Response to SGX Queries::

Hoe Leong Corporation Ltd.

(Incorporated in the Republic of Singapore)

(Company Registration Number 199408433W)

RESPONSES TO QUERIES

FROM SINGAPORE EXCHANGE TRADING LIMITED (THE "SGX-ST")

The Board of Directors (the "Board") of Hoe Leong Corporation Ltd. (the "Company", and together with its subsidiaries, the "Group") refers to the SGXNet announcement dated 11 May 2021 on its unaudited financial statements for the first quarter ended 31 March 2021 ("1Q 2021") and wishes to provide its responses to the following queries raised by the SGX- ST.

Query (a):

It is noted that the Group's trade and other receivables amounts to S$9,978,000 as at 31 March

2021. Please disclose:

1. the nature and breakdown of the Group's receivables
2. aging of the Group's receivables
3. details of the Group's underlying transactions of its other receivables and the terms of the transactions (including the contract sum) and payment terms of the underlying contracts;
4. the Company's plans to recover the trade and other receivables;
5. whether they are major customer(s) and whether the Company continues to transact with these customer(s);
6. How long are the debts outstanding and in which period the sales were reported; and
7. What were the actions taken to recover the trade and other receivables.

Responses:

a/c.	Nature and breakdown of trade and other receivables
	GROUP	31 March 2021	Details of underlying transactions
		S$'000
	Trade receivables (gross)	9,686		Sales of goods
	Less: Allowance for impairment	(1,874)		Impairment of trade receivables
	Total trade receivables	7,812
	Advances to suppliers	364		Advance payments for purchase
				of goods and services
	Deposits	1,002		Comprised mainly of:
				- Rental deposits
				- Funds set aside for
				employees' retirement
				pension for a Korea
				subsidiary
	Tax recoverable	83		Income tax recoverable
	Sundry receivables	580		Comprised mainly of value-
				added tax refundable
	Prepayments	137		Prepayment for expenses
	Total other receivables	2,166
	Total trade and other receivables	9,978

b/f.	Aging of the Group's gross trade receivables
	GROUP	31 March 2021
		S$'000
	Not past due	6,133
	Past due 0 - 30 days	862
	Past due 31 - 60 days	400
	Past due 61 - 90 days	134
	Past due 91 - 150 days	437
	Past due more than 150 days	1,720
	Total	9,686
	Credit term of up to 150 days is granted to customers. Trade receivables which were past due
	for more than 150 days amounting to S$1,720,000 were mainly pertaining to sales reported
	during year 2020. Of this outstanding balance, the management has made specific allowance
	for impairment of S$1,153,000. For the rest of the balance, the management is of the view
	that they are collectible.
d/g.	Company's plans/ actions taken to recover trade and other receivables
	The management reviews the trade receivables ledgers monthly and follows up with the
	respective sales managers and/ or customers on collection matters. If overdue debts remain

unpaid, the Group may stop processing new orders from the customers until the old debts are settled. The management may also take legal actions to recover debts, if necessary.

1. Trade receivables from major customers
   Five of the Group's major customers accounted for about 28% of total trade receivables of S$7,812,000 as at 31 March 2021. Considering the payment track record of these major customers, no allowance for impairment was made for the amount due as at 31 March 2021 and 30 June 2021 and the Group continues to trade with them.

Query (b):

Please provide information on the Group's inventory turnover days.

Response:

The Group's inventory turnover days as at 31 March 2021 is 183.

Query (c):

Please disclose a breakdown of trade and other payables amounting to S$9,844,000 as at 31 March 2021. For other payables, please disclose the aging and nature of these other payables and whether the counterparties are related parties.

Response:

GROUP	31 March 2021
	S$'000
Trade payables	3,891
Accrued expenses	5,429
Total trade payables	9,320
Other payables due to affiliated corporation (Note 1)	511
Deposits received	13
Total other payables	524
Total trade and other payables	9,844

Note 1:

Affiliated corporation refers to Hoe Leong Plastic Industry Co., Ltd, an associate of a controlling shareholder of the Group. The balance is pertaining to rental expenses for the Group's production premise in China that is accrued since December 2016. The Group and the affiliated corporation have agreed for the rent due to be paid via monthly instalments from September 2020 to December 2021. Please refer to the Company's SGXNet announcement dated 17 September 2020.

Query (d):

With regard to the current loans and borrowings of S$11,906,000 and non-current loans and borrowings of S$5,539,000, please disclose:

1. details of the loan, including the terms of the loan, interest on loans and maturity dates;
2. a breakdown of the lenders and their identities (and its ultimate beneficial shareholders and directors if this is not a bank);
3. when were the loans obtained and approved by the Board including the Audit Committee; and
4. the use of proceeds from the loan.

Response:

GROUP	31 March	Name of lender	Date of		Terms of loan; interest rate; and
	2021		inception		maturity dates
	S$'000
Non-current:
Unsecured term loan A*	4,210	UOB	16/5/2016	-	Repayable via monthly instalment of
					S$5,000 (April and May 2021); between
					S$30,000 and S$60,000 (June 2021 to
					May 2023; and between S$155,000 and
					S$165,000 (June 2023 to May 2025).
				-	Interest rate of 3% per annum.
Secured bank loan C	32	IBK	28/8/2020	Tenure of 36 months and interest rate of
				3.7% per annum.
Other borrowings	1,000	Shing Heng	30/12/2020	- Repayable in full within 18 months of
(Bridging loan)		Holding Pte. Ltd.			drawdown date (by 30 June 2022).
		(Note 1)		- Interest free for first 12 months of
					drawdown; Interest rate of 3.5% per
					annum for the 6 months following.
Hire purchase liabilities	143	Various financial	Between July	For various tenures between 36 and 60
		institutions	2017 and	months, and interest rates of between
			October	4.7% and 6.2% per annum
			2020
Other lease liabilities	154	Various landlords	-	-
		that lease
		property to the
		Group
Total non-current portion	5,539
of loans and borrowings

GROUP	31 March	Name of lender	Date of	Terms of loan; interest rate; and
	2021		inception	maturity dates
	S$'000
Current:
Unsecured term loan A*	1,010	UOB	6/5/2016	Please refer to remarks above.
Secured term loan A*	2,100	CIMB	10/5/2016	- Repayable over 180 monthly
				instalments until November 2031.
				- Interest rate of 4.1% per annum.
Secured term loan B*	887	NAB	December	- Loan is rolled over every 5 years.
			2019	- Repayable via monthly instalment of
			(Month of roll	S$12,000 and due for rollover in
			over)	December 2024.
				- Interest rate of 3.9% per annum.
Secured bank loans	4,320	IBK	31/5/2018	- Loans are available for 1 to 4 years from
(Term loans)		Woori Bank	22/10/2020	drawdown date and to be repaid in lump
		Shinhan Bank	10/6/2020	sum at maturity date.
				- Loans are subject to renewal annually
				and expected to be repriced or
				refinanced at maturity date.
				- Interest rates of between 2.0% and
				2.6% per annum.
Secured bank loans	926	IBK	Within 4	- Loans are repayable within 4 months of
(Invoice financing loans)		Kyungnam Bank	months from	drawdown date.
		KEB Hana Bank	period end	- Interest rates of between 2.9% and
			date	3.8% per annum.
Secured loans secured by	1,859	UOB	16/5/2016	Pursuant to a debt conversion exercise,
vessels*		SIF	6/8/2015	these loans were:
		RHB	20/7/2016	- Interest free since January 2021; and
				- Converted to share capital and/ or
				convertible bond in the second quarter
				of 2021.
Hire purchase liabilities	93	Various financial	Between July	Please refer to remarks above.
		institutions	2017 and
			October
			2020
Other lease liabilities	711	Various landlords	-	-
		that lease
		property to the
		Group
Total current portion of	11,906
loans and borrowings
Total loans and	17,445
borrowings

CIMB - CIMB Bank Berhad

IBK - Industrial Bank of Korea

NAB - National Australia Bank

RHB - RHB Bank Berhad

SIF - Sing Investments & Finance Limited

UOB - United Overseas Bank Limited

Note 1 - The directors and shareholders of Shing Heng Holding Pte. Ltd. are Lew Chee Beng, Lew Puay Ling and Yeo Puay Hin (who is also an Executive Director of the Company).

The above bank loans, except for secured bank loan C, are for working capital purposes. Hire purchase liabilities and secured bank loan C are in relation to purchase of plant and equipment. Other lease liabilities are mainly in relation to obligation to make payments to landlords for leases on properties that the Group occupies.

Corporate guarantee from the Company is provided for bank loans which are marked with asterisk (*) and approved by the Board of Directors before and/or on date of inception. Bridging loan of S$1 million was approved by the Board on 21 December 2020. Details of bank facilities and borrowings are tabled at Audit Committee meeting regularly.

Query (e):

Given the Group's significant current liabilities of S$25,451,000 and cash and cash equivalents of only S$1,960,000 and noting that the Company incurred losses of S$526,000 from continued operations in 1Q FY2021, please disclose the Board's assessment:

1. whether the Group's current assets are adequate to meet the Company's short term liabilities of S$25,451,000, including its bases of assessment; and
2. how the Group intends to fulfil its significant payment obligations in the next 12 months.

Where the Group has worked out debt repayment plans to fulfil its debt obligations, please disclose if the Group is on track to fulfilling these obligations.

Response:

During 2Q 2021, several corporate transactions were completed and their impact on the Group's current liabilities / current asset position are set out below:

Item	Description of corporate transactions	Impact -	Impact -
		Increase/	Increase/
		(Decrease) to	(Decrease) to
		current liabilities	current assets
		S$'000	S$'000
a	Issuance of convertible loan note amounting to	-	3,000
	S$3,000,000 to Shing Heng Holding Pte. Ltd.
b	Conversion of vessel loans amounting to S$1,859,000 to	(1,859)	-
	equity.
c	With the completion of item b above, certain loan	(2,697)	-
	covenants were extinguished or revised and there is no
	violation of loan covenants as at the end of 2Q 2021. Had
	this been considered in the end of 1Q 2021, the non-
	current portion of loans amounting to S$2,697,000 would
	have been reclassified from current liabilities to non-
	current liabilities.
d	Derecognition of trade and other payables of several of	(1,336)	-
	the Group's vessel companies following the
	commencement of liquidation on these companies.
	TOTAL	(5,892)	3,000

Assuming that the above corporate transactions were completed as at 31 March 2021, the net current asset position of the Group would improve significantly from S$4.1 million to S$13.0 million. With the completion of the fund raising and debt conversion exercise (being part of the corporate transaction set out in the table above) in 2Q 2021, current business conditions and barring unforeseen circumstances, the Board is of the opinion that the Group's current assets are adequate to meet its short term liabilities.

The Group has established debt repayment plans for a number of its creditors and it has currently been able to fulfil its obligations to these creditors. The Group continues to be in discussion with other parties to finalise repayment plans in due course.

With the improvement in net current asset position, the significant payment obligations of the Group in the next 12 months would be fulfilled by internal resources of the Group and proceeds from issuance of the convertible loan note. The Board will also explore additional funding means to shore up liquidity when necessary.

By Order of the Board

Liew Yoke Pheng Joseph

Executive Chairman and CEO

13 August 2021