SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
May 12, 2000(March 1, 2000)
TOR Minerals International, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of corporation)
0-17321
(Commission File Number)
74-2081929
(I.R.S. Employer Identification No.)
722 Burleson
Corpus Christi, Texas
(Address of principal executive offices)
78402
(Zip Code)
Registrant's telephone number, including area code: (361) 883-5591
HITOX CORPORATION OF AMERICA
(Former name or former address, if changed since last report)
<PAGE> 1
TOR MINERALS INTERNATIONAL, INC.
INDEX
Page
Item 5 Other Events 4
Item 7 Financial Statements and Exhibits
(a) Financial statements of the business acquired
Audited financial statements of MTC
In Ringgit Malaysia (RM)
Audited financial statements for the six months
ended December 31, 1999 5
Report of Deloitte Touche Tohmatsu 6
Balance Sheets at December 31, 1999
and June 30, 1999 7
Profit and loss accounts for the six months
ended December 31, 1999 and for the year
ended June 30, 1999 8
Cash flow statement for the six months
ended December 31, 1999 and for the year
ended June 30, 1999 9
Notes to the accounts 11
Statement by directors 23
Reconciliation of audited financial
statements for the six months ended
December 31, 1999 to US GAAP 24
Audited financial statements for the years
ended June 30, 1999 and 1998 28
Directors' Report 29
Report of Deloitte Touche Tohmatsu 34
Balance Sheets at June 30, 1999 and 1998 35
Profit and loss accounts for the years
ended June 30, 1999 and 1998 36
Cash flow statement for the years
ended June 30, 1999 and 1998 37
Notes to the accounts 39
Statement by directors 52
Reconciliation of audited financial
statements for the years ended
June 30, 1999 and 1998 to US GAAP 53
Audited financial statements for the years
ended June 30, 1998 and 1997 57
Directors' Report 58
Report of Deloitte Touche Tohmatsu 63
Balance Sheets at June 30, 1998 and 1997 64
Profit and loss accounts for the years
ended June 30, 1998 and 1997 65
Cash flow statement for the years
ended June 30, 1998 and 1997 66
Notes to the accounts 68
Statement by directors 81
Reconciliation of audited financial
statements for the years ended
June 30, 1998 and 1997 to US GAAP 82
(b) Pro forma financial information 86
TMI and MTC Pro Forma Condensed Combined
Financial Statements (Unaudited)
Pro Forma Condensed Combined
Balance Sheet December 31, 1999 87
Pro Forma Condensed Combined Statements
of Income for the twelve months ended
December 31, 1999 and 1998 89
Notes to Pro Forma Condensed Combined
Financial Statements 90
(c) Exhibit 23 - Consent of Deloitte Touche Tohmatsu 92
Signatures 93
Item 5. Other Events
On March 16, 2000, TOR Minerals International, Inc. (the "Company")
(formerly Hitox Corporation of America) filed a Current Report on Form
8-K reporting the acquisition (the"Acquisition") of Malaysian Titanium
Corporation Sdn. Bhd. ("MTC"). The Company is filing this amendment to
include financial statements under Item 7(a) and pro forma financial
information under Item 7(b).
<PAGE> 4
Item 7. Financial Statements and Exhibits
(a) Financial statements of the business acquired in Ringgit Malaysia
(RM)
MALAYSIAN TITANIUM CORPORATION SDN. BHD.
(Incorporated in Malaysia)
FINALCIAL STATEMENTS
FOR THE PERIOD 1ST JULY, 1999
TO 31ST DECEMBER, 1999
(In Ringgit Malaysia)
<PAGE> 5
The Board of Directors
Malaysian Titanium Corporation Sdn. Bhd.
4 1/2 Miles, Jalan Lahat
30200 IPOH
Dear Sirs,
We have examined the accompanying balance sheet of Malaysian Titanium
Corporation Sdn. Bhd., the related profit and loss account and cash flow
statement for the period 1st July, 1999 to 31st December, 1999, together
with the notes thereto. Our examination was made in accordance with
approved auditing standards in Malaysia and, accordingly, included such
tests of the accounting records and such other auditing procedures
as we considered necessary in the circumstances.
As mentioned in Note 2 to the Accounts, the above mentioned accounts
have been prepared using the same accounting principles and procedures as
were used in the preparation of the Company's statutory accounts as of
30th June, 1999.
In our opinion, these accounts have been properly drawn up so as to
give a true and fair view of the state of affairs of the Company at 31st
December, 1999 and of the results and the cash flows of the Company for
the period 1st July, 1999 to 31st December, 1999.
We understand that this report is for Malaysian Titanium Corporation
Sdn. Bhd.'s internal use only and shall not be used or referred to in
whole or part for any other purpose without our prior consent.
Yours truly,
DELOITTE TOUCHE TOHMATSU
AF 0834
Public Accountants
GREGORY WONG GUANG SENG
787/3/01(J/PH)
Partner
18th January, 2000
<PAGE> 6
MALAYSIAN TITANIUM CORPORATION SDN. BHD.
(Incorporated in Malaysia)
BALANCE SHEET
AT 31ST DECEMBER, 1999
Note 31.12.1999 30.6.1999
---- ----------- ----------
FIXED ASSETS 4 RM40,763,324 RM41,106,512
ASSOCIATED COMPANY 5 1 1
CURRENT ASSETS
Stocks 6 7,314,035 3,065,795
Trade debtors 4,091,801 4,176,503
Other debtors, deposits and prepayments 248,301 1,366,963
Amount owing by a related company 7 -- 44,590
Cash on hand and at banks 121,339 47,211
11,775,476 8,701,062
CURRENT LIABILITIES
Trade creditors 1,792,032 847,252
Other creditors and accrued expenses 8 1,618,543 1,242,113
Amount owing to holding companies 7 35,911 117,491
Amount owing to related companies 7 726,237 --
Bank borrowings 9 10,109,160 15,119,470
Provision for taxation 33,938 33,938
14,315,821 17,360,264
NET CURRENT LIABILITIES (2,540,345) (8,659,202)
------------ ------------
38,222,980 32,447,311
LONG-TERM LIABILITIES 10 (5,131,854) (1,331,854)
------------ ------------
NET ASSETS EMPLOYED RM33,091,126 RM31,115,457
============ ============
Represented by:
SHARE CAPITAL 11 RM24,130,000 RM24,130,000
UNAPPROPRIATED PROFIT 12 8,961,126 6,985,457
------------ ------------
TOTAL CAPITAL EMPLOYED RM33,091,126 RM31,115,457
============ ============
The accompanying Notes form an integral part of the Accounts.
<PAGE> 7
MALAYSIAN TITANIUM CORPORATION SDN. BHD.
(Incorporated in Malaysia)
PROFIT AND LOSS ACCOUNT
FOR THE PERIOD 1ST JULY, 1999 TO 31ST DECEMBER, 1999
(With Comparative Figures For The Year Ended 30th June, 1999)
Period Ended Year Ended
31.12.1999 30.6.1999
Note (6 months) (12 months)
---- ------------- -------------
TURNOVER 13 RM 8,988,436 RM 22,030,064
============= =============
PROFIT BEFORE TAXATION 14 RM 1,975,669 RM 3,340,145
PROVISION FOR TAXATION 15 -- (33,938)
------------- -------------
NET PROFIT 1,975,669 3,306,207
Unappropriated profit at beginning
of period/year 6,985,457 3,679,250
------------- -------------
UNAPPROPRIATED PROFIT AT END
OF PERIOD/YEAR RM 8,961,126 RM 6,985,457
============= =============
The accompanying Notes form an integral part of the Accounts.
<PAGE> 8
MALAYSIAN TITANIUM CORPORATION SDN. BHD.
(Incorporated in Malaysia)
CASHFLOW STATEMENT
FOR THE PERIOD 1ST JULY, 1999 TO 31ST DECEMBER, 1999
(With Comparative Figures For The Year Ended 30th June, 1999)
Period Ended Year Ended
31.12.1999 30.6.1999
(6 months) (12 months)
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before taxation RM 1,975,669 RM 3,340,145
Adjustments for:
Depreciation of fixed assets 623,585 832,693
Interest expense 547,130 1,637,557
Provision for doubtful debt -- 307,226
Provision for diminution
in value of investment -- 282,334
Fixed asset written off -- 80,154
Stocks written off -- 7,237
Gain on disposal of fixed assets (12,000) (711,493)
-------------- --------------
Operating Profit Before
Working Capital Changes 3,134,384 5,775,853
Decrease/(Increase) in stocks (4,248,240) 2,086,870
Decrease in trade and other receivables 1,247,954 2,339,438
Increase/(Decrease) in trade
and other payables 1,965,867 (1,560,106)
-------------- --------------
Cash Generated From Operations 2,099,965 8,642,055
Interest paid (344,064) (1,549,537)
-------------- --------------
Net Cash From Operating Activities 1,755,901 7,092,518
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of
other fixed assets 12,000 30,000
Deposits received from
disposal of property -- 110,000
Purchase of fixed assets (280,397) (2,123,540)
Net Cash Used In Investing Activities (268,397) (1,983,540)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from term loan RM 6,000,000 RM 1,331,854
Repayment of term loan (1,090,773) (988,020)
Net Cash From Financing Activities 4,909,227 343,834
-------------- --------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 6,396,731 5,452,812
<PAGE> 9
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD/YEAR (14,984,552) (20,437,364)
-------------- --------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD/YEAR RM (8,587,821) RM (14,984,552)
============== ==============
CASH AND CASH EQUIVALENTS
Cash and cash equivalents included
in the cash flow statement comprise
the following balance sheet amounts:
Cash on hand and at banks RM 122,339 RM 47,211
Bank overdrafts (4,194,624) (5,643,405)
Export credit refinancing (4,514,536) (5,388,358)
Other short-term borrowings -- (4,000,000)
-------------- --------------
Cash and cash equivalents RM (8,587,821) RM (14,984,552)
============== ==============
The accompanying Notes form an integral part of the Accounts.
<PAGE> 10
MALAYSIAN TITANIUM CORPORATION SDN. BHD.
(Incorporated in Malaysia)
NOTES TO THE ACCOUNTS
1. PRINCIPAL ACTIVITY
The Company is principally involved in the manufacturing of synthetic
rutile and its related products.
There has been no significant change in the nature of this activity
during the financial period.
2. BASIS OF PREPARATION OF ACCOUNTS
The accounts of the Company have been prepared in accordance with the
provisions of the Companies Act, 1965 and the applicable approved
accounting standards of the Malaysian Accounting Standards Board.
3. SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The accounts of the Company have been prepared under the historical
cost convention.
Depreciation of Fixed Assets
Fixed assets are stated at cost less accumulated depreciation.
Freehold land and capital work-in-progress are not depreciated while
long-term leasehold land is amortised evenly over the period of the
lease. Plant and machinery is depreciated based on units of
production over the plant's normal capacity for an estimated life of
15 years.
Depreciation of other fixed assets is computed using the straight-
line method at the following annual rates based on the estimated
useful lives of the various assets:
Buildings 2%
Motor vehicles 20%
Office equipment, furniture and fittings 15 - 20%
<PAGE> 11
Associated Company
An associated company is a company in which the Company has a long-
term equity investment of 20% to 50% and where the Company is in a
position to exercise significant influence through management
participation.
The Company has an equity interest of 40% (40% in 1999) in an
associated company, Fluid Minerals Espanola (FME) (a company
incorporated in Spain), whose principal activity is manufacturing and
sales of hitox pigment.
Investment in associated company is stated at cost unless, in the
opinion of the directors, there is a permanent diminution in the
value of investment in which case provision is made for the
diminution in value.
Stocks
Stocks are stated at the lower of cost and net realisable value.
Cost is determined on the "weighted average" method.
Cost of raw materials, consumables and trading goods comprise the
original purchase price plus cost of bringing these stocks to
location. Cost of finished goods and work-in-progress include the
cost of raw materials and an appropriate allocation of labour cost
and manufacturing overheads.
Capitalisation of Borrowing Cost
Borrowing costs incurred on the acquisition and construction of fixed
assets which require a substantial period of time to get them ready
for their intended use are capitalised and included as part of cost
of the related assets.
Deferred Taxation
Provision is made using the liability method for taxation deferred by
capital allowances and other timing differences except to the extent
that it can be demonstrated with reasonable probability that the
timing differences will continue in the foreseeable future. Timing
differences giving rise to deferred tax benefits are not recognised.
<PAGE> 12
Foreign Currency Conversion
All foreign currency transactions are converted into Ringgit Malaysia
at the exchange rates prevailing at the transaction dates or,
where settlement has not yet taken place at the end of the financial
year, at the approximate exchange rates prevailing on that date.
All exchange gains or losses are taken up in the profit and loss
account.
Cash Equivalents
Cash equivalents are short-term, highly liquid investments that are
readily convertible to known amounts of cash and which are subject to
an insignificant risk of changes in value.
<PAGE> 13
4. FIXED ASSETS
<TABLE>
<CAPTION>
---------------------Cost--------------------------------
Beginning End
31.12.1999 of period Additions Disposals of period
-------------- ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C>
Long-term leashold land RM 345,191 RM -- RM -- RM 345,191
Buildings 4,313,779 -- -- 4,313,779
Plant and machinery 42,970,294 90,444 -- 43,060,738
Motor vehicles 818,837 -- (34,383) 784,454
Office equipment
furniture & fittings 856,883 10,976 -- 867,859
Capital work-in-progress -- 178,977 -- 178,977
------------ ---------- ----------- ------------
Total RM49,304,984 RM 280,397 RM (34,383) RM49,550,998
============ ========== =========== ============
</TABLE>
<PAGE> 14
<TABLE>
<CAPTION>
--------------Accumulated Depreciation--------------
Beginning Charge for End Net book
31.12.1999 of period the period Disposals of period value
-------------- ------------ ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Long-term land RM 33,284 RM 2,064 RM - RM 35,348 RM 309,843
Buildings 665,639 43,134 - 708,773 3,605,006
Plant and machinery 6,010,033 528,425 - 6,538,458 36,522,280
Motor vehicles 721,967 24,942 (34,383) 712,526 71,928
Office equipment,
furniture and fittings 767,549 25,020 - 792,569 75,290
Capital work-in-progress - - - - 178,977
------------ ---------- ----------- ----------- ------------
Total RM 8,198,472 RM 623,585 RM (34,383) RM8,787,674 RM40,763,324
============ ========== =========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
-------------------------Cost------------------------------
Disposals/
Beginning Transfer/ End
30.6.1999 of year Additions Write off of year
-------------- ------------ ----------- ------------- ------------
<S> <C> <C> <C> <C>
Freehold land RM 265,979 RM - RM (265,979) RM -
Long-term leasehold land 345,191 - - 345,191
Buildings 4,553,634 8,720 (248,575) 4,313,779
Plant and machinery 40,854,801 2,115,493 - 42,970,294
Motor vehicles 890,837 - (72,000) 818,837
Office equipment
furniture fittings 781,540 75,343 - 856,883
Capital work-
Capital work-in-progress 76,016 2,040,497 (2,116,513) -
------------ ----------- ------------- ------------
Total RM47,767,998 RM4,240,053 RM(2,703,067) RM49,304,984
============ =========== ============= ============
</TABLE>
<PAGE> 15
<TABLE>
<CAPTION>
------------------Accumulated Depreciation---------------
Beginning Charge for End Net book
30.6.1999 of year the year Disposals of year value
-------------- ------------ ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Freehold land RM -- RM -- RM -- RM -- RM --
Long-term land 29,153 4,131 -- 33,284 311,907
Buildings 613,416 90,916 (38,693) 665,639 3,648,140
Plant and machinery 5,364,782 645,251 -- 6,010,033 36,960,261
Motor vehicles 717,078 54,089 (49,200) 721,967 96,870
Office equipment
furniture and fittings 729,243 38,306 -- 767,549 89,334
Capital work-
in-progress -- -- -- -- --
------------ ---------- ----------- ------------ ------------
Total RM 7,453,672 RM 832,693 RM (87,893) RM 8,198,472 RM41,106,512
============ ========== =========== ============ ============
</TABLE>
Current charges to plant and machinery include interest costs
capitalised of RM Nil (RM31,205 in 30th June, 1999).
<PAGE> 16
5. ASSOCIATED COMPANY
31.12.1999 30.6.1999
---------- ----------
Unquoted shares, at cost RM 837,902 RM 837,902
Less: Provision for diminution in value (837,901) (837,901)
---------- ----------
Net RM 1 RM 1
========== ==========
The directors of the Company have made a provision for diminution in the
carrying value of the associated company based on the net asset value of
the investee company and on the "prudence" concept.
Had the equity method of accounting been presented, the Company's share of
post-acquisition loss in associated company would have been RM Nil
(RM802,818 in 30th June, 1999).
<PAGE> 17
6. STOCKS
31.12.1999 30.6.1999
------------ ------------
Finished goods RM 5,149,699 RM 1,216,085
Work-in-progress 593,989 169,318
Raw materials 234,392 274,894
Consumables 1,335,955 1,405,498
------------ ------------
Total RM 7,314,035 RM 3,065,795
============ ============
7. HOLDING COMPANIES AND INTERCOMPANY TRANSACTIONS
31.12.1999 30.6.1999
------------ ------------
Amount owing to immediate
holding company RM 33,500 RM 33,500
Amount owing to intermediate
holding company 2,411 83,991
------------ ------------
Total RM 35,911 RM 117,491
============ ============
The Company is a 52.84% (52.84% at 30th June, 1999) owned subsidiary
of Megamin Ventures Sdn. Bhd.. The intermediate and ultimate holding
companies are Bonanza Venture Holdings Sdn. Bhd. and Kay Lim Holdings
Sdn. Bhd. respectively. All of these companies were incorporated
in Malaysia.
Significant intercompany transactions which were dealt with at
arm's length during the period are as follows:
31.12.1999 30.6.1999
------------ ------------
Related company:
Trade purchases RM 2,149,227 RM 2,987,993
Trade sales -- 594,886
============ ============
8. RELATED PARTY TRANSACTIONS
Included in other creditors and accrued expenses is an amount of
RM600 (RM600 at 30th June, 1999) owing to a company in which one of
the directors is also a director of the Company.
Significant related party transaction which was dealt with at arm's
length during the period comprise professional fee of RM1,200
(RM2,400 in 30th June, 1999).
<PAGE> 18
9. BANK BORROWINGS
31.12.1999 30.6.1999
------------ -----------
Secured:
Bank overdrafts RM 4,194,624 RM 5,643,405
Export credit refinancing 4,514,536 5,388,358
Current portion of term loan (Note 10) 1,400,000 87,707
Other short-term borrowings -- 4,000,000
------------ ------------
Total RM10,109,160 RM15,119,470
============ ============
The Company's bank overdraft and other short-term credit facilities
with two local banks up to a limit of RM23,900,000 (RM34,900,000 at
30th June, 1999) are secured by legal charges over the Company's
long-term leasehold land and debentures with fixed and floating
charges over all assets of the Company.
The above facilities bear interest rates ranging from 3.50% to 9.30%
(3.50% to 13.80% in 30th June, 1999) per annum.
10. LONG-TERM LIABILITIES
31.12.1999 30.6.1999
------------ ------------
Term loans - Principal outstanding RM 6,531,854 RM 1,419,561
Less: Current portion included
in bank borrowings under
current liabilities (Note 9) (1,400,000) (87,707)
------------ ------------
Long-term portion RM 5,131,854 RM 1,331,854
============ ============
The Company has two term loan facilities to the extent of RM6,000,000
and RM2,400,000 with a local bank mentioned in Note 9. The term
loans are secured on similar assets and guarantees as disclosed
therein and are repayable by 60 monthly instalments of RM100,000 and
48 monthly instalments of RM50,000 each commencing from October, 1999
and September, 2000 respectively. The term loans bear interest rates
ranging from 8.80% to 9.65% (9.25% to 14.10% in 30th June, 1999) per
annum.
The long-term portion of the term loan is repayable as follows:
31.12.1999 30.6.1999
------------ ------------
Within one to two years RM 1,800,000 RM 500,000
Within two to five years 3,331,854 831,854
------------ ------------
RM 5,131,854 RM 1,331,854
============ ============
<PAGE> 19
11. SHARE CAPITAL
31.12.1999 30.6.1999
------------ ------------
Ordinary shares of RM1 each:
Authorised RM60,000,000 RM60,000,000
============ ============
Issued and fully paid RM24,130,000 RM24,130,000
============ ============
12. UNAPPROPRIATED PROFIT
Subject to agreement with the Inland Revenue Board, as at 31st
December, 1999, the Company has a Section 108 tax credit of
approximately RM15,000 (RM15,000 at 30th June, 1999). The Company
also has a special tax-exempt account amounting to approximately
RM13,000 arising from the waiver of tax on chargeable income for Year
of Assessment 2000. Accordingly, the Company may distribute an
amount of approximately RM52,000 (RM52,000 at 30th June, 1999) out of
its unappropriated profit at 31st December, 1999 without incurring
additional tax liability. Any dividend declared and proposed out of
the aforesaid tax-exempt account will be tax-exempted in the hands of
the shareholders.
13. TURNOVER
Turnover represents sales of goods at gross invoiced value less
returns.
The cost of inventories recognised as an expense, applicable to
turnover, are as follows:
31.12.1999 30.6.1999
------------ ------------
Raw materials and consumables RM 5,595,495 RM 6,527,433
Net change in inventories of finished
goods and work-in-progress (4,358,285) 2,270,634
Labour costs 1,155,948 2,421,084
Depreciation and other
production overheads 3,123,362 4,057,675
------------ ------------
Total RM 5,516,520 RM15,276,826
============ ============
<PAGE> 20
14. PROFIT BEFORE TAXATION
Profit before taxation is arrived at:
31.12.1999 30.6.1999
------------ ------------
After charging:
Depreciation of fixed assets RM 623,585 RM 832,693
Interest on:
Other short-term borrowings 135,703 786,431
Bank overdrafts 208,361 763,106
Term loans 203,066 88,020
Directors' remuneration:
Fee -- 6,000
Other emoluments 191,520 409,318
Benefits-in-kind 7,830 16,021
Rental of premises and equipment 113,260 185,955
Audit fee:
Current -- 14,000
Special 8,000 --
Professional fees paid to a company in
which a director has an interest 1,200 2,400
Provision for doubtful debt -- 307,226
Provision for diminution in value of
investment -- 282,334
Fixed asset written off -- 80,154
============ ============
And crediting:
Gain on disposal of fixed assets RM 12,000 RM 711,493
Rental received 6,000 30,200
============ ============
15. PROVISION FOR TAXATION
31.12.1999 30.6.1999
----------- -----------
Real property gains tax RM -- RM 33,938
=========== ===========
Although the operations of the Company in the current and preceding
years resulted in profits, no provision for taxation has been made
due to the utilisation of brought forward unabsorbed capital
allowances to set-off in full the profits that would otherwise have
been subjected to tax. The tax benefits arising from such
utilisation is approximately RM374,000.
<PAGE> 21
Subject to approval from the Inland Revenue Board, at balance sheet
date, the Company has estimated unutilised tax losses and unabsorbed
capital allowances carried forward amounting to approximately
RM13,520,000 (RM13,520,000 at 30th June, 1999) and RM24,179,000
(RM25,513,000 at 30th June, 1999) respectively which can be carried
forward and utilised to set-off against future taxable profits.
As at 31st December, 1999, the amount of deferred taxation calculated
at current tax rate which is not recognised in the accounts are as
follows:
Deferred
Assets/(Liability)
31.12.1999 30.6.1999
------------ ------------
Tax effects of timing differences
in respect of:
Excess of capital allowances
over book depreciation RM(8,372,000) RM(8,182,000)
Unabsorbed capital allowances
and carry forward tax losses 10,556,000 10,929,000
------------ ------------
Net RM 2,184,000 RM 2,747,000
============ ============
16. CAPITAL COMMITMENTS
31.12.1999 30.6.1999
---------- ----------
Approved and contracted
but not provided for RM -- RM 21,000
========== ==========
17. CONTINGENT LIABILITY
As at 31st December, 1999, a former employee has filed a claim
against the Company for unlawful dismissal amounting to RM71,000.
The Company is repudiating the claim on grounds that the dismissal
was fair and just. The outcome of this case is presently not
determinable.
<PAGE> 22
MALAYSIAN TITANIUM CORPORATION SDN. BHD.
(Incorporated in Malaysia)
STATEMENT BY DIRECTORS
The directors of MALAYSIAN TITANIUM CORPORATION SDN. BHD. state that, in
their opinion, the accompanying balance sheet, profit and loss
account and cash flow statement, together with the notes thereto, are
drawn up in accordance with the provisions of the Companies Act, 1965 and
the applicable approved accounting standards so as to give a true and fair
view of the state of affairs of the Company at 31st December, 1999 and of
the results of its business and the cash flows of the period 1st July,
1999 to 31st December, 1999.
Signed in accordance with a resolution of the Directors,
____________________________________________
LEE HEE CHEW
_____________________________________________
TEOH LAY HOCK
Ipoh,
18th January, 2000
<PAGE> 23
<TABLE>
<CAPTION>
MALAYSIAN TITANIUM CORPORATION SDN BHD
BALANCE SHEET AT 31ST DECEMBER, 1999
Accounts Adjustments to Comply
Per Malaysian With US GAAP Accounts
Standards Debit Credit Per US GAAP
RM RM RM RM
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
FIXED ASSETS 40,763,324 40,763,324
ASSOCIATED COMPANY 1 837,901 802,818 35,084
DEFERRED TAX ASSETS
NON-CURRENT -- 2,746,846 1,108,227 1,638,619
CURRENT ASSETS
Stocks 7,314,035 7,314,035
Trade debtors 4,091,801 4,091,801
Other debtors, deposits
and prepayments 248,301 248,301
Amount owing by
associated company -- --
Amount owing by
related company -- --
Cash on hand and at banks 121,339 121,339
Deferred Tax Assets- Current 545,534 545,534
------------ ------------ ------------ ------------
11,775,476 545,534 0 12,321,010
</TABLE>
<PAGE> 24
<TABLE>
<CAPTION>
Accounts Adjustments to Comply
Per Malaysian With US GAAP Accounts
Standards Debit Credit Per US GAAP
RM RM RM RM
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CURRENT LIABILITIES
Trade creditors 1,792,032 1,792,032
Other creditors and
accrued expenses 1,618,543 1,618,543
Amount owing to
holding companies 35,911 35,911
Amount owing to
related companies 726,237 726,237
Bank borrowings 10,109,160 10,109,160
Provision for taxation 33,938 33,938
------------ ------------ ------------ ------------
14,315,821 14,315,821
------------ ------------ ------------ ------------
NET CURRENT LIABILITIES (2,540,345) 545,534 0 (1,994,811)
------------ ------------ ------------ ------------
38,222,980 4,130,281 1,911,045 40,442,216
LONG-TERM LIABILITY (5,131,854) (5,131,854)
------------ ------------ ------------ ------------
NET ASSETS EMPLOYED 33,091,126 4,130,281 1,911,045 35,310,362
============ ============ ============ ============
Represented by:
SHARE CAPITAL 24,130,000 24,130,000
UNAPPROPRIATED PROFIT 8,961,126 1,365,511 3,584,747 11,180,362
------------ ------------ ------------ ------------
TOTAL CAPITAL EMPLOYED 33,091,126 1,365,511 3,584,747 35,310,362
============ ============ ============ ============
</TABLE>
<PAGE> 25
<TABLE>
<CAPTION>
MALAYSIAN TITANIUM CORPORATION SDN BHD
PROFIT AND LOSS ACCOUNT FOR THE PERIOD 1ST JULY 1999 TO 31ST DECEMBER, 1999
Accounts Adjustments to Comply
Per Malaysian With US GAAP Accounts
Standards Debit Credit Per US GAAP
RM RM RM RM
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
TURNOVER 8,988,436 -- -- 8,988,436
================ ================ ================ ================
PROFIT BEFORE TAXATION 1,975,669 1,975,669
PROVISION FOR TAXATION -- 562,693 -- (562,693)
---------------- ---------------- ---------------- ----------------
NET PROFIT 1,975,669 562,693 -- 1,412,976
Unappropriated profit
at beginning of year 6,985,457 802,818 3,584,747 9,767,386
---------------- ---------------- ---------------- ----------------
UNAPPROPRIATED PROFIT
AT END OF YEAR 8,961,126 1,365,511 3,584,747 11,180,362
================ ================ ================ ================
</TABLE>
<PAGE> 26
MALAYSIAN TITANIUM CORPORATION SDN. BHD.
PERIOD 1ST JULY, 1999 TO 31ST DECEMBER, 1999
ADJUSTMENTS TO COMPLY WITH US GAAP
1 Provision for taxation -
Profit and loss Account 562,693
Deferred Tax Assets -
Balance Sheet 562,693
========= =========
(Being current period's movement
in deferred tax assets)
2 Deferred Tax Assets 2,746,846
Unappropriated profit
at beginning of year 2,746,846
========= =========
(Being adjustment to recognise
brought forward deferred
tax assets)
3 Deferred Tax Assets
Current Portion 545,534
Deferred Tax Assets
Non-Current Portion 545,534
========= =========
(Being reclassification of current
portion of deferred tax assets)
4 Unappropriated Profit Brought Forward 802,818
Associated Company 802,818
========= =========
(Being adjustment to recognise MTC's
share of post-acquisition loss in
Associated Company for years prior
to the period 1st July, 1999 to
31st December, 1999)
5 Associated Company 837,901
Unappropriated Profit Brought Forward 837,901
========= =========
(Being reversal of provision for
diminution in value of investment
in Associated Company)
<PAGE> 27
MALAYSIAN TITANIUM CORPORATION SDN. BHD.
(Company No: 014387-W)
(Incorporated in Malaysia)
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE, 1999
(In Ringgit Malaysia)
<PAGE> 28
MALAYSIAN TITANIUM CORPORATION SDN. BHD.
(Incorporated in Malaysia)
DIRECTORS' REPORT
The directors of MALAYSIAN TITANIUM CORPORATION SDN. BHD. have pleasure in
submitting their report and the audited accounts of the Company for the
financial year ended 30th June, 1999.
PRINCIPAL ACTIVITY
The Company is principally involved in the manufacturing of synthetic
rutile and its related products.
There has been no significant change in the nature of this activity during
the financial year.
RESULTS OF OPERATIONS
The results of operations of the Company for the financial year are as
follows:
Net profit RM3,306,207
Unappropriated profit at beginning of year 3,679,250
-----------
Unappropriated profit at end of year RM6,985,457
===========
In the opinion of the directors, the results of operations of the Company
during the financial year have not been substantially affected by any
item, transaction or event of a material and unusual nature.
DIVIDENDS
No dividend has been paid or declared by the Company since the end of the
previous financial year. The directors also do not recommend any dividend
payment in respect of the current financial year.
<PAGE> 29
RESERVES AND PROVISIONS
There were no material transfers to or from reserves or provisions during
the financial year other than those disclosed in the Accounts.
ISSUE OF SHARES AND DEBENTURES
The Company has not issued any new shares or debentures during the
financial year.
SHARE OPTIONS
No options have been granted by the Company to any parties during the
financial year to take up unissued shares of the Company.
No shares have been issued during the financial year by virtue of the
exercise of any 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 options.
OTHER FINANCIAL INFORMATION
Before the profit and loss account and balance sheet of the Company were
made out, the directors took reasonable steps:
(a) to ascertain that proper action had been taken in relation to the
writing off of bad debts and the making of provision for doubtful
debts, and have satisfied themselves that all known bad debts had
been written off and that adequate provision had been made for
doubtful debts; and
(b) to ensure that any current assets which were unlikely to realise
their book values in the ordinary course of business have been
written down to their estimated realisable values.
At the date of this report, the directors are not aware of any
circumstances:
(a) which would render the amount written off for bad debts or the
amount of the provision for doubtful debts in the accounts of the
Company inadequate to any substantial extent; or
(b) which would render the values attributed to current assets in the
accounts of the Company misleading; or
<PAGE> 30
(c) which have arisen which render adherence to the existing method of
valuation of assets or liabilities of the Company misleading
or inappropriate; or
(d) not otherwise dealt with in this report or accounts which would
render any amount stated in the accounts of the Company misleading.
At the date of this report, there does not exist:
(a) any charge on the assets of the Company which has arisen since the
end of the financial year which secures the liability of any other
person; and
(b) any contingent liability of the Company which has arisen since the
end of the financial year.
No contingent or other liability 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.
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 operations of the Company for the financial
year in which this report is made.
DIRECTORS
The following directors served on the Board of the Company since the date
of the last report:
Thomas Michael Mackey
Lim Chee Seng
Lee Hee Chew
Teoh Lay Hock
Dato' Dr. Abdullah Hasbi bin Haji Hassan
Ryan Hong
Ho Yean
<PAGE> 31
DIRECTORS' INTERESTS
The shareholdings in the Company of those who were directors at the end
of the financial year, as recorded in the Register of Directors'
Shareholdings kept by the Company under Section 134 of the Companies
Act, 1965, are as follows:
No. of Shares of RM1 each
-----------------------------------
Shares in the Company
Deemed interest
Thomas Michael Mackey 6,380,000
Lim Chee Seng 5,000,000
Ryan Hong 6,380,000
None of the other directors held shares or have any beneficial interest in
the shares of the Company during the financial year. Under the Company's
Articles of Association, the directors
are not required to hold shares in the Company.
There are no movement in the directors' shareholdings during the financial
year.
DIRECTORS' BENEFITS
Since the end of the previous financial year, none of the directors of
the Company have received or become entitled to receive any benefit
(other than those disclosed as directors' remuneration in the Accounts) 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.
During and at the end of the financial year, no arrangement subsisted to
which the Company was a party whereby directors of the Company might
acquire benefits by means of the acquisition of shares in, or debentures
of, the Company or any other body corporate.
HOLDING COMPANIES
The Company is a subsidiary of Megamin Ventures Sdn. Bhd.. The
intermediate and ultimate holding companies are Bonanza Venture Holdings
Sdn. Bhd. and Kay Lim Holdings Sdn. Bhd. respectively. All of these
companies were incorporated in Malaysia.
<PAGE> 32
AUDITORS
The auditors, Messrs. Deloitte Touche Tohmatsu, have indicated their
willingness to continue in office.
On behalf of the Board,
_____________________________________
LEE HEE CHEW
_____________________________________
TEOH LAY HOCK
Ipoh,
6th August, 1999
<PAGE> 33
REPORT OF THE AUDITORS TO THE MEMBERS OF
MALAYSIAN TITANIUM CORPORATION SDN. BHD.
(Incorporated in Malaysia)
We have audited the accompanying balance sheet as of 30th June, 1999, the
related profit and loss account and cash flow statement, together with the
notes thereto, for the year then ended. These accounts are the
responsibility of the Company's directors. Our responsibility is to
express an opinion on these accounts based on our audit.
We conducted our audit in accordance with approved standards on auditing
in Malaysia. These standards require that we plan and perform the audit
to obtain reasonable assurance about whether the accounts are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the accounts. An audit
also includes assessing the accounting principles used and significant
estimates made by the directors, as well as evaluating the overall
accounts presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion:
(a) the accounts are properly drawn up in accordance with the provisions
of the Companies Act, 1965 and the applicable approved accounting
standards in Malaysia so as to give a true and fair view of:
(i) the state of affairs of the Company as of 30th June, 1999 and
of the results and the cash flows of the Company for the year
ended on that date; and
(ii) the matters required by Section 169 of the Act to be dealt with
in the accounts; and
(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.
DELOITTE TOUCHE TOHMATSU
AF 0834
Public Accountants
GREGORY WONG GUANG SENG
787/3/01(J/PH)
Partner
6th August, 1999
<PAGE> 34
MALAYSIAN TITANIUM CORPORATION SDN. BHD.
(Incorporated in Malaysia)
BALANCE SHEET
AT 30TH JUNE, 1999
Note 1999 1998
---- ------------- -------------
FIXED ASSETS 4 RM 41,106,512 RM 40,314,326
ASSOCIATED COMPANY 5 1 282,335
CURRENT ASSETS
Stocks 6 3,065,795 5,159,902
Trade debtors 7 4,176,503 6,553,461
Other debtors, deposits
and prepayments 1,366,963 272,483
Amount owing by associated company 8 -- 418,776
Amount owing by a related company 9 44,590 --
Cash on hand and at banks 47,211 6,224
8,701,062 12,410,846
CURRENT LIABILITIES
Trade creditors 847,252 922,806
Other creditors and accrued expenses 7 1,242,113 2,570,260
Amount owing to holding companies 9 117,491 233,641
Amount owing to related companies 9 -- 40,255
Bank borrowings 10 15,119,470 21,343,588
Provision for taxation 33,938 --
17,360,264 25,110,550
NET CURRENT LIABILITIES (8,659,202) (12,699,704)
------------- -------------
32,447,311 27,896,957
LONG-TERM LIABILITY 11 (1,331,854) (87,707)
------------- -------------
NET ASSETS EMPLOYED RM 31,115,457 RM 27,809,250
============= =============
Represented by:
SHARE CAPITAL 12 RM 24,130,000 RM 24,130,000
UNAPPROPRIATED PROFIT 13 6,985,457 3,679,250
------------- -------------
TOTAL CAPITAL EMPLOYED RM 31,115,457 RM 27,809,250
============= =============
The accompanying Notes form an integral part of the Accounts.
<PAGE> 35
MALAYSIAN TITANIUM CORPORATION SDN. BHD.
(Incorporated in Malaysia)
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30TH JUNE, 1999
Note 1999 1998
---- ------------- -------------
TURNOVER 14 RM 22,030,064 RM 34,355,296
============= =============
PROFIT BEFORE TAXATION 15 RM 3,340,145 RM 3,550,012
PROVISION FOR TAXATION 16 (33,938) --
------------- -------------
NET PROFIT 3,306,207 3,550,012
Unappropriated profit at
beginning of year 3,679,250 129,238
------------- -------------
UNAPPROPRIATED PROFIT AT END
OF YEAR RM 6,985,457 RM 3,679,250
============= =============
The accompanying Notes form an integral part of the Accounts.
<PAGE> 36
MALAYSIAN TITANIUM CORPORATION SDN. BHD.
(Incorporated in Malaysia)
CASHFLOW STATEMENT
FOR THE YEAR ENDED 30TH JUNE, 1999
1999 1998
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before taxation RM 3,340,145 RM 3,550,012
Adjustments for:
Interest expense 1,637,557 2,238,812
Depreciation of fixed assets 832,693 1,311,232
Provision for doubtful debt 307,226 --
Provision for diminution
in value of investment 282,334 555,567
Fixed asset written off 80,154 --
Stocks written off 7,237 --
Gain on disposal of fixed assets (711,493) --
-------------- --------------
Operating Profit Before
Working Capital Changes 5,775,853 7,655,623
Decrease in stocks 2,086,870 2,990,222
Decrease/(Increase) in trade
and other receivables 2,339,438 (2,419,629)
Decrease in trade and other payables (1,560,106) (4,819,527)
-------------- --------------
Cash Generated From Operations 8,642,055 3,406,689
Interest paid (1,549,537) (2,062,667)
-------------- --------------
Net Cash From Operating Activities 7,092,518 1,344,022
CASH FLOWS FROM INVESTING ACTIVITIES
Deposits received from disposal
of property 110,000 --
Proceeds from disposal of
other fixed assets 30,000 2,448
Purchase of fixed assets (2,123,540) (845,704)
-------------- --------------
Net Cash Used In Investing Activities (1,983,540) (843,256)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from term loan 1,331,854 --
Repayment of term loan (988,020) (1,076,145)
Proceeds from issuance of shares -- 2,130,000
-------------- --------------
Net Cash From Financing Activities 343,834 1,053,855
-------------- --------------
<PAGE> 37
MALAYSIAN TITANIUM CORPORATION SDN. BHD.
(Incorporated in Malaysia)
CASHFLOW STATEMENT
FOR THE YEAR ENDED 30TH JUNE, 1999
1999 1998
-------------- --------------
NET INCREASE IN CASH
AND CASH EQUIVALENTS RM 5,452,812 RM 1,554,621
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR (20,437,364) (21,991,985)
-------------- --------------
CASH AND CASH EQUIVALENTS
AT END OF YEAR RM (14,984,552) RM (20,437,364)
============== ==============
CASH AND CASH EQUIVALENTS
Cash and cash equivalents included
in the cash flow statement
comprise the following
balance sheet amounts:
Cash on hand and at banks RM 47,211 RM 6,224
Bank overdrafts (5,643,405) (8,730,412)
Export credit refinancing (5,388,358) (7,713,176)
Other short-term borrowings (4,000,000) (4,000,000)
-------------- --------------
Cash and cash equivalents RM (14,984,552) RM (20,437,364)
============== ==============
The accompanying Notes form an integral part of the Accounts.
<PAGE> 38
MALAYSIAN TITANIUM CORPORATION SDN. BHD.
(Incorporated in Malaysia)
NOTES TO THE ACCOUNTS
1. PRINCIPAL ACTIVITY
The Company is principally involved in the manufacturing of synthetic
rutile and its related products.
There has been no significant change in the nature of this activity
during the financial year.
2. BASIS OF PREPARATION OF ACCOUNTS
The accounts of the Company have been prepared in accordance with the
provisions of the Companies Act, 1965 and the applicable approved
accounting standards of the Malaysian Accounting Standards Board.
3. SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The accounts of the Company have been prepared under the historical
cost convention.
Depreciation of Fixed Assets
Fixed assets are stated at cost less accumulated depreciation.
Freehold land and capital work-in-progress are not depreciated while
long-term leasehold land is amortised evenly over the period of the
lease. Plant and machinery is depreciated based on units of
production over the plant's normal capacity for an estimated life of
15 years.
Depreciation of other fixed assets is computed using the straight-
line method at the following annual rates based on the estimated
useful lives of the various assets:
Buildings 2%
Motor vehicles 20%
Office equipment, furniture and fittings 15 - 20%
<PAGE> 39
Associated Company
An associated company is a company in which the Company has a long-
term equity investment of 20% to 50% and where the Company is in a
position to exercise significant influence through management
participation.
The Company has an equity interest of 40% (40% in 1998) in an
associated company, Fluid Minerals Espanola (FME) (a company
incorporated in Spain), whose principal activity is manufacturing and
sales of hitox pigment.
Investment in associated company is stated at cost unless, in the
opinion of the directors, there is a permanent diminution in the
value of investment in which case provision is made for the
diminution in value.
Stocks
Stocks are stated at the lower of cost and net realisable value.
Cost is determined on the "weighted average" method.
Cost of raw materials, consumables and trading goods comprise the
original purchase price plus cost of bringing these stocks to
location. Cost of finished goods and work-in-progress include the
cost of raw materials and an appropriate allocation of labour cost
and manufacturing overheads.
Capitalisation of Borrowing Cost
Borrowing costs incurred on the acquisition and construction of fixed
assets which require a substantial period of time to get them ready
for their intended use are capitalised and included as part of cost
of the related assets.
Deferred Taxation
Provision is made using the liability method for taxation deferred
by capital allowances and other timing differences except to the
extent that it can be demonstrated with reasonable probability that
the timing differences will continue in the foreseeable future.
Timing differences giving rise to deferred tax benefits are not
recognised.
Foreign Currency Conversion
All foreign currency transactions are converted into Ringgit Malaysia
at the exchange rates prevailing at the transaction dates or,
where settlement has not yet taken place at the end of the financial
year, at the approximate exchange rates prevailing on that date.
All exchange gains or losses are taken up in the profit and loss
account.
<PAGE> 40
Cash Equivalents
Cash equivalents are short-term, highly liquid investments that are
readily convertible to known amounts of cash and which are subject to
an insignificant risk of changes in value.
<PAGE> 41
4. FIXED ASSETS
<TABLE>
<CAPTION>
----------------------------- Cost --------------------------
Disposals/
Beginning Transfer/
1999 of year Additions Write off End of year
------ ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Freehold land RM 265,979 RM -- RM (265,979) RM --
Long-term leasehold land 345,191 -- -- 345,191
Buildings 4,553,634 8,720 (248,575) 4,313,779
Plant and machinery 40,854,801 2,115,493 -- 42,970,294
Motor vehicles 890,837 -- (72,000) 818,837
Office equipment
furniture and fittings 781,540 75,343 -- 856,883
Capital work-in-progress 76,016 2,040,497 (2,116,513) --
------------- ----------- ------------- -------------
Total RM 47,767,998 RM4,240,053 RM(2,703,067) RM 49,304,984
============= =========== ============= =============
<TABLE/>
<PAGE> 42
</TABLE>
<TABLE>
<CAPTION>
--------------- Accumulated Depreciation ------------
Charge
Beginning for Disposals/ End Net book
1999 of year the year Write off of year value
------ ----------- --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Freehold land RM -- RM -- RM -- RM -- RM --
Long-term leasehold land 29,153 4,131 -- 33,284 311,907
Buildings 613,416 90,916 (38,693) 665,639 3,648,140
Plant and machinery 5,364,782 645,251 -- 6,010,033 36,960,261
Motor vehicles 717,078 54,089 (49,200) 721,967 96,870
Office equipment
furniture and fittings 729,243 38,306 -- 767,549 89,334
Capital work-in-progress -- -- -- -- --
----------- --------- ---------- ----------- ------------
Total RM7,453,672 RM832,693 RM (87,893) RM8,198,472 RM41,106,512
=========== ========= ========== =========== ============
<TABLE/>
<PAGE> 43
</TABLE>
<TABLE>
<CAPTION>
------------------------ Cost -------------------------------
Beginning Disposals/ End
1998 of year Additions Transfer of year
------ ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Freehold land RM 265,979 RM -- RM -- RM 265,979
Long-term leasehold land 345,191 -- -- 345,191
Buildings 4,553,634 -- -- 4,553,634
Plant and
Plant and Machinery 39,640,217 1,214,584 -- 40,854,801
Motor vehicles 837,837 53,000 -- 890,837
Office equipment
furniture and fittings 762,033 23,327 (3,820) 781,540
Capital work-in-progress 521,223 759,476 (1,204,683) 76,016
------------ ----------- ------------- ------------
Total RM46,926,114 RM2,050,387 RM(1,208,503) RM47,767,998
============ =========== ============= ============
<TABLE/>
<PAGE> 43
</TABLE>
<TABLE>
<CAPTION>
--------------- Accumulated Depreciation --------------
Charge
Beginning for End Net book
1998 of year the year Disposals of year value
------ ------------ --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Freehold land RM -- RM -- RM -- RM -- RM 265,979
Long-term leasehold land 25,022 4,131 -- 29,153 316,038
Buildings 522,343 91,073 -- 613,416 3,940,218
Plant and machinery 4,241,031 1,123,751 -- 5,364,782 35,490,019
Motor vehicles 656,306 60,772 -- 717,078 173,759
Office equipment
furniture and fittings 699,110 31,505 (1,372) 729,243 52,297
Capital work-in-progress -- -- -- -- 76,016
----------- ----------- --------- ----------- ------------
Total RM6,143,812 RM1,311,232 RM(1,372) RM7,453,672 RM40,314,326
=========== =========== ========= =========== ============
<TABLE/>
Current charges to plant and machinery include interest
costs capitalised of RM31,205 (RM Nil in 1998).
<PAGE> 44
5. ASSOCIATED COMPANY
1999 1998
----------- -----------
Unquoted shares, at cost RM 837,902 RM 837,902
Less: Provision for diminution in value (837,901) (555,567)
Net RM 1 RM 282,335
=========== ===========
The directors of the Company have made a provision for diminution in
the carrying value of the associated company based on the net asset
value of the investee company and on the "prudence" concept.
Had the equity method of accounting been presented, the Company's
share of post-acquisition loss in associated company would have been
RM802,818 (RM380,376 in 1998).
<PAGE> 45
6. STOCKS
1999 1998
------------- -------------
Finished goods RM 1,216,085 RM 3,096,631
Work-in-progress 169,318 386,378
Raw materials 274,894 79,242
Consumables 1,405,498 1,597,651
------------- -------------
Total RM 3,065,795 RM 5,159,902
============ ============
7. RELATED PARTY TRANSACTIONS
Included in the following current assets and liabilities are amounts
owing by and to certain companies in which one of the directors is
also a director of the Company:
1999 1998
------------ ------------
Trade debtors RM -- RM 6,463,289
Other creditors and accrued expenses 600 848
============ ============
The above balances arose mainly out of normal trade transactions and
payments on behalf.
Significant related party transactions which were dealt with at arm's
length during the year comprise of professional fees paid amounting
to RM2,400 (RM2,400 in 1998).
8. AMOUNT OWING BY ASSOCIATED COMPANY
1999 1998
------------ ------------
Gross RM 307,226 RM 418,776
Less: Provision for doubtful debt (307,226) --
------------ ------------
Net RM -- RM 418,776
============ ============
Transactions with the associated company during the financial year
include trade sales amounting to RM34,196 (RM304,250 in 1998).
<PAGE> 46
9. HOLDING COMPANIES AND INTERCOMPANY TRANSACTIONS
1999 1998
------------ ------------
Amount owing to immediate
holding company RM 33,500 RM 33,500
Amount owing to intermediate
holding company 83,991 200,141
------------ ------------
Total RM 117,491 RM 233,641
============ ============
The Company is a 52.84% (52.84% in 1998) owned subsidiary of Megamin
Ventures Sdn. Bhd.. The intermediate and ultimate holding companies
are Bonanza Venture Holdings Sdn. Bhd. and Kay Lim Holdings Sdn. Bhd.
respectively. All of these companies were incorporated in
Malaysia.
Significant intercompany transactions which were dealt with at
arm's length during the year are as follows:
1999 1998
------------ ------------
Related company
Trade purchases RM 2,987,993 RM 6,195,203
Trade sales 594,886 211,050
Sales of fixed assets -- 2,448
============ ============
Intermediate holding company
Management fees RM -- RM 6,250
============ ============
Immediate holding company
Interest on advances RM -- RM 4,609
============ ============
10. BANK BORROWINGS
1999 1998
------------- -------------
Secured:
Bank overdrafts RM 5,643,405 RM 8,730,412
Export credit refinancing 5,388,358 7,713,176
Current portion of term loan 87,707 900,000
(Note 11)
Other short-term borrowings 4,000,000 4,000,000
------------- -------------
Total RM 15,119,470 RM 21,343,588
============= =============
<PAGE> 47
The Company's bank overdraft and other short-term credit facilities
with two local banks up to a limit of RM34,900,000 (RM34,900,000 in
1998) are secured by legal charges over the Company's long-term
leasehold land and debentures with fixed and floating charges over
all assets of the Company.
The above facilities bear interest rates ranging from 3.50% to 13.80%
(7.70% to 14.30% in 1998) per annum.
11. LONG-TERM LIABILITY
1999 1998
------------- -------------
Term loans - Principal outstanding RM 1,419,561 RM 987,707
Less: Current portion included in
bank borrowings under
current liabilities (Note 10) (87,707) (900,000)
------------- -------------
Long-term portion RM 1,331,854 RM 87,707
============= =============
The Company has two term loan facilities to the extent of RM6,300,000 and
RM2,400,000 with the two local banks mentioned in Note 10. The term loans
are secured on similar assets and guarantees as disclosed therein and are
repayable by 28 quarterly instalments of RM225,000 and 48 monthly
instalments of RM50,000 each commencing from April, 1993 and September,
2000 respectively. The term loans bear interest rates ranging from 9.25%
to 14.10% (11.30% to 14.30% in 1998) per annum.
12. SHARE CAPITAL
1999 1998
------------- -------------
Ordinary shares of RM1 each:
Authorised RM 60,000,000 RM 60,000,000
============= =============
Issued and fully paid
Balance at beginning of year RM 24,130,000 RM 22,000,000
Add: Rights issue= -- 2,130,000
------------- -------------
Balance at end of year RM 24,130,000 RM 24,130,000
============= =============
<PAGE> 48
13. UNAPPROPRIATED PROFIT
Subject to agreement with the Inland Revenue Board, as at 30th June,
1999, the Company has a Section 108 tax credit of approximately
RM15,000 (RM15,000 in 1998). The Company also has a special tax-
exempt account arising from the waiver of chargeable income for the
basis period ended 1999 of approximately RM13,000. Accordingly, the
Company may distribute an amount of approximately RM52,000 (RM39,000
in 1998) out of its unappropriated profit at 30th June, 1999 without
incurring additional tax liability. Any dividend declared and
proposed out of the aforesaid tax-exempt account will be tax-exempted
in the hands of the shareholders.
14. TURNOVER
Turnover represents sales of goods at gross invoiced value less
returns.
The cost of inventories recognised as an expense, applicable to
turnover, are as follows:
1999 1998
------------- -------------
Raw materials and consumables RM 6,527,433 RM 12,778,935
Net change in inventories of
finished
goods and work-in-progress 2,270,634 3,204,159
Labour costs 2,421,084 2,792,591
Depreciation and other
production overheads 4,057,675 6,636,070
------------- -------------
Total RM 15,276,826 RM 25,411,755
============= =============
<PAGE> 49
15. PROFIT BEFORE TAXATION
Profit before taxation is arrived at:
1999 1998
After charging:
Depreciation of fixed assets RM 832,693 RM 1,343,347
Interest on:
Other short-term borrowings 786,431 1,119,708
Bank overdrafts 763,106 938,350
Term loans 88,020 176,145
Advances from holding company -- 4,609
Directors' remuneration:
Fee 6,000 15,000
Other emoluments 409,318 344,052
Benefits-in-kind 16,021 9,652
Provision for doubtful debt 307,226 --
Provision for diminution
in value of investment 282,334 555,567
Rental of premises and equipment 185,955 221,346
Fixed asset written off 80,154 --
Audit fee 14,000 14,000
Professional fees paid
to a company in which a
director has an interest 2,400 2,400
=========== ===========
And crediting:
Gain on disposal of fixed assets RM 711,493 RM --
Rental received 30,200 --
=========== ===========
16. PROVISION FOR TAXATION
1999 1998
----------- -----------
Real property gains tax RM 33,938 RM --
=========== ===========
Although the operations of the Company in the current and preceding
years resulted in profits, no provision for taxation has been made
due to the utilisation of brought forward unabsorbed capital
allowances to set-off in full the profits that would otherwise have
been subjected to tax. The tax benefits arising from such
utilisation is approximately RM1,093,000 (RM1,547,000 in 1998).
No provision for taxation has been made in the accounts in respect of
rental income because in accordance with the 1999 budget, tax on
rental income earned in the year of assessment 2000 will be waived.
<PAGE> 50
Subject to approval from the Inland Revenue Board, at balance sheet
date, the Company has estimated unutilised tax losses and unabsorbed
capital allowances carried forward amounting to approximately
RM13,520,000 (RM13,520,000 in 1998) and RM25,513,000 (RM21,528,000 in
1998) respectively which can be carried forward and utilised to set-
off against future taxable profits.
As at 30th June, 1999, the amount of deferred taxation calculated at
current tax rate which is not recognised in the accounts are as
follows:
Deferred Assets/(Liability)
1999 1998
------------- -------------
Tax effects of timing differences
in respect of:
Excess of capital allowances
over book depreciation RM(8,182,000) RM(6,278,000)
Unabsorbed capital allowances
and carry forward tax losses 10,929,000 9,813,000
------------- -------------
Net RM 2,747,000 RM 3,535,000
============= =============
17. CAPITAL COMMITMENTS
1999 1998
---------- ----------
Approved and contracted
but not provided for RM 21,000 RM --
========== ==========
18. CONTINGENT LIABILITY
As at 30th June, 1999, a former employee has filed a claim against
the Company for unlawful dismissal amounting to RM71,000. The
Company is repudiating the claim on grounds that the dismissal was
fair and just. The outcome of this case is presently not
determinable.
19. COMPARATIVE FIGURES
Certain comparative figures in the accounts have been reclassified to
conform with current year's presentation.
<PAGE> 51
MALAYSIAN TITANIUM CORPORATION SDN. BHD.
(Incorporated in Malaysia)
STATEMENT BY DIRECTORS
The directors of MALAYSIAN TITANIUM CORPORATION SDN. BHD. state that, in
their opinion, the accompanying balance sheet, profit and loss account and
cash flow statement, together with the notes thereto, are drawn up in
accordance with the provisions of the Companies Act, 1965 and the
applicable approved accounting standards so as to give a true and fair
view of the state of affairs of the Company at 30th June, 1999 and of the
results of its business and the cash flows for the year ended on that
date.
Signed in accordance with a resolution of the Directors,
____________________________________________
LEE HEE CHEW
____________________________________________
TEOH LAY HOCK
Ipoh,
6th August, 1999
DECLARATION BY THE DIRECTOR PRIMARILY RESPONSIBLE FOR
THE FINANCIAL MANAGEMENT OF THE COMPANY
I, LEE HEE CHEW, the director primarily responsible for the financial
management of MALAYSIAN TITANIUM CORPORATION SDN. BHD., do solemnly and
sincerely declare that the accompanying balance sheet, profit and loss
account and cash flow statement, together with the notes thereto, are, in
my opinion, correct and I make this solemn declaration conscientiously
believing the same to be true, and by virtue of the provisions of the
Statutory Declarations Act, l960.
Subscribed and solemnly declared by the above named LEE HEE
CHEW at IPOH in the State of PERAK DARUL RIDZUAN this
_____day of ______, 1999
____________________________________________
Before me,
____________________________________________
COMMISSIONER FOR OATHS
<PAGE> 52
</TABLE>
<TABLE>
<CAPTION>
MALAYSIAN TITANIUM CORPORATION SDN BHD
BALANCE SHEET AT 30TH JUNE, 1999
Accounts Adjustments to Comply
Per Malaysian With US GAAP Accounts
Standards Debit Credit Per US GAAP
RM RM RM RM
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
FIXED ASSETS 41,106,512 41,106,512
ASSOCIATED COMPANY 1 837,901 802,818 35,084
DEFERRED TAX ASSETS 3,535,714 1,593,855 1,941,859
CURRENT ASSETS
Stocks 3,065,795 3,065,795
Trade debtors 4,176,503 4,176,503
Other debtors, deposits
and prepayments 1,366,963 1,366,963
Amount owing by
associated company -- --
Amount owing by
related company 44,590 44,590
Cash on hand and at banks 47,211 47,211
Deferred Tax Assets 804,987 804,987
------------ ------------ ------------ ------------
8,701,062 804,987 0 9,506,049
============ ============ ============ ============
</TABLE>
<PAGE> 53
<TABLE>
<CAPTION>
Accounts Adjustments to Comply
Per Malaysian With US GAAP Accounts
Standards Debit Credit Per US GAAP
RM RM RM RM
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CURRENT LIABILITIES
Trade creditors 847,252 847,252
Other creditors and
accrued expenses 1,242,113 1,242,113
Amount owing to
holding companies 117,491 117,491
Amount owing to
related companies -- --
Bank borrowings 15,119,470 15,119,470
Provision for taxation 33,938 33,938
------------ ------------ ------------ ------------
17,360,264 0 0 17,360,264
------------ ------------ ------------ ------------
NET CURRENT LIABILITIES (8,659,202) 804,987 0 (7,854,215)
------------ ------------ ------------ ------------
32,447,311 5,178,602 2,396,673 35,229,240
LONG-TERM LIABILITY (1,331,854) (1,331,854)
------------ ------------ ------------ ------------
NET ASSETS EMPLOYED 31,115,457 5,178,602 2,396,673 33,897,386
============ ============ ============ ============
Represented by:
SHARE CAPITAL 24,130,000 24,130,000
UNAPPROPRIATED PROFIT 6,985,457 1,591,686 4,373,615 9,767,386
------------ ------------ ------------ ------------
TOTAL CAPITAL EMPLOYED 31,115,457 1,591,686 4,373,615 33,897,386
============ ============ ============ ============
</TABLE>
<PAGE> 54
<TABLE>
<CAPTION>
MALAYSIAN TITANIUM CORPORATION SDN BHD
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30TH JUNE, 1999
Accounts Adjustments to Comply
Per Malaysian With US GAAP Accounts
Standards Debit Credit Per US GAAP
RM RM RM RM
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
TURNOVER 22,030,064 -- -- 22,030,064
================ ================ ================ ================
PROFIT BEFORE TAXATION 3,340,145 422,442 282,334 3,200,037
PROVISION FOR TAXATION (33,938) 788,868 (822,806)
---------------- ---------------- ---------------- ----------------
NET PROFIT 3,306,207 1,211,310 282,334 2,377,231
Unappropriated profit
at beginning of year 3,679,250 380,376 4,091,281 7,390,155
---------------- ---------------- ---------------- ----------------
UNAPPROPRIATED PROFIT
AT END OF YEAR 6,985,457 1,591,686 4,373,615 9,767,386
================ ================ ================ ================
</TABLE>
<PAGE> 55
MALAYSIAN TITANIUM CORPORATION SDN. BHD.
YEAR ENDED 30TH JUNE, 1999
ADJUSTMENTS TO COMPLY WITH US GAAP
1 Provision for taxation - P&L 788,868
Deferred Tax Assets- B/S 788,868
========= =========
(Being current year's movement
in deferred tax assets)
2 Deferred Tax Assets 3,535,714
Unappropriated profit
at beginning of year 3,535,714
========= =========
(Being adjustment to recognise
brought forward deferred assets)
3 Deferred Tax Assets
Current Portion 804,987
Deferred Tax Assets
Non-Current Portion 804,987
========= =========
(Being reclassification of current
portion of defered tax assets)
4 Unappropriated Profit Brought Forward 380,376
Associated Company 380,376
========= =========
(Being adjustment to recognise MTC's
share of post-acquisition loss in
Associated Company for years prior
to 1999)
5 Associated Company 837,901
Unappropriated Profit Brought Forward 555,567
Profit Before Taxation 282,334
========= =========
(Being reversal of provision for
diminution in value of investment
in Associated Company)
6 Share of results in
Associated Company-P&L 422,442
Associated Company-B/S 422,442
========= =========
(Being adjustment to equity
account for the results of the
Associated Company in 1999)
<PAGE> 56
MALAYSIAN TITANIUM CORPORATION SDN. BHD.
(Company No: 014387-W)
(Incorporated in Malaysia)
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE, 1998
(In Ringgit Malaysia)
<PAGE> 57
MALAYSIAN TITANIUM CORPORATION SDN. BHD.
(Incorporated in Malaysia)
DIRECTORS' REPORT
The directors of MALAYSIAN TITANIUM CORPORATION SDN. BHD. have
pleasure in submitting their report and the audited accounts of the
Company for the financial year ended 30th June, 1998.
PRINCIPAL ACTIVITY
The Company is principally involved in the manufacturing of synthetic
rutile.
There has been no significant change in the nature of this activity
during the financial year.
RESULTS OF OPERATIONS
The results Of operations of the Company for the financial year are as
follows:
Net profit RM3,550,012
Unappropriated profit at beginning of year 129,238
-----------
Unappropriated profit at end of year RM3,679,250
===========
In the opinion of the directors, the results of operations of the
Company during the financial year have not been substantially affected
by any item, transaction or event of a material and unusual nature.
DIVIDENDS
No dividend has been paid or declared by the Company since the end of
the previous financial year. The directors also do not recommend any
dividend payment in respect of the current financial year.
RESERVES AND PROVISIONS
There were no material transfers to or from reserves or provisions
during the financial year other than those disclosed in the Accounts.
<PAGE> 58
ISSUE OF SHARES AND DEBENTURES
At an Extraordinary General Meeting held on 23rd June, 1997, the
shareholders approved a rights issue of 3,000,000 new ordinary shares
of RMI each at par on the basis of three (3) new ordinary shares for
every twenty-two (22) existing shares held. However, as at the date of
the report, 2,130,000 new ordinary shares of RMI each has been
subscribed. These new shares rank pari passu with the then existing
shares of the Company.
The Company has not issued any debentures during the financial year.
SHARE OPTIONS
No options have been granted by the Company to any parties during the
financial year to take up unissued shares of the Company.
No shares have been issued during the financial year by virtue of the
exercise of any 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 options.
OTHER FINANCIAL INFORMATION
Before the profit and loss account and balance sheet of the Company
were made out, the directors took reasonable steps:
(a) to ascertain that proper action had been taken in relation to the
writing off of bad debtsand the making of provision for doubtful
debts, and have satisfied themselves that all known bad debts had
been written off and that adequate provision had been made
fordoubtful debts; and
(b) to ensure that any current assets which were unlikely to realise
their book values in the ordinary course of business have been
written down to their estimated realisable values.
At the date of this report, the directors are not aware of any
circumstances:
(a) which would render the amount written off for bad debts or the
amount of the provision for doubtful debts in the accounts of the
Company inadequate to any substantial extent; or
(b) which would render the values attributed to current assets in the
accounts of the Company misleading; or
<PAGE> 59
(c) which have arisen which render adherence to the existing method
of valuation of assets or liabilities of the Company misleading
or inappropriate; or
(d) not otherwise dealt with in this report or accounts which would
render any amount stated in the accounts of the Company
misleading.
At the date of this report, there does not exist:
(a) any charge on the assets of the Company which has arisen since
the end of the financial year which secures the liability of any
other person; and
(b) any contingent liability of the Company which has arisen since
the end of the financial year.
No contingent or other liability 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.
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 operations of the Company for the
financial year in which this report is made.
DIRECTORS
The following directors served on the Board of the Company since the
date of the last report:
Dato'Lim Keng Kay (Resigned on 8.10.1998)
Thomas Michael Mackey
Lim Chee Seng
Lee Hee Chew
Teoh Lay Hock (Appointed on 6.4.1998)
Dato' Dr. Abdullah Hasbi bin Haji Hassan (Appointed on 6.4.1998)
Ryan Hong (Appointed on 28.7.1998)
Ho Yean (alternate to Dato' Lim Keng Kay; appointed on 6.4.1998)
Hong Slew Sing @ Johnny Fong (Deceased on 19.12.1997)
Yei Hong Chang (Resigned on 15.1.1998)
Tan Sri Dato'Abdullah Bin Ayub (Resigned on 17.3.1998)
Tan Hock Beng (alternate to Lim Chee Seng; resigned on 30.9.1997)
Teoh Lay Hock (alternate to Dato' Lim Keng Kay; resigned on 6.4.1998)
<PAGE> 60
DIRECTORS' INTERESTS
The shareholdings in the Company and in related companies of those who
were directors at the end of the financial year, as recorded in the
Register of Directors' Shareholdings kept by the Company under Section
134, are as follows:
No. of Shares of RM I each
Balance at Balance at
1.7.1997 Bought Sold 30.6.1998
----------- ---------- ----- -----------
Shares in the Company
Deemed interest
Dato'Lim Keng Kay 11,200,000 1,530,000 -- 12,750,000
Lim Chee Seng 4,400,000 600,000 -- 5,000,000
Shares in ultimate holding
Company
Kay Lim Holdings Sdn. Bhd.
Registered in name of
a director
Dato' Lim Keng Kay 2,280,000 -- -- 2,280,000
Deemed interest
Dato' Lim Keng Kay 720,000 -- -- 720,000
None of the other directors have any other interest in the shares of
the Company or its related companies during the financial year.
In addition, by virtue of Dato' Lim Keng Kay having an interest of
more than 15% of the shares in the ultimate holding company, he is
deemed to have an interest in the shares of the immediate holding
company and its related companies to the extent of the ultimate
holding company's shareholdings held therein.
DIRECTORS' BENEFITS
Since the end of the previous financial year, none of the directors of
the Company have received or become entitled to receive any benefit
(other than those disclosed as directors' remuneration in the
Accounts) 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 fin~ncial interest
except for any benefit which may be deemed to have allsen by virtue of
the following:
<PAGE> 61
(a) sale and purchase of goods in the ordinary course of business to
a company in which Dato' Lim Keng Kay has an interest; and
(b) provision of professional services to the Company by a company in
which Dato' Lim Keng Kay has substantial interest.
During and at the end of the financial year, no arrangement subsisted
to which the Company was a party whereby directors of the Company
might acquire benefits by means of the acquisition of shares in, or
debentures of, the Company or any other body corporate.
HOLDING COMPANIES
The Company is a subsidiary of Megamin Ventures Sdn. Bhd. The
intermediate and ultimate holding companies are Bonanza Venture
Holdings Scln. Bhd. and Kay, Lim Holdings Sdn, Bhd. respectively. All
of these companies were incorporated in Malaysia.
AUDITORS
The auditors. Messrs. Deloitte Touche Tohmatsu, have indicated their
'Aillineness to continue III office.
On behalf of the Board
LEE HEE CHEW
- ------------
Lee Hee Chew
TEOH LAY HOCK
- -------------
Teoh Lay Hock
Ipoh.
28 OCT 1998
<PAGE> 62
Deloitte Touche Tohmatsu
Public Accountants
Company No: 014387-W
REPORT OF THE AUDITORS TO THE MEMBERS OF
MALAYSIAN TITANIUM CORPORATION SDN. BHD.
(incorporated in Malaysia)
We have audited the accompanying balance sheet, profit and loss
account and cash flow statement. together with the notes thereto, in
accordance with approved auditing standards,
In our opinion'.
(a) the abovementioned accounts are properly drawn up in accordance
with the provisions of the Companies Act, 1965 and the applicable
approved accounting standards so as to give a true and fair view
of
(i) the state of affairs of the Company at 30th June, 1998 and
of the results and the cash flows of the Company for the
year ended on that date: and
(ii) the matters required by Section 169 of the Act to be dealt
with in the accounts, a n d
(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,
DELOITTE TOUCHE TOHMATSU
AF 0834
Public Accountants
GREGORY WONG GUANG SENG
7871/3/9 VPH)
Partner
28TH October, 1998
<PAGE> 631
MALAYSIAN TITANIUM CORPORATION SDN. BHD.
(Incorporated in Malaysia)
BALANCESHEET
AT 30TH JUNE, 1998
Notes 1998 1997
----- ------------ ------------
FIXED ASSETS 4 RM40,314,326 RM40,782,302
ASSOCIATED COMPANY 5 282,335 837,902
CURRENT ASSETS
Stocks 6 5,159,902 8,150,124
Trade debtors 7 6,553,461 3,842,680
Other debtors, deposits
and prepayments 7 & 8 272,483 746,462
Amount owing by associated company 418,776 235,949
Cash on hand and at banks 6,224 11,362
------------ ------------
12,410,846 12,986,577
------------ ------------
CURRENT LIABILITIES
Trade creditors 922,806 1,735,317
Other creditors and
accrued expenses 7 2,570,260 4,114,523
Amount owing to holding companies 9 233,641 1,252,833
Amount owing to related companies 9 40,255 1,483,816
Bank borrowings 10 21,343,588 22,903,347
------------ ------------
25,110,550 31,489,836
------------ ------------
NET CURRENT LIABILITIES (12,699,704) (18,503,259)
------------ ------------
27,896,957 23,116,945
LONG-TERM LIABILITY 11 (87,707) (987,707)
------------ ------------
NET ASSETS EMPLOYED RM27,809,250 RM22,129,238
============ ============
Represented by.
SHARE CAPITAL 12 RM24,130,000 RM22,000,000
UNAPPROPRIATED PROFIT 13 3,679,250 129,238
------------ ------------
TOTAL CAPITAL EMPLOYED RM27,809,250 RM22,129,238
============ ============
The accompanying Notes form an integral part of the Accounts.
<PAGE> 64
MALAYSIAN TITANIUM CORPORATION SDN. BHD.
(Incorporated in Malaysia)
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30TH JUNE, 1998
Note Note 1998 1997
------------ ------------
TURNOVER 14 RM34,355,296 RM29,152,235
============ ============
PROFIT BEFORE TAXATION 15 RM 3,550,012 RM231,916
PROVISION FOR TAXATION 16 -- 58,784
------------ ------------
NET PROFIT 3,550,012 290,700
Unappropriated profit/(Accumulated
loss)at beginning of year 129,238 (161,462)
------------ ------------
UNAPPROPRIATED PROFIT AT END
OF YEAR RM 3,679,250 RM129,238
============ ============
The accompanying Notes form an integral part of the Accounts.
<PAGE> 65
MALAYSIAN TITANIUM CORPORATION SDN. BHD.
(Incorporated in Malaysia)
CASHFLOW STATEMENT
FOR THE YEAR ENDED 30TH JUNE, 1998
1998 1997
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before taxation RM 3,550,012 RM 231,916
Adjustments for:
Interest expense 2,238,812 2,168,927
Depreciation of fixed assets 1,311,232 1,549,571
Provision for diminution in
value of investment 555,567 --
Gain on disposal of fixed assets -- (13,267)
------------ ------------
Operating Profit Before
Working Capital Changes 7,655,623 3,937,147
Decrease in stocks 2,990,222 148,700
Decrease/(Increase) in trade
and other receivables (2,419,629) 4,686,271
Increase/(Decrease) in trade
and other payables (4,819,527) 3,948,036
------------ ------------
Cash Generated From Operations 3,406,689 12,720,154
Tax refund -- 58,784
Interest paid (2,062,667) (1,910,804)
------------ ------------
Net Cash From Operating Activities 1,344,022 10,868,134
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of fixed assets 2,448 50,000
Purchase of investment in
associated company -- (837,902)
Purchase of fixed assets (845,704) (6,204,815)
------------ ------------
Net Cash Used In Investing Activities (843,256) (6,992,717)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of shares 2,130,000 253,493
Repayment of term loan (900,000) (900,000)
Repayment of interest on term loan (176,145) (258,123)
------------ ------------
Net Cash From/(Used In)
Financing Activities 1,053,855 (904,630)
------------ ------------
(Forward)
<PAGE> 66
1998 1997
-------------- --------------
NET INCREASE IN CASH AND
CASH EQUIVALENTS RM 1,554,621 RM 2,970,787
CASH A.ND CASH EQUIVALENTS AT
BEGINNING OF YEAR (21,991,985) (24,962,772)
-------------- --------------
CASH AND CASH EQUIVALENTS AT
END OF YEAR RM(20,437,364) RM(21,991,985)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents included
in the cash flow statement comprise
the following balance sheet amounts:
Cash on hand and at banks RM 6,224 RM 11,362
Bank overdrafts (8,730,412) (11,698,332)
Export credit refinancing (7,713,176) (4,905,015)
Other short-term borrowings (4,000,000) (5,400,000)
-------------- --------------
Cash and cash equivalents RM(20,437,364) RM(21,991,985)
The accompanying Notes form an integral part of the Accounts.
<PAGE> 67
MALAYSIAN TITANIUM CORPORATION SDN. BHD.
(Incorporated in Malaysia)
NOTES TO THE ACCOUNTS
1. PRINCIPAL ACTIVITY
The Company is principally involved in the manufacturing of
synthetic rutile.
There has been no significant change in the nature of this
activity during the financial year.
2. BASIS OF PREPARATION OF ACCOUNTS
The accounts of the Company have been prepared in accordance with
the provisions of the Companies Act, 1965 and applicable approved
accounting standards.
3. SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The accounts of the Company have been prepared under the
historical cost convention.
Depreciation of Fixed Assets
Fixed assets are stated at cost less accumulated depreciation.
Freehold land and capital work-in-progress are not depreciated
while long-term leasehold land is amortised evenly over the
period of the lease. Plant and machinery is depreciated based on
units of production over the plant's normal capacity for an
estimated life of 15 years,
Depreciation of other fixed assets is computed using the straight-
line method at the following annual rates based on the estimated
useful lives of the various assets:
Buildings 2%
Mlotor vehicles 20%
Office equipment, furniture and fittings 15 - 20%
<PAGE> 68
Associated Company
An associated company is a company in which the Company has a
long-term equity investment of 20% to 50% and where the Company
is in a position to exercise significant influence through
management participation.
The Company has an equity interest of 40% (40% in 1997) in an
associated company, Fluid Minerals Espanola (FME) (a company
incorporated in Spain), whose principal activity is manufacturing
and sales of hitox pigment.
Investment in associated company is stated at cost unless, in the
opinion of the directors, there is a permanent diminution in the
value of investment in which case provision is made for the
diminution in value.
Stocks
Stocks are stated at the lower of cost and net realisable value.
Cost is determined on the "weighted average" method.
Cost of raw materials, consurnables and trading goods comprise
the original purchase price plus cost of bringing these stocks to
location. Cost of finished goods and work-inprogress include the
cost of raw materials and an appropriate allocation of labour
cost and manufacturing overheads.
Capitalisation of Borrowing Cost
Borrowing costs incurred on the acquisition and construction of
fixed assets which require a substantial period of time to get
them ready for their intended use are capitalised and included as
part of cost of the related assets.
Deferred Taxation
Provision is made using the liability method for taxation
deferred by capital allowances and other timing differences
except to the extent that it can be demonstrated with reasonable
probability that the timing differences will continue in the
foreseeable future. Timing differences giving rise to deferred
tax benefits are not recognised.
<PAGE> 69
Foreign Currency Conversion
All foreign currency transactions are converted into Ringgit
Malaysia at the exchange rates prevailing at the transaction
dates or, where settlement has not yet taken place at the end of
the financial year, at the approximate exchange rates prevailing
on that date. All exchange gains or losses are taken up in the
profit and loss account.
Cash Equivalents
Cash equivalents are short-term, highly liquid investments that
are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value.
<PAGE> 70
4. FIXED ASSETS
<TABLE>
<CAPTION>
----------------------------Costs---------------------------
Beginning Disposals/ End
1998 of year Additions Transfer of year
---- ------------ ----------- ------------- ------------
<S> <C> <C> <C> <C>
Freehold land RM 265,979 RM -- RM -- RM 265,979
Long-term leasehold land 345,191 -- -- 345,191
Buildings 4,553,634 -- -- 4,553,634
Plant and machinery 39,640,217 1,214,584 -- 40,854,801
Motor vehicles 837,837 53,000 -- 890,837
Office equipment
furniture and fittings 762,033 23,327 (3,820) 781,540
Capital work- in-progress 521,223 759,476 (1,204,683) 76,016
------------ ----------- ------------- ------------
Total RM46,926,114 RM2,050,387 RM(1,208,503) RM47,767,998
============ =========== ============= ============
<TABLE/>
<PAGE> 71
</TABLE>
<TABLE>
<CAPTION>
--------------Accumulated depreciation-------------------
Change
1998 Beginning for End Net Book
---- of year the year Disposals of year value
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Freehold land RM -- RM -- RM -- RM -- RM 265,979
Long-term leasehold land 25,022 4,131 -- 29,153 316,038
Buildings 522,343 91,073 -- 613,416 3,940,218
Plant and machinery 4,241,031 1,123,751 -- 5,364,782 35,490,019
Motor vehicles 656,306 60,772 -- 717,078 173,759
Office equipment
furniture and fittings 699,110 31,505 (1,372) 729,243 52,297
Capital work-in-progress -- -- -- 76,016
----------- ----------- --------- ----------- ------------
Total RM6,143,812 RM1,311,232 RM (1,372) RM7,453,672 RM40,314,326
=========== =========== ========= =========== ============
<TABLE/>
</TABLE>
<TABLE>
<CAPTION>
----------------------------Costs---------------------------
Beginning Disposals/ End
1997 of year Additions Transfer of year
---- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Freehold land RM 265,979 RM -- RM -- RM 265,979
Long-term leasehold land 345,191 -- -- 345,191
Buildings 4,553,634 -- -- 4,553,634
Plant and machinery 31,541,302 8,098,915 -- 39,640,217
Motor vehicles 893,837 -- (58,000) 837,837
Office equipment
furniture and fittings 751,864 10,169 -- 762,033
Capital work-in-progress 2,425,492 6,170,190 (8,074,459) 521,223
------------ ------------ ------------- ------------
Total RM40,779,299 RM14,279,274 RM(8,132,459) RM46,926,114
============ ============ ============= ============
<TABLE/>
<PAGE> 72
</TABLE>
<TABLE>
<CAPTION>
----------------Accumulated depreciation----------------
Change
1997 Beginning for End Net Book
---- of year the year Disposals of year value
----------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Freehold land RM -- RM -- RM -- RM -- RM 265,979
Long-term leasehold land 20,891 4,131 -- 25,022 320,169
Buildings 431,270 91,073 -- 522,343 4,031,291
Plant and machinery 2,915,531 1,325,500 -- 4,241,031 35,399,186
Motor vehicles 596,245 81,328 (21,267) 656,306 181,531
Office equipment
furniture and fittings 651,571 47,539 -- 699,110 62,923
Capital work-in-progress -- -- -- 521,223
----------- ----------- ---------- ----------- ------------
Total RM4,615,508 RM1,549,571 RM (21,267) RM6,143,812 RM40,782,302
=========== =========== ========== =========== ============
<TABLE/>
Current charges to plant and machinery include
interest costs capitalised of RM Nil (RM130,148
in 1997).
<PAGE> 73
5. ASSOCIATED COMPANY
1998 1997
---------- ----------
Unquoted shares, at cost RM 837,902 RM 837,902
Less: Provision for diminution in value (555,567) --
---------- ----------
Net RM 282,335 RM 837,902
========== ==========
The directors of the Company have made a provision for diminution in
the carrying value of the associated company based on the net asset
value of the investee company and on the "prudence" concept.
The directors of the investee company have commenced several new
businesses which are expected to contribute positively to the
profitability of the company.
Transactions with the associated company during the financial year
include trade sales amounting to RM304,250 (RM255,780 in 1997).
Had the equity method of accounting been presented, the Company's
share of post-acquisition loss in associated company would have been
RM380,376 (RM133,103 in 1997).
<PAGE> 74
6. STOCKS
1998 1997
----------- -----------
Finished goods RM3,005,601 RM6,108,615
Work-in-progress 386,378 437,028
Raw materials 79,242 84,635
Consumables 1,597,651 1,454,019
Trading goods 91,030 65,827
----------- -----------
Total RM5,159,902 RM8,150,124
=========== ===========
7. RELATEDPARTY TRANSACTIONS
Included in the following current assets and liabilities are amounts owing
by and to certain companies in which one of the directors is also a
director of the Company:
1998 1997
----------- -----------
Trade debtors RM6,461,796 RM3,817,298
Other debtors, deposits and prepayments 1,493 1,495
Other creditors and accrued expenses 848 3,214
=========== ===========
The above balances arose mainly out of normal trade transactions and
payment on behalf,
Significant related party transactions which were dealt with at arm's
length during the year are as follows:
1998 1997
------------ ------------
Trade sales RM12,392,652 RM10,127,442
Trade purchases 46,635 --
Professional fees paid 2,400 1,200
============ ============
8. OTHER DEBTORS, DEPOSITS AND PREPAYMENTS
Included in other debtors, deposits and prepayments is depreciation
of fixed assets amounting to RM Nil (RM32,114 in 1997) which has been
deferred.
<PAGE> 75
9. HOLDING COMPANIES AND INTERCOMPANY TRANSACTIONS
1998 1997
------------ -----------
Amount owing to immediate
holding company RM 33,500 RM1,044,847
Amount owing to intermediate
holding company 200,141 207,986
------------ -----------
Total RM 233,641 RM1,252,833
============ ===========
The Company is a 52.84% (51.00% in 1997) owned subsidiary of Megamin
Ventures Sdn. Bhd. The interinediate and ultimate holding companies
are Bonanza Venture Holdings Sdn. Bhd. and Kay Lim Holdings Sdn. Bhd.
respectively. All of these companies were incorporated in Malaysia.
Significant intercompany transactions during the year consist of the
following:
1998 1997
------------ ------------
Related company
Trade purchases RM6,195,203 RM3,549,670
Trade sales 211,050 --
Sales of fixed assets 2,448 --
============ ============
Intermediate holding company
Management fees RM 6,250 RM 9,820
============ ============
Immediate holding company
Interest on advances RM 4,609 RM 14,847
Management fees -- 30,000
============ ============
<PAGE> 76
10. BANK BORROWINGS
1998 1997
------------ ------------
Secured:
Bank overdrafts RM 8,730,412 RM11,698,332
Export credit refinancing 7,713,176 4,905,015
Current portion of
term loan (Note 11) 900,000 900,000
Other short-term borrowings 4,000,000 5,400,000
------------ ------------
Total RM21,343,588 RM22,903,347
============ ============
The Company has bank overdrafts and other short-term credit
facilities with two local banks up to a limit of RM34,900,000
(RM36,400,000 in 1997) which are secured by legal charges over the
Company's long-term leasehold land and debentures with fixed and
floating charges over all assets of the Company.
The overdrafts and export credit refinancing facilities bear interest
rates ranging from 7.70% to 14.30% (7.70% to 11.20% in 1997) per
annum.
11. LONG-TERM LIABILITY
1998 1997
------------ ------------
Term loan - Principal outstanding RM 987,707 RM 1,887,707
Less: Current portion included
in bank borrowings under
Current liabilities (Note 10) (900,000) (900,000)
------------ ------------
Long-term portion RM 87,707 RM 987,707
============ ============
The term loan to the extent of RM6,300,000 obtained from one of the
local banks mentioned in Note 10 is repayable by 28 quarterly
instalments of RM225,000 each commencing April, 1993.
The securities for the term loan is similar to that as disclosed in
Note 10 and the loan bears interest rates ranging from 11.30% to
14.30% (11.05% to 11.50% in 1997) per annum.
<PAGE> 77
12. SHARE CAPITAL
1998 1997
------------ ------------
Ordinary shares of RM1 each:
Authorised RM60,000,000 RM60,000,000
============ ============
Issued and fully paid
Balance at beginning of year RM22,000,000 RM21,746,507
Add: Rights issue/
additional allotments 2,130,000 253,493
------------ ------------
Balance at end of year RM24,130,000 RM22,000,000
============ ============
At an Extraordinary General Meeting held on 23rd June, 1997, the
shareholders approved a rights issue of 3,000,000 new ordinary shares
of RM1 each at par on the basis of three (3) new ordinary shares for
every twenty-two (22) existing shares held. However, as at the date
of the report, 2,130,000 new ordinary shares of RM1 each has been
subscribed. These new shares rank pari passu with the then existing
shares of the Company.
13. UNAPPROPRIATED PROFIT
Subject to agreement with the Inland Revenue Board, as at 30th June,
1998, the Company has a Section 108 tax credit of approximately
RM15,000 (RM15,000 in 1997). Accordingly, the Company may distribute
an amount of approximately RM39,000 (RM39,000 in 1997) out of its
unappropriated profit at 30th June, 1998 without incurring additional
income tax.
14. TURNOVER
Turnover represents sales of goods at gross invoiced value less
returns.
The cost of inventories recognised as an expense, applicable to
turnover, are as follows:
1998 1997
------------ ------------
Raw materials and consurnables RM 5,305,258 RM 6,544,950
Net change in inventories of finished
goods and work-in-progress 3,153,664 (739,557)
Labour costs 1,086,325 978,570
Depreciation and other
production overheads 15,866,508 18,043,233
------------ ------------
Net RM25,411,755 RM24,827,196
============ ============
<PAGE> 78
15. PROFIT BEFORE TAXATION
Profit before taxation is arrived at:
1998 1997
------------ -----------
After charging:
Depreciation of fixed assets RM 1,343,347 RM1,517,457
Interest on:
Other short-term borrowings 1,119,708 965,578
Bank overdrafts 938,350 930,379
Term loans 176,145 258,123
Advances from holding company 4,609 14,847
Provision for diminution in
value of investment 555,567 --
Directors' remuneration:
Fee 15,000 20,000
Other emoluments 344,052 386,614
Benefits-in-kind 9,652 5,867
Rental of premises and equipment 221,346 306,802
Audit fee 14,000 14,000
Professional fees paid to a company
in which a director has an interest 2,400 1,200
============ ===========
And crediting:
Gain on disposal of fixed assets RM -- RM 13,267
============ ===========
16. PROVISION FOR TAXATION
1998 1997
------------ -----------
Overprovision in prior year RM -- RM 58,784
============ ===========
Although the operations of the Company during the year and in 1997
resulted in profits, no provision for taxation has been made due to
the utilisation of capital allowances to setoff in full the profits
that would otherwise have been subjected to tax. The tax benefits
arising from such utilisation is approximately RM1,547,000 (RM568,000
in 1997).
Subject to approval from the Inland Revenue Board, at balance sheet
date, the Company has estimated unutillsed tax losses and unabsorbed
capital allowances carried forward amounting to approximately
RM13,520,000 and RM21,528,000 respectively which can be carried
forward and utilised to set-off against future taxable profits.
<PAGE> 79
17. CAPITAL COMMITMENTS
1998 1997
------------ -----------
Amount authorised but
not contracted for RM -- RM 540,000
============ ===========
18 COMPARATIVE FIGURES
Certain comparative figures in the accounts have been reclassified to
conform with current year's presentation.
<PAGE> 80
MALAYSLAN TITANIUM CORPORATION SDN. BHD.
(Incorporated in Malaysia)
STATEMENT BY DIRECTORS
The directors of MALAYSIAN TITANIUM CORPORATION SDN. BHD. state that, in
their opinion, the accompanying balance sheet, profit and loss account and
cash flow statement, together with the notes thereto, are drawn up in
accordance with the provisions of the Companies Act, 1965 and the
applicable approved accounting standards so as to give a true and fair
view of the state of affairs of the Company at 30th June, 1998 and of the
results of its business and cash flows for the year ended on that date.
Signed in accordance with a resolution of the Directors,
LEE HEE CHEW
- -------------
Lee Hee Chew
TEOH LAY HOCK
- --------------
Teoh Lay Hock
Ipoh,
28 OCT 1998
DECLARATION BY THE DIRECTOR PRIMARILY RESPONSIBLE FOR THE FINANCIAL MANAGEMENT
OF THE COMPANY
I, LEE HEE CHEW, the director primarily responsible for the financial
management of MALAYSLAN TITANIUM CORPORATION SDN. BHD., do solemnly and
sincerely declare that the accompanying balance sheet, profit and loss
account and cash flow statement, together ,,vith the notes thereto, are,
in my opinion, correct and I make this solemn declaration conscientiouslv
believing the same to be true, and by virtue of the provisions of the
Statutory Declarations Act. 1960.
Subscribed and solemnly declared by the abovenamed LEE HEE CHEW at IPOH in
the State of PERAK DARUL RIDZUAN this day of 28 OCT 1998
Before me,
EEC
COMMISSIONIER FOR OATHS
<PAGE> 81
</TABLE>
<TABLE>
<CAPTION>
MALAYSIAN TITANIUM CORPORATION SDN BHD
BALANCE SHEET AT 30TH JUNE, 1998
Accounts Adjustments to Comply
Per Malaysian With US GAAP Accounts
Standards Debit Credit Per US GAAP
RM RM RM RM
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
FIXED ASSETS 40,314,326 40,314,326
ASSOCIATED COMPANY 282,335 555,567 380,376 457,526
DEFERRED TAX ASSETS 5,142,131 1,606,417 3,535,714
CURRENT ASSETS
Stocks 5,159,902 5,159,902
Trade debtors 6,553,461 6,553,461
Other debtors, deposits
and prepayments 272,483 272,483
Amount owing by
by associated company 418,776 418,776
Cash on hand and at banks 6,224 6,224
------------ ------------ ------------ ------------
12,410,846 12,410,846
------------ ------------ ------------ ------------
</TABLE>
<PAGE> 82
<TABLE>
<CAPTION>
Accounts Adjustments to Comply
Per Malaysian With US GAAP Accounts
Standards Debit Credit Per US GAAP
RM RM RM RM
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CURRENT LIABILITIES
Trade creditors 922,806 922,806
Other creditors and
accrued expenses 2,570,260 2,570,260
Amount owing to
holding companies 233,641 233,641
Amount owing to
related companies 40,255 40,255
Bank borrowings 21,343,588 21,343,588
------------ ------------ ------------ ------------
25,110,550 25,110,550
------------ ------------ ------------ ------------
NET CURRENT LIABILITIES (12,699,704) (12,699,704)
LONG-TERM LIABILITY (87,707) (87,707)
------------ ------------ ------------ ------------
NET ASSETS EMPLOYED 27,809,250 5,697,698 1,986,793 31,520,155
============ ============ ============ ============
Represented by:
SHARE CAPITAL 24,130,000 24,130,000
UNAPPROPRIATED PROFIT 3,679,250 1,986,793 5,697,698 7,390,155
------------ ------------ ------------ ------------
TOTAL CAPITAL EMPLOYED 27,809,250 1,986,793 5,697,698 31,520,155
============ ============ ============ ============
</TABLE>
<PAGE> 83
<TABLE>
<CAPTION>
MALAYSIAN TITANIUM CORPORATION SDN BHD
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30TH JUNE, 1998
Accounts Adjustments to Comply
Per Malaysian With US GAAP Accounts
Standards Debit Credit Per US GAAP
RM RM RM RM
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
TURNOVER 34,355,296 -- -- 34,355,296
================ ================ ================ ================
PROFIT BEFORE TAXATION 3,550,012 247,273 555,567 3,858,306
PROVISION FOR TAXATION -- 1,606,417 (1,606,417)
---------------- ---------------- ---------------- ----------------
NET PROFIT 3,550,012 1,853,690 555,567 2,251,889
Unappropriated profit
at beginning of year 129,238 133,103 5,142,131 5,138,266
---------------- ---------------- ---------------- ----------------
UNAPPROPRIATED PROFIT
AT END OF YEAR 3,679,250 1,986,793 5,697,698 7,390,155
================ ================ ================ ================
</TABLE>
<PAGE> 84
MALAYSIAN TITANIUM CORPORATION SDN. BHD.
YEAR ENDED 30TH JUNE, 1998
ADJUSTMENTS TO COMPLY WITH US GAAP
DEBIT CREDIT
RM RM
1 Unappropriated Profit Brought Forward 133,103
Associated Company-B/S 133,103
======== ========
(Being adjustment to recognise MTC's
share of post-acquisition loss in
Associated Company for years prior
to 1998)
2 Associated Company-B/S 555,567
Profit Before Taxation 555,567
======== ========
(Being reversal of provision for
diminution in value of investment
in Associated Company)
3 Share of results in Associated Company 247,273
Associated Company-B/S 247,273
======== ========
(Being adjustment to equity
account for the results of
the Associated Company)
4 Provision for taxation - P & L 1,606,417
Deferred Tax Assets- B/S 1,606,417
========= =========
(Being current year's movement
in deferred tax assets)
5 Deferred Tax Assets 5,142,131
Unappropriated profit
at beginning of year 5,142,131
========= =========
(Being adjustment to recognise
brought forward deferred assets)
<PAGE> 85
(b) Pro forma financial information
Unaudited Pro Forma Combined Condensed Financial Statements
The following unaudited pro forma combined condensed financial statements
give effect to the Acquisition. For accounting purposes the Acquisition
will be accounted for as a purchase of MTC by the Company; accordingly
the net assets of MTC have been adjusted to their estimated fair values
based upon a purchase price allocation.
The unaudited pro forma combined condensed statements of operations for
the year ended December 31, 1999 give effect to the Acquisition as if it
had occurred at January 1, 1999. The unaudited pro forma combined
condensed balance sheet at December 31, 1999 gives effect to the Merger as
if it occurred on December 31, 1999.
The unaudited pro forma combined condensed financial statements should be
read in conjunction with the historical financial statements of MTC,
included herein, and the annual and interim historical financial
statements of the Company as filed with the US Securities and Exchange
Commission.
The unaudited pro forma combined condensed financial statements are not
necessarily indicative of the actual results of operations or financial
position that would have occurred had the Acquisition occurred on the
dates indicated nor are they necessarily indicative of future operating
results or financial position.
The information presented below is unaudited and includes pro forma
information as if MTC was acquired at the beginning of each interim
period:
<PAGE> 86
<TABLE>
<CAPTION>
TOR Minerals International, Inc. ("TMI")
(formerly Hitox Corporation of America)
and Malaysian Titanium Corporation Sdn. Bhd. ("MTC")
Pro Forma Condensed Combined Balance Sheet (Unaudited)
December 31, 1999
Pro Forma
Adjustments Pro Forma
TMI MTC Increase(Decrease) Combined
------------- ------------- ------------------ -------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 2,329,877 $ 31,931 $ (430,000) (a) $ 1,931,808
Accounts Receivable-Trade 1,333,680 308,830 1,642,510
Accounts Receivable-MTC/Hitox -- 810,920 810,920
Accounts Receivable-Other 11,802 11,802
Inventory 6,489,840 1,924,746 (30,188) (b) 8,384,398
Other Current Assets 41,937 55,146 97,083
------------- ------------- -------- ----------
Total Current Assets 10,207,136 3,131,573 (460,188) 12,878,521
Investment in MTC -- 5,885,000 (a) --
(5,885,000) (b)
Property, Plant
and Equipment, net 2,709,868 10,727,190 (2,793,003) (b) 10,644,055
Other Assets 43,200 43,200
------------- ------------- ----------- -------------
Total Assets $ 12,960,204 $ 13,858,763 $(3,253,191) $ 23,565,776
============= ============= ============ =============
</TABLE>
<PAGE> 87
<TABLE>
<CAPTION>
TOR Minerals International, Inc. ("TMI")
(formerly Hitox Corporation of America)
and Malaysian Titanium Corporation Sdn. Bhd. ("MTC")
Pro Forma Condensed Combined Balance Sheet (Unaudited)
December 31, 1999
Pro Forma
Adjustments Pro Forma
TMI MTC Increase(Decrease) Combined
------------- ------------- ------------------ -------------
<S> <C> <C> <C> <C> <C>
LIABILITIES AND
SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable - Trade $ 578,224 $ 671,426 $ 1,249,650
Accounts Payable - MTC/Hitox 810,920 810,920
Notes Payable-Bank Line/Crdt -- 1,103,848 1,103,848
Export Credit Refinancing -- 1,188,036 1,188,036
Accrued Expenses 511,486 468,354 979,840
Current Portion
of Long Term Debt -- 368,420 499,000 (a) 867,420
------------- ------------- ------------ -------------
Total Current Liabilities 1,900,630 3,800,084 499,000 6,199,714
Long Term Debt -- 1,350,488 3,956,000 (a) 5,306,488
------------- ------------- ------------ -------------
Total Liabilities 1,900,630 5,150,572 4,455,000 11,506,202
------------- ------------- ------------ -------------
SHAREHOLDERS' EQUITY
Capital Stock $.25par 1,193,297 125,000 (a) 1,318,297
Additional Paid/Capital 14,315,410 -- 875,000 (a) 15,190,410
Equity-Retained Earnings (4,449,133) 8,708,191 (8,708,191) (b) (4,449,133)
------------- ------------- ------------ -------------
Total Shareholders' Equity 11,059,574 8,708,191 (7,708,191) 12,059,574
------------- ------------- ------------ -------------
Total Liabilities and
Stockholders' Equity $ 12,960,204 $ 13,858,763 $(3,253,191) $ 23,565,776
============= ============= ============ =============
</TABLE>
See notes to unaudited pro forma condensed combined financial statements
<PAGE> 88
<TABLE>
<CAPTION>
TOR Minerals International, Inc. ("TMI")
(formerly Hitox Corporation of America)
and Malaysian Titanium Corporation Sdn. Bhd. ("MTC")
Pro Forma Condensed Combined Statements of Income (Unaudited)
Twelve Months Ended December 31, 1999
Pro Forma
Adjustments Pro Forma
TMI MTC Increase(Decrease) Combined
------------ ------------ ---------------- ------------
<S> <C> <C> <C> <C> <C>
Net Sales $ 11,582,720 $ 5,919,887 $(4,026,751) (c) $ 13,475,856
Costs and expenses:
Cost of products sold 8,080,883 4,015,573 (2,537,748) (c) 9,558,708
Selling, administrative
and general 2,606,791 341,672 2,948,463
------------ ------------ ------------ ------------
Operating income 895,046 1,562,642 (1,489,003) 968,685
Other income (expenses):
Interest income 88,745 (65,000) (c) 23,745
Interest expense (3,853) (340,760) 278,700 (c) (623,313)
Other, net 28,054 34,324 (12,257) (c) 50,121
------------ ------------ ------------ ------------
Income before income tax 1,007,992 1,256,206 (1,844,960) 504,632
Provision for income tax 17,000 8,931 25,931
------------ ------------ ------------ ------------
NET INCOME $ 990,992 $ 1,247,275 $(1,844,960) (c) $ 393,307
============ ============ ============ ============
Earnings per common share:
Basic $ 0.21 $ 0.08
Diluted $ 0.21 $ 0.07
Weighted average common
shares and equivalents
outstanding:
Basic 4,718,093 5,218,093
Diluted 4,765,002 5,265,002
</TABLE>
See notes to unaudited pro forma condensed combined financial statements
<PAGE> 89
TMI and MTC
Notes to Pro Forma Condensed Combined Financial Statements
(Unaudited)
(a) The following pro forma adjustments reflect TMI's purchase of MTC.
Pro forma adjustments include estimated direct costs of acquisition
of $155,000
Cash $ 430,000
Note payable to seller 955,000
Note payable to bank 3,500,000
TMI common stock
(500,000 shares @ $2.00 per share) 1,000,000
-----------
$ 5,885,000
===========
(b) The following pro forma adjustments are made to reflect estimated
fair value adjustments at December 31, 1999, and to eliminate TMI's
investment in MTC.
MTC's stockholders' equity as reported $ 8,708,191
Fair value adjustments:
Decrease carrying amount of inventories (30,188)
Decrease carrying amount of
property, plant & equipment (2,793,003)
------------
$ 5,885,000
============
<PAGE> 90
(c) The following pro forma adjustments are incorporated in the pro forma
condensed combined statements of income
Increase
(Decrease)
Income
--------------
1. Decrease in sales resulting from
elimination of intercompany sales $ (4,026,751)
2. Decrease in cost of sales resulting
from elimination of intercompany sales 2,537,748
3. Decrease in interest income resulting
from reduction of short term investments (65,000)
4. Increase in interest expense
on assumed borrowing at 8% (278,700)
5. Decrease in other income net of
Elimination of write-down of investment
and related accounts receivable by MTC and
Elimination of gain on sale of asset by MTC (12,257)
--------------
$ (1,844,960)
==============
<PAGE> 91
(c) Exhibit 23 - Consent of Deloitte Touche Tohmatsu
Deloitte Touche Tohmatsu
________________________ __________________________________________
Public Accountant 87, Jalan Clarke Tel: 05-2531358
30300 Ipoh, Perak Fax: 05-2530090
Malaysia
11th May, 2000
The Directors
Hitox Corporation of America
722, Burleson Street
Texas 78402
United States of America
Attention of Mr. Craig Schkade
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-39755) pertaining to the 1990 Incentive Plan for Hitox
Corporation of America of our audit report dated 18th January, 2000 for
the period 1st July, 1999 to 31st December, 1999 and our reports dated 6th
August, 1999 and 28th October, 1998 for the financial years ended 30th
June, 1999 and 1998, which reports are included in Hitox Corporation of
America's Current Report on Form 8-K/A dated 12th May, 2000.
Yours truly,
DELOITTE TOUCHE TOHMATSU
- ------------------------
Deloitte Touche Tohmatsu
AF0834
Public Accountants
GREGORY WONG GUANG SENG
- ------------------------
Gregory Wong Guang Seng
787/3/01(J/PH)
Partner
Deloitte Touche Tohmatsu
International
<PAGE> 92
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TOR Minerals International, Inc.
____________
(Registrant)
Date: May 12, 2000 CRAIG SCHKADE
-------------------
Craig Schkade, Chief Financial Officer
(Principal Financial and Accounting Officer)
<PAGE> 93
