-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CVXEx58FlAx3cJYCBdY9skCpPx2lWs2U+FMIXWeVssZKcCuQnD+n8TZPK0Aa66QV CfjRhgUjDZ9teWOp1cfEyQ== 0000950134-03-009586.txt : 20030627 0000950134-03-009586.hdr.sgml : 20030627 20030627115306 ACCESSION NUMBER: 0000950134-03-009586 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030627 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL SHIPHOLDING CORP CENTRAL INDEX KEY: 0000278041 STANDARD INDUSTRIAL CLASSIFICATION: DEEP SEA FOREIGN TRANSPORTATION OF FREIGHT [4412] IRS NUMBER: 362989662 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-10852 FILM NUMBER: 03760084 BUSINESS ADDRESS: STREET 1: 650 POYDRAS ST STE 1700 CITY: NEW ORLEANS STATE: LA ZIP: 70130 BUSINESS PHONE: 5045295470 10-K/A 1 d07029e10vkza.txt AMENDMENT NO. 1 TO FORM 10-K ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 ---------- FORM 10-K/A (MARK ONE) AMENDMENT NO. 1 TO [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO ______________ COMMISSION FILE NO. 2-63322 INTERNATIONAL SHIPHOLDING CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 36-2989662 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 650 POYDRAS STREET, NEW ORLEANS, LOUISIANA 70130 (Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (504) 529-5461 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- ------------------- Common Stock, $1 Par Value New York Stock Exchange 7 3/4% Senior Notes Due 2007 New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] State the aggregate market value of the voting stock held by non-affiliates of the registrant. DATE AMOUNT ---- ------ February 24, 2003 $24,957,871 Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Common stock, $1 par value.............. 6,082,887 shares outstanding as of February 24, 2003 DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's definitive proxy statement dated March 13, 2003, have been incorporated by reference into Part III of this Form 10-K. ================================================================================ EXPLANATORY NOTE International Shipholding Corporation and its subsidiaries ("the Company") has a 30% equity interest in Belden Cement Holding Inc., a Panamanian limited company ("BCH"). BCH is a holding company engaged in the cement shipping industry through its eight wholly-owned subsidiaries. Because in 2002 the Company had a slight loss, the Company's equity in BCH's income during the same period met the significant subsidiary test at the 20% level. As a result, the Company is required by Rule 3-09 of Regulation S-X to provide audited consolidated financial statements for BCH for the year ended December 31, 2002 by June 30, 2003. Item 15 is the only portion of the 2002 Form 10-K being supplemented or amended by this Form 10-K/A. With this Amendment No. 1 to this Form 10-K for the year ended December 31, 2002, the Company is filing unaudited consolidated financial statements for BCH and separate audited financial statements for each of the eight subsidiairies of BCH along with audited unconsolidated financial statements of BCH . These financial statements were provided to the Company by BCH. In reliance on Rule 12b-21 under the Securities Exchange Act of 1934, the Company is omitting audited consolidated financial statements of BCH because the Company does not have them and they are not reasonably available to the Company since they rest peculiarly within the knowledge of BCH, which the Company does not control. The Company has requested audited consolidated financial statements from BCH and believes it is entitled to receive them under the terms of a Shareholders Agreement among the shareholders of BCH. In response to that request, however, BCH provided only the unaudited consolidated financial statements for BCH and the individual audited financial statements for the eight subsidiaries along with audited unconsolidated financial statements of BCH, and has stated that it would be uneconomical for BCH to provide the audited consolidated financial statements, although it has offered to provide them if the Company pays for the associated costs. The Company is continuing to negotiate with BCH to resolve the matter. Because the Company has provided with this filing audited financial statements for each subsidiary of BCH and audited unconsolidated financial statements of BCH along with unaudited consolidated financial statements for BCH, the Company does not expect the audited consolidated financial statements of BCH, when and if obtained, to provide any additional material information to the Company's shareholders. If the Company obtains the financial statements, it will file them as a further amendment to this Form 10-K. ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K The following financial statements, schedules and exhibits are filed as part of this report: (a) 1. Financial Statements The information provided on the Report on Form 10-K filed on March 12, 2003 is not being amended by this Report on Form 10-K/A. 2. Financial Statement Schedules The following financial statement schedules are included on pages A-1 through A-123 of this Form 10-K/A. Unaudited Consolidated Balance Sheet of Belden Cement Holding Inc. as at 31 December 2002 Unaudited Consolidated Profit and Loss Account of Belden Cement Holding Inc. for the year ended 31 December 2002 Statement by Board of Directors for Belden Cement Holding Inc. for the year ended 31 December 2002 Report of the Auditors to the Members of Belden Cement Holding Inc. Balance Sheets of Belden Cement Holding Inc. as at 31 December 2002 Profit and Loss Account of Belden Cement Holding Inc. for the year ended 31 December 2002 2 Statement of Changes in Equity of Belden Cement Holding Inc. for the year ended 31 December 2002 Statement of Cash Flows in Equity of Belden Cement Holding Inc. for the year ended 31 December 2002 Notes to the Financial Statements of Belden Cement Holding Inc. for the year ended 31 December 2002 Statement by Board of Directors for Belden Management Inc. for the year ended 31 December 2002 Report of the Auditors to the Members of Belden Management Inc. Balance Sheets of Belden Management Inc. as at 31 December 2002 Profit and Loss Account of Belden Management Inc. for the year ended 31 December 2002 Statement of Changes in Equity of Belden Management Inc. for the year ended 31 December 2002 Notes to the Financial Statements of Belden Management Inc. for the year ended 31 December 2002 Director's Report for Belden Shipping Pte Ltd for the year ended 31 December 2002 Statement by Board of Directors for Belden Shipping Pte Ltd for the year ended 31 December 2002 Report of the Auditors to the Members of Belden Shipping Pte Ltd. Balance Sheets of Belden Shipping Pte Ltd as at 31 December 2002 Profit and Loss Account of Belden Shipping Pte Ltd for the year ended 31 December 2002 Notes to the Financial Statements of Belden Shipping Pte Ltd for the year ended 31 December 2002 Statement by Board of Directors for Mattea Shipping Inc. for the year ended 31 December 2002 Report of the Auditors to the Members of Mattea Shipping Inc. Balance Sheets of Mattea Shipping Inc. as at 31 December 2002 Profit and Loss Account of Mattea Shipping Inc. for the year ended 31 December 2002 Statement of Changes in Equity of Mattea Shipping Inc. for the year ended 31 December 2002 Statement of Cash Flows in Equity of Mattea Shipping Inc. for the year ended 31 December 2002 Notes to the Financial Statements of Mattea Shipping Inc. for the year ended 31 December 2002 Statement by Board of Directors for Echelon Shipping Inc. for the year ended 31 December 2002 Report of the Auditors to the Members of Echelon Shipping Inc. Balance Sheets of Echelon Shipping Inc. as at 31 December 2002 Profit and Loss Account of Echelon Shipping Inc. for the year ended 31 December 2002 Statement of Changes in Equity of Echelon Shipping Inc. for the year ended 31 December 2002 Statement of Cash Flows in Equity of Echelon Shipping Inc. for the year ended 31 December 2002 3 Notes to the Financial Statements of Echelon Shipping Inc. for the year ended 31 December 2002 Statement by Board of Directors for Shining Star Shipping Inc. for the year ended 31 December 2002 Report of the Auditors to the Members of Shining Star Shipping Inc. Balance Sheets of Shining Star Shipping Inc. as at 31 December 2002 Profit and Loss Account of Shining Star Shipping Inc. for the year ended 31 December 2002 Statement of Changes in Equity of Shining Star Shipping Inc. for the year ended 31 December 2002 Statement of Cash Flows in Equity of Shining Star Shipping Inc. for the year ended 31 December 2002 Notes to the Financial Statements of Shining Star Shipping Inc. for the year ended 31 December 2002 Statement by Board of Directors for Emblem Shipping Inc. for the year ended 31 December 2002 Report of the Auditors to the Members of Emblem Shipping Inc. Balance Sheets of Emblem Shipping Inc. as at 31 December 2002 Profit and Loss Account of Emblem Shipping Inc. for the year ended 31 December 2002 Statement of Changes in Equity of Emblem Shipping Inc. for the year ended 31 December 2002 Statement of Cash Flows in Equity of Emblem Shipping Inc. for the year ended 31 December 2002 Notes to the Financial Statements of Emblem Shipping Inc. for the year ended 31 December 2002 Statement by Board of Directors for Yakumo Shipping Inc. for the year ended 31 December 2002 Report of the Auditors to the Members of Yakumo Shipping Inc. Balance Sheets of Yakumo Shipping Inc. as at 31 December 2002 Profit and Loss Account of Yakumo Shipping Inc. for the year ended 31 December 2002 Statement of Changes in Equity of Yakumo Shipping Inc. for the year ended 31 December 2002 Statement of Cash Flows in Equity of Yakumo Shipping Inc. for the year ended 31 December 2002 Notes to the Financial Statements of Yakumo Shipping Inc. for the year ended 31 December 2002 Statement by Board of Directors for Tilbury Shipping Inc. for the year ended 31 December 2002 Report of the Auditors to the Members of Tilbury Shipping Inc. Balance Sheets of Tilbury Shipping Inc. as at 31 December 2002 Profit and Loss Account of Tilbury Shipping Inc. for the year ended 31 December 2002 Statement of Changes in Equity of Tilbury Shipping Inc. for the year ended 31 December 2002 Statement of Cash Flows in Equity of Tilbury Shipping Inc. for the year ended 31 December 2002 Notes to the Financial Statements of Tilbury Shipping Inc. for the year ended 31 December 2002 4 3. Exhibits The information provided on the Report on Form 10-K filed on March 12, 2003 is not being amended by this Report on Form 10-K/A. (b) Reports on Form 8-K filed during the quarter ended December 31, 2002. The information provided on the Report on Form 10-K filed on March 12, 2003 is not being amended by this Report on Form 10-K/A. 5 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Amendment No. 1 to Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized. INTERNATIONAL SHIPHOLDING CORPORATION (REGISTRANT) /s/ Gary L. Ferguson June 27, 2003 By _______________________________________ Gary L. Ferguson Vice President and Chief Financial Officer 6 INDEX OF FINANCIAL STATEMENT SCHEDULES Unaudited Consolidated Balance Sheet of Belden Cement Holding Inc. as at 31 December 2002.................................................................................. A-5 Unaudited Consolidated Profit and Loss Account of Belden Cement Holding Inc. for the year ended 31 December 2002........................................................ A-6 Statement by Board of Directors for Belden Cement Holding Inc. for the year ended 31 December 2002..................................................................... A-7 Report of the Auditors to the Members of Belden Cement Holding Inc......................................... A-8 Balance Sheets of Belden Cement Holding Inc. as at 31 December 2002.................................................................................. A-9 Profit and Loss Account of Belden Cement Holding Inc. for the year ended 31 December 2002..................................................................... A-10 Statement of Changes in Equity of Belden Cement Holding Inc. for the year ended 31 December 2002..................................................................... A-11 Statement of Cash Flows in Equity of Belden Cement Holding Inc. for the year ended 31 December 2002..................................................................... A-12 Notes to the Financial Statements of Belden Cement Holding Inc. for the year ended 31 December 2002..................................................................... A-13 Statement by Board of Directors for Belden Management Inc. for the year ended 31 December 2002..................................................................... A-20 Report of the Auditors to the Members of Belden Management Inc............................................. A-21 Balance Sheets of Belden Management Inc. as at 31 December 2002.................................................................................. A-22 Profit and Loss Account of Belden Management Inc. for the year ended 31 December 2002..................................................................... A-23 Statement of Changes in Equity of Belden Management Inc. for the year ended 31 December 2002..................................................................... A-24 Notes to the Financial Statements of Belden Management Inc. for the year ended 31 December 2002..................................................................... A-25 Director's Report for Belden Shipping Pte Ltd for the year ended 31 December 2002..................................................................... A-31 Statement by Board of Directors for Belden Shipping Pte Ltd for the year ended 31 December 2002..................................................................... A-35 Report of the Auditors to the Members of Belden Shipping Pte Ltd........................................... A-36 Balance Sheets of Belden Shipping Pte Ltd as at 31 December 2002.................................................................................. A-37
A-1 Profit and Loss Account of Belden Shipping Pte Ltd for the year ended 31 December 2002..................................................................... A-38 Notes to the Financial Statements of Belden Shipping Pte Ltd for the year ended 31 December 2002..................................................................... A-39 Statement by Board of Directors for Mattea Shipping Inc. for the year ended 31 December 2002..................................................................... A-47 Report of the Auditors to the Members of Mattea Shipping Inc............................................... A-48 Balance Sheets of Mattea Shipping Inc. as at 31 December 2002.................................................................................. A-49 Profit and Loss Account of Mattea Shipping Inc. for the year ended 31 December 2002..................................................................... A-50 Statement of Changes in Equity of Mattea Shipping Inc. for the year ended 31 December 2002..................................................................... A-51 Statement of Cash Flows in Equity of Mattea Shipping Inc. for the year ended 31 December 2002..................................................................... A-52 Notes to the Financial Statements of Mattea Shipping Inc. for the year ended 31 December 2002..................................................................... A-53 Statement by Board of Directors for Echelon Shipping Inc. for the year ended 31 December 2002..................................................................... A-59 Report of the Auditors to the Members of Echelon Shipping Inc.............................................. A-60 Balance Sheets of Echelon Shipping Inc. as at 31 December 2002.................................................................................. A-61 Profit and Loss Account of Echelon Shipping Inc. for the year ended 31 December 2002..................................................................... A-62 Statement of Changes in Equity of Echelon Shipping Inc. for the year ended 31 December 2002..................................................................... A-63 Statement of Cash Flows in Equity of Echelon Shipping Inc. for the year ended 31 December 2002..................................................................... A-64 Notes to the Financial Statements of Echelon Shipping Inc. for the year ended 31 December 2002..................................................................... A-65 Statement by Board of Directors for Shining Star Shipping Inc. for the year ended 31 December 2002..................................................................... A-72 Report of the Auditors to the Members of Shining Star Shipping Inc......................................... A-73 Balance Sheets of Shining Star Shipping Inc. as at 31 December 2002.................................................................................. A-74 Profit and Loss Account of Shining Star Shipping Inc. for the year ended 31 December 2002..................................................................... A-75
A-2 Statement of Changes in Equity of Shining Star Shipping Inc. for the year ended 31 December 2002..................................................................... A-76 Statement of Cash Flows in Equity of Shining Star Shipping Inc. for the year ended 31 December 2002..................................................................... A-77 Notes to the Financial Statements of Shining Star Shipping Inc. for the year ended 31 December 2002..................................................................... A-78 Statement by Board of Directors for Emblem Shipping Inc. for the year ended 31 December 2002..................................................................... A-86 Report of the Auditors to the Members of Emblem Shipping Inc............................................... A-87 Balance Sheets of Emblem Shipping Inc. as at 31 December 2002.................................................................................. A-88 Profit and Loss Account of Emblem Shipping Inc. for the year ended 31 December 2002..................................................................... A-89 Statement of Changes in Equity of Emblem Shipping Inc. for the year ended 31 December 2002..................................................................... A-90 Statement of Cash Flows in Equity of Emblem Shipping Inc. for the year ended 31 December 2002..................................................................... A-91 Notes to the Financial Statements of Emblem Shipping Inc. for the year ended 31 December 2002..................................................................... A-92 Statement by Board of Directors for Yakuma Shipping Inc. for the year ended 31 December 2002..................................................................... A-99 Report of the Auditors to the Members of Yakuma Shipping Inc............................................... A-100 Balance Sheets of Yakuma Shipping Inc. as at 31 December 2002.................................................................................. A-101 Profit and Loss Account of Yakuma Shipping Inc. for the year ended 31 December 2002..................................................................... A-102 Statement of Changes in Equity of Yakuma Shipping Inc. for the year ended 31 December 2002..................................................................... A-103 Statement of Cash Flows in Equity of Yakuma Shipping Inc. for the year ended 31 December 2002..................................................................... A-104 Notes to the Financial Statements of Yakuma Shipping Inc. for the year ended 31 December 2002..................................................................... A-105 Statement by Board of Directors for Tilbury Shipping Inc. for the year ended 31 December 2002..................................................................... A-111 Report of the Auditors to the Members of Tilbury Shipping Inc.............................................. A-112
A-3 Balance Sheets of Tilbury Shipping Inc. as at 31 December 2002.................................................................................. A-113 Profit and Loss Account of Tilbury Shipping Inc. for the year ended 31 December 2002..................................................................... A-114 Statement of Changes in Equity of Tilbury Shipping Inc. for the year ended 31 December 2002..................................................................... A-115 Statement of Cash Flows in Equity of Tilbury Shipping Inc. for the year ended 31 December 2002..................................................................... A-116 Notes to the Financial Statements of Tilbury Shipping Inc. for the year ended 31 December 2002..................................................................... A-117
A-4 BELDEN CEMENT HOLDING INC. CONSOLIDATED BALANCE SHEET UNAUDITED AS AT 31 DECEMBER 2002
2002 US$ NON-CURRENT ASSETS Property, plant and equipment 56,338,356 Investment in associate 18,304 Loan to a third party 50,000 ------------ 56,406,660 CURRENT ASSETS Trade receivables 126,000 Other receivables 948,573 Amounts owing to shareholders 10,000 Cash and cash equivalents 4,387,919 ------------ 5,472,492 Less : CURRENT LIABILITIES Trade payables and accruals 215,107 Accrued expenses 277,622 Advance charter hire 413,343 Loan from shareholders 500,000 Current portion of debt obligations 7,039,861 ------------ 8,445,933 ------------ NET CURRENT ASSETS (2,973,441) NON-CURRENT LIABILITIES Loans from shareholders (8,069,250) Long-term portion of debt obligations (35,409,942) ------------ NET ASSETS $ 9,954,027 ============ CAPITAL AND RESERVES Share capital 10,000 Reserves 9,944,027 ------------ $ 9,954,027 ============
A-5 BELDEN CEMENT HOLDING INC. CONSOLIDATED PROFIT AND LOSS ACCOUNT UNAUDITED FOR THE YEAR ENDED 31 DECEMBER 2002
2002 US$ REVENUE 18,530,786 Other operating income 324,204 Depreciation of property, plant and equipment (6,471,180) Vessel operating expenses (4,329,029) Offhire expenses (166,997) Commission (397,215) Management Fee (41,473) Legal and consultancy fee (327,788) Compensation fee (96,754) Staff costs (310,924) Communication cost (71,317) Other operating expenses (199,226) ------------ PROFIT FROM OPERATIONS 6,443,087 Finance costs (3,493,864) ------------ PROFIT BEFORE TAXATION 2,949,223 Taxation (134,112) ------------ PROFIT AFTER TAXATION $ 2,815,111 ============
A-6 BELDEN CEMENT HOLDING INC. STATEMENT BY BOARD OF DIRECTORS ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002 We, ALF JOHAN LOVEN ANDERSEN and DAG AUDUN ROMMEN, being attorneys-in-fact of Belden Cement Holding Inc., do hereby state that in our opinion the financial statements set out on pages 3 to 13 are drawn up so as to present fairly the state of affairs of the Company as at 31 December 2002 and the results of the business, changes in equity and cash flows of the Company for the year ended on that date. On behalf of the Board of Directors /s/ Alf Johan Loven Andersen - ------------------------------------------- ALF JOHAN LOVEN ANDERSEN Attorney-in-fact /s/ Dag Audun Rommen - ------------------------------------------- DAG AUDUN ROMMEN Attorney-in-fact SINGAPORE 25 March 2003 A-7 REPORT OF THE AUDITORS TO THE MEMBERS OF BELDEN CEMENT HOLDING INC. We have audited the financial statements of Belden Cement Holding Inc. for the year ended 31 December 2002 as set out on pages 3 to 13. These financial statements are the responsibility of the Company's directors. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As stated in Note 3 to the Company's financial statements, the Company's presentation of consolidated financial statements is not in accordance with Singapore Statement of Accounting Standard 26 which requires the preparation of one set of consolidated financial statements for the Company and its subsidiaries. Except for the foregoing, in our opinion, the financial statements of the Company are properly drawn up in accordance with Singapore Statements of Accounting Standard and so as to present fairly, in all material respects, the state of affairs of the Company as at 31 December 2002 and the results, changes in equity and cash flows of the Company for the year ended on that date. /s/ KPMG KPMG CERTIFIED PUBLIC ACCOUNTANTS SINGAPORE 25 March 2003 A-8 BELDEN CEMENT HOLDING INC. BALANCE SHEET ANNUAL REPORT AS AT 31 DECEMBER 2002
NOTE 2002 2001 US$ US$ NON-CURRENT ASSETS Investment in subsidiaries 5 16,811,055 16,041,055 CURRENT ASSETS ------------ ------------ Loan to a subsidiary 6 703,530 255,961 Amounts owing by shareholders 7 10,000 10,000 Cash and cash equivalents 1,238,051 702,739 ------------ ------------ 1,951,581 968,700 ------------ ------------ Less: CURRENT LIABILITIES Accrued expenses 19,978 2,778 Amount owing to a subsidiary 6 10,000 10,000 ------------ ------------ 29,978 12,778 ------------ ------------ NET CURRENT ASSETS 1,921,603 955,922 NON-CURRENT LIABILITIES Loans from shareholders 8 (8,069,250) (9,082,815) ------------ ------------ NET ASSETS $ 10,663,408 $ 7,914,162 ------------ ------------ CAPITAL AND RESERVES Share capital 9 10,000 10,000 Reserves 10 10,653,408 7,904,162 ------------ ------------ $ 10,663,408 $ 7,914,162 ------------ ------------
The accompanying notes form an integral part of these financial statements. A-9 BELDEN CEMENT HOLDING INC. PROFIT AND LOSS ACCOUNT ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002
NOTE 2002 2001 US$ US$ REVENUE 11 3,325,000 2,185,000 Other income 12(a) 24,414 1,777 Consultancy fee (19,961) - Legal fee (67,315) (27,935) Other operating expenses (4,152) (2,920) ----------- ----------- PROFIT from operations 3,257,986 2,155,922 Finance costs 12(b) (508,740) (432,815) ----------- ----------- PROFIT FOR THE YEAR $ 2,749,246 $ 1,723,107 ----------- -----------
The accompanying notes form an integral part of these financial statements. A-10 BELDEN CEMENT HOLDING INC. STATEMENT OF CHANGES IN EQUITY ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002
SHARE SHARE RETAINED CAPITAL PREMIUM PROFITS TOTAL US$ US$ US$ US$ Issue of shares 10,000 6,181,055 - 6,191,055 Profit for the year - - 1,723,107 1,723,107 ------------- ------------- ------------- ------------- At 31 December 2001 10,000 6,181,055 1,723,107 7,914,162 Profit for the year - - 2,749,246 2,749,246 ------------- ------------- ------------- ------------- At 31 December 2002 $ 10,000 $ 6,181,055 $ 4,472,353 $10,663,408 ------------- ------------- ------------- -------------
The accompanying notes form an integral part of these financial statements. A-11 BELDEN CEMENT HOLDING INC. STATEMENT OF CASH FLOWS ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002
2002 2001 US$ US$ OPERATING ACTIVITIES Profit before taxation 2,749,246 1,723,107 Adjustments for: Interest income (24,414) (1,777) Interest expense 508,740 432,815 ------------ ------------ Operating profit before working capital changes 3,233,572 2,154,145 Changes in working capital: Accrued expenses 17,200 2,778 ------------ ------------ Cash generated from operations 3,250,772 2,156,923 Interest paid (822,305) - Interest received 1,845 816 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES 2,430,312 2,157,739 ------------ ------------ INVESTING ACTIVITIES Acquisition of shares in subsidiaries (770,000) (16,041,055) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES (770,000) (16,041,055) ------------ ------------ FINANCING ACTIVITIES Loan to a subsidiary (425,000) (255,000) Repayment of loans from shareholders (700,000) - Loans from shareholders - 8,650,000 Proceeds from issue of share capital - 6,191,055 ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES (1,125,000) 14,586,055 ------------ ------------ NET INCREASE IN CASH AND CASH EQUIVALENTS 535,312 702,739 Cash and cash equivalents at beginning of year 702,739 - ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,238,051 $ 702,739 ------------ ------------
The accompanying notes form an integral part of these financial statements. A-12 BELDEN CEMENT HOLDING INC. NOTES TO THE FINANCIAL STATEMENTS ANNUAL REPORT 31 DECEMBER 2002 These notes form an integral part of the financial statements. The financial statements were authorised for issue by the Directors on 25 March 2003. 1. DOMICILE AND ACTIVITIES Belden Cement Holding Inc. is a company incorporated in the Republic of Panama. The address of the resident agent is Arango Orillac Building, third floor, 54 Street, Nueva Urbanizacion Obarrio, P.O. Box 5216 Panama 5, Republic of Panama. The principal activities of the Company are those of an investment holding company. The principal activities of the subsidiaries are set out in note 5 to the financial statements. 2. THE RESTRUCTURING The Company was incorporated on 6 December 2000 to be the holding company for companies previously owned by the shareholders of the Company. On 10 January 2001, the Company undertook a restructuring (the "Restructuring") to acquire the entire share capital of the following companies, the consideration for which was based on the capital previously injected by the shareholders into these companies:-
CONSIDERATION NAME US$ Belden Shipping Pte Ltd 186,765 Belden Management Inc. 10,000 Echelon Shipping Inc. 2,250,000 Emblem Shipping Inc. 2,453,710 Shining Star Shipping Inc. 1,744,290 Tilbury Shipping Inc. 4,546,290 Yakumo Shipping Inc. 2,000,000 ----------- Total $13,191,055 -----------
The beneficial interests of the shareholders in the subsidiaries are exactly the same before and after the Restructuring. A-13 3. CONSOLIDATED FINANCIAL STATEMENTS One set of consolidated financial statements has not been prepared for the Company and its subsidiaries as it is the opinion of the shareholders that there is no practical benefit to the shareholders of Belden Cement Holding Inc. from the preparation of one set of consolidated financial statements. This presentation is not in accordance with Singapore Statement of Accounting Standard No. 26, which requires the preparation of one set of consolidated financial statements for the Company and its subsidiaries. 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) STATEMENT OF COMPLIANCE Except as stated in note 3, these financial statements have been prepared in accordance with the Singapore Statements of Accounting Standard ("SAS") (including Interpretations of Statements of Accounting Standard) issued by the Institute of Certified Public Accountants of Singapore. (b) BASIS OF PREPARATION The financial statements, expressed in United States dollars, are prepared on the historical cost basis. (c) SUBSIDIARIES Investments in subsidiaries are stated at cost less impairment losses. (d) REVENUE RECOGNITION Dividends from subsidiaries are recognised in the profit and loss account when the shareholder's right to receive payment is established. (e) CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash at banks. (f) AFFILIATED COMPANY An affiliated company is a company which has shareholders in common with the Company. A-14 5. INVESTMENT IN SUBSIDIARIES
2002 2001 US$ US$ Unquoted equity shares, at cost $16,811,055 $16,041,055 ----------- -----------
Details of the subsidiaries are as follows:-
PLACE OF EQUITY COST OF INCORPORATION INTEREST HELD INVESTMENT PRINCIPAL AND 2002 2001 2002 2001 NAME ACTIVITIES BUSINESS % % US$ US$ Echelon Shipping Shipowners Republic of Inc. Panama 100 100 2,250,000 2,250,000 Emblem Shipping Shipowners Republic of Inc. Panama 100 100 2,453,710 2,453,710 Mattea Shipping Inc. Shipowners Republic of Panama 100 100 3,450,000 2,850,000 Shining Star Shipowners Republic of Shipping Inc. Panama 100 100 1,744,290 1,744,290 Tilbury Shipping Inc. Shipowners Republic of Panama 100 100 4,546,290 4,546,290 Yakumo Shipping Shipowners Republic of Inc. Panama 100 100 2,000,000 2,000,000 Minardi Shipping Shipowners Republic of Inc. Panama 100 - 170,000 - Belden Management Commercial Republic of Inc. manager and Panama insurer 100 100 10,000 10,000 Belden Shipping Pte Commercial Republic of Ltd ship Singapore 100 100 186,765 186,765 Singapore management and brokering ----------- ----------- $16,811,055 $16,041,055 ----------- -----------
The shares of Tilbury Shipping Inc. and Emblem Shipping Inc. are pledged to the bank as additional security for the due performance by the subsidiaries of their duties and obligations under the loan agreements for the financing of the subsidiaries' vessels. A-15 6. LOAN TO A SUBSIDIARY/AMOUNT OWING TO A SUBSIDIARY
2002 2001 US$ US$ Principal 680,000 255,000 Accrued interest 23,530 961 ------------ ------------ $ 703,530 $ 255,961 ------------ ------------
The amounts owing by and to subsidiaries are unsecured and have no fixed terms of repayment. 7. AMOUNTS OWING BY SHAREHOLDERS The amounts owing by shareholders are unsecured and interest free, with no fixed terms of repayment. 8. LOANS FROM SHAREHOLDERS
2002 2001 US$ US$ Principal 7,950,000 8,650,000 Accrued interest 119,250 432,815 ----------- ----------- $ 8,069,250 $ 9,082,815 ----------- -----------
The loans from shareholders are unsecured. The loans have no fixed terms of repayment and are classified as non-current liabilities in accordance with management's intention to repay the loans after one year. 9. SHARE CAPITAL
2002 2001 US$ US$ AUTHORISED, ISSUED AND FULLY PAID: 200 ordinary shares of US$50 each $ 10,000 $ 10,000 ------------- -------------
10. RESERVES
2002 2001 US$ US$ Share premium 6,181,055 6,181,055 Retained profits 4,472,353 1,723,107 ----------- ----------- $10,653,408 $ 7,904,162 ----------- -----------
A-16 10. RESERVES (CONT'D) The application of the share premium account is governed by Panamanian laws and regulations. Movements in reserves are set out in the statement of changes in equity. 11. REVENUE Revenue represents gross dividend income from subsidiaries. 12. PROFIT FROM OPERATIONS Profit from operations includes the following:-
2002 2001 US$ US$ (a) OTHER OPERATING INCOME Interest income from: - banks 1,695 816 - loan to a subsidiary 22,719 961 ------------- ------------- $ 24,414 $ 1,777 ------------- ------------- (b) FINANCE COSTS Interest paid and payable to: - shareholders $ 508,740 $ 432,815 ------------ -------------
13. SIGNIFICANT RELATED PARTY TRANSACTIONS For the purpose of these financial statements, parties are considered to be related to the Company if the Company has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. During the year, there were the following significant transactions with related parties:-
2002 2001 US$ US$ Dividend income from subsidiaries 3,325,000 2,185,000 --------- ---------
A-17 14. FINANCIAL INSTRUMENTS (a) FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES Exposure to credit, foreign exchange and interest rate risk arises in the normal course of the Company's business. The Company manages these risks as part of the general day-to-day management of its operations. (b) CREDIT RISK The carrying amounts of financial assets included in the balance sheet represent the Company's maximum exposure to credit risk in relation to those assets. (c) FOREIGN EXCHANGE AND INTEREST RATE RISK The Company believes that it does not have significant foreign exchange and interest rate risk. EFFECTIVE INTEREST RATES AND REPRICING ANALYSIS In respect of interest earning financial assets and liabilities, the following table indicates their effective interest rates at balance sheet date and the periods in which they reprice.
EFFECTIVE WITHIN 1 TO 5 2002 NOTE INTEREST RATE TOTAL 1 YEAR YEARS FINANCIAL ASSETS US$ US$ US$ Loan to subsidiary 6 6% 625,000 625,000 - Loan to subsidiary 6 2% 55,000 55,000 - Cash and cash equivalents 0.25% 1,238,051 1,238,051 - ----------- ------------- ----------- $ 1,918,051 $ 1,918,051 $ - ----------- ------------- ----------- FINANCIAL LIABILITIES Loans from shareholders 8 6% $ 7,950,000 $ - $ 7,950,000 ----------- ------------- ----------- 2001 FINANCIAL ASSETS Loan to subsidiary 6 6% 200,000 200,000 - Loan to subsidiary 6 2% 55,000 55,000 - Cash and cash equivalents 0.75% 702,739 702,739 - ----------- ------------- ----------- $ 957,739 $ 957,739 $ - ----------- ------------- ----------- FINANCIAL LIABILITIES Loans from shareholders 8 6% $ 8,650,000 $ - $ 8,650,000 ----------- ------------- -----------
A-18 14. FINANCIAL INSTRUMENTS (CONT'D) (d) FAIR VALUES The fair values of the loans from shareholders cannot be reasonably determined as there are no fixed terms of repayment to ascertain the cash flows reliably. The fair values of other financial assets and liabilities are not significantly different from their carrying values. 15. CONTINGENT LIABILITY The Company has issued a guarantee amounting to US$1,100,000 (2001: US$600,000) for bank loans taken by its subsidiaries. 16. SUBSEQUENT EVENTS On 10 January 2003, the Company's subsidiary, Belden Shipping Pte Ltd, acquired a wholly-owned subsidiary, Belden Shipping Sweden AB incorporated in Sweden for a consideration of $11,639. The subsidiary's net assets at the date of acquisition were $11,639. 17. COMMITMENTS On 13 December 2002, the Company's subsidiary, Minardi Shipping Inc. has entered into a memorandum of agreement to acquire a vessel M/S Credo (to be renamed as MV Glory Credo) for a consideration of US$1,700,000. The transaction will be completed in 2003. A-19 BELDEN MANAGEMENT INC. STATEMENT BY BOARD OF DIRECTORS ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002 We, ALF JOHAN LOVEN ANDERSEN and DAG AUDUN ROMMEN, being attorneys-in-fact of BELDEN MANAGEMENT INC., do hereby state that in our opinion, the financial statements set out on pages 3 to 11 are drawn up so as to present fairly the state of affairs of the Company as at 31 December 2002 and the results of the business and changes in equity of the Company for the year ended on that date. On behalf of the Board of Directors /s/ Alf Johan Loven Andersen - ------------------------------------------- ALF JOHAN LOVEN ANDERSEN Attorney-in-fact /s/ Dag Audun Rommen - ------------------------------------------- DAG AUDUN ROMMEN Attorney-in-fact SINGAPORE 25 March 2003 A-20 REPORT OF THE AUDITORS TO THE MEMBER OF BELDEN MANAGEMENT INC. We have audited the financial statements of Belden Management Inc. for the year ended 31 December 2002 as set out on pages 3 to 11. These financial statements are the responsibility of the Company's directors. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements of the Company are properly drawn up in accordance with Singapore Statements of Accounting Standard and so as to present fairly, in all material respects, the state of affairs of the Company as at 31 December 2002 and the results of the business and changes in equity of the Company for the year ended on that date. /s/ KPMG KPMG CERTIFIED PUBLIC ACCOUNTANTS SINGAPORE 25 March 2003 A-21 BELDEN MANAGEMENT INC. BALANCE SHEET ANNUAL REPORT AS AT 31 DECEMBER 2002
NOTE 2002 2001 US$ US$ NON-CURRENT ASSETS Investment in associate 3 18,304 - Loan to associate 4 28,736 - Loan to a third party 5 51,114 - ------------- ------------- 98,154 - CURRENT ASSETS Loan to a third party 5 - 50,097 Loan to associate 4 65,669 - Amount owing by holding company (non-trade) 6 10,000 10,000 Cash and cash equivalents 152,745 201,195 ------------- ------------- 228,414 261,292 ------------- ------------- Less: CURRENT LIABILITIES Other payables and accrued expenses 4,249 2,778 Amount owing to associate (trade) 41,473 - Loan from holding company 7 347,289 255,961 ------------- ------------- 393,011 258,739 ------------- ------------- NET CURRENT (LIABILITIES)/ASSETS (164,597) 2,553 ------------- ------------- (Excess of liabilities over assets)/net assets $ (66,443) $ 2,553 ============= ============= CAPITAL AND RESERVE Share capital: Authorised, issued and fully paid: 100 ordinary shares of US$100 each 10,000 10,000 Accumulated losses (76,443) (7,447) ------------- ------------- $ (66,443) $ 2,553 ============= =============
The accompanying notes form an integral part of these financial statements. A-22 BELDEN MANAGEMENT INC. PROFIT AND LOSS ACCOUNT ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002
NOTE 2002 2001 US$ US$ REVENUE 8 722,884 178,333 Other income 9(a) 8,721 2,968 Waiver of amount owing by a related party (trade) 11 - (441,733) Management fees (366,473) - Compensation fee (96,754) - Legal fees (14,439) (700) Office rental (14,258) - Staff costs 9(b) (215,413) - Other operating expenses (76,936) (8,192) ----------- ---------- Loss from operations (52,668) (269,324) Finance cost 9(c) (16,328) (961) ----------- ---------- LOSS FOR THE YEAR $ (68,996) $ (270,285) ============ ===========
The accompanying notes form an integral part of these financial statements. A-23 BELDEN MANAGEMENT INC. STATEMENT OF CHANGES IN EQUITY ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002
RETAINED PROFITS/ SHARE (ACCUMULATED CAPITAL LOSSES) TOTAL $ $ $ At 1 January 2001 10,000 737,838 747,838 Net loss for the year - (270,285) (270,285) Dividend paid - (475,000) (475,000) ------------- ------------- ------------ At 31 December 2001 10,000 (7,447) 2,553 Net loss for the year - (68,996) (68,996) ------------- ------------- ------------ At 31 December 2002 $ 10,000 $ (76,443) $ (66,443) ============= ============= ============
The accompanying notes form an integral part of these financial statements. A-24 BELDEN MANAGEMENT INC. NOTES TO THE FINANCIAL STATEMENTS ANNUAL REPORT 31 DECEMBER 2002 These notes form an integral part of the financial statements. The financial statements were authorised for issue by the Directors on 25 March 2003. 1. DOMICILE AND ACTIVITIES Belden Management Inc. (the "Company") is incorporated in the Republic of Panama. The address of the resident agent is Arango Orillac Building, third floor, 54 Street, Nueva Urbanizacion Obarrio, P.O. Box 5216 Panama 5, Republic of Panama. The principal activities of the Company are those of a technical shipmanager for the vessels owned by its related corporations. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) STATEMENT OF COMPLIANCE These financial statements have been prepared in accordance with the Singapore Statements of Accounting Standard ("SAS") (including Interpretations of Statements of Accounting Standard) issued by the Institute of Certified Public Accountants of Singapore. (b) BASIS OF PREPARATION The financial statements, expressed in United States dollars, are prepared on the historical cost basis. (c) REVENUE RECOGNITION Shipmanagement fee is recognised on an accrual basis. (d) FOREIGN CURRENCY TRANSLATION Monetary assets and liabilities in foreign currencies are translated into United States dollars at rates of exchange closely approximate to those ruling at the balance sheet date. Transactions in foreign currencies are translated at rates ruling on transaction dates. Translation differences are included in the profit and loss account. (e) CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash at banks and fixed deposits. A-25 (f) ASSOCIATE An associate is a company in which the Company has significant influence, but not control or joint control, over its management, including participation in the financial and operating policy decisions. Investments in associates are stated at cost less any impairment losses. 3. INVESTMENT IN ASSOCIATE
2002 2001 US$ US$ Unquoted equity shares, at cost $ 18,304 $ - ============= =========
Details of the associate are as follows:
PLACE OF INCORPORATION EFFECTIVE EQUITY NAME PRINCIPAL ACTIVITIES AND BUSINESS HELD 2002 2001 % % Belden Ship Management, Shipmanager Philippines 40 - Inc.
The Company's share of unaudited post-acquisition accumulated profits of the associate at the balance sheet date was $14,570. 4. LOAN TO ASSOCIATE
2002 2001 US$ US$ Repayable within 1 year: Loan principal 64,456 - Accrued interest 1,213 - ------------- -------- 65,669 - ------------- -------- Repayable between 2 to 5 years: Loan principal 27,628 - Accrued interest 1,108 - ------------- -------- 28,736 - ------------- -------- Total $ 94,405 $ - ============= ========
The loan is expected to be fully repaid by July 2004. A-26 5. LOAN TO A THIRD PARTY
2002 2001 US$ US$ Loan principal 50,000 50,000 Accrued interest 1,114 97 ------------- ------------ $ 51,114 $ 50,097 ============= ============ Non-current 51,114 - Current - 50,097 ------------- ------------ $ 51,114 $ 50,097 ============= ============
The loan is repayable on 31 December 2004 (2001: 31 December 2002). 6. AMOUNT OWING BY HOLDING COMPANY The amount owing by holding company is unsecured and interest free and has no fixed terms of repayment. 7. LOAN FROM HOLDING COMPANY
2002 2001 US$ US$ Loan principal 330,000 255,000 Accrued interest 17,289 961 ------------ ------------ $ 347,289 $ 255,961 ============= ============
8. REVENUE Revenue represents management fees for providing technical and commercial shipmanagement to related parties. 9. NET LOSS FOR THE YEAR Net loss for the year includes the following:
2002 2001 US$ US$ (a) OTHER INCOME Interest income - bank 355 2,871 - loan to third party 1,017 97 - loan to associate 7,349 - ------------- ------------- $ 8,721 $ 2,968 ============= =============
A-27 9. NET LOSS FOR THE YEAR (CONT'D)
2002 2001 US$ US$ (b) STAFF COSTS Wages and salaries 200,573 - Other benefits 14,840 - ------------- ------------- $ 215,413 $ - ============= ============= Number of employees 3 - ============= ============= (C) FINANCE COST Interest on loan from holding company $ 16,328 $ 961 ============= =============
10. SIGNIFICANT RELATED PARTY TRANSACTIONS For the purpose of these financial statements, parties are considered to be related to the Company if the Company has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. A related corporation is a corporation which is a holding company or a subsidiary of the Company, or a subsidiary of the Company's holding company. In addition to those disclosed elsewhere in the financial statements, during the year, there were the following significant transactions with related parties:-
2002 2001 US$ US$ RELATED PARTIES Management fee income 722,884 - Insurance premium receivable - 178,333 Management fee expense (325,000) - Waiver of amount owing - (441,733) ASSOCIATE Management fee expense (41,473) - =========== ===========
11. HOLDING COMPANY The immediate and ultimate holding company is Belden Cement Holding Inc., incorporated in the Republic of Panama. A-28 12. FINANCIAL INSTRUMENTS (a) FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES Exposure to credit risk arises in the normal course of the Company's business. The Company manages this risk as part of the general day-to-day management of its operations. (b) CREDIT RISK The Company incurs credit risk on loans made to an associate and a third party and exposure to this risk is monitored on an ongoing basis. The Company does not require collateral in respect of financial assets. (c) INTEREST RATE RISK The Company's exposure to market risk for changes in interest rates relates primarily to the Company's debt obligations. EFFECTIVE INTEREST RATES AND REPRICING ANALYSIS In respect of interest-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at balance sheet date and the periods in which they reprice:
--------------------2002----------------- ---------2001------- EFFECTIVE WITHIN EFFECTIVE INTEREST WITHIN 2 TO INTEREST WITHIN NOTE RATE TOTAL 1 YEAR 5 YEARS RATE 1 YEAR $ $ $ $ FINANCIAL ASSETS Loan to a third party 5 2% 50,000 - 50,000 2% 50,000 Loan to associate 4 10% 92,084 64,456 27,628 - - Cash and cash equivalents 0.25% 152,745 152,745 - 0.75% 201,195 --------- --------- --------- --------- $ 294,829 $ 217,201 $ 77,628 $ 251,195 ========= ========= ========= ========= FINANCIAL LIABILITIES Loan from holding company 7 6% 275,000 275,000 - 6% 200,000 Loan from holding company 7 2% 55,000 55,000 - 2% 55,000 --------- --------- --------- --------- $ 330,000 $ 330,000 $ - $ 255,000 ========= ========= ========= =========
A-29 12. FINANCIAL INSTRUMENTS (CONT'D) (d) FAIR VALUES It is not practicable to estimate the fair values of the non-current portion of the loan to an associate as there are no fixed terms of repayment to ascertain the future cash flows reliably. As at 31 December 2002 and 2001, the carrying amounts of other financial assets and liabilities approximated their fair values. 13. COMPARATIVE INFORMATION Certain items in the comparative figures have been reclassified to conform with the current year's presentation. A-30 BELDEN SHIPPING PTE LTD DIRECTORS' REPORT ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002 DIRECTORS' REPORT On behalf of all the directors of the Company, we are pleased to submit this annual report to the member together with the audited financial statements of the Company for the financial year ended 31 December 2002. DIRECTORS The directors in office at the date of this report are as follows:- Alf Johan Loven Andersen Dag Audun Rommen PRINCIPAL ACTIVITIES The principal activities of the Company during the financial year have been those relating to commercial ship management and brokering. There have been no significant changes in such activities during the financial year. FINANCIAL RESULTS The results of the Company for the financial year were as follows:-
$ Profit after taxation 226,818 Accumulated losses brought forward (369,844) ----------- Accumulated losses carried forward $ (143,026) ===========
TRANSFERS TO OR FROM RESERVES OR PROVISIONS There were no material transfers to or from reserves during the financial year. Material movements in provisions including depreciation are as set out in the accompanying financial statements. ISSUES OF SHARES OR DEBENTURES During the financial year, the Company did not issue any shares or debentures. A-31 ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE SHARES AND DEBENTURES Neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose objects are, or one of whose objects is, to enable the directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate. DIRECTORS' INTERESTS IN SHARES OR DEBENTURES According to the register kept by the Company for the purposes of Section 164 of the Companies Act, Chapter 50 (the "Act"), particulars of interests of directors who held office at the end of the financial year in shares and debentures in the Company are as follows:
HOLDINGS IN THE NAME OTHER HOLDINGS IN OF THE DIRECTOR, SPOUSE WHICH THE DIRECTOR IS OR INFANT CHILDREN DEEMED TO HAVE AN INTEREST AT BEGINNING AT END OF AT BEGINNING AT END OF OF THE YEAR THE YEAR OF THE YEAR THE YEAR THE COMPANY ORDINARY SHARES OF $1 EACH FULLY PAID Alf Johan Loven Andersen - - 31,750 31,750
Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares or debentures of the Company or of related corporations either at the beginning or at the end of the financial year. DIVIDENDS Since the end of the last financial year, no dividend has been paid in respect of that previous financial year. No dividend has been paid or is proposed to be paid in respect of the financial year under review. BAD AND DOUBTFUL DEBTS Before the profit and loss account and the balance sheet of the Company were made out, the directors took reasonable steps to ascertain what action had been taken in relation to writing off bad debts and providing for doubtful debts of the Company. The directors have satisfied themselves that all known bad debts have been written off and that adequate provision has been made for doubtful debts. At the date of this report, the directors are not aware of any circumstances which would render any amounts written off for bad debts or provided for doubtful debts in the financial statements of the Company inadequate to any substantial extent. A-32 CURRENT ASSETS Before the profit and loss account and the balance sheet of the Company were made out, the directors took reasonable steps to ascertain that current assets of the Company which were unlikely to realise their book values in the ordinary course of business have been written down to their estimated realisable values and that adequate provision has been made for the diminution in value of such current assets. At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report which would render the values attributable to current assets in the financial statements of the Company misleading. CHARGES AND CONTINGENT LIABILITIES Since the end of the financial year: (i) no charge on the assets of the Company has arisen which secures the liabilities of any other person; and (ii) no contingent liability of the Company has arisen. ABILITY TO MEET OBLIGATIONS No contingent liability or other liability of the Company has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the directors, will or may substantially affect the ability of the Company to meet its obligations as and when they fall due. OTHER CIRCUMSTANCES AFFECTING THE FINANCIAL STATEMENTS At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements which would render any amount stated in the financial statements of the Company misleading. UNUSUAL ITEMS In the opinion of the directors, no item, transaction or event of a material and unusual nature has substantially affected the results of the operations of the Company during the financial year. In the opinion of the directors, no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Company for the financial year in which this report is made. A-33 DIRECTORS' INTERESTS IN CONTRACTS Since the end of the last financial year, no director has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member or with a company in which he has a substantial financial interest. SHARE OPTIONS During the financial year, there were:- (i) no options granted by the Company to any person to take up unissued shares in the Company; and (ii) no shares issued by virtue of any exercise of option to take up unissued shares of the Company. As at the end of the financial year, there were no unissued shares of the Company under option. AUDITORS The auditors, KPMG, have indicated their willingness to accept re-appointment. On behalf of the Board of Directors /s/ Alf Johan Loven Andersen - ------------------------------------------- ALF JOHAN LOVEN ANDERSEN Director /s/ Dag Audun Rommen - ------------------------------------------- DAG AUDUN ROMMEN Director SINGAPORE 1 April 2003 A-34 BELDEN SHIPPING PTE LTD STATEMENT BY BOARD OF DIRECTORS ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002 We, ALF JOHAN LOVEN ANDERSEN and DAG AUDUN ROMMEN, being directors of BELDEN SHIPPING PTE LTD, do hereby state that in our opinion:- (a) the financial statements set out on pages 7 to 16 are drawn up so as to give a true and fair view of the state of affairs of the Company as at 31 December 2002 and the results of the business of the Company for the year ended on that date; and (b) at the date of this statement there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due. The Board of Directors has authorised these financial statements for issue on the date of this statement. On behalf of the Board of Directors /s/ Alf Johan Loven Andersen - ------------------------------- ALF JOHAN LOVEN ANDERSEN Director /s/ Dag Audun Rommen - ------------------------------- DAG AUDUN ROMMEN Director SINGAPORE 1 April 2003 A-35 REPORT OF THE AUDITORS TO THE MEMBER OF BELDEN SHIPPING PTE LTD We have audited the financial statements of the Company for the year ended 31 December 2002 as set out on pages 7 to 16. These financial statements are the responsibility of the Company's directors. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion:- (a) the financial statements are properly drawn up in accordance with the provisions of the Singapore Companies Act, Chapter 50 (the "Act") and Singapore Statements of Accounting Standard and so as to give a true and fair view of:- (i) the state of affairs of the Company as at 31 December 2002 and the results of the Company for the year ended on that date; and (ii) the other matters required by Section 201 of the Act to be dealt with in the financial statements; (b) the accounting and other records, and the registers required by the Act to be kept by the Company have been properly kept in accordance with the provisions of the Act. /s/ KPMG KPMG CERTIFIED PUBLIC ACCOUNTANTS SINGAPORE 1 April 2003 A-36 BELDEN SHIPPING PTE LTD BALANCE SHEET ANNUAL REPORT AS AT 31 DECEMBER 2002
NOTE 2002 2001 $ $ NON-CURRENT ASSETS Property, plant and equipment 3 27,611 11,468 CURRENT ASSETS Amounts owing by related corporations (non-trade) - 31,363 Other receivables 4 162,202 15,295 Cash and cash equivalents 5 10,081 36,660 --------- -------- 172,283 83,318 --------- -------- Less: CURRENT LIABILITIES Loans from shareholders of holding company 6 - 66,248 Accrued expenses 25,420 80,882 --------- -------- 25,420 147,130 --------- -------- NET CURRENT ASSETS/(LIABILITIES) 146,863 (63,812) --------- -------- NET ASSETS/(EXCESS OF LIABILITIES OVER ASSETS) $ 174,474 $(52,344) ========= ======== CAPITAL AND RESERVE Share capital 7 317,500 317,500 Accumulated losses (143,026) (369,844) --------- -------- $ 174,474 $(52,344) ========= ========
The accompanying notes form an integral part of these financial statements. A-37 BELDEN SHIPPING PTE LTD PROFIT AND LOSS ACCOUNT ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002
NOTE 2002 2001 $ $ REVENUE 8 851,509 538,970 Other income 9(a) 35,204 1,154 Communication expenses (28,448) (30,229) Depreciation of property, plant and equipment 3 (13,392) (7,065) Legal and consultancy fees (269,557) (163,493) Office rental (51,620) (20,180) Staff costs 9(b)&(d) (145,683) (141,644) Travelling expenses (89,224) (90,183) Other operating expenses 9(c) (58,129) (51,404) --------- --------- Profit from operations 230,660 35,926 Finance costs 9(e) (3,842) (4,020) --------- --------- PROFIT before taxation 226,818 31,906 TAXATION 10 - - --------- --------- PROFIT AFTER TAXATION 226,818 31,906 Accumulated losses brought forward (369,844) (401,750) --------- --------- Accumulated losses carried forward $(143,026) $(369,844) ========= =========
No separate statement of recognised gains and losses has been prepared as the profit for the year would be the only component of this statement. The accompanying notes form an integral part of these financial statements. A-38 BELDEN SHIPPING PTE LTD NOTES TO THE FINANCIAL STATEMENTS ANNUAL REPORT 31 DECEMBER 2002 These notes form an integral part of the financial statements. The financial statements were authorised for issue by the Directors on 1 April 2003. 1. DOMICILE AND ACTIVITIES Belden Shipping Pte Ltd is a company incorporated in the Republic of Singapore with its place of business at 16 Stanley Street, Singapore 068735. The principal activities of the Company are those relating to commercial ship management and brokering. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) STATEMENT OF COMPLIANCE These financial statements have been prepared in accordance with the Singapore Statements of Accounting Standard ("SAS") (including Interpretations of Statements of Accounting Standard) issued by the Institute of Certified Public Accountants of Singapore and the applicable requirements of the Singapore Companies Act, Chapter 50. (b) BASIS OF PREPARATION The financial statements, which are expressed in Singapore dollars, are prepared on the historical cost basis. (c) PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION (i) OWNED ASSETS Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. (ii) SUBSEQUENT EXPENDITURE Subsequent expenditure relating to a fixed asset that has already been recognised is added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the enterprise. All other subsequent expenditure is recognised as an expense in the period in which it is incurred. A-39 (c) PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION (CONT'D) (iii) DEPRECIATION Items of property, plant and equipment are depreciated so as to write off their costs on a straight line basis over the following estimated useful lives:- Furniture and fixtures - 48 months Office equipment - 60 months Computer equipment - 15 to 36 months (d) REVENUE RECOGNITION Shipmanagement income is recognised on an accrual basis. Commission income for shipbroking is recognised when services are performed. (e) BORROWING COSTS Borrowing costs are recognised as an expense in the period in which they are incurred. (f) DEFERRED TAXATION Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Temporary differences are not recognised for goodwill not deductible for tax purposes and the initial recognition of assets or liabilities that affect neither accounting nor taxable profit. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. A-40 (h) FOREIGN CURRENCY TRANSLATION Monetary assets and liabilities in foreign currencies are translated into Singapore dollars at rates of exchange closely approximate to those ruling at the balance sheet date. Transactions in foreign currencies during the year are translated at rates of exchange closely approximate to those ruling at transaction dates. Translation differences are dealt with through the profit and loss account. (i) CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash in hand, bank deposits and short-term, highly liquid investments which are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. (j) OPERATING LEASES Rental payable under operating leases is accounted for in the profit and loss account on a straight-line basis over the periods of the respective leases. (k) EMPLOYEE BENEFITS Defined contribution plans Contributions to defined contribution plans are recognised as an expense in the profit and loss account as incurred. A-41 3. PROPERTY, PLANT AND EQUIPMENT
FURNITURE COMPUTER AND OFFICE EQUIPMENT FITTINGS EQUIPMENT TOTAL 2002 $ $ $ $ COST At beginning of the year - 8,247 28,456 36,703 Additions 29,535 - - 29,535 --------- -------- --------- ------- At end of the year $ 29,535 $ 8,247 $ 28,456 $66,238 ========= ======== ========= ======= ACCUMULATED DEPRECIATION At beginning of the year - 6,949 18,286 25,235 Charge for the year 8,523 556 4,313 13,392 --------- -------- --------- ------- At end of the year $ 8,523 $ 7,505 $ 22,599 $38,627 ========= ======== ========= ======= DEPRECIATION CHARGED for 2001 $ - $ 1,334 $ 5,731 $ 7,065 ========= ======== ========= ======= NET BOOK VALUE AT 31 December 2002 $ 21,012 $ 742 $ 5,857 $27,611 ========= ======== ========= ======= NET BOOK VALUE AT 31 December 2001 $ - $ 1,298 $ 10,170 $11,468 ========= ======== ========= =======
4. OTHER RECEIVABLES
2002 2001 $ $ Deposits 4,850 5,295 Staff advance 2,902 10,000 Prepayments 154,450 - --------- -------- $ 162,202 $ 15,295 ========= ========
5. CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash in hand and at banks. A-42 6. LOANS FROM SHAREHOLDERS OF HOLDING COMPANY The loans from shareholders of the holding company were unsecured with no fixed terms of repayment. Interest was charged at 6% (2001: 6%) per annum during the year. 7. SHARE CAPITAL
2002 2001 $ $ Authorised:- 500,000 ordinary shares of $1 each $ 500,000 $500,000 ========= ======== Issued and fully paid:- 317,500 ordinary shares of $1 each $ 317,500 $317,500 ========= ========
8. REVENUE Revenue represents management fees for providing commercial ship management to related corporations. 9. PROFIT BEFORE TAXATION Profit before taxation includes the following:- (a) OTHER OPERATING INCOME
2002 2001 $ $ Bank interest income 444 217 Sundry income 34,560 937 Gain on disposal of property, plant and equipment 200 - --------- -------- $ 35,204 $ 1,154 ========= ========
(b) STAFF COSTS Salaries and wages 110,400 80,000 Apartment rental 26,633 29,740 Relocation expenses - 17,504 Contributions to defined contribution plan 6,144 - Other staff benefits 2,506 14,400 ========= ======== $ 145,683 $141,644 ========= ======== Number of employees as at 31 December 2 1 ========= ========
A-43 9. PROFIT BEFORE TAXATION (CONT'D) (c) OTHER OPERATING EXPENSES
2002 2001 $ $ Auditors' remuneration 5,000 5,000 Operating lease expense 51,620 20,180 ========= ========
(d) DIRECTORS' REMUNERATION Directors' remuneration is recognised in the following line item in the profit and loss account:- Staff costs $ - $ 51,504 ========= ========
(e) FINANCE COSTS Interest on loans from shareholders of holding company $ 3,842 $ 4,020 ========= ========
10. TAXATION RECONCILIATION OF TAX CHARGE
2002 2001 $ $ Profit before taxation $ 226,818 $ 31,906 ========= ========= Income tax using Singapore tax rate of 22% (2001: 24.5%) 49,900 7,817 Benefit arising from unrecognised tax losses (49,900) (7,817) --------- --------- $ - $ - ========= =========
In May 2002, the Singapore government announced a reduction in the corporate tax rate from 24.5% to 22%. A-44 11. COMMITMENTS At the balance sheet date, the Company was committed to making the following payments in respect of lease agreements:-
2002 2001 $ $ Leases which expire: Within one year - 11,500 Within two to five years - - --------- -------- $ - $ 11,500 ========= ========
12. SIGNIFICANT RELATED PARTY TRANSACTIONS An affiliated company is a company which has shareholders in common with the Company. During the year, there were the following significant transactions with related parties:-
2002 2001 $ $ Management fee income from related corporations 851,509 438,065 Consultancy fee paid to an affiliated company 269,557 141,859 Consultancy fee paid to a company of which a director is a member - 20,000 ======= =======
13. FINANCIAL INSTRUMENTS (a) FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES Exposure to credit and currency risk arises in the normal course of the Company's business. The Company manages these risks as part of the general day-to-day management of its operations. No derivative financial instruments are used to reduce exposure to fluctuations in foreign exchange rates as the Company does not view them to have a significant impact on the financial statements. (b) CREDIT RISK The Company incurs credit risk on the amounts due from its related corporations and exposure to this risk is monitored on an ongoing basis. The Company does not require collateral in respect of financial assets. (c) FOREIGN EXCHANGE RISK The Company incurs foreign currency risk on settlement of payments made on behalf of related corporations that are denominated in a currency other than Singapore dollars. The currency giving rise to this risk is primarily the US dollar. A-45 13. FINANCIAL INSTRUMENTS (cont'd) (d) FAIR VALUES As at 31 December 2002 and 2001, the carrying amounts of financial assets and liabilities approximated their fair values. 14. HOLDING COMPANY The immediate and ultimate holding company is Belden Cement Holding Inc., incorporated in the Republic of Panama. 15. SUBSEQUENT EVENTS On 10 January 2003, the Company acquired a wholly-owned subsidiary, Belden Shipping Sweden AB incorporated in Sweden, for a consideration of $20,216. The subsidiary's net assets at the date of acquisition were $20,216. 16. COMPARATIVE INFORMATION During the year, the Company has adopted the revised SAS 12 (2001) - Income Taxes. The adoption of this accounting standard has not given rise to any adjustments to the opening balances of accumulated losses of the prior and current periods or to changes in comparative information. A-46 MATTEA SHIPPING INC. STATEMENT BY BOARD OF DIRECTORS ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002 We, ALF JOHAN LOVEN ANDERSEN and DAG AUDUN ROMMEN, being attorneys-in-fact of MATTEA SHIPPING INC., do hereby state that in our opinion, the financial statements set out on pages 3 to 12 are drawn up so as to present fairly the state of affairs of the Company as at 31 December 2002 and the results of the business, changes in equity and cash flows of the Company for the year ended on that date. On behalf of the Board of Directors /s/ Alf Johan Loven Andersen - -------------------------------- ALF JOHAN LOVEN ANDERSEN Attorney-in-fact /s/ Dag Audun Rommen - -------------------------------- DAG AUDUN ROMMEN Attorney-in-fact SINGAPORE 25 March 2003 A-47 REPORT OF THE AUDITORS TO THE MEMBER OF MATTEA SHIPPING INC. We have audited the financial statements of Mattea Shipping Inc. for the year ended 31 December 2002 as set out on pages 3 to 12. These financial statements are the responsibility of the Company's directors. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements of the Company are properly drawn up in accordance with Singapore Statements of Accounting Standard and so as to present fairly, in all material respects, the state of affairs of the Company as at 31 December 2002 and the results of the business, changes in equity and cash flows of the Company for the year ended on that date. /s/ KPMG KPMG CERTIFIED PUBLIC ACCOUNTANTS SINGAPORE 25 March 2003 A-48 MATTEA SHIPPING INC. BALANCE SHEET ANNUAL REPORT AS AT 31 DECEMBER 2002
NOTE 2002 2001 US$ US$ NON-CURRENT ASSETS Property, plant and equipment 3 12,397,208 11,298,117 CURRENT ASSETS Trade receivables - 32,582 Other receivables 81,538 263,756 Cash and cash equivalents 1,316,617 340,514 ---------- ---------- 1,398,155 636,852 ---------- ---------- Less: CURRENT LIABILITIES Trade payables and accruals 64,851 100,943 Advance charter hire 206,700 41,400 Current portion of interest bearing bank loans (secured) 4 2,500,000 1,500,000 ---------- ---------- 2,771,551 1,642,343 ---------- ---------- NET CURRENT LIABILITIES (1,373,396) (1,005,491) NON-CURRENT LIABILITY Interest-bearing bank loans (secured) 4 (6,125,000) (7,125,000) ---------- ---------- NET ASSETS $4,898,812 $3,167,626 ========== ========== CAPITAL AND RESERVES Share capital Authorised, issued and fully paid 100 ordinary shares of US$100 each 10,000 10,000 Reserves 5 4,888,812 3,157,626 ---------- ---------- $4,898,812 $3,167,626 ========== ==========
The accompanying notes form an integral part of these financial statements. A-49 MATTEA SHIPPING INC. PROFIT AND LOSS ACCOUNT ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002
PERIOD FROM 5/6/2001 (DATE YEAR ENDED OF INCORPORATION) NOTE 31/12/2002 TO 31/12/2001 US$ US$ REVENUE 6 5,674,450 1,355,850 Other operating income 7(a) 11,380 12,492 Depreciation of property, plant and equipment 3 (1,517,684) (350,982) Vessel operating expenses (2,118,454) (400,456) Offhire expenses - (61,272) Commission (165,461) (50,825) Consultancy fee - (18,000) Management fee (297,884) - Legal fees (25,906) - Other operating expenses (17,425) (4,648) ---------- ---------------- PROFIT FROM OPERATIONS 1,543,016 482,159 Finance costs 7(b) (411,830) (164,534) ---------- ---------------- NET PROFIT FOR THE YEAR $1,131,186 $ 317,625 ========== ================
The accompanying notes form an integral part of these financial statements. A-50 MATTEA SHIPPING INC. STATEMENT OF CHANGES IN EQUITY ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002
SHARE SHARE RETAINED CAPITAL PREMIUM PROFITS TOTAL US$ US$ US$ US$ Issue of shares 10,000 2,840,001 - 2,850,001 Net profit for the period - - 317,625 317,625 ---------- ---------- ---------- ---------- At 31 December 2001 10,000 2,840,001 317,625 3,167,626 Net profit for the year - - 1,131,186 1,131,186 Issue of shares - 600,000 - 600,000 ---------- ---------- ---------- ---------- At 31 December 2002 $ 10,000 $3,440,001 $1,448,811 $4,898,812 ========== ========== ========== ==========
The accompanying notes form an integral part of these financial statements. A-51 MATTEA SHIPPING INC. STATEMENT OF CASH FLOWS ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002
PERIOD FROM 5/6/2001 (DATE YEAR ENDED OF INCORPORATION) NOTE 31/12/2002 TO 31/12/2001 US$ US$ CASH FLOWS FROM OPERATING ACTIVITIES Profit for the year 1,131,186 317,625 ADJUSTMENTS FOR:- Interest income 7(a) (11,380) (12,492) Interest expense 7(b) 411,830 164,534 Depreciation of property, plant and equipment 3 1,517,684 350,982 ---------- ---------------- Operating profit before working capital changes 3,049,320 820,649 CHANGES IN WORKING CAPITAL: Trade receivables 32,582 (32,582) Other receivables 182,218 (263,756) Advance charter hire 165,300 41,400 Trade payables and accruals (23,300) 54,716 ---------- ---------------- CASH GENERATED FROM OPERATIONS 3,406,120 620,427 Interest paid (424,622) (118,307) Interest received 11,380 12,492 ---------- ---------------- Cash inflow from operating activities 2,992,878 514,612 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment 3 (2,616,775) (10,499,099) ---------- ---------------- Net cash outflow from investing activities (2,616,775) (10,499,099) CASH FLOWS FROM FINANCING ACTIVITIES Drawdown of bank loan 2,000,000 9,000,000 Repayment of bank loan (2,000,000) (375,000) Proceeds from issue of share capital 600,000 1,700,001 ---------- ---------------- Cash flows from financing activities 600,000 10,325,001 ---------- ---------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 976,103 340,514 Cash and cash equivalents at beginning of year 340,514 - ---------- ---------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $1,316,617 $ 340,514 ========== ================
The accompanying notes form an integral part of these financial statements. A-52 MATTEA SHIPPING INC. NOTES TO THE FINANCIAL STATEMENTS ANNUAL REPORT 31 DECEMBER 2002 These notes form an integral part of the financial statements. The financial statements were authorised for issue by the Directors on 25 March 2003. 1. DOMICILE AND ACTIVITIES Mattea Shipping Inc., is a company incorporated in the Republic of Panama. The address of the resident agent is Arango Orillac Building, third floor, 54 Street, Nueva Urbanizacion Obarrio, P.O. Box 5216 Panama 5, Republic of Panama. The principal activities of the Company are those of ship owners. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) STATEMENT OF COMPLIANCE These financial statements have been prepared in accordance with the Singapore Statements of Accounting Standard ("SAS") (including Interpretations of Statements of Accounting Standard) issued by the Institute of Certified Public Accountants of Singapore. (b) BASIS OF PREPARATION The financial statements, expressed in United States dollars, are prepared on the historical cost basis. (c) PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION (i) OWNED ASSETS Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. (iii) SUBSEQUENT EXPENDITURE Subsequent expenditure relating to a fixed asset that has already been recognised is added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the enterprise. All other subsequent expenditure is recognised as an expense in the period in which it is incurred. A-53 (c) PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION (CONT'D) (iii) DEPRECIATION Depreciation is calculated on a straight-line basis so as to write off the cost, less estimated residual value, of the vessels, MV "Glory Sun" and MV "Glory Moon", over their estimated useful lives of 13 and 2 years, respectively. (d) CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash at bank. (e) FOREIGN CURRENCY TRANSLATION Monetary assets and liabilities in foreign currencies are translated into United States dollars at rates of exchange closely approximate to those ruling at the balance sheet date. Transactions in foreign currencies are translated at rates ruling on transaction dates. Translation differences are included in the profit and loss account. (f) REVENUE RECOGNITION Revenue from charter of the vessel is recognised on a straight-line basis over the period of the charter and after providing for off-service days. Interest income from banks is recognised when earned based on the principal outstanding and at the rate applicable. (g) BORROWING COSTS Borrowing costs are recognised as an expense in the year in which they are incurred. (h) IMPAIRMENT The carrying amounts of the Company's assets, other than inventories, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an item of property, plant and equipment exceeds its recoverable amount. The impairment loss is charged to the profit and loss account unless it reverses a previous revaluation in which case it will be charged to equity. Any subsequent increase in recoverable amount is reduced by the amount that would have been recognised as depreciation had the write-down or write-off not occurred. A-54 (i) IDENTITY OF RELATED PARTIES For the purpose of these financial statements, parties are considered to be related to the Company if the Company has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. 3. PROPERTY, PLANT AND EQUIPMENT
VESSEL VESSEL 2002 MV "GLORY SUN" MV "GLORY MOON" TOTAL COST US$ US$ US$ At beginning of the year 11,649,099 - 11,649,099 Additions - 2,616,775 2,616,775 -------------- --------------- ----------- At end of the year $ 11,649,099 $ 2,616,775 $14,265,874 ============== =============== =========== ACCUMULATED DEPRECIATION At beginning of the year 350,982 - 350,982 Charge for the year 911,406 606,278 1,517,684 -------------- --------------- ----------- At end of the year $ 1,262,388 $ 606,278 $ 1,868,666 ============== =============== =========== NET BOOK VALUE AS AT 31 December 2002 $ 10,386,711 $ 2,010,497 $12,397,208 ============== =============== =========== NET BOOK VALUE AS AT 31 December 2001 $ 11,298,117 $ - $11,298,117 ============== =============== ===========
4. INTEREST-BEARING BANK LOANS (SECURED) This note provides information about the Company's interest bearing loans. For more information about the Company's exposure to interest rate changes, refer to note 9. A-55 4. INTEREST-BEARING BANK LOANS (SECURED) (CONT'D)
2002 2001 US$ US$ SECURED BANK LOANS Loan repayable in 20 quarterly instalments of US$375,000 commencing in August 2001 and a final instalment of US$1,500,000 in August 2006, secured by a mortgage over a vessel with net book value of US$10,386,711 (2001: US$11,298,117) and an assignment of the vessel's earnings and insurances. 7,125,000 8,625,000 Loan repayable in 8 quarterly instalments of US$250,000 commencing in July 2002, secured by a mortgage over a vessel with net book value of US$2,010,497 (2001: Nil) and an assignment of the vessel's earnings and insurances. 1,500,000 - ----------- ----------- $ 8,625,000 $ 8,625,000 =========== =========== Payable: Within 1 year 2,500,000 1,500,000 After 1 year but within 5 years 6,125,000 7,125,000 ----------- ----------- $ 8,625,000 $ 8,625,000 =========== ===========
The bank loans are guaranteed up to US$900,000 by shareholders of the holding company and guaranteed up to US$1,100,000 (2001: US$600,000) by the holding company. 5. RESERVES
2002 2001 US$ US$ Share premium 3,440,001 2,840,001 Retained profits 1,448,811 317,625 ----------- ----------- $ 4,888,812 $ 3,157,626 =========== ===========
Movements in reserves are set out in the statements of changes in equity. The application of the share premium account is governed by Panamanian laws and regulations. 6. REVENUE Revenue represents charter hire income. A-56 7. NET PROFIT FOR THE YEAR Net profit for the year includes the following:-
PERIOD FROM 5/6/2001 (DATE YEAR ENDED OF INCORPORATION) 31/12/2002 TO 31/12/2001 US$ US$ (a) OTHER OPERATING INCOME Interest income - banks $ 11,380 $ 12,492 =========== ================ (b) FINANCE COSTS Interest on bank loan $ 411,830 $ 164,534 =========== ================
8. HOLDING COMPANY The immediate and ultimate holding company is Belden Cement Holding Inc., incorporated in the Republic of Panama. 9. FINANCIAL INSTRUMENTS (a) FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES Exposure to credit and interest rate risk arises in the normal course of the Company's business. The Company manages these risks as part of the general day-to-day management of its operations. No derivative financial instruments are used to reduce exposure to fluctuations in interest rate as the Company does not view it to have a significant impact on the financial statements. (b) CREDIT RISK Credit evaluations are performed on charterers before chartering the Company's vessel to them. The Company does not require collateral in respect of financial assets. (c) INTEREST RATE RISK The Company's exposure to market risk for changes in interest rates relates primarily to the Company's debt obligations. A-57 9. FINANCIAL INSTRUMENTS (CONT'D) (c) INTEREST RATE RISK (CONT'D) EFFECTIVE INTEREST RATES AND REPRICING ANALYSIS In respect of interest-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at balance sheet date and the periods in which they reprice.
EFFECTIVE WITHIN NOTE INTEREST RATE 1 YEAR US$ 2002 FINANCIAL ASSETS Cash and cash equivalents 0.7% $ 1,316,617 =========== FINANCIAL LIABILITIES Secured bank loans 4 3.43% 6,375,000 3.43% 2,250,000 ----------- $ 8,625,000 =========== 2001 FINANCIAL ASSETS Cash and cash equivalents 1.25% $ 340,514 =========== FINANCIAL LIABILITIES Secured bank loans 4 5.16% 7,875,000 5.02% 375,000 5.06% 375,000 ----------- $ 8,625,000 ===========
(d) FAIR VALUES As at 31 December 2002, the carrying amounts of financial assets and liabilities approximated their fair values. 10. SIGNIFICANT RELATED PARTY TRANSACTIONS During the year, there were the following significant transactions with related parties:-
2002 2001 US$ US$ Related Party Management fee expense 297,884 - ======= ====
11. COMPARATIVE INFORMATION Certain items in the comparative figures have been reclassified to conform with the current year's presentation. A-58 ECHELON SHIPPING INC. STATEMENT BY BOARD OF DIRECTORS ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002 We, ALF JOHAN LOVEN ANDERSEN and DAG AUDUN ROMMEN, being attorneys-in-fact of ECHELON SHIPPING INC., do hereby state that in our opinion, the financial statements set out on pages 3 to 13 are drawn up so as to present fairly the state of affairs of the Company as at 31 December 2002 and the results of the business, changes in equity and the cash flows of the Company for the year ended on that date. On behalf of the Board of Directors /s/ Alf Johan Loven Andersen - -------------------------------------- ALF JOHAN LOVEN ANDERSEN Attorney-in-fact /s/ Dag Audun Rommen - -------------------------------------- DAG AUDUN ROMMEN Attorney-in-fact SINGAPORE 25 March 2003 A-59 REPORT OF THE AUDITORS TO THE MEMBER OF ECHELON SHIPPING INC. We have audited the financial statements of Echelon Shipping Inc. for the year ended 31 December 2002 as set out on pages 3 to 13. These financial statements are the responsibility of the Company's directors. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements of the Company are properly drawn up in accordance with Singapore Statements of Accounting Standard and so as to present fairly, in all material respects, the state of affairs of the Company as at 31 December 2002 and the results, changes in equity and cash flows of the Company for the year ended on that date. /s/ KPMG KPMG CERTIFIED PUBLIC ACCOUNTANTS SINGAPORE 25 March 2003 A-60 ECHELON SHIPPING INC. BALANCE SHEET ANNUAL REPORT AS AT 31 DECEMBER 2002
NOTE 2002 2001 US$ US$ NON-CURRENT ASSETS Property, plant and equipment 3 4,340,699 5,381,310 CURRENT ASSETS ----------- ---------- Trade receivables - 47,646 Other receivables 68,370 - Cash and cash equivalents 723,444 284,894 ----------- ---------- 791,814 332,540 ----------- ---------- Less: CURRENT LIABILITIES Trade payable and accruals 27,869 277,013 Advance charter hire 103,750 - Loan from shareholders of the holding company 4 578,128 548,046 Current portion of interest-bearing bank loan (secured) 5 1,000,000 2,750,000 ----------- ---------- 1,709,747 3,575,059 ----------- ---------- NET CURRENT LIABILITIES (917,933) (3,242,519) NON-CURRENT LIABILITIES Interest-bearing bank loan (secured) 5 (1,750,000) - Loan from a related party 6 - (770,600) ----------- ---------- NET ASSETS $ 1,672,766 $1,368,191 =========== ========== CAPITAL AND RESERVES Share capital Authorised, issued and fully paid 200 ordinary shares of US$50 each 10,000 10,000 Reserves 7 1,662,766 1,358,191 ----------- ---------- $ 1,672,766 $1,368,191 =========== ==========
The accompanying notes form an integral part of these financial statements. A-61 ECHELON SHIPPING INC. PROFIT AND LOSS ACCOUNT ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002
NOTE 2002 2001 US$ US$ REVENUE 8 3,103,925 3,772,694 Other income 9(a) 16,418 10,301 Depreciation of property, plant and equipment 3 (1,040,611) (1,174,160) Vessel operating expenses (1,245,210) (1,449,372) Management fees (175,000) (75,000) Commission (115,279) (100,874) Other operating expenses (27,979) (26,027) ----------- ---------- PROFIT FROM OPERATIONS 516,264 957,562 Finance costs 9(b) (211,689) (320,745) ----------- ---------- PROFIT FOR THE YEAR $ 304,575 $ 636,817 =========== ==========
The accompanying notes form an integral part of these financial statements. A-62 ECHELON SHIPPING INC. STATEMENT OF CHANGES IN EQUITY ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002
SHARE SHARE ACCUMULATED CAPITAL PREMIUM LOSSES TOTAL US$ US$ US$ US$ At 1 January 2001 10,000 2,240,000 (1,518,626) 731,374 Profit for the year - - 636,817 636,817 ----------- ----------- ----------- ----------- At 31 December 2001 10,000 2,240,000 (881,809) 1,368,191 Profit for the year - - 304,575 304,575 ----------- ----------- ----------- ----------- At 31 December 2002 $ 10,000 $ 2,240,000 $ (577,234) $ 1,672,766 =========== =========== =========== ===========
The accompanying notes form an integral part of these financial statements. A-63 ECHELON SHIPPING INC. STATEMENT OF CASH FLOWS ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002
NOTE 2002 2001 US$ US$ OPERATING ACTIVITIES Profit for the year 304,575 636,817 Adjustments for: Depreciation of property, plant and equipment 3 1,040,611 1,174,160 Interest income 9(a) (10,481) (10,301) Interest expense 9(b) 211,689 320,745 ----------- ---------- 1,546,394 2,121,421 Changes in working capital: Trade receivables 47,646 (728) Other receivables (68,370) - Trade payable and accruals (177,470) (262,014) Advance charter hire 103,750 (124,150) ----------- ---------- Cash generated from operations 1,451,950 1,734,529 Interest received 10,481 10,301 Interest paid (333,881) (176,270) ----------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES 1,128,550 1,568,560 ----------- ---------- FINANCING ACTIVITIES Refinancing of bank loan 2,750,000 - Repayment of bank loan (2,750,000) (1,000,000) Repayment of loan from a related party (690,000) - ----------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES (690,000) (1,000,000) ----------- ---------- INVESTING ACTIVITIES Purchase of property, plant and equipment 3 - (316,693) ----------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES - (316,693) ----------- ---------- NET INCREASE IN CASH AND CASH EQUIVALENTS 438,550 251,867 Cash and cash equivalents at beginning of year 284,894 33,027 ----------- ---------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 723,444 $ 284,894 =========== ==========
The accompanying notes form an integral part of these financial statements. A-64 ECHELON SHIPPING INC. NOTES TO THE FINANCIAL STATEMENTS ANNUAL REPORT 31 DECEMBER 2002 These notes form an integral part of the financial statements. The financial statements were authorised for issue by the Directors on 25 March 2003. 1. DOMICILE AND ACTIVITIES Echelon Shipping Inc is a company incorporated in the Republic of Panama. The address of the resident agent is Arango Orillac Building, third floor, 54 Street, Nueva Urbanizacion Obarrio, P.O. Box 5216 Panama 5, Republic of Panama. The principal activities of the Company are those of ship owners. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) STATEMENT OF COMPLIANCE These financial statements have been prepared in accordance with the Singapore Statements of Accounting Standard ("SAS") (including Interpretations of Statements of Accounting Standard) issued by the Institute of Certified Public Accountants of Singapore. (b) BASIS OF PREPARATION The financial statements, expressed in United States dollars, are prepared on the historical cost basis. (c) PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION (i) OWNED ASSETS Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. (ii) SUBSEQUENT EXPENDITURE Subsequent expenditure relating to a fixed asset that has already been recognised is added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the enterprise. All other subsequent expenditure is recognised as an expense in the period in which it is incurred. A-65 (iii) DEPRECIATION Depreciation is calculated on a straight line basis so as to write off the cost, less estimated residual value, of the vessel over its estimated useful life of 9 years. (d) REVENUE RECOGNITION Revenue from charter of the vessel is recognised on a straight line basis over the period of the charter and after providing for off-service days. Interest income from banks is recognised when earned based on the principal outstanding and at the rate applicable. (e) FOREIGN CURRENCY TRANSLATION Monetary assets and liabilities in foreign currencies are translated into United States dollars at rates of exchange closely approximate to those ruling at the balance sheet date. Transactions in foreign currencies are translated at rates ruling on transaction dates. Translation differences are included in the profit and loss account. (f) BORROWING COSTS Borrowing costs are recognised as an expense in the year in which they are incurred. (g) CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash at bank. (h) IMPAIRMENT The carrying amounts of the Company's assets, other than inventories, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an item of property, plant and equipment exceeds its recoverable amount. The impairment loss is charged to the profit and loss account unless it reverses a previous revaluation in which case it will be charged to equity. Any subsequent increase in recoverable amount is reduced by the amount that would have been recognised as depreciation had the write-down or write-off not occurred. A-66 3. PROPERTY, PLANT AND EQUIPMENT
VESSEL MV "MARIANA III" 2002 US$ COST At beginning of the year 9,470,590 Additions - ---------- At end of the year $9,470,590 ========== ACCUMULATED DEPRECIATION At beginning of the year 4,089,280 Charge for the year 1,040,611 ---------- At end of the year $5,129,891 ========== NET BOOK VALUE at 31 December 2002 $4,340,699 ========== NET BOOK VALUE at 31 December 2001 $5,381,310 ==========
4. LOAN FROM SHAREHOLDERS OF THE HOLDING COMPANY
2002 2001 US$ US$ Loan principal 500,000 500,000 Accrued interest 78,128 48,046 -------- -------- $578,128 $548,046 ======== ========
The loan from shareholders of the holding company is unsecured and has no fixed terms of repayment. 5. INTEREST-BEARING BANK LOAN (SECURED)
2002 2001 US$ US$ The bank loan is repayable as follows: - - Within 1 year 1,000,000 2,750,000 - - After 1 year but within 5 years 1,750,000 - ----------- ----------- $ 2,750,000 $ 2,750,000 =========== ===========
A-67 5. INTEREST-BEARING BANK LOAN (SECURED) (CONT'D) In October 2002, the Company refinanced its bank loan with another financial institution. The new bank loan is repayable in 9 quarterly instalments of US$250,000 commencing in January 2003 and a final instalment of US$500,000 in April 2005. It is secured by a mortgage over the Company's vessel and an assignment of the vessel's earnings and insurances, guaranteed up to US$900,000 by shareholders of the holding company and guaranteed up to US$1,100,000 by the holding company. 6. LOAN FROM A RELATED PARTY
2002 2001 US$ US$ Loan principal - 690,000 Accrued interest - 80,600 --------- ----------- $ - $ 770,600 ========= ===========
7. RESERVES
2002 2001 US$ US$ Share premium 2,240,000 2,240,000 Accumulated losses (577,234) (881,809) --------- ----------- 1,662,766 $ 1,358,191 ========= ===========
Movements in reserves are set out in the statement of changes in equity. The application of the share premium account is governed by Panamanian laws and regulations. 8. REVENUE Revenue represents charter hire income. 9. PROFIT FOR THE YEAR Profit for the year includes the following:
2002 2001 US$ US$ (a) OTHER INCOME Interest income - - bank 10,481 10,301 Others 5,937 - --------- ----------- $ 16,418 $ 10,301 ========= ===========
A-68 9. PROFIT FOR THE YEAR (CONT'D)
2002 2001 US$ US$ (b) FINANCE COSTS Loan refinancing charges 29,875 - Interest expense - - bank loan 117,232 248,272 - - loan from shareholders of the holding company 30,082 30,414 - - loan from a related party 34,500 41,400 - - bank overdraft - 659 -------- -------- $211,689 $320,745 ======== ========
10. SIGNIFICANT RELATED PARTY TRANSACTIONS For the purpose of these financial statements, parties are considered to be related to the Company if the Company has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. During the year, there were the following significant transactions with related parties:-
2002 2001 US$ US$ RELATED PARTY Management fee expense $175,000 $ 75,000 ======== ========
11. HOLDING COMPANY The immediate and ultimate holding company is Belden Cement Holding Inc., incorporated in the Republic of Panama. 12. FINANCIAL INSTRUMENTS (a) FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES Exposure to credit and interest rate risk arises in the normal course of the Company's business. The Company manages these risks as part of the general day-to-day management of its operation. No derivative financial instruments are used to reduce exposure to fluctuations in interest rate as the Company does not view them to have a significant impact on the financial statements. A-69 12. FINANCIAL INSTRUMENTS (CONT'D) (b) CREDIT RISK Credit evaluations are performed on charterers before chartering the Company's vessel to them. The Company does not require collateral in respect of financial assets. (c) INTEREST RATE RISK The Company's exposure to market risk for changes in interest rates relates primarily to the Company's debt obligations. EFFECTIVE INTEREST RATES AND REPRICING ANALYSIS In respect of interest-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at balance sheet date and the periods in which they reprice.
WITHIN 1 TO 5 EFFECTIVE 1 YEAR YEARS TOTAL NOTE INTEREST RATE US$ US$ US$ 2002 FINANCIAL ASSETS Cash and cash equivalents 0.7% $ 723,444 $ - $ 723,444 =========== ========= =========== FINANCIAL LIABILITIES Loan from shareholders of holding company 4 6% 500,000 - 500,000 Secured bank loan 5 3.34% 2,000,000 - 2,000,000 3.39% 250,000 - 250,000 3.30% 250,000 - 250,000 3.29% 250,000 - 250,000 ----------- --------- ----------- $ 3,250,000 $ - $ 3,250,000 =========== ========= =========== 2001 FINANCIAL ASSETS Cash and cash equivalents 1.5% $ 284,894 $ - $ 284,894 =========== ========= =========== FINANCIAL LIABILITIES Loan from shareholders of holding company 4 6% 500,000 - 500,000 Secured bank loan 5 5.63% 2,750,000 - 2,750,000 Loan from a related party 6 6% - 690,000 690,000 ----------- --------- ----------- $ 3,250,000 $ 690,000 $ 3,940,000 =========== ========= ===========
A-70 12. FINANCIAL INSTRUMENTS (CONT'D) (d) FAIR VALUES The net fair value of a financial liability which is not carried at fair value in the balance sheet as at 31 December is represented in the following table:
2002 2001 CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE NOTE US$ US$ US$ US$ FINANCIAL LIABILITY Loan from a related party 6 $ - $ - $ 770,600 $ 647,011 ============= =========== ========= =========== Unrecognised gain $ - $ 123,589 =========== ===========
Other than the above, as at 31 December 2002 and 2001, the carrying amounts of financial assets and liabilities approximated their fair values. 13. COMPARATIVE INFORMATION Certain items in the comparative figures have been reclassified to conform with the current year's presentation. A-71 SHINING STAR SHIPPING INC. STATEMENT BY BOARD OF DIRECTORS ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002 We, ALF JOHAN LOVEN ANDERSEN and DAG AUDUN ROMMEN, being attorneys-in-fact of SHINING STAR SHIPPING INC., do hereby state that in our opinion, the financial statements set out on pages 3 to 14 are drawn up so as to present fairly the state of affairs of the Company as at 31 December 2002 and the results of the business, changes in equity and cash flows of the Company for the year ended on that date. On behalf of the Board of Directors /s/ Alf Johan Loven Andersen - ---------------------------------- ALF JOHAN LOVEN ANDERSEN Attorney-in-fact /s/ Dag Audun Rommen - ---------------------------------- DAG AUDUN ROMMEN Attorney-in-fact SINGAPORE 25 March 2003 A-72 REPORT OF THE AUDITORS TO THE MEMBER OF SHINING STAR SHIPPING INC. We have audited the financial statements of Shining Star Shipping Inc. for the year ended 31 December 2002 as set out on pages 3 to 14. These financial statements are the responsibility of the Company's directors. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements of the Company are properly drawn up in accordance with Singapore Statements of Accounting Standard and so as to present fairly, in all material respects, the state of affairs of the Company as at 31 December 2002 and the results of the business, changes in equity and cash flows of the Company for the year ended on that date. /s/ KPMG KPMG CERTIFIED PUBLIC ACCOUNTANTS SINGAPORE 25 March 2003 A-73 SHINING STAR SHIPPING INC. BALANCE SHEET ANNUAL REPORT AS AT 31 DECEMBER 2002
NOTE 2002 2001 US$ US$ NON-CURRENT ASSETS Property, plant and equipment 3 11,825,501 12,933,737 Loan to a related party 4 - 770,600 ---------- ---------- 11,825,501 13,704,337 CURRENT ASSETS Trade receivables - 194,329 Other receivables 291,831 192,650 Cash and cash equivalents 172,270 26,140 ---------- ---------- 464,101 413,119 ---------- ---------- Less: CURRENT LIABILITIES Accrued expenses 2,156 13,683 Advance charter hire 102,893 23,121 Current portion of obligations under a hire purchase agreement 5 1,508,301 1,414,119 ---------- ---------- 1,613,350 1,450,923 ---------- ---------- NET CURRENT LIABILITIES (1,149,249) (1,037,804) NON-CURRENT LIABILITIES Obligations under a hire purchase agreement 5 (8,516,336) (10,024,637) ---------- ---------- NET ASSETS $2,159,916 $ 2,641,896 ========== =========== CAPITAL AND RESERVES Share capital Authorised, issued and fully paid 200 ordinary shares of US$50 each 10,000 10,000 Reserves 6 2,149,916 2,631,896 ---------- ---------- $2,159,916 $ 2,641,896 ========== ===========
The accompanying notes form an integral part of these financial statements. A-74 SHINING STAR SHIPPING INC. PROFIT AND LOSS ACCOUNT ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002
PERIOD FROM 14/08/2000 (DATE YEAR ENDED OF INCORPORATION) 31/12/2002 TO 31/12/2001 NOTE US$ US$ REVENUE 7 2,947,568 2,090,130 Other operating income 8(a) 232,554 235,866 Waiver of amount due to a related party (trade) - 441,733 Depreciation of property, plant and equipment 3 (1,108,236) (778,844) Management fees (75,000) - Legal fees (20,676) (20,532) Commission (69,365) (49,133) Other operating expenses (33,101) (6,514) ------------ ----------- PROFIT FROM OPERATIONS 1,873,744 1,912,706 Finance costs 8(b) (898,083) (711,045) ------------ ----------- PROFIT BEFORE TAXATION 975,661 1,201,661 Taxation 9 (132,641) (94,056) ------------ ----------- PROFIT AFTER TAXATION $ 843,020 $ 1,107,605 ============ ===========
The accompanying notes form an integral part of these financial statements. A-75 SHINING STAR SHIPPING INC. STATEMENT OF CHANGES IN EQUITY ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002
SHARE SHARE RETAINED CAPITAL PREMIUM PROFITS TOTAL US$ US$ US$ US$ Issue of shares 10,000 1,734,291 - 1,744,291 Profit for the period - - 1,107,605 1,107,605 Dividend paid - - (210,000) (210,000) ------------- ------------- ------------ ----------- At 31 December 2001 10,000 1,734,291 897,605 2,641,896 Net profit for the year - - 843,020 843,020 Dividend paid - - (1,325,000) (1,325,000) ------------- ------------- ------------ ----------- At 31 December 2002 $ 10,000 $ 1,734,291 $ 415,625 $ 2,159,916 ============= =========== ============ ===========
The accompanying notes form an integral part of these financial statements. A-76 SHINING STAR SHIPPING INC. STATEMENT OF CASH FLOWS ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002
PERIOD FROM 14/08/2000 (DATE YEAR ENDED OF INCORPORATION) 31/12/2002 TO 31/12/2001 NOTE US$ US$ OPERATING ACTIVITIES Profit before taxation 975,661 1,201,661 Adjustments for: Interest income 8(a) (50,643) (41,537) Interest expense 8(b) 898,083 711,045 Depreciation of property, plant and equipment 3 1,108,236 778,844 Waiver of amount due to a related party - (441,733) ------------- ------------- Operating profit before working capital changes 2,931,337 2,208,280 Changes in working capital: Trade receivables 194,329 (194,329) Other receivables (99,181) 393,207 Accrued expenses (3,444) (10,840) Charter hire received in advance 79,772 23,121 Trade portions of amount due to a related party - (647,866) ------------- ------------- Cash generated from operations 3,102,813 1,771,567 Interest paid (906,167) (748,024) Interest received 131,244 12,442 Dividends paid (1,325,000) (210,000) Foreign withholding tax deducted at source (132,641) (94,056) ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES 870,249 731,929 ------------- ------------- INVESTING ACTIVITIES Non-trade portions of amount due from a related party - 50,000 Effects of acquisition of assets and liabilities from a related party 10 - 246,544 ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES - 296,544 ------------- ------------- FINANCING ACTIVITIES Payment of hire purchase instalments (1,414,119) (1,002,333) Repayment of loan to a related party 690,000 - ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES (724,119) (1,002,333) ------------- ------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 146,130 26,140 Cash and cash equivalents at beginning of year 26,140 - ------------- ------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 172,270 $ 26,140 ============= =============
The accompanying notes form an integral part of these financial statements. A-77 SHINING STAR SHIPPING INC. NOTES TO THE FINANCIAL STATEMENTS ANNUAL REPORT 31 DECEMBER 2002 These notes form an integral part of the financial statements. The financial statements were authorised for issue by the Directors on 25 March 2003. 1. DOMICILE AND ACTIVITIES Shining Star Shipping Inc. is a company incorporated in the Republic of Panama. The address of the resident agent is Arango Orillac Building, third floor, 54 Street, Nueva Urbanizacion Obarrio, P.O. Box 5216 Panama 5, Republic of Panama. The principal activities of the Company are those of ship owners. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) STATEMENT OF COMPLIANCE These financial statements have been prepared in accordance with the Singapore Statements of Accounting Standard ("SAS") (including Interpretations of Statements of Accounting Standard) issued by the Institute of Certified Public Accountants of Singapore. (b) BASIS OF PREPARATION The financial statements, expressed in United States dollars, are prepared on the historical cost basis. (c) PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION (i) OWNED ASSETS Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. (iv) SUBSEQUENT EXPENDITURE Subsequent expenditure relating to a fixed asset that has already been recognised is added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the enterprise. All other subsequent expenditure is recognised as an expense in the period in which it is incurred. A-78 (c) PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION (CONT'D) (iii) DEPRECIATION Depreciation is calculated on a straight-line basis so as to write off the cost, less estimated residual value, of the vessel over its estimated useful life of 11 years. (d) REVENUE RECOGNITION Revenue from charter of the vessel is recognised on a straight-line basis over the period of the charter and after providing for off-service days. Interest income from banks is recognised when earned based on the principal outstanding and at the rate applicable. (e) FOREIGN CURRENCY TRANSLATION Monetary assets and liabilities in foreign currencies are translated into United States dollars at rates of exchange closely approximate to those ruling at the balance sheet date. Transactions in foreign currencies are translated at rates ruling on transaction dates. Translation differences are included in the profit and loss account. (f) BORROWING COSTS Borrowing costs are recognised as an expense in the year in which they are incurred. (g) CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash at bank. (h) IMPAIRMENT The carrying amounts of the Company's assets, other than inventories, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an item of property, plant and equipment exceeds its recoverable amount. The impairment loss is charged to the profit and loss account unless it reverses a previous revaluation in which case it will be charged to equity. Any subsequent increase in recoverable amount is reduced by the amount that would have been recognised as depreciation had the write-down or write-off not occurred. A-79 3. PROPERTY, PLANT AND EQUIPMENT
VESSEL MV "ARO" 2002 US$ COST At beginning of the year 13,712,581 Additions - ----------- At end of the year $13,712,581 =========== ACCUMULATED DEPRECIATION At beginning of the year 778,844 Charge for the year 1,108,236 ----------- At end of the year $ 1,887,080 =========== NET BOOK VALUE AS AT 31 December 2002 $11,825,501 =========== NET BOOK VALUE AS AT 31 December 2001 $12,933,737 ===========
4. LOAN TO A RELATED PARTY
2002 2001 US$ US$ Loan principal - 690,000 Accrued interest - 80,600 ------------- ------------- $ - $ 770,600 ============ =============
5. OBLIGATIONS UNDER A HIRE PURCHASE AGREEMENT The vessel was acquired through a hire purchase agreement, under which the outstanding principal is repayable in quarterly instalments of an increasing amount ranging from approximately $368,000 in March 2003 to approximately $405,000 in June 2004, and a final instalment of $7.3 million in December 2004. A-80 5. OBLIGATIONS UNDER A HIRE PURCHASE AGREEMENT (CONT'D) At 31 December, the obligations are payable as follows:
PAYMENTS INTEREST PRINCIPAL 2002 US$ US$ US$ Within 1 year 2,289,771 781,470 1,508,301 After 1 year but within 5 years 9,120,749 604,413 8,516,336 ----------- ----------- ----------- $11,410,520 $ 1,385,883 $10,024,637 =========== =========== =========== 2001 Within 1 year 2,315,265 901,146 1,414,119 After 1 year but within 5 years 11,471,382 1,446,745 10,024,637 ----------- ----------- ----------- $13,786,647 $ 2,347,891 $11,438,756 =========== =========== ===========
6. RESERVES
2002 2001 US$ US$ Share premium 1,734,291 1,734,291 Retained profit 415,625 897,605 ----------- ----------- $ 2,149,916 $ 2,631,896 =========== ===========
Movements in reserves are set out in the statement of changes in equity. The application of the share premium account is governed by Panamanian laws and regulations. 7. REVENUE Revenue represents charter hire income. A-81 8. PROFIT FROM OPERATIONS Profit from operations includes the following:-
PERIOD FROM 14/08/2000 (DATE YEAR ENDED OF INCORPORATION) 31/12/2002 TO 31/12/2001 US$ US$ (a) OTHER OPERATING INCOME Interest income - banks 16,143 12,442 - loan to a related party 34,500 29,095 Sundry income 181,911 194,329 ------------ ------------ $ 232,554 $ 235,866 ============ ============ (b) FINANCE COSTS Hire purchase interest $ 898,083 $ 711,045 ============ ============
9. TAXATION Taxation represents foreign withholding tax deducted at source. 10. SIGNIFICANT RELATED PARTY TRANSACTIONS For the purpose of these financial statements, parties are considered to be related to the Company if the Company has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. In addition to those disclosed elsewhere in the financial statements, during the year, there were the following significant transactions with related parties:-
2002 2001 US$ US$ RELATED PARTY Management fee expense 75,000 - ====== ======
A-82 11. FINANCIAL INSTRUMENTS (a) FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES Exposure to credit and interest rate risk arises in the normal course of the Company's business. The Company manages these risks as part of the general day-to-day management of its operations. (b) CREDIT RISK Credit evaluations are performed on charterers before chartering the Company's vessel to them. The Company does not require collateral in respect of financial assets. (c) INTEREST RATE RISK The Company's exposure to market risk for changes in interest rates relates primarily to the Company's debt obligations. Derivative financial instruments are used to reduce exposure to fluctuations in interest rate. EFFECTIVE INTEREST RATES AND REPRICING ANALYSIS In respect of interest-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at balance sheet date and the periods in which they reprice.
EFFECTIVE WITHIN 1 TO 5 INTEREST 1 YEAR YEARS TOTAL NOTE RATE US$ US$ US$ 2002 FINANCIAL ASSETS Cash and cash equivalents 0.25% $ 172,270 $ - $ 172,270 =========== =========== =========== FINANCIAL LIABILITY Hire purchase 5 8.145% $1,508,301 $8,516,336 $10,024,637 =========== =========== =========== 2001 FINANCIAL ASSETS Loan to a related party 4 6% - 690,000 690,000 Cash and cash equivalents 0.75% 26,140 - 26,140 ----------- ----------- ----------- $ 26,140 $ 690,000 $ 716,140 =========== =========== ===========
A-83 11. FINANCIAL INSTRUMENTS (CONT'D) (c) INTEREST RATE RISK (CONT'D) EFFECTIVE INTEREST RATES AND REPRICING ANALYSIS (CONT'D)
EFFECTIVE WITHIN 1 TO 5 INTEREST 1 YEAR YEARS TOTAL NOTE RATE US$ US$ US$ 2001 FINANCIAL LIABILITY Hire purchase 5 8.145% $1,414,119 $10,024,637 $11,438,756 ========== =========== ===========
(d) FAIR VALUES The net fair values of financial assets and liabilities which are not carried at fair value in the balance sheet as at 31 December is represented in the following table:
2002 2001 CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE NOTE US$ US$ US$ US$ FINANCIAL ASSET Loan to a related party 4 $ - $ - $ 770,600 $ 647,000 ============ ============ ============ ============ FINANCIAL LIABILITY Hire purchase obligations 5 $(10,024,637) $(11,018,877) $(11,438,756) $(12,172,011) ============ ============ ============ ============ Unrecognised loss $ (994,240) $ (856,855) ============ ============
The fair value of the hire purchase obligations is determined based on the current offer of the hire purchase obligations as advised by the financier. Other than the above, the carrying amounts of financial assets and liabilities approximated their fair values. A-84 12. HOLDING COMPANY The immediate and ultimate holding company is Belden Cement Holding Inc., incorporated in the Republic of Panama. 13. COMPARATIVE INFORMATION Certain items in the comparative figures have been reclassified to conform with the current year's presentation. A-85 EMBLEM SHIPPING INC. STATEMENT BY BOARD OF DIRECTORS ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002 We, ALF JOHAN LOVEN ANDERSEN and DAG AUDUN ROMMEN, being attorneys-in-fact of EMBLEM SHIPPING INC., do hereby state that in our opinion, the financial statements set out on pages 3 to 13 are drawn up so as to present fairly the state of affairs of the Company as at 31 December 2002 and the results of the business, changes in equity and cash flows of the Company for the year ended on that date. On behalf of the Board of Directors /s/ Alf Johan Loven Andersen - ---------------------------------- ALF JOHAN LOVEN ANDERSEN Attorney-in-fact /s/ Dag Audun Rommen - ---------------------------------- DAG AUDUN ROMMEN Attorney-in-fact SINGAPORE 25 March 2003 A-86 REPORT OF THE AUDITORS TO THE MEMBER OF EMBLEM SHIPPING INC. We have audited the financial statements of Emblem Shipping Inc. for the year ended 31 December 2002 as set out on pages 3 to 13. These financial statements are the responsibility of the Company's directors. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements of the Company are properly drawn up in accordance with Singapore Statements of Accounting Standard and so as to present fairly, in all material respects, the state of affairs of the Company as at 31 December 2002 and the results of the business, changes in equity and cash flows of the Company for the year ended on that date. /s/ KPMG KPMG CERTIFIED PUBLIC ACCOUNTANTS SINGAPORE 25 March 2003 A-87 EMBLEM SHIPPING INC. BALANCE SHEET ANNUAL REPORT AS AT 31 DECEMBER 2002
NOTE 2002 2001 US$ US$ NON-CURRENT ASSETS Property, plant and equipment 3 7,132,613 8,181,638 CURRENT ASSETS Sundry receivables 90,615 72,913 Cash and cash equivalents 260,854 187,374 ------------- ------------- 351,469 260,287 ------------- ------------- Less: CURRENT LIABILITIES Accrued expenses 110,478 84,108 Current portion of interest bearing bank loan (secured) 4 438,198 406,060 ------------- ------------- 548,676 490,168 ------------- ------------- NET CURRENT LIABILITIES (197,207) (229,881) NON-CURRENT LIABILITY Interest-bearing bank loan (secured) 4 (5,660,419) (6,098,617) ------------- ------------- NET ASSETS $ 1,274,987 $ 1,853,140 ============= ============= CAPITAL AND RESERVES Share capital Authorised, issued and fully paid 100 ordinary shares of US$100 each 10,000 10,000 Reserves 5 1,264,987 1,843,140 ------------- ------------- $ 1,274,987 $ 1,853,140 ============= =============
The accompanying notes form an integral part of these financial statements. A-88 EMBLEM SHIPPING INC. PROFIT AND LOSS ACCOUNT ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002
PERIOD FROM 27/10/2000 (DATE YEAR ENDED OF INCORPORATION) NOTE 31/12/2002 TO 31/12/2001 US$ US$ REVENUE 6 1,395,466 1,127,156 Other operating income 7(a) 1,040 5,718 Depreciation of property, plant and equipment 3 (1,049,025) (961,628) Management fee (75,000) (50,000) Other operating expenses (19,938) (8,890) ------------- ------------ PROFIT FROM OPERATIONS 252,543 112,356 Finance costs 7(b) (430,696) (462,926) ------------- ------------ NET LOSS FOR THE YEAR $ (178,153) $ (350,570) ============= ============
The accompanying notes form an integral part of these financial statements. A-89 EMBLEM SHIPPING INC. STATEMENT OF CHANGES IN EQUITY ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002
SHARE SHARE ACCUMULATED CAPITAL PREMIUM LOSS TOTAL US$ US$ US$ US$ Issue of shares 10,000 2,443,710 - 2,453,710 Net loss for the period - - (350,570) (350,570) Dividend paid - (250,000) - (250,000) ------------- ----------- ------------ ----------- At 31 December 2002 10,000 2,193,710 (350,570) 1,853,140 Net loss for the year - - (178,153) (178,153) Dividend paid - (400,000) - (400,000) ------------- ----------- ------------ ----------- At 31 December 2002 $ 10,000 $ 1,793,710 $ (528,723) $ 1,274,987 ============= =========== ============ ===========
The accompanying notes form an integral part of these financial statements. A-90 EMBLEM SHIPPING INC. STATEMENT OF CASH FLOWS ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002
PERIOD FROM 27/10/2000 (DATE YEAR ENDED OF INCORPORATION) NOTE 31/12/2002 TO 31/12/2001 US$ US$ OPERATING ACTIVITIES Net loss for the year (178,153) (350,570) Adjustments for: Interest income 7(a) (1,040) (5,718) Interest expense 7(b) 430,696 462,926 Depreciation of property, plant and equipment 3 1,049,025 961,628 ------------- ------------ Operating profit before working capital changes 1,300,528 1,068,266 Changes in working capital: Other receivables (17,702) (72,739) Accrued expenses (546) 4,818 ------------- ------------ Cash generated from operations 1,282,280 1,000,345 Interest paid (403,780) (383,636) Interest received 1,040 5,544 Dividend paid (400,000) (250,000) ------------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES 479,540 372,253 ------------- ------------ INVESTING ACTIVITIES Purchase of property, plant and equipment 3 - (9,143,266) ------------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES - (9,143,266) ------------- ------------ FINANCING ACTIVITIES Drawdown of bank loan - 6,789,556 Repayment of bank loan (406,060) (284,879) Proceeds from issue of share capital - 2,453,710 ------------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES (406,060) 8,958,387 ------------- ------------ NET INCREASE IN CASH AND CASH EQUIVALENTS 73,480 187,374 Cash and cash equivalents at beginning of year 187,374 - ------------- ------------ CASH AND CASH EQUIVALENTS AT END OF YEAR $ 260,854 $ 187,374 ============= =============
The accompanying notes form an integral part of these financial statements. A-91 EMBLEM SHIPPING INC. NOTES TO THE FINANCIAL STATEMENTS ANNUAL REPORT 31 DECEMBER 2002 These notes form an integral part of the financial statements. The financial statements were authorised for issue by the Directors on 25 March 2003. 1. DOMICILE AND ACTIVITIES Emblem Shipping Inc. (the "Company") is incorporated in the Republic of Panama. The address of the resident agent is Arango Orillac Building, third floor, 54 Street, Nueva Urbanizacion Obarrio, P.O. Box 5216 Panama 5, Republic of Panama. The principal activities of the Company are those of ship owners. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) STATEMENT OF COMPLIANCE These financial statements have been prepared in accordance with the Singapore Statements of Accounting Standard ("SAS") (including Interpretations of Statements of Accounting Standard) issued by the Institute of Certified Public Accountants of Singapore. (b) BASIS OF PREPARATION The financial statements, expressed in United States dollars, are prepared on the historical cost basis. (c) PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION (i) OWNED ASSETS Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. (v) SUBSEQUENT EXPENDITURE Subsequent expenditure relating to a fixed asset that has already been recognised is added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the enterprise. All other subsequent expenditure is recognised as an expense in the period in which it is incurred. A-92 (c) PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION (CONT'D) (iii) DEPRECIATION Depreciation is calculated on a straight-line basis so as to write off the cost, less estimated residual value, of the vessel over its estimated useful life of 8 years. (d) REVENUE RECOGNITION Revenue from charter of the vessel is recognised on a straight-line basis over the period of the charter and after providing for off-service days. Interest income from banks is recognised when earned based on the principal outstanding and at the rate applicable. (e) FOREIGN CURRENCY TRANSLATION Monetary assets and liabilities in foreign currencies are translated into United States dollars at rates of exchange closely approximate to those ruling at the balance sheet date. Transactions in foreign currencies are translated at rates ruling on transaction dates. Translation differences are included in the profit and loss account. (f) BORROWING COSTS Borrowing costs are recognised as an expense in the year in which they are incurred. (g) CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash at bank. (h) IMPAIRMENT The carrying amounts of the Company's assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. The impairment loss is charged to the profit and loss account. Any subsequent increase in recoverable amount is reduced by the amount that would have been recognised as depreciation had the write-down or write-off not occurred. A-93 (i) DERIVATIVE FINANCIAL INSTRUMENTS The Company uses interest rate swap contracts to hedge its exposure to interest rate risks from financing activities. Derivative financial instruments used for hedging purposes are accounted for on an equivalent basis to the underlying assets, liabilities or net positions. Any profit or loss arising is recognised on the same basis as that arising from the related assets, liabilities or positions. 3. PROPERTY, PLANT AND EQUIPMENT
VESSEL MV "ALCEM CALACA" 2002 US$ COST At beginning and end of the year $ 9,143,266 =========== ACCUMULATED DEPRECIATION At beginning of the year 961,628 Charge for the year 1,049,025 ----------- At end of the year $ 2,010,653 =========== NET BOOK VALUE AS AT 31 December 2002 $ 7,132,613 =========== NET BOOK VALUE AS AT 31 December 2001 $ 8,181,638 ===========
4. INTEREST-BEARING BANK LOAN
2002 2001 US$ US$ The bank loan is repayable as follows: - - Within 1 year 438,198 406,060 - - After 1 year but within 5 years 3,638,350 3,036,493 - - After 5 years 2,022,069 3,062,124 ----------- ----------- $ 6,098,617 $ 6,504,677 =========== ===========
A-94 4. INTEREST-BEARING BANK LOAN (CONT'D) The bank loan is repayable in 34 quarterly instalments ranging from $1,000 to $315,000 commencing in January 2001. It is secured by a mortgage over the Company's vessel and an assignment of the vessel's earnings and insurances and guaranteed by a related party. 5. RESERVES
2002 2001 US$ US$ Share premium 1,793,710 2,193,710 Accumulated loss (528,723) (350,570) ----------- ----------- $ 1,264,987 $ 1,843,140 =========== ===========
Movement in reserves are set out in the statement of changes in equity. The application of the share premium account is governed by Panamanian laws and regulations. 6. REVENUE Revenue represents charter hire income. 7. NET LOSS FOR THE YEAR Net loss for the year includes the following:-
PERIOD FROM 27/10/2000 (DATE YEAR ENDED OF INCORPORATION) NOTE 31/12/2002 TO 31/12/2001 US$ US$ (a) OTHER OPERATING INCOME Interest income - banks $ 1,040 $ 5,718 ============= ============= (b) FINANCE COSTS Interest on bank loan $ 430,696 $ 462,926 ============= =============
A-95 8. SIGNIFICANT RELATED PARTY TRANSACTIONS For the purpose of these financial statements, parties are considered to be related to the Company if the Company has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. During the year, there were the following significant transactions with related parties:-
2002 2001 US$ US$ Management fee expense $ 75,000 $ 50,000 ============= ============
9. HOLDING COMPANY The immediate and ultimate holding company is Belden Cement Holding Inc., incorporated in the Republic of Panama. 10. FINANCIAL INSTRUMENTS (a) FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES Exposure to credit and interest rate risk arises in the normal course of the Company's business. The Company manages these risks as part of the general day-to-day management of its operations. (b) CREDIT RISK Credit evaluations are performed on charterers before chartering the Company's vessel to them. The Company does not require collateral in respect of financial assets. (c) INTEREST RATE RISK The Company's exposure to market risk for changes in interest rates relates primarily to the Company's debt obligations. Interest rate swaps are used to reduce exposure to fluctuations in interest rates. EFFECTIVE INTEREST RATES AND REPRICING ANALYSIS In respect of interest-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at balance sheet date and the periods in which they reprice. A-96 10. FINANCIAL INSTRUMENTS (CONT'D) (c) INTEREST RATE RISK (CONT'D)
EFFECTIVE WITHIN 1 TO 5 AFTER INTEREST 1 YEAR YEARS 5 YEARS 2002 NOTE RATE US$ US$ US$ FINANCIAL ASSETS Cash and cash equivalents 0.24% $ 260,854 $ - $ - ============ =========== =========== FINANCIAL LIABILITIES Floating rate loan 4 3.21% 6,098,617 - - Effect of interest rate swap 2.98% (4,980,603) 4,177,757 802,846 ------------ ----------- ----------- $ 1,118,014 $ 4,177,757 $ 802,846 ============ =========== =========== 2001 FINANCIAL ASSETS Cash and cash equivalents 0.64% $ 187,374 $ - $ - ============ =========== =========== FINANCIAL LIABILITIES Floating rate loan 4 3.73% 6,504,677 - - Effect of interest rate swap 2.46% (5,689,740) 3,882,770 1,806,970 ------------ ----------- ----------- $ 814,937 $ 3,882,770 $ 1,806,970 ============ =========== ===========
(d) FAIR VALUES Recognised financial instruments As at 31 December 2002, the carrying amounts of financial assets and liabilities approximated their fair values. Unrecognised financial instruments. The valuation of financial instruments not recognised in the balance sheet reflects amounts which the Company expects to pay or receive to terminate the contracts or replace the contracts at their current market rates at the balance sheet date. A-97 10. FINANCIAL INSTRUMENTS (CONT'D) (d) FAIR VALUES (CONT'D) Unrecognised financial instruments (cont'd) The notional amount and net fair value of financial instrument not recognised in the balance sheet as at 31 December are:
2002 2001 NOTIONAL FAIR NOTIONAL FAIR AMOUNT VALUE AMOUNT VALUE US$ US$ US$ US$ Interest rate swap agreement $ 4,980,603 $ (645,852) $ 5,689,740 $ (224,936) ============= ============= ============= =============
11. COMPARATIVE INFORMATION Certain items in the comparative figures have been reclassified to conform with the current year's presentation. A-98 YAKUMO SHIPPING INC. STATEMENT BY BOARD OF DIRECTORS ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002 We, ALF JOHAN LOVEN ANDERSEN and DAG AUDUN ROMMEN, being attorneys-in-fact of YAKUMO SHIPPING INC., do hereby state that in our opinion, the financial statements set out on pages 3 to 12 are drawn up so as to present fairly the state of affairs of the Company as at 31 December 2002 and the results of the business, changes in equity and cash flows of the Company for the year ended on that date. On behalf of the Board of Directors /s/ Alf Johan Loven Andersen - ---------------------------------- ALF JOHAN LOVEN ANDERSEN Attorney-in-fact /s/ Dag Audun Rommen - ---------------------------------- DAG AUDUN ROMMEN Attorney-in-fact SINGAPORE 25 March 2003 A-99 REPORT OF THE AUDITORS TO THE MEMBER OF YAKUMO SHIPPING INC. We have audited the financial statements of Yakumo Shipping Inc. for the year 31 December 2002 as set out on pages 3 to 12. These financial statements are the responsibility of the Company's directors. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements of the Company are properly drawn up in accordance with Singapore Statements of Accounting Standard and so as to present fairly, in all material respects, the state of affairs of the Company as at 31 December 2002 and the results of the business, changes in equity and cash flows of the Company for the year ended on that date. /s/ KPMG KPMG CERTIFIED PUBLIC ACCOUNTANTS SINGAPORE 25 March 2003 A-100 YAKUMO SHIPPING INC. BALANCE SHEET ANNUAL REPORT AS AT 31 DECEMBER 2002
NOTE 2002 2001 US$ US$ NON-CURRENT ASSETS Property, plant and equipment 3 4,816,388 4,830,756 CURRENT ASSETS Trade receivable 126,000 - Other receivables 4 61,683 219,275 Cash and cash equivalents 218,195 308,517 ----------- ----------- 405,878 527,792 ----------- ----------- Less: CURRENT LIABILITIES Trade payables and accruals 25,958 332,823 Bank loan (secured) 5 700,000 700,000 Loan from holding company 6 356,241 - ----------- ----------- 1,082,199 1,032,823 ----------- ----------- NET CURRENT LIABILITIES (676,321) (505,031) NON-CURRENT LIABILITY Bank loan (secured) 5 (1,800,000) (2,100,000) ----------- ----------- NET ASSETS $ 2,340,067 $ 2,225,725 =========== =========== CAPITAL AND RESERVES Share capital Authorised, issued and fully paid 100 ordinary shares of US$100 each 10,000 10,000 Reserves 7 2,330,067 2,215,725 ----------- ----------- $ 2,340,067 $ 2,225,725 =========== ===========
The accompanying notes form an integral part of these financial statements. A-101 YAKUMO SHIPPING INC. PROFIT AND LOSS ACCOUNT ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002
NOTE 2002 2001 US$ US$ REVENUE 8 1,879,075 1,962,595 Other income 9(a) 27,003 12,499 Depreciation of property, plant and equipment 3 (464,368) (424,370) Vessel operating costs (932,490) (1,138,514) Management fee (175,000) (50,000) Commission expense (47,110) (48,131) Offhire - (20,286) Other operating expenses (20,027) (19,154) ------------- ------------- Profit from operations 267,083 274,639 Finance costs 9(b) (152,741) (212,706) ------------- ------------- NET PROFIT FOR THE YEAR $ 114,342 $ 61,933 ============= =============
The accompanying notes form an integral part of these financial statements. A-102 YAKUMO SHIPPING INC. STATEMENT OF CHANGES IN EQUITY ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002
SHARE SHARE RETAINED CAPITAL PREMIUM PROFITS TOTAL US$ US$ US$ US$ At 1 January 2001 10,000 1,990,000 163,792 2,163,792 Net profit for the year - - 61,933 61,933 ----------- ----------- ------------ ----------- At 31 December 2001 10,000 1,990,000 225,725 2,225,725 Net profit for the year - - 114,342 114,342 ----------- ----------- ------------ ----------- At 31 December 2002 $ 10,000 $ 1,990,000 $ 340,067 $ 2,340,067 =========== =========== ============ ===========
The accompanying notes form an integral part of these financial statements. A-103 YAKUMO SHIPPING INC. STATEMENT OF CASH FLOWS ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002
NOTE 2002 2001 US$ US$ OPERATING ACTIVITIES Profit for the year 114,342 61,933 Adjustments for: Interest expense 9(b) 109,170 212,706 Interest income 9(a) (3,095) (12,499) Depreciation of property, plant and equipment 3 464,368 424,370 ------------- ------------- 684,785 686,510 Changes in working capital:- Trade receivable (126,000) 50,736 Sundry receivables 157,592 29,545 Trade payables and accruals (274,947) 284,070 ------------- ------------- Cash generated from operations 441,430 1,050,861 Interest paid (134,847) (238,874) Interest received 3,095 12,499 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES 309,678 824,486 ------------- ------------- FINANCING ACTIVITIES Drawdown of bank loan 225,000 - Loan from holding company 350,000 - Repayment of bank loan (525,000) (700,000) ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES 50,000 (700,000) ------------- ------------- INVESTING ACTIVITIES Purchase of property, plant and equipment 3 (450,000) (216,736) ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES (450,000) (216,736) ------------- ------------- NET DECREASE IN CASH AND CASH EQUIVALENTS (90,322) (92,250) Cash and cash equivalents at beginning of year 308,517 400,767 ------------- ------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 218,195 $ 308,517 ============= =============
The accompanying notes form an integral part of these financial statements. A-104 YAKUMO SHIPPING INC. NOTES TO THE FINANCIAL STATEMENTS ANNUAL REPORT 31 DECEMBER 2002 These notes form an integral part of the financial statements. The financial statements were authorised for issue by the Directors on 25 March 2003. 1. DOMICILE AND ACTIVITIES Yakumo Shipping Inc. (the "Company") is incorporated in the Republic of Panama. The address of the resident agent is Arango Orillac Building, third floor, 54 Street, Nueva Urbanizacion Obarrio, P.O. Box 5216 Panama 5, Republic of Panama. The principal activities of the Company are those of ship owners. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) STATEMENT OF COMPLIANCE These financial statements have been prepared in accordance with the Singapore Statements of Accounting Standard (including Interpretations of Statements of Accounting Standard) issued by the Institute of Certified Public Accountants of Singapore. (b) BASIS OF PREPARATION The financial statements, expressed in United States dollars, are prepared on the historical cost basis. (c) PROPERTY, PLANT AND EQUIPMENT (i) OWNED ASSETS Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. (ii) SUBSEQUENT EXPENDITURE Subsequent expenditure relating to a fixed asset that has already been recognised is added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the enterprise. All other subsequent expenditure is recognised as an expense in the period in which it is incurred. (iii) DEPRECIATION Depreciation is calculated on a straight line basis so as to write off the cost, less estimated residual value, of the vessel over its estimated useful life of 13 years. A-105 Costs of drydocking are depreciated on a straight line basis over the interval to the next drydocking, which is estimated at 30 months. (d) REVENUE RECOGNITION Revenue from charter of the vessel is recognised on a straight line basis over the period of the charter and after providing for off-service days. Interest income from banks is recognised when earned based on the principal outstanding and at the rate applicable. (e) FOREIGN CURRENCY TRANSLATION Monetary assets and liabilities in foreign currencies are translated into United States dollars at rates of exchange closely approximate to those ruling at the balance sheet date. Transactions in foreign currencies are translated at rates ruling on transaction dates. Translation differences are included in the profit and loss account. (f) BORROWING COSTS Borrowing costs are recognised as an expense in the year in which they are incurred. (g) CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash at bank. (h) IMPAIRMENT The carrying amounts of the Company's assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. The impairment loss is charged to the profit and loss account. Any subsequent increase in recoverable amount is reduced by the amount that would have been recognised as depreciation had the write-down or write-off not occurred. 3. PROPERTY, PLANT AND EQUIPMENT
VESSEL MV "GLORY STAR" 2002 US$ COST At beginning of the year 5,339,542 Additions 450,000 ------------- At end of the year $ 5,789,542 =============
A-106 3. PROPERTY, PLANT AND EQUIPMENT (CONT'D)
VESSEL MV "GLORY STAR" 2002 US$ ACCUMULATED DEPRECIATION At beginning of the year 508,786 Charge for the year 464,368 ------------- At end of the year $ 973,154 ============= NET BOOK VALUE at 31 December 2002 $ 4,816,388 ============= NET BOOK VALUE at 31 December 2001 $ 4,830,756 =============
4. OTHER RECEIVABLES
2002 2001 US$ US$ Prepayments 19,154 - Sundry receivables 42,529 219,275 ------------- ------------- $ 61,683 $ 219,275 ============= =============
5. INTEREST-BEARING BANK LOAN (SECURED)
2002 2001 US$ US$ The bank loan is repayable as follows: - - Within 1 year 700,000 700,000 - - After 1 year but within 5 years 1,800,000 2,100,000 ------------- ------------- $ 2,500,000 $ 2,800,000 ============= =============
In October 2002, the Company refinanced its bank loan with another financial institution. The new bank loan is repayable in 13 quarterly instalments of US$175,000 commencing in January 2003 and a final instalment of US$225,000 in April 2006. It is secured by a mortgage over the Company's vessel and an assignment of the vessel's earnings and insurances, guaranteed up to US$900,000 by shareholders of the holding company and guaranteed up to US$1,100,000 by the holding company. The previous bank loan was repayable in 20 quarterly instalments of US$175,000 commencing in January 2002 and was secured by a mortgage over the Company's vessel and an assignment of the vessel's earnings and insurances. A-107 6. LOAN FROM HOLDING COMPANY
2002 2001 US$ US$ Loan principal 350,000 - Accrued interest 6,241 - ------------ ------------ $ 356,241 $ - ============ ============
The loan from the holding company is unsecured. The Company shall have the option at any time to repay the loan in full or in part. 7. RESERVES
2002 2001 US$ US$ Share premium 1,990,000 1,990,000 Retained profits 340,067 225,725 ----------- ----------- $ 2,330,067 $ 2,215,725 =========== ===========
Movements in reserves are set out in the statement of changes in equity. The application of the share premium account is governed by Panamanian laws and regulations. 8. REVENUE Revenue represents charter hire income. 9. NET PROFIT FOR THE YEAR
2002 2001 US$ US$ Net profit for the year includes the following:- (a) OTHER INCOME Interest income - bank 3,095 12,499 Sundry income 23,908 - ------------- ------------- $ 27,003 $ 12,499 ============= =============
A-108 9. NET PROFIT FOR THE YEAR (CONT'D)
2002 2001 US$ US$ (b) FINANCE COSTS Interest expense: - bank loan 102,929 212,706 - loan from holding company 6,241 - Loan refinancing charges 43,571 - ------------- ------------- $ 152,741 $ 212,706 ============= =============
10. SIGNIFICANT RELATED PARTY TRANSACTIONS For the purpose of these financial statements, parties are considered to be related to the Company if the Company has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. During the year, there were the following significant transactions with related parties:-
2002 2001 US$ US$ Management fee expense $ 175,000 $ 50,000 ============ =============
11. HOLDING COMPANY The immediate and ultimate holding company is Belden Cement Holding Inc., incorporated in the Republic of Panama. 12. FINANCIAL INSTRUMENTS (a) FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES Exposure to credit and interest rate risk arises in the normal course of the Company's business. The Company manages these risks as part of the general day-to-day management of its operations. No derivative financial instruments are used to reduce exposure to fluctuations in interest rate as the Company does not view them to have a significant impact on the financial statements. A-109 12. FINANCIAL INSTRUMENTS (CONT'D) (b) CREDIT RISK Credit evaluations are performed on all charterers before chartering the Company's vessel to them. The Company does not require collateral in respect of financial assets. (c) INTEREST RATE RISK The Company's exposure to market risk for changes in interest rates relates primarily to the Company's debt obligations. EFFECTIVE INTEREST RATES AND REPRICING ANALYSIS In respect of interest-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at balance sheet date and the periods in which they reprice.
NOTE EFFECTIVE WITHIN INTEREST RATE 1 YEAR TOTAL 2002 % US$ US$ FINANCIAL ASSETS Cash and cash equivalents 0.7% $ 218,195 $ 218,195 ============= ============= FINANCIAL LIABILITIES Bank loan 5 3.34% 1,975,000 1,975,000 3.32% 525,000 525,000 Loan from holding company 6 6% 350,000 350,000 ------------- ------------- $ 2,850,000 $ 2,850,000 ============= ============= 2001 FINANCIAL ASSETS Cash and cash equivalents 0.25% $ 308,517 $ 308,517 ============= ============= FINANCIAL LIABILITIES Bank loan 5 6.19% $ 2,800,000 $ 2,800,000 ============= =============
(d) FAIR VALUES As at 31 December 2002 and 2001, the carrying amounts of financial assets and liabilities approximated their fair values. 13. COMPARATIVE INFORMATION Certain items in the comparative figures have been reclassified to conform with the current year's presentation. A-110 TILBURY SHIPPING INC. STATEMENT BY BOARD OF DIRECTORS ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002 We, ALF JOHAN LOVEN ANDERSEN and DAG AUDUN ROMMEN, being attorneys-in-fact of TILBURY SHIPPING INC., do hereby state that in our opinion, the financial statements set out on pages 3 to 13 are drawn up so as to present fairly the state of affairs of the Company as at 31 December 2002 and the results of the business, changes in equity and cash flows of the Company for the year ended on that date. On behalf of the Board of Directors /s/ Alf Johan Loven Andersen - ---------------------------------- ALF JOHAN LOVEN ANDERSEN Attorney-in-fact /s/ Dag Audun Rommen - ---------------------------------- DAG AUDUN ROMMEN Attorney-in-fact SINGAPORE 25 March 2003 A-111 REPORT OF THE AUDITORS TO THE MEMBER OF TILBURY SHIPPING INC. We have audited the financial statements of Tilbury Shipping Inc. for the year ended 31 December 2002 as set out on pages 3 to 13. These financial statements are the responsibility of the Company's directors. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements of the Company are properly drawn up in accordance with Singapore Statements of Accounting Standard and so as to present fairly, in all material respects, the state of affairs of the Company as at 31 December 2002 and the results of the business, changes in equity and cash flows of the Company for the year ended on that date. /s/ KPMG KPMG CERTIFIED PUBLIC ACCOUNTANTS SINGAPORE 25 March 2003 A-112 TILBURY SHIPPING INC. BALANCE SHEET ANNUAL REPORT AS AT 31 DECEMBER 2002
NOTE 2002 2001 US$ US$ NON-CURRENT ASSETS Property, plant and equipment 3 15,812,600 17,103,861 CURRENT ASSETS Sundry receivables 1,494 1,776 Cash and cash equivalents 299,929 296,733 ------------- ------------- 301,423 298,509 ------------- ------------- Less: CURRENT LIABILITIES Accrued expenses 108,827 81,091 Current portion of interest bearing bank loan (secured) 4 893,362 827,598 ------------- ------------- 1,002,189 908,689 ------------- ------------- NET CURRENT LIABILITIES (700,766) (610,180) NON-CURRENT LIABILITY Interest-bearing bank loan (secured) 4 (11,558,187) (12,451,550) ------------- ------------- NET ASSETS $ 3,553,647 $ 4,042,131 ============= ============= CAPITAL AND RESERVES Share capital Authorised, issued and fully paid 100 ordinary shares of US$100 each 10,000 10,000 Reserves 5 3,543,647 4,032,131 ------------- ------------- $ 3,553,647 $ 4,042,131 ============= =============
The accompanying notes form an integral part of these financial statements. A-113 TILBURY SHIPPING INC. PROFIT AND LOSS ACCOUNT ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002
PERIOD FROM 1/12/2000 (DATE YEAR ENDED OF INCORPORATION) NOTE 31/12/2002 TO 31/12/2001 US$ US$ REVENUE 6 3,363,305 2,932,586 Other operating income 7(a) 2,426 27,467 Depreciation of property, plant and equipment 3 (1,291,261) (1,183,670) Management fee (75,000) (25,000) Legal and consultancy fee (10,505) (27,400) Other operating expenses (15,907) (22,875) ------------- ------------- PROFIT FROM OPERATIONS 1,973,058 1,701,108 Finance costs 7(b) (861,542) (955,268) ------------- ------------- NET PROFIT FOR THE YEAR $ 1,111,516 $ 745,840 ============= =============
The accompanying notes form an integral part of these financial statements. A-114 TILBURY SHIPPING INC. STATEMENT OF CHANGES IN EQUITY ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002
SHARE SHARE RETAINED CAPITAL PREMIUM PROFIT TOTAL US$ US$ US$ US$ Issue of shares 10,000 4,536,291 - 4,546,291 Net profit for the period - - 745,840 745,840 Dividend paid - (504,160) (745,840) (1,250,000) ------------- ------------- ------------- ------------- At 31 December 2001 10,000 4,032,131 - 4,042,131 Net profit for the year - - 1,111,516 1,111,516 Dividend paid - (488,484) (1,111,516) (1,600,000) ------------- ------------- ------------- ------------- At 31 December 2002 $ 10,000 $ 3,543,647 $ - $ 3,553,647 ============= ============= ============= =============
The accompanying notes form an integral part of these financial statements. A-115 TILBURY SHIPPING INC. STATEMENT OF CASH FLOWS ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2002
PERIOD FROM 1/12/2000 (DATE OF YEAR ENDED INCORPORATION) NOTE 31/12/2002 TO 31/12/2001 US$ US$ OPERATING ACTIVITIES Net profit for the year 1,111,516 745,840 Adjustments for: Interest income 7(a) (2,426) (27,467) Interest expense 7(b) 861,542 955,268 Depreciation of property, plant and equipment 3 1,291,261 1,183,670 ------------- ------------- Operating profit before working capital changes 3,261,893 2,857,311 Changes in working capital: Sundry receivables 282 (1,494) Accrued expenses (913) 3,690 ------------- ------------- Cash generated from operations 3,261,262 2,859,507 Interest paid (832,894) (877,867) Interest received 2,426 27,185 Dividend paid (1,600,000) (1,250,000) ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES 830,794 758,825 ------------- ------------- INVESTING ACTIVITIES Purchase of property, plant and equipment 3 - (18,287,531) ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES - (18,287,531) ------------- ------------- FINANCING ACTIVITIES Drawdown of bank loan - 13,859,614 Repayment of bank loan (827,598) (580,466) Proceeds from issue of share capital - 4,546,291 ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES (827,598) 17,825,439 ------------- ------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 3,196 296,733 Cash and cash equivalents at beginning of year 296,733 - ------------- ------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 299,929 $ 296,733 ============= =============
The accompanying notes form an integral part of these financial statements. A-116 TILBURY SHIPPING INC. NOTES TO THE FINANCIAL STATEMENTS ANNUAL REPORT 31 DECEMBER 2002 These notes form an integral part of the financial statements. The financial statements were authorised for issue by the Directors on 25 March 2003. 1. DOMICILE AND ACTIVITIES Tilbury Shipping Inc. is a company incorporated in the Republic of Panama. The address of the resident agent is Arango Orillac Building, third floor, 54 Street, Nueva Urbanizacion Obarrio, P.O. Box 5216 Panama 5, Republic of Panama. The principal activities of the Company are those of ship owners. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) STATEMENT OF COMPLIANCE These financial statements have been prepared in accordance with the Singapore Statements of Accounting Standard ("SAS") (including Interpretations of Statements of Accounting Standard) issued by the Institute of Certified Public Accountants of Singapore. (b) BASIS OF PREPARATION The financial statements, expressed in United States dollars, are prepared on the historical cost basis. (c) PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION (i) OWNED ASSETS Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. (vi) SUBSEQUENT EXPENDITURE Subsequent expenditure relating to a fixed asset that has already been recognised is added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the enterprise. All other subsequent expenditure is recognised as an expense in the period in which it is incurred. A-117 (c) PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION (CONT'D) (iii) DEPRECIATION Depreciation is calculated on a straight-line basis so as to write off the cost, less estimated residual value, of the vessel over its estimated useful life of 13 years. (d) REVENUE RECOGNITION Revenue from charter of the vessel is recognised on a straight-line basis over the period of the charter and after providing for off-service days. Interest income is recognised when earned based on the principal outstanding and at the rate applicable. (e) FOREIGN CURRENCY TRANSLATION Monetary assets and liabilities in foreign currencies are translated into United States dollars at rates of exchange closely approximate to those ruling at the balance sheet date. Transactions in foreign currencies are translated at rates ruling on transaction dates. Translation differences are included in the profit and loss account. (f) BORROWING COSTS Borrowing costs are recognised as an expense in the year in which they are incurred. (g) CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash at bank. (h) IMPAIRMENT The carrying amounts of the Company's assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. The impairment loss is charged to the profit and loss account. Any subsequent increase in recoverable amount is reduced by the amount that would have been recognised as depreciation had the write-down or write-off not occurred. A-118 (i) DERIVATIVE FINANCIAL INSTRUMENTS The Company uses interest rate swap contracts to hedge its exposure to interest rate risks from financing activities. Derivative financial instruments used for hedging purposes are accounted for on an equivalent basis to the underlying assets, liabilities or net positions. Any profit or loss arising is recognised on the same basis as that arising from the related assets, liabilities or positions. 3. PROPERTY, PLANT AND EQUIPMENT
VESSEL MV "ALCEM LUGAIT" 2002 US$ COST At beginning of the year 18,287,531 Additions - ------------- At end of the year $ 18,287,531 ============= ACCUMULATED DEPRECIATION At beginning of the year 1,183,670 Charge for the year 1,291,261 ------------- At end of the year $ 2,474,931 ============= NET BOOK VALUE AS AT 31 December 2002 $ 15,812,600 ============= NET BOOK VALUE AS AT 31 December 2001 $ 17,103,861 =============
A-119 4. INTEREST-BEARING BANK LOAN
2002 2001 US$ US$ The bank loan is repayable as follows: - - Within 1 year 893,362 827,598 - - After 1 year but within 5 years 7,427,072 6,196,456 - - After 5 years 4,131,115 6,255,094 ------------- ------------- $ 12,451,549 $ 13,279,148 ============= =============
The bank loan is repayable in 34 quarterly instalments ranging from $86,000 to $645,000 commencing in January 2001. It is secured by a mortgage over the Company's vessel and an assignment of the vessel's earnings and insurances and guaranteed by a related party. 5. RESERVES
2002 2001 US$ US$ Share premium 3,543,647 4,032,131 Retained profit - - ------------- ------------- $ 3,543,647 $ 4,032,131 ============= =============
Movements in reserves are set out in the statement of changes in equity. The application of the share premium account is governed by Panamanian laws and regulations. 6. REVENUE Revenue represents charter hire income. A-120 7. NET PROFIT FOR THE YEAR Net profit for the year includes the following:-
PERIOD FROM 1/12/2000 (DATE YEAR ENDED OF INCORPORATION) 31/12/2002 TO 31/12/2001 US$ US$ (a) OTHER OPERATING INCOME Interest income - banks $ 2,426 $ 27,467 ============= ============= (b) FINANCE COSTS Interest on bank loan $ 861,542 $ 955,268 ============= =============
8. SIGNIFICANT RELATED PARTY TRANSACTIONS For the purpose of these financial statements, parties are considered to be related to the Company if the Company has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. During the year, there were the following significant transactions with related parties:-
2002 2001 US$ US$ Management fee expense $ 75,000 $ 25,000 ========= =========
9. HOLDING COMPANY The immediate and ultimate holding company is Belden Cement Holding Inc., incorporated in the Republic of Panama. A-121 10. FINANCIAL INSTRUMENTS (a) FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES Exposure to credit and interest rate risk arises in the normal course of the Company's business. The Company manages these risks as part of the general day-to-day management of its operations. (b) CREDIT RISK Credit evaluations are performed on charterers before chartering the Company's vessel to them. The Company does not require collateral in respect of financial assets. (c) INTEREST RATE RISK The Company's exposure to market risk for changes in interest rates relates primarily to the Company's debt obligations. Interest rate swaps are used to reduce exposure to fluctuations in interest rates. EFFECTIVE INTEREST RATES AND REPRICING ANALYSIS In respect of interest-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at balance sheet date and the periods in which they reprice.
EFFECTIVE WITHIN 1 TO 5 AFTER INTEREST 1 YEAR YEARS 5 YEARS 2002 NOTE RATE US$ US$ US$ FINANCIAL ASSETS Cash and cash equivalents 0.24% $ 299,925 $ - $ - ============= ============= ============= FINANCIAL LIABILITIES Floating rate secured bank loan 4 2.93% 12,451,549 - - Effect of interest rate swap 3.29% (10,334,292) 8,725,426 1,608,866 ------------- ------------- ------------- $ 2,117,257 $ 8,725,426 $ 1,608,866 ============= ============= =============
A-122 10. FINANCIAL INSTRUMENTS (c) INTEREST RATE RISK (CONT'D) EFFECTIVE INTEREST RATES AND REPRICING ANALYSIS (CONT'D)
EFFECTIVE WITHIN 1 TO 5 AFTER INTEREST 1 YEAR YEARS 5 YEARS 2001 NOTE RATE US$ US$ US$ FINANCIAL ASSETS Cash and cash equivalents 0.64% $ 296,733 $ - $ - ============ ============ ============= FINANCIAL LIABILITIES Floating rate secured bank loan 4 3.58% 13,279,148 - - Effect of interest rate swap 2.64% (11,725,574) 8,105,353 3,620,221 ------------ ------------ ------------- $ 1,553,574 $ 8,105,353 $ 3,620,221 ============ ============ =============
(d) FAIR VALUES Recognised financial instruments As at 31 December 2002, the carrying amounts of financial assets and liabilities approximated their fair values. Unrecognised financial instruments The valuation of financial instruments not recognised in the balance sheet reflects amounts which the Company expects to pay or receive to terminate the contracts or replace the contracts at their current market rates at the balance sheet date. The notional amount and net fair value of financial instrument not recognised in the balance sheet as at 31 December are:
2002 2001 NOTIONAL FAIR NOTIONAL FAIR AMOUNT VALUE AMOUNT VALUE US$ US$ US$ US$ Interest rate swap agreement $ 10,334,292 $ (1,417,442) $ 11,725,574 $ (492,482) ============= ============= ============= =============
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