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Reply To SGX's Queries On The Annual Report For The Financial Year Ended 31 December 2002 (The "Annual Report")
SGX's question/request:
Your attention is drawn to Rule 1207(4)(c) and (d) of the Listing Manual which requires that certain information be disclosed in the Annual Report. With regard to the requirements of the aforesaid rules, please provide the following disclosures:
(a)(i) Prospectus-type information relating to the background of key management staff as required by Rule 1207(4)(c):
The Company's reply:
Mr Lim Kee Hee, the General Manager of the Company, is responsible for its trade and marketing functions. He has over 20 years of experience in the shipping industry where he had served in various senior management positions prior to joining the Company. Mr Lim holds a Bachelor of Science from the then University of Singapore and a Graduate Diploma in Financial Management from the Singapore Institute of Management.
Captain Tan Meng Toon is the General Manager of the Company. He is responsible for managing and developing the Liner business as well as controlling of containers fleet. Prior to his current appointment, he was a Deputy General Manager (Operation) of the Company, in charge of the management of ships and shore operations. Prior to joining the Company in 1993, Captain Tan had hands-on experience as an officer in several local-owned and foreign-owned ship management companies, as a Ship Master and as a technical superintendent and operations manager of a foreign-owned ship management company. Captain Tan holds a Foreign Ocean Going Master (Class 1) Certificate.
Mr Hermawan Fridiana Herman is the General Manager of the Group, who is responsible for the financial and administration of the Group as well as control regional offices and agents. He started his career with KPMG Indonesia as an auditor, thereafter he moved on to accounting and finance position with PT Samudera Indonesia Tbk. as a Group Accountant. Mr Hermawan holds a Bachelor of Economics degree (majoring in Accountancy) from the University of Indonesia.
Mr Chan Ngok Chuin joined the Company as a General Manager in 2002 to oversee the management information systems of the Group. He holds a Bachelor of Science major in Computer Science and Mathematics from Brandon University, Canada and a Master of Business Administration specializing in Strategic Management from Nanyang Technological University, Singapore. Mr Chan has more than 17 years of experience in the information technology field such as system implementation, Portnet interfaces, designing and developing real-time application system, providing management and leadership in all computerization projects in the South East Asia region, Hong Kong, Taiwan and China.
Mr Oh Kian Beng joined the Company in 1992. He holds the position of Assistant General Manager who is responsible for the sales & marketing and customer service functions. Prior to joining the Company, Mr Oh had many years of marketing experience in the shipping industry.
Captain Choo Jee Lim joined the Company in 1997. He holds the position of Assistant General Manager who is responsible for the business development and market analysis of the Company. Captain Choo obtained his Certificate of Competency in Master of Foreign-Going Ship from Sydney Technical Institute, Australia in 1984. Up-to-date, he has more than 25 years of experience in the shipping industry.
Captain Choo Eng Chye, Royce is the Assistant General Manager who is responsible for the operations and fleet management of the Company. He obtained a Certificate of Competency in Master of Foreign-Going Ship from Auckland Nautical Institute, New Zealand in 1995. Prior to joining the Company, Captain Choo has more than 12 years of managerial experience in the shipping industry.
Mr Aditya Girindra Wardhana is the Assistant General Manager of the Company who is responsible for the trade and marketing in Malaysia and the Indian Subcontinent. He joined the Company in 1996 and had assignments in various places of the Company's networks, such as Jakarta, Bangkok, Colombo, Dubai and Singapore where he was involved in the trade and marketing and overseeing the performance of agents. He holds a Bachelor of Mathematic and Science degree from the University of Indonesia.
SGX's question/request:
(a)(ii) Prospectus-type information relating to risk management policies and processes.
The Company's reply:
RISK MANAGEMENT POLICIES AND PROCESSES
The risk management policies and processes are set by the Board. These are regularly reviewed and updated as necessary.
The risk management issues are mainly in the following areas:
? Strategic Direction
? Investment
? Operation
? Financial
Strategic Direction
1. The Board sets the strategic direction, which essentially has four pillars:
a) "Go Regional": the objective is to reduce dependence on a single area or country.
b) "Go Liner": the objective is to increase the Carrier-owned Container (COC) content and thus in the process to reduce heavy dependence on Shipper-owned Container (SOC) segment.
c) "Go Logistics": the objective is to diversify into other business lines within the transportation industry, but to do so in a prudent manner, through leveraging competencies, brand recognition and network.
d) "Go Excellent": to strive for excellence in every aspects of the business including internal processes and customer selection, ensuring a healthy existence and long term viability.
2. Group adopts a portfolio approach in terms of business lines. Within shipping industry, it participates in two different areas: regional container shipping and industrial shipping, each having its own characteristics, unique risk and profitability patterns.
Investment
1. Written approval from Board is necessary prior to implementation of any new investment. The relevant business unit submits the proposal complete with a detailed feasibility study. The approval process involves a rigorous review of various aspects, including but not limited to:
a) competition and market
b) demand - supply
c) pre-operating project management risks, including risks of delay and cost overrun
d) operational risks and expertise necessary
e) valuation risks
f) currency risks
g) level of borrowing
h) interest rate risk
i) cash flow and returns
j) country risk
k) legal issues
2. The Group adopts a prudent approach in managing the funding of investments. In particular special attention is paid in managing the level of gearing on a consolidated basis. Although it covenants a gearing ratio of not higher than 2:1 (being the ratio of interest bearing debt over net worth) to its lenders, it consistently maintains a gearing level which is far lower than its covenants.
3. For external borrowings, it ensures that it works with a bank or a financial institution who is financially sound and who understands the Group's business and its risk characteristics. The Group believes that by choosing its lenders properly, it can expect a continuing support from the financing community at attractive terms.
Operation
1. The Group relies on proper Organization Structures to ensure a smooth running of operations in relation to Group's goals and the industry environments and various geographical areas that it operates in.
2. Being in the service industry, it places high emphasis on its quality of human resources. Through placement of right people at the right place and appropriate management control tools, the Group achieves the required delegation of authority.
3. The Company relies heavily on chartered vessels in its regional container shipping business. By doing so, it believes that it retains the necessary flexibility and thus would be in the best position to manage the capacity risks.
4. The Group has entered into ship management agreements with PT Samudera Denholm Ship Management, an associated company, for ship management of its owned vessels. The Ship Management agreements are entered into on arms length basis. The Ship Management company, being a specialized company in that industry, ensures that the Group's vessels are in compliance with various regulations e.g. IMO regulations including ISM Code, Classification Society's rules, Oil Major Terminal vetting inspections, CDI inspections etc.
5. The Group takes necessary insurance covers for example Hull & Machinery, Protection & Indemnity, Time Charterers' Liability and War Risk cover as and when necessary.
Financial
Please refer to the notes to the financial statement no.35 of the Annual Report.
SGX's question/request:
b) We also note that the figures in the cash flow statements in the Annual Report differed significantly from those in the Full Year Results and that the Company has not made any disclosure on these variances. In this regard, kindly provide an explanation for the variances in the figures.
The Company's reply
The main reason is the amount of "purchase of investment securities", where the actual amount stated in the Annual Report is S$ 4,454,927 and in the Full Year Results was S$ 13,154,927. The variance of S$ 8,700,000 which was classified as "securities held for trading" in the Full Year Results is actually structured fixed deposits and therefore it was re-classified into "call and fixed deposit" in the Annual Report.
Comparison of the related items of the Annual Report and the Full Year Results are as follows:
 |
Annual Report |
Full Year Results (Announcement) |
Variance |
|
S$ '000 |
S$ '000 |
S$ '000 |
|
(A) |
(B) |
(A) - (B) |
|
|
|
|
| Purchase of Investment in securities |
(4,455) |
(13,155) |
8,700 |
| Net cash used in investing activities |
(8,409) |
(17,109) |
8,700 |
| Net increase (decrease) in cash and cash equivalent |
6,848 |
(1,852) |
8,700 |
| Cash and cash equivalent at the end of the year |
45,468 |
36,768 |
8,700 |
BY ORDER OF THE BOARD
22 May 2003
Submitted by Anwarsyah, Executive Director on 22/05/2003 to the SGX