Far East : Annual Report

Journey To A

SUSTAINABLE

FUTURE

ANNUAL REPORT 2023

C

OUR VISION

A highly motivated and inspired team, working in unison towards leadership, striving for excellence through quality and technology and being ever sensitive and responsive to its employees, customers and the society in which we live.

1. Corporate Profile
2. CEO's Message

1. At A Glance
2. Board of Directors

1. Executive Officers & Key Management

1. Group Structure
2. Financial Contents

This Annual Report has been reviewed by the Company's sponsor, SAC Capital Private Limited (the "Sponsor"). This Annual Report has not been examined or approved by the Singapore Exchange Securities Trading Limited ("SGX-ST") and the SGX-ST assumes no responsibility for the contents of this Annual Report, including the correctness of any of the statements or opinions made or reports contained in this Annual Report.

The contact person for the Sponsor is Ms Lee Khai Yinn (Telephone: [phone]) at 1 Robinson Road, #21-00 AIA Tower, Singapore 048542.

Eden Exhibition

CORPORATE PROFILE

Founded in 1953, Far East Group is one of the pioneers in the refrigeration and air-conditioning business in Singapore and a leading regional distributor of commercial and light industrial refrigeration systems and products with more than 70 years of experience in the Heating, Ventilation, Air-conditioning and Refrigeration ("HVAC&R") industry in Southeast Asia ("SEA") and the People's Republic of China (the "PRC"). In 2011, the Group was listed on the Catalist Board of the Singapore Exchange.

Headquartered in Singapore with approximately 400 employees globally, the Group has subsidiaries in Singapore, Malaysia, Indonesia, Vietnam, Myanmar, Hong Kong and the PRC. Other than our physical presence in SEA and the PRC, the Group also works with distributors and dealers in countries including Malaysia, Indonesia, Vietnam, Thailand, Myanmar, the Philippines, Mauritius, Sri Lanka, Turkey and Australia.

The Group is a comprehensive provider of refrigeration and air-conditioning systems, products and services to various industries including, but not limited to Commercial & Retail, F&B, Supermarkets, Cold-Storages, Warehouse and Logistics, Hospitality, Healthcare, Oil, Marine and Gas, etc. Our manufacturing facilities for heat-exchangers and condensing units are based in the PRC and certain condensing units are built in Singapore. These heat-exchangers and condensing units are exported to various parts of SEA and the PRC. We are also engaged in the distribution of air- conditioning products and contracting and installation of air-conditioning systems in Singapore.

As a major Wholesaler and Distributor regionally, we represent multiple internationally renowned product brands in the refrigeration and air- conditioning market such as Bitzer, Danfoss, Schneider-Eliwell and Emerson etc. We offer a full suite of services ranging from consultation, engineering design, equipment supplies to commissioning and aftersales support. Our long-standing and close relationships with our partners ensure genuine and quality products are readily available through our distribution network.

Our Manufacturing arm has also established itself as one of China's leading providers of a comprehensive range of quality energy-efficientheat-exchangers, compressor rack systems and condensing units under our own brands "Eden" and "ELITE".

Eden products are manufactured by Eden Refrigeration Manufacturing (Jiangsu) Co., Ltd. (ISO9001:2015) which produces international standard heat-exchangers using the latest design and heat transfer technology in manufacturing a wide range of unit coolers, brine coolers, condensers and custom coils for commercial, industrial and marine applications. All our unit coolers and air-cooled condensers are Conformitè Europëenne (CE) certified and in compliance with the listed European Directives BS EN 60204-1:2006+A1:2009 on safety guidance on machinery.

ELITE's compressor rack systems, outdoor packaged refrigeration units and condensing units are designed according to standards widely used in low-temperature storage, food processing, slaughtering processing, chemical, agricultural products processing, cold chain logistics, hospitals, supermarkets and other fields.

Our Engineering Solutions arm provides engineering solutions in our system designs to meet evolving customer needs and requirements, and knowing that every engineering challenge has an ultimate solution, drives us forward towards achieving excellence.

M-TechAir-Con & Security Engineering Pte Ltd ("M-Tech"), established in Singapore since 1993, is an Air-Conditioning and Mechanical Ventilation ("ACMV") service provider for residential and commercial buildings, with vast experience and technical expertise in the design, supply and installation of ACMV and electrical systems.

M-Tech is a registered contractor with the Building and Construction Authority of Singapore (BCA), and certified in Air-conditioning, Refrigeration

• Ventilation Works (ME01-L6), Communication & Security Systems (ME04-L1) and Electrical Engineering (ME05-L1).

RSP Systems Pte. Ltd. is the System Integration arm of Far East Group in Singapore, specialising in providing a host of monitoring systems ranging from temperature monitoring, energy & resource monitoring to alarms management & asset management system tools; incorporating Internet of Things (IoT) devices from Eliwell, Schneider Electric and other third- party devices. These systems allow for quick deployment, full system management control and data analytics for troubleshooting and improving efficiency of any refrigeration and HVAC&R system.

In 2018, the Group relocated its regional headquarters to 51 Ubi Avenue 3, Singapore 408858 which operates as our regional distribution centre.

Environmental, Social, and Governance ("ESG") and Sustainability considerations have always been part of Far East Group's core values which are key to our long-term business strategy and we appreciate the opportunity to present our achievements and ambitions in this area. The Group aims to work with our suppliers and customers towards the phasing out of harmful gases and development of energy-efficient products, which are the two areas that can yield mutual benefits to both our business and society at large. At the same time, we recognise that our people are key drivers of our success and we place great emphasis on nurturing them by enhancing their training and development and taking care of their health and safety. It is our responsibility to exceed expectations of our stakeholders in the market and we strive to do so by delivering high quality and safe products, maintaining financial stability and tackling the risk of cybersecurity through robust internal controls, policies and measures.

FAR EAST GROUP LIMITED ANNUAL REPORT 2023

1

CEO'S MESSAGE

DEAR SHAREHOLDERS,

On behalf of the Board of Directors ("Board" or "Directors"), I am pleased to present to you the annual report of Far East Group Limited ("Far East Group" or the "Group") for the financial year ended 31 December ("FY") 2023.

FY2022 was a record year for the Group and the Management had hoped to ride the wave of growth into FY2023. The growth, however, was short- lived. As it turned out, we started to see signs of a slowdown shortly after the lunar new year in 2023. Orders started to wane in the Asia Pacific countries in which our Wholesale and Distribution segment operates as well as other export markets, with revenue in FY2023 falling by 25.9% compared with FY2022. Demand was similarly muted in China with the increased tensions between the United States of America and China, to the detriment of our Manufacturing segment. The segment suffered a 11.5% drop in revenue compared with FY2022. Customers were more apprehensive and cautious about spending and projects to set up new infrastructure and stores started to dwindle as well. The Engineering Solutions segment saw a slowdown in the award of tenders for the year, which led to the reduction in revenue by 26.6% in FY2023 as compared with FY2022.

In the second half of the year, the Management and team pushed to reverse the losses incurred in the first half by implementing severe cost- cutting measures. We pushed ahead with more frequent interactions with customers to improve sales, and where necessary, sacrificed some margins. These efforts by the team and the Group paid off to a certain extent, resulting in the improved bottom line in the second half of FY2023 but we were still unable to offset the losses incurred in the first half of the year.

Factors such as the high cost of materials resulting from high inflation worldwide and more expensive labour costs incurred internally and externally from subcontractors continue to plague the business. The persistently high interest rates affecting the global economy have not abated since the US Federal Reserve started its interest rates increase in 2022. This added to the increased cost pressures on the Group across the board. In October 2023, the Israel-Hamas war, and the ensuing Red Sea crisis with commercial vessels being targeted, affected the supply chain of the Group and resulted in some delayed shipments, thereby affecting the timely receipt of goods. If this were to continue, we expect freight and logistical costs to eventually increase on affected routes.

We foresee the various segments will continue to be cautious in navigating the uncertain and volatile environments in the regions that the Group operates. The Distribution and Wholesale segment remains challenging and very competitive with customers being very price-sensitive. The Engineering Solutions segment continues to face the impact of the inflation and will take actions to mitigate such impact by working with suppliers

and subcontractors with an increased order book. The Group expects the Manufacturing segment to ride the moderate growth of the China economy while striving to grow export sales.

In spite of the uncertainties which continued into 2024, the Group remains focused on our vision to have a highly motivated and inspired team working in unison and striving for excellence through providing quality and technologies and being ever sensitive and responsive to our employees, customers, suppliers and society in which we live. We will press ahead with our efforts to optimise our operating costs, improve efficiency and maintain our course to achieve the goals set out before us - to deliver maximum value to our customers.

Operations and Financial Review

The Group's revenue reduced by S$24.6 million or 23.6% to S$79.6 million in FY2023 from S$104.2 million in FY2022. The fall in revenue was across all 3 segments of the Group.

The Wholesale and Distribution segment and the Engineering Solutions segment accounted for 39.4% and 40.1% of the Group's total revenue respectively in FY2023. The Manufacturing segment accounted for the remaining 20.5%.

Gross profit decreased by S$7.6 million or 35.9% to S$13.4 million in FY2023 from S$21.0 million in FY2022, with gross profit margin decreasing by 3.2 percentage points to 16.9% from 20.1% over the comparative period.

2 FAR EAST GROUP LIMITED ANNUAL REPORT 2023

The Group generated S$14.2 million net cash flows from operating activities. Net cash flows generated from investing activities of S$1.2 million were mainly from the disposal of investment securities. The Group used S$15.1 million net cash flows in financing activities, repaying loans and trade facilities as well as paying dividends to shareholders. Cash and cash equivalents increased from S$6.0 million as at December 2022 to S$6.2 million a year after.

The Group reported a net loss attributable to shareholders of S$3.7 million in FY2023, compared with a profit of S$2.1 million in FY2022. Loss per share stood at 3.29 cents in FY2023, compared with earnings per share of

1.86 cents in FY2022 while net asset value per share decreased to 34.4 cents as at 31 December 2023 from 41.0 cents the year before.

Dividend

In view of the dismal results, no dividend is proposed for FY2023 as the Board is of the view that it would be more prudent to conserve the cash resources in times of economic slowdown, aggravated by high inflationary and interest pressures.

Appreciation

On behalf of my fellow Directors, I would like to thank all shareholders, customers and business partners for your continued support and trust. I would also like to extend my sincere appreciation to our Management and staff for their hard work and dedication to the Company and for their respective contributions in this difficult year as one cohesive unit.

On behalf of the Group, I would also like to take this opportunity to thank Mr Mak Yen-Chen Andrew and Mr Tan Hwee Kiong for their valuable inputs and guidance to the Group. Both Mr Mak Yen-Chen Andrew and Mr Tan Hwee Kiong have served on the Board of Directors and as Chairman of the Nominating Committee and Chairman of the Remuneration Committee, respectively, for an aggregate period of more than nine (9) years from the date of their first appointment and will be stepping down from the Board after the forthcoming Annual General Meeting.

Eden Industrial Unit Cooler

Eden Exhibition

FAR EAST GROUP LIMITED ANNUAL REPORT 2023

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AT A GLANCE

Segmental Revenue Contribution

100%

	30%
75%					42%				40%
50%		26%
		18%				21%
25%
	44%
		40%				39%
0%
	2021		2022		2023
			Wholesale & Distribution			Manufacturing		Engineering Solutions

$'000

Geographical Revenue Contribution

2%

100,000
					4%
						7%
	2%		13%			1%
80,000
	3%
							2%
		11%
								7%
		13%		20%			16%
60,000								16%
		28%							22%
40,000						54%
							52%
20,000
	43%
0
2021	2022			2023
				Singapore				Hong Kong / Macau / PRC
				Malaysia				Indonesia
				Indo-China				Others

4 FAR EAST GROUP LIMITED ANNUAL REPORT 2023

BOARD OF DIRECTORS

AB

A KAREN LOH	B STEVEN LOH
Non-Executive Chairman	Chief Executive Officer and Executive Director

Ms Karen Loh was appointed to the Board on 28 June 2011 and was appointed as the Non-Executive Chairman of the Group on 24 February 2017. Ms Loh commenced her career as a management trainee with the Group in 1988. From 1992 to 1993, she was an accounts executive of the Group and was responsible for the accounts of the Group's subsidiaries. From 1993 to 1997, she pursued her studies in Australia. From 1997 and 2000 onwards, she became the director of Far East Refrigeration (Hong Kong) Limited and Far East Refrigeration Limited, respectively.

Ms Loh obtained an Advanced Certificate in Accounting from Alexander College in 1994.

Mr Steven Loh was appointed to the Board of Far East Group in 1990. He has over 30 years of experience in the HVAC&R industry. He is responsible for the formulation and execution of the Group's business strategies, strategic directions and expansion plans, as well as managing the Group's overall business development and financial performance.

Mr Loh joined the Group in 1990 as a Retail Sales Executive and has risen through the ranks to become the Group's Assistant Managing Director in 2000, overseeing its operations and financial performance. In 2003, he was appointed as the Group Managing Director.

He graduated from the University of the Pacific, Stockton, California, with a degree in Bachelor of Science in Electrical Engineering in 1987. In 1996, he obtained a Master of Business Administration from the University of South Australia. On 24 June 2011, he was awarded the Outstanding Entrepreneur in the Asia Pacific Entrepreneurship Award 2011.

FAR EAST GROUP LIMITED ANNUAL REPORT 2023

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BOARD OF DIRECTORS

B

D

C

C DAVID LENG	D WILSON HO
Chief Operating Officer and Executive Director	Lead Independent Non-Executive Director

Mr David Leng joined the Group as Business Development Director and Assistant Group Managing Director in 2004, and was appointed to the Board in 2005. He is responsible for overseeing the Group's sales, strategic marketing and business development, as well as growing the Group's business in the Southeast Asia region.

Mr Leng has held several managerial positions in the automotive and leasing industry since the start of his career before joining Barcelona Motors Pte Ltd and Perocom Motors Pte Ltd (both of which are distributors of new motor vehicles) as the General Manager, where he was mainly responsible for the two companies' day-to-day operations and financial performance from 1995 to 2003.

He obtained his Industrial Technician Certificate in Mechanical Engineering from the Singapore Technical Institute in 1977 and his Certificate in Sales and Marketing from the Marketing Institute of Singapore in 1990.

Mr Wilson Ho was appointed as the Lead Independent Director of the Board on 1 September 2020. He is currently the Managing Director, Asia of Westcon-Comstor, a value-added global technology distributor of category-leading solutions in Security, Collaboration, Networking and Data Centre, where he is responsible for managing the business across 12 countries in Asia.

His experiences over the last 20 plus years include working in the capital markets group of DBS Bank Ltd, holding the post of Chief Financial Officer of a SGX-Main Board listed company, as well as building and managing a regional IT distribution group.

Mr Ho graduated from Nanyang Technological University in 1994 with a Bachelor of Accountancy (Hons) degree. He is a Chartered Accountant, Singapore (CA Singapore) and a Chartered Financial Analyst (CFA).

6 FAR EAST GROUP LIMITED ANNUAL REPORT 2023

E	F	Food processing plant in China

E ANDREW MAK	F TAN HWEE KIONG
Independent Non-Executive Director	Independent Non-Executive Director

Mr Andrew Mak was appointed to the Board on 28 June 2011. He is a practising lawyer with more than 28 years of experience in legal practice. He is currently a consultant with Fortis Law Corporation. His current practice focuses on mergers and acquisitions, joint ventures, securities and capital markets, listed company work, general corporate/commercial work, cross-border transactions. He is also familiar with corporate governance. Outside of Singapore, Mr Mak also consults for Chien Yeh Co., Ltd. (the Bangkok office of Taiwanese law practice Chien Yeh Law Offices) as a foreign consulting attorney.

Mr Mak is an independent director of Leader Environmental Technologies Limited, listed on the Main Board of the SGX-ST, and an independent director of H2G Green Limited, which is listed on the Catalist Board of the SGX-ST. He is also a member of the advisory board at Executives' Global Network (Singapore) as well as a board member of The Singapore Lyric Opera Limited. He is a Senior Accredited Director, accredited by the Singapore Institute of Directors. He was awarded the Public Service Medal (PBM) by the President of Singapore in the 2012 Singapore National Day honours list.

Mr Mak graduated from the National University of Singapore in 1994 with a Bachelor of Laws (Second Class Honours Upper Division).

Mr Mak will be retiring as Independent Non-Executive Director at the Company's upcoming Annual General Meeting on 25 April 2024.

Mr Tan Hwee Kiong was appointed to the Board on 28 June 2011. He is a senior business leader with 31 years of industrial and commercial experience, of which 16 years he was involved in the HVAC&R industry. Mr Tan spent most of his HVAC&R career in Carrier Corporation (a division of United Technologies Corporation), where he served as the Regional Managing Director responsible for South Asia region and various capacities in Asia Pacific region.

Mr Tan was the Regional Managing Director of Snap-On Tools (Singapore) Pte Ltd and responsible for Southeast Asia, Taiwan, Hong Kong and South Korea from 2008 to early 2018. From March 2018 to December 2021, Mr Tan was the Chief Operating Officer of Leedon National Oxygen Ltd and responsible for its Fire Safety group of companies in Singapore, Malaysia, China and Australia. He is currently running his own business in the food industry.

Mr Tan graduated from the University of London with a Bachelor of Science (Economics) degree. He also obtained a Diploma in Building Services from Ngee Ann Polytechnic and a Graduate Diploma in Marketing Management from Singapore Institute of Management.

Mr Tan will be retiring as Independent Non-Executive Director at the Company's upcoming Annual General Meeting on 25 April 2024.

FAR EAST GROUP LIMITED ANNUAL REPORT 2023

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EXECUTIVE OFFICERS & KEY MANAGEMENT

G

1. FRANCIS LAI

Chief Financial Officer

Mr Francis Lai joined the Group in April 2011 as Senior Finance and Business Development Manager and was part of the team involved in the Group's listing on the SGX-Catalist Board. He was promoted to the position of Chief Financial Officer of the Group in 2014 and was appointed Company Secretary of the Company on 26 June 2017. He is a Fellow Chartered Certified Accountant with more than 20 years' experience.

Mr Lai is responsible for all the Finance functions of the Group and strategising the Group's growth. He is responsible for developing the Group's finance policies and procedures, review of the Group's risk management policies and internal controls procedures and managing the Group's insurance policies. He also oversees due diligence studies and merger and acquisition ("M&A") processes of the Group in its business expansion plans, and was involved in the successful completion of several M&A deals that increased the Group's revenue. Prior to joining the Group, he spent 11 years in the semiconductor industry, taking on a wide spectrum of finance and accounting roles in financial and management accounting and M&A.

Mr Lai started his career as an entrepreneur in the education industry while studying for his Bachelor of Arts degree in the

I

H

National University of Singapore where he graduated with a Second-Class Honours degree in Arts specialising in Japanese Studies. He is a Fellow Chartered Accountant of Singapore (FCA Singapore) and a Fellow of the Association of Chartered Certified Accountants (FCCA).

1. RICHARD CHUNG

Director of Research & Development

Mr Richard Chung joined the Group as a Sales and Marketing Executive in 1995 and had served in various capacities, including Sales and Marketing Manager and Divisional Director (Systems and Projects). On 1 October 2018, he was promoted to the position of Director of Research & Development where he is responsible for the design of the new series of heat-exchangers and the technology employed in the Group's 'Eden' brand of products. In his last role as Head of Systems and Projects, he led the Group's project teams, including General Managers (Projects) and Project Managers, to deliver the projects in accordance with the project commitments and ensured that the projects are properly managed and planned with sufficient staff and appropriate resources.

Mr Chung had been invited as a speaker at various seminars, such as (i) the Asian Cold Chain Management Conference on topics of "Examining Trends in Temperature Control for the Food and Beverage Sector: An International Overview" and "Examining Trends in Temperature Control for the Healthcare

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