregates and supply

of other basic construction materials such as bricks, cement, timber and reinforcement bars with

no tendering limit.

To maintain the existing BCA grading, there are certain requirements to be complied with

including, but not limited to the following:

Type of permit/licence Requirements

CW02 Civil Engineering

(A2 grade)

• To secure, over a three-year period, projects with an

aggregate contract value of at least S$65 million, of which,

inter alia, a minimum of S$32.5 million worth of the projects

executed must be projects executed in Singapore.

• To have a minimum paid-up share capital and a minimum

net worth of S$6.5 million.


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• To employ at least 12 professional and technical personnel,

with at least four of them having a minimum of 24 months

experience in Singapore and at least four of them

possessing approved qualifications. Such approved

qualifications refer to, for professional personnel,

professional qualifications with a recognised degree in

architecture, building, civil/structural engineering or

equivalent and for technical personnel technical

qualifications in any of the following: (a) a recognised

polytechnic diploma in architecture, building, and

civil/structural engineering; (b) a national certificate in

construction supervision (“NCCS”); (c) an advance national

building qualification (“NBQ”)/specialist diploma in

mechanical and electronic coordination; or (d) other

equivalent qualifications approved by the BCA. In addition,

at least one of the professional and technical personnel

must be certified as having completed the Certificate

Course in Construction Productivity Management, and all

personnel are required to maintain their CET records and

submit annual declarations to the Contractors Registry in a

prescribed declaration form.

• To possess certain management certificates including (i)

ISO 9001:2008 (accredited by the Singapore Accreditation

Council); (ii) ISO 14000; (iii) OHSAS 18000; and (iv) Green

and Gracious Builders Scheme (by 2015).

• To possess a General Builder Class 1 licence.

CW01 General Building

(C2 grade)

• To secure, over a three-year period, projects with an

aggregate contract value of at least S$1 million.


net worth of S$100,000.

• To employ at least one professional personnel or two

technical personnel with approved qualifications. Such

approved qualifications refer to, for professional personnel,

professional qualifications with a recognised degree in

architecture, building, civil/structural engineering or

equivalent and for technical personnel technical

qualifications in any of the following: (a) a recognised

polytechnic diploma in architecture, building, and

civil/structural engineering; (b) a NCCS; (c) an advanced

NBQ/specialist diploma in mechanical and electronic

coordination; or (d) other equivalent qualifications

approved by the BCA.


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• To possess either the Safety Management Certificate

awarded by BCA or OHSAS 18000 required for the C2

grade.

• To possess a General Builder Class 1 licence.

SY01A Essential Construction

Materials (L6 grade)


net worth of S$1,500,000.

• To possess Import License for Essential Construction

Materials.

SY01C Other Basic

Construction Materials

(L6 grade)


net worth of S$1,500,000.

• To possess agency rights.

General Builder Licence

The Building Control Act, the Building Control (Amendment) Act 2007 and the Building Control

(Licensing of Builders) Regulations 2008 set out the requirements for licensing of builders. All

builders carrying out building works where plans are required to be approved by the

Commissioner of Building Control and builders who work in specialist areas which have a high

impact on public safety will require a Builder’s Licence from 16 June 2009. There are two types

of Builder’s Licences – the general builder licence (the “General Builder Licence”) and the

specialist builder licence (the “Specialist Builder Licence”).

Any builder undertaking general building works, excluding works that have been designated as

specialist works to be carried out by Specialist Builder, is required to obtain a General Builder

Licence. There are two classes of General Builder Licences: a Class One licence (GB1) which

permits the builder to undertake projects of any value and a Class Two licence (GB2) which

permits the builder to undertake projects of up to S$6.0 million.

As at the Latest Practicable Date, we have, through our subsidiary, Huationg Contractor, obtained

the General Builder Licence Class 1 (GB1).

Workplace and Health Safety Measures

Under MOM’s WSHA, every employer has the duty to take, so far as is reasonably practicable,

such measures as are necessary to ensure the safety and health of his employees at work. These

measures include providing and maintaining for the employees a work environment which is safe,

without risk to health and adequate as regards facilities and arrangements for their welfare at

work, ensuring that adequate safety measures are taken in respect of any machinery, equipment,

plant, article or process used by the employees, ensuring that the employees are not exposed to

hazards arising out of the arrangement, disposal, manipulation, organisation, processing, storage,

transport, working or use of things in their workplace or near their workplace and under the control

of the employer, developing and implementing procedures for dealing with emergencies that may

arise while those persons are at work and ensuring that the person at work has adequate

instruction, information, training and supervision as is necessary for that person to perform his


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work. More specific duties imposed by MOM on employers are laid out in the WSHR. Some of

these duties include taking effective measures to protect persons at work from the harmful effects

of any exposure to any biohazardous material which may constitute a risk to their health.

Pursuant to the WSHR, the following equipment, among others, are required to be tested and

examined by an examiner (the “Authorised Examiner”), who is authorised by the Commissioner

of Workplace Safety and Health (“CWSH”), before they can be used in a factory and thereafter,

at specified intervals:

• hoist or lift;

• lifting gears; and/or

• lifting appliances and lifting machines.

Upon examination, the Authorised Examiner will issue and sign a certificate of test and

examination, specifying the safe working load of the equipment. Such certificate of test and

examination shall be kept available for inspection. Under the WSHR, it is the duty of the owner of

the equipment/occupier of a workplace to keep a register containing the requisite particulars with

respect to the lifting gears, lifting appliances and lifting machines. In addition to the above, under

the WSHA, inspectors appointed by the CWSH may, among others, enter, a workplace, to make

such examination and inquiry as may be necessary to ascertain whether the provisions of the

WSHA are complied with, to take samples of any material or substance found in a workplace or

being discharged from any workplace for the purpose of analysis or test, to assess the levels of

noise, illumination, heat or harmful or hazardous substances in any workplace and the exposure

levels of persons at work therein and to take into custody any article in a workplace which is

required for the purpose of an investigation or inquiry under the WSHA.

Under the WSHA, the CWSH may serve a stop-work order in respect of a workplace if he is

satisfied that (i) the workplace is in such condition, or is so located, or any part of the machinery,

equipment, plant or article in the workplace is so used, that any process or work carried on in the

workplace cannot be carried on with due regard to the safety, health and welfare of persons at

work; (ii) any person has contravened any duty imposed by the WSHA; or (iii) any person has done

any act, or has refrained from doing any act which, in the opinion of the CWSH, poses or is likely

to pose a risk to the safety, health and welfare of persons at work. The stop-work order shall direct

the person served with the order to immediately cease to carry on any work indefinitely or until

such measures as are required by the CWSH have been taken to remedy any danger so as to

enable the work in the workplace to be carried on with due regard to the safety, health and welfare

of the persons at work.

MOM has also introduced a demerit points system for the construction sector. The purpose of the

debarment scheme is to improve the safety situation in the construction industry. Under this

scheme, contractors who are found to have violated safety requirements at work sites will be given

demerit points. A company which accumulates more than 18 demerit points within a 12-month

period will be issued a warning. Further accumulation of more than 18 demerit points within a

12-month period following the warning, will result in the contractor being debarred from employing

Non-Traditional Source (“NTS”) foreign workers, who include those from Bangladesh, Pakistan

and Thailand.

We are also subject to the WSHCR. Under the WSHCR, every occupier of a work site shall

implement and maintain at all times a safety and health management system for the purpose of

ensuring the safety and protecting the health of every person within the work site, whether or not

the person is at work or is an employee of the occupier. A workplace safety and health co-ordinator


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shall be appointed by the occupier in respect of every work site where the contract sum of the

building operation or works of engineering construction carried out therein is less than S$10

million. Any occupier of a work site who contravenes this shall be guilty of an offence and shall be

liable on conviction to a fine not exceeding S$10,000 and, in the case of continuing offence, to a

further fine not exceeding S$1,000 fine for every day or part thereof during which the offence

continues after conviction. The workplace safety and health co-ordinator’s duty, in respect of a

work site, is to:

• assist the occupier of the work site to identify any unsafe condition in the work site or unsafe

work practice which is carried out in the work site;

• recommend to the occupier of the work site to implement such reasonably practicable

measures to remedy the unsafe condition or unsafe work practice; and

• assist the occupier of the work site to implement such reasonably practicable measures

referred to in sub-paragraph (b) above.

Any workplace safety and health co-ordinator who, without reasonable excuse, contravenes his

duties as stated above shall be guilty of an offence and shall be liable on conviction to a fine not

exceeding S$1,000 and, in the case of a second and subsequent offence, to a further fine not

exceeding S$5,000.

Where the contract sum of the building operation or works of engineering construction to be

carried out in a work site is S$30 million or more, it shall be the duty of the occupier of the worksite

to appoint a workplace safety and health auditor to audit the safety and health management

system of the work site at least once every six months. Where the contract sum of the building

operation or works of engineering construction to be carried out in a work site is less than S$30.0

million, it shall be the duty of the occupier of the work site to (a) conduct a review of the safety

and health management system of the work site at least once every six months; and (b) if directed

by the CWSH, appoint a workplace safety and health auditor to audit the safety and health

management system of the work site.

In September 2014, MOM issued a stop-work order to Huationg Contractor following a fatal

accident which took place between a worker employed by our Group and a tipper truck driven by

a third party contractor’s employee at one of our job sites. The stop-work order was lifted after 10

days. Although MOM and the Singapore Police Force are still in the process of conducting their

investigations and no penalties have been imposed on us, we may be subject to a fine if we are

found to have failed to maintain safety standards at our job site. For more details, please refer to

section titled “Risk Factors – Risks relating to our business or the industry in which we operate –

We may be affected by accidents at our civil engineering sites and our storage yard” of the Offer

Document.

Environmental laws and regulations

The EPHA requires, among others, a person, during the erection, alteration, construction or

demolition of any building or at any time, to take reasonable precautions to prevent danger to the

life, health or well-being of persons using any public places from flying dust or falling fragments

or from any other material, thing or substance. The EPHA also regulates, among others, the

disposal and treatment of industrial waste and public nuisances.

Under the EPHA, the Ministry of Environment has empowered the Director-General of Public

Health to serve a nuisance order on the owner or occupier of the premises on which the nuisance

arises. Some of the nuisances which are liable to be dealt with by the Ministry of Environment


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and/or its statutory board, NEA, summarily under the EPHA include any factory or workplace

which is not kept in a clean state and any place where there exists or is likely to exist any condition

giving rise, or capable of giving rise to the breeding of flies or mosquitoes, any place where there

occurs, or from which there emanates noise or vibration as to amount to a nuisance and any

machinery, plant or any method or process used in any premises which causes a nuisance or is

dangerous to public health and safety. The EPHA also requires the occupier of any construction

site to employ a competent person to act as an environmental control officer in the construction

site for the purpose of exercising general supervision within the construction site of the

observance of the provisions of, among others, the EPHA.

Huationg Contractor was issued a stop-work order in August 2013 for creating conditions

favourable for mosquito-breeding at one of our job sites. The stop-work order was lifted after 10

days after we had complied with the requirements of the order. In 2013, Huationg Contractor was

required to pay fines amounting to a total of S$1,000 for the discharge of silty water with total

suspended solids in concentrations exceeding the legal limit of 50 milligrams per litre.

The Environmental Protection and Management Act seeks to control the levels of pollution in

Singapore by regulating the activities of various industries and regulates, among others, air

pollution, water pollution, land pollution and noise control. Under the Environmental Pollution

Control (Control of Noise at Construction Sites) Regulations, the owner or occupier of any

construction site shall ensure that the level of noise emitted from his construction site shall not

exceed the maximum permissible noise levels prescribed in such Regulations.

In July 2014, we paid a compounded fine of S$5,000 for generating noise and failing to cease

works at our work sites between the time from 10:00 pm on Saturdays and eve of public holidays

to 7:00 am on Mondays and the day following the public holidays.

Approval and execution of plans of building works

Under BCA’s Building Control Act, no person shall commence or carry out, or permit or authorise

the commencement or carrying out of, any building works unless the plans of the building works

have been approved by the Commissioner of Building Control (“CBC”) and, in the case of

structural works, there is in force a permit granted by the CBC to carry out the structural works.

Before an application to the CBC for the approval of the plans of the building works is made, every

person for whom any relevant building works are or are to be carried out, or the builder of such

building works, shall appoint a qualified person to prepare the said plans in accordance with the

Building Control Regulations 2003, and to supervise the building works (“Qualified Person”). The

carrying out of structural elements and concreting, piling, pre-stressing, tightening of high-friction

grip bolts or other critical structural works of a prescribed class of building works would also

require the supervision of the Qualified Person or a site supervisor appointed by him. Under the

Building Control Act, a builder undertaking any building works shall, inter alia, (i) ensure that the

building works are carried out in accordance with the plans of the building works supplied to it by

the Qualified Person and with any terms or conditions imposed by the CBC in accordance with the

Building Control Act and the Building Control Regulations 2003, (ii) notify the CBC of any

contravention of the provisions of the Building Control Act or the building regulations in connection

with those building works and (iii) within seven days from the completion of the building works,

certify that the new building has been erected or the building works have been carried out in

accordance with the Building Control Act and the building regulations and deliver such certificate

to the CBC.

The Building Control Regulations 2003 sets out certain requirements of BCA relating to, among

others, design and construction and the installation of exterior features. For example, no person

shall, without the permission of the CBC, install any lift in any building, and when installing an


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air-conditioning unit on the exterior of any building or which projects outwards from any building,

a trained air-conditioning unit installer would have to be engaged to carry out the installation works

relating to the air-conditioning unit. Also, whenever soil investigation and determination of the

depth of the water table are to be carried out in respect of any building works, the Qualified Person

shall submit the soil investigation reports to the CBC.

If the CBC is of the opinion that any building works, other than structural works, have been or are

carried out in such a manner as (i) will cause, or will be likely to cause, a risk of injury to any

person or damage to any property, (ii) will cause, or will be likely to cause, a total or partial

collapse of any adjoining or other building or street or land; or (iii) will render, or will be likely to

render, any adjoining or other building or street or land so dangerous that it will collapse or be

likely to collapse either totally or partially, he may, by order, direct the person for whom those

building works have been or are being carried out to immediately stop the building works and to

take such remedial or other measures as he may specify to prevent the abovementioned

situations from happening.

Under the Fire Safety Act, the person for whom any proposed fire safety works are to be

commenced or carried out in any building shall apply to the Commissioner of Civil Defence

(“CCD”) for approval of the plans of the fire safety works in accordance with the Fire Safety

(Building Fire Safety) Regulations, and such person shall appoint an appropriate qualified person

to prepare those plans. No person shall commence or carry out or permit or authorise the

commencement or carrying out of any fire safety works in any building unless the CCD has

approved all the plans of the fire safety works. Upon completion of any fire safety works, the

person for whom the fire safety works had been carried out shall apply for a fire safety certificate

from the CCD in respect of the completed fire safety works.

Where, in the opinion of the CCD, any fire safety works are carried out or have been carried out

in contravention of the Fire Code, the Fire Safety Act or any rules or regulations made thereunder,

he may by order in writing require (i) the cessation of the unauthorised fire safety works until such

order is withdrawn, (ii) such work or alteration to be carried out to the unauthorised fire safety

works or the building or part thereof to which the unauthorised fire safety works relate as may be

necessary to comply with the Fire Code, Fire Safety Act or any rules or regulations made

thereunder, or (iii) the demolition of the building or part thereof to which the unauthorised fire

safety works relate.

Under the Fire Safety Act, no person shall store or keep, or caused to be stored or kept, any

petroleum or flammable material except, among others, under the authority of and in accordance

with the provisions of a licence from the CCD and every condition specified therein, and such

licence shall be applied for in accordance with the Fire Safety (Petroleum and Flammable

Materials) Regulations 2005.

Public Sector Standard Conditions of Contract for Construction Works

The Public Sector Standard Conditions of Contract for Construction Works (“PSSCOC”) was

developed by BCA to enable a common contract form to be used in all public sector construction

projects. The PSSCOC contains terms relating to, among others, the general obligations of the

contractor, programme for the works, quality in construction, commencement of works,

suspension of works, time for completion, liquidated damages, defects, variations to the works,

valuation of variations, procedures for claims, indemnity provisions, insurance, progress

payments and final account and settlement of disputes.


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Employment of Foreign Workers

The employment of foreign workers in Singapore is governed by the EFMA and regulated by MOM.

Under Section 5(1) of the EFMA, no person shall employ a foreign worker unless he has obtained

in respect of the foreign worker a valid work permit from MOM, which allows the foreign worker

to work for him. Any person who fails to comply with or contravenes the section shall be guilty of

an offence and shall (a) be liable on conviction to a fine not exceeding S$15,000 or to

imprisonment for a term not exceeding 12 months or to both; and (b) on a second or subsequent

conviction, in the case of an individual be punished with imprisonment for a term of not less than

one month and not more than 12 months and also be liable to a fine not exceeding S$15,000 and

in the case of a body corporate, be punished with a fine not exceeding S$30,000.

From 1 July 2012, basic skilled construction work permit workers would be allowed to work up to

a maximum of 10 years, while higher skilled workers would be allowed to work up to 18 years. As

a transitional measure, MOM will grant an extension to the period of employment of all affected

workers. Employers will have at least two years to upgrade their workers from basic skilled to

higher skilled.

The availability of the foreign workers to the construction industry is regulated by the MOM

through the following policy instruments:

• approved source countries;

• dependency ceilings based on the ratio of local to foreign workers;

• the imposition of security bonds and levies; and

• quotas based on the MYEs in respect of workers from NTS and the PRC.

Approved source countries

The approved source countries for construction workers are Malaysia, the PRC, NTS countries

and North Asian Sources (“NAS”). NTS countries include countries such as India, Thailand,

Bangladesh, Myanmar, the Philippines and Sri Lanka. NAS countries include Hong Kong, Macau,

South Korea and Taiwan.

Dependency ratio ceiling

The dependency ratio ceiling (“DRC”) for the construction industry is currently set at a ratio of one

full-time local worker to seven foreign workers. This means that for every full-time Singapore

Citizen or Singapore Permanent Resident employed by a company in the construction sector with

regular full month CPF contributions made by the employer, our Company can employ seven

foreign workers.

Security bonds and foreign worker levies

The employment of foreign workers is also subject to the payment of levies. Pursuant to Budget

2010, it was announced that there will be an increase in the foreign workers’ levy every six months

from July 2010 till July 2012. In the Singapore government’s Budget 2011, it was announced that

further increases to the foreign worker levies will be phased in at six-monthly intervals from

January 2012 to July 2013. In Budget 2012, it was announced that a higher foreign worker levy

of S$650 will be introduced for basic skilled work permit holders in the MYE-waiver category from

1 January 2013, and this will be raised to S$750 in July 2013.


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As at July 2014, a levy of S$550 will apply to work permit holders under the basic skilled and on

MYE category (including work permit holders who possess the SEC or SEC(K) (as defined

below)), and a levy of S$300 will apply to work permit holders under the higher skilled and on MYE

category. For basic skilled foreign work permit holders with at least two years’ working experience

in the construction sector and who are exempt from MYE requirements, a levy of S$950 will apply,

while for higher skilled foreign work permit holders with at least two years’ of working experience

in the construction sector and who are exempt from MYE requirements, a levy of S$700 will apply.

In Budget 2013, it was announced that levies for less-skilled work permit holders would be raised

by S$150 between July 2013 and July 2015, bringing the applicable levy to S$600. It was also

announced in Budget 2014 that there will be an increase in the levy for work permit holders under

the basic skilled and on MYE category in the construction sector from S$600 to S$700 in July

2016, and that levies for workers hired outside a company’s MYE will be increased by S$300.

Effective since 1 July 2013, the qualifying salaries for S Pass holders is S$2,200 while the foreign

worker levy for S Pass holders is S$300 for Tier 1 DRC and S$450 for Tier 2 DRC. The levy is

expected to increase to S$330 for Tier 1 DRC and S$650 for Tier 2 DRC by 1 July 2015. A Tier

1 DRC represents companies with a ratio of one full-time local worker for every ten foreign

workers (10.0%) or lower while the Tier 2 DRC represents companies with a ratio between 10.0

to 15.0%.

For each NAS, NTS or PRC construction worker whom we have successfully obtained a work

permit, a security bond of S$5,000 in the form of a banker’s guarantee or insurance guarantee is

required to be furnished to the Controller of Work Passes. The security bond must be furnished

prior to the foreign worker’s arrival in Singapore, failing which entry into Singapore will not be

allowed. The security bond will be returned only if the following conditions are met – firstly, the

work permit has been cancelled; secondly, the foreign worker has returned to his home country;

and thirdly, there were no breaches of the conditions of the work permit, conditions of the security

bond and any relevant law.

Prior approval

Construction companies must have prior approval (“PA”) from MOM in order to employ foreign

workers from NTS countries and the PRC. The PA indicates the number of foreign workers a

company is allowed to bring in from NTS countries and the PRC. It also determines the number

of workers who can have their work permits renewed, or who can be transferred from another

company in Singapore. PAs are granted based on, inter alia, the duration of the work permits

applied for, the number of full-time local workers employed by the Company over the past three

months as reflected in the Company’s CPF contribution statements and the number of MYEs

allocated from the Company’s main contractor.

All new NTS and PRC workers who have been approved under the PA scheme must also possess

either the Skills Evaluation Certificate (“SEC”) or the Skills Evaluation Certificate (Knowledge)

(“SEC(K)”) before they are allowed to work in Singapore. These schemes are initiatives by the

BCA to raise the skill levels and productivity of the construction sector, as well as to enhance

safety in the construction sector. All NAS workers must possess the SEC or the SEC(K) as well.

All Malaysian workers must possess either Secondary 4 education or its equivalent, the SEC or

SEC(K), before they are allowed to work in Singapore. These workers will be classified as basic

skilled workers.


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In-Principle Approval

In addition, for each individual’s work permit, in-principle approvals (“IPAs”) have to be sought for

each individual’s work permit. The foreign construction worker is required to undergo a medical

examination by a registered Singapore doctor and must pass such medical examination before a

work permit can be issued to him.

Construction Safety Orientation Course (“CSOC”)

All foreign workers employed in the construction industry must attend a full-day CSOC. At the end

of the course, the workers will receive a safety orientation pass if they are able to pass the

requirements and assessment of the course. Foreign workers who fail the assessment will need

to retake the course. Employers must ensure that foreign workers attend the course within two

weeks of arrival in Singapore. Employers who fail to ensure that their workers take and pass the

CSOC course will be barred from applying for new work permits for three months, while the

affected workers will have their work permits revoked.

MYEs

The MYEs allocation system is a work permit allocation system pertaining to the employment of

construction workers from NTS countries and the PRC. MYEs represent the total number of

foreign workers that each main contractor is entitled to employ based on the value of the projects

or contracts awarded by the developers or owners. At the time of the MYE application, the balance

duration of the project must be at least one month and the total remaining contract value of the

project must be at least S$500,000. To employ NTS and PRC construction workers, the employer

must make an application for MYE, PA and IPAs for individual work permits. The allocation of MYE

is in the form of the number of “man-years” required to complete a project and only main

contractors may apply for MYEs. All levels of sub-contractors are required to obtain their MYE

allocation from their main contractors. A main contractor’s MYEs will expire on the completion date

of the relevant project. In Budget 2012, MOM announced a further 5.0% cut in the MYE quota for

new projects in July 2012. This is in addition to the 15.0% cut in the MYE quota for new projects

in July 2013 as announced in Budget 2011 and the reduction in the MYE by 25.0% over three

years for the construction sector as announced in Budget 2010, bringing total cumulative MYE

cuts to 45.0%.

Under the work permit conditions, employers are required to provide acceptable accommodation

for their foreign workers. Such accommodation must meet the statutory requirements set by

various government agencies, including NEA, PUB, SCDF and BCA. A list of approved off-site

housing is provided by the relevant approving agencies, namely URA, SLA, JTC and HDB.

An employer of foreign workers is also subject to, among others, the provisions set out in the

Employment Act, the EMFA, the Immigration Act and the Immigration Regulations.

Work Injury Compensation Act

The WICA, which is regulated by MOM, applies to workmen in all industries in respect of injury

suffered by them in the course of their employment and sets out, among others, the amount of

compensation they are entitled to and the method(s) of calculating such compensation. The WICA

provides that if in any employment, personal injury by accident arising out of and in the course of

the employment is caused to a workman, the employer shall be liable to pay compensation in

accordance with the provisions of the WICA.


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The WICA provides, among others, that, where any person (referred to as the principal) in the

course of its business or for the purpose of his trade or business contracts with any other person

(referred to as the contractor) for the execution by the contractor of the whole or any part of any

work undertaken by the principal, the principal shall be liable to pay to any workman employed in

the execution of the work any compensation which he would have been liable to pay if that

workman had been immediately employed by the principal.

Employers are required to maintain work injury compensation insurance for two categories of

employees engaged under contracts of service (unless exempted) – firstly, all employees doing

manual work and secondly, non-manual employees earning S$1,600 or less a month. Failure to

do so is an offence punishable by a maximum fine of S$10,000 and/or imprisonment of up to 12

months.

Building and Construction Industry Security of Payment Act

Prior to the introduction of the BCISP Act, a construction contract between a main contractor and

a sub-contractor would typically contain a “pay when paid” provision. Such provision would

provide that the liability of the main contractor to pay money owing to the sub-contractor is

contingent or conditional on payment to the main contractor by a third party of the whole or part

of that money, or make the due date for payment of money owing by the main contractor to the

sub-contractor contingent or conditional on the date on which payment of the whole or any part

of that money is made to the main contractor by the third party. With the introduction of the BCISP

Act by the Ministry of National Development of Singapore, such “pay when paid” provisions in

construction or supply contracts are now rendered unenforceable and have no effect in relation to

any payment for construction work carried out or undertaken to be carried out, or for goods or

services supplied or undertaken to be supplied, under the contract.

The BCISP Act, regulated by BCA, confers a statutory entitlement to progress payments on any

person who has carried out any construction work or supplied any goods or services under a

contract. The BCISP Act also contains provisions relating to, among others, the amount of the

progress payment to which a person who has carried out any construction work is entitled under

a contract, the valuation of the construction work carried out and the date on which a progress

payment becomes due and payable (even where a construction contract does not provide for such

date). In addition, the BCISP Act, among others, endorses the following rights:

(i) the right of a claimant (being the person who is or claims to be entitled to a progress

payment) who, in relation to a construction contract, fails to receive payment by the due date

of an amount that is proposed to be paid by the respondent (being the person who is or may

be liable to make a progress payment under a contract to a claimant) and accepted by the

claimant, to make an adjudication application in relation to the payment claim. The BCISP Act

has established an adjudication process by which a person may claim payments due under

a contract and enforce payment of the adjudicated amount;

(ii) the right of a claimant to suspend the carrying out of construction work or supply of goods

or services, and to exercise a lien over goods supplied by the claimant to the respondent that

are unfixed and which have not been paid for, or to enforce the adjudication as if it were a

judgment debt, if such claimant is not paid after he obtains judgment against the respondent

pursuant to an adjudication; and


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(iii) where the respondent fails to pay the whole or any part of the adjudicated amount to a

claimant, the right of a principal of the respondent (being the person who is liable to make

payment to the respondent for or in relation to the whole or part of the construction work that

is the subject of the contract between the respondent and the claimant) to make direct

payment of the outstanding amount of the adjudicated amount to the claimant, together with

the right for such principal to recover such payment from the respondent.

Administration of Carriage of Goods by Motor Vehicles

The regulation of road traffic and movement of vehicles in Singapore, including the administration

of the carriage of goods by motor vehicles, is governed by the Road Traffic Act and relevant

subsidiary legislation, including, among others, the Road Traffic (Motor Vehicles, Registration &

Licensing) Rules.

Pursuant to Rule 46 of the Road Traffic (Motor Vehicles, Registration & Licensing) Rules, no

person shall cause or permit a motor vehicle or trailer constructed or adapted for use for the

carriage of goods to carry a load in excess of the maximum laden weight as determined by the

Registrar of Vehicles (the “Registrar”). Pursuant to Rules 43 and 44, the owner of a motor vehicle

which is constructed or adapted for use for the carriage of goods or a trailer shall inform the

Registrar of the maximum laden weight of the vehicle or trailer in accordance with the

manufacturer’s specification, or shall otherwise provide the Registrar with such information as the

Registrar may require in order to enable him to ascertain the maximum laden weight, and the

Registrar shall upon receiving such information, determine the maximum laden weight of the

motor vehicle or trailer. Owners of the motor vehicles and trailers are required to paint or otherwise

clearly mark upon a conspicuous place on the vehicle or trailer, among others, the maximum laden

weight of the vehicle or trailer and the weight of the vehicle or trailer unladen.

Contravention of Rule 46 of the Road Traffic (Motor Vehicles, Registration & Licensing) Rules

constitutes an offence under Section 131(1) of the Road Traffic Act, punishable under Section

131(2) of the Road Traffic Act. Under Section 131(2), the offender may be liable, in the case of a

first offence, to a fine not exceeding S$1,000 or imprisonment for a term not exceeding three

months, and in the case of a second or subsequent offence, to a fine not exceeding S$2,000 or

imprisonment for a term not exceeding six months. Section 131B(1) of the Road Traffic Act

prescribes that where an offence committed by a body corporate is proved to have been

committed with the consent or connivance of an officer or to be attributable to any act or default

on his part, the officer, meaning any director, member of the committee of management, chief

executive officer, manager, secretary or other similar officer, including any person purporting to act

in any such capacity, shall be guilty of an offence and shall be liable to be proceeded against and

punished accordingly.

LTA has in the past imposed fines on both our tipper truck drivers and Huationg Contractor.

However, no notice of summons has been issued to any officer of our Company. In 2013 and the

first six months of 2014, LTA imposed fines amounting to approximately S$321,100 and

S$114,400, respectively, for loading our tipper trucks with aggregates and soil exceeding the

maximum laden weight of 28 metric tonnes in contravention of Rule 46 of the Road Traffic (Motor

Vehicles, Registration & Licensing) Rules.


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In view of the foregoing, we have implemented further procedures to help to avoid such incidents

of over loading. Besides conducting briefings with all our workers on loading guidelines and safety

procedures every fortnightly, we will also be installing weighbridges at all work sites controlled by

us. Where the work sites are not controlled by us, our attempts to raise awareness amongst our

clients by highlighting relevant penalties which may be imposed and guidelines may help to

reduce incidents of over loading of our tipper trucks at such work sites. Further, we have also

adopted the policy of terminating the services of drivers who have been found guilty of overloading

our tipper trucks with aggregates or soil on three or more instances within a period of three

months. Please refer to the section titled “Risk Factors – Risks Relating to our Business or the

Industry in which we operate – We may be subject to fines imposed by LTA for overloading our

tipper trucks beyond their maximum laden weight”.

LICENCES, PERMITS, APPROVALS, CERTIFICATIONS AND AWARDS

Our businesses in Singapore are carried out by our wholly-owned subsidiaries, Huationg

Contractor, Soil Engineering and majority-owned HT Equipment. Huationg Contractor is currently

registered with BCA with a BCA grading of A2 under the category CW02 for civil engineering. The

A2 grading enables Huationg Contractor to tender for public sector procurement in relation to civil

engineering works of values not exceeding S$90.0 million. Huationg Contractor is also currently

registered with BCA with a BCA grading of C2 under the category CW01 for general building,

which enables Huationg Contractor to tender for public sector procurement in relation to general

building works of values up to a tendering limit of S$1.4 million.

Save as disclosed below, to our best knowledge, our Group has obtained all necessary permits,

approvals and licences required for our business and operations. As at the Latest Practicable

Date, save for those disclosed herein and in the section titled “Risk Factors” of this Offer

Document, our business and operations are not subject to any special legislation or regulatory

controls which have a material effect on our business and operations other than those generally

applicable to companies and businesses operating in Singapore.


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The following are the main licences, permits, approvals, certificates and awards issued and/or

granted to our Group which are essential for the business operations of our Group:

Huationg Contractor

Date of grant/expiry date

Licence, permits, approvals,

certificates and awards Awarding organisation

Registered on 19 October

2007/Expiring on 31

December 2014

Certificate of Registration(1) The Singapore

Contractors Association

Ltd

Granted in 2010 Honorary Member of the Ministry for

Defence Awards League

Ministry of Defence,

Singapore

Awarded on 4 November

2011

Certificate of Recognition – Best

Sub-Contractor(2)

Samsung Corporation

Issued on 3 July 2012/

Expiring on 25 June 2015

bizSAFE STAR certificate(3) WSHC

Awarded in 2012 Annual Safety Award 2012 –

Subcontractor’s Safety Recognition

LTA

Issued on 20 August

2012/Expiring on 19 August

2015

Certificate certifying conformity with ISO

9001:2008 for the Provision of Civil

Engineering Services

TÜV SÜD PSB Pte. Ltd.

Issued on 20 August

2012/Expiring on

19 August 2015

Certificate certifying conformity with ISO

9001:2008 for the Provision of Inland

Transportation Services and Renting/Hiring

of Construction Equipment


Issued on 29 August

2012/Expiring on 28 August

2015

Certificate certifying conformity with BS

OHSAS 18001:2007 for the provision of

civil engineering services and the provision

of inland transportation services and

renting/hiring of construction equipment


Awarded on 23 October

2013/Expiring on 22

October 2015

Licence to Operate a Licensed Warehouse Singapore Customs

Issued on 2 December

2013/Expiring on 1

December 2016

Certificate of Registration certifying

conformity of Quality Management System

with ISO 9001:2008 for the provision of

crushing and screening of construction and

demolition materials for recycling

Certification International

(Singapore) Pte Ltd


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Date of grant/expiry date




2013/Expiring on 1

December 2016

Certificate of Registration certifying

conformity of Quality Management System

with ISO 14001:2004 for the provision of

civil engineering services


(Singapore) Pte Ltd


2013/Expiring on

1 December 2016

Provision of crushing and screening of

construction and demolition materials for

recycling


(Singapore) Pte Ltd

4 September 2014/Expiring

on 21 August 2015

General Waste Collector (Class A) NEA

Expiring on 1 July 2015 CW01 General Building Grade C2 BCA

Expiring on 1 July 2015 CW02 Civil Engineering Grade A2 BCA

Expiring on 1 July 2015 SY01A Essential Construction Materials

Grade L6(4)

BCA

Expiring on 1 July 2015 SY01C Other Basic Construction Materials

Grade L6(5)

BCA

Expiring on 16 June 2015 GB1 General Builder Class 1(6) BCA

Notes:

(1) Certificate of Registration with the Registry of the Singapore List of Trade Subcontractors (“SLOTS”) issued by theSingapore Contractors Association Ltd certifying that Huationg Contractor (a) has fulfilled the relevant requirementsand was admitted to the Registry of SLOTS; and (b) has been awarded the trade registration qualifications of CS10for conducting demolition works and CS11 for conducting soil investigation, stabilisation and earthwork services.

(2) In recognition of Huationg Contractor’s significant contribution and commitment to the establishment of a safe andhealthy management standard in relation to the Marina Coastal Expressway project.

(3) The bizSAFE STAR certificate issued by the WSHC certifying that Huationg Contractor has fulfilled the requirementto attain bizSAFE STAR. bizSAFE is a programme tailored to assist enterprises, especially the small and mediumenterprises, build up their workplace safety and health capabilities. It provides a five-level approach to helpenterprises progress towards workplace safety and health management system (“WSHMS”) capabilities. ThebizSAFE STAR is the highest level (Level 5). In order to obtain bizSAFE STAR, the enterprise must implement theWSHMS plan and the enterprise must obtain a SS506 Certificate issued by the Singapore Accreditation Councilaccredited certification bodies or OHSAS 18001 or other equivalent certification accompanied by a risk managementaudit report by a MOM-approved workplace safety and health auditor.

(4) Essential Construction Materials Grade L6 licence issued by BCA certifying that Huationg Contractor is licenced tosupply essential construction materials listed under Part VIA of the Building Control Act and its subsidiary legislationsuch as sand and granite aggregates without any tendering limit. Please refer to “General Information on our Group– Government Regulations” of this Offer Document for more details.

(5) Other Basic Construction Materials Grade L6 licence issued by BCA certifying that Huationg Contractor is licencedto supply other construction materials such as bricks, cement timber and reinforcing bars without any tendering limit.Please refer to “General Information on our Group – Government Regulations” of this Offer Document for moredetails.

(6) General Builder Class 1 licence issued by BCA certifying that Huationg Contractor is licensed to undertake projectswith no tendering limit.


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Soil Engineering

Expiry date



Registered on 9 May 2005/

Expiring on 31 December

2014

Certificate of Registration(1) The Singapore Contractors

Association Ltd

Issued on 30 April 2012/

Expiring on 22 April 2015

bizSAFE Level 3 Certificate(2) WSHC

Notes:

(1) Certificate of Registration with the Registry of SLOTS issued by the Singapore Contractors Association Ltd certifyingthat Soil Engineering (a) has fulfilled the relevant requirements and was admitted to the Registry of SLOTS; and (b)has been awarded the trade registration qualifications of CS01 for conducting road works and pipe and cableinstallation, CS03 for conducting concreting works and CS11 for conducting soil investigation, stabilisation andearthwork services.

(2) The bizSAFE Star certificate issued by the WSHC certifying that Soil Engineering has fulfilled the requirement toattain bizSAFE Level 3. bizSAFE is a programme tailored to assist enterprises, especially the small and mediumenterprises, build up their workplace safety and health capabilities. It provides a five-level approach to helpenterprises progress towards WSHMS capabilities. In order to obtain bizSAFE Level 3, the enterprise must fullyimplement a risk management plan and the plan must be accompanied by a risk management audit report by aMOM-approved workplace safety and health auditor.

As at the Latest Practicable Date, none of the aforesaid permits, approvals, licences and

certificates have been suspended, revoked or cancelled and to the best of our Directors’

knowledge and belief, we are not aware of any facts or circumstances which would cause such

permits, approvals, licences and certificates to be suspended, revoked or cancelled, as the case

may be, or any applications for, or renewal of, any of these licences, permits approvals and

certificates to be rejected by the relevant authorities.

Besides having to obtain all necessary permits, approvals and licences required for our business

and operations, our Group is required to comply with all environmental regulations and to ensure

prompt payment of GST and CPF contributions. In 2014, Huationg Contractor was required to pay

a composition fine of S$800 to the Comptroller of GST for the incorrect GST returns filed for the

period ended 30 September 2013.

In addition to the fine of S$800, Huationg Contractor was also required to pay a composition fine

of S$26,000 to the Comptroller of Income Tax in 2014 for submitting incorrect income tax returns

for the years of assessment 2006 to 2012. Both the aforementioned fines have since been paid

by Huationg Contractor.

As at the Latest Practicable Date, all of these past breaches have either been rectified by our

Group or our Group has ceased such business practices which have contravened the relevant

governmental regulations.

Save as disclosed above, to the best of our Directors’ knowledge and belief, our Company and our

subsidiaries have not breached any environmental regulations, MOM, CPF and GST regulations.


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CREDIT POLICY

Credit policy for our customers

Our services are generally provided on credit terms. In general, we normally extend to our

customers credit ranging from 30 to 60 days depending on the size of the projects or contracts,

our customers’ creditworthiness and payment history. Our customer’s payment profile and credit

exposure are continuously monitored by our Directors. Our trade receivables’ turnover days for

FY2011, FY2012, FY2013 and HY2014 are as follows:

FY2011 FY2012 FY2013 HY2014

Trade receivables’ turnover days(1) 87 80 74 59

Note:

(1) Trade receivables’ turnover days is computed as follows:

Average trade receivables balancesX Number of days

Revenue

Where:

Trade receivables refer to receivables excluding retention sums on construction contracts.

“Average trade receivables” balance is the average of the opening and closing trade receivables balances for the

relevant financial year/period.

“Number of days” is defined as the number of calendar days in the relevant financial year/period.

The trade receivables’ turnover days have decreased from 87 days in FY2011 to 59 days in

HY2014. This is attributable to more stringent internal controls pertaining to the management of

credit limits of our customers.

Our Group has trade receivables amounting to S$4.8 million that are past due as at 30 June 2014

but are not impaired. These receivables are unsecured and the analysis of their aging as at 30

June 2014 is as follows:

Trade receivables past due

As at 30 June 2014

(S$’000)

Less than 30 days 2,473

31 to 60 days 711

61 to 90 days 460

More than 90 days 1,149

We monitor all outstanding trade receivables closely and make specific provision in the event the

recovery of any trade receivables appears doubtful. The quantum of such provision is dependent

on the duration for which the trade receivables are overdue as well as on our assessment of the

likelihood that such trades may be unrecoverable. Our Directors do not foresee any issues with

the recovery of trade receivables which are more than 90 days past due.


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Credit policy from our suppliers and/or sub-contractors

Payment terms granted by our suppliers and/or sub-contractors vary depending on, among others,

our relationship with the suppliers and/or sub-contractors as well as the size of the projects.

Typical credit terms granted by our suppliers and/or sub-contractors range from 30 days to 60

days. Our trade payables’ turnover days for FY2011, FY2012, FY2013 and HY2014 are as follows:

FY2011 FY2012 FY2013 HY2014

Trade payables’ turnover days(1) 43 60 71 62

Note:

(1) Trade payables’ turnover days is computed as follows:

Average trade payables balancesX Number of days

Cost of sales

Where:

“Average trade payables balances” is the average of the opening and closing trade payables balances for the

relevant financial year/period.

“Number of days” is defined as the number of calendar days in the relevant financial year/period.

The trade payables’ turnover days have increased from 43 days in FY2011 to 62 days in HY2014.

This is attributable to an increase in purchases and works performed by sub-contractors, which is

in line with our Group’s increased turnover over the period under review.

INVENTORY MANAGEMENT

In order to minimise carrying cost, we generally do not maintain materials and inventories. We

usually purchase materials as and when required based on the budget and costing requirements

as set out by our team when a contract is secured. However, from time to time, where we

anticipate that there could be a shortage in the supply of materials due to market conditions, we

may maintain some inventory to meet the needs of our projects. In cases where we sub-contract

the work for our projects, the sub-contractor may be responsible for the materials purchased.

COMPETITION

We mainly provide civil engineering services, inland logistics support services and construction

materials comprising LSS and RCA to the construction industry. We believe the following service

providers are our main competitors:

For civil engineering services:

• KTC Civil Engineering & Construction Pte Ltd;

• Chye Joo Construction Pte Ltd; and

• Jin Choon Civil Engineering Pte. Ltd..

For sale of construction materials:

• HSS Enviro Pte. Ltd.;


140

• SamGreen Pte. Ltd.; and

• Soon Yong Huat Engineering Construction.

For inland logistics support services:

• TMC Concrete Pumping Services Pte. Ltd.;

• Koh Kock Leong Enterprise Pte Ltd; and

• Eng Lee Equipment Pte. Ltd..

COMPETITIVE STRENGTHS

We believe that we are able to compete effectively with the following competitive strengths:

(a) We are a full-service integrated civil engineering solutions provider

We are able to provide quality one-stop civil engineering solutions to our customers at

competitive rates. The range of civil engineering services which our Group provides includes

earthworks, infrastructure works, external works, demolition and excavation works, drainage

works, as well as stockpile management services. Customers can also look to us for inland

logistics support in the form of rental of a wide range of construction equipment. Our

integrated business segments and extensive resources enable us to meet our customers’

needs in an efficient and cost-effective manner.

Further, our ability to manufacture and supply construction materials such as LSS and RCA

enables us to provide unique and tailored solutions to our customers. As LSS is a

self-compacting material, it is often used to backfill narrow spaces between structures or

vacant spaces where compaction is difficult or cannot be done. The liquidity and strength of

LSS can be adjusted according to the specific requirements of each customer. LSS may also

reduce the time required for construction as it allows customers to avoid the time-consuming

process of compacting the backfill through vibration or tamping. In addition, as our crushers

are able to produce aggregates of different sizes, including fine aggregates, 20 mm

aggregates and graded stones, we are also able to provide customised solutions to our

clients to cater to the nature and requirements of their projects.

(b) We have an established track record and reputation of more than 30 years

We have been involved in the civil engineering business since 1983 and have gone through

several fluctuations in the construction industry over the past three decades. We believe that,

over the years, we have established a track record in completing our projects on time and

have built a reputation for delivering quality civil engineering works. Our established track

record has enabled us to gain our customers’ confidence in our services which is evident

from the long-standing relationships we share with our existing customers.

Our Group has completed civil engineering works for numerous large infrastructural

construction projects in Singapore including, among others, the Singapore Downtown Line

MRT, Circle Line MRT, Kallang-Paya Lebar Expressway and Marina Coastal Expressway.


141

Huationg Contractor is currently registered with BCA with a BCA grading of A2 under the

category CW02 for civil engineering and C2 under the category CW01 for General Building.

The A2 grading enables Huationg Contractor to tender for public sector procurement in

relation to civil engineering works of values not exceeding S$90.0 million while the C2

grading enables Huationg Contractor to tender for public sector procurement in relation to

general building works with a tendering limit of S$1.4 million. For further details on the

licences in this regard that our Group has obtained, please refer to the section titled “General

Information on our Group – Government Regulations” of this Offer Document for further

details.

Over the years, we have also received numerous accreditations and awards from various

government bodies and industry authorities as a form of recognition for the different aspects

of our construction work. Please refer to the section titled “General Information on our Group

– Licences, Permits, Approvals, Certifications and Awards” of this Offer Document for more

details.

(c) We have an experienced and dedicated management team

We have an experienced and dedicated management team led by Mr Ng Hai Liong, our

Executive Chairman and Executive Director, Mr Ng Kian Ann Patrick, our Chief Executive

Officer and Executive Director, and Mr Ng Kian Yeow, Vincent, our Chief Operating Officer

and Executive Director, who have more than 40 years, 14 years and 13 years of experience

in the construction industry respectively.

We place strong emphasis on professional development, and members of our management

team regularly attend training and education programmes to update themselves on

management techniques and the latest market developments relating to our business. Our

management is supported by a team of key executives who are also experienced and

competent in their respective functions. Please see the section titled “Directors, Executive

Officers and Employees” of this Offer Document for more details on the working experience

of our Directors and Executive Officers.

(d) We are able to keep our cost of construction materials low as we have the ability to

recycle construction waste and aggregates

As we have the capabilities to recycle construction waste and aggregates, we are able to

source internally for construction materials which we would ordinarily use for our civil

engineering works. As such, we are able to reduce our cost of construction materials and

reduce our exposure to delays due to disruption in supply. Our reduced costs in turn allow

us to tender for projects at more competitive rates.


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PROSPECTS

Our Directors believe that we will continue to enjoy consistent growth in the foreseeable future as,

barring any unforeseen circumstances, the civil engineering construction industry in Singapore is

expected to continue to develop for the following reasons:

(a) Sustained Demand for Civil Engineering Construction

Based on BCA’s media release in January 2014, civil engineering construction demand in

2013 reached S$6.8 million and is estimated to grow to between S$8.9 billion and S$10.3

billion in 20141. For 2015 and 2016, average construction demand is projected to be

sustained at between S$25.0 billion and S$34.0 billion per annum with 40.0% of the total

demand expected to come from civil engineering projects2. The historical and forecast

figures for the construction contracts by type of work are presented in the chart below.

Aggregate Construction Demand – Contracts Awarded for Public and Private Sectors

2009 2010 2011 2012 2013p 2014f

Civil Engineering Work Building WorkS$’billion

0

5

10

15

20

25

30

35

40

9.0

3.06.7 4.8 6.8

9.6

13.5 24.5

28.8

26.0

29.1 24.9

Source: BCA Media Release – Construction demand for 2014 to remain strong, dated 9 January 2014.

Notes:

(1) Construction demand is measured by the total value of construction contracts awarded, excluding reclamation

projects.

(2) p: Preliminary, f: Forecast (based on the average of the forecast range)

1 This information was extracted from a BCA Media Release – Construction demand for 2014 to remain strong, dated

9 January 2014

2 This information was extracted from a BCA Media Release – Construction demand for 2014 to remain strong, dated

9 January 2014


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The following table further shows a breakdown of the value of contracts awarded for civil

engineering projects in the public and private sectors.

Year

Public Sector

(S$ billion)

Private Sector

(S$ billion)

Total

(S$ billion)

2009 8.2 0.8 9.0

2010 2.2 0.8 3.0

2011 6.1 0.6 6.7

2012 2.1 2.7 4.8

2013 (preliminary) 5.4 1.4 6.8

2014 (forecast)(2) 8.8 0.8 9.6

Source: BCA Media Release – Construction demand for 2014 to Remain Strong, dated 9 January 2014.

Notes:

(1) Data excludes reclamation projects.

(2) Forecast figures are based on the average of the forecast range.

The figures show that projects from the public sector accounted for the majority of the civil

engineering projects in Singapore. Public sector projects are expected to contribute to the

bulk of the industry’s future demand as private sector demand is expected to continue to

moderate amid the Singapore government’s multi-pronged approach to stabilise the property

market, the substantial supply of completed housing units coming on-stream over the next

few years, as well as the scaling back of new government land sales1. This indicates that the

public sector demand will continue to be a key driver of the civil engineering industry.

(b) Population Growth

Public infrastructure works are expected to support civil engineering construction demand in

view of population growth and accordingly, the need for Singapore to expand the capacity of

its existing infrastructure. The estimated total population of Singapore was approximately 5.4

million in 20132 and based on the Singapore’s Population White Paper 2013, total population

is projected to be between 5.8 and 6.0 million in 2020 and between 6.5 and 6.9 million by

20303.

As part of population planning and given the Singapore government’s ongoing drive to

transform Singapore into a leading global city, it is envisaged that the government will

continue to spend on infrastructure development to overcome current strains and congestion

and to accommodate a larger population. These will include the need for more transportation

infrastructure, industrial facilities as well as public housing, which will translate into a

sustained level of construction activities over the foreseeable future. Therefore, we expect

the civil engineering construction industry to be well-supported by future infrastructure and

housing projects as the population grows.

1 This information was extracted from a BCA Media Release – Construction demand for 2014 to Remain Strong, dated

9 January 2014.

2 This information was extracted from http://www.singstat.gov.sg which was accessed on 11 November 2014.

3 This information was extracted from Singapore’s Population White Paper – A Sustainable Population for a Dynamic

Singapore issued in January 2013.


144

(c) Pipeline of civil infrastructure projects

(i) Expansion of the MRT network

The Singapore government had earlier unveiled plans to improve the land transport system

in Singapore to support the country’s long-term development and to ensure that the rail

network will comfortably meet the expected increase in public transport ridership over the

next two decades1. According to the Land Transport Master Plan 2013, the Singapore

Government plans to double the MRT network from 138 km today to 280 km by 2020. The

Government also plans to invest in two new rail lines, the Cross Island Line and the Jurong

Region Line as well as implement three extensions to the Circle Line, the North East Line and

the Downtown Line. With these additional lines, the rail network is expected to increase to

about 360 km by around 20302. Further details on the expansion of the MRT network are as

follows:

Existing Rail Lines

Land Transport Master Plan 2008 Rail Lines

Land Transport Master Plan 2013 Rail Lines

Jurong

Region Line

Thomson Line

Cross Island

LineNorth East Line

Extension

Downtown Line

Downtown Line

Extension

Eastern Region

Line

North-South Line

Extension

Circle Line

Stage 6

Downtown Line

Tuas West

Extension

Note: LTMP 2008 Rail lines include Thomson Line, Eastern Region Line, Tuas West Extension, and North-South Line Extension.

Source: Land Transport Master Plan 2013

1 This information was extracted from the Land Transport Master Plan 2013

2 This information was extracted from the Land Transport Master Plan 2013


145

Project title

Estimated

year of

completion Description

Thomson-East

Coast Line (“TEL”)

2019 Stations: 3

Residents in the Woodlands community will be

better connected to the rail network as the TEL

links them directly to the North-South Line.

2020 Stations: 6

The TEL extends southward to the Thomson area

and connects commuters to the Circle Line.

2021 Stations: 13

Direct Access to Shenton Way, Orchard or Gardens

by the Bay.

2023 Stations: 7

Seven more stations to be added to the TEL from

Tanjong Rhu to Bayshore.

2024 Stations: 2

The TEL will fully complete in 2024 and will serve

about 1 million commuters daily in years to come,

and also help to relieve crowding on the East-West

and North-South Lines.

Downtown Line 3

Extension

2024 The 2.2 km Downtown Line 3 Extension will join the

current Downtown Line, East-West Line and future

TEL that runs through Marine Parade.

Extension to Circle

Line Stage 6

(“CCL6”)

2025 The loop for the Circle Line will be closed by linking

HarbourFront MRT Station to Marina Bay MRT

Station with the completion of the 4 km CCL6.

Jurong region Line

(“JRL”)

2025 The 20km-long JRL will bring greater connectivity

to areas such as Jurong West, Jurong Industrial

District, West Coast, Choa Chu Kang and new

developments in Tengah.

Extension to North

East Line

2030 The North East Line will be extended by 2 km to

serve Punggol North, including the new Punggol

Downtown. It will be built in tandem with other

developments in the area so that it will be available

when residents move into Punggol North.

Cross Island Line

(“CRL”)

2030 The CRL will span the length of Singapore,

connecting east to west. The CRL is targeted to be

approximately 50 km in length. An eastern segment

of the CRL will also extend into the centre of

Punggol.

Source: http://www.lta.gov.sg/content/ltaweb/en/featured-projects.html, accessed on 11 November 2014.


146

(ii) Road developments in Singapore

Under the Land Transport Master Plan 2013, notwithstanding the existing policy of promoting

the use of public transport which will continue, LTA will continue to expand the road network,

albeit at a slower pace.

A major road project will be the North-South Expressway (“NSE”), Singapore’s 11th

expressway. The NSE will run largely parallel to the Central Expressway (“CTE”), catering to

the increase in travel demand along the north-south corridor as well as alleviating the traffic

load on the heavily-utilised CTE and nearby major arterial roads such as Thomson Road and

Marymount Road. The NSE is expected to be completed around 2020. It is envisaged that

LTA will also be making improvements to major roads leading out from the central to the east

and west regions, including upgrading works to expand capacity of the roads.

There is also an ongoing review of the Singapore Underground Road System (“SURS”)1.

SURS was originally conceived as two concentric rings of underground tunnels, each about

15 km in length, encircling the city centre where most commercial activity is concentrated

and also directly serving the Marina Bay area. With new commercial and residential

developments planned for the Marina South area and the new southern waterfront city area

that will extend from Marina Bay along the waterfront from Keppel Channel, through Telok

Blangah to Pasir Panjang Terminal, SURS is now under study for how it can serve these new

developments in the long term.

(iii) Underground works

As the need for more facilities increases, there will be a need for land space to cater to

supplementary infrastructure such as sewerage systems, cable systems, and other common

service tunnels. Some of the major ongoing sewerage projects are the deep tunnel sewerage

system, the rehabilitation of sewerage network system phase 4; the sewerage schemes to

serve developments in Jurong Eastern Catchment and Jurong Lake District; and the sewer

schemes to serve Marina South and Pasir Ris/Tampines areas. Based on Budget 2014,

development expenditure has been allocated for the improvement of the drainage systems,

which includes improvements to old roadside drains, improvement to the first diversion canal

in Bukit Timah, as well as the proposed diversion canal and detention tank to enhance the

flood protection mechanisms of the Stamford Canal catchment area.

We have not sought the consent of BCA, PUB, Singstat and LTA to the inclusion of the relevant

information extracted from the relevant website or publication and disclaim any responsibility in

relation to reliance on these statistics and information. As they have not consented to the inclusion

of the above information in this Offer Document for the purposes of section 249 of the SFA, they

are therefore not liable for the relevant information under section 253 and 254 of the SFA. While

reasonable actions have been taken by our Directors to ensure that the relevant statements from

the relevant information are reproduced in their proper form and context, and that the information

is extracted accurately and fairly from the relevant website or publication, all other parties and

ourselves have not conducted an independent review of the information contacted in the relevant

website or publication and have not verified the accuracy of the contents of the relevant

statements.

1 This information was extracted from the Land Transport Master Plan 2013.


147

TREND INFORMATION

The following sections discuss some of the industry trends and drivers for the construction

industry, with a focus on the civil engineering sector, in Singapore.

Sustained demand for civil engineering construction works

BCA(1) has announced that construction demand is expected to remain strong, with public sector

projects expected to contribute close to 60.0% of the total demand, or between S$19.0 billion to

S$22.0 billion1. The expansion will be fuelled by an anticipated higher volume of contracts to be

awarded for institutional and civil engineering and construction works. In addition to the existing

construction activities in relation to the Marina Coastal Expressway and the Downtown MRT Line

Stages 2 and 3, the Changi 2036 Steering Committee has also recently announced the expansion

of Changi Airport, including the construction of a new mega terminal and the implementation of a

three-runway system.

Note:

(1) We have not sought the consent of BCA to the inclusion of the relevant information extracted from the relevant









Increased competition from newer and smaller competitors

Our Directors expect increased competition from newer and smaller competitors. As these newer

and smaller companies may not be able to meet the tender qualification requirements for public

sector projects, they are likely to compete for more private sector jobs. In order for them to

compete with the incumbent players in the industry, these smaller companies may enter into joint

ventures with larger and more established companies.

Increased cost of labour and a tightening labour supply

The foreign worker policies in Singapore have been tightened over the recent years. The cost of

hiring foreign workers has been increased as the levy payable by companies across all sectors,

including the construction sector, to the Singapore government for hiring S Pass and Work Permit

holders will be increased in 2014 and 2015. Further, the DRC for the services and marine

industries has also been reduced. Our Directors expect that, in line with the trend of tighter foreign

worker policies, the DRC for the construction sector will also be reduced, resulting in a tighter

labour supply for the construction industry.

Rise in interest rates

Our Directors expect a modest increase in interest rates following the normalisation of global

economic conditions in the wake of the global financial crisis. The increase in interest rates will

cause the cost of debt and cost of acquiring construction equipment through hire purchase

arrangements to increase.

1 This information was extracted from a BCA Media Release – Construction demand for 2014 to Remain Strong, dated

9 January 2014.


148

Save as disclosed above and in the sections titled “Risk Factors”, “Management’s Discussion and

Analysis of Results of Operations and Financial Position”, “General Information on our Group –

Prospects” and “General Information on our Group – Business Strategies and Future Plans” of this

Offer Document, and barring any unforeseen circumstances, our Directors are not aware of any

other significant recent trends in sales and in the costs and prices of services or any other known

trends, uncertainties, demands, commitments or events that are reasonably likely to have a

material effect on our net sales or revenue, profitability, liquidity or capital resources, or that would

cause the financial information disclosed in this Offer Document to be not necessarily indicative

of our future operating results or financial condition. Please also refer to the section titled

“Cautionary Note Regarding Forward-Looking Statements” of this Offer Document.

BUSINESS STRATEGIES AND FUTURE PLANS

Our business strategies towards the future growth and expansion of our business are as follows:

To advance our position as a service provider of civil engineering works for the

construction industry in Singapore

We are currently registered with BCA with a BCA grading of A2 under the category CW02 for civil

engineering. The A2 grading enables us to tender for public sector procurements in relation to civil

engineering works of values not exceeding S$90.0 million.

As we expect increased competition from smaller and newer companies, we intend to remain

competitive by moving up the value chain and taking steps to obtain an A1 grading which would

allow us to tender for public sector procurements in relation to civil engineering works with no

tendering limit. We intend to do so by employing more professional and technical personnel with

the relevant qualifications.

To expand our customer base for LSS to overseas markets while maintaining our presence

in the Singapore market

Our Directors believe that we were the pioneers who introduced the manufacture and use of LSS

in the construction industry in Singapore. As such, we intend to continue maintaining our presence

in this industry by promoting and increasing the use of LSS in upcoming projects, including our

projects relating to the upcoming Thomson MRT Line and potentially the North-South Expressway.

Further, leveraging on our expertise in relation to the manufacture and use of LSS, we also intend

to expand our customer base to overseas markets such as Malaysia. We intend to enter into

strategic alliances with established players in Malaysia in order to market the use of LSS in the

public infrastructure projects there.


Our Group intends to expand our business and to constantly explore business opportunities by

collaborating with suitable partners through suitable acquisitions, joint ventures or strategic

alliances.

Other than entering into strategic alliances with Malaysian counterparts in order to market the use

of LSS in Malaysia, we also intend to expand our civil engineering business by entering into joint

ventures with other companies and, through these joint ventures, undertake larger scale public

sector works.


149


We have a proven track record for civil engineering works. The recent noteworthy projects include,

among others, the Singapore Downtown MRT Line and Marina Coastal Expressway.

Our Directors believe that the demand for public sector projects, in particular projects related to

the construction of MRT lines, will continue to be strong. Therefore, we intend to focus our

resources on such public sector projects. As such public sector projects tend to be larger in scale,

we can ensure that the use of our equipment and resources will be maximised by undertaking

more of such projects.

ORDER BOOK

As at the Latest Practicable Date, our order book from our civil engineering business segment

stood at approximately S$114.3 million, which will be recognised as revenue for our Group over

the next one to three years. As revenue from our civil engineering business is recognised based

on the percentage-of-completion method, our order book excludes the contract value of

completed works which have been recognised as revenue. The value of our order book is not

indicative of our revenue for FY2014, as the revenue derived from our order book will be

recognised over a number of years.

As our revenue from our inland logistics support business segment is mainly driven by short-term

project work requirements of our customers, our order book for inland logistics support (in respect

of project works) as at any particular date is subject to changes in our customers’ project

schedules or cancellations of projects and may not be indicative of revenue for any succeeding

period. In relation to our revenue from our sale of construction materials business segment, our

trading customers place orders for construction materials in accordance with their operational

requirements, which may vary from time to time. Accordingly, we do not have a meaningful order

book for these two business segments.


150

INTERESTED PERSON TRANSACTIONS

In general, transactions between our Group and any of our interested persons (namely, our

Directors, CEO, Controlling Shareholders or any associates (as defined in the Rules of Catalist)

of such Directors, CEO or Controlling Shareholders) (“Interested Persons” and each, an

“Interested Person”) would constitute interested person transactions for the purposes of Chapter

9 of the Rules of Catalist.

Details of the present and ongoing transactions as well as past transactions between our Group

and Interested Persons which are material in the context of the Placement are set out below. Save

as disclosed in this section and in the section titled “Restructuring Exercise” of this Offer

Document, there are no material interested person transactions for FY2011, FY2012, FY2013,

HY2014 and for the period from 1 July 2014 to the Latest Practicable Date (the “Relevant

Period”).

Save as otherwise provided in this section, investors, upon subscription of the Placement Shares,

are deemed to have specifically approved these transactions with our Interested Persons and as

such, these transactions are not subject to Rules 905 and 906 of the Rules of Catalist to the extent

there are no subsequent changes to the terms of the agreements in relation to each of these

transaction.

PAST INTERESTED PERSON TRANSACTIONS

(a) Advances to NHL Investment

In FY2012, our subsidiaries, Soil Engineering and Huationg Contractor, had made advances

of approximately S$1.7 million in aggregate to NHL Investment, a company wholly-owned by

Mr Ng Hai Liong and Mr Ng Kian Ann Patrick. The advances were interest-free with no fixed

term of repayment and were not made on an arm’s length basis.

The table below sets forth the amounts outstanding from NHL Investment during the

Relevant Period:

(S$’000)

As at

31 December

2011

As at

31 December

2012

As at

31 December

2013

As at

30 June

2014

As at

the Latest

Practicable Date

Amounts owing

from NHL

Investment

– 1,678 1,678 1,678 –

The largest amount of advances outstanding from NHL Investment during the Relevant

Period was approximately S$1.7 million based on our month-end balances.

In August 2014, NHL Investment fully repaid to Huationg Contractor and Soil Engineering all

outstanding advances. There are no outstanding amounts owing from NHL Investment as at

the Latest Practicable Date.

We do not intend to enter into any transactions of the above nature in the future.


151

(b) Loans and advances to NHL Holding

In FY2011, our subsidiaries, Soil Engineering and Huationg Contractor, had made available

to NHL Holding, a company wholly-owned by Mr Ng Hai Liong, Mr Ng Kian Ann Patrick, Mr

Ng Kian Yeow, Vincent and their family members, an aggregate of approximately S$2.8

million in unsecured loans. The unsecured loans were non-interest bearing and had no fixed

terms of repayment. The loans were not made on an arm’s length basis as the terms of the

loans were more favourable than the prevailing terms for unsecured loans provided by banks

or financial institutions in Singapore.

Our subsidiaries, Soil Engineering and Huationg Contractor, had also made certain advances

to NHL Holding in FY2013 and HY2014 for the purpose of financing the business activities

of NHL Holding. The advances were interest-free with no fixed term of repayment and were

not made on an arm’s length basis.

The table below sets forth the amounts outstanding from NHL Holding during the Relevant

Period:

(S$’000)

As at

31 December

2011

As at

31 December

2012

As at

31 December

2013

As at

30 June

2014

As at

the Latest

Practicable Date

Loans owing from NHL

Holding

2,820 2,720 2,720 1,500 –

Outstanding advances

to NHL Holding

– – 147 301 –

The largest amount of advances and loans outstanding were S$2.0 million and S$2.8 million

respectively during the Relevant Period based on our month-end balances. As at the Latest

Practicable Date, all amounts of loans and advances owing to our Group by NHL Holding

have been fully repaid.


(c) Use of office resources by NHL Investment and NHL Holding

In 2013, Huationg Contractor entered into an arrangement with NHL Investment and NHL

Holding for the use of our office resources by the two companies. The arrangement provides

for the use of Huationg Contractor’s administrative facilities, including printers and

computers, as well as the provision of accounting services by our Group’s accountant, for

two to three days each month during the year of 2013.

In August 2014, NHL Investment and NHL Holding paid S$180,000 and S$80,000

respectively to Huationg Contractor as fees for the use of Huationg Contractor’s office

resources and the services of our Group’s accountant in FY2013.

The arrangement was not made on an arm’s length basis and we do not intend to enter into

any transactions of the above nature in the future.


152

(d) Provision of guarantees by our Executive Chairman and Executive Director, Mr Ng Hai

Liong, our Chief Executive Officer and Executive Director, Mr Ng Kian Ann Patrick and

our Chief Operating Officer and Executive Director, Mr Ng Kian Yeow, Vincent

We had, from time to time during FY2011, FY2012 and FY2013, entered into certain facility

agreements with various financial institutions for the purposes of our day-to-day operations.

Several of these facilities were secured by personal guarantees provided by our Executive

Chairman and Executive Director, Mr Ng Hai Liong, our CEO and Executive Director, Mr Ng

Kian Ann Patrick and our COO and Executive Director, Mr Ng Kian Yeow, Vincent. Details of

the guarantees provided in respect of the facilities for our Group are as follows:

Financial

institution Type of facility

Amount of

the facility

(S$’000)

Interested Person(s)

who provided the

guarantees

Largest amount

guaranteed during

the Relevant Period

(S$’000)

Caterpillar

Financial

Services Asia

Pte Ltd

Hire purchase

facilities

11,214 Joint and several personal

guarantees provided by Mr

Ng Kian Ann Patrick and

Mr Ng Hai Liong

8,260

MBB Hire purchase

facilities

179 Joint and several personal


Ng Kian Ann Patrick and

Mr Ng Hai Liong

122

UOB Bridging loan 6,000 Joint and several personal


Ng Hai Liong, Mr Ng Kian

Ann Patrick and Mr Ng

Kian Yeow, Vincent

6,000

As at the Latest Practicable Date, all amounts outstanding under the above facilities have

been fully repaid and the personal guarantees set out above have been discharged.

As Mr Ng Hai Liong, Mr Ng Kian Ann Patrick and Mr Ng Kian Yeow, Vincent did not receive

any consideration (monetary or otherwise) for the provision of the above guarantees, the

above transactions were not carried out on an arm’s length basis. However, they were not

prejudicial to the interests of our Group.

(e) Provision of corporate guarantees in respect of banking facilities granted to NHL

Holding

Huationg Contractor has provided corporate guarantees to secure five banking facilities

taken up by NHL Holding. In the event that NHL Holding defaults on its payment obligations

under the loans, its lenders may claim for the amounts owing by NHL Holding from Huationg

Contractor, in which case Huationg Contractor would be required to pay the lenders for the

amounts owing.


153

Details of the guarantees provided in favour of NHL Holding are set out below:

Financial

institution Type of facility

Amount of

the facility

(S$’000)


who provided the

guarantees

Largest amount

guaranteed during

the Relevant Period

based on our

month-end balances

(S$’000)

DBS Term loan 4,080 Corporate guarantee

provided by Huationg

Contractor

3,981

Non-revolving hire

purchase facility

2,000 Corporate guarantee


Contractor

2,168

Fixed advance

facility



Contractor

2,500

UOB Hire purchase

facilities



Contractor

1,848

OCBC Hire purchase

facilities



Contractor

2,912

The largest aggregate outstanding amount guaranteed by Huationg Contractor during the

Relevant Period, based on aggregate amounts as at the end of each calendar month, was

approximately S$13.4 million. As at the date of this Offer Document, all the above guarantees

provided by Huationg Contractor in favour of NHL Holdings have been fully discharged.

As Huationg Contractor did not receive any consideration (monetary or otherwise) for the

provision of the above guarantees, the above transactions were not carried out on an arm’s

length basis.


(f) Sale of property to Mr Douglas Ng

On 7 November 2014, a private residential property previously held by Huationg Contractor

was sold to Mr Ng Kian Haw Douglas, the brother of Mr Ng Kian Ann Patrick and Mr Ng Kian

Yeow, Vincent and son of Mr Ng Hai Liong. The property was valued at S$3.4 million (based

on an independent valuation undertaken in October 2014) and sold for S$3.5 million. As

such, our Directors are of the view that, based on the independent valuation conducted,

although the terms of the sale were not on an arm’s length basis, they were not prejudicial

to the interests of our Group.


154

PRESENT AND ONGOING INTERESTED PERSON TRANSACTIONS

(a) Provision of a joint and several indemnity by, among others, Mr Ng Hai Liong, Mr Ng

Kian Ann Patrick and Mr Ng Kian Yeow, Vincent, in respect of the guarantees in favour

of MOM in lieu of furnishing security bonds for the engagement of foreign workers

As our Group employs foreign workers in Singapore, our Group is required to, among others,

furnish a security bond of S$5,000 in favour of MOM for each foreign worker before we are

allowed to employ that foreign worker. Our Group had obtained the services of Tenet Sompo

Insurance Pte. Ltd. (the “Insurer”) to provide a guarantee in favour of MOM for each foreign

worker employed by our Group (each a “Guarantee” and collectively, the “Guarantees”).

In connection with the Guarantees provided by the Insurer, our Executive Directors, Mr Ng

Hai Liong, Mr Ng Kian Ann Patrick and Mr Ng Kian Yeow, Vincent, have jointly and severally

undertaken and agreed to indemnify and keep the Insurer indemnified against, among

others, all demands, claims, actions, suits, liabilities, losses, costs and expenses that the

Insurer may incur in connection with any Guarantee (the “Personal Indemnities”). As no

fees were paid by us to Mr Ng Hai Liong, Mr Ng Kian Ann Patrick and Mr Ng Kian Yeow,

Vincent for the aforesaid arrangement, we believe that such transactions were not entered

into on an arm’s length basis or on normal commercial terms. As at the Latest Practicable

Date, our Group has 507 foreign workers, and the amount of Guarantees which have been

provided by the Insurer in favour of MOM is S$2,535,000.

Mr Ng Hai Liong, Mr Ng Kian Ann Patrick and Mr Ng Kian Yeow, Vincent have indicated that

they intend to procure the release and discharge of the Personal Indemnities by substituting

the same with other security instruments that are acceptable to the Insurers upon the

admission of our Company to Catalist.

However, in the event that the Insurer does not release them from their obligations under the

Personal Indemnities and our Group is unable to secure alternative arrangements with the

Insurer on similar terms, they will continue to provide the Personal Indemnities until such

time as our Group is able to secure alternative arrangements at no less favourable terms

from other insurance companies similar to those applicable to the current arrangement.

(b) Provision of indemnity by Mr Ng Hai Liong in respect of the Relevant Issuances and

Relevant Transfers

As the Relevant Issuances and Relevant Transfers were not carried out in accordance with

the requirements of the Companies Act and Articles of Association of Huationg Contractor,

our Executive Chairman and Executive Director, Mr Ng Hai Liong, has executed the

Indemnity to support our Group in respect of the Relevant Issuances and Relevant Transfers.

Pursuant to the Indemnity, Mr Ng Hai Liong has undertaken to indemnify the Indemnified

Entities against Relevant Claims made against the Indemnified Entities by any person who

may have a right of claim or interest in the Relevant Shares due to the non-compliance with

the relevant corporate secretarial procedures pursuant to, among others, the Companies Act

and Articles of Association of Huationg Contractor, which the Indemnified Entities actually

(and not potentially) suffers.


155

The Indemnity is subject to, inter alia, the following conditions and limitations:

(i) the Indemnity takes effect upon the listing of our Company on Catalist and shall expire

on the date of privatisation of our Company (whether by way of a scheme of

arrangement pursuant to Section 210 of the Companies Act, compulsory acquisition of

shares pursuant to Section 215 of the Companies Act, or otherwise) whereby there

would not be any minority interest in our Company;

(ii) the Indemnity only indemnifies the Indemnified Entities against Relevant Loss directly

made against the relevant Indemnified Entities by any person arising out of or in

connection with the Relevant Claims, which the Indemnified Entities actually (and not

potentially) suffers; and

(iii) as the extent of a Relevant Loss cannot presently be quantified as the nature of a claim

cannot presently be identified, the extent to which an Indemnified Entity will be

compensated for a Relevant Loss pursuant to the Indemnity is also dependent on the

ability of the Indemnifiers to compensate for such Relevant Loss.

As no fees were paid by us to Mr Ng Hai Liong for the aforesaid arrangement, we believe that

such a transaction was not entered into on an arm’s length basis or on normal commercial

terms, but is not prejudicial to the interest of our Group and/or our minority Shareholders.

(c) Transactions with NHL Holding

(i) Lease of construction equipment and vehicles to our Group

Mr Ng Hai Liong and Mr Ng Kian Ann Patrick, our Substantial Shareholders and

Executive Directors, are directors and controlling shareholders of NHL Holding. Mr Ng

Kian Yeow, Vincent, our Substantial Shareholder and Executive Director is also a

controlling shareholder of NHL Holding.

Huationg Contractor leases a fleet of 106 tipper trucks, four mini excavators, one brush

chipper, four vans and seven pickup trucks, from NHL Holding at a monthly rental of

S$345,200 pursuant to a lease agreement dated 10 November 2014. The lease

agreement is for an initial period of five years and shall be automatically renewed

thereafter on an annual basis for the full extent of the lifetime of each of the construction

equipment and vehicles. Both NHL Holding and Huationg Contractor may unilaterally

terminate the lease agreement. The monthly rental of S$345,200 is equivalent to the

aggregate of the lower of the rental rates quoted by up to two third-party providers for

each type of comparable construction equipment and vehicle. As such, our Directors

are of the view that the terms of the lease agreement are on an arm’s length basis and

based on normal commercial terms and market rates. Chapter 9 of the Rules of Catalist

will apply if the terms of the lease agreement are amended.

(ii) Lease of dormitories to Huationg Contractor

Pursuant to two rental agreements both dated 1 October 2014, NHL Holding leases two

dormitories to Huationg Contractor at a monthly rental of S$13,000 and S$11,000

respectively, for a period of three years. The rental agreements may be unilaterally

terminated by NHL Holding in the event that, among others, Huationg Contractor fails

to observe or perform any covenant contained in the rental agreements or the rent

payable remains unpaid fourteen days after becoming payable. Based on the


156

independent valuation conducted on the monthly rental rate of the two dormitories, our

Directors are of the view that the rental and other terms and conditions of the lease

agreed between Huationg Contractor and NHL Holding are on an arm’s length basis and

based on normal commercial terms and market rates. Chapter 9 of the Rules of Catalist

will apply if the terms of the rental agreements are amended.

(d) Provision of personal guarantees by Mr Ng Hai Liong, Mr Ng Kian Ann Patrick and Mr

Ng Kian Yeow, Vincent

Several of our Group’s facilities are secured by personal guarantees provided by our

Executive Chairman and Executive Director, Mr Ng Hai Liong, our CEO and Executive

Director, Mr Ng Kian Ann Patrick and our COO and Executive Director, Mr Ng Kian Yeow,

Vincent.

Details of the guarantees provided in respect of the banking facilities of our Group are as

follows:

(i) Guarantees provided on behalf of Huationg Contractor

Financial

institution

Type of

facility

Amount

available

under the

facility

(S$’000)


who provided the

guarantees

Largest amount

guaranteed

during the

Relevant Period

(S$’000)

Amount

outstanding

as at the Latest

Practicable Date

(S$’000)

DBS Term loan 13,200 Joint and several

personal guarantees

provided by Mr Ng Kian


Hai Liong

13,200 10,945

Trade

facilities

7,000 Joint and several

personal guarantees



Hai Liong

6,011 3,544

Fixed

advance

facility


personal guarantees



Hai Liong

1,000 1,000

Commercial

credit card

800 Joint and several

personal guarantees



Hai Liong

652 435

Foreign

exchange

(spot and

forward

contract)


personal guarantees



Hai Liong

– –


157

Financial

institution

Type of

facility

Amount

available

under the

facility

(S$’000)


who provided the

guarantees

Largest amount

guaranteed

during the

Relevant Period

(S$’000)

Amount

outstanding

as at the Latest

Practicable Date

(S$’000)

Non-revolving

hire purchase

facilities


personal guarantees



Hai Liong

9,012 7,849

Revolving

credit facilities

5,316(1) Joint and several

personal guarantees



Hai Liong

2,466 2,466

RHB Trade facility 2,000 Joint and several

personal guarantees



Hai Liong

2,240 –

Revolving

credit facility


personal guarantees



Hai Liong

3,500 –

Banker’s

guarantee


personal guarantees



Hai Liong

891 891

MBB Trade facility 1,500 Joint and several

personal guarantees



Hai Liong

1,292 –

Hire purchase

facility


personal guarantees



Hai Liong

2,000 100

Revolving

credit facility


personal guarantees



Hai Liong

– –

SCB Trade

facilities


personal guarantees



Hai Liong

4,880 4,500


158

Financial

institution

Type of

facility

Amount

available

under the

facility

(S$’000)


who provided the

guarantees

Largest amount

guaranteed

during the

Relevant Period

(S$’000)

Amount

outstanding

as at the Latest

Practicable Date

(S$’000)

UOB Trade

facilities


personal guarantees



Hai Liong

4,000 3,080

Overdraft 800 Joint and several

personal guarantees



Hai Liong

800 –

Credit card

line


personal guarantees



Hai Liong

120 3

Foreign

exchange

contract


personal guarantees



Hai Liong

– –

Banker’s

guarantees


personal guarantees



Hai Liong

6,869 6,869

Money market

loans

5,022(1) Joint and several

personal guarantees



Hai Liong

4,909 –

Hire purchase

facilities


personal guarantees



Hai Liong

6,431 6,378

ANZ Trade facility 5,000 Joint and several

personal guarantees



Hai Liong

4,009 4,009

OCBC Trade

facilities


personal guarantees



Hai Liong

4,000 3,113


159

Financial

institution

Type of

facility

Amount

available

under the

facility

(S$’000)


who provided the

guarantees

Largest amount

guaranteed

during the

Relevant Period

(S$’000)

Amount

outstanding

as at the Latest

Practicable Date

(S$’000)

Specific

advance

facility


personal guarantees



Hai Liong

500 –

Foreign

exchange

(forward

contract)


personal guarantees



Hai Liong

– –

Hire purchase

facilities


personal guarantees



Hai Liong

21,700 15,769

CIMB Trade facility 4,500 Joint and several

personal guarantees



Hai Liong

4,114 4,114

Foreign

currency (spot

and forward

contract)


personal guarantees



Hai Liong

– –

Revolving

credit facility


personal guarantees



Hai Liong

1,500 1,500

BEA Term loan 4,000 Joint and several

personal guarantees



Hai Liong

4,000 3,556

EQ

Insurance

Company

Limited

Performance

guarantees


personal guarantees



Hai Liong

930 930

ECICS

Limited

Performance

guarantees


personal guarantees



Hai Liong

7,000 7,000


160

Financial

institution

Type of

facility

Amount

available

under the

facility

(S$’000)


who provided the

guarantees

Largest amount

guaranteed

during the

Relevant Period

(S$’000)

Amount

outstanding

as at the Latest

Practicable Date

(S$’000)

Hitachi

Capital

Singapore

Pte. Ltd.

Hire purchase

facilities


personal guarantees



Hai Liong

427 9

Caterpillar

Financial

Services

Asia Pte Ltd

Hire purchase

facilities


personal guarantees



Hai Liong

2,287 208

Note:

(1) Converted from US$ based on the exchange rate of S$1:US$1.2779 as at 31 October 2014 as obtained from

www.oanda.com. We have not sought the consent of Oanda Corporation to the inclusion of the relevant

information extracted from the relevant website or publication and disclaim any responsibility in relation to

reliance on these statistics and information. As they have not consented to the inclusion of the above

information in this Offer Document for the purposes of section 249 of the SFA, they are therefore not liable

for the relevant information under section 253 and 254 of the SFA. While reasonable actions have been taken

by our Directors to ensure that the relevant statements from the relevant information are reproduced in their

proper form and context, and that the information is extracted accurately and fairly from the relevant website

or publication, all other parties and ourselves have not conducted an independent review of the information

contacted in the relevant website or publication and have not verified the accuracy of the contents of the

relevant statements.

(ii) Guarantees provided for Soil Engineering

Financial

institution

Type of

facility

Amount

available

under

the Facility

(S$’000)


who provided the

guarantees

Largest amount

guaranteed

during the

Relevant Period

(S$’000)

Amount

outstanding

as at the Latest

Practicable Date

(S$’000)

DBS Trade facility 800 Joint and several

personal guarantees


Ann Patrick, Mr Ng Kian

Yeow, Vincent and Mr

Ng Hai Liong

500 274

Non-revolving

hire purchase

facility


personal guarantees


Ann Patrick, Mr Ng Kian


Ng Hai Liong

1,216 1,175

UOB Overdraft

facility


personal guarantees



Ng Hai Liong

300 –


161

(iii) Guarantees provided for HT Equipment

Financial

institution

Type of

facility

Amount

available

under the

Facility

(S$’000)


who provided the

guarantees

Largest amount

guaranteed

during the

Relevant Period

(S$’000)

Amount

outstanding

as at the Latest

Practicable Date

(S$’000)

UOB Hire purchase

facilities


personal guarantees

provided by, among

others, Mr Ng Kian Ann

Patrick

7,085 2,362

As Mr Ng Hai Liong, Mr Ng Kian Ann Patrick and Mr Ng Kian Yeow, Vincent did not receive

any consideration (monetary or otherwise) for the provision of the above guarantees, the

above transactions were not carried out on an arm’s length basis. However, they were not

prejudicial to the interests of our Group.

Subsequent to the successful admission of our Company to the Official List of Catalist, we

intend to obtain a release and discharge of the above guarantees provided by the Interested

Persons from the respective banks and financial institutions by substituting the same with

other securities to be provided by our Group which may be acceptable to the banks and

financial institutions (as the case may be), subject to their consent. Following such

replacement of the guarantees, we do not expect any material changes to the other terms

and conditions of the banking facilities. In the event that the banks or financial institutions do

not accept the substitution of the guarantees and we are unable to secure alternative credit

facilities on similar terms, the above-named Interested Persons have agreed to continue

providing such guarantees until such time as we are able to secure alternative facilities from

other financial institutions. The above-named Interested Persons have also confirmed that

they will not receive any consideration (monetary or otherwise) for the provision of the above

guarantees in the future.

(e) Life insurance policy taken up on the life of Mr Ng Kian Ann Patrick

In June 2014, Huationg Contractor took out a life insurance policy on the life of our CEO and

Executive Director, Mr Ng Kian Ann Patrick. The total initial sum insured under this policy is

US$10.0 million. Huationg Contractor took up a revolving credit facility amounting to US$1.9

million to finance the payment of the premium under the insurance policy. The

abovementioned revolving credit facility, along with other facilities provided by the relevant

bank, is secured by way of a mortgage over our property at 9 Benoi Crescent, Singapore

629972. These facilities are further secured by a joint and several personal guarantee

provided by Mr Ng Hai Liong and Mr Ng Kian Ann Patrick, and the first legal assignment of

all rights, title, interests and benefits arising out of the insurance policy, including all

proceeds payable under the policy and proceeds of any repayment or refund of the premium

to the bank.

The beneficiary of the life insurance policy for the first five years from the date of the policy

shall be Huationg Contractor, after which Mr Ng Kian Ann Patrick shall become the

beneficiary of the policy and be entitled to all payments and other benefits arising therefrom

after deducting for the amounts paid under the abovementioned revolving credit facility and

the surrender value of the insurance policy.


162

The foregoing arrangement was not carried out on an arm’s length basis but is not prejudicial

to the interests of our Group.

(f) Provision of irrevocable undertaking by Mr Ng Hai Liong to provide or procure

financial support to our Group

On 5 November 2014, our Executive Chairman, Mr Ng Hai Liong, provided an irrevocable

undertaking to provide or procure financial support of up to a maximum of S$8.0 million,

where necessary, to our Group for a period of up to three years after the listing of our

Company on Catalist (in the form of capital injection, loans or a combination of both). Any

loans advanced by Mr Ng Hai Liong personally will be interest-free and will be due and

payable on such date as may be agreed between him and our Company, subject to review

by our Audit Committee, taking into account the financial position of our Group and/or any

other factors that may potentially affect the position of our Group. Our Audit Committee may,

after a review of the ongoing liquidity requirements of our Group, release Mr Ng Hai Liong

from the undertaking before the expiry of the three-year period.

As Mr Ng Hai Liong did not receive any consideration (monetary or otherwise) for providing

the irrevocable undertaking, the foregoing arrangement was not carried out on an arm’s

length basis. However, it is not prejudicial to the interests of our Group.

(g) Provision of security management services by SECOM (Singapore) Pte Ltd (“SECOM”)

Our Independent Director, Mr Yen Se-Hua Stewart, is currently the chief executive officer of

SECOM and owns a 33.8% shareholding interest in SECOM. The remaining 66.2% of the

share capital of SECOM is held by parties not related to Mr Yen Se-Hua Stewart or any of

the Directors, Controlling Shareholders and Executive Officers of our Company.

Our Group engaged SECOM in 2005 for the provision of managed security services

including, among others, the design, installation and maintenance of security systems and

24-hour monitor-and-respond services, for our office premises at a monthly fee.

The value of our transactions with SECOM over the Relevant Period is as follows:

(S$) FY2011 FY2012 FY2013 HY2014

For the period

from 1 July 2014

to the Latest

Practicable Date

Provision of

security services

by SECOM

3,430 5,591 4,200 2,100 1,400

The security services were provided by SECOM on an arm’s length basis, at the then

prevailing market prices and on the same terms and conditions as that offered to the other

customers of SECOM.

We intend to continue with our transactions with SECOM and our future transactions will be

subject to review by our Audit Committee to ensure that they are carried out on an arm’s

length basis and on normal commercial terms. Mr Yen Se-Hua Stewart will abstain from

participating in the review and approval process in relation to transactions with SECOM and

all future transactions will be in compliance with Chapter 9 of the Rules of Catalist.


163

(h) Dividends payable to Mr Ng Hai Liong, Mr Ng Kian Ann Patrick, Mr Ng Kian Yeow,

Vincent and members of their immediate family

As at 30 June 2014, the aggregate dividends of approximately S$8.5 million were

outstanding and accrued as dividends payable to the then shareholders of Huationg

Contractor and Soil Engineering. As at the Latest Practicable Date, S$5.0 million has been

paid out while the Outstanding Dividends of approximately S$3.5 million remains outstanding

and payable. Of the Outstanding Dividends, approximately S$1.2 million is payable to Mr Ng

Hai Liong, S$0.7 million each to Mr Ng Kian Ann Patrick and Mr Ng Kian Yeow, Vincent,

S$0.6 million to Mr Ng Hai Liong’s spouse, Ms Lee Swee Chu, and S$0.3 million to Mr Ng

Hai Liong’s son, Mr Ng Kian Peng Albert. The relevant shareholders entitled to the

Outstanding Dividends have undertaken that they will not demand the payment of the

Outstanding Dividends until such time as the consolidated financial statements of our Group

for the 6 months ending 30 June 2015 are announced and our Audit Committee confirms that

such payment would not adversely affect our Group’s working capital and consents to such

payment.

As the relevant shareholders did not receive any consideration (monetary or otherwise) for

providing the undertaking, the foregoing arrangement was not carried out on an arm’s length

basis but is not prejudicial to the interests of our Group.

(i) Provision of corporate guarantee in respect of hire purchase facilities granted to NHL

Holding

Huationg Contractor has provided a corporate guarantee to secure hire purchase facilities

amounting to approximately S$5.3 million granted to NHL Holding by MBB. In the event that

NHL Holding defaults on its payment obligations, MBB may claim for the amount owing by

NHL Holding from Huationg Contractor, in which case, Huationg Contractor would be

required to pay the lenders the amounts owing. Based on our month-end balances, the

largest amount guaranteed under the facilities during the Relevant Period is approximately

S$4.3 million.

As Huationg Contractor did not receive any consideration (monetary or otherwise) for the

provision of the guarantee, the transaction was not carried out on an arm’s length basis.

The guarantee will be released and discharged upon the successful admission of our Group

to the Official List of Catalist.

GUIDELINES AND REVIEW PROCEDURES FOR ONGOING AND FUTURE INTERESTED

PERSON TRANSACTIONS

Our Audit Committee will review and approve all interested person transactions to ensure that they

are on normal commercial terms and on arm’s length basis, that is, the transactions are transacted

in terms and prices not more favourable to the Interested Persons than if they were transacted

with a third party and are not prejudicial to the interests of our Group and our Shareholders in any

way.


164

To ensure that all future interested person transactions are carried out on normal commercial

terms and will not be prejudicial to the interests of our Group or our Shareholders, the following

procedures will be implemented by our Group:

(a) when purchasing any products or engaging any services from an Interested Person, two

other quotations from non-Interested Persons will be obtained for comparison to ensure that

the interests of our Group and Shareholders are not disadvantaged. The purchase price or

fee for services shall not be higher than the most competitive price or fee of the two other

quotations from non-Interested Persons. In determining the most competitive price or fee, all

pertinent factors including, but not limited to, quality, requirements, specifications, delivery

time and track record will be taken into consideration;

(b) in the case of renting properties from or to an Interested Person, our Board shall take

appropriate steps to ensure that the rent is commensurate with the prevailing market rates,

including adopting measures such as making relevant inquiries with landlords of similar

properties and/or obtaining necessary reports or reviews published by property agents

(including an independent valuation report by a property valuer, where considered

appropriate). The amount payable shall be based on the most competitive market rental rate

of similar properties in terms of size, suitability for purpose and location, based on the results

of the relevant inquiries;

(c) where it is not possible to compare against the terms of other transactions with unrelated

third parties and given that the products or services may be purchased only from an

Interested Person, the interested person transaction will be approved by either our CEO, if

he has no interest in the transaction, or failing which, our Audit Committee, in accordance

with our usual business practices and policies. In determining the transaction price payable

to the Interested Person for such products and/or service, factors such as, but not limited to,

quantity, requirements and specifications will be taken into account; and

(d) in addition, we shall monitor all interested person transactions entered into by us and

categorise these transactions as follows:

(i) a Category 1 interested person transaction is one where the value thereof is equal or

in excess of 3.0% of the latest audited NTA of our Group; and

(ii) a Category 2 interested person transaction is one where the value thereof is below 3.0%

of the latest audited NTA of our Group.

All Category 1 interested person transactions must be approved by our Audit Committee prior

to entry whereas Category 2 interested person transactions need not be approved by our

Audit Committee prior to entry but shall be reviewed on a periodic basis by our Audit

Committee.

Our Audit Committee will review all interested person transactions, if any, on a periodic basis

to ensure that they are carried out on an arm’s length basis and in accordance with the

procedures outlined above, it will take into account all relevant non-quantitative factors. In

the event that a member of our Audit Committee is interested in any such transaction, he will

abstain from participating in the review and approval process in relation to that particular

transaction.


165

We shall prepare all the relevant information to assist our Audit Committee in its review and

will keep a register recording all interested person transactions. The register shall also

record the basis for entry into the transactions, including the quotations and other evidence

obtained to support such basis.

In addition, our Audit Committee and our Board will also ensure that all disclosure, approval

and other requirements on interested person transactions, including those required by

prevailing legislation, the Rules of Catalist (in particular, Chapter 9) and relevant accounting

standards, are complied with. The annual internal audit plan shall incorporate a review of all

interested person transactions entered into. Such transactions will also be subject to the

approval of our Shareholders if required by the Rules of Catalist. We will also endeavour to

comply with the recommendations set out in the Code of Corporate Governance.

These internal audit reports will be reviewed by our Audit Committee to ascertain whether the

guidelines and procedures established to monitor interested person transactions have been

complied with. Our Audit Committee shall also review from time to time such guidelines and

procedures to determine if they are adequate and/or commercially practicable in ensuring

that interested person transactions are conducted on normal commercial terms, on an arm’s

length basis and do not prejudice our interests and the interests of our Shareholders. Further,

if during these periodic reviews by our Audit Committee, our Audit Committee is of the opinion

that the guidelines and procedures as stated above are not sufficient to ensure that

interested person transactions will be on normal commercial terms, on an arm’s length basis

and not prejudicial to our interests and the interests of our Shareholders, our Audit

Committee will adopt such new guidelines and review procedures for future interested

person transactions as may be appropriate.

Disclosure will be made in our annual report of the aggregate value of interested person

transactions during the relevant financial year under review.

POTENTIAL CONFLICTS OF INTERESTS

Mr Ng Hai Liong and Mr Ng Kian Ann Patrick, our Executive Directors and Substantial

Shareholders, are directors and controlling shareholders of NHL Holding, which is engaged

principally in leasing construction equipment such as tipper trucks, mini excavators, brush

chippers, vans and pickup trucks. Mr Ng Kian Yeow, Vincent, our Substantial Shareholder and

Executive Director, is also a controlling shareholder of NHL Holding.

Pursuant to a deed of undertaking dated 5 November 2014 given by NHL Holding to our Company,

NHL Holding has given an irrevocable undertaking to our Company that, for as long as a director

and/or substantial shareholder of NHL Holding is also a Director and/or Substantial Shareholder

of our Company:

(a) it shall not carry out any business similar to or competing with the business carried on by our

Company or any of our subsidiaries from time to time;

(b) it will, for the lifetime of their construction equipment and vehicles, only lease their

construction equipment and vehicles exclusively for use by our Group;

(c) to the extent that the useful life of their construction equipment and vehicles has been

extended, continue to lease their fleet of construction equipment and vehicles exclusively for

use by our Group;


166

(d) it shall not purchase any new construction equipment or vehicles;

(e) in the event any of its shareholders wishes to sell or transfer any shares held in NHL Holding,

such shareholder(s) shall be required to first offer in writing those shares to be transferred

or sold to our Company at the net book value of the shares and on such terms and conditions

as may be agreed between our Company and the relevant shareholder(s);

(f) subject to Clause (g) below, in the event it wishes to sell or transfer any construction

equipment or vehicles, it shall first offer in writing those construction equipment or vehicles

to be transferred or sold to our Company at the net book value of the construction equipment

or vehicles and on such terms and conditions as may be agreed between our Company and

NHL Holding; and

(g) it shall not sell or transfer any construction equipment or vehicles to:

(i) directors of our Company and/or NHL Holding, and their associates;

(ii) controlling shareholders of our Company and/or NHL Holding, and their associates; and

(iii) companies in which directors, controlling shareholders of our Company and/or NHL

Holding, and their associates, have a controlling interest.

In view of the above, our Directors believe that adequate measures have been taken to safeguard

the interests of our Group.

Save as disclosed above and in the section titled “Interested Person Transactions” of this Offer

Document:

(a) none of our Directors, Executive Officers or Controlling Shareholders or any of their

associates has any interest, direct or indirect, in any material transactions to which we were

or are to be a party;

(b) none of our Directors, Executive Officers or Controlling Shareholders or any of their

associates has any interest, direct or indirect, in any company carrying on the same business

or carrying on a similar trade which competes materially and directly with the existing

business of our Group; and

(c) none of our Directors, Executive Officers or Controlling Shareholders or any of their

associates has any interest, direct or indirect, in any company that is our customer or

supplier of goods and/or services.

Interests of Experts

No expert is interested, directly or indirectly, in the promotion of, or in any property or assets which

have, within the two years preceding the date of this Offer Document, been acquired or disposed

of by or leased to our Company or its subsidiaries or are proposed to be acquired or disposed of

by or leased to our Company or its subsidiaries.

No expert (i) is employed on a contingent basis by our Company or its subsidiaries; (ii) has a

material interest, whether direct or indirect, in our Shares or the shares of our subsidiaries; or (iii)

has a material economic interest, whether direct or indirect, in our Company, including an interest

in the success of the Placement.


167

Interests of the Issue Manager, Sponsor and Placement Agent

In the reasonable opinion of our Directors, PPCF does not have a material relationship with our

Company, save as disclosed below and in the section titled “General and Statutory Information –

Management and Placement Arrangements” of this Offer Document:

(a) PPCF is the Issue Manager, Sponsor and Placement Agent in relation to the Placement;

(b) PPCF will be the continuing Sponsor of our Company for a period of three years from the

date our Company is admitted and listed on Catalist; and

(c) pursuant to the Management Agreement and as part of PPCF’s fees as the Issue Manager

and Sponsor, our Company allotted and issued 1,875,000 new Shares at the Placement

Price to PPCF representing 1.5% of the issued and paid-up share capital of our Company

immediately prior to the Placement. After completion of the relevant moratorium period as set

out in the section titled “Shareholders – Moratorium” of this Offer Document, PPCF may

dispose its shareholding interest in our Company at its discretion.

Interests of the Sub-Placement Agent

In the reasonable opinion of our Directors, UOBKH does not have a material relationship with our

Company, save that UOBKH is the Sub-Placement Agent of the Placement and save as disclosed

below in the section titled “General and Statutory Information — Management and Placement

Arrangements” of this Offer Document.


168

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169

DIRECTORS

Our Board of Directors is entrusted with the responsibility for the overall management of ourGroup. Our Directors’ particulars are listed below:

Name Age Address Position

Ng Hai Liong 67 9 Benoi CrescentSingapore 629972

Executive Chairman andExecutive Director

Ng Kian Ann Patrick 39 9 Benoi CrescentSingapore 629972

CEO and Executive Director

Ng Kian Yeow, Vincent 36 9 Benoi CrescentSingapore 629972

COO and Executive Director

Yuen Sou Wai 60 9 Benoi CrescentSingapore 629972

Lead Independent Director

Yen Se-Hua Stewart 64 9 Benoi CrescentSingapore 629972

Independent Director

Wee Heng Yi, Adrian 35 9 Benoi CrescentSingapore 629972

Independent Director

The working and business experience, education and professional qualifications, if any, and areasof responsibility of our Directors are set out below:

Mr Ng Hai Liong is the Executive Chairman and Executive Director of our Group. He wasappointed as an Executive Director of our Company on 1 August 2014 and is currently also aDirector of Huationg Contractor, Soil Engineering, NHL Holding and NHL Investment. Mr Ng HaiLiong is responsible for overseeing the strategic positioning and business expansion of our Group,including making major business and financial decisions.

Mr Ng Hai Liong has more than 40 years of experience in the civil engineering constructionindustry and has been instrumental in the development and growth of our Group’s business. MrNg Hai Liong was first employed with Swee Construction & Transport Co. Pte Ltd in 1970 as a sitesupervisor before joining Ng Keam Teng Construction Pte Ltd, a company providing civilengineering services, in 1973. He later set up a partnership in 1978 which was involved in theprovision of civil engineering services such as roadworks and drainage works. In 1980, Mr Ng HaiLiong left the partnership and set up Huationg Contractor, where he was responsible for, amongothers, managing our Company’s civil engineering projects and securing various overseasprojects in China and Myanmar.

Mr Ng Kian Ann Patrick is the CEO and Executive Director of our Group and was appointed asCEO and Executive Director to our Company in 1 August 2014. He currently also serves as adirector of Huationg Contractor, HT Equipment, NHL Holding and NHL Investment.

Mr Ng Kian Ann Patrick has more than 14 years of experience in the civil engineering constructionindustry and has been responsible for the overall management, operations, strategic planning andbusiness expansion of our Group since 2000. He was responsible for the expansion of our saleof construction materials business segment as he oversaw the development and marketing of LSSby our Group in 2002 and spearheaded the initiative to recycle construction waste and aggregates

DIRECTORS, EXECUTIVE OFFICERS AND EMPLOYEES

170

in 2004. Further, under Mr Ng Kian Ann Patrick’s management, Huationg Contractor was awarded

the BCA grading of A2 under the category CW02 for civil engineering in 2009, which allows our

Group to tender for larger value contracts.

Mr Ng Kian Ann Patrick graduated from the University of London with a Bachelor’s Degree in

Engineering (First Class Honours) in 1999.

Mr Ng Kian Yeow, Vincent is the COO and Executive Director of our Group and was appointed

as Executive Director to our Company on 11 November 2014. Mr Ng Kian Yeow, Vincent is

currently also a director of Huationg Contractor, Soil Engineering and HT Equipment.

Mr Ng Kian Yeow, Vincent has more than 13 years of experience in the civil engineering

construction industry and has been responsible for the project management and overall strategic

planning for project completion of our Group since 2001. Mr Ng Kian Yeow, Vincent was involved

in the development and commercialisation of our Group’s LSS production in 2002 and oversaw the

smooth completion of various contracts, including contract C487, a major contract awarded by

Daelim Industrial Co. Ltd. in 2008 for the provision of earthworks and LSS backfill services in the

design, construction and completion of the Marina Coastal Expressway. He was also instrumental

in our Group securing our first contract for the design and build of a bus park with LTA in 2012.

Mr Ng Kian Yeow, Vincent graduated from the Curtin University of Technology with a Bachelor’s

Degree in Applied Science Construction Management and Economics in 2001.

Mr Yuen Sou Wai is the Lead Independent Director of our Group and was appointed to our

Company on 11 November 2014. Mr Yuen is currently an independent director of YHI International

Limited, the lead independent director and audit committee chairman of Chew’s Group Limited as

well as a lead independent director and audit committee chairman of Libra Group Limited. The

aforementioned companies are presently listed on the SGX-ST. Mr Yuen has in total more than 36

years of financial management experience in various large local and global multi-national

companies and had held several senior financial positions, including chief financial officer,

regional finance director and group controller in the Asia-Pacific region. Prior to his appointment

as a non-executive director of YHI International Limited, Mr Yuen was holding the position of a

group chief financial officer as well as executive director responsible for the group’s operations in

Australia, New Zealand, Italy, United States of America and Canada. Prior to joining the YHI group

of companies in 1996, Mr Yuen was the regional finance director (Asia-Pacific) with Diversey

Corporation, Canada. He had served with the Diversey group of companies since 1988 and had

held several key portfolios in financial management within the Asia-Pacific region. From 1980 to

1988, he served as the Financial Manager and Company Secretary of Computer Forms Toppan

Moore Private Limited. From 1977 to 1980, he served as a management accountant at Singapore

Glass Manufacturers Pte Ltd. From 1975 to 1977, he was the cost and management accountant

at Metal Containers Pte Ltd.

Mr Yuen is a Fellow of the Institute of Singapore Chartered Accountants and is a Fellow of the

Chartered Institute of Management Accountants of the United Kingdom. He is also a member of

the Singapore Institute of Directors. Mr Yuen holds a Master of Business Administration Degree

from the University of Leicester, United Kingdom.

Mr Yen Se-Hua Stewart is an Independent Director of our Group and was appointed as

Independent Director to our Company in 11 November 2014. He is currently the chief executive

officer and executive director of SECOM, a company which engages in the provision of security

services. Mr Yen is currently an independent director of Telechoice International Limited, a


171

company listed on the Main Board of the SGX-ST, and STT Communication (Beijing) Co., Ltd.. He

is also a non-executive director of System-bilt Pte Ltd, System-bilt (Myanmar) Ltd, Verint Systems

(Singapore) Pte Ltd, D’Garde Security Pte. Ltd. and ProVision Technology (Asia Pacific) Pte Ltd.

Mr Yen has held senior management positions in various industries such as defence marketing,

construction and development and security services. Mr Yen began his career as a systems

engineer in the Ministry of Defence, Singapore, in 1973. In 1977, he was posted to the Singapore

Embassy in Washington, D.C. as Second Secretary (Logistics), where he was responsible for

defence procurement and liaison. Between 1979 and 1980, Mr Yen was employed at Unicorn

International (UK) Private Limited as a manager overseeing the international marketing of

Singapore-made defence systems. In 1980, he left Unicorn International (UK) Private Limited to

join Duce International Pte. Ltd. as its regional sales manager. Mr Yen later formed part of the

team which established CDC-Construction & Development Pte Ltd (now known as Sembawang

Engineers & Constructors Pte. Ltd.), and was employed as the company’s assistant general

manager between 1982 and 1988. In 1988, Mr Yen rejoined Unicorn International (UK) Private

Limited as a general manager for defence sales and marketing, before leaving his position in 1999

to join SECOM as its chief executive officer.

Mr Yen graduated with a Bachelor’s Degree in Engineering from McMaster University in 1972.

Mr Wee Heng Yi, Adrian is an Independent Director of our Group and was appointed as an

Independent Director to our Company in 11 November 2014.

Mr Wee began his career in Harry Elias Partnership LLP’s civil and commercial litigation practice

group in 2004. He left Harry Elias Partnership LLP in 2008 to join Characterist LLC as a director,

and presently heads the criminal defence and advocacy practice group. Mr Wee’s current practice

areas are civil and commercial litigation and criminal defence.

Mr Wee obtained his Bachelor of Laws (Honours) from the National University of Singapore in

2003 and is admitted to the roll of solicitors in England and Wales. He is a member of the ASEAN

Law Association and the Law Society of Singapore.

Rule 406(3)(a) of the Rules of Catalist states that as a pre-quotation disclosure requirement, a

listing applicant must release a statement (via SGXNET or in the offer document) identifying for

each director, whether the person has prior experience (and what) or, if the director has no prior

experience as a director of a listed company, whether the person has undertaken training in the

roles and responsibilities of a director of a listed company. With regard to Rule 406(3)(a) of the

Rules of Catalist, two of our Directors, Mr Yuen Sou Wai and Mr Yen Se-Hua Stewart, have prior

and/or current experience as directors of other public listed companies in Singapore, and are

familiar with the roles and responsibilities of a director of a public listed company in Singapore. Mr

Ng Hai Liong, Mr Ng Kian Ann Patrick, Mr Ng Kian Yeow, Vincent and Mr Wee Heng Yi, Adrian

have attended the relevant trainings at the Singapore Institute of Directors to familiarise

themselves with the roles and responsibilities of a director of a public listed company in

Singapore.

Save as disclosed in the sections titled “Share Capital – Ownership Structure” and “Directors,

Executive Officers and Employees” of this Offer Document, none of our Directors are related to

each other, our Executive Officers or our Substantial Shareholders.

Mr Ng Hai Liong is the father of our Executive Directors, Mr Ng Kian Ann Patrick and Mr Ng Kian

Yeow, Vincent.


172

Our Independent Directors do not have any existing business or professional relationship of a

material nature with our Group, our Directors or Substantial Shareholders.

None of our Independent Directors sits on the board of our subsidiaries.

None of our Directors has any arrangement or understanding with any of our customers or

suppliers pursuant to which such person was appointed as our Director.

The list of present and past directorships of each Director over the last five years excluding those

held in our Company is set out below:

Name Present directorships Past directorships

Ng Hai Liong Group Companies

Huationg Contractor

Soil Engineering

Group Companies

Nil

Other Companies

Dandelion Capital

NHL Holding

NHL Investment

Other Companies

JRC Batam Pte Ltd

Ng Kian Ann Patrick Group Companies

HT Equipment

Huationg Contractor

Group Companies

Nil

Other Companies

Dandelion Capital

NHL Holding

NHL Investment

Other Companies

Nil

Ng Kian Yeow, Vincent Group Companies

HT Equipment

Huationg Contractor

Soil Engineering

Group Companies

Nil

Other Companies

Nil

Other Companies

Novem Healthcare Pte Ltd

Yuen Sou Wai Group Companies

Nil

Group Companies

Nil


173


Other Companies

Chew’s Group Limited

Libra Group Limited

YHI International Limited

Other Companies

YHI (Australia) Pty Limited

YHI (Canada) Inc

YHI (New Zealand) Ltd

YHI International (Taiwan)

Co., Ltd.

YHI Manufacturing (Shanghai)

Co., Ltd.

YHI Power Pty Limited

O.Z. S.p.A.

Pan Mar Corporation D/B/A

Konig (American)

Toshka Holdings Limited

Yen Se-Hua Stewart Group Companies

Nil

Group Companies

Nil

Other Companies

D’Garde Security Pte Ltd

Info D Pte Ltd

ProVision Technology

(Asia Pacific) Pte Ltd

Secom Data Protection Pte. Ltd.

SECOM (Singapore) Pte Ltd

Shenstone Investments Pte Ltd

System-bilt Pte Ltd

System-bilt (Myanmar) Ltd

Telechoice International Limited

STT Communication (Beijing)

Co., Ltd.

Verint Systems (Singapore)

Pte Ltd

Other Companies

Aetos Grand Services Pte. Ltd.

Aetos Security Management

Pte. Ltd.

Hersing Corporation Pte. Ltd.

Regional Hotel Pte Ltd

Reliance Contractors Private

Limited

Ventura Development

(Myanmar) Pte Ltd

Wee Heng Yi, Adrian Group Companies

Nil

Group Companies

Nil

Other Companies

Characterist LLC

Other Companies

Nil

Each of Mr Ng Hai Liong, Mr Ng Kian Ann Patrick, Mr Ng Kian Yeow, Vincent and Mr Goh Tuck

Peng has agreed, pursuant to their Service Agreements that they shall not, during the period of

employment and up to two years after the termination of their employment, engage, directly or

indirectly, in any business which competes with any business carried on or proposed to be carried

on by our Group. Please refer to the section titled “Directors, Executive Officers and Employees

– Service Agreements” for further details.


174

EXECUTIVE OFFICERS

The day-to-day operations of our Group are entrusted to our Executive Directors who are assisted

by an experienced and qualified team of Executive Officers. The particulars of our Executive

Officers are set out below:

Name Age Address Position

Goh Tuck Peng 44 9 Benoi Crescent

Singapore 629972

Financial Controller

Khin Maung Tun

@ Lim Ming Hwee

51 9 Benoi Crescent

Singapore 629972

Project Manager

Heng Yann Syin 35 9 Benoi Crescent

Singapore 629972

Senior Contract Administrator

Teo Bee Chin 41 9 Benoi Crescent

Singapore 629972

Accountant

The working, business experience and areas of responsibility of our Executive Officers are set out

below:

Mr Goh Tuck Peng is our Financial Controller. He was appointed as Financial Controller of our

Group on 7 April 2014. Mr Goh is responsible for our Group’s financial and accounting matters and

its compliance with financial reporting and regulatory requirements.

Mr Goh has more than 17 years of experience in dealing with the financial and accounting matters

of companies and in ensuring compliance with financial reporting and regulatory requirements. He

was employed with Qianhu Corporation Limited, Guangzhou, China, in February 2003, as a

finance and administration manager. From March 2005 to May 2007, he was the group finance

manager of Shanghai Asia Holdings Limited. Mr Goh later joined Zhejiang Red Sun Wool

Technology Ltd. in January 2008 as their chief financial officer. Between December 2009 and June

2011, Mr Goh was the financial controller of CCM Group Limited (now known as “Singapore

Edevelopment Limited”), before being promoted to chief financial officer in January 2012.

Mr Goh graduated from the Singapore Accountancy Academy with an Association of Chartered

Certified Accountants Professional Degree in 1997. He is also a Member of the Institute of

Singapore Chartered Accountants.

Mr Khin Maung Tun @ Lim Ming Hwee is our Project Manager. He joined our Group in 1995 and

is in charge of project management, project planning and procurement of technical support for

projects.

Prior to joining our Group, Mr Khin began his career as a site engineer at Koh Bian Construction

Pte Ltd in 1990, where he was involved in project planning and management. Mr Khin left Koh

Bian Construction Pte Ltd in 1992 and joined HN Constructor Pte Ltd, where he was also

employed as a site engineer.


175

Mr Khin graduated from Rangoon Institute of Technology, Myanmar, with a Bachelor of

Engineering (Civil) in 1986 and received a Diploma in Public Health Engineering from Rangoon

Institute of Technology, Myanmar in 1988, He also has a Certificate in Pavement Construction and

Maintenance from the Construction Industry Development Board, Singapore. Mr Khin is an

associate member of the American Society of Civil Engineers and a resident technical officer of

the Institute of Engineers Singapore.

Ms Heng Yann Syin is our Senior Contract Administrator. Ms Heng joined our Group in 2002 as

an Assistant Quantity Surveyor before being promoted as a Contract Administrator in 2004 and

then as Senior Contract Administrator in 2012. As Senior Contract Administrator, Ms Heng

oversees our contract department and is in charge of project tendering and procurement of

projects.

Ms Heng graduated from Ngee Ann Polytechnic, Singapore, with a Diploma in Civil and

Environmental Engineering in 2002.

Ms Teo Bee Chin is our accountant. She joined our Group in 2012 and is responsible for all

treasury matters, the monitoring of cash flow as well as timely and accurate monthly financial

closings.

Prior to joining our Group, Ms Teo began her career at Practical Secretarial Services in 1992 as

an accountant, where she was involved in the company’s book keeping, taxation and corporate

secretarial matters. Between 1995 to 1997, she was employed as an accounts officer at A & I

Commercial Management, where she was involved in audit and other corporate secretarial work.

Ms Teo joined Vibro Holdings Pte Ltd in 1997 where she held the position of accounts executive

and oversaw the company’s financial and accounting matters and its compliance with financial

reporting and regulatory requirements. Between 2001 to 2008, she was employed as an accounts

executive at Visa Engineering Pte Ltd, where she was also responsible for the company’s financial

and accounting matters and its compliance with financial reporting and regulatory requirements.

She was promoted to finance manager of Visa Engineering Pte Ltd in 2009.

Ms Teo completed Level 2 of the Chartered Certified Accountant qualification administered by the

Association of Chartered Certified Accountants in 2011.

The Executive Officers do not hold any directorships presently and have not held any past

directorships over the last five years save as set out below:


Heng Yann Syin Group Companies

Nil

Group Companies

Nil

Other Companies

Nil

Other Companies

Ho Construction Pte. Ltd.

(struck off)


176

DIRECTORS’ AND EXECUTIVE OFFICERS’ REMUNERATION

The remuneration (including bonus, contributions to CPF, directors’ fees and benefits-in-kind) paid

or payable to our Directors and Executive Officers and in remuneration bands for FY2012 and

FY2013 and the estimated remuneration (excluding any profit-linked bonus, and benefits-in-kind)

payable to them on an individual basis and in remuneration bands for FY2014 are as follows:

FY2012 FY2013

FY2014

(Estimated)

Directors

Ng Hai Liong Band C Band A Band A

Ng Kian Ann Patrick Band A Band A Band A

Ng Kian Yeow, Vincent Band B Band A Band B

Yuen Sou Wai – – Band A

Yen Se-Hua Stewart – – Band A

Wee Heng Yi, Adrian – – Band A

Executive Officers

Goh Tuck Peng – – Band A

Khin Maung Tun @ Lim Ming Hwee Band A Band A Band A

Heng Yann Syin Band A Band A Band A

Teo Bee Chin Band A Band A Band A

Note:

(1) Remuneration bands:

“Band A” means from S$0 up to S$250,000 per annum.

“Band B” means from S$250,001 up to S$500,000 per annum.

“Band C” means from S$500,001 up to S$750,000 per annum.

EMPLOYEES

A breakdown of the number of employees of our Group by business function as at the end of each

of FY2011, FY2012 and FY2013 and HY2014 is as follows:

Segmented by Function

As at

31 December

2011

As at

31 December

2012

As at

31 December

2013

As at

30 June

2014

Management 15 12 13 15

Administration 31 39 51 49

Technical 23 26 21 29

Project Operations 371 460 443 537

Inland Logistics 171 211 244 258

Total 611 748 772 888

The number of our employees increased significantly from 611 as at 31 December 2011 to 888 as

at 30 June 2014 as we managed to secure larger sized projects over the years and more labour

was required to support the expansion of our operations.


177

Our employees are not unionised. The relationship and cooperation between the management

and staff have always been good and is expected to continue in the future. There has not been

any incidence of work stoppages or labour disputes which affected our operations.

As at the Latest Practicable Date, we do not employ a significant number of employees on a

temporary basis.

Pension or retirement benefits

As at the Latest Practicable Date, save for the amounts set aside or accrued in respect of

mandatory employee funds, we have not set aside or accrued any amounts to provide pension,

retirement or similar benefits to our employees.

Related Employees

As at the Latest Practicable Date, other than our Executive Director and CEO, Mr Ng Kian Ann

Patrick and our Executive Director and COO, Mr Ng Kian Yeow, Vincent, being the sons of our

Executive Chairman and Executive Director, Mr Ng Hai Liong, as disclosed in the section titled

“Directors, Executive Officers and Employees – Directors”, we have six other employees who are

related to our Executive Chairman and Executive Director, Mr Ng Hai Liong (the “Related

Employees”), the details of which are as follows:

Name Position held

Relationship with our

Executive Directors and

Executive Officers

Managerial positions

Ng Swee Seng Workshop Manager Nephew of Mr Ng Hai Liong

Ng Say Beng Charlie Site Manager Nephew of Mr Ng Hai Liong

Non-managerial positions

Ng Hwee Min Josephine Part Time Administrative

Assistant

Daughter of Mr Ng Hai Liong

Ng Kian Haw Douglas Part Time Administrative

Assistant

Son of Mr Ng Hai Liong

Ng Ah Hwa Site Supervisor Nephew of Mr Ng Hai Liong

Ng Yiew Huay Cleaner Sister of Mr Ng Hai Liong

Save as disclosed above, there is no family relationship between any of our Directors and/or

Executive Officers, or between any of our Directors, Executive Officers, Substantial Shareholders

and employees.

The remuneration of the Related Employees is determined on the same basis as those of

unrelated employees. The Related Employees, other than Mr Ng Swee Seng and Mr Ng Say Beng

Charlie, do not hold managerial positions in our Group.


178

SERVICE AGREEMENTS

On 11 November 2014, our Company entered into separate service agreements (collectively, the

“Service Agreements” and individually, the “Service Agreement”) with our Executive Chairman

and Executive Director, Mr Ng Hai Liong, our CEO and Executive Director, Mr Ng Kian Ann Patrick,

our COO and Executive Director, Mr Ng Kian Yeow, Vincent and our Financial Controller, Mr Goh

Tuck Peng (collectively, the “Executives” and individually, the “Executive”).

The Service Agreements are for an initial period of three years (the “Initial Term”) commencing

with effect from the date of admission of our Company to Catalist, subject to renewal annually

thereafter, unless otherwise agreed in writing between our Company and the Executive or

terminated in accordance with the Service Agreements. During the Initial Term, the parties may

terminate the respective service agreement by giving not less than six months’ notice in writing to

the other. We may also terminate the Service Agreements by notice upon the occurrence of certain

events, such as, among others, serious misconduct, bankruptcy or criminal conviction.

Pursuant to the terms of the respective Service Agreements, Mr Ng Hai Liong, Mr Ng Kian Ann

Patrick, Mr Ng Kian Yeow, Vincent and Mr Goh Tuck Peng will receive a monthly remuneration of

S$25,000, S$38,000, S$35,000 and S$10,500 respectively. In addition, each of the Executives

shall be entitled to an annual wage supplement equivalent to one month of the Executive’s last

drawn monthly salary (the “Incentive Bonus”).

Mr Ng Hai Liong, Mr Ng Kian Ann Patrick and Mr Ng Kian Yeow, Vincent will also be entitled to a

performance bonus (the “Performance Bonus”) based on our Group’s profit before income tax

(“PBT”) for each financial year. For this purpose, “PBT” refers to the audited consolidated profit

before income tax of our Group (before the Incentive Bonus, non-recurring exceptional items and

minority interests) for the relevant financial year. The amount of Performance Bonus is determined

as follows:

PBT

Mr Ng Hai Liong

Executive Chairman

Mr Ng Kian Ann

Patrick

CEO

Mr Ng Kian Yeow,

Vincent

COO

Less than S$4.0

million

Nil Nil Nil

Exceeds S$4.0 million

but does not exceed

or equal to S$6.0

million

2.0% of the amount in

excess of S$4.0

million


excess of S$4.0

million


excess of S$4.0

million

Exceeds S$6.0 million

but does not exceed

or equal to S$8.0

million

S$40,000 and 2.5% of

the amount in excess

of S$6.0 million

S$70,000 and 4.0% of


of S$6.0 million

S$64,000 and 3.7% of


of S$6.0 million

Exceeds S$8.0 million S$90,000 and 3.0% of


of S$8.0 million

S$150,000 and 4.5%

of the amount in

excess of S$8.0

million

S$138,000 and 4.2%

of the amount in

excess of S$8.0

million


179

Our Group will also extend to each of the Executives, among others, insurance, medical and

dental benefits in line with our Group’s prevailing policy. In particular, Huationg Contractor has

taken out a life insurance policy on the life of Mr Ng Kian Ann Patrick whereby the sum insured

under this policy is up to US$10.0 million. The beneficiary for the first five years from the date of

the policy shall be Huationg Contractor, after which Mr Ng Kian Ann Patrick shall become the

beneficiary of the policy and be entitled to all payments and other benefits arising therefrom after

deducting for the amounts paid under the revolving credit facility taken up to finance the payment

of the premium under the insurance policy and the surrender value of the insurance policy. Our

Group will also take up a similar insurance policy on the life of Mr Ng Kian Yeow, Vincent and

another additional insurance policy on the life of Mr Ng Kian Ann Patrick as provided for in their

service agreements. In addition, pursuant to his service agreement, Mr Ng Hai Liong will be

entitled to the use of a club membership owned by our Group. All entertainment expenses,

travelling, hotel and other out-of-pocket expenses incurred by them in connection with our Group’s

business will also be borne by our Group.

The remuneration of the Executives is subject to review by our Board at the end of each financial

year of our Company. The relevant Executive shall abstain from voting in respect of any resolution

or decision to be made by our Board in relation to the terms and renewal of his Service Agreement.

Under the terms of the Service Agreements, each of the Executives is subject to certain restrictive

covenants as described below. Each of them is also prohibited, during the term of their Service

Agreements and their termination thereof, to disclose any information, which they know or ought

to reasonably know to be confidential concerning the business of our Group, so far as the

information had come to their knowledge during their appointment with our Company.

Each of the Executives shall not at any time during the period of their employment and for a period

of two years after the expiry or termination of their employment for whatever reason, do or permit,

inter alia, the following without the prior written consent of our Board:

(a) being directly or indirectly carry on or be engaged or interested in any capacity in or

concerned in the conduct of any other business competing with any business carried on or

proposed to be carried on by our Group; and/or

(b) solicit any customer or any person who is or has been, during their engagement, a customer

of our Group for the purpose of offering to that person goods and services similar to or

competing with those of the business conducted by our Group.

Had the Service Agreements for the Executives been effective on 1 January 2013, the total

remuneration payable to the Executives for FY2013 would have been approximately S$1.5 million

instead of S$0.7 million and the profit attributable to owners of the parent would have been

approximately S$4.2 million instead of approximately S$5.0 million.

Save as disclosed above, there are no other existing or proposed Service Agreements between

our Company or our subsidiaries and any of our Directors. There are no existing or proposed

service agreements entered into or to be entered into by our Directors with our Company or any

of our subsidiaries which provide for benefits upon termination of employment without cause.


180

Audit Committee

Our Audit Committee comprises our Independent Directors, Mr Yuen Sou Wai, Mr Yen Se-Hua

Stewart and Mr Wee Heng Yi, Adrian. The Chairman of our Audit Committee is Mr Yuen Sou Wai.

After our listing on Catalist, our Executive Directors and Executive Officers will manage the

business and operations of our Group. Our Audit Committee will assist our Board of Directors with

regard to discharging its responsibility to safeguard our Company’s assets, maintain adequate

accounting records, and develop and maintain effective systems of internal controls with an

overall objective to ensure that our management has created and maintained an effective control

environment in our Group.

Our Directors recognise the importance of corporate governance and the offering of high

standards of accountability to the Shareholders. Our Audit Committee shall meet periodically to

perform, among others, the following functions:

(a) assist our Board in the discharge of its responsibilities on financial reporting matters;

(b) review, with the internal and external auditors, the audit plans, scope of work, their evaluation

of the system of internal accounting controls, their management letter and our management’s

response, and results of our audits compiled by our internal and external auditors;

(c) review the half-yearly and annual financial statements and results announcements before

submission to our Board for approval, focusing in particular, on changes in accounting

policies and practices, major risk areas, significant adjustments resulting from the audit, the

going concern statement, compliance with financial reporting standards as well as

compliance with the Rules of Catalist and any other statutory/regulatory requirements;

(d) review the effectiveness and adequacy of our internal control and procedures, including

accounting and financial controls and procedures and ensure co-ordination between our

internal and external auditors, and our management, reviewing the assistance given by our

management to the auditors, and discuss problems and concern, if any, arising from the

interim and final audits, and any matters which the auditors may wish to discuss (in the

absence of our management where necessary);

(e) review the scope and results of the external audit, and the independence and objectivity of

the external auditors;

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

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

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

management’s response;

(g) review significant financial reporting issues and judgments with financial controller and the

external auditors so as to ensure the integrity of the financial statements of our Group and

any formal announcements relating to our Group’s financial performance before their

submission to our Board of Directors;

(h) to review and report to our Board at least annually the adequacy and effectiveness of our

Group’s material internal controls with the financial controller and the internal and external

auditors, including financial, operation, compliance and information technology controls via

reviews carried out by the internal auditors;

CORPORATE GOVERNANCE

181

(i) review and approve transactions falling within the scope of Chapter 9 and Chapter 10 of the

Rules of Catalist (if any);

(j) review any potential conflicts of interest;

(k) review and approve all hedging policies and instruments (if any) to be implemented by our

Group;

(l) undertake such other reviews and projects as may be requested by our Board and report to

our Board its findings from time to time on matters arising and requiring the attention of our

Audit Committee;

(m) review and establish procedures for receipt, retention and treatment of complaints received

by our Group, inter alia, criminal offences involving our Group or its employees, questionable

accounting, auditing, business, safety or other matters that impact negatively on our Group;

(n) review the financial position of our Group (including the cash flow position and balance sheet

of our Group) and/or consider any other factors that may potentially affect the financial

position of our Group, and determine if it would be in the best interests of our Group to call

upon the irrevocable undertaking in writing dated 5 November 2014 given by Mr Ng Hai Liong

to provide or procure financial support to our Group; and

(o) generally to undertake such other functions and duties as may be required by statue or the

Rules of Catalist, and by such amendments made thereto from time to time.

Our Audit Committee will meet, at a minimum, once every six months. Apart from the duties listed

above, our Audit Committee shall commission an annual internal controls audit until such time as

it is satisfied that the internal controls of our Group are sufficiently robust and effective in

mitigating any key internal control weaknesses our Group may have. Prior to decommissioning

such annual internal controls audit, our Board shall report to the Sponsor and the SGX-ST on the

basis for deciding to decommission the annual internal controls audit, as well as the measures

taken to rectify key weaknesses in and/or strengthen the internal controls of our Group.

Thereafter, our Audit Committee shall commission such audits as and when it deems fit for the

purposes of satisfying itself that the internal controls of our Group have remained robust and

effective. Upon the completion of an internal control audit, our Board shall make the appropriate

disclosures via the SGXNET of any weaknesses in our Group’s internal controls which may be

material or of a price-sensitive nature, as well as any follow-up actions to be taken by our Board.

Our Audit Committee shall also commission and review the findings of internal investigations into

matters where there is any suspected fraud or irregularity, or failure of internal controls or

infringement of any Singapore law, rules or regulations which has or is likely to have a material

impact on our Group’s operating results and/or financial position. Each member of our Audit

Committee shall abstain from reviewing any particular transaction or voting on such resolution in

respect of which he is or may be interested in.

In preparation for our Group’s listing on Catalist (the “Listing”), our Audit Committee has held

discussions with our Financial Controller together with our Independent Auditor and Reporting

Accountant in relation to our Group’s internal controls. During the course of discussions, our Audit

Committee was given a broad overview of our Group’s current internal control procedures, with

emphasis on our Group’s internal controls of cash and bank balances and procedures on the

reconciliation and confirmation of bank balances.


182

Our Board of Directors has also noted that no material internal control weaknesses have been

raised by our Independent Auditor and Reporting Accountant in the course of their audit of the

financial statements of our Group for the past three financial years ended 31 December 2011,

2012 and 2013.

Following our Group’s listing on Catalist, our Audit Committee will continually review the

effectiveness of the internal control procedures within our Group and, if necessary, outsource our

Group’s internal audit function to ensure the adequacy and sufficiency of internal controls

procedures within our Group.

Based on the foregoing, our Board of Directors, after making all reasonable enquiries and to the

best of its knowledge and belief, with the concurrence of our Audit Committee, is of the opinion

that the internal controls of our Group are adequate to address the financial, operational and

compliance risks.

Our Audit Committee having (i) conducted an interview with Mr Goh Tuck Peng; (ii) considered the

qualifications and past working experience of Mr Goh Tuck Peng (as described in the section titled

“Directors, Executive Officers and Employees – Executive Officers” of this Offer Document); (iii)

observed his abilities, familiarity and diligence in relation to the financial matters and information

of our Group; and (iv) noted the absence of negative feedback from BDO, is of the view that Mr

Goh Tuck Peng is suitable for the position of Financial Controller.

After making all reasonable enquiries, and to the best of the knowledge and belief of our Audit

Committee, nothing has come to the attention of the members of our Audit Committee to cause

them to believe that Mr Goh Tuck Peng does not have the competence, character, integrity

expected of a Financial Controller (or its equivalent rank) of a listed issuer.

Nominating Committee

Our Nominating Committee comprises our Independent Directors Mr Yuen Sou Wai, Mr Yen

Se-Hua Stewart and Mr Wee Heng Yi, Adrian, and our CEO and Executive Director, Mr Ng Kian

Ann Patrick. The Chairman of our Nominating Committee is Mr Wee Heng Yi, Adrian. Our

Nominating Committee will be responsible for the following functions, inter alia:

(a) reviewing and approving any new employment of related persons and proposed terms of

their employment;

(b) re-nomination of our directors for re-election of directors in accordance with our Articles of

Association at each annual general meeting and having regard to the Director’s contribution

and performance;

(c) determining annually whether or not a Director of our Company is independent;

(d) deciding whether or not a Director of our Company is able to and has been adequately

carrying out his duties as a Director; and

(e) to decide how our Board’s performance may be evaluated and propose objective

performance criteria, as approved by our Board that allows comparison with its industry

peers, and address how our Board has enhanced long-term Shareholders’ value.


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Our Nominating Committee will decide how our Board’s performance is to be evaluated and

propose objective performance criteria, subject to the approval of our Board, which addresses

how our Board has enhanced long-term Shareholders’ value. The performance evaluation will also

include consideration of our Share price performance over a five-year period vis-à-vis the

Singapore Straits Times Index and a benchmark index of our industry peers. Our Board will also

implement a process to be carried out by our Nominating Committee for assessing the

effectiveness of our Board as a whole and for assessing the contribution by each individual

Director to the effectiveness of our Board.

Each member of our Nominating Committee shall abstain from voting on any resolutions in respect

of the assessment of his performance or re-nomination as Director of our Company. In the event

that any member of our Nominating Committee has an interest in a matter being deliberated upon

by our Nominating Committee, he will abstain from participating in the review and approval

process relating to that matter.

Since 2005, SECOM has, in the ordinary course of business, provided security services to our

Group, and will continue to do so after the date of admission of our Company to the Catalist.

Notwithstanding the aforementioned business relationship between our Group and SECOM, our

Nominating Committee and our Directors (save for Mr Yen) consider Mr Yen to be independent for

the purposes of the Code of Corporate Governance, for the following reasons:

(a) Mr Yen is not related to any of the Directors, Controlling Shareholders and Executive Officers

of our Company. He became acquainted with Mr Ng Hai Liong through business dealings in

the construction industry when he was employed as an assistant general manager of

CDC-Construction & Development Pte Ltd between 1982 and 1988. Our Group has had only

occasional direct contact with Mr Yen over the years;

(b) The aggregate value of the historical transactions between our Group and SECOM had been

insignificant for our Group and SECOM. The aggregate value of the transactions amounted

to approximately S$3,430, S$5,591, S$4,200 and S$2,100 during FY2011, FY2012, FY2013

and HY2014 respectively based on a fixed monthly fee of S$350 since FY2013. Save for the

security alarm monitor-and-respond services, SECOM does not sell any other product nor

provide any other services to our Group;

(c) Our Company is not dependent on SECOM for the supply and maintenance of our security

systems and we do not foresee any issues with switching to alternative suppliers at

comparable terms and conditions;

(d) SECOM is also not dependent on our Group as the annual trade transactions with our Group,

on average, accounts for approximately 0.02% of the annual revenue of SECOM since the

commencement of the business relationship in 2005; and

(e) Our Group’s business transaction with SECOM is serviced by a business manager of

SECOM and Mr Yen has not been personally involved in the business transactions with our

Group.

Mr Yuen Sou Wai and Mr Yen Se-Hua Stewart are directors of three listed companies and one

listed company respectively. Mr Yuen Sou Wai and Mr Yen Se-Hua Stewart have confirmed, and

our Nominating Committee is of the opinion, that Mr Yuen Sou Wai and Mr Yen Se-Hua Stewart

will be able to devote sufficient time to discharge their duties as our Independent Directors.


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Remuneration Committee

Our Remuneration Committee comprises our Independent Directors Mr Yuen Sou Wai, Mr Yen

Se-Hua Stewart and Mr Wee Heng Yi, Adrian. The Chairman of our Remuneration Committee is

Mr Yen Se-Hua Stewart. The role of our Remuneration Committee shall be to recommend to our

Board a framework of remuneration for the Directors and Executive Officers, and specific

remuneration packages for each Executive Director. The quantum of the bonus of our Executive

Directors and CEO will be subject to the approval of our Remuneration Committee. The bonus for

our other Executive Officers will be determined solely by our Executive Directors and CEO.

Our Remuneration Committee’s recommendations shall then be submitted for endorsement by our

entire Board. The scope of responsibilities of our Remuneration Committee encompasses all

aspects of remuneration including, but not limited to, our Directors’ and Financial Controller’s

fees, salaries, allowances, bonuses, options and benefits in kind. Our Remuneration Committee

shall also review the remuneration of senior management and employees related to our Directors.

Each member of our Remuneration Committee shall abstain from voting on any resolutions in

respect of his or her remuneration package.

Board Practices

Our Directors are to be appointed by our Shareholders at a general meeting and an election of

Directors is held annually. One third (or the number nearest to one third) of our Directors are

required to retire from office at least once every three years. However, a retiring Director is eligible

for re-election at the meeting at which he retires. Further details on the appointment and

retirement of Directors can be found in Appendix D to this Offer Document.


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On 18 November 2014, our Shareholders adopted the Share Option Scheme.

The Share Option Scheme will provide eligible participants with an opportunity to participate in the

equity of our Company and to motivate them towards better performance through increased

dedication and loyalty. The Share Option Scheme, which forms an integral and important

component of a compensation plan, is designed primarily to reward and retain employees whose

services are vital to our success.

As at the Latest Practicable Date, no Options have been granted under the Share Option Scheme.

Objectives of the Share Option Scheme

The objectives of the Share Option Scheme are as follows:

(a) to motivate participants to optimise their performance standards and efficiency and to

maintain a high level of contribution to our Group;

(b) to retain key employees whose contributions are essential to the long-term growth and

profitability of our Group;

(c) to instil loyalty to, and a stronger identification by participants with the long-term prosperity

of, our Group;

(d) to attract potential employees with relevant skills to contribute to our Group and to create

value for our Shareholders; and

(e) to align the interests of participants with the interests of our Shareholders.

Summary of the Share Option Scheme

The rules of the Share Option Scheme may be inspected by Shareholders at the registered office

of our Company for a period of six months from the date of registration of this Offer Document. The

following is a summary of the rules of the Share Option Scheme:

Participants

The Share Option Scheme allows for participation by confirmed employees of our Group

(including our Executive Directors) and Non-executive Directors (including Independent Directors)

who have attained the age of 21 years on or before the relevant date of grant of the Option,

provided that none of them shall be an undischarged bankrupt or have entered into a composition

with his creditors.

Controlling Shareholders and their associates will not be eligible to participate in the Share Option

Scheme.

Administration of the Scheme

The Share Option Scheme shall be administered by a committee comprising of members of both

our Nominating Committee and our Remuneration Committee (collectively, the “Administration

Committee”), with powers to determine, inter alia, the following:

(a) persons to be granted Options;

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(b) number of Options to be offered; and

(c) recommendations for modifications to the Share Option Scheme.

However, in compliance with the requirement of the Rules of Catalist, a participant of the Share

Option Scheme who is a member of the Administration Committee will not be involved in any

deliberation or decision in respect of Options to be granted to that participant.

Size of the Share Option Scheme

The total number of Shares over which the Administration Committee may grant Options on any

date, when added to the number of Shares issued and issuable in respect of all Options granted

under the Share Option Scheme (including the Share Plan and any other share option schemes

of our Company), shall not exceed 15.0% of the number of issued Shares (including treasury

shares, as defined in the Companies Act) on the day preceding the date of the relevant grant.

Our Directors believe that this limit gives us sufficient flexibility to decide upon the number of

Option Shares to offer to the employees of our Group under the Share Option Scheme. The

number of eligible participants is expected to grow over the years. Our Company, in line with its

goals of ensuring sustainable growth, is constantly reviewing its position and considering the

expansion of its talent pool which may involve employing new employees. As a result, the

employee base and the number of eligible participants will increase. The number of Options

offered must also be significant enough to serve as a meaningful reward for an employee’s

contribution to our Group. The Administration Committee shall exercise its discretion in deciding

the number of Shares to be granted to each employee under the Share Option Scheme which will

depend on the performance and value of the employee to our Group.

Options entitlements

The number of Option Shares to be offered to a participant shall be determined by the

Administration Committee, in their absolute discretion. The Administration Committee shall

consider criteria such as rank and responsibilities within our Group, performance, years of

service/appointment and potential for future development of that participant and the performance

of our Company.

Options, exercise period and exercise price

The Options that are granted under the Share Option Scheme may have exercise prices that are,

at the discretion of the Administration Committee:

(a) set at a discount to a price (the “Market Price”) equal to the average of the last dealt prices

for the Shares on the SGX-ST for the five consecutive market days immediately preceding

the relevant date of grant of the relevant Option of a Share (the “Incentive Option”),

provided that:

(i) the maximum discount shall not exceed 20.0% of the Market Price (or such other

percentage or amount as may be determined by the Administration Committee and

permitted by the SGX-ST); and

(ii) the Shareholders in general meeting shall have authorised, in a separate resolution, the

making of offers and grants of Options under the Scheme at a discount not exceeding

the maximum discount as aforesaid,


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in which event, such Options may be exercised after the second anniversary of the Date of

Grant and expiring on the fifth anniversary of such Date of Grant; or

(b) fixed at the Market Price (the “Market Price Option”). Market Price Options may be

exercised after the first anniversary of the Date of Grant and expiring on the fifth anniversary

of such Date of Grant.

Grant of Options

There are no fixed periods for the grant of Options. As such, offers of the grant of Options may be

made at any time from time to time at the discretion of the Administration Committee.

However, in the event that an announcement on any matter of an exceptional nature involving

unpublished price sensitive information is imminent, offers may only be made after the second

market day from the date on which the aforesaid announcement is made.

Termination of Options

Options may lapse or be exercised earlier in circumstances which include the termination of the

employment of the participant in our Group and our parent company, the bankruptcy of the

participant, the death of the participant, a take-over of our Company, and the winding-up of our

Company.

Acceptance of Options

The grant of Options shall be accepted within 30 days from the date of the offer. Offers of Options

made to grantees, if not accepted before the closing date, will lapse. Upon acceptance of the offer,

the grantee must pay our Company a consideration of S$1.

Rights of Shares arising from the exercise of Options

New Shares arising from the exercise of Options, when allotted and issued shall be subject to all

the provisions of the Memorandum and Articles of Association of our Company and shall rank for

all entitlements, including dividends or other distributions declared or recommended in respect of

the then existing Shares, the Record Date for which is on or after the relevant date upon which

such exercise occurred, and shall in all other respects rank pari passu with other existing Shares

then in issue.

Duration of the Share Option Scheme

The Share Option Scheme shall continue in operation for a maximum period of 10 years

commencing on the date on which the Share Option Scheme is adopted by our Company in

general meeting, provided that the Share Option Scheme may continue for any further period

thereafter with the approval of our Shareholders by ordinary resolution in general meeting and of

any relevant authorities which may then be required.

Abstention from voting

Participants who are Shareholders are to abstain from voting on any Shareholders’ resolution

relating to the Share Option Scheme.


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Modifications to the Share Option Scheme

The Share Option Scheme may be modified and/or altered from time to time by a resolution of the

Administrative Committee, subject to the compliance with the requirements of the Listing Manual

and the requirements of any other regulatory authorities as may be necessary.

However, no modification or alteration shall adversely affect the rights attached to Options granted

prior to such modification or alteration except with the written consent of such number of

participants under the Share Option Scheme who, if they exercised their Options in full, would

thereby become entitled to not less than 75.0% of the number of all the Shares which would fall

to be allotted upon exercise in full of all outstanding Options under the Share Option Scheme.

No alteration to certain rules of the Share Option Scheme which would be to the advantage of

participants under the Share Option Scheme, such as the repricing of the exercise price of the

Options and the replacement of existing Options, shall be made except with the prior approval of

our Shareholders in general meeting.

Grant of Incentive Options with a discounted exercise price

The ability to offer Options to participants of the Share Option Scheme with exercise prices set at

a discount to the prevailing market prices of our Shares will operate as a means to recognise the

performance of participants. This would motivate them to continue to excel while encouraging

them to focus more on improving the profitability and return of our Group above a certain level,

which will benefit all Shareholders when these are eventually reflected through share price

appreciation. Incentive Options would be perceived in a more positive light by the participants,

inspiring them to work hard and produce results in order to be offered Incentive Options, as only

employees who have made outstanding contributions to the success and development of our

Group would be granted Incentive Options.

The flexibility to grant Options with discounted prices is also intended to cater to situations where

the stock market performance has overrun the general market conditions. In such events, the

Administration Committee will have absolute discretion to:

(a) grant Options set at a discount to Market Price of a Share (subject to a maximum limit of

20.0%); and

(b) determine the participants to whom, and the Options to which, such reduction in exercise

prices will apply.

In determining whether to give a discount and the quantum of the discount, the Administration

Committee shall be at liberty to consider factors including the performance of our Company, our

Group, the performance of the participant concerned, the contribution of the participant to the

success and development of our Group and the prevailing market conditions. The Administration

Committee will determine on a case-by-case basis whether a discount will be given, and if so, the

quantum of the discount, taking into account the objective that is desired to be achieved by our

Company and the prevailing market conditions. As the actual discount given will depend on the

relevant circumstances, the extent of the discount may vary from one case to another, and from

time to time, subject to a maximum discount of 20.0% of the Market Price of a Share. The

discretion to grant Incentive Options will, however, be used judiciously.


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It is envisaged that our Company may consider granting the Incentive Options under

circumstances including (but not limited to) the following:

(a) where, due to speculative forces in the stock market resulting in an overrun of the market,

the market price of our Shares at the time of the grant of Incentive Options is not a true

reflection of the financial performance of our Company;

(b) to enable our Company to offer competitive remuneration packages in the event that the

practice of granting Incentive Options become more significant components of executive

remuneration packages, a discretion to grant Incentive Options will provide our Company

with a means to maintain the competitiveness of our Group compensation strategy; and/or

(c) where our Group needs to provide more compelling motivation for specific business units to

improve their performance, grants of Incentive Options will help to align the interests of

employees with those of our Shareholders by encouraging them to focus more on improving

the profitability and return of our Group above a certain level which will benefit all

Shareholders when these are eventually reflected through share price appreciation. As such,

Incentive Options would be perceived more positively by the employees who receive such

Incentive Options.

Such flexibility in determining the quantum of discount would enable the Administration Committee

to tailor the incentives in the grant of Incentive Options to be commensurate with the performance

and contribution of each individual participant. By individually recognising the degree of

performance and contribution of each participant, the granting of Incentive Options at a

commensurate discount would enable the Administration Committee to provide incentives for

better performance, greater dedication and loyalty of the participants.

Our Company may also grant Market Price Options without any discount to the market price of our

Company’s shares. Additionally, our Company may, if it deems fit, impose conditions on the

exercise of the Options (whether such Options are granted at the market price or at a discount to

the market price), such as restricting the number of Shares for which the Option may be exercised

during the initial years following its vesting.

Rationale for participation by employees of our Group in the Share Option Scheme

The extension of the Share Option Scheme to employees of our Group allows us to have a fair and

equitable system to reward directors and employees of our Company and/or subsidiaries who

have made and who continue to make significant contributions to the long-term growth of our

Group.

We believe that the grant of Options to the employees of our Group will enable us to attract, retain

and provide incentives to its participants to produce higher standards of performance as well as

encourage greater dedication and loyalty to our Group. This would enable our Company to give

recognition to past contributions and services as well as motivating participants generally to

contribute towards the long-term growth of our Group.


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Rationale for participation by Non-Executive Directors (including Independent Directors) in

the Share Option Scheme

Although Non-executive Directors are not involved in the day-to-day running of our operations,they play an invaluable role in furthering the business interests of our Group by contributing theirexperience and expertise. The participation by Non-executive Directors in the Share OptionScheme will provide our Company with a further avenue to acknowledge and recognise theirservices and contributions to our Group as it may not always be possible to compensate them fullyor appropriately by increasing the directors’ fees or other forms of cash payment. For instance,Non-executive Directors may bring strategic or other value to our Company which may be difficultto quantify in monetary terms. The grant of Options to Non-executive Directors will allow ourCompany to attract and retain experienced and qualified persons from different professionalbackgrounds to join our Company as Non-executive Directors, and to motivate our existingIndependent Directors to take extra efforts to promote the interests of our Company and/or ourGroup.

In deciding whether to grant Options to Non-executive Directors, our Remuneration Committeewill take into consideration, among other things, the services and contributions made to thegrowth, development and success of our Group and the years of service of a particularNon-executive Directors. Our Remuneration Committee may also, where it considers relevant,take into account other factors such as the economic conditions and our Company’s performance.

In order to minimise any potential conflict of interests and not to compromise the independenceof the Non-executive Directors, our Company intends to grant only a nominal number of Optionsgranted under the Share Option Scheme to such Non-executive Directors. In addition, in the eventthat any conflict of interests arises in any matter to be decided by our Board, our Company shallprocure that the relevant Independent Directors abstain from voting on such matter at the Boardmeeting.

Cost of Options granted under the Share Option Scheme to our Company

Any Options granted under the Share Option Scheme would have a fair value. In the event thatsuch Options are granted at prices below the fair value of the Options, there will be a cost to ourCompany. The amounts of such costs may be more significant in the case of Incentive Options,where such Options are granted with exercise prices set at a discount to the prevailing marketprice of our Shares. The cost to our Company of granting Options under the Share Option Schemewould be as follows:

(a) the exercise of an Option at the exercise price would translate into a reduction of theproceeds from the exercise of such Option, as compared to the proceeds that our Companywould have received from such exercise had the exercise been made at the prevailingmarket price of our Shares. Such reduction of the exercise proceeds would represent themonetary cost to our Company;

(b) as the monetary cost of granting Options with a discounted exercise price is borne by ourCompany, the earnings of our Company would effectively be reduced by an amountcorresponding to the reduced interest earnings that our Company would have received fromthe difference in proceeds from exercise price with no discount versus the discountedexercise price. Such reduction would, accordingly, result in the dilution of our Company’sEPS; and

(c) the effect of the issue of new Shares upon the exercise of Options, is that our Company’sNTA per Share will increase if the exercise price is above the NTA per Share and decrease,if the exercise price is below the NTA per Share.


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The costs as discussed above would only materialise upon the exercise of the relevant Options.

Share options have value because the option to buy a company’s share for a fixed price during

an extended future time period is a valuable right, even if there are restrictions attached to such

an option. As our Company is required to account for share-based awards granted to our

employees, the cost of granting Options will affect our financial results as this cost to our Company

would be required to be charged to our Company’s profit and loss account commencing from the

time Options are granted. Subject as aforesaid, as and when Options are exercised, the cash

inflow will add to the net tangible assets of our Company and its share capital base will grow.

Where Options are granted with subscription prices that are set at a discount to the market prices

for our Shares prevailing at the time of the grant of such Options, the amount of the cash inflow

to our Company on the exercise of such Options would be diminished by the quantum of the

discount given, as compared with the cash inflow that would have been receivable by our

Company had the Options been granted at the market price of our Shares prevailing at the time

of the grant.

The grant of Options will have an impact on our Company’s reported profit under the accounting

rules in the Singapore Financial Reporting Standards which is effective for financial periods

beginning on or after 1 January 2013. It requires the recognition of an expense in respect of

Options granted. The expenses will be based on the fair value of the Options at the date of grant

(as determined by an option-pricing model) and will be recognised over the vesting period.

Details of the number of Options granted pursuant to the Share Option Scheme, the number of

Options exercised and the exercise price (as well as any applicable discounts) will be disclosed

in our annual report.


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On 18 November 2014, our Shareholders adopted the Share Plan.

We recognise that the contributions and continued dedication of the employees of our Group and

Non-executive Directors, are critical to the future growth and development of our Group and have

undertaken a review of employee remuneration and benefits to this end. The Share Plan is a new

compensation scheme that promotes higher performance goals and recognises exceptional

achievement. We have taken steps to align ourselves with and embrace local trends and best

practices in compensation.

Unlike the Options granted under the Share Option Scheme, the Share Plan contemplates the

award of fully-paid Shares to participants after certain pre-determined benchmarks have been

met. Although we may, where appropriate, continue to distribute cash bonuses to the employees

of our Group and Non-executive Directors, we believe that the Share Plan will be more effective

than pure cash bonuses in motivating employees of our Group to work towards pre-determined

goals.

As at the Latest Practicable Date, no Awards have been granted under the Share Plan.

Objectives of the Share Plan

The Share Plan is based on the principle of pay-for-performance and is designed to enable us to

reward, retain and motivate employees of our Group to achieve superior performance. The

purpose of adopting the Share Plan in addition to the Share Option Scheme is to give us greater

flexibility to align the interests of employees of our Group, especially key executives, with the

interests of Shareholders.

The objectives of the Share Plan are as follows:

(a) to provide an opportunity for participants of the Share Plan to participate in the equity of our

Company, thereby inculcating a stronger sense of identification with the long-term prosperity

of our Group and promoting organisational commitment, dedication and loyalty of

participants towards our Group;

(b) to motivate participants to strive towards performance excellence and to maintain a high

level of contribution to our Group;

(c) to give recognition to contributions made or to be made by participants by introducing a

variable component into their remuneration package; and

(d) to make employee remuneration sufficiently competitive to recruit new participants and/or to

retain existing participants whose contributions are important to the long-term growth and

profitability of our Group.

Overview of the Share Plan

The Share Plan is designed to reward its participants through the issue of fully-paid Shares

according to the extent to which they complete certain time-based service conditions or achieve

their performance targets over set performance periods.

HUATIONG PERFORMANCE SHARE PLAN

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Awards granted under the Share Plan may be time-based or performance-related, and in each

instance, shall vest only:

(a) where the Award is time-based, after the satisfactory completion of time-based service

conditions, that is, after the Participant has served our Group for a specified number of years

(such Awards being “time-based Awards”); or

(b) where the Award is performance-related, after the Participant achieves a pre-determined

performance target (such Awards being “performance-related Awards”).

A time-based Award may be granted, for example, as a supplement to the cash component of the

remuneration packages of senior executive officers our Company seeks to attract and recruit. A

performance-related Award may be granted, for example, with a performance target based on the

successful completion of a project or the successful achievement of certain quantifiable

performance targets, such as sales growth or productivity enhancement.

Performance targets set are based on short to medium-term corporate objectives including market

competitiveness, quality of returns, business growth and productivity growth. These performance

targets include targets set based on criteria such as shareholders’ return, return on equity and

EPS. By working towards and achieving their own performance targets, the participants would

also indirectly be assisting our Company in attaining its corporate objectives and strategic

business goals.

No minimum vesting periods are prescribed under the Share Plan for Awards, and the length of

the vesting period in respect of each Award will be determined on a case-by-case basis.

We will announce the following information to the SGX-ST and the public immediately upon the

grant of awards under the Share Plan:

(a) total number of participants;

(b) total number of shares granted; and

(c) range of number of shares granted to each participant.

Summary of the Share Plan

The rules of the Share Plan may be inspected by Shareholders at the registered office of our

Company for a period of six months from the date of registration of this Offer Document. The

following is a summary of the rules of the Share Plan:

Participants

The Share Plan allows for participation by full-time employees of our Group (including the

Executive Directors) and Non-executive Directors (including Independent Directors) who have

attained the age of 21 years and above on or before the relevant date of grant of the Award,

provided that none shall be an undischarged bankrupt or have entered into a composition with his

creditors.

Controlling Shareholders and their associates will not be eligible to participate in the Share Plan.


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Management of the Share Plan

The Share Plan shall be managed by our Remuneration Committee (the “Administration

Committee”), which has the absolute discretion to determine persons who will be eligible to

participate in the Share Plan. However, in compliance with the requirements of the Listing Manual,

a participant who is a member of the Administration Committee shall not be involved in any

deliberation or decision in respect of Awards (as the case may be) to be granted to or held by that

participant.

Our Board is responsible for reviewing and approving remuneration packages of our key

executives (other than Executive Directors). Our Remuneration Committee will recommend to our

Board a framework of remuneration for our Directors and key executives and determine specific

remuneration packages for each Executive Director. Our Board and Remuneration Committee aim

to build a capable and committed management team and workforce for our Group, through

focused management and progressive policies and competitive remuneration packages which can

attract and retain a pool of talented executive officers to meet the current and future growth of our

Group.

Our Board will be responsible for:

(a) determining the terms of grant of Awards (and variation thereof) to participants (other than

our Directors); and

(b) the general administration of the Share Plan such as extension of the duration of the term of

the Share Plan.

Our Remuneration Committee will be responsible for determining the terms of grant of Awards

(and variation thereof) to our Directors. However, a participant who is a member of our

Remuneration Committee shall not be involved in any deliberation or decision in respect of Awards

(as the case may be) to be granted to or held by such member.

Size of the Share Plan

The (a) total number of new Shares which may be issued pursuant to Awards granted on any date;

and (b) total number of existing Shares which may be purchased from the market for delivery

pursuant to Awards granted under the Share Plan, when added to the number of new Shares

issued and issuable in respect of all Awards granted under the Share Plan (including the Share

Option Scheme and any other share option schemes of our Company), shall not exceed 15.0% of

the number of issued Shares (including treasury shares, as defined in the Companies Act) on the

day preceding that date of grant of the relevant Awards.

To enjoy greater flexibility in structuring remuneration and compensation packages, our Company

believes that it should have a sufficient number of Shares to accommodate Awards issued under

the Share Plan. Taking into consideration the size of the post-Placement share capital of our

Company as well as the number of eligible participants in the Share Plan, our Directors believe

that such limit is necessary to accommodate the existing number of participants to whom Awards

may be granted under the Share Plan annually over the 10-year period of the Share Plan so as

to create a meaningful compensation for the participants’ contributions.


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Awards Entitlement

Awards represent the right of a participant to receive fully-paid Shares free of charge. Awards

granted under the Share Plan may be time-based or performance-related as set out above.

In respect of time-based Awards, a participant is entitled to receive fully-paid Shares free of

charge, upon the expiry of the prescribed vesting periods.

In the case of performance-related Awards, a participant is entitled to receive fully-paid Shares

free of charge subject to certain prescribed performance targets being met.

The vesting periods of Awards (whether time-based or performance-related) will be determined by

the Administration Committee and may not be subject to such time restrictions before vesting.

The selection of a participant, the type of Award (whether time-based or performance-related), the

number of Award Shares to be granted to him, and the prescribed vesting period shall be

determined at the absolute discretion of the Administration Committee, which shall take into

account:

(a) in respect of a participant being an employee of our Group, criteria such as his rank, job

performance, potential for future development and his contribution to the success and

development of our Group; and

(b) in respect of a participant being a Non-executive Director, criteria such as his contribution to

the success and development of our Group.

In addition, for performance-related Awards, the extent of effort required to achieve the

performance target(s) within the performance period shall also be considered.

The Administration Committee shall decide, in relation to each Award (whether time-based or

performance related) to be granted to a participant:

(a) the date on which the Award is to be granted;

(b) the number of Award Shares;

(c) the prescribed vesting period(s); and

(d) the extent to which Award Shares shall be released at the end of each prescribed Vesting

Period.

In the case of performance-related Awards, the Administration Committee shall also decide on:

(a) the prescribed performance target(s);

(b) the performance period during which the prescribed performance target(s) are to be

satisfied; and

(c) the extent to which Award Shares shall be released on the prescribed performance target(s)

being satisfied (whether fully or partially) or exceeded or not being satisfied, as the case may

be, at the end of the performance period.


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Grant of Awards

Awards may be granted at any time during the period when the Share Plan is in force. An Award

letter confirming the Award and specifying, amongst others, in relation to a performance-related

Award, the prescribed performance target(s) and the performance period during which the

prescribed performance target(s) are to be satisfied, will be sent to each participant as soon as

is reasonably practicable after making an Award.

Vesting of Awards

Special provisions for the vesting and lapsing of Awards (some at the discretion of the

Administration Committee) under certain circumstances include:

(a) a participant, being an employee of our Group, ceasing for any reason whatsoever, to be in

the employment of a company in our Group or in the event the company by which the

participant is employed ceases to be a company in our Group;

(b) a participant, being a Non-executive Director, ceasing to be a director of a company in our

Group, for any reason whatsoever;

(c) upon the bankruptcy of the participant;

(d) ill health, injury, disability or death of a participant;

(e) a participant committing any breach of any of the terms of his Award;

(f) misconduct on the part of a participant as determined by the Administration Committee in its

discretion;

(g) a general offer being made of all or any part of our Shares;

(h) a scheme of arrangement or compromise between our Company and our Shareholders being

sanctioned by the Court under the Companies Act;

(i) an order for the compulsory winding-up of our Company being made;

(j) a resolution for a voluntary winding-up (other than for amalgamation or reconstruction) of our

Company being made; and/or

(k) any other event approved by the Administration Committee.

Upon the occurrence of any of the events specified in paragraphs (g) to (j) above, the

Administration Committee may consider, in its absolute discretion, whether or not to release any

Award. If the Administration Committee decides to release any Award, then in determining the

number of Shares to be vested in respect of such Award, the Administration Committee will have

regard to the proportion of the vesting period(s) which has elapsed and the extent to which the

prescribed performance target(s) (if any) has been satisfied.

Upon the occurrence of any of the events specified in paragraphs (a) to (f) above, an Award then

held by a participant shall, subject as provided in the rules of the Share Plan and to the extent not

yet released, immediately become void and cease to have effect and the participant shall have no

claim whatsoever against our Company.


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Our Company will have the flexibility to deliver Award Shares to participants upon the vesting of

their Awards by way of:

(a) an issue of new Shares; and/or

(b) the purchase of existing Shares on behalf of the participants.

It is the intention of our Company that Award Shares will typically be delivered to participants upon

the vesting of their Awards by way of an issue of new Shares. However, our Company anticipates

that our Company may, in very limited circumstances, purchase existing Shares on behalf of the

participants upon the vesting of their Awards. These circumstances include situations when our

Shares are undervalued or when it otherwise makes economic sense to purchase existing Shares.

New Shares, when allotted and issued, and existing Shares, when transferred to the participants

upon the release of Awards shall be subject to all the provisions of the Memorandum and Articles

of Association of our Company and shall rank pari passu in all respects with the then existing

issued Shares, save for any dividends, rights, allotments or distributions on the record date of

which falls on or before the relevant vesting date of the Shares which are the subject of the

Awards. For such purposes, record date means the date as at the close of business on which our

Shareholders must be registered in order to participate in any dividends, rights, allotments or

other distributions.

Shares which are the subject of:

(a) a time-based Award shall, vest upon the expiry of each vesting period in relation to such

Award and our Company shall release to the relevant participant the Award Shares to which

his Award relates on the vesting date; and

(b) a performance-related Award shall be vested with a participant on the vesting date, which

shall be a Market Day falling as soon as practicable after the review by the Administration

Committee of the performance target(s) prescribed in respect of such Award and determine

whether it has been satisfied and, if so, the extent to which it has been satisfied, and, on the

vesting date, the Administration Committee will procure the allotment or transfer to each

participant of the number of Award Shares so determined.

For the purposes of determining if performance target(s) in respect of performance-related Awards

have been achieved, the Administration Committee has the right to make computational

adjustments to the audited results of our Company or our Group, as the case may be, to take into

account such factors as the Administration Committee may determine to be relevant, including

changes in accounting methods, taxes and extraordinary events. The Administration Committee

also has the discretion to amend the performance target(s) if the Administration Committee

decides that a changed performance target would be a fairer measure of performance, or to waive

the performance target where the participant has achieved a level of performance that the

Administration Committee considers satisfactory notwithstanding that the performance target has

not been fulfilled.


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Adjustments and Alterations under the Share Plan

If a variation in the share capital of our Company (whether by way of a capitalisation of profits or

reserves, rights issue, reduction, subdivision, consolidation or distribution) shall take place, then:

(a) the class and/or number of Award Shares to the extent not yet vested; and/or

(b) the class and/or number of Shares over which future Awards may be granted under the Share

Plan,

may, at the option of the Administration Committee, be adjusted in such manner as the

Administration Committee may determine to be appropriate. However, any adjustment shall be

made in such a way that a participant will not receive a benefit that a Shareholder does not

receive.

The issue of securities as consideration for an acquisition or a private placement of securities or

the cancellation of issued shares purchased or acquired by our Company by way of a market

purchase of such shares undertaken by our Company on the SGX-ST during the period when a

share purchase mandate granted by our Shareholders (including any renewal of such mandate)

is in force shall not normally be regarded as a circumstance requiring adjustment.

Any adjustment (except in relation to a capitalisation issue) must be confirmed in writing by the

auditors to be fair and reasonable.

Modifications to the Share Plan

The Share Plan may be modified and/or altered from time to time by a resolution of our Board,

subject to the prior approval of the SGX-ST and such other regulatory authorities as may be

necessary.

However, no modification or alteration shall adversely affect the rights attached to Awards granted

prior to such modification or alteration except with the written consent of such number of

participants under the relevant Plan who, if their Awards were released to them, would thereby

become entitled to not less than 75.0% of the aggregate number of all our Shares which would be

issued upon exercise in full of all outstanding Awards under the Share Plan.

No alteration shall be made to certain rules of the Share Plan to the advantage of the holders of

the Awards, as the case may be, except with the prior approval of our Shareholders in general

meeting.

Duration of the Share Plan

The Share Plan shall continue in operation at the discretion of the Administration Committee for

a maximum period of 10 years commencing on the date on which the Share Plan is adopted by

our Company in general meeting, provided that the Share Plan may continue beyond the above

stipulated period with the approval of our Shareholders by ordinary resolution in general meeting

and of any relevant authorities which may then be required.

The Share Plan may be terminated at any time by the Administration Committee and by resolution

of our Company in general meeting, subject to all relevant approvals which may be required being

obtained. The termination of the Share Plan shall not affect Awards which have been granted in

accordance with the Share Plan.


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Abstention from voting

Participants who are Shareholders are to abstain from voting on any Shareholders’ resolution

relating to the Share Plan and any modification thereof. Participants may, however, act as proxies

of Shareholders in respect of the votes of such Shareholders in relation to any such resolutions,

provided that specific instructions have been given in the proxy forms on how the votes are to be

cast in respect of the resolution.

Rationale for participation by employees of our Group in the Share Plan

The grant of Awards to the employees of our Group allows us to have a fair and equitable system

to reward our Directors and employees of our Group who have made and who continue to make

significant contributions to the long-term growth of our Group.

We believe that the grant of Awards to the employees of our Group will enable us to attract, retain

and provide incentives to our Directors and employees of our Group to produce higher standards

of performance as well as encourage greater dedication and loyalty by enabling our Company to

give recognition to past contributions and services as well as motivating participants generally to

contribute towards the long-term growth of our Group.

Rationale for participation by Non-executive Directors (including Independent Directors) in

the Share Plan

Our Non-executive Directors come from diverse professions and working backgrounds. Although

they are not involved in the day-to-day running of our Group’s operations, they are able to

contribute their extensive experience, knowledge, expertise and business contacts to the benefit

of our Group and assist in our Group’s business interests. Leveraging on their contacts, they may

also be able to provide our Group with strategic or significant alliances or opportunities. Our

Company therefore regards our Non-executive Directors as a resource pool from which we are

able to tap business contacts, knowledge, expertise and experience.

Our Non-executive Directors are presently also members of our Audit Committee, Remuneration

Committee and Nominating Committee. Each of these committees plays an important role in the

corporate governance of our group.

Currently, our Non-executive Directors are remunerated only by way of directors’ fees. Allowing

the participation by our Non-executive Directors in the Share Plan provides our Company with a

further avenue of acknowledging the services and contributions to our Group and to reward and

give recognition to such services and contributions by way of remuneration comprising a

combination of fees and Awards. This flexibility is important since it may not always be possible

to compensate Non-executive Directors fully or appropriately by increasing the directors’ fees or

other forms of cash payment. Having a flexible remuneration system will enable our Company to

continue to attract individuals of great ability and aptitude to serve as Non-executive Directors. In

the long-term, this will help ensure the continuity of good corporate governance in our Company.

However, as the Share Plan is intended to cater primarily to employees of the Group who will

comprise the bulk of the participants of the Share Plan, our Directors anticipate that awards that

may be granted to our Non-executive Directors pursuant to the Share Plan, would not comprise

a significant portion of the shares available under the Share Plan. Further, in order to minimise any

potential conflict of interests which may arise as a result of granting Awards to Non-executive

Directors who are also members of our Audit Committee, Remuneration Committee or Nominating

Committee, any grant of awards to Non-executive Directors is anticipated to be minimal, with such


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grants being made as a token of our Company’s appreciation for their contributions to our

Company and to help further align their interests with those of our Shareholders. Our Non-

executive Directors would generally continue to be remunerated for their services by way of

directors’ fees.

The Administration Committee shall act judiciously in the exercise of its discretion in respect of the

grant of Awards to our Non-executive Directors. In deciding whether to grant Awards to our

Non-executive Directors, the Administration Committee will take into consideration, among other

things, the services and contributions made to the growth of our Group, attendance and

participation in meetings and the years of service of a particular Non-executive Director. The

Administration Committee may also, where it considers relevant, take into account other factors

such as prevailing economic conditions and our performance. A Non-executive Director will

abstain from voting as a Director or a member of the Administration Committee when the grant of

Awards to him is being deliberated.

The grant of Awards to Non-executive Directors of our Company will be subject to and shall

comply with the provisions of Section 76 of the Companies Act.

Financial Effects of the Share Plan

The accounting rules in the Singapore Financial Reporting Standards are effective for financial

periods beginning on or after 1 January 2005. It requires the fair value of employee services

received in exchange for the grant of our Shares to be recognised as an expense. For

equity-settled share-based payment transactions, the total amount to be expensed in the income

statement over the vesting period is determined by reference to the fair value of the each Share

granted at the grant date and the number of Shares vested by the vesting date, with a

corresponding increase in equity.

Before the end of the vesting period, at each balance sheet date, the entity revises its estimates

of the number of Shares that are expected to vest by the vesting date and recognises the impact

of this revision in the income statement with a corresponding adjustment to equity. After the

vesting date, no adjustment to the income statement would be made.

When new Shares are issued to participants, the share capital will increase. If existing Shares are

purchased, as opposed to new Shares issued for delivery to participants, the Share Plan will have

no impact on our Company’s share capital.

The consolidated NTA will be decreased by the amount of expenses charged to the income

statement if existing Shares are purchased. If new Shares are issued, there would be no effect on

the consolidated NTA due to the offsetting effect of expenses recognised and increased share

capital.

During the vesting period, the consolidated EPS would be reduced by both the expense

recognised and the potential ordinary Shares to be issued under the Share Plan. NTA per Share

would be diluted as a result of the reduced NTA if existing Shares are purchased or the increased

share capital if new Shares are issued.


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The following statements are brief summaries of our capital structure and the more important

rights and privileges of our Shareholders as conferred by the laws of Singapore and our

Memorandum and Articles of Association. These statements summarise the material provisions of

our Articles of Association but are qualified in entirety by reference to our Articles of Association

and the laws of the Singapore. A copy of our Memorandum and Articles of Association will be

available for inspection at our offices during normal business hours for a period of six months from

the date of the registration of this Offer Document with the SGX-ST.

Shares

Our Articles provide that we may issue shares of a different class with preferential, deferred,

qualified or special rights, privileges or conditions as our Directors may think fit and may issue

preference shares which are, or at our option are, redeemable, subject to certain limitations. Our

Articles provide that we may issue shares of a different class with preferential, deferred, qualified

or special rights, privileges or conditions as our Directors may think fit and may issue preference

shares which are, or at our option are, redeemable, subject to certain limitations. Our Shares do

not have a par value.

As at the Latest Practicable Date, our issued ordinary share capital is S$2 consisting of 2 Shares.

As at the date of this Offer Document, all the Shares have been issued and fully paid. All of our

Shares are in registered form. We may, subject to the provisions of the Companies Act and the

listing rules of the SGX-ST, purchase our own shares. However, we may not, except in

circumstances permitted by the Companies Act, grant any financial assistance for the acquisition

or proposed acquisition of our Shares.

Shareholders

Only persons who are registered on our register of Shareholders and, in cases in which the person

so registered is CDP, the persons named as the depositors in the Depository Register maintained

by CDP for our Shares, are recognised as our Shareholders. We will not, except as required by

law, recognise any equitable, contingent, future or partial interest in any share or other rights for

any share other than the absolute right thereto of the registered holder of that share or of the

person whose name is entered in the Depository Register for that share. We may close our

register of members for any time or times if we provide the Accounting and Corporate Regulatory

Authority of Singapore with at least 14 days’ notice and the SGX-ST at least 10 clear market days’

notice. However, the register may not be closed for more than 30 days in aggregate in any

calendar year. We typically close the register to determine our Shareholders’ entitlement to

receive dividends and other distributions.

Transfer of Shares

There is no restriction on the transfer of fully-paid shares except where required by law or the

listing rules or the rules or bylaws of the SGX-ST. Our Directors may, in their discretion, decline

to register any transfer of Shares which are not fully paid or Shares on which we have a lien.

Shares may be transferred by a duly signed instrument of transfer in a form approved by the

SGX-ST. Our Directors may also decline to register any instrument of transfer unless, among other

things, it has been duly stamped and is presented for registration together with the share

certificate and such other evidence of title as they may require. We will replace lost or destroyed

share certificates if we are properly notified and the applicant pays a fee which will not exceed S$2

and furnishes any evidence and indemnity that our Directors may require.

DESCRIPTION OF OUR SHARES

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General Meetings of Shareholders

We are required to hold an annual general meeting every year. Our Directors may convene an

extraordinary general meeting whenever they thinks fit and must do so if our Shareholders

representing not less than 10.0% of the total voting rights of all our Shareholders, request in

writing that such a meeting be held. In addition, two or more of our Shareholders holding not less

than 10.0% of our issued share capital may call a meeting. Unless otherwise required by law or

by our Articles, voting at general meetings is by ordinary resolution, requiring an affirmative vote

of a simple majority of the votes cast at that meeting. An ordinary resolution suffices, for example,

for the appointment of Directors. A special resolution, requiring the affirmative vote of at least

75.0% of the votes cast at the meeting, is necessary for certain matters under Singapore law,

including voluntary winding up, amendments to our Memorandum and Articles of Association, a

change of our corporate name and a reduction in our share capital or capital redemption reserve

fund. We must give at least 21 days’ notice in writing for every general meeting convened for the

purpose of passing a special resolution. Ordinary resolutions generally require at least 14 days’

notice in writing. The notice must be given to each of our shareholders who have supplied us with

an address in Singapore for the giving of notices and must set forth the place, the day and the hour

of the meeting and, in the case of special business, the general nature of that business.

Voting Rights

A holder of our Shares is entitled to attend, speak and vote at any general meeting, in person or

by proxy. A proxy does not need to be a Shareholder. A person who holds Shares through the

SGX-ST book-entry settlement system will only be entitled to vote at a general meeting as a

Shareholder if his name appears on the Depository Register maintained by CDP 48 hours before

the general meeting. Except as otherwise provided in our Articles, two or more Shareholders must

be present in person or by proxy to constitute a quorum at any general meeting. Under our

Articles, on a show of hands, every Shareholder present in person and by proxy shall have one

vote (provided that in the case of a Shareholder who is represented by two proxies, only one of

the two proxies as determined by that Shareholder or, failing such determination, by the Chairman

of the meeting in his sole discretion shall be entitled to vote on a show of hands), and on a poll,

every Shareholder present in person or by proxy shall have one vote for each Share which he

holds or represents. A poll may be demanded in certain circumstances, including by the Chairman

of the meeting or by any Shareholder present in person or by proxy and representing not less than

10.0% of the total voting rights of all Shareholders having the right to attend and vote at the

meeting or by any two Shareholders present in person or by proxy and entitled to vote. In the case

of a tie vote, whether on a show of hands or a poll, the Chairman of the meeting shall be entitled

to a casting vote.

Dividends

We may, by ordinary resolution of our Shareholders, declare dividends at a general meeting, but

we may not pay dividends in excess of the amount recommended by our Board. We must pay all

dividends out of our profits. We may satisfy dividends by the issue of Shares to our Shareholders.

See the section titled “Bonus and Rights Issue” below. All dividends are paid pro-rata among our

Shareholders in proportion to the amount paid-up on each Shareholder’s shares, unless the rights

attaching to an issue of any Share provide otherwise. Unless otherwise directed, dividends are

paid by cheque or warrant sent through the post to each Shareholder at his registered address.

Notwithstanding the foregoing, the payment by us to CDP of any dividend payable to a

Shareholder whose name is entered in the Depository Register shall, to the extent of payment

made to CDP, discharge us from any liability to that Shareholder in respect of that payment.


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Bonus and Rights Issue

Our Board may, with the approval of our Shareholders at a general meeting, capitalise any

reserves or profits (including profits or monies carried and standing to any reserve) and distribute

the same as bonus shares credited as paid-up to our Shareholders in proportion to their

shareholdings. Our Board may also issue rights to take up additional Shares to other

Shareholders in proportion to their shareholdings. Such rights are subject to any conditions

attached to such issue and the regulations of any stock exchange on which we are listed.

Take-overs

Under the Take-over Code issued by the Authority pursuant to Section 321 of the SFA, any person

acquiring an interest, either on his own or together with persons acting in concert with him, in

30.0% or more of our voting shares must extend a takeover offer for the remaining voting shares

in accordance with the provisions of the Take-over Code. In addition, a mandatory take-over offer

is also required to be made if a person holding, either on his own or together with persons acting

or presumed to be acting in concert with him, between 30.0% and 50.0% of the voting shares

acquires additional voting shares representing more than 1.0% of the voting shares in any

six-month period.

Liquidation or Other Return of Capital

If we are liquidated or in the event of any other return of capital, holders of our Shares will be

entitled to participate in any surplus assets in proportion to their shareholdings, subject to any

special rights attaching to any other class of shares.

Indemnity

As permitted by Singapore law, our Articles provide that, subject to the Companies Act, our Board

and officers shall be entitled to be indemnified by us against any liability incurred in defending any

proceedings, whether civil or criminal, which relate to anything done or omitted to have been done

as an officer, director or employee and in which judgement is given in their favour or in which they

are acquitted or in connection with any application under any statute for relief from liability in

respect thereof in which relief is granted by the court. We may not indemnify our Directors and

officers against any liability which by law would otherwise attach to them in respect of any

negligence, default, breach of duty or breach of trust of which they may be guilty in relation to us.

Limitations on Rights to Hold or Vote Shares

Except as described in “Voting Rights” and “Take-overs” above, there are no limitations imposed

by Singapore law or by our Articles on the rights of non-resident Shareholders to hold or vote

ordinary Shares.


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Minority Rights

The rights of minority shareholders of Singapore-incorporated companies are protected under

Section 216 of the Companies Act, which gives the Singapore courts a general power to make any

order, upon application by any of our shareholders, as they think fit to remedy any of the following

situations where:

(a) our affairs are being conducted or the powers of our Directors are being exercised in a

manner oppressive to, or in disregard of the interests of, one or more of our Shareholders;

or

(b) we take an action, or threaten to take an action, or our Shareholders pass a resolution, or

propose to pass a resolution, which unfairly discriminates against, or is otherwise prejudicial

to, one or more of our Shareholders, including the applicant.

Singapore courts have a wide discretion as to the relief they may grant and such relief is in no way

limited to those listed in the Companies Act itself. Without prejudice to the foregoing, the

Singapore courts may:

(a) direct or prohibit any act or cancel or vary any transaction or resolution;

(b) regulate the conduct of our affairs in the future;

(c) authorise civil proceedings to be brought in our name, or on our behalf, by a person or

persons and on such terms as the court may direct;

(d) provide for the purchase of a minority shareholder’s shares by our other shareholders or by

us and, in the case of a purchase of shares by us, a corresponding reduction of our share

capital;

(e) in the case of a purchase of shares by our Company, provide for a reduction accordingly of

our Company’s capital; or

(f) provide that we be wound up.

Treasury Shares

Our Articles of Association expressly permits our Company to purchase or acquire shares or

stocks of our Company and to hold such shares or stocks (or any of them) as treasury shares in

accordance with requirements of Section 76 of the Companies Act. Our Company may make a

purchase or acquisition of our own shares (i) on a securities exchange if the purchase or

acquisition has been authorised in advance by our Company in general meeting; or otherwise than

on a securities exchange if the purchase or acquisition is made in accordance with an equal

access scheme authorised in advance by our company in general meeting. The aggregate number

of Shares held as treasury shares shall not at any time exceed 10.0% of the total number of

Shares of our Company at that time. Any excess shares shall be disposed or cancelled before the

end of a period of six months beginning with the day on which that contravention of limit occurs,

or such further period as the Registrar may allow. Where shares or stocks are held as treasury

shares by our Company through purchase or acquisition by our Company, our Company shall be

entered in the register as the member holding those shares or stocks.


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Our Company shall not exercise any right in respect of the treasury shares and any purported

exercise of such a right is void. Such rights include any right to attend or vote at meetings and our

Company shall be treated as having no right to vote and the treasury shares shall be treated as

having no voting rights.

In addition, no dividend may be paid, and no other distribution (whether in cash or otherwise) of

our Company’s assets (including any distribution of assets to members on a winding up) may be

made, to our Company in respect of the treasury shares. However, this would not prevent an

allotment of shares as fully-paid bonus shares in respect of the treasury shares or the subdivision

or consolidation of any treasury share into treasury share of a smaller amount, if the total value

of the treasury shares after the subdivision or consolidation is the same as the total value of the

treasury share before the subdivision or consolidation, as the case may be.

Where Shares are held as treasury shares, our Company may at any time (i) sell the Shares (or

any of them) for cash; (ii) transfer the Shares (or any of them) for the purposes of or pursuant to

an employees’ share scheme; (iii) transfer the Shares (or any of them) as consideration for the

acquisition of shares in or assets of another company or assets of a person; or (iv) cancel the

Shares (or any of them).


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SINGAPORE TAXATION

The following is a discussion of certain tax matters arising under the current tax laws in Singapore

and is not intended to be and does not constitute legal or tax advice.

While this discussion is considered to be a correct interpretation of existing laws in force as at the

date of this Offer Document, we cannot assure you that the courts or fiscal authorities responsible

for the administration of such laws will agree with this interpretation or that changes in such law,

which may be retrospective, will not occur. The discussion is limited to a general description of

certain tax consequences in Singapore with respect to ownership of the Shares by Singapore

investors, and does not purport to be a comprehensive or exhaustive description of all of the tax

considerations that may be relevant to a Shareholder’s decision with regard to the ownership of

the Shares.

Prospective investors should consult their tax advisers regarding Singapore tax and other tax

consequences of owning and disposing the Shares. It is emphasised that neither our Company,

the Vendors, our Directors nor any other persons involved in this Placement accepts responsibility

for any tax effects or liabilities resulting from the subscription, purchase, holding or disposal of our

Shares.

Singapore Income Tax

Individual income tax

Individual taxpayers who are Singapore tax residents are subject to tax on income accrued in or

derived from Singapore, subject to certain exceptions. All foreign-sourced income (except for

income received through a partnership in Singapore) received or deemed received in Singapore

by tax resident individuals will be generally exempt from tax. Certain Singapore-sourced

investment income received or deemed received by tax resident individuals is also exempt from

tax.

A Singapore tax resident individual is taxed at progressive rates up to a maximum rate of 20.0%.

Non-resident individuals, subject to certain exceptions, are generally subject to tax on income

accrued in or derived from Singapore at a flat rate of 20.0%, except that Singapore employment

income is taxed at a flat rate of 15.0% or at progressive resident rates with relief, whichever yields

a higher tax.

An individual is regarded as a tax resident in Singapore if in the calendar year preceding the year

of assessment, he was physically present in Singapore or exercised an employment in Singapore

(other than as a director of a company) for 183 days or more, or if he ordinarily resides in

Singapore.

TAXATION

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Corporate income tax

A Singapore tax resident corporate taxpayer is subject to Singapore income tax on:

• income accrued in or derived from Singapore; and

• foreign-sourced income received or deemed received in Singapore, unless it is exempted

under the Income Tax Act.

Foreign-sourced income in the form of branch profits, dividends and service fee income received

or deemed received in Singapore by a Singapore tax resident corporate taxpayer on or after 1

June 2003 are exempted from Singapore tax subject to meeting the following conditions:

(i) At the time the foreign-sourced income is received in Singapore, the highest rate of tax of a

similar character to income tax (by whatever name called) levied under the law of the territory

from which the income is received is at least 15.0%;

(ii) Such foreign-sourced income is subject to tax of a similar character to income tax under the

law of the jurisdiction from which such income is received; and

(iii) IRAS is satisfied that the tax exemption would be beneficial to the recipient of the

foreign-sourced income.

A company is regarded as tax resident in Singapore if the control and management of the

company’s business is exercised in Singapore. Generally, control and management of the

company is vested in its board of directors and the place where the board of directors’ meetings

are held is regarded to be the place where the management and control of the company is

exercised.

The corporate tax rate in Singapore is 17.0% after the partial tax exemption on the first S$300,000

of a company’s chargeable income as follows:

(i) 75.0% of the first S$10,000 of a company’s chargeable income; and

(ii) 50.0% of the next S$290,000 of a company’s chargeable income.

A start-up tax exemption scheme (“Full Tax Exemption Scheme”) is granted to newly

incorporated Singapore companies for the first 3 consecutive Years of Assessment (“YsA”),

subject to meeting the qualifying conditions. Under the Full Tax Exemption Scheme, the first

S$300,000 of the company’s normal chargeable income will be exempted as follows:

(i) 100.0% of the first S$100,000 of chargeable income; and

(ii) 50.0% of the next S$200,000 of chargeable income.

The remaining chargeable income (after the tax exemptions as mentioned above) will be taxed at

the prevailing corporate tax rate of 17.0%.

TAXATION

208

However, the Full Tax Exemption Scheme is no longer available to the following companies which

are incorporated after 25 February 2013:

• A company whose principal activity is that of investment holding; and

• A company whose principal activity is that of developing properties (i.e. a company that buys

or leases land and arranges for a building to be built on the land in order to lease, manage

or sell the building).

For the YA 2013 to 2015, companies will be granted a 30.0% corporate income tax rebate, capped

at S$30,000 for each YA.

Dividend Distributions

Singapore adopts the One-Tier Corporate Tax System. Under such system, the tax paid by a

Singapore resident company is a final tax and the after-tax profits of the company can be

distributed to its shareholders as one-tier tax exempt dividends, regardless of their tax residence

status or whether the shareholders are individual or corporate.

Further, there is no Singapore withholding tax applicable on dividends paid to both Singapore

resident shareholders as well as non-Singapore resident shareholders.

Capital Gains Tax

Singapore does not impose a tax on capital gains. However, there are no specific laws or

regulations which deal with the characterisation of capital gains, and hence, gains may be

construed to be of an income nature and therefore be subject to tax if they arise from activities

which the IRAS regards as the carrying on of a trade or business in Singapore. Any gains from the

disposal of the Shares are generally not taxable in Singapore unless the seller is regarded as

having derived gains of an income nature in Singapore, in which case, the gains would be taxable

as income.

For any disposal of our Shares made during the period 1 June 2012 to 31 May 2017 (both dates

inclusive) by companies, there is certainty that any gains derived by the seller (a divesting

company) from its disposal of our Shares would not be taxable if immediately prior to the date of

share disposal, the divesting company has held at least 20.0% of our Shares for a continuous

period of at least 24 months.

In addition, corporate shareholders who apply, or who are required to apply, the Singapore

Financial Reporting Standard 39 Financial Instruments – Recognition and Measurement (“SFRS

39”) for the purposes of Singapore income tax may be required to recognise revenue gains or

losses (i.e. excluding capital gains or losses) in accordance with the provisions of SFRS 39 (as

modified by the applicable provisions of Singapore income tax law) even though no sale or

disposal of our Shares have been made.

Bonus Shares

Any bonus shares received by our Shareholders are not taxable.

Estate Duty

Singapore estate duty has been abolished with effect from 15 February 2008.

TAXATION

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Stamp Duty

There is no stamp duty payable on the subscription for, allotment or holding of shares.

Where shares evidenced in certificated form are acquired in Singapore, with effect from 22

February 2014, stamp duty is payable on the instrument of transfer of shares at the rate of 0.2%

of the purchase price or market value of the shares transferred, whichever is higher.

The purchaser is liable for stamp duty unless there is an agreement to the contrary. Stamp duty

is not applicable to electronic transfers of shares through the scripless trading system given that

that the transfer does not require instruments of transfer to be executed.

As our Shares will be listed on Catalist and their transfers will be “scripless” transfers via the CDP,

no stamp duty will be imposed on the transfers of our Shares via the CDP.

GST

The sale of the Shares by a GST-registered investor belonging to Singapore through a SGX-ST

member is an exempt supply for GST purposes and hence, not subject to GST. Any GST directly

or indirectly incurred by the investor in respect of this exempt sale is not claimable from the

Comptroller of GST.

Where our Shares are sold by a GST-registered investor in the course of a business to a person

belonging outside Singapore, and that person is outside Singapore when the sale is executed, the

sale should generally, subject to satisfaction of certain conditions, be considered a taxable supply

subject to GST at zero-rate. Any GST incurred by a GST-registered investor in the making of this

supply in the course of furtherance of a business may, subject to the provisions of the Goods and

Services Tax Act, be recoverable from the Comptroller of GST as input tax.

Services such as brokerage, handling and clearing services rendered by a GST-registered person

to an investor belonging in Singapore in connection with the investor’s purchase, sale or holding

of our Shares will be subject to GST at the standard rate of 7.0%. Similar services rendered to an

investor belonging outside Singapore is generally subject to GST at zero-rate, provided that the

investor is outside Singapore when the services are performed and the services provided do not

benefit any Singapore persons.

Shareholders, whether or not domiciled in Singapore, should consult their own tax advisers

regarding the Singapore tax and estate duty consequences of their acquisition ownership and/or

disposal of our Shares.

TAXATION

210

Upon listing and quotation on Catalist, our Shares will be traded under the book-entry settlement

system of the CDP, and all dealings in and transactions of our Shares through Catalist will be

effected in accordance with the terms and conditions for the operation of Securities Accounts with

the CDP, as amended from time to time.

Our Shares will be registered in the name of CDP or its nominee and held by CDP for and on

behalf of persons who maintain, either directly or through Depository Agents, Securities Accounts

with CDP. Persons named as direct Securities Account holders and Depository Agents in the

Depository Register maintained by the CDP, rather than CDP itself, will be treated, under our

Articles of Association and the Companies Act, as members of our Company in respect of the

number of Shares credited to their respective Securities Accounts.

Persons holding our Shares in Securities Accounts with CDP may withdraw the number of Shares

they own from the book-entry settlement system in the form of physical share certificates. Such

share certificates will, however, not be valid for delivery pursuant to trades transacted on Catalist,

although they will be prima facie evidence of title and may be transferred in accordance with our

Articles of Association. A fee of S$10 for each withdrawal of 1,000 Shares or less and a fee of

S$25 for each withdrawal of more than 1,000 Shares is payable upon withdrawing our Shares from

the book entry settlement system and obtaining physical share certificates. In addition, a fee of

S$2 or such other amount as our Directors may decide, is payable to the share registrar for each

share certificate issued and a stamp duty of S$10 is also payable where our Shares are withdrawn

in the name of the person withdrawing our Shares or S$0.20 per S$100 or part thereof of the last

transacted price where it is withdrawn in the name of a third party. Persons holding physical share

certificates who wish to trade on Catalist must deposit with CDP their share certificates together

with the duly executed and stamped instruments of transfer in favour of CDP, and have their

respective Securities Accounts credited with the number of Shares deposited before they can

effect the desired trades. A fee of S$10 is payable upon the deposit of each instrument of transfer

with CDP. The above fees may be subject to such charges as may be in accordance with CDP’s

prevailing policies or the current tax policies that may be in force in Singapore from time to time.

Transactions in our Shares under the book-entry settlement system will be reflected by the seller’s

Securities Account being debited with the number of Shares sold and the buyer’s Securities

Account being credited with the number of Shares acquired. No transfer of stamp duty is currently

payable for our Shares that are settled on a book-entry basis.

A Singapore clearing fee for trades in our Shares on Catalist is payable at the rate of 0.0325% of

the transaction value. The clearing fee, instrument of transfer deposit fee and share withdrawal

fee may be subject to GST at the prevailing rate of 7.0% (or such other rate prevailing from time

to time).

Dealing in our Shares will be carried out in Singapore dollars and will be effected for settlement

on CDP on a scripless basis. Settlement of trades on a normal “ready” basis on Catalist generally

takes place on the third Market Day following the transaction date, and payment for the securities

is generally settled on the following business day. CDP holds securities on behalf of investors in

Securities Accounts. An investor may open a direct account with CDP or a sub-account with a CDP

Depository Agent. The CDP Depository Agent may be a member company of the SGX-ST, bank,

merchant bank or trust company.

CLEARANCE AND SETTLEMENT

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INFORMATION ON DIRECTORS AND EXECUTIVE OFFICERS

1. Save as disclosed below, none of our Directors, Executive Officers and Controlling

Shareholders:

(a) has, at any time during the last 10 years, had an application or a petition under any

bankruptcy laws of any jurisdiction filed against him or against a partnership of which

he was a partner at the time when he was a partner or at any time within two years from

the date he ceased to be a partner;

(b) has, at any time during the last 10 years, had an application or a petition under any law

of any jurisdiction filed against an entity (not being a partnership) of which he was a

director or an equivalent person or a key executive, at the time when he was a director

or an equivalent person or a key executive of that entity or at any time within two years

from the date he ceased to be a director or an equivalent person or a key executive of

that entity, for the winding up or dissolution of that entity or, where that entity is the

trustee of a business trust, that business trust, on the ground of insolvency;

(c) has any unsatisfied judgement against him;

(d) has ever been convicted of any offence, in Singapore or elsewhere, involving fraud or

dishonesty which is punishable with imprisonment, or has been the subject of any

criminal proceedings (including any pending criminal proceedings of which he is aware)

for such purpose;

(e) has ever been convicted of any offence, in Singapore or elsewhere, involving a breach

of any law or regulatory requirement that relates to the securities or futures industry in

Singapore or elsewhere, or has been the subject of any criminal proceedings (including

any pending criminal proceedings of which he is aware) for such breach;

(f) has, at any time during the last 10 years, had judgement entered against him in any civil

proceedings in Singapore or elsewhere involving a breach of any law or regulatory

requirement that relates to the securities or futures industry in Singapore or elsewhere,

or a finding of fraud, misrepresentation or dishonesty on his part, nor has he been the

subject of any civil proceedings (including any pending civil proceedings of which he is

aware) involving an allegation of fraud, misrepresentation or dishonesty on his part;

(g) has ever been convicted in Singapore or elsewhere of any offence in connection with

the formation or management of any entity or business trust;

(h) has ever been disqualified from acting as a director or an equivalent person of any entity

(including the trustee of a business trust), or from taking part directly or indirectly in the

management of any entity or business trust;

(i) has ever been the subject of any order, judgement or ruling of any court, tribunal or

governmental body permanently or temporarily enjoining him from engaging in any type

of business practice or activity;

GENERAL AND STATUTORY INFORMATION

212

(j) has ever, to his knowledge, been concerned with the management or conduct, in

Singapore or elsewhere, of affairs of:

(i) any corporation which has been investigated for a breach of any law or regulatory

requirement governing corporations in Singapore or elsewhere;

(ii) any entity (not being a corporation) which has been investigated for a breach of

any law or regulatory requirement governing such entities in Singapore or

elsewhere;

(iii) any business trust which has been investigated for a breach of any law or

regulatory requirement governing business trusts in Singapore or elsewhere; or

(iv) any entity or business trust which has been investigated for a breach of any law

or regulatory requirement that relates to the securities or futures industry in

Singapore or elsewhere,

in connection with any matter occurring or arising during the period when he was so

concerned with the entity or business trust; or

(k) has been the subject of any current or past investigation or disciplinary proceedings, or

has been reprimanded or issued any warning, by the Authority or any other regulatory

authority, exchange, professional body or governmental agency, whether in Singapore

or elsewhere.

In the later half of 2000, Mr Ng Hai Liong assisted in the Corrupt Practices Investigation

Bureau’s (“CPIB”) investigations, after an anonymous complaint was filed against an

employee of HDB and himself alleging that Mr Ng Hai Liong had given various gifts or other

favours to the HDB employee in return for securing a contract. During the course of CPIB’s

investigation, Mr Ng Hai Liong was interviewed once and CPIB has not followed up on the

matter with him since. To the best of his knowledge, no further action was taken by the CPIB

after his interview with the CPIB and no one was charged following the investigations.

2. There is no shareholding qualification for Directors under our Articles of Association.

3. No option to subscribe for shares in, or debentures of, our Company or any of our

subsidiaries has been granted to, or was exercised by, any of our Directors or Executive

Officers within the last financial year.

4. Save as disclosed in the sections titled “Interested Person Transactions” of this Offer

Document, none of our Directors is interested, directly or indirectly, in the promotion of, or in

any property or assets which have, within the two years preceding the date of this Offer

Document, been acquired or disposed of by or leased to, us or any of our subsidiaries, or are

proposed to be acquired or disposed of by or leased to us or any of our subsidiaries.

5. No sum or benefit has been paid or is agreed to be paid to any Director or expert, or to any

firm in which such Director or expert is a partner or any corporation in which such Director

or expert holds shares or debentures, in cash or shares or otherwise, by any person to

induce him to become, or to qualify him as, a Director, or otherwise for services rendered by

him or by such firm or corporation in connection with the promotion or formation of our

Company.


213

SHARE CAPITAL

6. As at the Latest Practicable Date, there is one class of shares in the capital of our Company.

There is no founder, management or deferred shares. The rights and privileges attached to

our Shares are stated in our Articles of Association.

7. Save as disclosed in the sections titled “Share Capital” of this Offer Document, there are no

changes in the share capital or the number and classes of shares of our Company or our

subsidiaries within the last three years preceding the date of lodgement of this Offer

Document.

8. Save as disclosed in the sections titled “Share Capital” and “Restructuring Exercise” of this

Offer Document, no shares in, or debentures of, our Company or any of our subsidiaries have

been issued, or are proposed to be issued, as fully or partly paid for cash or for a

consideration other than cash, during the last three years preceding the date of lodgement

of this Offer Document.

9. Save as disclosed under the sections titled “Share Capital – Ownership Structure” of this

Offer Document, as at the Latest Practicable Date, no person has been, or is entitled to be,

given an option to subscribe for any shares in or debentures of our Company or any of our

subsidiaries.

MEMORANDUM AND ARTICLES OF ASSOCIATION

10. Our Company is registered in Singapore with the Accounting and Corporate Regulatory

Authority with the registration number 201422395Z.

11. A summary of our Articles of Association relating to, among others, Directors’ powers to vote

on contracts in which they are interested, Directors’ remuneration, Directors’ borrowing

powers, Directors’ retirement, Directors’ share qualification, rights pertaining to shares,

convening of general meetings and alteration of capital are set out in Appendix D to this Offer

Document. Our Articles of Association are available for inspection at our registered office in

accordance with paragraph 38 in the section titled “General and Statutory Information –

Documents Available for Inspection” of this Offer Document.

MATERIAL CONTRACTS

12. The following contract, not being a contract entered into in the ordinary course of business,

has been entered into by us within the two years preceding the date of lodgement of this

Offer Document and is or may be material:

(a) The share sale agreement dated 11 November 2014 entered into between our Company

and Mr Ng Hai Liong, Ms Lee Swee Chu, Mr Ng Kian Peng Albert, Mr Ng Kian Ann

Patrick and Mr Ng Kian Yeow, Vincent in relation to the sale of their shares, representing

100.0% of the share capital in Huationg Contractor for an aggregate consideration of

S$22,516,497 to be satisfied in full by the allotment and issue of, respectively,

111,864,000 ordinary shares in our Company. Please refer to the section titled

“Restructuring Exercise” of this Offer Document for more details;


214

(b) The share sale agreement dated 11 November 2014 entered into between our Company

and Mr Ng Kian Ann Patrick and Mr Ng Kian Yeow, Vincent in relation to the sale of their

shares, representing 75.0% of the share capital in HT Equipment for an aggregate

consideration of S$1,015,821 to be satisfied in full by the allotment and issue of,

respectively, 6,453,600 ordinary shares in our Company. Please refer to the section

titled “Restructuring Exercise” of this Offer Document for more details; and

(c) The share sale agreement dated 11 November 2014 entered into between our Company

and Mr Ng Hai Liong, Mr Ng Kian Ann Patrick and Mr Ng Kian Yeow, Vincent in relation

to the sale of their shares, representing 100.0% of the share capital in Soil Engineering

for an aggregate consideration of S$9,703,066 to be satisfied in full by the allotment

and issue of, respectively, 3,441,998 ordinary shares in our Company. Please refer to

the section titled “Restructuring Exercise” of this Offer Document for more details.

LITIGATION

13. From time to time, our trucks and vehicles may be subject to motor accident negligence

claims during the course of their work. Generally, such claims are settled through our

insurers or pursuant to a claim under common law. Saved as disclosed below, as at the

Latest Practicable Date, neither us nor any of our subsidiaries are engaged in any legal or

arbitration proceedings, including those which are pending or known to be contemplated,

which may have, or which have had in the 12 months immediately preceding the date of

lodgement of the Offer Document, a material effect on our financial position or profitability

and/or the financial position or profitability of our subsidiaries.

14. (a) In 2013, Huationg Contractor was charged by the Info-Communications Development

Authority of Singapore for committing an offence under Section 49(2) of the

Telecommunications Act, Chapter 323 of Singapore, after damaging a

telecommunication junction fibre cable belonging to the Singapore Telecommunications

Limited in the course of conducting earthworks for Contract 911 – Design and

Construction of Depot for Downtown Line. Huationg Contractor was ordered to pay, and

has since paid, a fine of S$60,000 and the case has been concluded.

(b) On 9 June 2014, a sub-contractor (the “Plaintiff”) of one of the projects in which we

were involved filed a Writ of Summons in the State Courts of the Republic of Singapore

alleging that one of the vehicles owned by Huationg Contractor had caused damage to

a vehicle owned by the Plaintiff. The Plaintiff is claiming an amount of S$57,877.55 from

Huationg Contractor in connection with this incident. We intend to take such action as

is necessary to protect our interests. As at the date of this Offer Document, legal

proceedings are ongoing between the parties.

MANAGEMENT AND PLACEMENT ARRANGEMENTS

15. Pursuant to the Management Agreement dated 1 December 2014 entered into between our

Company and PPCF, our Company appointed PPCF to manage and sponsor the Placement.

PPCF will receive a management fee for such services rendered.

16. Pursuant to the Placement Agreement dated 1 December 2014 entered into between our

Company and PPCF as the Placement Agent, our Company appointed PPCF as the

Placement Agent and PPCF agreed to subscribe or procure subscriptions for the Placement


215

Shares for a placement commission of 3.5% of the Placement Price for each Placement

Share successfully subscribed for. PPCF may, at its absolute discretion appoint one or more

secondary sub-placement agents for the Placement.

17. Subscribers of the Placement Shares may be required to pay a brokerage of up to 1.0% of

the Placement Price to the Placement Agent (and the prevailing GST, if applicable). Save as

aforesaid, no commission, discount or brokerage, has been paid or other special terms

granted within the two years preceding the date of this Offer Document or is payable to any

Director, promoter, expert, proposed Director or any other person for purchasing and/or

subscribing or agreeing to purchase and/or subscribe or procuring or agreeing to procure

purchase and/or subscriptions for any shares in, or debentures of, our Company or any of our

subsidiaries.

18. The Management Agreement may be terminated by PPCF, at any time on or before the close

of the Application List, on the occurrence of certain events including the following:

(a) PPCF becomes aware of any breach by our Company and/or its agent(s) of any

warranties, representations, covenants or undertakings given by our Company to PPCF

in the Management Agreement; or

(b) there shall have been, since the date of the Management Agreement, any changes to

or prospective change in or any introduction or prospective introduction of any

legislation, regulation, policy, directive, guideline, rule or bylaw by any relevant

government or regulatory body, whether or not having the force of law, or any other

occurrence of similar nature that would materially change the scope of work,

responsibility or liability required of PPCF.

19. The Placement Agreement is conditional upon the Management Agreement not being

terminated or rescinded pursuant to the provisions of the Management Agreement and may

be terminated on the occurrence of certain events, including those specified above. In the

event that the Management Agreement or the Placement Agreement is terminated, our

Company reserves the right, at the absolute discretion of our Directors, to cancel the

Placement.

20. In the reasonable opinion of our Directors, PPCF and UOBKH do not have any material

relationship with our Company, save as disclosed below:

(a) PPCF is the Issue Manager, Sponsor and Placement Agent in relation to the Listing;

(b) PPCF will be our continuing Sponsor for a period of three years from the date we are

admitted to and listed on Catalist;

(c) pursuant to the Management Agreement and as part of PPCF’s fees as the Issue

Manager and Sponsor, our Company allotted and issued 1,875,000 new Shares at the

Placement Price to PPCF representing 1.5% of the issued and paid-up share capital of

our Company immediately prior to the Placement. After completion of the relevant

moratorium period as set out in the section titled “Shareholders – Moratorium” of this

Offer Document, PPCF may dispose its shareholding interest in our Company at its

discretion; and

(d) UOBKH is the Sub-Placement Agent of the Placement.


216

MISCELLANEOUS

21. The nature of our business has been stated earlier in this Offer Document. The corporations

which by virtue of Section 6 of the Companies Act are deemed to be related to us are set out

in the section titled “Group Structure” of this Offer Document.

22. There has been no previous issue of shares by us or offer for sale of our shares to the public

within the two years preceding the date of this Offer Document.

23. There has not been any public take-over offer by a third party in respect of our shares or by

us in respect of shares of another corporation or units of a business trust which has occurred

between the beginning of FY2013 and the Latest Practicable Date.

24. Save as disclosed in this Offer Document, no amount of cash or securities or benefit has

been paid or given to any promoter within the two years preceding the Latest Practicable

Date or is proposed or intended to be paid or given to any promoter at any time.

25. Save as disclosed in the section titled “General and Statutory Information – Management and

Placement Arrangements” of this Offer Document, no commission, discount or brokerage has

been paid or other special terms granted within the two years preceding the Latest

Practicable Date or is payable to any Director, promoter, expert, proposed director or any

other person for purchasing and/or subscribing or agreeing to purchase and/or subscribe or

procuring or agreeing to procure purchases and/or subscriptions for any shares in, or

debentures of, our Company or any of our subsidiaries.

26. No expert employed on a contingent basis by our Company or any of our subsidiaries, has

a material interest, whether direct or indirect, in the shares of our Company or our

subsidiaries, or has a material economic interest, whether direct or indirect, in our Company,

including an interest in the success of the Placement.

27. Application monies received by us in respect of successful applications (including successful

applications which are subsequently rejected) will be placed in a separate non-interest

bearing account with BEA. In the ordinary course of business, the Receiving Bank will deploy

these monies in the inter-bank money market. All profits derived from the deployment of such

monies will accrue to the Receiving Bank. Any refund of all or part of the application monies

to unsuccessful or partially successful applicants will be made without any interest or any

share of revenue or any other benefit arising therefrom.

28. Save as disclosed in this Offer Document, our Directors are not aware of any relevant

material information including trading factors or risks which are unlikely to be known or

anticipated by the general public and which could materially affect our profits and the profits

of our subsidiaries.

29. Save as disclosed in this Offer Document, our financial condition and operations are not

likely to be affected by any of the following:

(a) known trends or demands, commitments, events or uncertainties that will result in or are

reasonably likely to result in our liquidity increasing or decreasing in any material way;

(b) material commitments for capital expenditure;


217

(c) unusual or infrequent events or transactions or any significant economic changes that

materially affected the amount of reported income from operations; and

(d) known trends or uncertainties that have had or that we reasonably expect will have a

material favourable or unfavourable impact on revenues or operating income.

30. Save as disclosed in this Offer Document, our Directors are not aware of any event which has

occurred since the end of HY 2014 to the Latest Practicable Date which may have a material

effect on our financial position and results or the financial information provided in this Offer

Document.

31. BDO is our current auditor. We currently have no intention of changing our auditors after the

listing of our Company on Catalist.

CONSENTS

32. The Independent Auditor and Reporting Accountant, BDO, have given and have not

withdrawn their written consent to the issue of this Offer Document with the inclusion herein

of the “Independent Auditor’s Report and Audited Combined Financial Statements for the

Financial Years ended 31 December 2011, 2012 and 2013”, the “Independent Auditor’s

Review Report and Unaudited Interim Condensed Combined Financial Statements for the

Financial Period from 1 January 2014 to 30 June 2014” and the “Independent Auditor’s

Assurance Report and Unaudited Pro Forma Combined Financial Information for the

Financial Year ended 31 December 2013 and for the Financial Period from 1 January 2014

to 30 June 2014 as set out in Appendices A, B and C to this Offer Document, and references

to their name in the form and context in which it appears in this Offer Document and to act

in such capacity in relation to this Offer Document.

33. The Issue Manager, Sponsor, and Placement Agent, PPCF, has given and has not withdrawn

its written consent to the issue this Offer Document with the inclusion herein of its name and

references thereto in the form and context in which they appear in this Offer Document and

to act in such capacities in relation to this Offer Document.

34. The Sub-Placement Agent has given and has not withdrawn its written consent to the issue

of this Offer Document with the inclusion herein of its name and references thereto in the

form and context in which they respectively appear in this Offer Document and to act in such

capacity in relation to this Offer Document.

35. Each of the Sub-Placement Agent, the Solicitors to the Placement and Legal Advisers to our

Company as to Singapore Law, the Share Registrar and Share Transfer Agent, the Principal

Bankers and the Receiving Bank do not make or purport to make any statement in this Offer

Document or any statement upon which a statement in this Offer Document is based and

each of them makes no representation regarding any statement in this Offer Document and

to the maximum extent permitted by law, expressly disclaims and takes no responsibility for

any liability to any person which is based on, or arises out of, any statement, information or

opinions in, or omission from, this Offer Document.

RESPONSIBILITY STATEMENT BY OUR DIRECTORS

36. Our Directors collectively and individually accept full responsibility for the accuracy of the

information given in this Offer Document and confirm after making all reasonable enquiries

that, to the best of their knowledge and belief, this Offer Document constitutes full and true


218

disclosure of all material facts about the Placement and our Group, and our Directors are not

aware of any facts the omission of which would make any statement in this Offer Document

misleading. Where information in this Offer Document has been extracted from published or

otherwise publicly available sources or obtained from a named source, the sole responsibility

of our Directors has been to ensure that such information has been accurately and correctly

extracted from those sources and/or reproduced in this Offer Document in its proper form and

context.

DOCUMENTS AVAILABLE FOR INSPECTION

37. The following documents or copies thereof may be inspected at our registered office during

normal business hours for a period of six months from the date of registration of this Offer

Document with the SGX-ST:

(a) our Memorandum and Articles of Association;

(b) Independent Auditor’s Report and Audited Combined Financial Statements for the

Financial Years ended 31 December 2011, 2012 and 2013 set out in Appendix A to this

Offer Document;

(c) Independent Auditor’s Review Report and Unaudited Interim Condensed Combined

Financial Statements for the Financial Period from 1 January 2014 to 30 June 2014 set

out in Appendix B to this Offer Document;

(d) Independent Auditor’s Assurance Report and Unaudited Pro Forma Combined Financial

Information for the Financial Year ended 31 December 2013 and for the Financial

Period from 1 January 2014 to 30 June 2014 set out in Appendix C to this Offer

Document;

(e) the material contracts referred to in this Offer Document;

(f) the letters of consent referred to in this Offer Document;

(g) the Service Agreements;

(h) the Rules of the Huationg Employee Share Option Scheme; and

(i) the Rules of the Huationg Performance Share Plan.


219

HUATIONG GLOBAL LIMITED

And its subsidiaries

Audited Combined Financial Statements

For the financial years ended 31 December 2011, 2012 and 2013

APPENDIX A – INDEPENDENT AUDITOR’S REPORT AND AUDITEDCOMBINED FINANCIAL STATEMENTS FOR THE FINANCIAL YEARS

ENDED 31 DECEMBER 2011, 2012 AND 2013

A-1


AND ITS SUBSIDIARIES

STATEMENT OF DIRECTORS

We, Ng Hai Liong and Ng Kian Ann Patrick, being two of the Directors of Huationg Global Limited

(the “Company”), do hereby state that, in the opinion of the Board of Directors,

(i) the accompanying combined financial statements together with the notes thereon are

properly drawn up in accordance with Singapore Financial Reporting Standards so as to

present fairly, in all material respects, the state of affairs of the Company and its subsidiaries

(the “Group”) as at 31 December 2011, 2012 and 2013 and of the results, changes in equity

and cash flows of the Group for the financial years ended on those dates; and

(ii) at the date of this statement, there are reasonable grounds to believe that the Group will be

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

On behalf of the Board of Directors

Ng Hai Liong

Director

Ng Kian Ann Patrick

Director

Singapore

1 December 2014

A-2

INDEPENDENT AUDITOR’S REPORT ON AUDITED COMBINED FINANCIAL STATEMENTS

FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2011, 2012 AND 2013

1 December 2014

The Board of Directors

Huationg Global Limited

9 Benoi Crescent

Singapore 629972

Report on the Combined Financial Statements

We have audited the accompanying combined financial statements of Huationg Global Limited

(the “Company”) and its subsidiaries (the “Group”) comprising the combined statements of

financial position as at 31 December 2011, 2012 and 2013, and the combined statements of

comprehensive income, statements of changes in equity and statements of cash flows for each of

the financial years ended 31 December 2011, 2012 and 2013 and a summary of significant

accounting policies and other explanatory notes as set out on pages A-5 to A-68.

Management’s Responsibility for the Combined Financial Statements

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

statements in accordance with Singapore Financial Reporting Standards, and for devising and

maintaining a system of internal accounting controls sufficient to provide a reasonable assurance

that assets are safeguarded against loss from unauthorised use or disposition; and transactions

are properly authorised and that they are recorded as necessary to permit the preparation of true

and fair profit and loss accounts and balance sheets and to maintain accountability of assets.

Auditor’s Responsibility

Our responsibility is to express an opinion on these combined financial statements based on our

audits. We conducted our audits in accordance with Singapore Standards on Auditing. Those

standards require that we comply with ethical requirements and plan and perform the audits to

obtain reasonable assurance about whether the combined financial statements are free from

material misstatement.

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

disclosures in the combined financial statements. The procedures selected depend on the

auditor’s judgement, including the assessment of the risks of material misstatement of the

combined financial statements, whether due to fraud or error. In making those risk assessments,

the auditor considers internal control relevant to the entity’s preparation and fair presentation of

combined financial statements in order to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s

internal control. An audit also includes evaluating the appropriateness of accounting policies used

and the reasonableness of accounting estimates made by management, as well as evaluating the

overall presentation of the combined financial statements.

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

basis for our audit opinion.

A-3

INDEPENDENT AUDITOR’S REPORT ON AUDITED COMBINED FINANCIAL STATEMENTS

FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2011, 2012 AND 2013 (Continued)

Report on the Combined Financial Statements (Continued)

Opinion

In our opinion, the accompanying combined financial statements of the Group present fairly, in all

material respects, the state of affairs of the Group as at 31 December 2011, 2012 and 2013 and

of its results of operations, changes in equity and cash flows for each of the financial years ended

31 December 2011, 2012 and 2013 in accordance with the Singapore Financial Reporting

Standards.

Restriction on Distribution and Use

This report is made solely to you as a body and for inclusion in the Offer Document to be issued

in relation to the proposed initial public offering of ordinary shares of the Company in connection

with the Company’s listing on Catalist, the sponsor-supervised listing platform of the Singapore

Exchange Securities Trading Limited.

BDO LLP

Public Accountants and

Chartered Accountants

Singapore

1 December 2014

William Ng Wee Liang

Partner-in-charge

A-4



COMBINED STATEMENTS OF FINANCIAL POSITION

AS AT 31 DECEMBER 2011, 2012 AND 2013

Note 2011 2012 2013

$ $ $

ASSETS

Non-current assets

Property, plant and equipment 5 58,651,883 69,555,621 73,234,159

Investment property 6 2,600,000 3,000,000 3,800,000

Intangible asset 7 11,000 11,000 11,000

Total non-current assets 61,262,883 72,566,621 77,045,159

Current assets

Amounts due from contract customers 8 4,007,881 9,297,649 11,095,948

Trade and other receivables 9 24,508,078 39,812,839 32,196,870

Prepayments 350,781 487,195 411,189

Cash and bank balances 10 7,338,532 5,167,199 12,536,380

Total current assets 36,205,272 54,764,882 56,240,387

Total assets 97,468,155 127,331,503 133,285,546

EQUITY AND LIABILITIES

Share capital 11 3,200,000 6,700,001 7,075,000

Accumulated profits 22,383,938 25,864,630 29,827,447

Equity attributable to owners of the parent 25,583,938 32,564,631 36,902,447

Non-controlling interests – – 312,802

Total equity 25,583,938 32,564,631 37,215,249


Other payables 12 1,333,333 933,333 533,333

Finance lease payables 13 11,385,168 16,290,135 21,605,128

Bank borrowings 14 12,445,746 11,517,917 10,835,000

Deferred tax liabilities 15 3,402,000 3,684,000 3,966,501

Total non-current liabilities 28,566,247 32,425,385 36,939,962

Current liabilities

Amounts due to contract customers 8 9,683,625 19,621,368 6,399,073

Trade and other payables 12 19,029,539 24,846,684 27,981,330

Finance lease payables 13 6,185,513 7,523,401 9,146,648

Bank borrowings 14 8,160,858 10,119,034 14,866,435

Current income tax payable 258,435 231,000 736,849

Total current liabilities 43,317,970 62,341,487 59,130,335

Total liabilities 71,884,217 94,766,872 96,070,297

Total equity and liabilities 97,468,155 127,331,503 133,285,546

The accompanying notes form an integral part of these combined financial statements.

A-5



COMBINED STATEMENTS OF COMPREHENSIVE INCOME


Note 2011 2012 2013

$ $ $

Revenue 16 80,984,128 92,212,718 108,475,177

Cost of sales and services (65,992,361) (77,727,228) (91,977,380)

Gross profit 14,991,767 14,485,490 16,497,797

Other item of income

Other income 17 1,413,178 2,757,932 3,965,179

Other items of expense

Administrative expenses (9,248,709) (10,711,197) (11,879,461)

Other expenses (665,001) (1,057,138) (1,087,741)

Finance costs 18 (1,126,683) (980,672) (1,167,917)

Profit before income tax 19 5,364,552 4,494,415 6,327,857

Income tax expense 20 (829,600) (513,723) (1,177,238)

Profit for the financial year, representing total

comprehensive income for the financial year 4,534,952 3,980,692 5,150,619

Total comprehensive income attributable to:

Owners of the parent 4,534,952 3,980,692 4,962,817

Non-controlling interests – – 187,802

4,534,952 3,980,692 5,150,619

Earnings per share: 21

– Basic and diluted (in cents) 3.00 2.63 3.28


A-6



COMBINED STATEMENTS OF CHANGES IN EQUITY


Share

capital

Accumulated

profits

Total equity

attributable

to owners of

the parent

$ $ $

Balance as at 1 January 2011 3,200,000 20,848,986 24,048,986

Profit for the financial year, representing

total comprehensive income for the

financial year – 4,534,952 4,534,952

Transactions with owners of the parent:

Dividends (Note 22) – (3,000,000) (3,000,000)

Balance as at 31 December 2011 3,200,000 22,383,938 25,583,938


A-7





Share

capital

Accumulated

profits

Total equity

attributable

to owners of

the parent

$ $ $

Balance as at 1 January 2012 3,200,000 22,383,938 25,583,938

Profit for the financial year, representing

total comprehensive income for the

financial year – 3,980,692 3,980,692

Transactions with owners of the parent:

Issue of ordinary shares (Note 11) 3,500,001 – 3,500,001

Dividends (Note 22) – (500,000) (500,000)

Total transactions with owners of

the parent 3,500,001 (500,000) 3,000,001

Balance as at 31 December 2012 6,700,001 25,864,630 32,564,631


A-8





Share

capital

Accumulated

profits

Total equity

attributable

to owners of

the parent

Non-

controlling

interests Total equity

$ $ $ $ $

Balance as at

1 January 2013 6,700,001 25,864,630 32,564,631 – 32,564,631

Profit for the financial

year, representing

total comprehensive

income for the

financial year – 4,962,817 4,962,817 187,802 5,150,619

Transactions with

owners of the parent:

Issue of ordinary

shares (Note 11) 374,999 – 374,999 125,000 499,999

Dividends (Note 22) – (1,000,000) (1,000,000) – (1,000,000)

Total transactions with

owners of the parent 374,999 (1,000,000) (625,001) 125,000 (500,001)

Balance as at

31 December 2013 7,075,000 29,827,447 36,902,447 312,802 37,215,249


A-9



COMBINED STATEMENTS OF CASH FLOWS


2011 2012 2013

$ $ $

Cash flows from operating activities

Profit before income tax 5,364,552 4,494,415 6,327,857

Adjustments for:

Allowance for impairment of trade receivables 26,978 236,031 352,050

Depreciation of property, plant and equipment 6,508,707 7,832,966 9,308,599

Fair value gain on investment property (400,000) (400,000) (800,000)

Gain on disposal of plant and equipment (56,160) (527,265) (353,815)

Interest income (2,754) (9,614) (3,058)

Interest expenses 1,048,569 895,184 941,524

Provision for foreseeable losses – 1,504,867 –

Write-back of allowance for impairment of trade

receivables no longer required (48,153) – (60,580)

Operating cash flows before working capital

changes 12,441,739 14,026,584 15,712,577

Working capital changes:

Trade and other receivables 1,225,744 (13,962,321) 7,471,359

Prepayments 116,694 (136,411) 76,006

Amounts due to contract customers, net (4,720,073) 3,143,110 (15,020,596)

Trade and other payables 4,584,380 4,426,372 1,052,239

Cash generated from operations 13,648,484 7,497,334 9,291,585

Interest income 2,754 9,614 3,058

Income tax paid (820,288) (259,158) (388,888)

Net cash from operating activities 12,830,950 7,247,790 8,905,755

Cash flows from investing activities

Purchase of property, plant and equipment (6,372,817) (2,785,558) (369,578)

Proceeds from disposal of plant and equipment 184,919 1,426,323 805,501

Net cash (used in)/from investing activities (6,187,898) (1,359,235) 435,923


A-10



COMBINED STATEMENTS OF CASH FLOWS


2011 2012 2013

$ $ $

Cash flows from financing activities

Advances to related parties (199,176) (1,678,470) (146,860)

Repayment from related parties – 100,000 –

Advances from Directors 4,533,758 – 400,110

Repayment to Directors – (2,536,890) –

Proceeds from trust receipts 21,624,405 28,436,139 44,584,486

Repayment of trust receipts (18,013,257) (25,323,850) (40,592,110)

Proceeds from term loans – – 1,500,000

Repayment of term loans (2,051,415) (2,081,944) (1,427,892)

Interest paid (1,048,569) (895,184) (941,524)

Dividends paid (3,000,000) (500,000) –

Proceeds from issuance of shares – 3,500,001 499,999

Repayment of finance lease payables (8,147,689) (7,079,690) (5,848,706)

Net cash used in financing activities (6,301,943) (8,059,888) (1,972,497)

Net change in cash and bank balances 341,109 (2,171,333) 7,369,181

Cash and bank balances as at the beginning of

the financial year 6,997,423 7,338,532 5,167,199

Cash and bank balances as at the end of the

financial year (Note 10) 7,338,532 5,167,199 12,536,380


A-11



NOTES TO THE COMBINED FINANCIAL STATEMENTS


These notes form an integral part and should be read in conjunction with the combined financial

statements.

These combined financial statements have been prepared for inclusion in the Offer Document of

Huationg Global Limited (the “Company”) and its subsidiaries (the “Group”) and were authorised

for issue by the Directors of the Company on 1 December 2014.

1. Corporate information

1.1 Domicile and activities

The Company was incorporated and domiciled in the Republic of Singapore on 1

August 2014 under the Singapore Companies Act, Cap. 50 (the “Act”) as an exempt

private company limited by shares in the name of “Huationg Global Private Limited”.

In connection with its conversion into a public company limited by shares, the

Company changed its name from “Huationg Global Private Limited” to “Huationg

Global Limited” on 26 November 2014. The Company’s registration number is

201422395Z.

The address of the Company’s registered office and principal place of business is 9

Benoi Crescent Singapore 629972.

The principal activity of the Company is that of an investment holding company.

The principal activities of the subsidiaries are set out in Note 1.3 to the combined

financial statements.

1.2 Restructuring exercise

1.2.1 Incorporation of the Company

The Company was incorporated on 1 August 2014 in Singapore under the Act

as an exempt private limited company. The Company is the investment holding

company of the Group. At the time of incorporation, the Company had an issued

and paid-up share capital of S$2 comprising 2 ordinary shares held by Mr. Ng

Hai Liong and Mr. Ng Kian Ann Patrick in the proportion of 50.0% and 50.0%

respectively.

1.2.2 Acquisition of Huationg Contractor Pte Ltd

On 11 November 2014, the Company entered into a sale and purchase

agreement with Mr. Ng Hai Liong, Ms. Lee Swee Chu, Mr. Ng Kian Peng, Albert,

Mr. Ng Kian Ann Patrick and Mr. Ng Kian Yeow, Vincent, for the acquisition of

the entire issued share capital of Huationg Contractor Pte Ltd for a

consideration of S$22,516,497, based on the net tangible assets of Huationg

Contractor Pte Ltd adjusted for revaluation reserves as at 30 June 2014. The

consideration was satisfied by the allotment and issue of 111,864,000 ordinary

shares in the Company. The acquisition was completed on 11 November 2014.

A-12





1. Corporate information (Continued)

1.2 Restructuring exercise (Continued)

1.2.3 Acquisition of HT Equipment Pte. Ltd.


agreement with Mr. Ng Kian Ann Patrick and Mr. Ng Kian Yeow, Vincent, for the

acquisition of 75.0% share capital of HT Equipment Pte. Ltd. for a consideration

of S$1,015,821, based on the net tangible assets of HT Equipment Pte. Ltd. as

at 30 June 2014. The consideration was satisfied by the allotment and issue of

6,453,600 ordinary shares in the Company. The acquisition was completed on

11 November 2014.

1.2.4 Acquisition of Soil Engineering Pte. Ltd.


agreement with Mr. Ng Hai Liong, Mr. Ng Kian Ann Patrick and Mr. Ng Kian

Yeow, Vincent, for the acquisition of the entire issued share capital of Soil

Engineering Pte. Ltd. for a consideration of S$9,703,066, based on the net

tangible assets of Soil Engineering Pte. Ltd. as at 30 June 2014. The

consideration was satisfied by the allotment and issue of 3,441,998 ordinary

shares in the Company. The acquisition was completed on 11 November 2014.

The respective vendors in the above restructuring exercise have renounced the

ordinary shares of the Company to be alloted and issued to them pursuant to the sale

and purchase agreements and directed that the total 121,759,598 ordinary shares of

the Company be alloted and issued in favour of Dandelion Capital Pte. Ltd.

(“Dandelion Capital”), a company incorporated in Singapore and controlled by the

vendors. On that date, Dandelion Capital becomes the Company’s ultimate holding

Company.

1.3 Details of subsidiaries

As at the date of this report after the Restructuring Exercise, the Group has the

following subsidiaries:

Name of subsidiary

Date and

country of

incorporation

Principal

activities

Effective equity

interest

2011

%

2012

%

2013

%

Huationg Contractor

Pte Ltd

06.09.1983

Singapore

Provision of civil

engineering

services and

inland construction

logistics support

100 100 100

A-13





1. Corporate information (Continued)

1.3 Details of subsidiaries (Continued)

Name of subsidiary

Date and

country of

incorporation

Principal

activities

Effective equity

interest

2011

%

2012

%

2013

%

Soil Engineering

Pte. Ltd.

30.12.2003

Singapore

Supply of LSS 100 100 100

HT Equipment

Pte. Ltd.

18.10.2012

Singapore

Provision of

industrial

machinery and

equipment rental

services

– 100 75

2. Basis of preparation of combined financial statements

The audited combined financial statements of the Group for the financial years ended 31

December 2011, 2012 and 2013 have been prepared in accordance with Singapore Financial

Reporting Standards (“FRS”).

The statutory audited financial statements of all companies within the Group for the financial

years ended 31 December 2011, 2012 and 2013 covered by this report were audited by the

following firms of Chartered Accountants who issued unmodified audit opinions in their

reports as follows:

Name of company Auditors Financial year

Huationg Contractor Pte Ltd S.L. Lim & Co., Singapore Financial years ended

31 December 2011 and 2012

BDO LLP, Singapore Financial year ended

31 December 2013

Soil Engineering Pte. Ltd. S.L. Lim & Co., Singapore Financial years ended

31 December 2011 and 2012

BDO LLP, Singapore Financial year ended

31 December 2013

HT Equipment Pte. Ltd. BDO LLP, Singapore Financial period from

18 October 2012 to

31 December 2013

A-14





2. Basis of preparation of combined financial statements (Continued)

The preparation of combined financial statements in conformity with FRS requires the

management to exercise judgement in the process of applying the Group’s accounting

policies and requires the use of accounting estimates and assumptions that affect the

reported amounts of assets and liabilities and disclosures of contingent assets and liabilities

at the end of the reporting periods, and the reported amounts of revenue and expenses

throughout the financial years. Although these estimates are based on management’s best

knowledge of historical experience and other factors, including expectations of future events

that are believed to be reasonable under the circumstances, actual results may ultimately

differ from those estimates. The estimates and underlying assumptions are reviewed on an

ongoing basis. Revisions to accounting estimates are recognised in the financial year in

which the estimate is revised if the revision affects only that financial year or in the financial

year of the revision and future financial years if the revision affects both current and future

financial years.

Critical accounting judgements and key sources of estimation uncertainty used that are

significant to the combined financial statements are disclosed in Note 4 to the combined

financial statements.

3. Summary of significant accounting policies

3.1 Changes in accounting policies

During the financial years ended 31 December 2011, 2012 and 2013, the Group

adopted the new or revised Singapore Financial Reporting Standards and

Interpretations of FRS (“INT FRS”) that are relevant to its operations and effective for

each annual period respectively. Changes to the Group’s accounting policies have

been made as required, in accordance with the relevant transitional provisions in the

respective FRS and INT FRS. The adoption of the new or revised FRS and INT FRS

did not result in any substantial changes to the Group’s accounting policies and has

no material effect on the amounts reported for the current and prior financial years,

except as disclosed below.

FRS 113 – Fair Value Measurement

FRS 113 provides a single source of guidance on fair value measurement and fair

value disclosure requirements when fair value measurement and/or disclosure is

required by other FRSs. It also provides a common fair value definition and hierarchy

applicable to the fair value measurement of assets, liabilities, and an entity’s own

equity instruments within its scope.

The adoption of FRS 113 does not have any material impact on any of the Group’s fair

value measurements, therefore there has been no material impact on the financial

position or financial performance of the Group. FRS 113 has been adopted

prospectively from 1 January 2013 and therefore comparative information has not

been presented for the new disclosure requirements.

A-15





3. Summary of significant accounting policies (Continued)

3.1 Changes in accounting policies (Continued)

FRS and INT FRS issued but not yet effective

As at the date of the authorisation of these combined financial statements, the Group

has not adopted the following FRS and INT FRS that have been issued but not yet

effective:

Effective date(annual periods

beginning onor after)

FRS 16, 38 : Amendments to FRS 16 and FRS 38:Clarification of Acceptable Methods ofDepreciation and Amortisation

1 January 2016

FRS 16, 41 : Amendments to FRS 16 and FRS 41:Agriculture: Bearer Plants

1 January 2016

FRS 19 : Amendments to FRS 19: Defined Benefit Plans:Employee Contributions

1 July 2014

FRS 27 : Separate Financial Statements 1 January 2014

Amendments to FRS 27 – Investment Entities 1 January 2014

Amendments to FRS 27 – Equity Method inSeparate Financial Statement

1 January 2016

FRS 28 : Investments in Associates and Joint Ventures 1 January 2014

FRS 32 : Amendments to FRS 32 – Offsetting FinancialAssets and Financial Liabilities

1 January 2014

FRS 36 : Amendments to FRS 36 – Recoverable AmountDisclosures for Non-Financial Assets

1 January 2014

FRS 39 : Amendments to FRS 39 – Novation ofDerivatives and Continuation of HedgeAccounting

1 January 2014

FRS 110 : Consolidated Financial Statements 1 January 2014

: Amendments to FRS 110 – Investment Entities 1 January 2014

FRS 111 : Joint Arrangements 1 January 2014

: Amendments to FRS 111 – Accounting forAcquisition of interests in a Joint Operation

1 January 2016

FRS 112 : Disclosure of Interests in Other Entities 1 January 2014

: Amendments to FRS 112 – Investment Entities 1 January 2014

FRS 114 : Regulatory Deferral Accounts 1 January 2016

INT FRS 121 : Levies 1 January 2014

Improvements to FRSs (2014) 1 July 2014

A-16






3.1 Changes in accounting policies (Continued)

Consequential amendments were also made to various standards as a result of these

new or revised standards.

The Group expects that the adoption of the above FRS and INT FRS, if applicable, will

have no material impact on the combined financial statements in the period of initial

adoption except as disclosed below.

FRS 110 Consolidated Financial Statements and FRS 27 Separate Financial

Statements

FRS 110 replaces the control assessment criteria and consolidation requirements

currently in FRS 27 and INT FRS 12, Consolidation – Special Purpose Entities. FRS

110 defines the principle of control and establishes a new control model as the basis

for determining which entities are consolidated in the consolidated financial

statements. FRS 27 remains as a standard applicable only to separate financial

statements. On adoption of FRS 110 management will be required to exercise more

judgement than under the current requirements of FRS 27 in order to determine which

entities are controlled by the Group. These changes will take effect from the financial

year beginning on 1 January 2014 with full retrospective application. Management is

currently in the process of determining the impact on the Group, but does not expect

that there will be any changes to the entities being consolidated by the Group.

FRS 112 Disclosure of Interests in Other Entities

FRS 112 is a new standard which prescribes comprehensive disclosure requirements

for all types of interests in other entities. It requires an entity to disclose information

that helps users to assess the nature and financial effects of relationships with

subsidiaries, associates, joint arrangements and unconsolidated structured entities.

This new standard is likely to result in more extensive disclosures in the financial

statements, however, there will be no impact on the financial position or financial

performance of the Group on initial adoption of the standard in the financial year

beginning on 1 January 2014.

3.2 Basis of combination

The combined financial statements comprise the financial statements of the

subsidiaries made up to end of each financial year. The financial statements of the

subsidiaries are prepared for the same reporting date.

Accounting policies of subsidiaries have been changed where necessary to align them

with the policies adopted by the Group to ensure consistency.

Subsidiaries are combined from the date on which control is transferred to the Group

up to the effective date on which that control ceases. In preparing the combined

financial statements, inter-company transactions, balances and unrealised gains on

A-17






3.2 Basis of combination (Continued)

transactions between group companies are eliminated. Unrealised losses are also

eliminated unless the transaction provides evidence of an impairment loss of the asset

transferred.

Non-controlling interests in subsidiaries are identified separately from the Group’s

equity therein. Non-controlling interests in the acquiree may be initially measured

either at fair value or at the non-controlling interests’ proportionate share of the fair

value of the acquiree’s identifiable net assets. The choice of measurement basis is

made on an acquisition-by-acquisition basis. Subsequent to acquisition, the carrying

amount of non-controlling interests is the amount of those interests at initial

recognition plus the non-controlling interests’ share of subsequent changes in equity.

Total comprehensive income is attributed to non-controlling interests even if this

results in the non-controlling interests having a deficit balance.

Changes in the Group’s interest in a subsidiary that do not result in a loss of control

are accounted for as equity transactions. The carrying amounts of the Group’s

interests and the non-controlling interests are adjusted to reflect the changes in their

relative interests in the subsidiary. Any difference between the amount by which the

non-controlling interests are adjusted and the fair value of the consideration paid or

received is recognised directly in equity and attributed to owners of the parent.

When the Group loses control of a subsidiary, the profit or loss on disposal is

calculated as the difference between (i) the aggregate of the fair value of the

consideration received and the fair value of any retained interest and (ii) the previous

carrying amount of the assets (including goodwill), and liabilities of the subsidiary and

any non-controlling interests. Amounts previously recognised in other comprehensive

income in relation to the subsidiary are accounted for (i.e. reclassified to profit or loss

or transferred directly to retained earnings) in the same manner as would be required

if the relevant assets or liabilities were disposed of. The fair value of any investments

retained in the former subsidiary at the date when control is lost is regarded as the fair

value on initial recognition for subsequent accounting under FRS 39 Financial

Instruments: Recognition and Measurement or, when applicable, the cost on initial

recognition of an investment in an associate or jointly controlled entity.

Acquisition under common control

Business combination arising from transfers of interest in entities that are under

common control are accounted for as if the acquisition had occurred at the beginning

of the earliest comparative period presented or, if later, at the date that common

control was established. For this purpose, comparatives are restated. The assets and

liabilities acquired are recognised at the carrying amounts recognised previously and

no adjustments are made to reflect the fair values or recognised any new assets or

liabilities, including no goodwill is recognised as a result of the combination. The

components of equity of the acquired entities are added to the same components

within the Group equity. Any difference between the cash paid for the acquisition and

share capital of acquiree is recognised directly to equity as merger reserve.

A-18






3.3 Subsidiaries

Subsidiaries are entities over which the Group has power to govern the financial and

operating policies, generally accompanying a shareholding of more than one half of

the voting rights. The existence and effect of potential voting rights that are currently

exercisable or convertible are considered when assessing whether the Group controls

another entity.

3.4 Property, plant and equipment

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

any accumulated impairment losses. The cost includes its purchase price and any

costs directly attributable to bringing the asset to the location and condition necessary

for it to be capable of operating in the manner intended by management.

Dismantlement, removal or restoration costs are included as part of the cost if the

obligation for dismantlement, removal or restoration is incurred as a consequence of

acquiring or using the property, plant and equipment.

Subsequent expenditure relating to the property, plant and equipment that has already

been recognised is added to the carrying amount of the property, plant and equipment

when it is probable that the future economic benefits, in excess of the standard of

performance of the property, plant and equipment before the expenditure was made,

will flow to the Group, and the cost can be reliably measured. Other subsequent

expenditure is recognised as an expense during the financial year in which it is

incurred.

Depreciation is charged so as to write off the depreciable amounts of assets, over their

estimated useful lives, using the straight-line method, on the following bases:

Years

Leasehold properties 30 to 52 years

Computers 3 years

Container offices 5 years

Office equipment and electrical fittings 10 years

Plant and machineries 10 years

Worksite equipment 5 years

Trucks and vehicles 10 years

The carrying values of property, plant and equipment are reviewed for impairment

when events or changes in circumstances indicate that the carrying value may not be

recoverable.

The estimated useful lives, residual values and depreciation methods are reviewed,

and adjusted as appropriate, at the end of each financial year.

A-19






3.4 Property, plant and equipment (Continued)

Assets held under finance leases are depreciated over their expected useful lives on

the same basis as owned assets or, if there is no certainty that the lessee will obtain

ownership by the end of the lease term, the asset shall be fully depreciated over the

shorter of the lease term and its useful life.

An item of property, plant and equipment is derecognised upon disposal or when no

future economic benefits are expected from its use or disposal.

The gain or loss arising on disposal or retirement of an item of property, plant and

equipment is determined as the difference between the sales proceeds and the

carrying amount of the asset and is recognised in profit or loss.

3.5 Investment property

Investment property, which is property held to earn rentals and/or for capital

appreciation, is measured initially at its cost, including transaction costs. Subsequent

to initial recognition, investment property is measured at fair value. Gains or losses

arising from changes in the fair value of investment property are included in profit or

loss for the period in which they arise.

Investment property is subject to renovations or improvements at regular intervals.

The costs of major renovations and improvements are capitalised as additions and the

carrying amounts of the replaced components are written off to profit or loss. The costs

of maintenance, repairs and minor improvement are charged to profit or loss when

incurred.

On disposal or retirement of an investment property, the difference between the net

disposal proceeds and the carrying amount of the asset is recognised in profit or loss.

3.6 Intangible asset

Intangible asset acquired separately, which relates to club membership is measured

initially at cost. Following initial recognition, intangible asset is carried at cost less any

accumulated impairment losses.

Intangible asset with indefinite useful lives are tested for impairment annually or more

frequently if the events or changes in circumstances indicate that the carrying amount

may be impaired either individually or at the cash-generating unit level. Such

intangible asset is not amortised. The useful life of an intangible asset with an

indefinite useful life is reviewed annually to determine whether the useful life

assessment continues to be supportable. If not, the change in useful life from indefinite

to finite is made on a prospective basis.

Gains or losses arising from derecognition of an intangible asset are measured at the

difference between the net disposal proceeds and the carrying amount of the asset

and are recognised in profit and loss when the asset is derecognised.

A-20






3.7 Impairment of non-financial assets

At the end of each financial year, the Group reviews the carrying amounts of its

non-financial assets to determine whether there is any indication that those assets

have suffered an impairment loss. If any such indication exists, the recoverable

amount of the asset is estimated in order to determine the extent of the impairment

loss (if any). Where it is not possible to estimate the recoverable amount of an

individual asset, the Group estimates the recoverable amount of the cash-generating

unit to which the asset belongs.

Intangible asset with indefinite useful lives is tested for impairment annually, and

whenever there is an indication that the asset may be impaired.

The recoverable amount of an asset or cash-generating unit is the higher of its fair

value less costs to sell and its value in use. In assessing value in use, the estimated

future cash flows are discounted to their present value using a pre-tax discount rate

that reflects current market assessments of the time value of money and the risks

specific to the asset.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less

than its carrying amount, the carrying amount of the asset (cash-generating unit) is

reduced to its recoverable amount. An impairment loss is recognised immediately in

profit or loss, unless the relevant asset is carried at a revalued amount, in which case

the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset

(cash-generating unit) is increased to the revised estimate of its recoverable amount,

but so that the increased carrying amount does not exceed the carrying amount that

would have been determined had no impairment loss been recognised for the asset

(cash-generating unit) in prior years. A reversal of an impairment loss is recognised

immediately in profit or loss, unless the relevant asset is carried at a revalued amount,

in which case the reversal of the impairment loss is treated as revaluation increase.

3.8 Financial instruments

Financial assets and financial liabilities are recognised on the statement of financial

position when the Group becomes a party to the contractual provisions of the

instrument.

A-21






3.8 Financial instruments (Continued)

Effective interest method

The effective interest method is a method of calculating the amortised cost of a

financial instrument and allocating the interest income or expense over the relevant

period. The effective interest rate is the rate that exactly discounts estimated future

cash receipts or payments (including all fees on points paid or received that form an

integral part of the effective interest rate, transaction costs and other premiums or

discounts) through the expected life of the financial instrument, or where applicable,

a shorter period, to the net carrying amount of the financial instrument. Income and

expense are recognised on an effective interest basis for debt instruments.

Financial assets

Financial assets are initially measured at fair value, plus transaction costs.

The Group classifies its financial assets as loans and receivables. The classification

depends on the nature and purpose for which these financial assets were acquired and

is determined at the time of initial recognition.

Loans and receivables

Non-derivative financial assets which have fixed or determinable payments that are

not quoted in an active market are classified as loans and receivables. Loans and

receivables are measured at amortised cost, using the effective interest method, less

impairment. Interest is recognised by applying the effective interest rate, except for

short-term receivables when the recognition of interest would be immaterial.

The Group’s loans and receivables in the statement of financial position comprise

trade and other receivables (excluding non-refundable deposits), amounts due from

contract customers and cash and bank balances.

Impairment of financial assets

Financial assets are assessed for indicators of impairment at the end of each financial

year. Financial assets are impaired where there is objective evidence that the

estimated future cash flows of the asset have been impacted.

For financial assets carried at amortised cost, the amount of the impairment is the

difference between the asset’s carrying amount and the present value of estimated

future cash flows, discounted at the original effective interest rate.

The carrying amounts of all financial assets are reduced by the impairment loss

directly with the exception of receivables where the carrying amount is reduced

through the use of an allowance account. Changes in the carrying amount of the

allowance account are recognised in profit or loss.

A-22







Financial assets (Continued)

If, in a subsequent period, the amount of the impairment loss decreases and the

decrease can be related objectively to an event occurring after the impairment loss

was recognised, the previously recognised impairment loss is reversed through profit

or loss to the extent the carrying amount of the asset at the date the impairment is

reversed does not exceed what the amortised cost would have been had the

impairment not been recognised.

Derecognition of financial assets

The Group derecognises a financial asset only when the contractual rights to the cash

flows from the asset expire, or it transfers the financial asset and substantially all the

risks and rewards of ownership of the asset to another entity.

On derecognition, any difference between the carrying amount and the sum of

proceeds received and amounts previously recognised in other comprehensive

income is recognised in profit or loss.

Financial liabilities and equity instruments

Classification as debt or equity

Financial liabilities and equity instruments issued by the Group are classified

according to the substance of the contractual arrangements entered into and the

definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of

the Group after deducting all of its liabilities. Equity instruments are recorded at the

proceeds received, net of direct issue costs. The Group classifies ordinary shares as

equity instruments.

Financial liabilities

Financial liabilities are classified as other financial liabilities.

Other financial liabilities

Trade and other payables

Trade and other payables, excluding non-refundable deposits, are initially measured

at fair value, net of transaction costs, and are subsequently measured at amortised

cost, where applicable, using the effective interest method.

A-23







Financial liabilities (Continued)

Borrowings

Interest-bearing borrowings are initially measured at fair value, and are subsequently

measured at amortised cost, using the effective interest method. Any difference

between the proceeds (net of transaction costs) and the settlement or redemption of

borrowings is recognised over the term of the borrowings in accordance with the

Group’s accounting policy for borrowing costs (see below).

Derecognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group’s

obligations are discharged, cancelled or they expire. The difference between the

carrying amount and the consideration paid is recognised in profit or loss.

3.9 Construction contracts

Where the outcome of a construction contract can be estimated reliably, revenue and

costs are recognised by reference to the stage of completion of the contract activity at

the end of the financial year (percentage-of-completion method), except where this

would not be representative of the stage of completion. Variations in contract work,

claims and incentive payments are included to the extent that they have been agreed

with the customer. The Group measures stage of completion based on the proportion

of contract costs incurred to date compared to expected total contract costs.

Where the outcome of a construction contract cannot be estimated reliably, contract

revenue is recognised to the extent of contract costs incurred that are likely to be

recoverable. Contract costs are recognised as expenses in the period in which they

are incurred. When it is probable that total contract costs will exceed total contract

revenue, the expected loss is recognised as an expense immediately.

At the end of the financial year, the aggregated costs incurred plus recognised profit

(less recognised loss) on each contract is compared against the progress billings.

Where costs incurred plus the recognised profits (less recognised losses) exceed

progress billings, the balance is presented on the face of the statement of financial

position as “Amounts due from contract customers”. Where progress billings exceed

costs incurred plus recognised profits (less recognised losses), the balance is

presented as “Amounts due to contract customers”. Progress billings not yet paid by

customers and retentions are included within “Trade and other receivables”.

3.10 Cash and bank balances

Cash and bank balances comprise cash on hand, demand deposits and other

short-term highly liquid investments which are readily convertible to known amounts of

cash and are subject to insignificant risk of changes in value.

A-24






3.11 Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and

represents amounts receivable for sales of goods and services rendered in the normal

course of business, net of discounts and sales related taxes.

Revenue from construction contracts

Revenue from construction contracts is recognised in accordance with the accounting

policy on construction contracts.

Transportation income and management fee income

Transportation income and management fee income are recognised upon completion

of services.

Sale of construction materials

Revenue from the sales of construction materials is recognised when the materials are

delivered to and accepted by the customers.

Rental income

Rental income from properties, leasing of trucks and equipment are recognised on a

straight-line basis over the term of the relevant lease.

Interest income

Interest income is accrued on a time basis, by reference to the principal outstanding

and at the effective interest rate applicable.

3.12 Government grants

Government grants are recognised at their fair value where there is reasonable

assurance that the grant will be received and all attaching conditions will be complied

with. Where the grant relates to expenditure, the grant is recognised as income over

the periods necessary to match them with the costs for which they are intended to

compensate, on a systematic basis. Government grants that are receivable as

compensation for expenses or losses already incurred or for the purpose of giving

immediate financial support to the Group with no future related costs are recognised

in profit or loss in the period in which they become receivable.

3.13 Borrowing costs

Borrowing costs are recognised in profit or loss in the period in which they are incurred

using the effective interest method.

A-25






3.14 Retirement benefit costs

Payments to defined contribution plans are charged as an expense as they fall due.

Payments made to state-managed retirement benefit schemes, such as the Singapore

Central Provident Fund, are dealt with as payments to defined contribution plans

where the Group’s obligations under the plans are equivalent to those arising in a

defined contribution plan.

3.15 Employee leave entitlements

Employee entitlements to annual leave are recognised when they accrue to

employees. An accrual is made for the estimated undiscounted liability for unutilised

annual leave expected to be settled wholly within 12 months from the reporting date

as a result of services rendered by employees up to the end of the financial year.

3.16 Leases

Finance leases

Leases are classified as finance leases whenever the terms of the lease transfer

substantially all the risks and rewards incidental to ownership of the leased assets to

the lessee. All other leases are classified as operating leases.

Assets held under finance leases are capitalised as property, plant and equipment at

their fair value at the inception of the lease or, if lower, at the present value of the

minimum lease payments. The corresponding liability to the lessor is included in the

statements of financial position as a finance lease obligation. Lease payments are

apportioned between finance charges and reduction of the lease obligation so as to

achieve a constant rate of interest on the remaining balance of the liability. Finance

charges are charged to profit or loss.

The Group as a lessee

Rentals payable under operating leases (net of any incentives received from lessors)

are charged to profit or loss on a straight-line basis over the term of the relevant lease

unless another systematic basis is more representative of the time pattern in which

economic benefits from the leased asset are consumed.

The Group as a lessor

Rental income from operating leases (net of any incentives given to lessees) is

recognised on a straight-line basis over the term of the relevant lease unless another

systematic basis is more representative of the time pattern in which user benefit

derived from the leased asset is diminished. Initial direct costs incurred in negotiating

and arranging an operating lease are added to the carrying amount of the leased asset

and recognised on a straight-line basis over the lease term.

A-26






3.17 Taxes

Income tax expense represents the sum of the tax currently payable and deferred tax.

Current income tax

The tax currently payable is based on taxable profit for the financial year. Taxable

profit differs from profit reported in profit or loss because it excludes items of income

or expense that are taxable or deductible in other financial years and it further

excludes items that are not taxable or tax deductible. The Group’s liability for current

tax is recognised at the amount expected to be paid or recovered from the tax authority

and is calculated using tax rates (and tax laws) that have been enacted or

substantively enacted by the end of the financial year.

Current income taxes are recognised in profit or loss, except to the extent that the tax

relates to items recognised outside profit or loss, either in other comprehensive

income or directly in equity.

Deferred tax

Deferred tax is recognised on all temporary differences between the carrying amounts

of assets and liabilities in the combined financial statements and the corresponding

tax bases used in the computation of taxable profit, and is accounted for using the

balance sheet liability method. Deferred tax liabilities are generally recognised for all

taxable temporary differences and deferred tax assets are recognised to the extent

that it is probable that taxable profits will be available against which deductible

temporary differences can be utilised. Such assets and liabilities are not recognised if

the temporary difference arises from the initial recognition of other assets and

liabilities in a transaction that affects neither the taxable profit nor the accounting

profit.

Deferred tax liabilities are recognised on taxable temporary differences arising on

investment in subsidiary, except where the Group is able to control the reversal of the

temporary difference and it is probable that the temporary difference will not reverse

in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each financial

year and reduced to the extent that it is no longer probable that sufficient taxable

profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when

the liability is settled or the asset realised based on the tax rates (and tax laws) that

have been enacted or substantively enacted by the end of the financial year.

The measurement of deferred tax reflects the tax consequences that would follow from

the manner in which the group expects to recover or settle its assets and liabilities,

except for investment properties at fair value which are presumed to be recovered

through sale.

A-27






3.17 Taxes (Continued)

Deferred tax (Continued)

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

to set off current tax assets against current tax liabilities and when they relate to

income taxes levied by the same taxation authority and the Group intends to settle its

current tax assets and liabilities on a net basis.

Deferred tax is recognised in profit or loss, except when it relates to items recognised

outside profit or loss, in which case the tax is also recognised either in other

comprehensive income or directly in equity, or where they arise from the initial

accounting for a business combination. Deferred tax arising from a business

combination, is taken into the account in calculating goodwill on acquisition.

Sales tax

Revenue, expenses and assets are recognised net of the amount of sales tax except:

• when the sales tax that is incurred on purchase of assets or services is not

recoverable from the tax authorities, in which case the sales tax is recognised as

part of cost of acquisition of the asset or as part of the expense item as

applicable; and

• receivables and payables that are stated with the amount of sales tax included.

3.18 Dividends

Equity dividends are recognised when they become legally payable. Interim dividends

are recorded in the financial year in which they are declared payable. Final dividends

are recorded in the financial year in which dividends are approved by shareholders.

3.19 Foreign currency transactions and translation

Items included in the individual financial statements of each entity in the Group are

measured using the currency of the primary economic environment in which the entity

operates (“functional currency”).

The combined financial statements are presented in Singapore dollar.

In preparing the financial statements, transactions in currencies other than the entity’s

functional currency (“foreign currencies”) are recorded at the rates of exchange

prevailing on the date of the transactions. At the end of each reporting period,

monetary items denominated in foreign currencies are re-translated at the rates

prevailing at the end of the reporting period. Non-monetary items carried at fair value

that are denominated in foreign currencies are re-translated at the rates prevailing on

the date when the fair value was determined. Non-monetary items that are measured

in terms of historical cost in a foreign currency are not re-translated.

A-28






3.19 Foreign currency transactions and translation (Continued)

Exchange differences arising on the settlement of monetary items and on re-

translating of monetary items are recognised in profit or loss for the financial year.

Exchange differences arising on the re-translation of non-monetary items carried at

fair value are recognised in profit or loss for the financial year except for differences

arising on the re-translation of non-monetary items in respect of which gains and

losses are recognised in other comprehensive income. For such non-monetary items,

any exchange component of that gain or loss is also recognised in other

comprehensive income.

3.20 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 relating to transactions with other components of the Group) and whose

operating results are regularly reviewed by the Group’s chief operating decision maker

to make decisions about resources to be allocated to the segment and assess its

performance.

4. Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group’s accounting policies, which are described in Note 3,

management made judgements, estimates and assumptions about the carrying amounts of

assets and liabilities that were not readily apparent from other sources. The estimates and

associated assumptions were based on historical experience and other factors that were

considered to be reasonable under the circumstances. Actual results may differ from these

estimates.

These estimates and underlying assumptions are reviewed on an ongoing basis. Revisions

to accounting estimates are recognised in the period in which the estimate is revised if the

revision affects only that period, or in the period of the revision and future periods if the

revision affects both current and future periods.

4.1 Critical judgements made in applying the accounting policies

In the process of applying the Group’s accounting policies, the management is of the

opinion that there are no critical judgements involved that have a significant effect on

the amounts recognised in the combined financial statements except as discussed

below.

A-29





4. Critical accounting judgements and key sources of estimation uncertainty (Continued)

4.1 Critical judgements made in applying the accounting policies (Continued)

(i) Impairment of financial assets

The Group follows the guidance of FRS 39 in determining whether financial

assets are impaired. This determination requires significant judgement. The

Group evaluates, among other factors, the duration and extent to which the fair

value of a financial asset is less than its cost and the financial health of the

near-term business outlook for the financial asset, including factors such as

industry and sector performance, changes in technology and operational and

financing cash flows.

(ii) Contract revenue

The Group recognises contract revenue to the extent of contract costs incurred

where it is probable that those costs will be recoverable or based on the stage of

completion method. The stage of completion is measured by reference to the

contract costs incurred to date to the estimated costs for the contract.

Significant judgement is required in determining the stage of completion, the

extent of the contract cost incurred, the estimated total contract revenue and

contract costs, as well as the recoverability of the contracts. Total contract

revenue also includes an estimation of the recoverable variation works that are

recoverable from the customers. In making the judgement, management’s

evaluation is based on the actual level of work performed and past experience.

4.2 Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation

uncertainty at the end of the financial year, that have a significant risk of causing a

material adjustment to the carrying amounts of assets and liabilities within the next

financial year, are discussed below.

(i) Depreciation of property, plant and equipment

The Group depreciates property, plant and equipment on a straight-line method,

over their estimated useful lives after taking into account of their estimated

residual values. The estimated useful life reflects management’s estimate of the

period that the Group intends to derive future economic benefits from the use of

the Group’s property, plant and equipment. The residual value reflects

management’s estimated amount that the Group would currently obtain from the

disposal of the asset, after deducting the estimated costs of disposal, as if the

asset were already of the age and in the condition expected at the end of its

useful life. Changes in the expected level of usage and technological

developments could affect the economic, useful lives and the residual values of

these assets which could then consequentially impact future depreciation

charges. The carrying amounts of the Group’s property, plant and equipment as

at 31 December 2011, 2012 and 2013 were $58,651,883, $69,555,621 and

$73,234,159 respectively.

A-30





4. Critical accounting judgements and key sources of estimation uncertainty (Continued)

4.2 Key sources of estimation uncertainty (Continued)

(ii) Allowances for impairment of trade and other receivables

The policy for impairment of receivables of the Group is on a case-by-case basis

and management’s ongoing evaluation of the recoverability of the outstanding

receivables. A considerable amount of judgement is required in assessing the

ultimate realisation of these receivables, including the assessment of the

creditworthiness and the past collection history of each customer. If the financial

conditions of these customers were to deteriorate, resulting in an impairment of

their ability to make payments, additional allowances may be required. The

carrying amounts of trade and other receivables (excluding non-refundable

deposit) as at 31 December 2011, 2012 and 2013 were $24,473,226,

$39,488,706 and $31,819,228 respectively.

(iii) Provision of foreseeable losses in respect of construction works

The management reviews its work-in-progress for projects to determine whether

there is any indication of foreseeable losses. Identified foreseeable losses are

recognised immediately in the statement of comprehensive income when it is

probable that total contract costs will exceed total contract revenue. Foreseeable

losses in respect of certain work-in-progress for projects as at 31 December

2011, 2012 and 2013 were Nil, $1,504,867 and Nil respectively.

(iv) Income taxes

Significant judgement is involved in determining the provision for income taxes.

The Group recognises expected liabilities for income tax based on an estimation

of the likely taxes due, which requires significant judgement as to the ultimate tax

determination of certain items. Where the actual liability arising from these issues

differs from these estimates, such differences will have an impact on income tax

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

carrying amounts of the Group’s current income tax payable as at 31 December

2011, 2012 and 2013 were $258,435, $231,000 and $736,849 respectively. The

carrying amounts of the current income tax recoverable as at 31 December 2011,

2012 and 2013 were Nil, $72,298 and Nil respectively. The carrying amounts of

the deferred tax liabilities as at 31 December 2011, 2012 and 2013 were

$3,402,000, $3,684,000 and $3,966,501 respectively.

A-31

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A-34





5. Property, plant and equipment (Continued)

As at 31 December 2011, 2012 and 2013, the Group’s plant and machineries with a carrying

amount of $22,331,798, $19,605,457 and $26,531,646 respectively, and trucks and vehicles

with a carrying amount of $4,391,551, $13,794,891 and $17,203,198 respectively were

purchased under finance lease agreements. Finance lease assets are pledged as securities

for the related finance lease payables (Note 13).

The Group’s leasehold properties as at 31 December 2011, 2012 and 2013 with a carrying

amount of $16,748,485, $16,169,194 and $15,592,092 respectively were pledged as

securities for the banking facilities granted to the Group as disclosed in Note 14 to the

combined financial statements.

As at 31 December 2011, 2012 and 2013, the carrying amounts of motor vehicles which were

registered under the name of a Director of the Group who is holding the motor vehicle in trust

for the Group were $155,514, $137,570 and $119,626 respectively.

During the financial years, the Group’s additions to property, plant and equipment were

financed as follows:

2011 2012 2013

$ $ $

Additions to property, plant and equipment 28,710,707 19,635,762 13,438,823

Acquired under finance lease agreements (9,137,890) (13,322,545) (9,376,365)

Acquired under bank borrowings (13,200,000) – –

Acquired under trade and other payables – (3,527,659) (3,692,880)

Cash payments to acquire property, plant

and equipment 6,372,817 2,785,558 369,578

Particulars of the leasehold properties held by the Group are as follows:

Location Description Tenure

3 Kranji Loop

Singapore 739539

Industrial building with a floor

area of 2,213 square metre

4 years 9 months commencing

1 April 2011 and a further term

of 5 years from 1 January

2016

9 Benoi Crescent

Singapore 629972

Industrial building with a floor

area of 7,579 square metre

30 years commencing

1 January 1989 and a further

term of 22 years from

1 January 2019

A-35





6. Investment property

2011 2012 2013

$ $ $

At fair value

Balance as at the beginning of the financial year 2,200,000 2,600,000 3,000,000

Fair value gain recognised in profit or loss 400,000 400,000 800,000

Balance as at the end of the financial year 2,600,000 3,000,000 3,800,000

The Group’s investment property was valued as at 31 December 2011, 2012 and 2013 by

Messrs GB Global Pte Ltd, an independent professional valuation firm with recent experience

in the location and category of the investment property held by the Group. The fair value gain

arising from the revaluations were recognised in the line item of “Other income” in the

combined statements of comprehensive income. The valuations are based on the market

comparison approach. Details of valuation techniques and inputs used are disclosed in Note

29 to the combined financial statements.

The Group’s investment property is held under freehold interests.

The following amounts are recognised in profit or loss:

2011 2012 2013

$ $ $

Rental income from investment property

(Note 17) 52,822 54,249 55,301

Direct operating expenses arising from

rental-generating investment property 3,600 3,600 3,960

The Group does not have any investment property that do not generate rental income.

Details of the Group’s investment property as at 31 December 2011, 2012 and 2013 are as

follows:


33 Bedok Road Singapore 469358 3 Storey semi-detached house Freehold

A-36





7. Intangible asset

2011 2012 2013

$ $ $

Club membership, at cost 54,400 54,400 54,400

Less: Allowance for impairment (43,400) (43,400) (43,400)

11,000 11,000 11,000

8. Construction contracts

2011 2012 2013

$ $ $

Contracts in progress as at 31 December:

Amounts due from contract customers 4,007,881 9,297,649 11,095,948

Amounts due to contract customers (9,683,625) (19,621,368) (6,399,073)

(5,675,744) (10,323,719) 4,696,875

Contract costs incurred and attributable

profits less recognised losses 110,548,818 161,318,050 240,648,346

Less: Progress billings (116,224,562) (171,641,769) (235,951,471)

(5,675,744) (10,323,719) 4,696,875

As at 31 December 2011, 2012 and 2013, retention monies held by customers for contract

work amounted to $7,479,436, $9,596,149 and $9,641,129 respectively and are presented

within trade receivables in Note 9. The amounts due from and to contract customers are

denominated in Singapore dollar.

A-37





9. Trade and other receivables

2011 2012 2013

$ $ $

Trade receivables

– third parties 14,406,866 25,750,362 18,464,952

– a related party 1,774 50,670 10,109

Retention sums on construction contracts 7,479,436 9,596,149 9,641,129

21,888,076 35,397,181 28,116,190

Less: Allowance for impairment – third

parties (940,219) (1,176,250) (1,467,720)

20,947,857 34,220,931 26,648,470

Other receivables

– third parties 15,842 11,103 19,143

– employees 42,642 62,526 43,449

– related parties 2,820,000 4,398,470 4,545,330

2,878,484 4,472,099 4,607,922

Deposits

– refundable 646,885 795,676 562,836

– non-refundable 34,852 251,835 377,642

681,737 1,047,511 940,478

Current income tax recoverable – 72,298 –

Trade and other receivables 24,508,078 39,812,839 32,196,870

Add/(Less):

Cash and bank balances 7,338,532 5,167,199 12,536,380

Amount due from contract customers 4,007,881 9,297,649 11,095,948

Non-refundable deposits (34,852) (251,835) (377,642)

Current income tax recoverable – (72,298) –

Loans and receivables 35,819,639 53,953,554 55,451,556

A-38





9. Trade and other receivables (Continued)

Trade receivable from third parties are unsecured, non-interest bearing and generally on 30

to 60 days’ credit terms.

Trade and non-trade receivables from related parties are unsecured, non-interest bearing

and repayable on demand.

Movements in allowance for impairment of trade receivables were as follows:

2011 2012 2013

$ $ $

Balance as at the beginning of

the financial year 963,032 940,219 1,176,250

Allowance made during the financial year 26,978 236,031 352,050

Write-back of allowance no longer required (48,153) – (60,580)

Bad debts written-off (1,638) – –

Balance as at the end of the financial year 940,219 1,176,250 1,467,720

During the financial years ended 31 December 2011, 2012 and 2013, an allowance for

impairment of trade receivables amounting to $26,978, $236,031 and $352,050 was

recognised in profit or loss under “other expenses” line item subsequent to a debt recovery

assessment performed.

Trade receivables are subject to a negative pledge as security for the banking facilities as set

out in Note 14 to the combined financial statements.

Trade and other receivables are denominated in Singapore dollar.

10. Cash and bank balances

Cash and bank balances are denominated in the following currencies:

2011 2012 2013

$ $ $

Singapore dollar 7,245,818 5,083,428 12,476,663

United States dollar 83,966 79,282 56,353

Euro 8,748 4,489 3,364

7,338,532 5,167,199 12,536,380

A-39





11. Share capital

For the purpose of preparing the combined financial statements, the share capital represents

the paid-up share capital of the Company and its subsidiaries. As the Company was only

incorporated after the end of the reporting periods, the share capital presented relates to the

aggregation of the Group’s share in the paid-up capital of Huationg Contractor Pte Ltd, Soil

Engineering Pte. Ltd. and HT Equipment Pte. Ltd..

During the financial year ended 31 December 2012, Huationg Contractor Pte Ltd issued

3,500,000 ordinary shares for a cash consideration of $3,500,000.

HT Equipment Pte. Ltd. issued 1 subscriber’s share at $1 for cash at the date of

incorporation.

During the financial year ended 31 December 2013, HT Equipment Pte. Ltd. issued 499,999

ordinary shares for a cash consideration of $499,999.

12. Trade and other payables

2011 2012 2013

$ $ $

Current

Trade payables

– third parties 8,820,012 15,783,588 17,319,441

– a related party 30,154 854,852 1,882,132

Retention sums payable to subcontractors 583,895 290,790 449,582

9,434,061 16,929,230 19,651,155

Other payables

– third parties 358,048 420,684 142,046

– Directors 4,533,758 1,996,868 2,396,978

– Dividend payable – – 1,000,000

4,891,806 2,417,552 3,539,024

Refundable deposits 91,381 1,196,296 388,697

Advance rental 400,000 400,000 400,000

Staff retention monies 462,101 576,912 716,891

Accrued expenses 3,750,190 3,326,694 3,285,563

19,029,539 24,846,684 27,981,330

A-40





12. Trade and other payables (Continued)

2011 2012 2013

$ $ $

Non-current

Other payables

Advance rental 1,333,333 933,333 533,333


Add/(Less):

Advance rental (1,733,333) (1,333,333) (933,333)

Finance lease payables 17,570,681 23,813,536 30,751,776

Bank borrowings 20,606,604 21,636,951 25,701,435

Other financial liabilities at amortised cost 56,806,824 69,897,171 84,034,541

Trade payables due to third parties are unsecured, non-interest bearing and generally on 30

to 60 days’ credit terms. Trade payables due from a related party is unsecured, non-interest

bearing and repayable on demand.

The non-trade amounts due to Directors and dividend payable are unsecured, non-interest

bearing, repayable on demand.

Current and non-current advance rental represent part of the consideration arising from the

purchase of a property located at 9 Benoi Crescent Singapore 629972 by the Group in May

2011 from its previous owner which became one of the Group’s lessee. Part of the

consideration paid to the previous owner was used as a prepaid rent and shall be amortised

over the next 5 years from the date of the commencement of the lease.

Trade and other payables are denominated in Singapore dollar.

A-41





13. Finance lease payables

Minimum

lease

payments

Future

finance

charges

Present

value of

minimum

lease

payments

$ $ $

2011

Not later than one year 6,723,319 (537,806) 6,185,513

Later than one year and not later than five years 11,892,956 (507,788) 11,385,168

18,616,275 (1,045,594) 17,570,681

2012



24,770,553 (957,017) 23,813,536

2013



31,743,409 (991,633) 30,751,776

The finance lease term is 4 to 5 years. The average effective interest rates for the finance

lease payable are 3.66%, 3.22% and 2.26% per annum in the financial years ended 31

December 2011, 2012 and 2013 respectively.

The finance lease payables are secured by the lessor’s title to the leased asset (Note 5).

The management estimates that the carrying amounts of the finance lease payables

approximate their fair values.

The finance lease payables are denominated in Singapore dollar.

A-42





14. Bank borrowings

2011 2012 2013

$ $ $

Current

Secured

Trust receipts 1 3,134,504 790,241 4,208,206

Term loan 1 660,000 660,000 660,000

Unsecured

Trust receipts 2 2,444,341 7,900,893 8,475,304

Revolving loans 400,000 500,000 1,500,000

Term loan 2 1,267,156 – –

Term loan 3 254,857 267,900 22,925

8,160,858 10,119,034 14,866,435

Non-current

Secured

Term loan 1 12,155,000 11,495,000 10,835,000

Unsecured

Term loan 3 290,746 22,917 –

12,445,746 11,517,917 10,835,000

Total bank borrowings 20,606,604 21,636,951 25,701,435

A-43





14. Bank borrowings (Continued)

The weighted average effective interest rates per annum of the borrowings were as follows:

2011 2012 2013

% % %

Short-term bank loans 2.00 1.80 1.75

Long-term bank loans 1.55 1.23 1.20

Trust receipts 1.97 1.71 1.60

Term loan 1 is repayable over a period of 20 years by monthly instalments commencing from

May 2011. Term loan 1 is secured by the legal mortgage over the leasehold property of the

Group (Note 5), and joint and severally guarantee from certain Directors of Huationg

Contractor Pte Ltd amounting to $13,200,000 in the financial years ended 31 December

2011, 2012 and 2013.


October 2009. The term loan was supported by joint and severally guarantees from certain

Directors of Huationg Contractor Pte Ltd, and was fully repaid in September 2012.


February 2010. The term loan was supported by joint and severally guarantees from the

Directors of Soil Engineering Pte. Ltd. amounting to $1,000,000 in the financial years ended

31 December 2011, 2012 and 2013.

As at 31 December 2011, 2012 and 2013, the trust receipts 1 are secured by the legal

mortgage over the leasehold property of the Group (Note 5) and a negative pledge on trade

receivables (Note 9). As at 31 December 2011, 2012 and 2013, the trust receipts 1 and 2 are

supported by joint and several guarantees of certain Directors of Huationg Contractor Pte Ltd

and Soil Engineering Pte. Ltd., amounting to $19,720,000, $22,800,000 and $36,380,000

respectively.

Revolving loans are secured by joint and severally guarantees from certain Directors of

Huationg Contractor Pte Ltd amounting to $6,500,000, $6,500,000 and $11,000,000 in the

financial years ended 31 December 2011, 2012 and 2013 respectively.

Management estimates that the carrying amounts of the bank borrowings approximate their

fair values.

A-44






As at the end of each financial year, the Group has facilities as follows:

2011 2012 2013

$ $ $

Facilities granted 48,400,000 50,400,000 78,560,000

Facilities utilised 22,247,710 23,880,239 34,145,925

Bank borrowings are denominated in Singapore dollar.

15. Deferred tax liabilities

The following are the major deferred tax liabilities and assets recognised by the Group and

movements thereon during the financial year.

Accelerated

tax

depreciation

Foreseeable

losses Others Total

Balance as at 1.1.2011 2,773,000 – – 2,773,000

Charged to profit or loss 629,000 – – 629,000

Balance as at 31.12.2011 3,402,000 – – 3,402,000

Balance as at 1.1.2012 3,402,000 – – 3,402,000

Charged/(Credited) to

profit or loss 553,000 (250,000) (21,000) 282,000

Balance as at 31.12.2012 3,955,000 (250,000) (21,000) 3,684,000

Balance as at 1.1.2013 3,955,000 (250,000) (21,000) 3,684,000

Charged to profit or loss 11,501 250,000 21,000 282,501

Balance as at 31.12.2013 3,966,501 – – 3,966,501

A-45





16. Revenue

2011 2012 2013

$ $ $

Revenue from contract works 51,893,454 65,256,914 79,612,922

Lease of trucks and equipment and

transportation income 16,438,779 16,207,532 23,824,469

Sale of construction materials 12,651,895 10,748,272 5,037,786

80,984,128 92,212,718 108,475,177

17. Other income

2011 2012 2013

$ $ $

Fair value gain on investment property 400,000 400,000 800,000

Foreign exchange gain, net 16,594 14,266 –

Gain on disposal of plant and equipment 56,160 527,265 353,815

Government grants 889 46,889 313,678

Insurance claim monies received 168,719 66,269 45,249

Interest income 2,754 9,614 3,058

Management fee income – – 260,000

Operating lease income

– Leasehold properties 349,841 1,041,813 1,061,503

– Investment property 52,822 54,249 55,301

– Sublease of other operating lease facilities 246,574 476,503 1,024,279

Sundry income 118,825 121,064 48,296

1,413,178 2,757,932 3,965,179

A-46





18. Finance costs

2011 2012 2013

$ $ $

Interest expenses

– bank overdrafts 223 55 785

– revolving loan 3,485 235 9,517

– finance lease 731,510 591,409 585,826

– late payment 113 63 679

– term loans 225,077 191,144 151,857

– trust receipts 88,161 112,278 189,093

– others – – 3,767

1,048,569 895,184 941,524

Bank charges 78,114 85,488 226,393

1,126,683 980,672 1,167,917

19. Profit before income tax

In addition to the charges and credits disclosed elsewhere in the notes to the combined

financial statements, the above includes the following charges:

2011 2012 2013

$ $ $


Employee benefits expense

– salaries, wages and other benefits 12,692,308 14,667,649 16,284,020

– contribution to Central Provident Fund 260,680 246,123 325,696

Depreciation of property, plant

and equipment 6,054,174 7,167,646 8,654,412

Diesel/fuel costs 14,253,802 14,214,536 15,318,538

Material costs 10,794,603 10,493,386 19,806,191

Operating lease expense

– trucks and equipment 4,233,190 4,549,317 4,927,593

A-47





19. Profit before income tax (Continued)

2011 2012 2013

$ $ $

Provision for foreseeable losses – 1,504,867 –

Repair and maintenance 7,990,297 8,992,182 8,185,806

Subcontract costs 8,046,859 14,115,909 16,093,581



– salaries, wages and other benefits 5,043,435 5,082,598 6,613,130


Directors’ remuneration

– salaries, wages and other benefits 799,143 822,800 701,200

– Directors’ fees 1,000,000 400,000 –


Depreciation of property, plant

and equipment 454,533 665,320 654,187


– Construction site and other

operating facilities 872,789 1,254,278 1,472,505

Other expenses

Allowance for impairment of

trade receivables 26,978 236,031 352,050

Foreign exchange loss, net – – 12,966

Write-back of allowance for impairment of

trade receivables no longer required (48,153) – (60,580)

Penalty and fine 316,600 383,575 416,417

Transportation expense 87,591 95,300 44,409

A-48





20. Income tax expense

2011 2012 2013

$ $ $

Current income tax

– current financial year 200,600 231,000 763,709

– underprovision in prior financial years – 723 131,028

200,600 231,723 894,737

Deferred tax expense

– current financial year 629,000 294,283 65,501

– (over)/underprovision in prior financial years – (12,283) 217,000

629,000 282,000 282,501

829,600 513,723 1,177,238

Reconciliation of effective income tax rate

2011 2012 2013

$ $ $

Profit before income tax 5,364,552 4,494,415 6,327,857

Income tax calculated at Singapore’s

statutory tax rate of 17%, 17% and

17% respectively 911,974 764,050 1,075,736

Tax effect of:

– Income not subject to tax (69,501) (69,700) (183,383)

– Expenses not deductible for tax purposes 167,890 199,164 207,049

– Tax rebates and enhanced allowances (144,847) (326,271) (184,859)

– Singapore statutory stepped income

exemption (36,379) (25,925) (85,850)

Underprovision of income tax in prior

financial years – 723 131,028

(Over)/underprovision of deferred tax in prior

financial years – (12,283) 217,000

Others 463 (16,035) 517

829,600 513,723 1,177,238

A-49





21. Earnings per share

Basic earnings per share

Basic earnings per share is calculated by dividing the profit for the financial years attributable

to owners of the parent by the number of ordinary shares post restructuring during the

respective financial years.

2011 2012 2013

Profit attributable to owners of

the parent ($) 4,534,952 3,980,692 4,962,817

Number of ordinary shares post

restructuring exercise 151,384,600 151,384,600 151,384,600

Basic earnings per share (in cents) 3.00 2.63 3.28

Diluted earnings per share

The Group has not granted any potential convertible instruments over its share and

consequently there is no dilution of earnings per share.

22. Dividends

2011 2012 2013

$ $ $

First interim tax exempt dividend of $0.9375

per ordinary share in respect of financial

year ended 31 December 2011 3,000,000 – –



year ended 31 December 2012 – 500,000 –



year ended 31 December 2013 – – 1,000,000

3,000,000 500,000 1,000,000

A-50





23. Significant related party transactions

A related party is defined as follows:

(a) A person or a close member of that person’s family is related to the Group and Company

if that person:

(i) Has control or joint control over the Company;

(ii) Has significant influence over the Company; or

(iii) Is a member of the key management personnel of the Group and Company or of

a parent of the Company.

(b) An entity is related to the Company if any of the following conditions apply:

(i) The entity and the Company are members of the same group (which means that

each parent, subsidiary and fellow subsidiary is related to the others).

(ii) One entity is an associate or joint venture of the other entity (or an associate or

joint venture of a member of a group of which the other entity is a member).

(iii) Both entities are joint venture of the same third party.

(iv) One entity is a joint ventures of a third entity and the other entity is an associate

of the third entity.

(v) The entity is a post-employment benefit plan for the benefit of employees of either

the Company or an entity related to the Company. If the Company is itself such a

plan, the sponsoring employers are also related to the Company.

(vi) The entity is controlled or jointly controlled by a person identified in (a);

(vii) A person identified in (a)(i) has significant influence over the entity or is a member

of the key management personnel of the entity (or of a parent of the entity).

A-51





23. Significant related party transactions (Continued)

During the financial year 2011, 2012 and 2013, in addition to the information disclosed

elsewhere in these financial statements, the Group entered into the following transactions

with related parties at rates and terms agreed between the parties:

2011 2012 2013

$ $ $

With related parties

Sale of construction materials 413,670 15,000 –

Advances to related parties 199,176 – –

Management fee income charged

to related parties – – 260,000

Purchase of construction materials 294,250 1,350,000 650,000

Rental of equipment and trucks

from related parties 4,391,804 4,587,732 4,221,600

Compensation of key management personnel

Key management personnel are Directors of the Group and those persons having authority

and responsibility for planning, directing and controlling the activities of the Group, directly,

or indirectly.

The remuneration of Directors of the Group during the financial years ended 31 December

2011, 2012 and 2013 were as follows:

2011 2012 2013

$ $ $

Directors of subsidiaries

– Directors’ fees 1,000,000 400,000 –

– Short-term employee benefits 799,143 822,800 701,200

– Post-employment benefits 53,012 58,324 57,046

1,852,155 1,281,124 758,246

A-52





24. Operating lease commitments

The Group as lessee

At the end of the financial year, commitments in respect of non-cancellable operating leases

in respect of construction site and other operating facilities are as follows:

2011 2012 2013

$ $ $

Not later than one year 365,286 1,065,923 743,604

Later than one year and not later than

five years 217,703 918,579 863,847

582,989 1,984,502 1,607,451

Operating lease payments represent rents payable by the Group for construction site and

other operating facilities. Leases are negotiated for an average term of 2 to 3 years and

rentals are fixed for an average of 2 to 3 years with no provisions for contingent rent or

upward revision of rent based on market price indices.

The Group as lessor

The Group has entered into commercial property leases on its investment property and

leasehold properties. These non-cancellable leases have remaining lease terms of between

1 and 2 years. All leases include a clause to enable upward revision of the rental charge of

an annual basis based on prevailing market conditions.

As at the end of the financial year, future minimum rentals receivable under non-cancellable

operating leases at the end of the financial year are as follows:

2011 2012 2013

$ $ $

Not later than one year 672,023 1,175,317 1,036,261


five years 959,602 930,722 295,000

1,631,625 2,106,039 1,331,261

A-53





25. Capital commitments

2011 2012 2013

$ $ $

Capital expenditure approved and contracted

for but not provided for in the financial

statements 962,905 2,984,928 2,138,395

26. Contingent liabilities

As at the end of the financial year, the Group has the following unsecured contingent

liabilities:

2011 2012 2013

$ $ $

Guarantees given as securities for term loan

and finance lease facilities granted to a

related party 16,351,600 16,351,600 16,351,600

The Group has not recognised any liability in respect of the guarantees given to the banks

for banking facilities granted to a related party as the Directors have assessed that the

likelihood of the related party defaulting on repayment of its loan is remote.

27. Segment information

Management has determined the operating segment based on the reports reviewed by the

chief operating decision maker. For management purposes, the Group is organised into

business units based on its services, and has three reportable operating segments as

follows:

(a) Civil engineering services;

(b) Inland logistics support; and

(c) Sales of construction materials.

Civil engineering services includes construction projects on earthworks, infrastructure works,

external works, demolition and excavation works, drainage works and road diversion. The

Group also operates and manage entire stockpile sites.

Inland logistics support includes rental of construction equipment including tipper trucks,

compactors and excavators.

Sale of construction materials includes the supplies of LSS, as well as other construction

related equipment and consumables.

The Group’s reportable segments are strategic business units that are organised based on

their function.

A-54





27. Segment information (Continued)

Management monitors the operating results of the segment separately for the purposes of

making decisions about resources to be allocated and of assessing performance. Segment

performance is evaluated based on operating profit or loss which is similar to the accounting

profit or loss.

The accounting policies of the operating segments are the same of those described in the

summary of significant accounting policies. There is no asymmetrical allocation to reportable

segments.

Segment results include items directly attributable to a segment as well as those that can be

allocated on a reasonable basis. Unallocated items comprise assets, liabilities and other

corporate expenses.

Due to the nature of the Group’s operations, no segment assets and liabilities are presented

to the chief operating decision maker. Chief operating decision maker manages the assets,

liabilities, finance costs and income taxes on a Group basis.

Business Segment

Civil

engineering

services

Inland

logistics

support

Sale of

construction

materials Unallocated Elimination Consolidated

$ $ $ $ $ $

2011

Revenue

External revenue 51,893,454 16,438,779 12,651,895 – – 80,984,128

Inter-segment revenue – 99,025 3,916,482 – (4,015,507) –

51,893,454 16,537,804 16,568,377 – (4,015,507) 80,984,128

Results

Segment results 11,511,702 3,867,263 1,000,912 (9,888,642) – 6,491,235

Finance costs (1,126,683)

Profit before incometax 5,364,552

Income tax expense (829,600)

Profit for the financialyear 4,534,952

A-55






Business Segment

Civil

engineering

services

Inland

logistics

support

Sale of

construction


$ $ $ $ $ $

2011 (Continued)

Non-cash items

Fair value gain oninvestment property – – – 400,000 – 400,000

Gain on disposalof property, plantand equipment – – – 56,160 – 56,160

Write-back ofallowancefor impairment of tradereceivables no longerrequired 48,153 – – – – 48,153

Depreciation ofproperty, plant andequipment – – – (6,508,707) – (6,508,707)

Allowance forimpairmentof trade receivables (26,978) – – – – (26,978)

2012

Revenue


Inter-segment revenue – 41,150 3,430,745 – (3,471,895) –

65,256,914 16,248,682 14,179,017 – (3,471,895) 92,212,718

Results

Segment results 12,694,446 1,414,658 1,498,635 (10,132,652) – 5,475,087

Finance costs (980,672)




A-56






Business Segment

Civil

engineering

services

Inland

logistics

support

Sale of

construction


$ $ $ $ $ $

2012 (Continued)

Non-cash items



Provision forforeseeable losses (1,504,867) – – – – (1,504,867)


Allowance forimpairmentof trade receivables (236,031) – – – – (236,031)

2013

Revenue


Inter-segment revenue – 2,148,394 4,151,152 – (6,299,546) –

79,612,922 25,972,863 9,188,938 – (6,299,546) 108,475,177

Results

Segment results 16,243,989 1,738,593 606,577 (11,093,385) – 7,495,774

Finance costs (1,167,917)


Income tax expense (1,177,238)


A-57






Business Segment

Civil

engineering

services

Inland

logistics

support

Sale of

construction


$ $ $ $ $ $

2013 (Continued)

Non-cash items



Write-back ofallowancefor impairment of tradereceivables no longerrequired 60,680 – – – – 60,680


Allowance forimpairment of tradereceivables (352,050) – – – – (352,050)

Major customers

For the financial years ended 31 December 2011, 2012 and 2013, the revenue from 4, 3 and

2 major customers of the Group amounted to approximately $41,096,000, $34,076,100 and

$31,282,000 of the total revenue respectively from civil engineering services segment.

Geographic information

The Group’s sales and assets are mainly derived in Singapore. Accordingly, no geographical

segment information are presented during the financial years.

A-58





28. Financial instruments, financial risks and capital management

The Group’s activities expose it to credit risks, market risks (including foreign currency risks,

interest rate risks and equity price risks) and liquidity risks. The Group’s overall risk

management strategy seeks to minimise adverse effects from the volatility of financial

markets on the Group’s financial performance to hedge certain financial risk exposures.

The Board of Directors is responsible for setting the objectives and underlying principles of

financial risk management for the Group. The management then establishes the detailed

policies such as authority levels, oversight responsibilities, risk identification and

measurement, exposure limits and hedging strategies, in accordance with the objectives and

underlying principles approved by the Board of Directors.

There have been no changes to the Group’s exposure to these financial risks or the manner

in which it manages and measures the risk. Market risk exposures are measured using

sensitivity analysis as indicated below.

28.1 Credit risks

Credit risk refers to the risk that the counterparty will default on its contractual

obligations resulting in a loss to the Group. The Group has adopted a policy of only

dealing with creditworthy counterparties as a means of mitigating the risk of financial

loss from defaults. The Group performs ongoing credit evaluation of its counterparties’

financial condition and generally does not require collateral.

As at 31 December 2011, 2012 and 2013, approximately 26%, 49% and 34% of the

Group’s trade receivables from third parties were due from 2, 1 and 2 customers

respectively.

The Group’s major classes of financial assets are available-for-sale financial assets,

trade and other receivables, amounts due from contract customers and cash and cash

equivalents.

Bank deposits are mainly deposits with banks with high credit-ratings assigned by

international credit rating agencies.

Trade receivables that are neither past due nor impaired are substantially companies

with good collection track record with the Group.

The age analysis of trade receivables past due but not impaired is as follows:

2011 2012 2013

$ $ $

Past due for 1 to 30 days 3,400,758 3,499,504 4,384,378

Past due for 31 to 60 days 728,897 953,598 1,176,861

Past due for 61 to 90 days 242,868 664,888 519,194

Past due for more than 90 days 2,336,514 1,413,122 1,063,114

A-59





28. Financial instruments, financial risks and capital management (Continued)

28.2 Market risks

Foreign currency risks

The Group is not expose to significant financial risks on changes in foreign currency

exchange rates as the Group’s transactions are mainly denominated in the respective

functional currencies of the Group entities.

As at the end of the financial year, monetary items denominated in a currency other

than the Group’s functional currency comprise cash and bank balances (Note 10).

Interest rate risks

The Group’s exposure to market risk for changes in interest rates relates primarily

finance lease payables and bank borrowings as shown in Notes 13 and 14 to the

combined financial statements respectively.

The Group’s results are affected by changes in interest rates due to the impact of such

changes on interest expenses from bank loans and trust receipts which are at floating

interest rates. It is the Group’s policy to obtain quotes from banks to ensure that the

most favourable rates are made available to the Group.

If the interest rate increases or decreases by 0.5%, the Group’s equity will decrease

or increase by approximately $12,607, $14,096 and $24,230 as at 31 December 2011,

2012 and 2013 respectively, arising mainly as a result of higher or lower interest on

floating rates for bank borrowings. The interest expense from bank borrowings are

recognised as an expense under “Finance costs” line item in the statement of

comprehensive income.

28.3 Liquidity risks

Liquidity risks refer to the risks in which the Group encounters difficulties in meeting

its short-term obligations. Liquidity risks are managed by matching the payment and

receipt cycle.

The following table details the Group’s remaining contractual maturity for its non-

derivative financial instruments. The table has been drawn up based on undiscounted

cash flows of financial instruments based on the earlier of the contractual date or when

the Group is expected to receive or (pay). The table includes both expected interest

and principal cash flows.

A-60






28.3 Liquidity risks (Continued)

Effective

interest

rate

Within one

financial

year

After one

financial

year but

within five

financial

years

More than

five

financial

years Total

% $ $ $ $

2011


Trade and other

payables – 18,629,539 – – 18,629,539

Finance lease payables 3.66 6,723,319 11,892,956 – 18,616,275

Bank loans, floating

interest rates:

– Revolving loans 2.00 402,000 – – 402,000

– Term loans 1.55 2,374,972 3,470,297 10,361,031 16,206,300

Trust receipts 1.97 5,588,004 – – 5,588,004

33,717,834 15,363,253 10,361,031 59,442,118

A-61







Effective

interest

rate

Within one

financial

year

After one

financial

year but

within five

financial

years

More than

five

financial

years Total

% $ $ $ $

2012


Trade and other

payables – 24,446,684 – – 24,446,684



interest rates:

– Revolving loans 1.80 502,250 – – 502,250

– Term loans 1.23 1,079,749 3,268,405 9,483,157 13,831,311

Trust receipts 1.71 8,726,471 – – 8,726,471

42,753,754 20,040,358 9,483,157 72,277,269

2013


Trade and other

payables – 27,581,330 – – 27,581,330



interest rates:

– Revolving loans 1.75 1,506,563 – – 1,506,563

– Term loans 1.20 820,297 3,204,919 8,726,361 12,751,577

Trust receipts 1.60 12,733,233 – – 12,733,233

52,260,872 25,328,879 8,726,361 86,316,112

The disclosed amounts for the financial guarantee contracts in Note 26 represent the

maximum amount of issued financial guarantees in the earliest time period for which

the guarantees could be called upon in the contractual maturity analysis.

A-62







The Group’s operations are financed mainly through accumulated profits and bank

borrowings. Adequate lines of credits are maintained to ensure the necessary liquidity

is available when required.

The repayment terms of the finance lease and bank borrowings are disclosed in Notes

13 and 14 to these combined financial statements respectively.

28.4 Capital management policies and objectives

The Group manages capital to ensure that the Group is able to continue as a going

concern and maintain an optimal capital structure so as to maximise shareholders’

value.

The Group is in compliance with externally imposed capital requirements for the

financial years ended 31 December 2011, 2012 and 2013.

The management reviews the capital structure to ensure that the Group is able to

service any debt obligations (including principal repayment and interest) based on its

operating cash flows. Upon review, the Group will balance its overall capital structure

through new share issues and the issue of new debt or the redemption of existing debt,

if necessary. The Group’s overall strategy remains unchanged during the financial

years ended 31 December 2011, 2012 and 2013.

The Group monitors capital based on a gearing ratio, which is net debt divided by total

equity plus net debt. The Group includes within net debt, trade and other payables,

finance lease payables and borrowings less cash and cash equivalents. Total equity

comprises of share capital plus reserves.

2011 2012 2013

$ $ $


Finance lease payables 17,570,681 23,813,536 30,751,776

Bank borrowings 20,606,604 21,636,951 25,701,435

Less: Cash and cash equivalents (7,338,532) (5,167,199) (12,536,380)

Net debt 51,201,625 66,063,305 72,431,494

Total equity 25,583,938 32,564,631 37,215,249

Total capital 76,785,563 98,627,936 109,646,743

A-63






28.4 Capital management policies and objectives (Continued)

2011 2012 2013

$ $ $

Gearing ratio 67% 67% 66%

29. Fair value measurement

29.1 Fair value of financial assets and financial liabilities

The carrying amounts of the current financial assets and current financial liabilities

approximate their respective fair values as at the end of the reporting period due to the

relatively short-term maturity of these financial instruments.

The fair values of non-current financial liabilities in relation to finance lease payables

and bank borrowings are disclosed in Notes 13 and 14 to the combined financial

statements respectively.

29.2 Fair value of investment property

The fair value of investment property has been determined based on the market

comparison approach that reflects most recent transaction prices for similar

properties, after adjusting for relevant factors such as land tenure, physical attributes,

location and the date of transaction.

Level 3 recurring fair value measurements

(i) Information about significant unobservable inputs used in Level 3 recurring fair

value measurements

The following table shows the information about fair value measurements using

significant unobservable inputs (Level 3):

Description

Fair value

as at

31 December

2013

Valuation

techniques

Unobservable

inputs

Relationship of

unobservable

inputs to

fair value

Investment

Property:

Held for

generating

operating lease

income

3,800,000 Market

comparable

approach

Yield adjustments

based on

management’s

assumptions*

The higher

the yield

adjustments,

the higher the

fair value

* The yield adjustments are made for any difference in the nature, location or condition of the

specific property.

A-64





29. Fair value measurement (Continued)

29.2 Fair value of investment property (Continued)

(ii) Valuation policies and procedures

Management of the Group oversees the Group’s financial reporting valuation

process and is responsible for setting and documenting the Group’s valuation

policies and procedures.

For all significant financial reporting valuations using valuation models and

significant unobservable inputs, it is the Group’s policy to engage external

valuation experts to perform the valuation. Management is responsible for

selecting and engaging valuation experts that possess the relevant credentials

and knowledge on the subject of valuation, valuation methodologies, and FRS

113 Fair Value Measurement guidance.

For valuations performed by external valuation experts, the management reviews

the appropriateness of the valuation methodologies and assumptions adopted.

The management also evaluates the appropriateness and reliability of the inputs

used in the valuations.

Significant changes in fair value measurements from period to period are

evaluated by the management for reasonableness. Key drivers of the changes

are identified and assessed for reasonableness against relevant information from

independent sources, or internal sources if necessary and appropriate.

30. Events subsequent to the reporting period

30.1 On 7 November 2014, the Group entered into a sale and purchase agreement with a

related party to sell the freehold investment property located at 33 Bedok Road

Singapore 469358 (Note 6) for a sale consideration of $3,500,000.

30.2 At an extraordinary general meeting held on 18 November 2014, the Shareholders

approved, among others, the following:

(a) the conversion of our Company into a public limited company and the change of

the name to “Huationg Global Limited”;


(c) the allotment and issue of the Placement Shares which are the subject of the

Placement, on the basis that the Placement Shares, when allotted, issued and

fully-paid, will rank pari passu in all respects with the existing Shares;

(d) the allotment and issue of 1,875,000 ordinary shares to PrimePartners Corporate

Finance Pte. Ltd. (“PPCF Shares”) in satisfaction of their management fee as

Sponsor and Issue Manager, which when allotted, issued and fully-paid, will rank

pari passu in all respects with the existing issued Shares;

A-65





30. Events subsequent to the reporting period (Continued)


approved, among others, the following: (Continued)

(e) the allotment and issue of 250,000 ordinary shares to the financial controller, Goh

Tuck Peng (“FC Shares”), which when allotted, issued and fully-paid, will rank


(f) the adoption of the Share Option Scheme and the Share Plan (details of which

are set in the sections “Huationg Employee Share Option Scheme” and “Huationg

Performance Share Plan” of this Offer Document) and the authorisation of the

Directors, pursuant to Section 161 of the Companies Act, to allot and issue

Shares upon the exercise of Options granted under the Share Option Scheme

and upon the grant of Awards under the Share Plan;

(g) the listing and quotation of all the issued Shares (including the Placement Shares

to be allotted and issued pursuant to the Placement, the FC Shares and the

PPCF Shares) on Catalist;

(h) the authorisation to the Directors, pursuant to Section 161 of the Companies Act

and by way of ordinary resolution in a general meeting, to:


(ii) make or grant offers, agreements or options (each and “Instrument”

and collectively, “Instruments”) that might or would require Shares to

be issued during the continuance of this authority or thereafter,

including but not limited to the creation and issue of (as well as

adjustments to) warrants, debentures, convertible securities or other

instruments convertible into Shares; and/or

(iii) notwithstanding that such authority may have ceased to be in force at

the time that Instruments are to be issued, issue additional Instruments

arising from adjustments made to the number of Instruments

previously issued in the event of rights, bonus or other capitalisation

issues,

at any time and upon such terms and conditions and for such purposes and

to such persons as the Directors may in their absolute discretion deem fit;

and

(B) issue Shares in pursuance of any Instrument made or granted by the

Directors pursuant to (A)(ii) and/or (A)(iii) above, while such authority was

in force (notwithstanding that such issue of Shares pursuant to the

Instruments may occur after the expiration of the authority contained in this

resolution), provided that:

A-66








(i) the aggregate number of Shares to be issued pursuant to such

authority (including the Shares to be issued in pursuance of

Instruments made or granted pursuant to this authority but excluding

Shares which may be issued pursuant to any adjustments

(“Adjustments”) effected under any relevant Instrument, which

Adjustment shall be made in compliance with the provisions of the

Rules of Catalist for the time being in force (unless such compliance

has been waived by the SGX-ST) and the Articles of Association for the

time being of the Company, does not exceed 100.0% of the post-

Placement issued share capital excluding treasury shares, and

provided further that the aggregate number of Shares to be issued

other than on a pro-rata basis to Shareholders (including Shares to be

issued in pursuance of Instruments made or granted pursuant to such

authority but excluding Shares which may be issued pursuant to any

Adjustments effected under any relevant Instrument) shall not exceed

50.0% of the post-Placement issued share capital excluding treasury

shares;

(ii) in exercising such authority, the Company shall comply with the

provisions of the Rules of Catalist for the time being in force (unless

such compliance has been waived by the SGX-ST) and the Articles of

Association for the time being of the Company; and

(iii) unless revoked or varied by the Company in general meeting by

ordinary resolution, the authority so conferred 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 the earlier.

For the purpose of this resolution, the “post-Placement issued share capital” shall

mean the total number of issued Shares of the Company (excluding treasury shares)

immediately after the Placement, after adjusting for (i) new Shares arising from the

conversion or exercise of any convertible securities; (ii) new Shares arising from

exercising share options or vesting of share awards outstanding or subsisting at the

time such authority is given, provided the options or share awards were granted in

compliance with the Rules of Catalist; and (iii) any subsequent bonus issue,

consolidation or sub-division of Shares.

(i) without prejudice to the generality of, and pursuant and subject to the approval

of the general mandate to issue Shares set out in paragraph (i) above,

authorisation of the Directors, pursuant to Section 161 of the Companies Act, to

issue Shares other than on a pro-rata basis, at a discount to the weighted

average price of the Shares for trades done on the SGX-ST for the full market day

on which the placement or subscription agreement is signed (or if not available,

the weighted average price based on trades done on the preceding market day),

A-67








of not more than 10.0%, at any time and upon such terms and conditions and for

such purposes and to such persons as the Directors may in their absolute

discretion deem fit, provided that (unless revoked or varied by the Company in

general meeting) the authority so conferred in this paragraph (j) 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.

A-68



Unaudited Interim Condensed Combined Financial Statements

For the financial period from 1 January 2014 to 30 June 2014

APPENDIX B – INDEPENDENT AUDITOR’S REVIEW REPORT ANDUNAUDITED INTERIM CONDENSED COMBINED FINANCIAL STATEMENTSFOR THE FINANCIAL PERIOD FROM 1 JANUARY 2014 TO 30 JUNE 2014

B-1



STATEMENT OF DIRECTORS

We, Ng Hai Liong and Ng Kian Ann Patrick, being two of the Directors of Huationg Global Limited

(the “Company”), do hereby state that, in the opinion of the Board of Directors,

(i) the accompanying unaudited interim condensed combined financial statements together with

the notes thereon are properly drawn up so as to present fairly, in all material respects, the

state of affairs of the Company and its subsidiaries (the “Group”) as at 30 June 2014 and of

the results, changes in equity and cash flows of the Group for the six-month period then

ended on those dates; and

(ii) at the date of this statement, there are reasonable grounds to believe that the Group will be

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

On behalf of the Board of Directors

Ng Hai Liong

Director

Ng Kian Ann Patrick

Director

Singapore

1 December 2014

B-2

INDEPENDENT AUDITOR’S REVIEW REPORT ON

UNAUDITED INTERIM CONDENSED COMBINED FINANCIAL STATEMENTS

FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2014 TO 30 JUNE 2014

1 December 2014



9 Benoi Crescent

Singapore 629972

Introduction

We have reviewed the accompanying unaudited interim condensed combined financial statements

of Huationg Global Limited (the “Company”) and its subsidiaries (the “Group”) comprising the

unaudited interim condensed combined statement of financial position of the Group as at 30 June

2014, and the related unaudited interim condensed combined statement of comprehensive

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

period from 1 January 2014 to 30 June 2014 and selected explanatory notes as set out on pages

B-5 to B-46. Management is responsible for the preparation and fair presentation of the unaudited

interim condensed combined financial statements in accordance with the Singapore Financial

Reporting Standard 34, Interim Financial Reporting (“FRS 34”). Our responsibility is to express a

conclusion on the unaudited interim condensed combined financial statements based on our

review.

Scope of Review

We conducted our review in accordance with Singapore Standard on Review Engagements 2410,

“Review of Interim Financial Information Performed by the Independent Auditor of the Entity”. A

review of interim financial information consists of making inquiries, primarily of persons

responsible for financial and accounting matters, and applying analytical and other review

procedures. A review is substantially less in scope than an audit conducted in accordance with

Singapore Standards on Auditing and consequently does not enable us to obtain assurance that

we would become aware of all significant matters that might be identified in an audit. Accordingly,

we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the

accompanying unaudited interim condensed combined financial statements is not prepared, in all

material respects, in accordance with FRS 34.

B-3

INDEPENDENT AUDITOR’S REVIEW REPORT ON

UNAUDITED INTERIM CONDENSED COMBINED FINANCIAL STATEMENTS

FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2014 TO 30 JUNE 2014 (Continued)

Restriction on Distribution and Use

This report is made solely to you as a body and for inclusion in the Offer Document to be issued

in relation to the proposed initial public offering of ordinary shares of the Company in connection

with the Company’s listing on Catalist, the sponsor-supervised listing platform of the Singapore

Exchange Securities Trading Limited.

BDO LLP



Singapore

1 December 2014


Partner-in-charge

B-4



UNAUDITED INTERIM CONDENSED COMBINED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2014

Note 30 June 2014 31 December 2013

(Unaudited) (Audited)

$ $

Non-current assets

Property, plant and equipment 5 84,769,930 73,234,159

Investment property 6 – 3,800,000

Available-for-sale financial assets 7 1,925,034 –

Prepayment 388,339 –

Intangible asset 8 11,000 11,000

Total non-current assets 87,094,303 77,045,159

Current assets

Amounts due from contract customers 9 9,948,892 11,095,948

Available-for-sale financial assets 7 1,284,542 –

Trade and other receivables 10 34,984,264 32,196,870

Prepayments 671,484 411,189

Cash and bank balances 11 22,317,004 12,536,380

69,206,186 56,240,387

Non-current asset held for sale 12 3,500,000 –

Total current assets 72,706,186 56,240,387

Total assets 159,800,489 133,285,546


Share capital 13 7,075,000 7,075,000

Accumulated profits 24,831,376 29,827,447

Other reserves 14 6,728,924 –

Equity attributable to owners of the parent 38,635,300 36,902,447

Non-controlling interests 338,607 312,802

Total equity 38,973,907 37,215,249


Other payables 15 3,828,333 533,333

Finance lease payables 16 24,125,251 21,605,128

Bank borrowings 17 13,108,890 10,835,000

Deferred tax liabilities 18 3,895,811 3,966,501

Total non-current liabilities 44,958,285 36,939,962

Current liabilities

Amounts due to contract customers 9 10,289,065 6,399,073

Trade and other payables 15 31,561,773 27,981,330

Finance lease payables 16 10,710,520 9,146,648

Bank borrowings 17 22,067,253 14,866,435

Current income tax payable 1,239,686 736,849

Total current liabilities 75,868,297 59,130,335

Total liabilities 120,826,582 96,070,297

Total equity and liabilities 159,800,489 133,285,546

The accompanying notes form an integral part of these unaudited interim condensed combinedfinancial statements.

B-5



UNAUDITED INTERIM CONDENSED COMBINED STATEMENT OF COMPREHENSIVE

INCOME FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2014 TO 30 JUNE 2014

Note

1 January 2014 to

30 June 2014

1 January 2013 to

30 June 2013

(Unaudited) (Unaudited)

$ $

Revenue 19 67,608,681 52,830,810

Cost of sales and services (57,275,946) (44,176,616)

Gross profit 10,332,735 8,654,194


Other income 20 1,855,624 1,344,684


Administrative expenses (7,051,324) (5,953,729)

Other expenses (855,170) (1,001,271)

Finance costs 21 (703,541) (464,916)

Profit before income tax 22 3,578,324 2,578,962

Income tax expense 23 (553,590) (444,696)

Profit for the financial period 3,024,734 2,134,266

Other comprehensive income:

Items that may be reclassified subsequently toprofit or loss:

Available-for-sale financial assets:

Gains arising during the financial period 30,871 –

Items that will not be classified subsequently toprofit or loss:

Gain on revaluation of property, plant and

equipment 6,698,053 –

Other comprehensive income for the financial

period 6,728,924 –

Total comprehensive income for the financial

period 9,753,658 2,134,266


Owners of the parent 2,998,929 2,010,818


3,024,734 2,134,266




9,753,658 2,134,266

Earnings per share 24

– Basic and diluted (in cents) 1.98 1.33


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B-8



UNAUDITED INTERIM CONDENSED COMBINED STATEMENT OF CASH FLOWS FOR

THE FINANCIAL PERIOD FROM 1 JANUARY 2014 TO 30 JUNE 2014

1 January 2014 to

30 June 2014

1 January 2013 to

30 June 2013


$ $


Profit before income tax 3,578,324 2,578,962

Adjustments for:

Allowance for impairment of trade receivables 163,040 –

Depreciation of property, plant and equipment 5,238,463 4,631,350

Fair value gain on investment property – (200,000)

(Gain)/Loss on disposal of plant and equipment (12,172) 548,996

Impairment loss on non-current asset held for sale 300,000 –

Interest expenses 600,885 417,817

Interest income (5,107) (433)

Operating cash flows before working capital changes 9,863,433 7,976,692


Trade and other receivables (4,017,043) 4,725,807

Prepayments (163,210) (142,964)

Amounts due to contract customers, net 5,037,048 (12,582,951)

Trade and other payables (125,518) 4,503,239

Cash generated from operations 10,594,710 4,479,823

Interest income 5,107 433

Income tax paid (121,443) (212,370)

Net cash from operating activities 10,478,374 4,267,886


Purchase of property, plant and equipment (1,476,814) (92,635)

Purchase of available-for-sale investments (1,253,671) –

Proceeds from disposal of plant and equipment 326,573 167,601

Net cash (used in)/from investing activities (2,403,912) 74,966


B-9



UNAUDITED INTERIM CONDENSED COMBINED STATEMENT OF CASH FLOWS FOR


1 January 2014 to

30 June 2014

1 January 2013 to

30 June 2013


$ $


Advances to related parties (153,391) –

Repayment from related parties 1,220,000 –

Advances to a director – 100,000

Repayment to a director (809) –

Proceeds from trust receipts 30,804,945 18,086,746

Repayment of trust receipts (28,412,850) (18,552,570)

Proceeds from term loans 5,002,155 –

Dividends paid (500,000) –

Repayment of term loans (330,000) (462,279)

Interest paid (600,885) (417,817)

Repayment of finance lease payables (5,323,003) (5,368,915)

Net cash from/(used in) financing activities 1,706,162 (6,614,835)

Net change in cash and bank balances 9,780,624 (2,271,983)


the financial period 12,536,380 5,167,199

Cash and bank balances as at the end of

the financial period (Note 11) 22,317,004 2,895,216


B-10



NOTES TO THE UNAUDITED INTERIM CONDENSED COMBINED FINANCIAL STATEMENTS


These notes form an integral part and should be read in conjunction with the unaudited interim

condensed combined financial statements.

These unaudited interim condensed combined financial statements have been prepared for

inclusion in the Offer Document of Huationg Global Limited (the “Company”) and its subsidiaries

(the “Group”) and were authorised for issue by the Directors of the Company on 1 December 2014.

1. General corporate information

The Company was incorporated and domiciled in the Republic of Singapore on 1 August

2014 under the Singapore Companies Act, Cap. 50 (the “Act”) as an exempt private company

limited by shares in the name of “Huationg Global Private Limited”. In connection with its

conversion into a public company limited by shares, the Company changed its name from

“Huationg Global Private Limited” to “Huationg Global Limited” on 26 November 2014. The

company’s registration number is 201422395Z.

The address of the Company’s registered office and principal place of business is 9 Benoi

Crescent Singapore 629972.

The principal activity of the Company is that of an investment holding company.

The principal activities of the subsidiaries are set out in Note 1.3 to the audited combined

financial statements for the financial years ended 31 December 2011, 2012 and 2013.

In preparation for the proposed listing of the Company on the Singapore Exchange Securities

Trading Limited (“SGX-ST”), the Company underwent a restructuring exercise to streamline

and rationalise the group structure which are disclosed in the audited combined financial

statements for the financial years ended 31 December 2011, 2012 and 2013.

These unaudited interim condensed combined financial statements have been prepared

solely in connection with the proposed listing of the Company on Catalist, the sponsor-

supervised board of the SGX-ST.

2. Basis of preparation of unaudited interim condensed combined financial statements

The unaudited interim condensed combined financial statements have been prepared for the

six months ended 30 June 2014 in accordance with Singapore Financial Reporting Standard

(“FRS”) 34 Interim Financial Reporting.

The unaudited interim condensed combined financial statements do not include the full

disclosures normally included in a complete set of financial statements and should be read

in conjunction with the audited combined financial statements for the financial years ended

31 December 2011, 2012 and 2013.

B-11





3.1 Summary of significant accounting policies

The interim condensed combined financial statements have been prepared on the historical

basis except as disclosed in the accounting policies in the audited combined financial

statements for the financial years ended 31 December 2011, 2012 and 2013.

The accounting policies and methods of computation used in the unaudited interim

condensed combined financial statements are consistent with those applied in the audited

combined financial statements for the financial years ended 31 December 2011, 2012 and

2013, except as disclosed in Note 3.2 to the unaudited interim condensed combined financial

statements. These accounting policies are set out in the audited combined financial

statements for the financial years ended 31 December 2011, 2012 and 2013, except as

disclosed below.

Non-current assets held for sale

Non-current assets are classified as held-for-sale if their carrying amount will be recovered

through a sale transaction rather than through continuing use. This condition is regarded as

met only when the sale is highly probable and the asset is available for immediate sale in its

present condition. Management must be committed to the sale, which should be expected to

qualify for recognition as a completed sale within one year from the date of classification.

Non-current assets classified as held-for-sale are measured at the lower of the asset’s

previous carrying amount and fair value less costs to sell. Any impairment loss on initial

classification and subsequent measurement is recognised as an expense. Any subsequent

increase in fair value less costs to sell (not exceeding the accumulated impairment loss that

has been previously recognised) is recognised in profit or loss.

Available-for-sale financial assets (“AFS”)

Certain bond securities and investment in life insurance held by the Group are classified as

AFS if they are not classified in any of the other categories. Subsequent to initial recognition,

they are measured at fair value and changes therein are recognised in other comprehensive

income and accumulated in the available-for-sale reserve, with the exception of impairment

losses, interest calculated using the effective interest method and foreign exchange gains

and losses which are recognised in profit or loss. Where the investment is disposed of or is

determined to be impaired, the cumulative gain or loss previously recognised in the

available-for-sale reserve is included in profit or loss for the period.

The unaudited interim condensed combined financial statements are presented in Singapore

dollar, which is the functional currency of the Company.

B-12





3.2 Changes in accounting policies

Change in valuation of property, plant and equipment (for leasehold properties) from

cost model to the revaluation model

On 1 January 2014, the Group has changed its accounting policy with respect to thesubsequent measurement of leasehold properties from cost model to the revaluation model.Under the revaluation model, the carrying amounts of leasehold properties increase as aresult of revaluation surplus, the revaluation surplus is recognised in other comprehensiveincome and accumulated in equity under the heading of asset revaluation reserve. Theincrease shall be recognised in profit or loss to the extent that it reverses a revaluationdecrease of the same asset previously recognised in profit or loss.

However, if the carrying amounts of the leasehold properties decreased as a result ofrevaluation, the decrease is recognised in profit or loss. The decrease shall be recognisedin other comprehensive income to the extent of any credit balance existing in the revaluationreserve in respect of that leasehold property. The decrease recognised in othercomprehensive income reduced the amount accumulated in equity under the heading ofasset revaluation reserve.

Leasehold properties are revalued by independent professional valuers with sufficientregularity such that the carrying amounts do not differ materially from those which would bedetermined using fair values at the end of the financial year. Any accumulated depreciationat the date of revaluation is eliminated against the gross carrying amount of the asset. Thenet amount is then restated to the revalued amount of the asset.

This change in accounting policy was applied prospectively in accordance with the standardsand there are no effects on the financial statements as the change was applied at thebeginning of the financial period ended 30 June 2014.

The effects of the change is as follows:

Leasehold

properties

$

Balance before revaluation 15,301,947

Gain on revaluation 6,698,053

At 30 June 2014 22,000,000

The effect on other comprehensive income was as follows:

$

Gain on revaluation 6,698,053

4. Critical accounting judgements and key sources of estimation uncertainty

The critical judgements and key sources of estimation uncertainty made by the managementremain unchanged from the audited combined financial statement for the financial yearsended 31 December 2011, 2012 and 2013.

B-13

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B-15





5. Property, plant and equipment (Continued)

The Group’s leasehold properties as at 30 June 2014 with a carrying amount of $18,000,000(31 December 2013: $15,592,092) were pledged as securities for the term loans and bankingfacilities granted to the Group as disclosed in Note 16 to the combined financial statements.

As at 30 June 2014, the carrying amounts of motor vehicles which were registered under thename of a Director of the Group who is holding the motor vehicle in trust for the Group were$111,626 (31 December 2013: $119,626).

For the purpose of unaudited interim condensed combined statements of cash flows, theGroup’s additions to property, plant and equipment during the financial period were financedas follows:

1 January 2014 to

30 June 2014

1 January 2013 to

30 June 2013


$ $

Additions to property, plant and equipment 10,390,582 10,829,199

Acquired under finance lease agreements (6,867,870) (8,772,681)

Acquired under trade and other payables (2,045,898) (1,963,883)

Cash payments to acquire property, plant

and equipment 1,476,814 92,635

Particulars of the leasehold properties held by the Group are as follows:


3 Kranji Loop

Singapore 739539

Industrial building with

a floor area of 2,213

square metre

4 years 9 months commencing 1

April 2011 and a further term of 5

years from 1 January 2016

9 Benoi Crescent

Singapore 629972

Industrial building with

a floor area of 7,579

square metre

30 years commencing 1 January

1989 and a further term of 22 years

from 1 January 2019

The Group’s leasehold properties had been revalued on 30 June 2014 which was recognisedin the combined financial statements based on valuations performed by Messrs GB GlobalPte Ltd, an accredited independent valuation firm. The surpluses arising from therevaluations have been credited to other comprehensive income and accumulated in equityunder asset revaluation reserve (Note 14). The fair value of leasehold properties has beendetermined based on the market comparison approach that reflects most recent transactionprices for similar properties, after adjusting for relevant factors such as property size. If therevalued properties had been included in the financial statements at historical cost lessaccumulated depreciation, the carrying amount as at 30 June 2014 would have been$15,301,948.

B-16





6. Investment property

30 June 2014 31 December 2013


$ $

At fair value

Balance as at the beginning of the financial

period/year 3,800,000 3,000,000

Fair value gain recognised in profit

or loss – 800,000

Reclassification as asset held for sale (3,800,000) –

Balance as at the end of the financial

period/year – 3,800,000

The Group’s investment property was valued at 31 December 2013 by Messrs GB Global PteLtd, an independent professional valuation firm with recent experience in the location andcategory of the investment property held by the Group. The fair value gain arising from therevaluation was recognised in the unaudited interim condensed combined statements ofcomprehensive income. The valuations are based on the market comparison approach.Details of valuation techniques and inputs used are disclosed in Note 32 to the unauditedinterim condensed combined financial statements.

The Group’s investment property is held under freehold interests.

The following amounts are recognised in profit or loss:



$ $

Rental income from investment property 27,911 55,301

Direct operating expenses arising from

rental-generating investment property 2,580 3,960

The Group does not have any investment property that do not generate rental income.

Details of the Group’s investment property as at 30 June 2014 are as follows:


33 Bedok Road

Singapore 469358

3 Storey semi-detached

house

Freehold

B-17





7. Available-for-sale financial assets



$ $


period/year – –

Additions 3,178,705 –

Fair value changes recognised in other

comprehensive income 30,871 –


period/year 3,209,576 –

Details of the available-for-sale financial assets are as follows:



$ $

Current

Quoted debt securities, at fair value

Instrument I 1,034,520 –

Instrument II 250,022 –

1,284,542 –

Non-current

Investment in life insurance, at fair value 1,925,034 –

3,209,576 –

Quoted debt securities

The Group’s quoted debt instrument I has coupon rate of 5.2% per annum and matures on17 April 2019. The fair value of this debt instrument as at 30 June 2014 is based on theclosing quoted market price on the last market day of the financial period.

The Group’s quoted debt instrument II has coupon rate of 3.75% per annum and matures on19 September 2024. The fair value of this debt instrument as at 30 June 2014 is based onthe closing quoted market price on the last market day of the financial period.

The management has the intention to dispose the above quoted debt securities within 12months after the end of the reporting period.

B-18





7. Available-for-sale financial assets (Continued)

Investment in life insurance

The Group entered into a Flexible Premium Universal Life Insurance Policy – Asian WealthPrestige Plus (the “Policy”) for a Director of the Group with a single premium amountingUS$1,929,910 (approximately $2,410,458) by taking up a revolving loan (Note 17). ThePolicy’s total initial sum insured is US$10,000,000, and has a guaranteed interest of 4.2%per annum within the 5 years lock-in period.

The Policy provides the Group with a sum insured of US$10,000,000 or return on investmentwhen the Policy is surrendered to the insurer based on the cash value as determined by theinsurer.

5 years from the date of the Policy taken up by the Group on the life of the Director, theDirector shall become the beneficiary of the Policy and be entitled to (a) all payments andother benefits arising therefrom after deducting for the amounts paid under the revolving loan(Note 17), as well as (b) the surrender value of the insurance policy.

The available-for-sale financial assets are denominated in the following currencies:



$ $

Singapore dollar 1,034,520 –

United States dollar 2,175,056 –

3,209,576 –

8. Intangible asset



$ $

Club membership, at cost 54,400 54,400

Less: Allowance for impairment (43,400) (43,400)

11,000 11,000

B-19





9. Construction contracts



$ $

Contracts in progress as at period/year end

Amounts due from contract customers 9,948,892 11,095,948

Amounts due to contract customers (10,289,065) (6,399,073)

(340,173) 4,696,875

Contract costs incurred and attributable

profits less recognised losses 294,870,039 240,648,346

Less: Progress billings (295,210,212) (235,951,471)

(340,173) 4,696,875

As at 30 June 2014, retention monies held by customers for contract work amounted to$10,231,889 (31 December 2013: $9,641,129) and are presented within trade receivables inNote 10. The amounts due from and to contract customers are denominated in Singaporedollar.

B-20





10. Trade and other receivables



$ $

Trade receivables

– third parties 21,784,269 18,464,952

– a related party 123,886 10,109

Retention sums on construction contracts 10,231,889 9,641,129

32,140,044 28,116,190

Less: Allowance for impairment –

third parties (1,630,760) (1,467,720)

30,509,284 26,648,470

Other receivables

– third parties 35,058 19,143

– employees 70,409 43,449

– related parties 3,478,721 4,545,330

3,584,188 4,607,922

Deposits

– refundable 838,382 562,836

– non-refundable 52,410 377,642

890,792 940,478

Trade and other receivables 34,984,264 32,196,870

Add/(Less):

Cash and bank balances 22,317,004 12,536,380

Amount due from contract customers 9,948,892 11,095,948

Non-refundable deposits (52,410) (377,642)

Loans and receivables 67,197,750 55,451,556

Trade receivables from third parties are unsecured, non-interest bearing and generally on 30to 60 days’ credit terms.

Trade and non-trade receivables from related parties are unsecured, non-interest bearingand repayable on demand.

B-21





10. Trade and other receivables (Continued)

Movements in allowance for impairment loss on third parties trade receivables were asfollows:



$ $

Balance as at beginning of financial

period/year 1,467,720 1,176,250

Allowance made during the financial

period/year 163,040 352,050

Write-back of allowance no longer required – (60,580)


period/year 1,630,760 1,467,720

During the financial period ended 30 June 2014, an allowance for impairment of tradereceivables amounting to $163,040 (31 December 2013: $352,050) was recognised in profitor loss under “other expenses” line item subsequent to a debt recovery assessmentperformed.

Trade receivables are subject to a negative pledge as security for the banking facilities as setout in Note 17 to the combined financial statements.

Trade and other receivables are denominated in Singapore dollar.

11. Cash and bank balances

Cash and bank balances are denominated in the following currencies:



$ $

Singapore dollar 22,139,662 12,476,663

United States dollar 173,977 56,353

Euro 3,365 3,364

22,317,004 12,536,380

B-22





11. Cash and bank balances (Continued)

Cash and bank balances included in the unaudited interim condensed combined statementof cash flows is as follows:

1 January 2014 to

30 June 2014

1 January 2013 to

30 June 2013


$ $

Cash and bank balances on unaudited

interim condensed combined statements of

cash flows 22,317,004 2,895,216

12. Non-current asset held for sale

1 January 2014 to

30 June 2014

1 January 2013 to

30 June 2013


$ $

Balance as at the beginning of financial

period/year – –

Reclassification from investment property 3,800,000 –

Impairment loss* (300,000) –



* This is included in the “Other expenses” line item in the Group’s interim condensed combined statement of

comprehensive income for the financial period then ended.

During the financial period ended 30 June 2014, the Group has reclassified its investment

property to Non-current asset held for sale as it will be recovered principally through a sale

transaction. On 7 November 2014, the Group entered into a sale and purchase agreement

with a related party to sell the freehold investment property for a sale consideration of

$3,500,000.

13. Share capital

For the purpose of preparing the combined financial statements, the share capital represents

the paid-up share capital of the Company and its subsidiaries. As the Company was only

incorporated after the end of the reporting period, the share capital presented relates to the

aggregation of its subsidiaries issued and fully paid-up capital.

B-23





14. Other reserves



$ $

Asset revaluation reserve 6,698,053 –

Available-for-sale reserve 30,871 –

6,728,924 –

Asset revaluation reserve

The asset revaluation reserve arises from the revaluation of leasehold properties and is not

available for distribution. Movement in this reserve is set out in the unaudited interim

condensed combined statement of changes in equity.



$ $


period/year – –

Gain on revaluation 6,698,053 –



Available-for-sale reserve

Available-for-sale reserve represents the cumulative fair value changes of available-for-sale

financial assets until they are derecognised or impaired.



$ $


period/year – –

Gain in fair value 30,871 –


period/year 30,871 –

B-24





15. Trade and other payables



$ $

Current

Trade payables

– third parties 18,354,561 17,319,441

– a related party 1,071,716 1,882,132

Retention sums payable to subcontractors 382,889 449,582

19,809,166 19,651,155

Other payables

– third parties 1,012 142,046

– Directors 2,396,169 2,396,978

– Dividend payable 5,000,000 1,000,000

7,397,181 3,539,024

Refundable deposits 301,576 388,697

Rental receipt in advance 400,000 400,000

Staff retention monies 752,321 716,891

Accrued expenses 2,901,529 3,285,563

31,561,773 27,981,330

Non-current

Other payables

– Dividend payable 3,495,000 –

– Rental receipt in advance 333,333 533,333

3,828,333 533,333

Trade and other payables 35,390,106 28,514,663

Add/(Less):

Rental receipt in advance (733,333) (933,333)

Finance lease payables 34,835,771 30,751,776

Bank borrowings 35,176,143 25,701,435

Other financial liabilities at amortised cost 104,668,687 84,034,541

B-25





15. Trade and other payables (Continued)

Trade payable due to third parties are unsecured, non-interest bearing and generally on 30to 60 days’ credit terms.

Trade payable to a related party is unsecured, non-interest bearing and repayable ondemand.

The non-trade amounts due to Directors and current dividend payable are unsecured,non-interest bearing and repayable on demand.

The non-current dividend payable is unsecured, non-interest bearing and repayable on 15August 2015.

Current and non-current advance rental represent part of the consideration arising from thepurchase of a property located at 9 Benoi Crescent Singapore 629972 by the Group in May2011 from its previous owner which became one of the Group’s lessee. Part of theconsideration paid to the previous owner was used as a prepaid rent and shall be amortisedover the next 5 years from the date of the commencement of the lease.

Trade and other payables are denominated in Singapore dollar.

16. Finance lease payables

Minimum

lease

payments

Future

finance

charges

Present value

of minimum

lease

payments

$ $ $

Unaudited

30 June 2014


Later than one year and not later thanfive years 24,706,925 (581,674) 24,125,251

35,929,229 (1,093,458) 34,835,771

Minimum

lease

payments

Future

finance

charges

Present value

of minimum

lease

payments

$ $ $

Audited

31 December 2013


Later than one year and not later thanfive years 22,123,960 (518,832) 21,605,128

31,743,409 (991,633) 30,751,776

B-26





16. Finance lease payables (Continued)

The finance lease term is 4 to 5 years. As at 30 June 2014, the average effective interest

rates for the finance lease payable is 2.03% (31 December 2013: 2.26%).

The finance lease payables are secured by the lessor’s title to the leased asset (Note 5).

The management estimates that the carrying amounts of the finance lease payables

approximate their fair values.

The finance lease payables are denominated in Singapore dollar.

17. Bank borrowings



$ $

Current

Secured

Trust receipts 1 5,576,814 4,208,206

Revolving loan 1 2,410,458 –

Term loan 1 660,000 660,000

Unsecured

Trust receipts 2 9,498,791 8,475,304

Revolving loans 2,525,080 1,500,000

Term loan 2 – 22,925

Term loan 3 1,396,110 –

22,067,253 14,866,435

Non-current

Secured

Term loan 1 10,505,000 10,835,000

Unsecured

Term loan 3 2,603,890 –

13,108,890 10,835,000

35,176,143 25,701,435

B-27






The weighted average effective interest rates per annum of the borrowings were as follows:



% %

Revolving loans 1.75 1.75

Long-term bank loans 1.94 1.20

Trust receipts 1.47 1.60


May 2011. Term loan 1 is secured by the legal mortgage over the leasehold property of the

Group (Note 5), and joint and severally guarantee from certain Directors of Huationg

Contractor Pte Ltd amounting to $13,200,000 as at 30 June 2014 and 31 December 2013.


February 2010. The term loan 2 was supported by joint and severally guarantees from

Directors of the Soil Engineering Pte. Ltd.. The term loan was fully repaid in January 2014.


June 2014. The term loan 3 was supported by joint and severally guarantees from Directors

of the Huationg Contractor Pte Ltd and Soil Engineering Pte. Ltd. amounting to $4,000,000

as at 30 June 2014.

As at 30 June 2014, the trust receipts 1 are secured by the legal mortgage over the leasehold

property of the Group (Note 5) and a negative pledge on trade receivables (Note 10). As at

30 June 2014, the trust receipts 1 and 2 are supported by joint and several guarantees of

certain directors of Huationg Contractor Pte Ltd and Soil Engineering Pte. Ltd., amounting to

$47,380,000 (31 December 2013: $36,380,000).

As at 30 June 2014, the revolving loan 1 amounting to $2,410,458 is secured through the

legal mortgage over the leasehold property of the Group (Note 5), joint and severally

guarantee from certain Directors of Huationg Contractor Pte Ltd amounting to $13,200,000,

and first legal assignment of all the rights, title, interests and benefits arising from the Policy

(Note 7).

As at 30 June 2014, revolving loans amounting to $2,525,080 (2013: $1,500,000) are

supported by joint and severally guarantees from certain Directors of Huationg Contractor

Pte Ltd amounting to $11,000,000.

Management estimates that the carrying amounts of the bank borrowings approximate their

fair values.

B-28






As at the end of the financial period, the Group has facilities as follows:



$ $

Facilities granted 81,661,386 78,560,000

Facilities utilised 43,620,834 34,145,925

Bank borrowings are denominated in the following currencies:



$ $

Singapore dollar 32,765,685 25,701,435

United States dollar 2,410,458 –

35,176,143 25,701,435

18. Deferred tax liabilities

The following are the major deferred tax liabilities and assets recognised by the Group and

movements thereon during the financial period/year.

Accelerated

tax

depreciation

Foreseeable

losses Others Total

$ $ $ $

Balance as at 1.1.2014 3,966,501 – – 3,966,501

Charged to profit or loss (36,690) – (34,000) (70,690)

Balance as at 30.6.2014 3,929,811 – (34,000) 3,895,811

Balance as at 1.1.2013 3,955,000 (250,000) (21,000) 3,684,000

Charged to profit or loss 11,501 250,000 21,000 282,501

Balance as at 31.12.2013 3,966,501 – – 3,966,501

B-29





19. Revenue

1 January 2014 to

30 June 2014

1 January 2013 to

30 June 2013


$ $

Revenue from contract works 54,485,813 37,675,509

Lease of trucks and equipment and

transportation income 12,238,857 13,641,302

Sale of construction materials 884,011 1,513,999

67,608,681 52,830,810

20. Other income

1 January 2014 to

30 June 2014

1 January 2013 to

30 June 2013


$ $

Fair value gain on investment property – 200,000

Foreign exchange gain, net 8,114 –

Gain on disposal of plant and equipment 12,172 –

Government grants 155,193 211,463

Insurance claim monies received 19,601 39,125

Interest income 5,107 433

Operating lease income

– Leasehold properties 547,928 578,219

– Investment property 27,911 27,650

– Sublease of other operating lease facilities 887,900 260,077

Sundry income 191,698 27,717

1,855,624 1,344,684

B-30





21. Finance costs

1 January 2014 to

30 June 2014

1 January 2013 to

30 June 2013


$ $

Interest expenses

– bank overdrafts 35 30

– revolving loan 15,319 4,676

– finance lease 297,077 268,681

– late payment 304 22

– term loans 164,157 82,678

– trust receipts 123,993 61,730

600,885 417,817

Bank charges 102,656 47,099

703,541 464,916

22. Profit before income tax

In addition to the charges and credits disclosed elsewhere in the notes to the combined

financial statements, the above includes the following charges:

1 January 2014 to

30 June 2014

1 January 2013 to

30 June 2013


$ $

Cost of sales and service


– salaries, wages and other benefits 9,695,039 7,780,901

– contribution to Central Provident Fund 198,154 173,740

Depreciation of property, plant and

equipment 4,911,623 4,296,207

Diesel/fuel costs 7,556,434 6,983,737

Material costs 10,079,914 9,879,173

Operating lease expense 2,720,851 1,796,407

Repair and maintenance 4,251,981 3,688,246

Subcontract costs 16,067,989 8,451,745

B-31





22. Profit before income tax (Continued)

1 January 2014 to

30 June 2014

1 January 2013 to

30 June 2013


$ $



– salaries, wages and other benefits 2,837,886 2,110,638


Directors’ remuneration

– salaries, wages and other benefits 306,600 299,400



equipment 326,840 335,143


– Construction site and other operating

facilities 846,596 616,949

Other expenses

Allowance for impairment of trade

receivables 163,040 –

Loss on disposal of plant and equipment – 548,996

Impairment loss on non-current asset held

for sale 300,000 –

Penalties and fines 210,533 302,048

23. Income tax expense

1 January 2014 to

30 June 2014

1 January 2013 to

30 June 2013


$ $

Current income tax

– current financial period 624,280 404,696

Deferred tax

– current financial period (70,690) 40,000

Total income tax expense recognised in

profit or loss 553,590 444,696

B-32





23. Income tax expense (Continued)

Reconciliation of effective income tax rate

1 January 2014 to

30 June 2014

1 January 2013 to

30 June 2013


$ $


Tax calculated at statutory tax rate of 17% 608,315 438,424

Tax effect of:

– Income not subject to tax (148) (34,000)

– Expenses not deductible for tax purposes 152,525 100,551

– Tax rebates and enhanced allowances (153,944) (30,000)

– Singapore statutory stepped income

exemption (51,850) (25,925)

Others (1,308) (4,354)

553,590 444,696

24. Earnings per share

Basic earnings per share

Basic earnings per share is calculated by dividing the profit for the financial periods

attributable to owners of the parent by the number of ordinary shares post restructuring

during the respective financial periods.

1 January 2014 to

30 June 2014

1 January 2013 to

30 June 2013


Profit attributable to owners of the parent ($) 2,998,929 2,010,818

Number of ordinary shares post restructuring

exercise 151,384,600 151,384,600

Basic earnings per share (in cents) 1.98 1.33

Diluted earnings per share

The Group has not granted any potential convertible instruments over its share and

consequently there is no dilution of earnings per share.

B-33





25. Dividends

1 January 2014 to

30 June 2014

1 January 2013 to

30 June 2013


$ $

Final tax exempt dividend of $1.23 per

ordinary share in respect of financial year

ended 31 December 2013 7,995,000 –

26. Significant related party transactions

A related party is defined as follows:

(a) A person or a close member of that person’s family is related to the Group and Company

if that person:

(i) Has control or joint control over the Company;

(ii) Has significant influence over the Company; or

(iii) Is a member of the key management personnel of the Group and Company or of

a parent of the Company.

(b) An entity is related to the Company if any of the following conditions apply:

(i) The entity and the Company are members of the same group (which means that

each parent, subsidiary and fellow subsidiary is related to the others).

(ii) One entity is an associate or joint venture of the other entity (or an associate or

joint venture of a member of a group of which the other entity is a member).

(iii) Both entities are joint venture of the same third party.

(iv) One entity is a joint ventures of a third entity and the other entity is an associate

of the third entity.

(v) The entity is a post-employment benefit plan for the benefit of employees of either

the Company or an entity related to the Company. If the Company is itself such a

plan, the sponsoring employers are also related to the Company.

(vi) The entity is controlled or jointly controlled by a person identified in (a);

(vii) A person identified in (a)(i) has significant influence over the entity or is a member

of the key management personnel of the entity (or of a parent of the entity).

As at the date of this report, the ultimate holding company is Dandelion Capital Pte. Ltd., a

company incorporated in Singapore.

B-34





26. Significant related party transactions (Continued)

During the financial periods ended 30 June 2014 and 30 June 2013, in addition to theinformation disclosed elsewhere in these financial statements, the Group entered into thefollowing transactions with related parties at rates and terms agreed between the parties:

1 January 2014 to

30 June 2014

1 January 2013 to

30 June 2013


$ $

With related parties

Labour services rendered to related parties 80,000 80,000

Purchase of construction materials – 650,000

Rental of equipment and trucks fromrelated parties 2,096,258 2,110,800

Compensation of key management personnel

Key management personnel are Directors of the Group and those persons having authorityand responsibility for planning, directing and controlling the activities of the Group, directly,or indirectly.

The remuneration of Directors of the Group during the financial period were as follows:

1 January 2014 to

30 June 2014

1 January 2013 to

30 June 2013


$ $

Directors of subsidiaries

– Short-term employee benefits 306,600 299,400

– Post-employment benefits 28,277 22,916

334,877 322,316

27. Operating lease commitments

The Group as lessee

At the end of the financial period/year, commitments in respect of non-cancellable operatingleases in respect of construction site and other operating facilities are as follows:



$ $

Not later than one year 934,028 743,604

Later than one year and not later thanfive years 492,045 863,847

1,426,073 1,607,451

B-35





27. Operating lease commitments (Continued)

Operating lease payments represent rents payable by the Group for construction site and

other operating facilities. Leases are negotiated for an average term of 2 to 3 years and

rentals are fixed for an average of 2 to 3 years with no provisions for contingent rent or

upward revision of rent based on market price indices.

The Group as lessor

The Group has entered into commercial property leases on its investment property and

leasehold properties. These non-cancellable leases have remaining lease terms of between

1 and 2 years. All leases include a clause to enable upward revision of the rental charge of

an annual basis based on prevailing market conditions.

As at the end of the financial period/year, future minimum rentals receivable under

non-cancellable operating leases at the end of the financial period/year are as follows:



$ $

Not later than one year 976,284 1,036,261


five years 329,997 295,000

1,306,281 1,331,261

28. Capital commitments



$ $

Capital expenditure approved and

contracted for but not provided for

in the financial statements 111,240 2,138,395

29. Contingent liabilities



$ $

Guarantees given as securities for term loan

and finance lease facilities granted to a

related party 16,351,600 16,351,600

The Group has not recognised any liability in respect of the guarantees given to the banks

for banking facilities granted to a related party as the Directors have assessed that the

likelihood of the related party defaulting on repayment of its loan is remote.

B-36





30. Segment information

Management has determined the operating segment based on the reports reviewed by the

chief operating decision maker. For management purposes, the Group is organised into

business units based on its services, and has three reportable operating segments as

follows:

(a) Civil engineering services;

(b) Inland logistics support; and

(c) Sale of construction materials

Civil engineering includes construction projects on earthworks, infrastructure works, external

works, demolition and excavation works, drainage works and road diversion. The Group also

operates and manage entire stockpile sites.

Inland logistics support includes rental of construction equipment including tipper trucks,

compactors and excavators.

Sale of construction materials includes the supplies of LSS, as well as other construction

related equipment and consumables.

The Group’s reportable segments are strategic business units that are organised based on

their function.

Management monitors the operating results of the segment separately for the purposes of

making decisions about resources to be allocated and of assessing performance. Segment

performance is evaluated based on operating profit or loss which is similar to the accounting

profit or loss.

The accounting policies of the operating segments are the same of those described in the

summary of significant accounting policies. There is no asymmetrical allocation to reportable

segments.

There is no change from prior periods in the measurement methods used to determine

reported segment profit or loss.

Segment results include items directly attributable to a segment as well as those that can be

allocated on a reasonable basis. Unallocated items comprise assets, liabilities and other

corporate expenses.

Due to the nature of the Group’s operations, no segment assets and liabilities are presented

to the chief operating decision maker. Chief operating decision maker manages the assets,

liabilities, finance costs and income taxes on a Group basis.

B-37






Business Segment

Civilengineering

services

Inlandlogisticssupport

Sale ofconstruction


$ $ $ $ $ $

Unaudited

Financial period from1 January 2014 to30 June 2014

Revenue

External revenue 54,485,813 12,238,857 884,011 – – 67,608,681


54,485,813 13,664,928 2,548,097 – (3,090,157) 67,608,681

Results

Segment results 10,116,800 938,066 78,095 (6,851,096) – 4,281,865


Profit before income tax 3,578,324


Profit for the financial year 3,024,734

Non-cash items

Gain on disposal ofproperty, plant andequipment – – – 12,172 – 12,172

Depreciation of property,plant and equipment – – – (5,238,463) – (5,238,463)

Allowance for impairmentof trade receivables (163,040) – – – – (163,040)

Impairment loss onnon-current assetheld for sale – – – (300,000) – (300,000)

B-38






Business Segment

Civilengineering

services

Inlandlogisticssupport

Sale ofconstruction


$ $ $ $ $ $

Financial period from1 January 2013 to30 June 2013

Revenue



37,675,509 14,696,250 2,776,151 – (2,317,100) 52,830,810

Results

Segment results 7,677,963 1,214,160 279,144 (6,127,389) – 3,043,878


Profit before income tax 2,578,962


Profit for the financial year 2,134,266

Non-cash items


Loss on disposal ofproperty, plant andequipment – – – (548,996) – (548,996)

Depreciation of property,plant and equipment – – – (4,631,350) – (4,631,350)

Major customers

For the financial period ended 30 June 2014, the revenue from 2 major customers of the

Group represents approximately $25,137,706 of the total revenue from civil engineering

services segment.

Geographic information

The Group’s sales and assets are mainly derived in Singapore. Accordingly, no geographical

segment information are presented during the financial years.

B-39





31. Financial instruments, financial risks

The Group’s overall financial risks and capital management remains unchanged from the last

audited combined financial statements for the financial years ended 31 December 2011,

2012 and 2013.

32. Fair value measurement

32.1 Fair value of financial assets and financial liabilities

The carrying amounts of the current financial assets and current financial liabilities

approximate their respective fair values as at the end of the reporting period due to the

relatively short-term maturity of these financial instruments, expect as disclosed below.

The fair values of non-current financial liabilities in relation to finance lease payables

and bank borrowings are disclosed in Notes 16 and 17 to the interim condensed

combined financial statements respectively.

Financial instruments carried at fair value classified by level of fair value hierarchy are

as follows:

Recurring fair value measurement using:

Level 1 Level 2 Level 3

$ $ $

30 June 2014

Assets

Available-for-sale financial assets

– Quoted debt securities 1,284,542 – –

– Investment in life insurance – – 1,925,034

Total 1,284,542 – 1,925,034

B-40






32.1 Fair value of financial assets and financial liabilities (Continued)

Recurring fair value measurement using:

Level 1 Level 2 Level 3

$ $ $

31 December 2013

Available-for-sale financial assets

– Quoted debt securities – – –

– Investment in life insurance – – –

Total – – –

There were no transfers between levels during the financial period.

The financial instruments included in Level 1 are traded in active markets and their fair

values are based on quoted market prices at the end of the reporting period.

The fair value measurements categorised within Level 3 includes unobservable inputs

that are not developed by the entity. The fair value of the investment in life insurance

is based on the cash value provided by the insurer without adjustment.

There have been no changes in the valuation techniques of the various classes of

financial instruments during the financial period.

32.2 Fair value of leasehold properties and investment property

The fair value of leasehold properties and investment property have been determined

based on the market comparison approach that reflects most recent transaction prices

for similar properties, after adjusting for relevant factors such as land tenure, physical

attributes, location and the date of transaction.

B-41






32.2 Fair value of leasehold properties and investment property (Continued)

Level 3 recurring fair value measurements

(i) Information about significant unobservable inputs used in Level 3 recurring fair

value measurements

The following table shows the information about fair value measurements using

significant unobservable inputs (Level 3):

Description

Fair value

as at

30 June

2014

Valuation

Techniques

Unobservable

inputs

Relationship of

unobservable

inputs to

fair value

Leasehold

Properties:

Held for generating

operating lease

income and for own

use

22,000,000 Market

comparable

Approach

Yield

adjustments

based on

management’s

assumptions*

The higher the

yield adjustments,

the higher the

fair value

Fair value

as at

31 December

2013

Valuation

techniques

Unobservable

inputs

Relationship of

unobservable

inputs to

fair value

Investment

Property:

Held for generating

operating lease

income

3,800,000 Market

comparable

approach

Yield

adjustments

based on

management’s

assumptions*

The higher the

yield adjustments,

the higher the

fair value

* The yield adjustments are made for any difference in the nature, location or condition of the

specific property.

(ii) Valuation policies and procedures

Management of the Group oversees the Group’s financial reporting valuation

process and is responsible for setting and documenting the Group’s valuation

policies and procedures.

B-42






32.2 Fair value of leasehold properties and investment property (Continued)

Level 3 recurring fair value measurements (Continued)

(ii) Valuation policies and procedures (Continued)

For all significant financial reporting valuations using valuation models and

significant unobservable inputs, it is the Group’s policy to engage external

valuation experts to perform the valuation. Management is responsible for

selecting and engaging valuation experts that possess the relevant credentials

and knowledge on the subject of valuation, valuation methodologies, and FRS 113

fair value measurement guidance.

For valuations performed by external valuation experts, the management reviews

the appropriateness of the valuation methodologies and assumptions adopted.

The Management also evaluates the appropriateness and reliability of the inputs

used in the valuations.

Significant changes in fair value measurements from period to period are

evaluated by Management for reasonableness. Key drivers of the changes are

identified and assessed for reasonableness against relevant information from

independent sources, or internal sources if necessary and appropriate.

33. Events subsequent to the reporting period


approved, among others, the following:

(a) the conversion of the Company into a public limited company and the change of

the name to “Huationg Global Limited”;


(c) the allotment and issue of the Placement Shares which are the subject of the

Placement, on the basis that the Placement Shares, when allotted, issued and

fully-paid, will rank pari passu in all respects with the existing Shares;

(d) the allotment and issue of 1,875,000 ordinary shares to PrimePartners Corporate

Finance Pte. Ltd. (“PPCF Shares”) in satisfaction of their management fee as

Sponsor and Issue Manager, which when allotted, issued and fully-paid, will rank


(e) the allotment and issue of 250,000 ordinary shares to the financial controller, Goh

Tuck Peng (“FC Shares”) which when allotted, issued and fully-paid, will rank pari

passu in all respects with the existing issued Shares;

B-43








(f) the adoption of the Share Option Scheme and the Share Plan (details of which are

set in the sections “Huationg Employee Share Option Scheme” and “Huationg

Performance Share Plan” of this Offer Document) and the authorisation of the

Directors, pursuant to Section 161 of the Companies Act, to allot and issue Shares

upon the exercise of Options granted under the Share Option Scheme and upon

the grant of Awards under the Share Plan;

(g) the listing and quotation of all the issued Shares (including the Placement Shares

to be allotted and issued pursuant to the Placement, the FC Shares and the PPCF

Shares) on Catalist;


and by way of ordinary resolution in a general meeting, to:


(ii) make or grant offers, agreements or options (each and “Instrument”

and collectively, “Instruments”) that might or would require Shares to

be issued during the continuance of this authority or thereafter, including

but not limited to the creation and issue of (as well as adjustments to)

warrants, debentures, convertible securities or other instruments

convertible into Shares; and/or

(iii) notwithstanding that such authority may have ceased to be in force at

the time that Instruments are to be issued, issue additional Instruments

arising from adjustments made to the number of Instruments previously

issued in the event of rights, bonus or other capitalisation issues,

at any time and upon such terms and conditions and for such purposes and

to such persons as the Directors may in their absolute discretion deem fit;

and

B-44









and by way of ordinary resolution in a general meeting, to: (Continued)

(B) issue Shares in pursuance of any Instrument made or granted by the

Directors pursuant to (A)(ii) and/or (A)(iii) above, while such authority was in

force (notwithstanding that such issue of Shares pursuant to the Instruments

may occur after the expiration of the authority contained in this resolution),

provided that:

(i) the aggregate number of Shares to be issued pursuant to such authority

(including the Shares to be issued in pursuance of Instruments made or

granted pursuant to this authority but excluding Shares which may be

issued pursuant to any adjustments (“Adjustments”) effected under any

relevant Instrument, which Adjustment shall be made in compliance with

the provisions of the Rules of Catalist for the time being in force (unless

such compliance has been waived by the SGX-ST), does not exceed

100.0% of the post-Placement issued share capital excluding treasury

shares, and provided further that the aggregate number of Shares to be

issued other than on a pro-rata basis to Shareholders (including Shares

to be issued in pursuance of Instruments made or granted pursuant to

such authority but excluding Shares which may be issued pursuant to

any Adjustments effected under any relevant Instrument) shall not

exceed 50.0% of the post-Placement issued share capital excluding

treasury shares;

(ii) in exercising such authority, the Company shall comply with the

provisions of the Rules of Catalist for the time being in force (unless

such compliance has been waived by the SGX-ST) and the Articles of

Association for the time being of the Company; and

(iii) unless revoked or varied by the Company in general meeting by

ordinary resolution, the authority so conferred 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 the earlier.

For the purpose of this resolution, the “post-Placement issued share capital” shall mean

the total number of issued Shares of the Company (excluding treasury shares)

immediately after the Placement, after adjusting for (i) new Shares arising from the

conversion or exercise of any convertible securities; (ii) new Shares arising from

exercising share options or vesting of share awards outstanding or subsisting at the

time such authority is given, provided the options or share awards were granted in

compliance with the Rules of Catalist; and (iii) any subsequent bonus issue,

consolidation or sub-division of Shares.

B-45








(i) without prejudice to the generality of, and pursuant and subject to the approval of

the general mandate to issue Shares set out in paragraph (i) above, authorisation

of the Directors, pursuant to Section 161 of the Companies Act, to issue Shares

other than on a pro-rata basis, at a discount to the weighted average price of the

Shares for trades done on the SGX-ST for the full market day on which the

placement or subscription agreement is signed (or if not available, the weighted

average price based on trades done on the preceding market day), of not more

than 10.0%, at any time and upon such terms and conditions and for such

purposes and to such persons as the Directors may in their absolute discretion

deem fit, provided that (unless revoked or varied by the Company in general

meeting) the authority so conferred in this paragraph (j) 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.

B-46



Unaudited Pro Forma Combined Financial Information

For the financial year ended 31 December 2013 and

For the financial period from 1 January 2014 to 30 June 2014

APPENDIX C – INDEPENDENT AUDITOR’S ASSURANCE REPORT ANDUNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013 ANDFOR THE FINANCIAL PERIOD FROM 1 JANUARY 2014 TO 30 JUNE 2014

C-1

INDEPENDENT AUDITOR’S ASSURANCE REPORT ON

THE UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION FOR THE

FINANCIAL YEAR ENDED 31 DECEMBER 2013 AND FOR THE FINANCIAL PERIOD

FROM 1 JANUARY 2014 TO 30 JUNE 2014

1 December 2014



9 Benoi Crescent

Singapore 629972

Report on the Unaudited Pro Forma Combined Financial Information

We have completed our assurance engagement to report on the compilation of Unaudited Pro

Forma Combined Financial Information of Huationg Global Limited (the “Company”) and its

subsidiaries (the “Group”). The Unaudited Pro Forma Combined Financial Information consists of

the pro forma combined statements of financial position as at 31 December 2013 and 30 June

2014, the pro forma combined statements of comprehensive income and the pro forma combined

statements of cash flows for the financial year ended 31 December 2013 and for the financial

period from 1 January 2014 to 30 June 2014, and related notes as set out on pages C-5 to C-19

of the Offer Document issued by the Company. The applicable criteria on the basis of which

management has compiled the Unaudited Pro Forma Combined Financial Information are

described in Note 3.

The Unaudited Pro Forma Combined Financial Information has been compiled by management to

illustrate the impact of the significant event (the “Significant Event”) set out in Note 2 on:

(i) the financial positions of the Group as at 31 December 2013 and 30 June 2014 as if the

Significant Event had taken place on those dates; and

(ii) the financial performances and cash flows of the Group for the financial year ended 31

December 2013 and the financial period from 1 January 2014 to 30 June 2014 as if the

Significant Event had taken place on 1 January 2013 and 1 January 2014 respectively.

As part of this process, information about the Group’s financial position, financial performance and

cash flows has been extracted by management from the Group’s combined financial statements

for the financial year ended 31 December 2013 and for the financial period from 1 January 2014

to 30 June 2014, on which an audit report and a review report respectively have been published.

Management’s Responsibility for the Unaudited Pro Forma Combined Financial Information

Management is responsible for compiling the Unaudited Pro Forma Combined Financial

Information on the basis of the applicable criteria.

C-2




FROM 1 JANUARY 2014 TO 30 JUNE 2014 (Continued)

Report on the Unaudited Pro Forma Combined Financial Information (Continued)

Practitioner’s Responsibilities

Our responsibility is to express an opinion about whether the Unaudited Pro Forma Combined

Financial Information has been compiled, in all material respects, by the management on the basis

of the applicable criteria.

We conducted our engagement in accordance with Singapore Standard on Assurance

Engagements (SSAE) 3420, Assurance Engagements to Report on the Compilation of Pro FormaFinancial Information Included in a Prospectus, issued by the Institute of Singapore Chartered

Accountants. This standard requires that the practitioner comply with ethical requirements and

plan and perform procedures to obtain reasonable assurance about whether management has

compiled, in all material respects, the Unaudited Pro Forma Combined Financial Information on

the basis of the applicable criteria.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or

opinions on any historical financial information used in compiling the Unaudited Pro Forma

Combined Financial Information, nor have we, in the course of this engagement, performed an

audit or review of the financial information used in compiling the Unaudited Pro Forma Combined

Financial Information.

The purpose of Unaudited Pro Forma Combined Financial Information included in the Offer

Document is solely to illustrate the impact of a significant event or transaction on unadjusted

financial information of the Group as if the event had taken place or the transaction had been

undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not

provide any assurance that the actual outcome of the event or transaction at 31 December 2013

and 30 June 2014 would have been as presented.

A reasonable assurance engagement to report on whether the Unaudited Pro Forma Combined

Financial Information has been compiled, in all material respects, on the basis of the applicable

criteria involves performing procedures to assess whether the applicable criteria used by the

management in the compilation of the Unaudited Pro Forma Combined Financial Information

provide a reasonable basis for presenting the significant effects directly attributable to the event

or transaction, and to obtain sufficient appropriate evidence about whether:

• The related pro forma adjustments give appropriate effect to those criteria; and

• The pro forma financial information reflects the proper application of those adjustments to the

unadjusted financial information.

The procedures selected depend on the practitioner’s judgement, having regard to the

practitioner’s understanding of the nature of the Group the event or transaction in respect of which

the Unaudited Pro Forma Combined Financial Information has been compiled, and other relevant

engagement circumstances.

The engagement also involves evaluating the overall presentation of the Unaudited Pro Forma

Combined Financial Information.

C-3




FROM 1 JANUARY 2014 TO 30 JUNE 2014 (Continued)

Report on the Unaudited Pro Forma Combined Financial Information (Continued)

Practitioner’s Responsibilities (Continued)

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

our opinion.

Opinion

In our opinion:

(a) The Unaudited Pro Forma Combined Financial Information has been compiled:

(i) in a manner consistent with the accounting policies adopted by entities within the Group

in their latest audited financial statements, which are in accordance with Singapore

Financial Reporting Standards;

(ii) on the basis of the applicable criteria stated in Note 3 to the Unaudited Pro Forma

Combined Financial Information; and

(b) each material adjustment made to the information used in the preparation of the Unaudited

Pro Forma Combined Financial Information is appropriate for the purpose of preparing such

unaudited financial information.

BDO LLP



Singapore

1 December 2014


Partner-in-charge

C-4



UNAUDITED PRO FORMA COMBINED STATEMENTS OF FINANCIAL POSITION

AS AT 31 DECEMBER 2013 AND 30 JUNE 2014

31 December 2013 30 June 2014

$ $

Non-current assets

Property, plant and equipment 73,234,159 84,769,930

Available-for-sale financial assets – 1,925,034

Prepayment – 388,339

Intangible asset 11,000 11,000


Current assets

Amounts due from contract customers 11,095,948 9,948,892

Available-for-sale financial assets – 1,284,542



Cash and bank balances 15,985,039 25,791,673


Total assets 132,934,205 159,775,158


Share capital 7,075,000 7,075,000

Accumulated profits 29,484,834 24,810,351

Other reserves – 6,728,924



Total equity 36,872,636 38,952,882


Other payables 533,333 3,828,333


Bank borrowings 10,835,000 13,108,890

Deferred tax liabilities 3,966,501 3,895,811


Current liabilities

Amounts due to contract customers 6,399,073 10,289,065



Bank borrowings 14,866,435 22,067,253

Current income tax payable 728,121 1,235,380




C-5



UNAUDITED PRO FORMA COMBINED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013 AND FOR THE FINANCIAL PERIOD


1 January 2013 to

31 December 2013

1 January 2014 to

30 June 2014

$ $

Revenue 108,475,177 67,608,681

Cost of sales (91,977,380) (57,275,946)

Gross profit 16,497,797 10,332,735


Other income 3,609,878 1,827,713



Other expenses (1,083,781) (852,590)

Finance costs (1,167,917) (703,541)


Income tax expense (1,168,510) (549,284)


Other comprehensive income:

Items that may be reclassified subsequently toprofit or loss:

Available-for-sale financial assets:

Gains arising during the financial period – 30,871

Items that will not be classified subsequently toprofit or loss:

Gain on revaluation of property, plant and

equipment – 6,698,053

Other comprehensive income for

the financial period – 6,728,924

Total comprehensive income for





4,808,006 3,003,709




4,808,006 9,732,633

Earnings per share

– Basic and diluted 3.05 1.97

C-6



UNAUDITED PRO FORMA COMBINED STATEMENTS OF CASH FLOWS



1 January 2013 to

31 December 2013

1 January 2014 to

30 June 2014

$ $



Adjustments for:

Allowance for impairment of trade receivables 352,050 163,040

Depreciation of property, plant and equipment 9,308,599 5,238,463

(Gain)/Loss on disposal of investment property (500,000) 300,000

Gain on disposal of plant and equipment (353,815) (12,172)


Interest income (3,058) (5,107)

Write-back of allowance for impairment of

trade receivables (60,580) –

Operating cash flows before working capital

changes 15,661,236 9,838,102


Trade and other receivables 7,471,359 (4,017,043)

Prepayments 76,006 (163,210)

Amounts due to contract customers, net (15,020,596) 5,037,048

Trade and other payables 1,052,239 (125,518)


Interest income 3,058 5,107

Income tax paid (388,888) (121,443)



Purchase of property, plant and equipment (369,578) (1,476,814)

Purchase of available-for-sale investments – (1,253,671)

Proceeds from disposal of investment property 3,500,000 –

Proceeds from disposal of non-current asset held

for sale – 3,500,000

Proceeds from disposal of plant and equipment 805,501 326,573

Net cash from investing activities 3,935,923 1,096,088

C-7



UNAUDITED PRO FORMA COMBINED STATEMENTS OF CASH FLOWS



1 January 2013 to

31 December 2013

1 January 2014 to

30 June 2014

$ $


Advances to related parties (146,860) (153,391)

Repayment from related parties – 1,220,000

Advances from Directors 400,110 –

Repayment to a Director – (809)



Proceeds from term loans 1,500,000 5,002,155

Dividends paid – (500,000)

Repayment of term loans (1,427,892) (330,000)

Interest paid (941,524) (600,885)

Proceeds from issuance of shares 499,999 –


Net cash (used in)/from financing activities (1,972,497) 1,706,162

Net change in cash and bank balances 10,817,840 13,255,293


the financial year/period 5,167,199 12,536,380

Cash and bank balances as at the end of

the financial year/period 15,985,039 25,791,673

C-8



STATEMENTS OF ADJUSTMENTS FOR THE UNAUDITED PRO FORMA COMBINED

STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 2013

Audited

combined

statement of

financial

position

Pro forma

adjustments

Note 4

Unaudited pro

forma

combined

statement of

financial

position

As at 31 December 2013 $ $ $

ASSETS

Non-current assets

Property, plant and equipment 73,234,159 73,234,159

Investment property 3,800,000 (3,800,000) (i) –

Intangible asset 11,000 11,000


Current assets

Amount due from contract customers 11,095,948 11,095,948



Cash and bank balances 12,536,380 3,500,000 (i) 15,985,039

(55,301) (i)

3,960 (i)


Total assets 133,285,546 132,934,205


Share capital 7,075,000 7,075,000

Accumulated profits 29,827,447 (300,000) (i) 29,484,834

(55,301) (i)

3,960 (i)

8,728 (i)



Total equity 37,215,249 36,872,636


Other payables 533,333 533,333


Bank borrowings 10,835,000 10,835,000

Deferred tax liabilities 3,966,501 3,966,501


Current liabilities

Amounts due to contract customers 6,399,073 6,399,073



Bank borrowings 14,866,435 14,866,435

Current income tax payable 736,849 (8,728) (i) 728,121




C-9




STATEMENTS OF FINANCIAL POSITION AS AT 30 JUNE 2014

Unauditedinterim

combinedstatement of

financialposition

Pro formaadjustments

Note 4

Unauditedpro formacombined

statement offinancialposition

As at 30 June 2014 $ $ $

ASSETSNon-current assetsProperty, plant and equipment 84,769,930 84,769,930Available-for-sale financial assets 1,925,034 1,925,034Prepayment 388,339 388,339Intangible asset 11,000 11,000


Current assetsAmount due from contract customers 9,948,892 9,948,892Available-for-sale financial assets 1,284,542 1,284,542Trade and other receivables 34,984,264 34,984,264Prepayments 671,484 671,484Cash and bank balances 22,317,004 3,500,000 (i) 25,791,673

(27,911) (i)2,580 (i)

Total current assets 69,206,186 72,680,855Non-current asset held for sale 3,500,000 (3,500,000) (i) –

72,706,186 72,680,855

Total assets 159,800,489 159,775,158

EQUITY AND LIABILITIESShare capital 7,075,000 7,075,000Accumulated profits 24,831,376 (27,911) (i) 24,810,351

2,580 (i)4,306 (i)

Other reserves 6,728,924 6,728,924

Equity attributable to owners ofthe parent 38,635,300 38,614,275Non-controlling interests 338,607 338,607

Total equity 38,973,907 38,952,882

Non-current liabilitiesOther payables 3,828,333 3,828,333Finance lease payables 24,125,251 24,125,251Bank borrowings 13,108,890 13,108,890Deferred tax liabilities 3,895,811 3,895,811


Current liabilitiesAmounts due to contract customers 10,289,065 10,289,065Trade and other payables 31,561,773 31,561,773Finance lease payables 10,710,520 10,710,520Bank borrowings 22,067,253 22,067,253Current income tax payable 1,239,686 (4,306) (i) 1,235,380




C-10



UNAUDITED PRO FORMA COMBINED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013

Financial year ended

31 December 2013

Audited

combined

statement of

comprehensive

income

Pro forma

adjustments

Note 4

Unaudited

pro forma

combined

statement of

comprehensive

income

$ $ $

Revenue 108,475,177 108,475,177

Cost of sales (91,977,380) (91,977,380)

Gross profit 16,497,797 16,497,797


Other income 3,965,179 (300,000) (i) 3,609,878

(55,301) (i)



Other expenses (1,087,741) 3,960 (i) (1,083,781)

Finance costs (1,167,917) (1,167,917)


Income tax expense (1,177,238) 8,728 (i) (1,168,510)

Profit for the financial year,

representing total comprehensive

income for the financial year 5,150,619 4,808,006

Total comprehensive income

attributable to:



5,150,619 4,808,006

C-11



UNAUDITED PRO FORMA INTERIM COMBINED STATEMENTS OF COMPREHENSIVE

INCOME FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2014 TO 30 JUNE 2014

Financial period from

1 January 2014 to 30 June 2014

Unaudited

interim

combined

statement of

comprehensive

income

Pro forma

adjustments

Note 4

Unaudited

pro forma

interim

combined

statement of

comprehensive

income

$ $ $

Revenue 67,608,681 67,608,681

Cost of sales (57,275,946) (57,275,946)

Gross profit 10,332,735 10,332,735

Other item of incomeOther income 1,855,624 (27,911) (i) 1,827,713

Other items of expenseAdministrative expenses (7,051,324) (7,051,324)

Other expenses (855,170) 2,580 (i) (852,590)

Finance costs (703,541) (703,541)


Income tax expense (553,590) 4,306 (i) (549,284)


Other comprehensive income

Items that may be reclassifiedsubsequently to profit or loss:Available-for-sale financial assets:

Gains arising during the

financial period 30,871 30,871

Items that will not be classifiedsubsequently to profit or loss:Gain on revaluation of property,

plant and equipment 6,698,053 6,698,053

Other comprehensive income for


Total comprehensive income for





3,024,734 3,003,709

Total comprehensive income

attributable to:



9,753,658 9,732,633

C-12




STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013


31 December 2013

Audited

combined

statement of

cash flows

Pro forma

adjustments

Note 4

Unaudited

pro forma

combined

statement of

cash flows

$ $ $


Profit before income tax 6,327,857 (300,000) (i) 5,976,516

(55,301) (i)

3,960 (i)

Adjustments for:


receivables 352,050 352,050


equipment 9,308,599 9,308,599

Fair value gain on investment property (800,000) 800,000 (i) –

Gain on disposal of investment property – (500,000) (i) (500,000)

Gain on disposal of plant and

equipment (353,815) (353,815)



Write-back of allowance for impairment

of trade receivables (60,580) (60,580)

Operating cash flows before working

capital changes 15,712,577 15,661,236




Amounts due to contract customers, net (15,020,596) (15,020,596)




Income tax paid (388,888) (388,888)


C-13




STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013


31 December 2013

Audited

combined

statement of

cash flows

Pro forma

adjustments

Note 4

Unaudited

pro forma

combined

statement of

cash flows

$ $ $


Purchase of property, plant and

equipment (369,578) (369,578)

Proceeds from disposal of investment

property – 3,500,000 (i) 3,500,000

Proceeds from disposal of plant and

equipment 805,501 805,501

Net cash from investing activities 435,923 3,935,923



Advances from Directors 400,110 400,110




Repayment of term loans (1,427,892) (1,427,892)

Interest paid (941,524) (941,524)

Proceeds from issuance of shares 499,999 499,999


Net cash used in financing activities (1,972,497) (1,972,497)


Cash and bank balances as at the

beginning of the financial year 5,167,199 5,167,199


end of the financial year 12,536,380 15,985,039

C-14




STATEMENTS OF CASH FLOWS FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2014

TO 30 JUNE 2014



Unaudited

interim

combined

statement of

cash flows

Pro forma

adjustments

Note 4

Unaudited

pro forma

combined

statement of

cash flows

$ $ $


Profit before income tax 3,578,324 (27,911) (i) 3,552,993

2,580 (i)

Adjustments for:


receivables 163,040 163,040


equipment 5,238,463 5,238,463

Gain on disposal of plant and

equipment (12,172) (12,172)

Impairment loss on non-current asset

held for sale 300,000 (300,000) (i) –



Loss on disposal of investment property – 300,000 (i) 300,000

Operating cash flows before working

capital changes 9,863,433 9,838,102


Trade and other receivables (4,017,043) (4,017,043)

Prepayments (163,210) (163,210)

Amounts due to contract customers, net 5,037,048 5,037,048

Trade and other payables (125,518) (125,518)



Income tax paid (121,443) (121,443)


C-15




STATEMENTS OF CASH FLOWS FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2014

TO 30 JUNE 2014



Unaudited

interim

combined

statement of

cash flows

Pro forma

adjustments

Note 4

Unaudited

pro forma

combined

statement of

cash flows

$ $ $


Purchase of property, plant and

equipment (1,476,814) (1,476,814)

Purchase of available-for-sale financial

assets (1,253,671) (1,253,671)

Proceeds from disposal of non-current

asset held for sale – 3,500,000 (i) 3,500,000

Proceeds from disposal of plant and

equipment 326,573 326,573

Net cash (used in)/from investing

activities (2,403,912) 1,096,088



Repayment from related parties 1,220,000 1,220,000

Repayment to a Director (809) (809)




Dividends paid (500,000) (500,000)

Repayment of term loans (330,000) (330,000)

Interest paid (600,885) (600,885)


Net cash from financing activities 1,706,162 1,706,162



beginning of the financial period 12,536,380 12,536,380


end of the financial period 22,317,004 25,791,673

C-16



NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013 AND FOR


1. Corporate information

Huationg Global Limited (the “Company”) was incorporated and domiciled in the Republic of

Singapore on 1 August 2014 under the Singapore Companies Act, Cap. 50 (the “Act”) as an

exempt private company limited by shares in the name of “Huationg Global Private Limited”.

In connection with its conversion into a public company limited by shares, the Company

changed its name from “Huationg Global Private Limited” to “Huationg Global Limited” on 26

November 2014. The Company’s registration number is 201422395Z.

The address of the Company’s registered office and principal place of business is 9 Benoi

Crescent Singapore 629972.

2. Significant event

Save for the following significant event relating to the disposal of an asset (the “Significant

Event”), the Directors of the Company, as at the date of this report, are not aware of any

significant acquisitions/disposals of assets which have taken place since 31 December 2013

and any significant changes made to the capital structure of the Company subsequent to 31

December 2013:

– On 7 November 2014, an investment property previously held by Huationg Contractor

Pte Ltd, a wholly-owned subsidiary of the Company, was sold to a related party at a

consideration of $3.5 million.

3. Basis of preparation of the unaudited pro forma combined financial information

The Group in this unaudited pro forma combined financial information relates to the

companies referred to in the entities within Huationg Global Limited and its subsidiaries (the

“Group”) subsequent to the Restructuring Exercise as referred to in the Offer Document.

The unaudited pro forma combined financial information, which are presented in Singapore

dollar, have been prepared based on audited combined financial statements of the Group for

the financial year ended 31 December 2013 and unaudited interim condensed combined

financial statements for the financial period from 1 January 2014 to 30 June 2014, prepared

in accordance with Singapore Financial Reporting Standards by the Directors of the

Company. The combined financial statements for the financial year ended 31 December

2013 and interim condensed combined financial statements for the financial period from 1

January 2014 to 30 June 2014 were audited and reviewed by BDO LLP in accordance with

Singapore Standards on Auditing and Singapore Standard on Review Engagement 2410

respectively. The auditors’ report on these financial statements were not qualified.

The unaudited pro forma combined financial information is prepared using the same

accounting policies as the audited combined financial statements of the Group for the

financial year ended 31 December 2013 and the unaudited interim combined financial

statements of the Group for the financial period from 1 January 2014 to 30 June 2014.

C-17






3. Basis of preparation of the unaudited pro forma combined financial information

(Continued)

The Unaudited Pro Forma Combined Financial Information for the financial year ended 31

December 2013 and the financial period from 1 January 2014 to 30 June 2014 are prepared

for illustrative purposes only. These are prepared based on certain assumptions and after

making certain adjustments to show what:

– the financial positions of the Group as at 31 December 2013 and 30 June 2014 would

have been if the Significant Event had taken place on those dates; and

– the financial results and cash flows of the Group for the financial year ended 31

December 2013 and the financial period from 1 January 2014 to 30 June 2014 would

have been if the Significant Event discussed above had taken place on 1 January 2013

and 1 January 2014 respectively.

Based on the assumptions discussed above, the material adjustments as set out in Note 4

have been made to the unaudited combined financial statements of the Group in arriving at

the Unaudited Pro Forma Combined Financial Information.

The Unaudited Pro Forma Combined Financial Information, because of their nature, is not

necessarily indicative of the results of the operations, cash flows or the related effects on the

financial position that would have been attained had the Significant Event actually taken

place earlier. Save as disclosed in the Explanatory Notes, the Directors of the Company, for

the purposes of preparing this set of Unaudited Pro Forma Combined Financial Information,

have not considered the effects of the other events.

4. Pro forma adjustments

The following pro forma adjustments were made assuming the transactions taken place on

1 January 2013 and 1 January 2014 respectively:

(i) inclusion of Unaudited Pro Forma Combined Financial Information for the financial year

ended 31 December 2013 and for the financial period from 1 January 2014 to 30 June

2014, assuming that the Group had disposed of its investment property at a

consideration of $3.5 million.

For the financial year ended 31 December 2013, the fair value gain on the investment

property amounting to $800,000 would be reversed, and a gain on disposal of

investment property amounting to $500,000 would be recognised.

For the financial year ended 31 December 2013, the rental income and direct operating

expenses incurred from the investment property, which amounted to $55,301 and

$3,960 respectively, would be reversed. The impact on income tax amounted to $8,728.

C-18






4. Pro forma adjustments (Continued)

For the financial period from 1 January 2014 to 30 June 2014, the impairment loss on

non-current asset held for sale amounting to $300,000 would be reversed, and a loss

on disposal of investment property amounting to $300,000 would be recognised.

For the financial period from 1 January 2014 to 30 June 2014, the rental income and

direct operating expenses incurred from the investment property, which amounted to

$27,911 and $2,580 respectively, would be reversed. The impact on income tax

amounted to $4,306.

C-19

The discussion below provides information about certain provisions of our Memorandum and

Articles of Association and certain aspects of Singapore company law. This description is only a

summary and is qualified by reference to the Companies Law and our Memorandum and Articles

of Association. The instruments that constitute and define us are our Memorandum and Articles

of Association.

REGISTRATION NUMBER

We are registered in Singapore with the Accounting and Corporate Regulatory Authority. Our

company registration number is 201422395Z.

SUMMARY OF OUR ARTICLES OF ASSOCIATION

1. Directors

(a) Ability of interested directors to vote

A Director shall not vote in respect of any contract, proposed contract or arrangement

or any other proposal in which he has any personal material interest, and he shall not

be counted in the quorum present at the meeting.

(b) Remuneration

Fees payable to non-executive Directors shall be a fixed sum (not being a commission

on or a percentage of profits or turnover of the Company) as shall from time to time be

determined by the Company in general meeting. Fees payable to Directors shall not be

increased except at a general meeting convened by a notice specifying the intention to

propose such increase.

Any Director who holds any executive office, or who serves on any committee of the

Directors, or who performs services outside the ordinary duties of a Director, may be

paid extra remuneration by way of salary, commission or otherwise, as the Directors

may determine.

The remuneration of a Managing Director shall be fixed by the Directors and may be by

way of salary or commission or participation in profits or by any or all of these modes

but shall not be by a commission on or a percentage of turnover. The Directors shall

have power to pay pensions or other retirement, superannuation, death or disability

benefits to (or to any person in respect of) any Director for the time being holding any

executive office and for the purpose of providing any such pensions or other benefits,

to contribute to any scheme or fund or to pay premiums.

There are no specific provisions in our Articles of Association relating to a Director’s

power to vote on remuneration (including pension or other benefits) for himself or for

any other Director, and whether the quorum at a meeting of our Board of Directors to

vote on Directors’ remuneration may include the Director whose remuneration is the

subject of the vote.

APPENDIX D – SUMMARY OF SELECTED ARTICLES OF ASSOCIATIONOF OUR COMPANY

D-1

(c) Borrowing

Our Directors may exercise all the powers of our Company to raise or borrow money,

to mortgage or charge its undertaking, property and uncalled capital, and to secure any

debt, liability or obligation of our Company.

(d) Retirement Age Limit

There is no retirement age limit for Directors under our Articles of Association. Section

153 of the Companies Act however, provides that no person of or over the age of 70

years shall be appointed a director of a public company, unless he is appointed or

re-appointed as a director of the Company or authorised to continue in office as a

director of the Company by way of an ordinary resolution passed at an annual general

meeting of the Company.

(e) Shareholding Qualification

There is no shareholding qualification for Directors in the Memorandum and Articles of

Association of the Company.

2. Share rights and restrictions

We currently have one class of shares, namely, ordinary shares. Only persons who are

registered on our register of shareholders are recognised as our shareholders. In cases

where the person so registered is CDP, the persons named as the depositors in the

depository register maintained by CDP for the ordinary shares are recognised as our

shareholders.

(a) Dividends and distribution

We may, by ordinary resolution of our shareholders, declare dividends at a general

meeting, but we may not pay dividends in excess of the amount recommended by our

Directors. We must pay all dividends out of profits available for distribution. We may

capitalise any sum standing to the credit of any of the Company’s reserve accounts and

apply it to pay dividends, if such dividends are satisfied by the issue of shares to our

shareholders. All dividends are paid pro-rata amongst our shareholders in proportion to

the amount paid up on each shareholder’s ordinary shares, unless the rights attaching

to an issue of any ordinary share provide otherwise. Unless otherwise directed,

dividends are paid by cheque or warrant sent through the post to each shareholder at

his registered address. Notwithstanding the foregoing, the payment by us to CDP of any

dividend payable to a shareholder whose name is entered in the depository register

shall, to the extent of payment made to CDP, discharge us from any liability to that

shareholder in respect of that payment.

The payment by the Directors of any unclaimed dividends or other monies payable on

or in respect of a share into a separate account shall not constitute the Company a

trustee in respect thereof. All dividends unclaimed after being declared may be invested

or otherwise made use of by the Directors for the benefit of the Company. Any dividend

unclaimed after a period of six years after having been declared may be forfeited and


D-2

shall revert to the Company but the Directors may thereafter at their discretion annul

any such forfeiture and pay the dividend so forfeited to the person entitled thereto prior

to the forfeiture.

The Directors may retain any dividends or other monies payable on or in respect of a

share on which our Company has a lien, and may apply the same in or towards

satisfaction of the debts, liabilities or engagements in respect of which the lien exists.

(b) Voting rights

A holder of our ordinary shares is entitled to attend and vote at any general meeting, in

person or by proxy. Proxies need not be a shareholder. A person who holds ordinary

shares through the SGX-ST book-entry settlement system will only be entitled to vote

at a general meeting as a shareholder if his name appears on the depository register

maintained by CDP at least 48 hours before the general meeting. Except as otherwise

provided in our Articles of Association, two or more shareholders must be present in

person or by proxy to constitute a quorum at any general meeting. Under our Articles

of Association, on a show of hands, every shareholder present in person and by proxy

shall have one vote, and on a poll, every shareholder present in person or by proxy shall

have one vote for each ordinary share which he holds or represents. A poll may be

demanded in certain circumstances, including by the Chairman of the meeting or by any

shareholder present in person or by proxy and representing not less than 10% of the

total voting rights of all shareholders having the right to attend and vote at the meeting

or by any two shareholders present in person or by proxy and entitled to vote. In the

case of a tie vote, whether on a show of hands or a poll, the Chairman of the meeting

shall be entitled to a casting vote.

3. Change in capital

Changes in the capital structure of our Company (for example, an increase, consolidation,

cancellation, sub-division or conversion of our share capital) require shareholders to pass an

ordinary resolution. General meetings at which ordinary resolutions are proposed to be

passed shall be called by at least 14 days’ notice in writing. The notice must be given to each

of our shareholders who have supplied us with an address in Singapore for the giving of

notices and must set forth the place, the day and the hour of the meeting. The reduction of

our share capital is subject to the conditions prescribed by law.

4. Variation of rights of existing shares or classes of shares

Subject to the Companies Act, whenever the share capital of the Company is divided into

different classes of shares, the special rights attached to any class may be varied or

abrogated either with the consent in writing of the holders of three-quarters of the total voting

rights of the issued shares of the class or with the sanction of a special resolution passed at

a separate general meeting of the holders of the shares of the class. To every such separate

general meeting, the provisions of our Articles of Association relating to general meetings of

the Company and to the proceedings thereat shall mutatis mutandis apply, except that the

necessary quorum shall be two persons holding or representing by proxy at least one-third

of the total voting rights of the issued shares of the class, and that any holder of shares of

the class present in person or by proxy may demand a poll and that every such holder shall

on a poll have one vote for every share of the class held by him, provided always that where


D-3

the necessary majority for such a special resolution is not obtained at such general meeting,

consent in writing if obtained from the holders of three-quarters of the total voting rights of

the issued shares of the class concerned within two months of such general meeting shall be

as valid and effectual as a special resolution carried at such general meeting. These

provisions shall apply to the variation or abrogation of the special rights attached to some

only of the shares of any class as if each group of shares of the class differently treated

formed a separate class the special rights whereof are to be varied or abrogated.

The relevant Article does not impose more significant conditions than the Companies Act in

this regard.

5. Limitations on foreign or non-resident shareholders

There are no limitations imposed by Singapore law or by our Articles of Association on the

rights of our shareholders who are regarded as non-residents of Singapore, to hold or vote

their shares.


D-4

You are invited to apply and subscribe for the Placement Shares at the Placement Price, subject

to the following terms and conditions:

1. YOUR APPLICATION MUST BE MADE IN LOTS OF 1,000 PLACEMENT SHARES AND

INTEGRAL MULTIPLES THEREOF. YOUR APPLICATION FOR ANY OTHER NUMBER OF

SHARES WILL BE REJECTED.

2. Your application for Placement Shares may only be made by way of printed Placement

Shares Application Forms.

YOU MAY NOT USE CPF FUNDS TO APPLY FOR THE PLACEMENT SHARES.

3. You are allowed to submit only one application in your own name for the Placement

Shares.

If you, being other than an approved nominee company, have submitted an application

for Placement Shares in your own name, you should not submit any other application

for Placement Shares for any other person. Such separate applications shall be

deemed to be multiple applications and may be rejected at the discretion of our

Company, the Issue Manager, Sponsor and Placement Agent, as well as the Sub-

Placement Agent.

Joint and multiple applications for the Placement Shares shall be rejected. If you

submit or procure submissions of multiple share applications for the Placement

Shares, you may be deemed to have committed an offence under the Penal Code,

Chapter 224 of Singapore and the SFA, and your applications may be referred to the

relevant authorities for investigation. Multiple applications or those appearing to be or

suspected of being multiple applications may be rejected at the discretion of our

Company, the Issue Manager, Sponsor and Placement Agent, as well as the Sub-

Placement Agent.

4. We will not accept applications from any person under the age of 18 years, undischarged

bankrupts, sole proprietorships, partnerships, non-corporate bodies, joint Securities Account

holders of CDP and from applicants whose addresses (as furnished in their Application

Forms) bear post office box numbers. No person acting or purporting to act on behalf of a

deceased person is allowed to apply under the Securities Account with CDP in the deceased

name at the time of application.

No person acting or purporting to act on behalf of a deceased person is allowed to apply

under the Securities Account with CDP in the deceased name at the time of application.

5. We will not recognise the existence of a trust. Any application by a trustee or trustees must

be made in his/her/their own name(s) and without qualification or, where the application is

made by way of an Application Form by a nominee, in the name(s) of an approved nominee

company or companies after complying with paragraph 6 below.

6. WE WILL NOT ACCEPT APPLICATIONS FROM NOMINEES EXCEPT THOSE MADE BY

APPROVED NOMINEE COMPANIES ONLY. Approved nominee companies are defined as

APPENDIX E – TERMS, CONDITIONS AND PROCEDURES FORAPPLICATION AND ACCEPTANCE

E-1

banks, merchant banks, finance companies, insurance companies and licensed securities

dealers in Singapore and nominee companies controlled by them. Applications made by

nominees other than approved nominee companies shall be rejected.

7. IF YOU ARE NOT AN APPROVED NOMINEE COMPANY, YOU MUST MAINTAIN A

SECURITIES ACCOUNT WITH CDP IN YOUR OWN NAME AT THE TIME OF YOUR

APPLICATION. If you do not have an existing Securities Account with CDP in your own name

at the time of your application, your application will be rejected. If you have an existing

Securities Account with CDP but fail to provide your Securities Account number or provide an

incorrect Securities Account number in Section B of the Application Form, your application

may be rejected. Subject to paragraph 8 below, your application shall be rejected if your

particulars such as name, NRIC/passport number, nationality, permanent residence status

and CDP Securities Account number provided in your Application Form differ from those

particulars in your Securities Account as maintained with CDP. If you possess more than one

individual direct Securities Account with CDP, your application shall be rejected.

8. If your address as stated in the Application Form is different from the address

registered with CDP, you must inform CDP of your updated address promptly, failing

which the notification letter on successful allotment and other correspondence from

CDP will be sent to your address last registered with CDP.

9. Our Company, the Issue Manager, Sponsor and Placement Agent, as well as the

Sub-Placement Agent reserve the right to reject any application which does not

conform strictly to the instructions set out in the Application Form and in this Offer

Document or with the terms and conditions of this Offer Document or, which is

illegible, incomplete, incorrectly completed or which is accompanied by an improperly

drawn remittance or improper form of remittance or remittances which are not

honoured upon the first presentation.

10. Our Company, the Issue Manager, Sponsor and Placement Agent, as well as the

Sub-Placement Agent further reserve the right to treat as valid any applications not

completed or submitted or effected in all respects in accordance with the instructions

set out in the Application Form or the terms and conditions of this Offer Document,

and also to present for payment or other processes all remittances at any time after

receipt and to have full access to all information relating to, or deriving from, such

remittances or the processing thereof.

11. Our Company, the Issue Manager, Sponsor and Placement Agent, as well as the Sub-

Placement Agent reserve the right to reject or to accept, in whole or in part, or to scale down,

any application, without assigning any reason therefor, and no enquiry and/or

correspondence on the decision with regards hereto will be entertained. In deciding the basis

of allotment and/or allocation which shall be at the discretion of our Company, the Issue

Manager, Sponsor and Placement Agent, as well as the Sub-Placement Agent, due

consideration will be given to the desirability of allotting and/or allocating the Placement

Shares to a reasonable number of applicants with a view to establishing an adequate market

for our Shares.

12. Share certificates will be registered in the name of CDP or its nominee and will be forwarded

only to CDP. It is expected that CDP will send to you, at your own risk, within 15 Market Days

after the close of the Application List, a statement of account stating that your Securities


E-2

Account has been credited with the number of Placement Shares allotted to you, if your

application is successful. This will be the only acknowledgement of application monies

received and is not an acknowledgement by our Company, the Issue Manager, Sponsor and

Placement Agent, as well as the Sub-Placement Agent. You irrevocably authorise CDP to

complete and sign on your behalf, as transferee or renounce, any instrument of transfer

and/or other documents required for the issue or transfer of the Placement Shares allotted

and/or allocated to you.

13. In the event that we lodge a supplementary or replacement Offer Document (“Relevant

Document”) pursuant to the SFA or any applicable legislation in force from time to time prior

to the close of the Placement, and the Placement Shares have not been issued and/or sold,

we will (as required by law), and subject to the SFA, at our sole and absolute discretion

either:

(i) within 7 days of the lodgement of the Relevant Document give you a copy of the

Relevant Document and provide you with an option to withdraw; or

(ii) deem your application as withdrawn and cancelled and refund your application monies

(without interest or any share of revenue or other benefit arising therefrom) to you within

7 days from the lodgement of the Relevant Document.

Where you have notified us within 14 days from the date of lodgement of the Relevant

Document of your wish to exercise your option under paragraph 13(i) and (ii) above to

withdraw your application, we shall pay to you all monies paid by you on account of your

application for the Placement Shares without interest or any share of revenue or other benefit

arising therefrom and at your own risk, within 7 days from the receipt of such notification.

In the event that at any time at the time of the lodgement of the Relevant Document, the

Placement Shares have already been issued and/or sold but trading has not commenced, we

will (as required by law), and subject to the SFA, either:

(iii) within 7 days from the lodgement of the Relevant Document give you a copy of the

Relevant Document and provide you with an option to return the Placement Shares; or

(iv) deem the issue as void and refund your payment for the Placement Shares (without

interest or any share of revenue or other benefit arising therefrom) within 7 days from

the lodgement of the Relevant Document.

Any applicant who wishes to exercise his option under paragraph 13(iii) above to return the

Placement Shares issued and/or sold to him shall, within 14 days from the date of lodgement

of the Relevant Document, notify us of this and return all documents, if any, purporting to be

evidence of title of those Placement Shares, whereupon we shall, subject to the SFA, within

7 days from the receipt of such notification and documents, pay to him all monies paid by him

for the Placement Shares without interest or any share of revenue or other benefit arising

therefrom and at his own risk, and the Placement Shares issued to him shall be void.

Additional terms and instructions applicable upon the lodgement of the Relevant Document,

including instructions on how you can exercise the option to withdraw, may be found in such

Relevant Document.


E-3

14. You irrevocably authorise CDP to disclose the outcome of your application, including the

number of Placement Shares allotted and/or allocated to you pursuant to your application, to

us, the Issue Manager, Sponsor and Placement Agent as well as the Sub-Placement Agent

and, any other parties so authorised by the foregoing persons.

15. Any reference to “you” or the “applicant” in this section shall include an individual, a

corporation, an approved nominee and trustee applying for the Placement Shares through

the Placement Agent or its designated sub-placement agent.

16. By completing and delivering an Application Form in accordance with the provisions of this

Offer Document, you:

(i) irrevocably offer, agree and undertake to subscribe for the number of Placement Shares

specified in your application (or such smaller number for which the application is

accepted) at the Placement Price and agree that you will accept such Placement

Shares as may be allotted and/or allocated to you, in each case, subject to the

conditions set out in this Offer Document and the Memorandum and Articles of

Association of our Company;

(ii) agree that the aggregate Placement Price for the Placement Shares applied for is due

and payable to our Company forthwith;

(iii) (i) consent to the collection, use and disclosure of your name, NRIC/passport number

or company registration number, address, nationality, permanent resident status,

Securities Account number, share application amount, share application details and

other personal data (“Personal Data”) by the Share Registrar, CDP, Securities Clearing

and Computer Services (Pte.) Ltd (“SCCS”), SGX-ST, our Company, the Issue Manager,

Sponsor and Placement Agent as well as the Sub-Placement Agent and/or other

authorised operators (the “Relevant Persons”) for the purpose of facilitating your

application for the Placement Shares, and (ii) warrant that where you, as an approved

nominee company, disclose the Personal Data of the beneficial owner(s) to the

Relevant Persons, such disclosure is in compliance with applicable law (collectively, the

“Personal Data Privacy Terms”);

(iv) warrant the truth and accuracy of the information contained, and representations and

declarations made, in your application, and acknowledge and agree that such

information, representations and declarations will be relied on by our Company, the

Issue Manager, Sponsor and Placement Agent as well as the Sub-Placement Agent in

determining whether to accept your application and/or whether to allot and/or allocate

any Placement Shares to you; and

(v) agree and warrant that, if the laws of any jurisdictions outside Singapore are applicable

to your application, you have complied with all such laws and none of our Company, the

Issue Manager, Sponsor and Placement Agent and/or the Sub-Placement Agent will

infringe any such laws as a result of the acceptance of your application.


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17. Our acceptance of applications will be conditional upon, inter alia, our Company, the Issue

Manager, Sponsor and Placement Agent as well as the Sub-Placement Agent being satisfied

that:

(i) permission has been granted by the SGX-ST to deal in and for quotation of all our

existing Shares, the Placement Shares, the Award Shares and Option Shares on the

Catalist;

(ii) the Management Agreement and the Placement Agreement referred to in the section

titled “General and Statutory Information – Management and Placement Arrangements”

of this Offer Document have become unconditional and have not been terminated or

cancelled prior to such date as our Company may determine; and

(iii) the Authority has not served a stop order which directs that no or no further shares to

which this Offer Document relates be allotted and/or allocated.

18. In the event that a stop order in respect of the Placement Shares is served by the Authority

or other competent authority, and

(i) the Placement Shares have not been issued, and/or sold, we will (as required by law),

and subject to the SFA, deem all applications withdrawn and cancelled and we shall

refund the application monies (without interest or any share of revenue or other benefit

arising therefrom) to you within 14 days of the date of the stop order; or

(ii) If the Placement Shares have already been issued but trading has not commenced, the

issue of the Placement Shares will (as required by law) be deemed void and

i. if documents purporting to evidence title had been issued to you, our Company

shall inform you to return such documents to us within 14 days from that date; and

ii. we will refund the application monies (without interest or any share of revenue or

other benefit arising therefrom) to you within 7 days from the date of receipt of

those documents (if applicable) or the date of the stop order, whichever is later.

This shall not apply where only an interim stop order has been served.

19. In the event that an interim stop order in respect of the Placement Shares is served by the

Authority or other competent authority, no Placement Shares shall be issued to you when the

interim stop order is in force.

20. The Authority or the SGX-ST (acting on behalf of the Authority) is not able to serve a stop

order in respect of the Placement Shares if the Placement Shares have been issued and

listed on a securities exchange and trading in them has commenced.

21. In the event of any changes in the closure of the Application List or the time period during

which the Placement is open, we will publicly announce the same through a SGXNET

announcement to be posted on the Internet at the SGX-ST website http://www.sgx.com and

through a paid advertisement in a generally circulating daily press.

22. We will not hold any application in reserve.


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23. We will not allot and/or allocate shares on the basis of this Offer Document later than six

months after the date of registration of this Offer Document.

24. Additional terms and conditions for applications by way of Application Forms are set out on

pages E6 to E9 of this Offer Document.

ADDITIONAL TERMS AND CONDITIONS FOR APPLICATIONS USING APPLICATION FORMS

Applications by way of an Application Form shall be made on, and subject to, the terms and

conditions of this Offer Document, including but not limited to, the terms and conditions appearing

below as well as those set out in “Appendix E – Terms, Conditions And Procedures For Application

and Acceptance” to this Offer Document as well as the Memorandum and Articles of Association

of our Company.

1. Your application for the Placement Shares must be made using the Application Form for

Placement Shares accompanying and forming part of this Offer Document.

We draw your attention to the detailed instructions contained in the Application Form and this

Offer Document for the completion of the Application Form which must be carefully followed.

Our Company, the Issue Manager, Sponsor and Placement Agent, as well as the

Sub-Placement Agent reserve the right to reject applications which do not conform

strictly to the instructions set out in the Application Form and this Offer Document or

to the terms and conditions of this Offer Document or which are illegible, incomplete,

incorrectly completed or which are accompanied by improperly drawn remittances or

improper form of remittances, which are not honoured upon their first presentation.

2. Your Application Forms must be completed in English. Please type or write clearly in ink

using BLOCK LETTERS.

3. All spaces in the Application Form, except those under the heading “FOR OFFICIAL USE

ONLY”, must be completed and the words “NOT APPLICABLE” or “N.A.” should be written

in any space that is not applicable.

4. Individuals, corporations, approved nominee companies and trustees must give their names

in full. If you are an individual, you must make your application using your full names as they

appear in your identity cards (if you have such identification document) or in your passports

and, in the case of corporation, in your full name as registered with a competent authority.

If you are not an individual, you must complete the Application Form under the hand of an

official who must state the name and capacity in which he signs the Application Form. If you

are a corporation completing the Application Form, you are required to affix your Common

Seal (if any) in accordance with your Memorandum and Articles of Association or equivalent

constitutive documents of the corporation. If you are a corporate applicant and your

application is successful, a copy of your Memorandum and Articles of Association or

equivalent constitutive documents must be lodged with our Company’s Share Registrar and

Share Transfer Office. Our Company, the Issue Manager, Sponsor and Placement Agent, as

well as the Sub-Placement Agent, reserve the right to require you to produce documentary

proof of identification for verification purposes.

5. (i) You must complete Sections A and B and sign on page 1 of the Application Form.


E-6

(ii) You are required to delete either paragraph 7(a) or 7(b) on page 1 of the Application

Form. Where paragraph 7(a) is deleted, you must also complete Section C of the

Application Form with particulars of the beneficial owner(s).

(iii) If you fail to make the required declaration in paragraph 7(a) or 7(b), as the case may

be, on page 1 of the Application Form, your application may be rejected.

6. You (whether you are an individual or corporate applicant, whether incorporated or

unincorporated and wherever incorporated or constituted) will be required to declare whether

you are a citizen or permanent resident of Singapore or a corporation in which citizens or

permanent residents of Singapore or any body corporate constituted under any statute of

Singapore having an interest in the aggregate of more than 50 per cent. of the issued share

capital of or interests in such corporations. If you are an approved nominee company, you are

required to declare whether the beneficial owner of the Placement Shares is a citizen or

permanent resident of Singapore or a corporation, whether incorporated or unincorporated

and wherever incorporated or constituted, in which citizens or permanent residents of

Singapore or any body corporate whether incorporated or unincorporated and wherever

incorporated or constituted under any statute of Singapore have an interest in the aggregate

of more than 50 per cent. of the issued share capital of or interests in such corporation.

7. Your application must be accompanied by a remittance in Singapore currency for the full

amount payable, in respect of the number of Placement Shares applied for, in the form of a

BANKER’S DRAFT or CASHIER’S ORDER drawn on a bank in Singapore, made out in

favour of “HUATIONG SHARE ISSUE ACCOUNT” crossed “A/C PAYEE ONLY”, with your

name, CDP Securities Account Number and address written clearly on the reverse side.

Applications not accompanied by any payment or accompanied by ANY OTHER FORM OF

PAYMENT WILL NOT BE ACCEPTED. We will reject remittances bearing “NOT

TRANSFERABLE” or “NON TRANSFERABLE” crossings. No acknowledgement or receipt

will be issued by us, the Issue Manager, Sponsor and Placement Agent or the Sub-

Placement Agent for applications and application monies received.

8. Where your application is rejected or accepted in part only, the full amount or the balance of

the application monies, as the case may be, will be refunded (without interest or any share

of revenue or other benefit arising therefrom) to you by ordinary post at your own risk within

14 Market Days after the close of the Application List, provided that the remittance

accompanying such application which has been presented for payment or other processes

has been honoured and application monies have been received in the designated share

issue account. In the event that the Placement is cancelled by us following the termination

of the Management Agreement and/or the Placement Agreement or the Placement does not

proceed for any reason, the application monies received will be refunded (without interest or

any share of revenue or any other benefit arising therefrom) to you by ordinary post or

telegraphic transfer at your own risk within 5 Market Days from the termination of the

Placement. In the event that the Placement is cancelled by us following the issuance of a

stop order by the Authority, the application monies received will be refunded (without interest

or any share of revenue or other benefit arising therefrom) to you by ordinary post or

telegraphic transfer at your own risk within 14 Market Days from the date of the stop order.

9. Capitalised terms used in the Application Forms and defined in this Offer Document shall

bear the meanings assigned to them in this Offer Document.


E-7

10. You irrevocably agree and acknowledge that your application is subject to risks of fire, acts

of God and other events beyond the control of our Company, the Issue Manager, Sponsor

and Placement Agent, as well as the Sub-Placement Agent and/or any other party involved

in the Placement, and if, in any such event, our Company, the Issue Manager, Sponsor and

Placement Agent and/or the Sub-Placement Agent do/does not receive your Application

Form, you shall have no claim whatsoever against our Company, the Issue Manager,

Sponsor and Placement Agent, as well as the Sub-Placement Agent and/or any other party

involved in the Placement for the Placement Shares applied for or for any compensation, loss

or damage.

11. By completing and delivering the Application Form, you agree that:

(i) in consideration of our Company having distributed the Application Form to you and

agreeing to close the Application List at 12.00 noon on 5 December 2014 or such other

time or date as our Directors may, in consultation with the Issue Manager, Sponsor and

Placement Agent, as well as the Sub-Placement Agent decide and by completing and

delivering the Application Form, you agree that:

i. your application is irrevocable; and

ii. your remittance will be honoured on first presentation and that any application

monies returnable may be held pending clearance of your payment without interest

or any share of revenue or other benefit arising therefrom;

(ii) neither our Company, the Issue Manager, Sponsor and Placement Agent, Sub-

Placement Agent nor any party involved in the Placement shall be liable for any delays,

failures or inaccuracies in the rewarding, storage or in the transmission or delivery of

data relating to your application to us or CDP due to breakdowns or failure of

transmission, delivery or communication facilities or any risks referred to in paragraph

10 above or to any cause beyond their respective controls;

(iii) all applications, acceptances and contracts resulting therefrom under the Placement

shall be governed by and construed in accordance with the laws of Singapore and that

you irrevocably submit to the non-exclusive jurisdiction of the Singapore courts;

(iv) in respect of the Placement Shares for which your application has been received and

not rejected, acceptance of your application shall be constituted by written notification

and not otherwise, notwithstanding any remittance being presented for payment by or

on behalf of our Company;

(v) you will not be entitled to exercise any remedy of rescission for misrepresentation at

any time after acceptance of your application;

(vi) in making your application, reliance is placed solely on the information contained in this

Offer Document and that none of our Company, the Issue Manager, Sponsor and

Placement Agent, Sub-Placement Agent or any other person involved in the Placement

shall have any liability for any information not so contained;

(vii) you accept and agree to the Personal Data Privacy Terms set out in this Offer

Document; and


E-8

(viii) you irrevocably agree and undertake to subscribe for the number of Placement Shares

applied for as stated in the Application Form or any smaller number of such Placement

Shares that may be allotted and/or allocated to you in respect of your application. In the

event that our Company decides to allot and/or allocate any smaller number of

Placement Shares or not to allot and/or allocate any Placement Shares to you, you

agree to accept such decision as final.

Applications for Placement Shares

1. Your application for Placement Shares MUST be made using the Application Form. ONLY

ONE APPLICATION should be enclosed in each envelope.

2. The completed Placement Shares Application Form and the correct remittance in full in

respect of the number of Placement Shares applied for (in accordance with the terms and

conditions of this Offer Document) with your name and address written clearly on the reverse

side, must be enclosed and sealed in an envelope to be provided by you. You must affix

adequate postage (if despatching by ordinary post) and thereafter the sealed envelope must

be DESPATCHED BY ORDINARY POST OR DELIVERED BY HAND at your own risk to

Huationg Global Limited c/o Boardroom Corporate & Advisory Services Pte. Ltd., 50 Raffles

Place, #32-01, Singapore Land Tower, Singapore 048623, to arrive by 12.00 noon on 5

December 2014 or such other time as our Company may, in consultation with the Issue

Manager, Sponsor and Placement Agent as well as the Sub-Placement Agent, decide.

Local Urgent Mail or Registered Post must NOT be used. ONLY ONE APPLICATION

should be enclosed in each envelope. No acknowledgement of receipt will be issued for any

application or remittance received.

3. Applications that are illegible, incomplete or incorrectly completed or accompanied by

improperly drawn remittances or improper form of remittance or which are not honoured upon

their first presentation are liable to be rejected.


E-9

1. NAME OF THE SCHEME

The Scheme shall be called the “Huationg Employee Share Option Scheme”.

2. DEFINITIONS

2.1 In the Scheme, unless the context otherwise requires, the following words and expressions

shall have the following meanings:

“Administration Committee” The Administration Committee comprising of members

of the nominating committee and remuneration

committee of the Company to administer the Scheme

“Adoption Date” The date on which the Scheme is adopted by the

Company in general meeting

“Aggregate Subscription Cost” The total amount payable for Shares which may be

acquired on the exercise of an Option

“Articles” The Articles of Association of the Company, as

amended from time to time

“Associates” Has the meaning ascribed to it in the SGX-ST Listing

Manual

“Auditors” The auditors of the Company for the time being

“Board” The board of directors of the Company

“Catalist” The sponsor-supervised listing platform of the SGX-ST

“CDP” The Central Depository (Pte) Limited

“CPF” Central Provident Fund

“Companies Act” The Companies Act, Chapter 50 of Singapore as

amended, modified or supplemented from time to time

“Company” Huationg Global Limited, a public company

incorporated in Singapore with limited liability

“control” The capacity to dominate decision making, directly or

indirectly, in relation to the financial and operating

policies of the Company

“Controlling Shareholder” A person who: (a) holds directly or indirectly 15.0% or

more of the number of all voting shares in a company;

or (b) in fact exercises control over a company, unless

otherwise determined

APPENDIX F – RULES OF THE HUATIONG EMPLOYEE SHARE OPTION SCHEME

F-1

“Date of Grant” In relation to an Option, the date on which the Option is

granted pursuant to Rule 6

“Director” A person holding office as a director for the time being

of the Company and/or its Subsidiaries, as the case

may be

“Employee” An employee or an Executive Director of the Group

selected by the Administration Committee to participate

in the Scheme

“Executive Director” A director for the time being of the Company and/or any

of its Subsidiaries, holding office in an executive

capacity in the Company and/or such Subsidiary

“Exercise Period” The period for the exercise of an Option, being a period

commencing:

(a) after the first anniversary of the Date of Grant and

expiring on the tenth anniversary of such Date of

Grant in the case of a Market Price Option; and

(b) after the second anniversary of the Date of Grant

and expiring on the tenth anniversary of such

Date of Grant in the case of an Incentive Option

“Exercise Price” The price at which a Participant shall subscribe for

each Share upon the exercise of an Option which shall

be the price as determined in accordance with Rule 7,

as adjusted in accordance with Rule 12

“Grantee” The person to whom an offer of an Option is made

“Group” The Company and its Subsidiaries

“Incentive Option” An Option granted with the Exercise Price set at a

discount to the Market Price

“Market Day” A day on which the SGX-ST is open for trading in

securities

“Market Price” A price equal to the average of the last dealt prices for

the Shares on the SGX-ST over the five consecutive

Trading Days immediately preceding the Date of Grant

of that Option, as determined by the Administration

Committee by reference to the daily official list or any

other publication published by the SGX-ST, rounded to

the nearest whole cent in the event of fractional prices

“Market Price Option” An Option granted with the Exercise Price set at the

Market Price


F-2

“Non-executive Director” A director (other than an Executive Director) from time

to time of the Company and/or any of its Subsidiaries

“Option” The right to subscribe for Shares granted or to be

granted to an Employee pursuant to the Scheme and

for the time being subsisting

“Participant” The holder of an Option

“Record Date” The date as at the close of business (or such other time

as may have been prescribed by the Company) on

which Shareholders must be registered in order to

participate in the dividends, rights, allotments or other

distributions (as the case may be)

“Rules” Rules of the Scheme

“Rules of Catalist” Section B of the SGX-ST Listing Manual dealing with

the rules of Catalist, as from time to time amended,

modified or supplemented

“Scheme” The Huationg Employee Share Option Scheme, as the

same may be modified or altered from time to time

“Securities Account” The securities account maintained by a Depositor with

CDP

“Shareholders” Registered holders of Shares, except where the

registered holder is CDP, the term “Shareholders”

shall, in relation to such Shares, mean the Depositors

whose Securities Accounts are credited with Shares

“SGX-ST” Singapore Exchange Securities Trading Limited

“SGX-ST Listing Manual” Listing Manual of the SGX-ST

“Shares” Ordinary shares in the capital of the Company

“Subsidiary” A company (whether incorporated within or outside

Singapore and wheresoever resident) being a

subsidiary for the time being of the Company within the

meaning of Section 5 of the Companies Act

“Trading Day” A day on which the Shares are traded on the SGX-ST

“S$” Singapore dollar

“%” Per centum or percentage


F-3

2.2 The terms “Depositor”, “Depository Agent” and “Depository Register” shall have the

meanings ascribed to them respectively by Section 130A of the Companies Act.

2.3 Words importing the singular number shall, where applicable, include the plural number and

vice versa. Words importing the masculine gender shall, where applicable, include the

feminine and neuter gender.

2.4 Any reference to a time of a day in the Scheme is a reference to Singapore time.

2.5 Any reference in the Scheme to any enactment is a reference to that enactment as for the

time being amended or re-enacted. Any word defined under the Companies Act or any

statutory modification thereof and used in the Scheme shall have the meaning assigned to

it under the Companies Act.

3. OBJECTIVES OF THE SCHEME

3.1 The Scheme is a share incentive plan. The Scheme is proposed on the basis that it is

important to retain staff whose contributions are essential to the well-being and prosperity

of the Group and to give recognition to outstanding Employees who have contributed to the

growth of the Group.

3.2 The objectives of the Scheme are as follows:

(a) the motivation of each Participant to optimise his performance standards and

efficiency and to maintain a high level of contribution to the Group;

(b) the retention of key employees of the Group whose contributions are essential to the

long-term growth and profitability of the Group;

(c) to instil loyalty to, and a stronger identification by the Participants with the long-term

prosperity of, the Company;

(d) to attract potential employees with relevant skills to contribute to the Group and to

create value for the Shareholders of the Company; and

(e) to align the interests of the Participants with the interests of the Shareholders.

4. ELIGIBILITY OF PARTICIPANTS

4.1 The Employee’s eligibility to participate in the Scheme shall be at the absolute discretion of

the Administration Committee. Such person must:

(a) be confirmed in his/her employment with the Group;

(b) have attained the age of 21 years on or before the Date of Grant; and

(c) not be an undischarged bankrupt and must not have entered into a composition with

his creditors.

4.2 Non-executive Directors who satisfy the eligibility requirements in Rule 4.1(ii) and (iii) shall

also be eligible to participate in the Scheme.


F-4

4.3 For the avoidance of doubt, Controlling Shareholders and their Associates shall not be

eligible to participate in the Scheme.

4.4 Subject to the Companies Act and any requirement of the SGX-ST, the terms of eligibility

for participation in the Scheme may be amended from time to time at the absolute discretion

of the Administration Committee, which would be exercised judiciously.

5. OPTION ENTITLEMENT

Subject to Rule 4, Rule 11 and Rule 12, the aggregate number of Shares in respect of which

Options may be offered to a Grantee for subscription in accordance with the Scheme shall

be determined at the discretion of the Administration Committee, which would be exercised

judiciously, who shall take into account criteria such as the rank and responsibilities within

the Group, performance, years of service/appointment and potential for future development

of the Grantee and the performance of the Company.

6. GRANT AND ACCEPTANCE OF OPTIONS

6.1 Subject as provided in Rule 11, the Administration Committee may grant Options at any time

during the period when the Scheme is in force, provided that in the event that an

announcement on any matter of an exceptional nature involving unpublished price sensitive

information is made, Options may only be granted on or after the second Market Day from

the date on which such announcement is released.

6.2 The Letter of Offer to grant an Option shall be in, or substantially in, the form set out in

Schedule A, subject to such modification as the Administration Committee may from time to

time determine.

6.3 An Option shall be personal to the person to whom it is granted and shall not be transferred

(other than to a Participant’s personal representative on the death of that Participant),

charged, assigned, pledged or otherwise disposed of, in whole or in part, except with the

prior approval of the Administration Committee.

6.4 The grant of an Option under this Rule 6 shall be accepted by the Grantee within 30 days

from the Date of Grant of that Option and, in any event, not later than 5.00 p.m. on the

thirtieth day from such Date of Grant by completing, signing and returning the Acceptance

Form in or substantially in the form set out in Schedule B, subject to such modification as

the Administration Committee may from time to time determine, accompanied by payment

of S$1.00 as consideration.

6.5 If a grant of an Option is not accepted in the manner as provided in Rule 6.4, such offer

shall, upon the expiry of the 30-day period, automatically lapse and become null, void and

of no effect.


F-5

7. EXERCISE PRICE

Subject to any adjustment pursuant to Rule 12, the Exercise Price for each Share in respect

of which an Option is exercisable shall be determined by the Administration Committee, in

its absolute discretion, on the Date of Grant, at:

(a) a price equal to the Market Price; or

(b) a price which is set at a discount to the Market Price, provided that:

(i) the maximum discount shall not exceed 20.0% of the Market Price (or such other

percentage or amount as may be determined by the Administration Committee

and permitted by the SGX-ST); and

(ii) the Shareholders in general meeting shall have authorised, in a separate

resolution, the making of offers and grants of Options under the Scheme at a

discount not exceeding the maximum discount as aforesaid.

8. RIGHTS TO EXERCISE OPTIONS

8.1 Subject as provided in Rule 8 and Rule 9, a Market Price Option or an Incentive Option, as

the case may be, shall be exercisable, in whole or in part, during the Exercise Period

applicable to that Option.

8.2 An Option shall, to the extent unexercised, immediately lapse without any claim whatsoever

against the Company:

(a) in the event of misconduct on the part of the Participant as determined by the

Administration Committee in its discretion;

(b) subject to Rule 8.3(b), where the Participant ceases at any time to be in the

employment of any of the Group, for any reason whatsoever;

(c) the bankruptcy of the Participant or the happening of any other event which results in

his being deprived of the legal or beneficial ownership of an Option; or

(d) the company by which he is employed ceasing to be a company within the Group, or

the undertaking or part of the undertaking of such company being transferred

otherwise than to another company within the Group.

For the purpose of Rule 8.2(b), the Participant shall be deemed to have ceased to be so

employed as at the last day of his employment. For avoidance of doubt, no Option shall

lapse pursuant to Rule 8.2(b) in the event of any transfer of employment of a Participant

between companies in the Group.


F-6

8.3 In any of the following events, namely:

(a) where the Participant ceases at any time to be in the employment of the Group by

reason of:

(i) ill health, injury or disability (in each case, evidenced to the satisfaction of the

Administration Committee);

(ii) redundancy;

(iii) retirement at or after the legal retirement age; or

(iv) retirement before the legal retirement age with the consent of the Administration

Committee; or

(b) where the Participant ceases at any time to be in the employment of any of the

companies in the Group by reason of any other event approved in writing by the

Administration Committee,

the Participant may exercise any Option:

(i) in the case where the cessation of employment or cessation to be a Director, as

the case may be, occurs after the first day of the Exercise Period in respect of

such Option, within the period of 18 months after the date of such cessation of

employment or such cessation to be a director, as the case may be, or before the

expiry of the Exercise Period in respect of that Option, whichever is earlier, and

upon expiry of such period the Option shall lapse; and

(ii) in the case where the cessation of employment or cessation to be a Director, as

the case may be, occurs before the first day of the Exercise Period in respect of

such Option, within the period of 18 months after the first day of the Exercise

Period in respect of that Option, and upon expiry of such period the Option shall

lapse.

8.4 If a Participant dies, whether or not while still in the employment of any of the companies

in the Group and at the date of his death holds any unexercised Option, such Option shall

continue to be exercisable by the duly appointed personal representatives of the

Participant:

(a) in the case where death occurs after the first day of the Exercise Period in respect of

such Option, within the period of 18 months after the date of such cessation of

employment or before the expiry of the Exercise Period in respect of that Option,

whichever is earlier, and upon expiry of such period the Option shall lapse; and

(b) in the case where the death occurs before the first day of the Exercise Period in

respect of such Option, within the period of 18 months after the first day of the

Exercise Period in respect of that Option, and upon expiry of such period, the Option

shall lapse.


F-7

9. TAKE-OVER AND WINDING-UP OF THE COMPANY

9.1 Notwithstanding Rule 8 but subject to Rule 9.5, in the event of a take-over being made for

the Shares, a Participant shall be entitled to exercise any Option held by him and as yet

unexercised, in respect of such number of Shares comprised in that Option as may be

determined by the Administration Committee in its absolute discretion, in the period

commencing on the date on which such offer is made or, if such offer is conditional, the date

on which such offer becomes or is declared unconditional, as the case may be, and ending

on the earlier of:

(a) the expiry of six months thereafter, unless prior to the expiry of such six-month period,

at the recommendation of the officer and with the approvals of the Administration

Committee and the SGX-ST, such expiry date is extended to a later date (in either

case, being a date falling not later than the expiry of the Exercise Period relating

thereto); or

(b) the date of expiry of the Exercise Period relating thereto,

whereupon the Option then remaining unexercised shall lapse.

Provided that if during such period, the offeror becomes entitled or bound to exercise rights

of compulsory acquisition under the provisions of the Companies Act and, being entitled to

do so, gives notice to the Participants that it intends to exercise such rights on a specified

date, the Option shall remain exercisable by the Participant until the expiry of such specified

date or the expiry of the Exercise Period relating thereto, whichever is earlier. Any Option

not so exercised shall lapse provided that the rights of acquisition or obligations to acquire

shall have been exercised or performed, as the case may be. If such rights or obligations

have not been exercised or performed, the Option shall, notwithstanding Rule 8, remain

exercisable until the expiry of the Exercise Period relating thereto.

9.2 If under any applicable laws, the court sanctions a compromise or arrangement proposed

for the purposes of, or in connection with, a scheme for the reconstruction of the Company

or its amalgamation with another company or companies, each Participant shall be entitled,

notwithstanding Rule 8 but subject to Rule 9.5, to exercise any Option then held by him, in

respect of such number of Shares comprised in that Option as may be determined by the

Administration Committee in its absolute discretion, during the period commencing on the

date upon which the compromise or arrangement is sanctioned by the court and ending

either on the expiry of 60 days thereafter or the date upon which the compromise or

arrangement becomes effective, whichever is later (but not after the expiry of the Exercise

Period relating thereto), whereupon the Option shall lapse and become null and void.

9.3 If an order is made for the winding-up of the Company on the basis of its insolvency, all

Options, to the extent unexercised, shall lapse and become null and void.

9.4 In the event a notice is given by the Company to its members to convene a general meeting

for the purposes of considering and, if thought fit, approving a resolution to voluntarily

wind-up the Company, the Company shall on the same date as or soon after it dispatches

such notice to each member of the Company give notice thereof to all Participants (together

with a notice of the existence of the provision of this Rule 9.4) and thereupon, each

Participant (or his personal representative) shall be entitled to exercise all or any of his

Options at any time not later than two business days prior to the proposed general meeting

of the Company by giving notice in writing to the Company, accompanied by a remittance


F-8

for the Aggregate Subscription Cost whereupon the Company shall as soon as possible and

in any event, no later than the business day immediately prior to the date of the proposed

general meeting referred to above, allot the relevant Shares to the Participant credited as

fully paid.

9.5 If in connection with the making of a general offer referred to in Rule 9.1 or the scheme

referred to in Rule 9.2 or the winding-up referred to in Rule 9.4, arrangements are made

(which are confirmed in writing by the Auditors, acting only as experts and not as arbitrators,

to be fair and reasonable) for the compensation of Participants, whether by the continuation

of their Options or the payment of cash or the grant of other options or otherwise, a

Participant holding an Option, as yet not exercised, may not, at the discretion of the

Administration Committee, be permitted to exercise that Option as provided for in this

Rule 9.

9.6 To the extent that an Option is not exercised within the periods referred to in this Rule 9,

it shall lapse and become null and void.

10. EXERCISE OF OPTIONS, ALLOTMENT AND LISTING OF SHARES

10.1 Subject to Rule 8.1, an Option may be exercised, in whole or in part, by a Participant giving

notice in writing to the Company in or substantially in the form set out in Schedule C, subject

to such modification as the Administration Committee may from time to time determine.

Such notice must be accompanied by payment in cash for the Aggregate Subscription Cost

in respect of the Shares for which that Option is exercised and any other documentation the

Administration Committee may require. An Option shall be deemed to be exercised upon

receipt by the Company of the said notice, duly completed, and the Aggregate Subscription

Cost. All payments made shall be made by cheque, cashiers’ order, banker’s draft or postal

order made out in favour of the Company or such other mode of payment as may be

acceptable to the Company.

10.2 Subject to all such consents or other required action of any competent authority under any

regulations or enactment for the time being in force as may be necessary and subject to the

compliance with the terms of the Scheme and the Memorandum and Articles of Association

of the Company, the Company shall, within 10 Market Days after the exercise of an Option,

allot the relevant Shares and despatch to CDP the relevant share certificates by ordinary

post or such other mode as the Administration Committee may deem fit. The Company

shall, as soon as practicable after such allotment, apply to the SGX-ST for permission to

deal in and for quotation of such Shares, if necessary.

10.3 Shares which are allotted on the exercise of an Option by a Participant shall be issued in

the name of CDP to the credit of the securities account of that Participant maintained with

CDP, the securities sub-account of that Participant maintained with a Depository Agent or

the CPF investment account maintained with a CPF agent bank.


F-9

10.4 Shares allotted and issued on exercise of an Option shall:

(a) be subject to all the provisions of the Memorandum and Articles of Association of the

Company; and

(b) rank in full for all entitlements, including dividends or other distributions declared or

recommended in respect of the then existing Shares, the Record Date for which is on

or after the relevant date upon which such exercise occurred, and shall in all other

respects rank pari passu with other existing Shares then in issue.

10.5 The Company shall keep available sufficient unissued Shares to satisfy the full exercise of

all Options for the time being remaining capable of being exercised.

11. LIMITATION ON THE SIZE OF THE SCHEME

The total number of new Shares over which the Administration Committee may grant

Options on any date, when added to the number of new Shares issued and issuable in

respect of all Options granted under the Scheme, and all awards granted under any other

share option, share incentive, performance share or restricted share plan implemented by

the Company and for the time being in force, shall not exceed 15.0% of the number of all

issued Shares (excluding treasury shares, as defined in the Companies Act) on the day

preceding that date.

12. ADJUSTMENT EVENTS

12.1 If a variation in the issued ordinary share capital of the Company (whether by way of a

capitalisation of profits or reserves or rights issue, reduction, subdivision, consolidation,

distribution or otherwise) shall take place, then:

(a) the Exercise Price of the Shares, class and/or number of Shares comprised in an

Option to the extent unexercised; and/or

(b) the class and/or number of Shares over which Options may be granted under the

Scheme,

shall be adjusted in such manner as the Administration Committee may determine to be

appropriate.

12.2 Unless the Administration Committee considers an adjustment to be appropriate, the issue

of securities as consideration for an acquisition or a private placement of securities, or the

cancellation of issued Shares purchased or acquired by the Company by way of a market

purchase of such Shares undertaken by the Company on the SGX-ST during the period

when a share purchase mandate granted by the Shareholders (including any renewal of

such mandate) is in force, shall not normally be regarded as a circumstance requiring

adjustment.


F-10

12.3 Notwithstanding the provisions of Rule 12.1:

(a) no such adjustment shall be made if as a result the Participant receives a benefit that

a Shareholder does not receive; and

(b) any adjustment (except in relation to a capitalisation issue) must be confirmed in

writing by the Auditors (acting only as experts and not as arbitrators) to be in their

opinion, fair and reasonable.

12.4 Upon any adjustment required to be made pursuant to this Rule 12, the Company shall

notify the Participant (or his duly appointed personal representatives where applicable) in

writing and deliver to him (or his duly appointed personal representatives where applicable)

a statement setting forth the Exercise Price thereafter in effect and class and/or number of

Shares thereafter to be issued on the exercise of the Option. Any adjustment shall take

effect upon such written notification being given.

13. ADMINISTRATION OF THE SCHEME

13.1 The Scheme shall be administered by the Administration Committee in its absolute

discretion with such powers and duties as are conferred on it by the Board, provided that

no member of the Administration Committee shall participate in any deliberation or decision

in respect of Options to be granted to him or held by him.

13.2 The Administration Committee shall have the power, from time to time, to make and vary

such regulations (not being inconsistent with the Scheme) for the implementation and

administration of the Scheme as they think fit. Any matter pertaining or pursuant to the

Scheme and any dispute and uncertainty as to the interpretation of the Scheme, any rule,

regulation or procedure thereunder or any rights under the Scheme shall be determined by

the Administration Committee.

13.3 Neither the Scheme nor the grant of Options under the Scheme shall impose on the

Company or the Administration Committee any liability whatsoever in connection with:

(a) the lapsing or early expiry of any Options pursuant to any provision of the Scheme;

(b) the failure or refusal by the Administration Committee to exercise, or the exercise by

the Administration Committee of, any discretion under the Scheme; and/or

(c) any decision or determination of the Administration Committee made pursuant to any

provision of the Scheme.

13.4 Any decision or determination of the Administration Committee made pursuant to any

provision of the Scheme (other than a matter to be certified by the Auditors) shall be final,

binding and conclusive.

14. NOTICES

14.1 Any notice required to be given by a Participant to the Company shall be sent or made to

the principal place of business of the Company or such other addresses (including

electronic mail addresses) or facsimile number, and marked for the attention of the

Administration Committee, as may be notified by the Company to him in writing.


F-11

14.2 Any notices or documents required to be given to a Participant or any correspondence to

be made between the Company and the Participant shall be given or made by the

Administration Committee (or such person(s) as it may from time to time direct) on behalf

of the Company and shall be delivered to him by hand or sent to him at his home address,

electronic mail address or facsimile number according to the records of the Company or the

last known address, electronic mail address or facsimile number of the Participant.

14.3 Any notice or other communication from a Participant to the Company shall be irrevocable,

and shall not be effective until received by the Company. Any other notice or communication

from the Company to a Participant shall be deemed to be received by that Participant, when

left at the address specified in Rule 14.2 or, if sent by post, on the day following the date

of posting or, if sent by electronic mail or facsimile transmission, on the day of despatch.

15. MODIFICATIONS TO THE SCHEME

15.1 Any or all the provisions of the Scheme may be modified and/or altered at any time and from

time to time by resolution of the Administration Committee, except that:

(a) no modification or alteration shall alter adversely the rights attaching to any Option

granted prior to such modification or alteration except with the consent in writing of

such number of Participants who, if they exercised their Options in full, would thereby

become entitled to not less than 75.0% of the number of all the Shares which would

fall to be allotted upon exercise in full of all outstanding Options;

(b) any modification or alteration which would be to the advantage of Participants under

the Scheme shall be subject to the prior approval of the Shareholders in general

meeting; and

(c) no modification or alteration shall be made without the prior approval of the SGX-ST

and such other regulatory authorities as may be necessary.

15.2 Notwithstanding anything to the contrary contained in Rule 15.1, the Administration

Committee may at any time by resolution (and without other formality, save for the prior

approval of the SGX-ST) amend or alter the Scheme in any way to the extent necessary to

cause the Scheme to comply with any statutory provision or the provision or the regulations

of any regulatory or other relevant authority or body (including the SGX-ST).

15.3 Written notice of any modification or alteration made in accordance with this Rule 15 shall

be given to all Participants.

16. TERMS OF EMPLOYMENT UNAFFECTED

The terms of employment of a Participant shall not be affected by his participation in the

Scheme, which shall neither form part of such terms nor entitle him to take into account

such participation in calculating any compensation or damages on the termination of his

employment for any reason.


F-12

17. DURATION OF THE SCHEME

17.1 The Scheme shall continue to be in force at the discretion of the Administration Committee,

subject to a maximum period of 10 years commencing on the Adoption Date, provided

always that the Scheme may continue beyond the above stipulated period with the approval

of the Shareholders by ordinary resolution in general meeting and of any relevant

authorities which may then be required.

17.2 The Scheme may be terminated at any time by the Administration Committee, at the

discretion of the Administration Committee, or by resolution of the Company in general

meeting, subject to all relevant approvals which may be required and if the Scheme is so

terminated, no further Options shall be offered by the Company hereunder.

17.3 The termination of the Scheme shall not affect Options which have been granted and

accepted as provided in Rule 6.4, whether such Options have been exercised (whether fully

or partially) or not.

18. TAXES

All taxes (including income tax) arising from the exercise of any Option granted to any

Participant under the Scheme shall be borne by that Participant.

19. COSTS AND EXPENSES OF THE SCHEME

19.1 Each Participant shall be responsible for all fees of CDP relating to or in connection with the

issue and allotment of any Shares pursuant to the exercise of any Option in CDP’s name,

the deposit of share certificate(s) with CDP, the Participant’s securities account with CDP,

or the Participant’s securities sub-account with a Depository Agent or CPF investment

account with a CPF agent bank.

19.2 Save for the taxes referred to in Rule 18 and such other costs and expenses expressly

provided in the Scheme to be payable by the Participants, all fees, costs and expenses

incurred by the Company in relation to the Scheme including but not limited to the fees,

costs and expenses relating to the allotment and issue of Shares pursuant to the exercise

of any Option shall be borne by the Company.

20. DISCLAIMER OF LIABILITY

Notwithstanding any provisions herein contained, the Administration Committee and the

Company shall not under any circumstances be held liable for any costs, losses, expenses

and damages whatsoever and howsoever arising in any event, including but not limited to

the Company’s delay in issuing the Shares or applying for or procuring the listing of the

Shares on the SGX-ST in accordance with Rule 10.2.


F-13

21. DISCLOSURE IN ANNUAL REPORT

The following disclosures (as applicable) will be made by the Company in its annual report

for so long as the Scheme continues in operation:

(a) the names of the members of the Administration Committee;

(b) the information in respect of Options granted to the following Participants in the table

set out below:

(i) Directors of the Company;

(ii) Participants, other than those in (i) above, who receive 5.0% or more of the total

number of Shares comprised in Options available under the Scheme.

Name of

Participant

Number of

Shares

comprised in

Options

granted during

financial year

under review

(including

terms)

Aggregate

number of

Shares

comprised in

Options

granted since

commencement

of Scheme to

end of

financial year

under review

Aggregate

number of

Shares

comprised in

Options

exercised since

commencement

of Scheme to

end of

financial year

under review

Aggregate

number of

Shares

comprised in

Options

outstanding

as at end of

financial year

under review

(c) the number of Incentive Options during the financial year under review in the following

bands:

Discount to the Market Price

%

Aggregate number of

Incentive Options

granted during the

financial year

under review

Proportion of

Incentive Options to

Market Price Options

granted during the

financial year

under review

0-10

11-20

(d) Disclosure in the annual report of information on Options granted to directors and

employees of the Company’s parent company and its subsidiaries would not be

necessary as such persons are not Participants.


F-14

22. ABSTENTION FROM VOTING

Participants who are Shareholders are to abstain from voting on any Shareholders’

resolution relating to the Scheme.

23. DISPUTES

Any disputes or differences of any nature arising hereunder shall be referred to the

Administration Committee and its decision shall be final and binding in all respects.

24. GOVERNING LAW

The Scheme shall be governed by, and construed in accordance with, the laws of the

Republic of Singapore. The Participants, by accepting Options in accordance with the

Scheme, and the Company submit to the exclusive jurisdiction of the courts of the Republic

of Singapore.


F-15

Schedule A


LETTER OF OFFER

Serial No:

Date:

To: [Name]

[Designation]

[Address]

Private and Confidential

Dear Sir/Madam,

1. We have the pleasure of informing you that, pursuant to the Huationg Employee Share

Option Scheme (the “Share Option Scheme”), you have been nominated to participate in

the Share Option Scheme by the Administration Committee (the “Administration

Committee”) appointed by the Board of Directors of Huationg Global Limited (the

“Company”) to administer the Share Option Scheme. Terms as defined in the Share Option

Scheme shall have the same meaning when used in this letter.

2. Accordingly, in consideration of the payment of a sum of S$1.00, an offer is hereby made to

grant you an option (the “Option”), to subscribe for and be allotted

Shares at the price of S$ for each Share.

3. The Option is personal to you and shall not be transferred, charged, pledged, assigned or

otherwise disposed of by you, in whole or in part, except with the prior approval of the

Administration Committee.

4. The Option shall be subject to the terms of the Share Option Scheme, a copy of which is

available for inspection at the business address of the Company.

5. If you wish to accept the offer of the Option on the terms of this letter, please sign and return

the enclosed Acceptance Form with a sum of S$1.00 not later than 5.00 p.m.

on , failing which this offer will lapse.

Yours faithfully,

For and on behalf of


Name:

Designation:


F-16

Schedule B


ACCEPTANCE FORM

Serial No:

Date:

To: The Administration Committee,

Huationg Employee Share Option Scheme,

Closing Date for Acceptance of Offer :

Number of Shares Offered :

Exercise Price for each Share : S$

Total Amount Payable : S$

I have read your Letter of Offer dated and agree to be bound by the terms

of the Letter of Offer and the Share Option Scheme referred to therein. Terms defined in your

Letter of Offer shall have the same meanings when used in this Acceptance Form.

I hereby accept the Option to subscribe for Shares at S$

for each Share. I enclose cash for S$1.00 in payment for the purchase of the Option/I authorise

my employer to deduct the sum of S$1.00 from my salary in payment for the purchase of the

Option.

I understand that I am not obliged to exercise the Option.

I confirm that my acceptance of the Option will not result in the contravention of any applicable law

or regulation in relation to the ownership of shares in the Company or options to subscribe for such

shares.

I agree to keep all information pertaining to the grant of the Option to me confidential.

I further acknowledge that you have not made any representation to induce me to accept the offer

and that the terms of the Letter of Offer and this Acceptance Form constitute the entire agreement

between us relating to the offer.


F-17

Please print in block letters

Name in full :

Designation :

Address :

Nationality :

*NRIC/Passport No. :

Signature :

Date :

Note:

* Delete accordingly


F-18

Schedule C


FORM OF EXERCISE OF OPTION

Total number of ordinary shares (the

“Shares”) offered at S$

for each Share (the “Exercise Price”)

under the Huationg Employee Share

Option Scheme on (Date

of Grant)

:

Number of Shares previously allotted

thereunder

:

Outstanding balance of Shares to be

allotted thereunder

:

Number of Shares now to be subscribed :

To: The Administration Committee,

Huationg Employee Share Option Scheme,

1. Pursuant to your Letter of Offer dated and my acceptance thereof, I

hereby exercise the Option to subscribe for Shares in Huationg Global

Limited (the “Company”) at S$ for each Share.

2. I enclose a *cheque/cashier’s order/banker’s draft/postal order no. for

S$ by way of subscription for the total number of the said Shares.

3. I agree to subscribe for the said Shares subject to the terms of the Letter of Offer, the

Huationg Employee Share Option Scheme and the Memorandum and Articles of Association

of the Company.

4. I declare that I am subscribing for the said Shares for myself and not as a nominee for any

other person.

5. I request the Company to allot and issue the Shares in the name of The Central Depository

(Pte) Limited (“CDP”) for credit of my *Securities Account with CDP/Sub-Account with the

Depository Agent/CPF investment account with my Agent Bank specified below and I hereby

agree to bear such fees or other charges as may be imposed by CDP in respect thereof.


F-19

Please print in block letters

Name in full :

Designation :

Address :

Nationality :

*NRIC/Passport No :

*Direct Securities

Account No.

:

OR

*Sub Account No. :

Name of Depository

Agent

:

OR

*CPF Investment

Account No.

:

Name of Agent

Bank

:

Signature :

Date :

Note:

* Delete accordingly


F-20

1. NAME OF THE PLAN

This Plan shall be called the “Huationg Performance Share Plan”.

2. DEFINITIONS

2.1 In this Plan, unless the context otherwise requires, the following words and expressions

shall have the following meanings:

“Administration Committee” The Administration Committee comprising of members

of the nominating committee and remuneration

committee of the Company to administer the Plan

“Adoption Date” The date on which the Plan is adopted by the Company

in general meeting

“Articles” The Articles of Association of the Company, as


“Associates” Has the meaning ascribed to it in the Rules of Catalist

“Auditors” The auditors for the time being of the Company

“Award” A contingent award of Shares granted under Rule 5

“Award Letter” A letter in such form as the Administration Committee

shall approve, confirming an Award granted to a

Participant by the Administration Committee

“Board” The board of directors of the Company

“Catalist” The sponsor-supervised listing platform of the SGX-ST

“CDP” The Central Depository (Pte) Limited

“Companies Act” The Companies Act, Chapter 50 of Singapore, as

amended, modified or supplemented from time to time

“Company” Huationg Global Limited, a public company

incorporated in Singapore with limited liability

“control” The capacity to dominate decision-making, directly or

indirectly, in relation to the financial and operating

policies of a company

“Controlling Shareholder” A person who: (a) holds directly or indirectly 15.0% or

more of the number of all voting shares in a company;

or (b) in fact exercises control over a company, unless

otherwise determined

APPENDIX G – RULES OF THE HUATIONG PERFORMANCE SHARE PLAN

G-1

“Date of Grant” In relation to an Award, the date on which the Award is

granted pursuant to Rule 5

“Director” A person holding office as a director for the time being

of the Company and/or any of its Subsidiaries, as the

case may be

“Employee” An employee of the Group selected by the

Administration Committee to participate in the Plan

“Executive Director” A director for the time being of the Company and/or any

of its Subsidiaries, holding office in an executive

capacity in the Company and/or such Subsidiary

“Group” The Company and its Subsidiaries

“Market Day” A day on which the SGX-ST is open for trading of

securities

“Non-executive Director” A director (other than an Executive Director) from time

to time of the Company and/or any of its Subsidiaries

“Participant” The holder of an Award

“Performance Condition” In relation to a Performance-related Award, the

condition specified on the Date of Grant in relation to

that Award

“Performance-related Award” An Award in relation to which a Performance Condition

is specified

“Performance Period” In relation to a Performance-related Award, a period,

the duration of which is to be determined by the

Administration Committee on the Date of Grant, during

which the Performance Condition is to be satisfied

“Plan” The Huationg Performance Share Plan, as the same

may be modified or altered from time to time

“Record Date” The date as at the close of business (or such other time

as may have been prescribed by the Company) on

which Shareholders must be registered in order to

participate in the dividends, rights, allotments or other

distributions (as the case may be)


G-2

“Release” In relation to an Award, the release at the end of the

Vesting Period relating to that Award of all or some of

the Shares to which that Award relates in accordance

with Rule 7 and, to the extent that any Shares which

are the subject of the Award are not released pursuant

to Rule 7, the Award in relation to those Shares shall

lapse accordingly, and “Released” shall be construed

accordingly

“Released Award” An Award in respect of which the Vesting Period

relating to that Award has ended and which has been

released in accordance with Rule 7

“Rules” Rules of the Plan

“Rules of Catalist” Section B of the Listing Manual dealing with the rules of

Catalist, as from time to time amended, modified or

supplemented

“SGX-ST” Singapore Exchange Securities Trading Limited

“SGX-ST Listing Manual” Listing Manual of the SGX-ST

“Huationg Employee Share

Option Scheme”

The share option scheme that may be adopted by the

Company on terms determined by the Company as

may be modified or altered from time to time

“Securities Accounts” The securities account maintained by a Depositor with

CDP

“Shareholders” Registered holders of Shares, except where the

registered holder is CDP, the term “Shareholders”

shall, in relation to such Shares, mean the Depositors

whose Securities Accounts are credited with Shares

“Shares” Ordinary shares in the capital of the Company

“Subsidiary” A company (whether incorporated within or outside

Singapore and wheresoever resident) being a

subsidiary for the time being of the Company within the

meaning of Section 5 of the Companies Act

“Trading Day” A day on which the Shares are traded on the SGX-ST

“Vesting” In relation to Shares which are the subject of a

Released Award, the absolute entitlement to all or

some of the Shares which are the subject of a

Released Award and “Vest” and “Vested” shall be

construed accordingly


G-3

“Vesting Date” In relation to Shares which are the subject of a

Released Award, the date (as determined by the

Administration Committee and notified to the relevant

Participant) on which those Shares have Vested

pursuant to Rule 7

“Vesting Period” In relation to an Award, a period or periods, the

duration of which is to be determined by the

Administration Committee at the Date of Grant

“S$” Singapore dollars

“%” Per centum or percentage

2.2 The terms “Depositor”, “Depository Agent” and “Depository Register” shall have the

meanings ascribed to them, respectively, in Section 130A of the Companies Act.

2.3 Words importing the singular number shall, where applicable, include the plural number and

vice versa. Words importing the masculine gender shall, where applicable, include the

feminine and neuter gender.

2.4 Any reference to a time of a day in the Plan is a reference to Singapore time.

2.5 Any reference in the Plan to any enactment is a reference to that enactment as for the time

being amended or re-enacted. Any word defined under the Companies Act and used in the

Plan shall have the meaning assigned to it under the Companies Act.

3. OBJECTIVES OF THE PLAN

3.1 The Plan is a performance incentive scheme which will form an integral part of the Group’s

incentive compensation program.

3.2 The objectives of the Plan are as follows:

(a) provide an opportunity for Participants to participate in the equity of the Company,

thereby inculcating a stronger sense of identification with the long-term prosperity of

the Group and promoting organisational commitment, dedication and loyalty of

Participants towards the Group;

(b) motivate Participants to strive towards performance excellence and to maintain a high

level of contribution to the Group;

(c) give recognition to contributions made or to be made by Participants by introducing a

variable component into their remuneration package; and

(d) make employee remuneration sufficiently competitive to recruit new Participants

and/or to retain existing Participants whose contributions are important to the

long-term growth and profitability of the Group.


G-4

4. ELIGIBILITY OF PARTICIPANTS

4.1 Any person shall be eligible to participate in the Plan at the absolute discretion of the

Administration Committee if at the Date of Grant such person must:

(a) be confirmed in his/her employment with the Group;

(b) he shall have attained the age of 21 years; and

(c) he shall not be an undischarged bankrupt and must not have entered into a

composition with his/her creditors.

4.2 Non-executive Directors who satisfy the eligibility requirements in Rule 4.1(b) and (c) shall

also be eligible to participate in the Plan.

4.3 For the avoidance of doubt, Controlling Shareholders and their associates will not be

eligible to participate in the Plan.

4.4 The eligibility of Participants to participate in the Plan, and the number of Shares which are

the subject of each Award to be granted to a Participant in accordance with the Plan and

the Vesting Period shall be determined at the absolute discretion of the Administration

Committee, which shall take into account:

(a) the financial performance of the Group;

(b) in respect of a Participant being an Employee, criteria such as his rank, job

performance, potential for future development and his contribution to the success and

development of the Group; and

(c) in respect of a Participant being a Non-executive Director, criteria such as his

contribution to the success and development of the Group.

In addition, for Performance-related Awards, the extent of effort required to achieve the

Performance Condition within the Performance Period shall also be considered.

4.5 Subject to the Companies Act and any requirement of the SGX-ST, the terms of eligibility

for participation in the Plan may be amended from time to time at the absolute discretion of

the Administration Committee, which would be exercised judiciously.

5. GRANT OF AWARDS

5.1 Subject as provided in Rule 8, the Administration Committee may grant Awards to

Employees as the Administration Committee may select in its absolute discretion, at any

time during the period when the Plan is in force.

5.2 The Administration Committee shall decide, in its absolute discretion, in relation to each

Award:

(a) the Participant;

(b) the Date of Grant;


G-5

(c) the number of Shares which are the subject of the Award;

(d) the prescribed Vesting Period(s);

(e) the extent to which Shares which are the subject of that Award shall be Released at

the end of each prescribed Vesting Period; and

(f) in the case of a Performance-related Award, the Performance Period and the

Performance Condition,

PROVIDED THAT:

(i) any grant of an Award to Non-executive Directors will be subject to and shall comply

with the provisions of Section 76 of the Companies Act; and

(ii) subject to Rules 5.3 and 6, the Vesting Period(s) shall not be of shorter duration than

the minimum vesting periods prescribed under the SGX-ST Listing Manual in respect

of employee share options.

5.3 The Administration Committee may amend or waive the Vesting Period(s) and, in the case

of a Performance related Award, the Performance Period and/or the Performance Condition

in respect of any Award:

(a) in the event of a general offer (whether conditional or unconditional) being made for

all or any part of the Shares, or a scheme of arrangement or compromise between the

Company and its Shareholders being sanctioned by the Court under the Companies

Act, or a proposal to liquidate or sell all or substantially all of the assets of the

Company; or

(b) in the case of a Performance-related Award, if anything happens which causes the

Administration Committee to conclude that:

(i) a changed Performance Condition would be a fairer measure of performance,

and would be no less difficult to satisfy; or

(ii) the Performance Condition should be waived as the Participant has achieved a

level of performance that the Administration Committee considers satisfactory

notwithstanding that the Performance Condition may not have been fulfilled,

and shall notify the Participants of such change or waiver (but accidental omission to give

notice to any Participant(s) shall not invalidate any such change or waiver).

5.4 As soon as reasonably practicable after making an Award, the Administration Committee

shall send to each Participant an Award Letter confirming the Award and specifying in

relation to the Award:

(a) the Date of Grant;

(b) the number of Shares which are the subject of the Award;

(c) the prescribed Vesting Period(s);


G-6

(d) the extent to which Shares which are the subject of that Award shall be released at the

end of each prescribed Vesting Period; and

(e) in the case of a Performance-related Award, the Performance Period and the

Performance Condition.

5.5 Participants are not required to pay for the grant of Awards.

5.6 An Award or Released Award shall be personal to the Participant to whom it is granted and

no Award or Released Award or any rights thereunder shall not be transferred, charged,

assigned, pledged, mortgaged, encumbered or otherwise disposed of, in whole or in part,

and if a Participant shall do, suffer or permit any such act or thing as a result of which he

would or might be deprived of any rights under an Award or Released Award, that Award or

Released Award shall immediately lapse.

6. EVENTS PRIOR TO THE VESTING DATE

6.1 An Award, to the extent not yet Released, shall forthwith become void and cease to have

effect on the occurrence of any of the following events (and in such an event, the Participant

shall have no claim whatsoever against the Company, its Directors or employees):

(a) a Participant, being an Employee, ceasing for any reason whatsoever, to be in the

employment of the Company and/or the relevant Subsidiary or in the event the

company by which the Employee is employed ceases to be a company in the Group;

(b) a Participant, being a Non-executive Director, ceasing to be a director of the Company

and/or the relevant Subsidiary, as the case may be, for any reason whatsoever;

(c) upon the bankruptcy of the Participant or the happening of any other event which

results in him being deprived of the legal or beneficial ownership of or interest in such

Award;

(d) ill health, injury, disability or death of a Participant;

(e) a Participant commits any breach of any of the terms of his Award;

(f) misconduct on the part of a Participant as determined by the Company in its discretion;

(g) a take-over, winding-up or reconstruction of the Company; and/or

(h) any other event approved by the Administration Committee.

For the purpose of Rule 6.1(a) above, an Employee shall be deemed to have ceased to be

in the employment of the Company or the Subsidiary (as the case may be) on the date on

which he gives notice of termination of employment, unless prior to the date on which

termination takes effect, the Employee has (with the consent of the Company or the

Subsidiary (as the case may be)) withdrawn such notice.

For the purpose of Rule 6.1(b), a Participant shall be deemed to have ceased to be an

Non-executive Director as at the date the notice of resignation of or termination of

directorship, as the case may be, is tendered by or is given to him, unless such notice shall

be withdrawn prior to its effective date.


G-7

6.2 The Administration Committee may in its absolute discretion and on such terms and

conditions as it deems fit, preserve all or any part of any Award notwithstanding the

provisions of any other Rules including Rules 6.1 and 7.1. Further to such exercise of

discretion, the Awards shall be deemed not to have become void nor cease to have effect

in accordance with the relevant provisions in Rule 6.1.

6.3 Without prejudice to the provisions of Rules 5.3 and 7.1, to the extent of an Award yet to be

Released, if any of the following occurs:

(a) a general offer (whether conditional or unconditional) being made for all or any part of

the Shares;

(b) a scheme of an arrangement or compromise between the Company and its

Shareholders being sanctioned by the Court under the Companies Act;

(c) an order for the compulsory winding-up of the Company is made; or

(d) a resolution for a voluntary winding-up (other than for amalgamation or reconstruction)

of the Company being made,

the Administration Committee may consider, at its discretion, whether or not to Release

such Award. If the Administration Committee decides to Release such Award, then in

determining the number of Shares to be Vested in respect of such Award, the Administration

Committee will have regard to the proportion of the Vesting Period(s) which has elapsed

and the extent to which the Performance Condition (if any) has been satisfied. Where such

Award is Released, the Administration Committee will, as soon as practicable after such

Release, procure the allotment or transfer to each Participant of the number of Shares so

determined, such allotment or transfer to be made in accordance with Rule 7.

7. RELEASE OF AWARDS

7.1 (a) In relation to each Performance-related Award, as soon as reasonably practicable

after the end of the relevant Performance Period, the Administration Committee shall

review the Performance Condition specified in respect of that Award and determine

whether it has been satisfied and, if so, the extent to which it has been satisfied.

If the Administration Committee determines in its sole discretion that the Performance

Condition has not been satisfied or if the relevant Participant (being an Employee) has

not continued to be an Employee from the Date of Grant up to the end of the relevant

Performance Period, that Award shall lapse and be of no value and the provisions of

Rule 7 (save for this Rule 7.1(a)) shall be of no effect.

The Administration Committee shall have the discretion to determine whether the

Performance Condition has been satisfied (whether fully or partially) or exceeded and,

in making any such determination, the Administration Committee shall have the right

to make computational adjustments to the audited results of the Company or the

Group, as the case may be, to take into account such factors as the Administration

Committee may determine to be relevant, including changes in accounting methods,

taxes and extraordinary events.


G-8

Subject to:

(i) (in relation to a Performance-related Award) the Administration Committee

having determined that the Performance Condition has been satisfied;

(ii) the relevant Participant (being an Employee) having continued to be an

Employee from the Date of Grant up to the end of the relevant Vesting Period;

(iii) the Administration Committee being of the opinion that the job performance of the

relevant Participant has been satisfactory;

(iv) such consents (including any approvals required by the SGX-ST) as may be

necessary;

(v) compliance with the terms of the Award, the Plan, the Articles and the

Memorandum of Association of the Company;

(vi) where Shares are to be allotted or transferred on the release of an Award, the

Participant having a securities account with CDP and compliance with the

applicable requirements of CDP; and

(vii) where Placement Shares are to be allotted on the release of an Award, the

Company being satisfied that the Shares which are the subject of the Released

Award will be listed for quotation on the SGX-ST,

upon the expiry of each Vesting Period in relation to an Award, the Company shall

Release to the relevant Participant the Shares to which his Award relates on the

Vesting Date.

(b) Shares which are the subject of a Released Award shall be Vested to a Participant on

the Vesting Date, which shall be a Market Day falling as soon as practicable after the

Release of such Award in accordance with Rule 7.1(a) and, on the Vesting Date, the

Administration Committee will procure the allotment or transfer to each Participant of

the number of Shares so determined.

(c) Where Placement Shares are allotted upon the Vesting of any Award, the Company

shall, as soon as practicable after such allotment, apply to the SGX-ST for the listing

and quotation of such Shares.

7.2 Shares which are allotted or transferred on the Release of an Award to a Participant shall

be registered in the name of, or transferred to, CDP to the credit of the securities account

of that Participant maintained with CDP or the securities sub-account of that Participant

maintained with a Depository Agent.


G-9

7.3 Placement Shares allotted and issued, and existing Shares procured by the Company on

behalf of the Participants for transfer, upon the Release of an Award shall:

(a) be subject to all the provisions of the Articles and the Memorandum of Association of

the Company; and

(b) rank for any dividend, right, allotment or other distribution on the Record Date of which

is on or after the relevant Vesting Date and (subject as aforesaid) will rank pari passu

in all respects with the Shares then existing.

8. LIMITATION ON THE SIZE OF THE PLAN

The aggregate number of Shares which may be issued and/or transferred pursuant to

Awards granted under the Plan on any date, when added to the number of Shares issued

and issuable and/or transferred and transferrable in respect of (a) all Awards granted under

the Plan, and (b) all options granted under any other share option, share incentive,

performance share or restricted share plan implemented by the Company and for the time

being in force, shall not exceed 15.0% of the number of all issued Shares (excluding

treasury shares, as defined in the Companies Act) on the day preceding that date.

9. ADJUSTMENT EVENTS

9.1 If a variation in the issued share capital of the Company (whether by way of a capitalisation

of profits or reserves, rights issue, reduction, subdivision, consolidation, distribution or

otherwise) shall take place, then:

(a) the class and/or number of Shares which are the subject of an Award to the extent not

yet Vested and the rights attached thereto; and/or

(b) the class and/or number of Shares in respect of which Awards may be granted under

the Plan,

may, at the option of the Administration Committee, be adjusted in such manner as the

Administration Committee may determine to be appropriate, provided that any such

adjustment shall be made in such a way that a Participant will not receive a benefit that a

Shareholder does not receive.

9.2 Unless the Administration Committee considers an adjustment to be appropriate, the issue

of securities as consideration for an acquisition or a private placement of securities, or the

cancellation of issued Shares purchased or acquired by the Company by way of a market

purchase of such Shares undertaken by the Company on the SGX-ST during the period

when a share purchase mandate granted by Shareholders (including any renewal of such

mandate) is in force, shall not normally be regarded as a circumstance requiring

adjustment.

9.3 Notwithstanding the provisions of Rule 9.1, any adjustment (except in relation to a

capitalisation issue) must be confirmed in writing by the Auditors (acting only as experts and

not as arbitrators) to be in their opinion, fair and reasonable.


G-10

9.4 Upon any adjustment being made pursuant to this Rule 9, the Company shall notify the

Participant (or his duly appointed personal representatives where applicable) in writing and

deliver to him (or his duly appointed personal representatives where applicable) a

statement setting forth the class and/or number of Shares thereafter to be issued or

transferred on the Vesting of an Award and the date on which such adjustment shall take

effect.

9.5 Notwithstanding the provisions of Rule 9.1 or that no adjustment is required under the

provisions of the Plan, the Administration Committee may, in any circumstances where it

considers that no adjustment should be made or that it should take effect on a different date

or that an adjustment should be made to any of the matters referred to in Rule 9.1

notwithstanding that no adjustment is required under the said provisions (as the case may

be), request the Auditors to consider whether for any reasons whatsoever the adjustment

or the absence of an adjustment is appropriate or inappropriate as the case may be, and,

after such consideration, no adjustment shall take place or the adjustment shall be modified

or nullified or an adjustment made (instead of no adjustment made) in such manner and on

such date as shall be considered by such Auditors (acting only as experts and not as

arbitrators) to be in their opinion appropriate.

10. ADMINISTRATION OF THE PLAN

10.1 The Plan shall be administered by the Administration Committee in its absolute discretion,

with such powers and duties as are conferred on it by the Board, provided that no member

of the Administration Committee shall participate in any deliberation or decision in respect

of Awards granted or to be granted to him or held by him.

10.2 The Administration Committee shall have the power, from time to time, to make and vary

such arrangements, guidelines and/or regulations (not being inconsistent with the Plan) for

the implementation and administration of the Plan, to give effect to the provisions of the

Plan and/or to enhance the benefit of the Awards and the Released Awards to the

Participants, as it may, in its absolute discretion, think fit.

10.3 The Company shall bear the costs of establishing and administering the Plan.

11. NOTICES

11.1 A Participant shall not by virtue of being granted any Award be entitled to receive copies of

any notices or other documents sent by the Company to Shareholders of the Company.

11.2 Any notice or other communication between the Company and a Participant may be given

by sending the same by prepaid post or by personal delivery to, in the case of the Company,

its registered office and, in the case of the Participant, his address as notified by him to the

Company from time to time.

11.3 Any notice or other communication sent by post:

(a) by the Company shall be deemed to have been received 24 hours after the same was

put in the post properly addressed and stamped and/or;

(b) by the Participant shall be deemed to have been received when the same is received

by the Company at the registered office of the Company.


G-11

12. MODIFICATIONS TO THE PLAN

12.1 Any or all the provisions of the Plan may be modified and/or altered at any time and from

time to time by resolution of the Board, except that:

(a) no modification or alteration shall be made which would adversely affect the rights

attached to any Award granted prior to such modification or alteration except with the

prior consent in writing of such number of Participants who, if their Awards were

Released to them upon the expiry of all the Vesting Periods applicable to their Awards,

would be entitled to not less than 75.0% of the aggregate number of the Shares which

would fall to be vested upon the Release of all outstanding Awards upon the expiry of

all the Vesting Periods applicable to all such outstanding Awards;

(b) no modification or alteration to the definitions of “Associate”, “Administration

Committee”, “Controlling Shareholders”, “Employee”, “Participant”, “Performance

Period” and “Vesting Period” and the provisions of Rules 4, 5, 7, 8, 9, 10 and this Rule

12 shall be made to the advantage of Participants except with the prior approval of the

Shareholders of the Company in general meeting; and

(c) no modification or alteration shall be made without the prior approval of the SGX-ST

and such other regulatory authorities as may be necessary.

12.2 Notwithstanding anything to the contrary contained in Rule 12.1, the Board may at any time

by resolution (and without other formality, save for the prior approval of the SGX-ST) amend

or alter the Plan in any way to the extent necessary to cause the Plan to comply with any

statutory provision or the provision or the regulations of any regulatory or other relevant

authority or body (including the SGX-ST).

12.3 Written notice of any modification or alteration made in accordance with this Rule 12 shall

be given to all Participants but accidental omission to give notice to any Participant(s) shall

not invalidate any such modifications or alterations.

13. TERMS OF EMPLOYMENT UNAFFECTED

Notwithstanding the provisions of any other Rule:

(a) the Plan or any Award shall not form part of any contract of employment between the

Company and/or any Subsidiary and/or any Employee and the rights and obligations

of any individual under the terms of the office or employment with any such company

shall not be affected by his participation in the Plan or any right which he may have to

participate in it or any Award which he may be granted and the Plan or any Award shall

afford such an individual no additional rights to compensation or damages in

consequence of the termination of such office or employment for any reason

whatsoever (whether lawful or not); and

(b) the Plan shall not confer on any person any legal or equitable rights (other than those

constituting the Awards themselves) against the Company and/or any Subsidiary

directly or indirectly or give rise to any cause of action at law or in equity against any

such company, its directors or employees.


G-12

14. DURATION OF THE PLAN

14.1 The Plan shall continue to be in operation at the discretion of the Administration Committee

for a maximum period of 10 years commencing on the Adoption Date, provided always that

the Plan may, subject to applicable laws and regulations, continue beyond the above

stipulated period with the approval of the Shareholders of the Company by ordinary

resolution in general meeting and of any relevant authorities which may then be required.

14.2 The Plan may be terminated at any time by the Administration Committee and by resolution

of the Company in general meeting, subject to all relevant approvals which may be required

and if the Plan is so terminated, no further Awards shall be granted by the Company

hereunder.

14.3 The termination of the Plan shall not affect Awards which have been granted, whether such

Awards have been Released (whether fully or partially) or not.

15. ANNUAL REPORT DISCLOSURE

The Company shall make the following disclosures in its annual report to Shareholders for

the duration of the Plan:

(a) the names of the members of the Administration Committee;

(b) information as required in the table below for the following Participants:

(i) Participants who are Directors;

(ii) Participants, other than those in (i) above, who receive Awards comprising

Shares representing 5.0% or more of the aggregate of:

(1) total number of Placement Shares available under the Plan; and

(2) the total number of existing Shares purchased for delivery of Released

Awards under the Plan.

Name of

Participant

Number of

Placement

Shares

allotted

pursuant to

Release of

Awards under

the Plan

during

financial year

under review

(including

terms)

Number of

existing

Shares

purchased for

delivery

pursuant to

Release of

Awards under

the Plan during

financial year

under review

(including

terms)

Aggregate

number of

Placement

Shares allotted

and existing

Shares

purchased for

delivery since

commencement

of the Plan to

end of

financial year

under review

Aggregate

number of

Shares

comprised in

Awards

which have

not been

Released as at

the end of the

financial year

under review


G-13

(c) in relation to the Plan, the following particulars:

(i) the aggregate number of Shares comprised in Awards granted since the

commencement of the Plan to the end of the financial year under review;

(ii) the aggregate number of Shares comprised in Awards which have Vested during

the financial year under review and in respect of such Awards, the proportion of:

(1) Placement Shares issued; and

(2) where applicable, existing Shares purchased, including the range of prices

at which such Shares have been purchased,

upon the Vesting of Released Awards; and

(iii) the aggregate number of Shares comprised in Awards which have not been

Released as at the end of the financial year under review.

(d) if any of the disclosures above in the foregoing of this Rule 15 is not applicable, an

appropriate negative statement will be included in the annual report.

16. ABSTENTION FROM VOTING

Participants who are Shareholders are to abstain from voting on any Shareholders’

resolution relating to the Plan. Participants may act as proxies of Shareholders of the

Company in respect of the votes of such Shareholders in relation to any such resolution

provided that specific instructions have been given in the proxy forms on how the votes are

to be cast in respect of the resolution.

17. TAXES, COSTS AND EXPENSES OF THE PLAN

17.1 Notwithstanding anything herein, each Participant shall be responsible for all fees of CDP

relating to or in connection with the issue and allotment or transfer of any Shares pursuant

to the Release of any Award in CDP’s name, the deposit of share certificate(s) with CDP,

the Participant’s securities account with CDP, or the Participant’s securities sub-account

with a CDP Depository Agent.

17.2 The Participants shall be responsible for obtaining any governmental or other official

consent that may be required by any country or jurisdiction in order to permit the grant or

Vesting of the relevant Award. All taxes (including income tax) arising from the grant or

Vesting of any Award under the Plan shall be borne by that Participant. The Company shall

not be responsible for any failure by the Participant to obtain any such consent or for any

tax or other liability to which the Participant may become subject as a result of his

participation in the Plan.


G-14

18. DISCLAIMER OF LIABILITY

Notwithstanding any provisions herein contained, the Company, its Directors or employees

or the Administration Committee shall not under any circumstances be held liable for any

costs, losses, expenses liabilities or damages whatsoever and howsoever arising in respect

of any matter under or in connection with the Plan, including but not limited to any delay or

failure to issue, or procure the transfer of, the Shares or to apply for or procure the listing

of new Shares on the SGX-ST in accordance with Rule 7.1(c) (and any other stock

exchange on which the Shares are quoted or listed).

19. DISPUTES

Any disputes or differences of any nature arising hereunder (other than matters to be

confirmed by the Auditors in accordance with the Plan) shall be referred to the

Administration Committee and its decision shall be final and binding in all respects

(including any decisions pertaining to disputes as to interpretation of the Plan or any Rule,

regulation, procedure thereunder or as to any rights under the Plan).

20. GOVERNING LAW

The Plan shall be governed by, and construed in accordance with, the laws of the Republic

of Singapore. The Participants, by being granted Awards in accordance with the Plan, and

the Company submit to the exclusive jurisdiction of the courts of the Republic of Singapore.


G-15

CIVIL ENGINEERING SERVICESWe are registered with the Building and Construction Authority of Singapore (“BCA”) with a BCA grading of A2 under the category CW02 for civil engineering which allows us to tender for public sector procurement in relation to civil engineering works of values not exceeding S$90.0 million. We provide a full range of civil engineering services from earthworks, infrastructure works, external works, demolition and excavation works, site clearance, drainage works, reinforcing bar installation, formwork, concrete installation, backfill and compaction to final handover. With our comprehensive pool of construction equipment and specialist modular formwork, we are able to undertake concrete construction projects in Singapore. We have completed civil engineering works for numerous large infrastructural construction projects in Singapore and our customers in this segment include, among others, the Housing and Development Board, the Land Transport Authority (“LTA”), and Daelim Industrial Co. Ltd.. In addition, we also provide stockpile management services.

INLAND LOGISTICS SUPPORTWe provide a wide range of construction equipment including articulated dump trucks, rollers, bulldozers, wheel loaders, telescopic clamshell, breakers, tipper trucks, compactors, excavators and concrete pumps. As at the Latest Practicable Date, we have 149 tipper trucks and 388 units of other construction equipment. We also provide experienced operators who are familiar with operating the equipment.

SALE OF CONSTRUCTION MATERIALSWe recycle construction waste and aggregates at our recycling operations at Tuas South Avenue 1. The RCA produced are primarily used to support our own civil engineering activities and depending on prevailing market conditions and demand, also sold to third parties.

We also manufacture and supply LSS, a self-flowable, self-compacting and self-leveling alternative to conventional compacted fill. LSS can be used as non-structural fill for buildings and other structures and for backfill in utility and road construction. Most of the LSS is used to support our civil engineering operations though we do supply them to third parties as and when there is market demand. As we are able to adjust the liquidity and strength of LSS mixtures, we are able to provide customised solutions to meet the different needs of our customers.

COMPETITIVE STRENGTHSFull-service integrated civil engineering solutions provider

• Our integrated business segments and extensive resources enable us to meet our customer’s civil engineering needs in an efficient and cost-effective manner.

• We are also able to provide unique and tailored solutions to our customers through our ability to manufacture and supply construction materials such as LSS and RCA.

Established track record and reputation of over 30 years

• Our track record of completing our projects on time and reputation for delivering quality civil engineering works has enabled us to gain our customers’ confidence in our services which is evident from the long-standing relationships we share with our existing customers.

Experienced and dedicated management team

• Our Executive Directors, comprising our Executive Chairman, CEO and COO, have over 67 years of experience in the construction industry collectively. They are supported by a team of experienced and competent key executives.

• Members of the management team regularly update themselves on management techniques and the latest market developments relating to our business by attending training and education programmes.

Ability to keep our cost of construction materials low

• Through our capabilities to recycle construction waste and aggregates, we are able to source internally for construction materials which we would ordinarily use for our civil engineering works. This enables us to reduce our cost of construction materials and exposure to delays due to disruption in supply, allowing us to tender for projects at more competitive rates.

PROSPECTSSustained demand for civil engineering construction

• For 2015 and 2016, average construction demand is projected to be sustained between S$25b and S$34b per annum with 40% of this to come from civil engineering projects1.

Population growth in Singapore: Estimated to grow to between 6.5 and 6.9 million by 20302

• Government is expected to continue to spend on infrastructure development to overcome current strains and congestion and to accommodate a larger population. The civil engineering construction industry is envisaged to be well supported by future infrastructure and housing projects as population grows.

1 BCA Media Release – Construction Demand for 2014 to Remain Strong, dated 9 January 2014

2 Singapore’s Population White Paper – A Sustainable Population for a Dynamic Singapore issued in January 2013

3 Singapore’s Land Transport Master Plan 2013

OUR BUSINESS

BUSINESS STRATEGIES AND FUTURE PLANSTo advance our position as a service provider of civil engineering works for Singapore’s construction industry

• We intend to employ more professional and technical personnel with relevant qualifications and take steps to obtain an A1 grading with the BCA, which will allow us to tender for civil engineering related public sector projects with no tendering limit.

To expand our customer base for LSS to overseas markets while maintaining our market presence in Singapore

• We intend to promote and increase the use of LSS in our upcoming projects in Singapore and enter into strategic alliances with established players in Malaysia to market the use of LSS there.


• We intend to expand our civil engineering business by entering into joint ventures with other companies and, through these joint ventures, undertake larger scale public sector works.


• We intend to focus on public sector projects that are typically larger in scale and which can ensure that the use of our equipment and resources will be maximised.

FINANCIAL HIGHLIGHTS (Financial year ended 31 December)

12.7 10.7 5.0 0.9

16.4 16.2 23.8

12.2

51.9 65.3

79.6

54.5

81.0

92.2108.4

67.6

FY2011 FY2012 FY2013 HY2014Civil Engineering Inland Logistics SupportSales of Construction Materials

15.0 14.5 16.5 10.3

FY2011 FY2012 FY2013 HY2014

GROSS PROFIT (S$’million)

Gross Profit Gross Margin

18.5%

15.7%15.2%

15.2%

4.5

4.0 5.0 3.0

FY2011 FY2012 FY2013 HY2014

PROFIT ATTRIBUTABLE TO OWNERS OF THE PARENT (S$’million)

Profit Attributable to Owners of the Parent Profit Margin

5.6%

4.3% 4.6% 4.4%

Pipeline of civil infrastructure projects

• Expansion of the MRT network: The MRT network is expected to double from the current 138 km to 280 km by 2020 and to approximately 360 km by around 20303.

• Road developments in Singapore: The LTA is expected to continue to expand and improve the road network with ongoing road developments in the country.

• Underground works: Based on Budget 2014, development expenditure has been allocated for the improvement of the drainage systems.

REVENUE (S$’million)

should make the decision to invest only after careful consideration and, if appropriate, consultation with your professional adviser(s).

Neither the Authority nor the SGX-ST has examined or approved the contents of this Offer Document. Neither the Authority nor the SGX-ST assumes any responsibility for the contents of this Offer Document, including the correctness of any of the statements or opinions made or reports contained in this Offer Document. The SGX-ST does not normally review the application for admission to Catalist but relies on the Sponsor confirming that the Company is suitable to be listed and complies with the Rules of Catalist (as defined herein). Neither the Authority nor the SGX-ST has in any way considered the merits of the Shares being offered for investment.

We have not lodged this Offer Document in any other jurisdiction.

Investing in our Shares involves risks which are described in the section titled “RISK FACTORS” of this Offer Document.

After the expiration of six months from the date of registration of this Offer Document, no person shall make an offer of our Shares, or allot, issue or sell any of our Shares, on the basis of this Offer Document; and no officer or equivalent person or promoter of our Company will authorise or permit the offer of any of our Shares or the allotment, issue or sale of any of our Shares, on the basis of this Offer Document.

Issue Manager, Sponsor and Placement Agent

PRIMEPARTNERS CORPORATE FINANCE PTE. LTD.(Company Registration No.: 200207389D)(Incorporated in the Republic of Singapore)

Sub-Placement Agent

UOB KAY HIAN PRIVATE LIMITED(Company Registration No.: 197000447W)(Incorporated in the Republic of Singapore)

OFFER DOCUMENT DATED 1 DECEMBER 2014

(Registered by the Singapore Exchange Securities Trading Limited (the “SGX-ST”), acting as agent on behalf of the Monetary Authority of Singapore (the “Authority”) on 1 December 2014)

This document is important. If you are in any doubt as to the action you should take, you should consult your legal, financial, tax or other professional adviser(s).

THIS OFFER IS MADE IN OR ACCOMPANIED BY THIS OFFER DOCUMENT (THE “OFFER DOCUMENT”) THAT HAS BEEN REGISTERED BY THE SGX-ST, ACTING AS AGENT ON BEHALF OF THE AUTHORITY ON 1 DECEMBER 2014. THE REGISTRATION OF THIS OFFER DOCUMENT BY THE SGX-ST, ACTING AS AGENT ON BEHALF OF THE AUTHORITY, DOES NOT IMPLY THAT THE SECURITIES AND FUTURES ACT, CHAPTER 289 OF SINGAPORE, OR ANY OTHER LEGAL OR REGULATORY REQUIREMENTS, OR REQUIREMENTS UNDER THE SGX-ST’S LISTING RULES, HAVE BEEN COMPLIED WITH.

PrimePartners Corporate Finance Pte. Ltd. (“PPCF” or the “Sponsor”) has made an application to the SGX-ST for permission to deal in, and for quotation of, all the ordinary shares (the “Shares”) in the capital of Huationg Global Limited (the “Company”) that are already issued, including the PPCF Shares (as defined herein) and the FC Shares (as defined herein), the new Shares which are the subject of this Placement (the “Placement Shares”), and the new Shares which may be issued pursuant to the Huationg Performance Share Plan (the “Award Shares”) or upon the exercise of the options granted or to be granted under the Huationg Employee Share Option Scheme (the “Option Shares”) to be listed for quotation on Catalist (as defined herein). Acceptance of applications will be conditional upon, inter alia, issue of the Placement Shares, permission being granted by the SGX-ST for the listing and quotation of all the existing issued Shares including the PPCF Shares and the FC Shares, the Placement Shares, the Award Shares and the Option Shares on Catalist. Monies paid in respect of any application accepted will be returned if the admission and listing do not proceed. The dealing in and quotation of the Shares will be in Singapore dollars.

Companies listed on Catalist may carry higher investment risk when compared with larger or more established companies listed on the Main Board of the SGX-ST. In particular, companies may list on Catalist without a track record of profitability and there is no assurance that there will be a liquid market in the Shares traded on Catalist. You should be aware of the risks of investing in such companies and

As at the Latest Practicable Date, the

order book for our civil engineering business was

S$114.3 million which will be recognised as revenue for our Group

over the next one to three years.

This overview section is qualified in its entirety by, and should be read in conjunction with, the full text of this Offer Document. Meanings of capitalised terms used may be found in the sections titled “Definitions” and “Glossary of Technical Terms” of this Offer Document.

LICENCES AND CERTIFICATIONS CW02 Civil Engineering Grade A2 CW01 General Building Grade C2 GB1 General Builder Licence Class 1 SY01A Essential Construction Materials

Grade L6 SY01C Other Basic Construction

Materials Grade L6 ISO 9001:2008 ISO 14001:2004 OHSAS 18001:2007 bizSAFE STAR certificate

LSS PROJECTS MAJOR COMPLETED PROJECTS Singapore Marina Bayfront Bridges Singapore Sports Hub Marina Bay Sands

MAJOR ONGOING PROJECTS Sewer diversion works at Punggol Bukit Batok West Avenue 8 Underpass at Orchard Road and Somerset

Road Jurong Town Hall Parc Olympia condominium New Futura condominium

MAJOR PROJECTS





Placement of 27,500,000 Placement Shares at S$0.20 for each Placement Share, payable in full on application

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CIVIL ENGINEERING PROJECTS MAJOR COMPLETED PROJECTS

Earthworks for Stage 3 of the Downtown Line MRT project

Civil engineering works for certain Circle Line MRT stations

Earthworks and external works for Marina Coastal Expressway

Civil engineering works for Kallang-Paya Lebar Expressway

Earthworks for the construction of the Watertown Mixed Development Project at Punggol

MAJOR ONGOING PROJECTS Earthworks for the construction of Bukit

Panjang, Tampines East and Upper Changi MRT stations

Traffic diversion and road and drainage works for the Tuas West MRT line extension

Civil engineering works, operation and maintenance of a stockpile site at Tuas View Extension Area A

Earthworks, civil engineering works and ancillary building works for the proposed bus depot at Loyang

Road diversion works for the design and construction of a segmental tunnel with a 2200 mm diameter pipeline for the NEWater Infrastructure Plan Extension

Site clearance, earthworks and temporary drainage works at Tampines Neighbourhood 6 (Part 1)

Earthworks for the construction of The Tembusu condominium

Design, construction, operation and maintenance of a stockpile site

Earthworks for the construction of a proposed community hospital at 100 Yishun Central

Earthworks for the construction of a civic and community / sports and recreation development in the Tampines Planning Area

Civil engineering term contract for the eastern sector of a stockpile site at Changi East

Design, development and construction of electrical substations at Lim Chu Kang

Maintenance of foreshore structures and physical barriers for Singapore Police Force and Immigration & Checkpoints Authority of Singapore

Huationg Global Limited is principally engaged in the provision of civil engineering services for infrastructure projects and ancillary inland logistics support services. It is also involved in the sale of construction materials such as recycled concrete aggregate (“RCA”) and liquefied soil stabiliser (“LSS”).