ANNUAL REPORT 2009 GROWING LEADING BECOMING

Transcription

1 ANNUAL REPORT 2009 GROWING LEADING BECOMING

2 OUR MISSION AND VISION Our Mission To be the first and preferred civil engineering contractor for various industries, here and overseas. Our Vision To be a leading transport infrastructure and civil engineering company in Singapore, the region and beyond. CONTENTS 00 Our Mission and Vision 01 Our Theme 02 Our Corporate Profi le 03 Corporate Information 04 Our Guiding Principles 05 Our Three-Pronged Strategy 08 Our Milestones 12 Chairman s Statement 16 Board Of Directors 20 Key Management 21 Organisation Chart 22 Group Structure 23 Value Added Statement 26 Financial Highlights 28 Managing Director s Overview Of Operations 30 Operating And Financial Review 43 Group s Quarterly Results 44 Corporate Liquidity And Cash Resources 46 Our People 48 Our Shareholders And Investors 52 Our Customers 54 Safety And Environmental Awareness 56 Financial Contents GROWING LEADING BECOMING

3 OUR THEME Growing. Leading. Becoming. This theme aptly refl ects our aspirations and our journey of growth. The design concept is an extension of last year s theme. Just as a tiny acorn weathers the changing elements and gradually grows to become a mighty oak tree, OKP s journey of growth over the years refl ects fortitude and perseverance. As we advance on our growth path, these attributes will guide us and help us to stay the course. Growing. 43 years of stable growth have come with big triumphs and equally big challenges. Growth is a process, and in many ways, we are still a growing company. We are continually being inspired to change for the better, by fl uctuating market forces, changing competitive landscape, new customer requirements and a personal passion for excellence. We are excited by new opportunities ahead as OKP looks for growth beyond our shores. Leading was a year when we consolidated our leading position in the market for public sector infrastructure projects. We will continue to reinforce our market leadership in this segment and build market share by leveraging our strong track record in public sector works and existing client relationships to win new projects. Becoming. This word is also defi ned as appropriate, suitable, proper, pleasing to the eye. As we continue to evolve in our growth journey, it is our desire to grow as a corporate entity that exemplifi es qualities that are appropriate, suitable and proper, as befi ts a corporation of our standing. As a relatively young company, we have many aspirations. Some of our aspirations include becoming the fi rst and preferred service provider in the markets where we operate, an organisation where staff members know they are valued and can be certain they will be able to fulfi l their potential as well as an establishment that exudes fi nancial success and embraces all the values embodied in the oak tree solid, dependable, reliant, enduring. ANNUAL REPORT

4 OUR CORPOR ATE PROFILE Housing & Development Board, Jurong Town Corporation, Land Transport Authority, National Parks Board, Public Utilities Board and Urban Redevelopment Authority as well as private sector organisations like Foster Wheeler Asia Pacific Pte Ltd and WorleyParsons Pte Ltd and Far East Organisation. Our current market capitalisation is $118.7 million while total assets are $122.4 million as at 31 December OKP used special-mix asphalt F1 SBS PMB for the Formula One roads to ensure good traction for the high-speed race OKP Holdings Limited ( OKP ) is a leading home-grown infrastructure and civil engineering company, specialising in the construction of airport runways and taxiways, expressways, fl yovers, vehicular bridges, urban and arterial roads, airport infrastructure and oil & gas-related infrastructure for petrochemical plants and oil storage terminals. Established in 1966 by Founder and Chairman, Mr Or Kim Peow, OKP has two core business segments, Construction and Maintenance. The Group tenders for both public and private civil engineering and infrastructure construction projects as well as contracts for maintenance of roads and road-related facilities and building construction-related works. Since 2006, the Group has forged a presence in the Oil & Gas sector. Since then, we have completed a project relating to the $750 million Universal Terminal, a massive petroleum storage facility on Jurong Island, Singapore s oil refi ning and petrochemical hub and gone on to secure a number of other projects, including civil works relating to ExxonMobil s multi-billion dollar petrochemical project, known as the Singapore Parallel Train Project. In 2009, we secured our single largest public sector project in our 43-year history, a $119.3 million contract from the Land Transport Authority to widen the portion of Central Expressway from Pan Island Expressway to Braddell Interchange. In a strategic move to expand the global arm of our business, our wholly-owned subsidiary, OKP Technical Management Pte. Ltd., entered into a Joint Venture Agreement with CIF Singapore Pte. Ltd., a subsidiary of China Sonangol International (S) Pte. Ltd. Earlier, OKP had allotted and issued 15 million new ordinary shares to China Sonangol International (S) Pte. Ltd., a subsidiary of China Sonangol International Limited which is an overseas conglomerate engaged in oil, gas and minerals investments and explorations, crude oil supply and national infrastructure construction projects OKP has been listed on the Singapore Exchange of Singapore Dealing and Automated Quotation System ( SESDAQ ), now renamed Catalist, since 26 July Our listing was upgraded from the Catalist to the SGX Mainboard with effect from 25 July Our current market capitalisation is $118.7 million while total assets are $122.4 million as at 31 December OKP s client base includes various public sector agencies such as Civil Aviation Authority of Singapore, 2 GROWING LEADING BECOMING

5 CORPOR ATE INFORMATION BOARD OF DIRECTORS Group Chairman Mr Or Kim Peow Group Managing Director Mr Or Toh Wat Executive Director Mdm Ang Beng Tin Executive Director Mr Or Kiam Meng Executive Director Mr Oh Enc Nam Executive Director Mr Or Lay Huat Daniel Lead Independent Director Dr Chen Seow Phun, John Independent Director Mr Nirumalan s/o V Kanapathi Pillai Independent Director Mr Tan Boen Eng AUDIT COMMITTEE Chairman Dr Chen Seow Phun, John Members Mr Nirumalan s/o V Kanapathi Pillai Mr Tan Boen Eng NOMINATING COMMITTEE Chairman Mr Tan Boen Eng Members Dr Chen Seow Phun, John Mr Nirumalan s/o V Kanapathi Pillai REMUNERATION COMMITTEE Chairman Mr Nirumalan s/o V Kanapathi Pillai Members Dr Chen Seow Phun, John Mr Tan Boen Eng COMPANY SECRETARY Mr Vincent Lim Bock Hui LL.B (Hons) REGISTERED OFFICE Company Registration Number: G No. 6 Tagore Drive #B1-06 Tagore Building Singapore Tel : (65) Fax : (65) Website : DATE OF INCORPORATION 15 February 2002 SHARE LISTING OKP has been listed on the Singapore Exchange Dealing and Automated Quotation System ( SESDAQ ), now renamed Catalist, on 26 July Its listing was upgraded from the Catalist to the SGX Mainboard with effect from 25 July SHARE REGISTRAR Boardroom Corporate & Advisory Services Pte. Ltd. 50 Raffl es Place #32-01 Singapore Land Tower Singapore Tel : (65) Fax : (65) INDEPENDENT AUDITOR Nexia TS Public Accounting Corporation Public Accountants and Certified Public Accountants 5 Shenton Way #16-00 UIC Building Singapore Tel: (65) Fax: (65) Director-in-charge: Ms Kristin YS Kim (appointed from financial year ended 31 December 2007) PRINCIPAL BANKERS Oversea-Chinese Banking Corporation Limited 63 Chulia Street #06-00 OCBC Centre East Singapore Tel : (65) Fax : (65) Malayan Banking Berhad Maybank Tower 2 Battery Road Singapore Tel : (65) Fax : (65) DBS Bank Ltd 6 Shenton Way #32-02 DBS Building Tower One Singapore Tel : (65) Fax : (65) United Overseas Bank Limited 80 Raffl es Place #11-00 UOB Plaza 1 Singapore Tel : (65) Fax : (65) Citibank, N.A., Singapore Branch 3 Temasek Avenue #10-01 Centennial Tower Singapore Tel : (65) Fax : (65) INVESTOR RELATIONS For enquires, please contact the Investor Relations Department at Tel : (65) Fax : (65) okpir@okph.com STOCK DATA Stock Code : OKP SP (Bloomberg) OKPH.SI (Reuters) ISIN Code : SG1M SINGID : 5CF Sector : Construction ANNUAL REPORT

6 OUR GUIDING PRINCIPLES To Our Clients, We are committed to providing them with a superior service that meets their time schedule, exceeds their expectations in quality, reliability and safety and that is within their budget. To Our Employees, We are committed to providing them with a safe working environment, training and advancement in their respective fields and a fair and equitable system that rewards their productivity. To Our Suppliers, We are committed to developing and strengthening relationships with them, recognising them as valued contributors/partners to our business, and we as their first and preferred customer. To Our Shareholders, We are committed to maximising their return on investment while maintaining excellence in our products and services. 4 GROWING LEADING BECOMING

7 OUR THREE-PRONGED STRATEGY Staying Focused on Core Competencies Civil engineering projects will continue to feature prominently as this is our area of expertise where we have built up a distinctive track record over the years. THREE- PRONGED STRATEGY Growing Our Presence in the Oil & Gas Sector To spread risk, we will actively grow our niche in the oil & gas sector in order to grow our earnings base, and to ensure that we do not become overly-dependent on a single revenue source. Exploring Overseas Opportunities While keeping a firm grip on the local market, we will also continually look for opportunities to grow our business overseas. ANNUAL REPORT

8 GROWING 6 GROWING LEADING BECOMING

9 in STRENGTH and CAPABILITY With a focus on cultivating our internal strengths in order to promote local development and further global expansion, OKP remains on track for growth in the years ahead. ANNUAL REPORT

10 MILESTONES 2002 Listed on SESDAQ on 26 July 2002 Secured our first airport-related project worth $39.5 million Secured our first design-and-build project worth $21.6 million 2003 Incorporated a wholly-owned subsidiary company, OKP Investments (China) Pte Ltd, to handle constructionrelated business in China Entered into an Alliance Agreement with other building and construction professionals to offer a one-stop solutions centre to customers in India and other countries Undertook our first construction-related high-rise building project worth $10.5 million with a private property developer 2004 Ranked the 2nd runner-up at the 30th Annual Report Awards in the SESDAQlisted companies category Successfully completed the first construction-related high-rise building project 2005 Incorporated a 96%-owned subsidiary company, OKP (CNMI) Corporation in Saipan, Commonwealth of Northern Mariana Islands ( CNMI ) to handle the Group s infrastructure, construction and building-related businesses in CNMI 2006 Awarded our first overseas project worth approximately $14.3 million in Rota Became the first Singapore company to do business in the CNMI Broke into the oil & gas industry with our first and largest project worth approximately $50 million Became one of the first civil contractors appointed by Foster Wheeler Asia Pacific Pte Ltd and WorleyParsons Pte Ltd to carry out civil works in Jurong Island Won the Best Annual Report Award for SESDAQ company at the Inaugural Singapore Corporate Awards 2006 Incorporated a 55%-owned subsidiary company, United Pavement Specialists Pte Ltd, to handle asphalt-related business in the CNMI and Micronesia Winner of the Housing & Development Board Safety Award 2006 Secured our first project with the National Parks Board Received the Contractor of the Month Award for July 2006 from Foster Wheeler Asia Pacific Pte Ltd and WorleyParsons Pte Ltd 2007 Issued and allotted 13.6 million new ordinary shares for cash at $ each pursuant to a placement exercise Incorporated a 55% joint venture company, OKP (Oil & Gas) Infrastructure Pte Ltd, to carry out civil engineering projects in respect of oil, petrochemical and gas related businesses in Singapore Bagged a hefty $44 million civil engineering deal from Foster Wheeler Asia Pacific Pte Ltd and WorleyParsons Pte Ltd Secured two awards totaling $8.6 million from the Land Transport Authority to widen and re-surface roads with special-mix asphalt for the prestigious Formula One race slated for September 2008 Received the Contractor of the Month Award for October and November 2007 from Foster Wheeler Asia Pacific Pte Ltd and WorleyParsons Pte Ltd Successfully completed our first overseas project in Rota OKP (Oil & Gas) Infrastructure Pte Ltd took off, securing a total of three projects on Jurong Island worth a total of $11.1 million 8 GROWING LEADING BECOMING

11 2008 OKP was the Silver Winner for Best Investor Relations Award Small Market Capitalisation Category, at the Singapore Corporate Awards 2008 OKP was the first to be awarded a road-widening contract in relation to the Government s plan for the upgrading and improvement of the Central Expressway ("CTE"). The contract, worth $16.9 million, was to widen the stretch of the CTE between Ang Mo Kio Avenue 1 and Ang Mo Kio Avenue 3 One of our subsidiaries, Or Kim Peow Contractors (Pte) Ltd, was upgraded to an A1 grade civil engineering contractor under the Contractors Registration System regulated by the BCA, allowing it to tender for public sector construction projects of unlimited value Upgraded our listing from the Catalist to the SGX Mainboard with effect from 25 July 2008 Eng Lam Contractors Co. (Pte) Ltd received the Meritorious Defence Partner Award at the Total Defence Awards 2008 Successfully completed two projects from the Land Transport Authority to widen and re-surface roads with special-mix asphalt for the prestigious Formula One race which took place in September 2008 Successfully completed our first and largest oil & gas-related project, which is related to the $750 million Universal Terminal, a massive petroleum storage facility Successfully completed another oil & gas-related project in Jurong Island Left: Minister of State for Defence Associate Professor Koo Tsai Kee presenting the Meritorious Defence Partner Award to our Executive Director, Mr Or Kiam Meng, at the Total Defence Awards 2009 in recognition of OKP s support and contribution to Total Defence 2009 Secured our largest public sector project to date $119.3 million contract from LTA to widen the stretch of Central Expressway ( CTE ) from Pan Island Expressway ( PIE ) to Braddell Interchange Allotted and issued 15 million new ordinary shares at the price of $0.45 for each share to China Sonangol International (S) Pte. Ltd., a subsidiary of China Sonangol International Holding Limited which is an overseas conglomerate engaged in oil, gas and minerals investments and explorations, crude oil supply and national infrastructure construction projects Won two awards at the Singapore Corporate Awards 2009, namely Best Investor Relations Award (Gold) and Best Annual Report Award (Silver) for 2008 Awarded a Certifi cate of Achievement by DP Information Group in recognition of OKP s achievement in entering the 22nd Singapore 1000 & SME 500 rankings Secured our maiden contract from the Urban Redevelopment Authority a $3.4 million deal for environmental improvement works Wholly-owned subsidiary, Or Kim Peow Contractors (Pte) Ltd, was presented the Meritorious Defence Partner Award at the Total Defence Awards 2009 Our Group Managing Director, Mr Or Toh Wat, (standing extreme left) in one of his site visits to the Republic of Guinea Wholly-owned subsidiary, Eng Lam Contractors Co. (Pte) Ltd, was upgraded to an A2 grade civil engineering contractor under the BCA Contractors Registry System which allows the company to tender for public sector construction projects with contract values of up to $85 million Wholly-owned subsidiary, OKP Technical Management Pte. Ltd., entered into a Joint Venture Agreement with CIF Singapore Pte. Ltd., a subsidiary of China Sonangol International (S) Pte. Ltd., to further grow the external wing of our business and to undertake large urban development projects overseas Bonus Issue of 82,430,468 new shares on the basis of 1 new OKP share for every 2 existing shares held and a Rights Issue of Warrants on the basis of 1 warrant for every 4 existing ordinary shares held by entitled shareholders. Each warrant was issued at a consideration of 1 cent, with an exercise price of 20 cents and an exercise period of 3 years One of our subsidiaries, Or Kim Peow Contractors (Pte) Ltd, received a Certifi cate of Excellence from the Land Transport Authority at its Annual Safety Award The award in the Minor Category (Civil Contracts less than $20 million) was in recognition of the company s outstanding performance in occupational safety and health management ANNUAL REPORT

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13 with INNOVATIVE PRACTICES Despite changing times, OKP remains firmly rooted to our core values. Our commitment towards upholding the highest standards of excellence, quality, reliability and safety continues to reinforce our position as a leading industry player. ANNUAL REPORT

14 CHAIRMAN S STATEMENT We are certain that there will be challenges along the way, but we are prepared for all eventualities, counting on our dexterity to manoeuvre the right moves and to make the necessary decisions when the time comes. These will help us to shape OKP into the strong, vibrant and dynamic organisation that we want it to be. 12 GROWING LEADING BECOMING

15 Dear Shareholders, It has been an eventful and challenging year for OKP. We had entered 2009 with a feeling of trepidation, having been forewarned that times were looking grim. Against a backdrop of recession and a challenging global economic climate, OKP has performed well. It is with great pleasure that I present our financial performance for the year ended 31 December Financial Highlights The Group turned in a net profit after tax and minority interest of $14.4 million for the full year ended 31 December 2009, up 52.7% from $9.5 million in the preceding year. This came on the back of a record revenue of $130.0 million, an increase of 27.7% over the previous year. The Group s performance was largely driven by its construction segment, which registered a revenue of $98.2 million. This segment continued to account for the major share, or 75.5%, of the total revenue. Revenue from the Group s maintenance segment remained relatively stable at $31.8 million, up 2.9% against $30.9 million previously. The Group reported a lower gross profit margin of 18.0% compared to 20.9% in the previous year due primarily to the relatively higher costs accrued during the initial stages of a few new projects that started in Earnings per share grew to 6.06 cents, from 4.21 cents, in the previous year. We closed the year on the back of strong financials. Our assets totalled $122.4 million and net tangible assets were $57.2 million giving a net tangible asset per share of 23.1 cents. Our cash flow was healthy and at year end, our cash and cash equivalents stood at $72.2 million against $29.9 million previously, a steep rise of 141.5%. As at 31 December 2009, our shareholders fund stood at $59.5 million; we held no long-term bank debt and our working capital stood at $44.6 million. A Growing Organisation Our focus at OKP has always been to ensure that we continue to be a growing organisation. Growth can come in many forms. For investors and shareholders, the most evident and apparent growth in any listed company will be the increase in its revenue and profits. Because it is a continual process, growth is often imperceptible. Still, there is an old management adage that says you can t manage what you don t measure. Thus at OKP, we try to assess as far as possible our growth and achievement, beyond the financial numbers. While these forms of measure may be far from perfect, they do serve to keep our management and staff informed and watchful. The size of our organisation as measured by head-count has increased over the years. When we began in the 1960s, we had only 10 employees. When we went public in 2002, our strength was 409. As at 31 December 2009, we have a total of 740 staff on our payroll. This growth in staff numbers is in line with the overall uptrend in the type and size of projects we have been involved in. Over the years, our subsidiaries have gradually been upgraded under the Building and Construction Authority s Contractors Registration System. Today, our subsidiary Or Kim Peow Contractors (Pte) Ltd has an A1 grade allowing it to tender for public sector construction projects of unlimited value while another subsidiary, Eng Lam Contractors Co. (Pte) Ltd, was recently upgraded to an A2 grade contractor enabling it to tender for public sector construction projects with contract values of up to $85 million each. Indeed, in 2009, we secured our largest public sector contract to date a $119.3 million contract from the Land Transport Authority to widen the Central Expressway from the Pan Island Expressway to Braddell Interchange. Another measure of growth is in terms of OKP s market capitalisation, which roughly represents the investing public s opinion of a company s net worth. OKP started out with a market capitalisation of approximately $27.0 million when it was listed in As at 31 December 2009, its market capitalisation stood at $118.7 million, an increase of 339.6%. An Eventful Year With Some Interesting Moves OKP initiated several moves in 2009 that will facilitate our growth. We teamed up with a strategic partner, China Sonangol International (S) Pte. Ltd. ( China Sonangol ), by entering into an agreement to allot and issue 15 million new ordinary shares. China Sonangol is a subsidiary of China Sonangol International Limited, ANNUAL REPORT

16 CHAIRMAN S STATEM ENT (cont d) an overseas conglomerate engaged in oil, gas and minerals investment and explorations, crude oil supply and national infrastructure construction projects. To further cement our relationship, OKP Technical Management Pte. Ltd., entered into a 50:50 Joint Venture Agreement with CIF Singapore Pte. Ltd., a subsidiary of China Sonangol. Specifically, this move was to enable us to undertake large urban development projects overseas. The corporate move was in line with OKP s overall strategic vision to grow our business globally. We saw a good opportunity to tap on the reach, relationships and expertise of our new partner, and are exceedingly excited by the growth prospects. In September, to prime the Company for further growth, the Group proposed a Bonus Issue of 82,430,468 new shares on a one-for-two basis and a Rights Issue of Warrants on a one-for-four basis to shareholders. The rationale for the Bonus Issue was to reflect the growth and expansion of the Group s business and to improve the liquidity of OKP s shares in the market. The Rights Issue helped to generate further equity participation in the Company by shareholders through the exercise of the warrants, and as and when the warrants are exercised, the proceeds derived will expand and strengthen the capital base of the Company and provide additional resources and working capital required to support the business activities and operations of the Group. These initiatives reflect flexibility in thinking, a fleet-footed approach to market opportunities and a wholesome appetite for new challenges. It is this entrepreneurial spirit spiced with healthy and calculated risk-taking that we seek to cultivate. Needless to say, we continue to exercise due care and diligence in our cost control in the course of our business, ensuring that we do not take unnecessary financial risk, always working towards optimum efficiency. Leading The Market: Beneficiary Of Public Sector Projects In 2009, OKP continued to score in public sector projects. It was fortuitous that OKP operated in an industry that was deemed to be a bright spark in a sea of gloom. The Singapore Government had advanced $1.3 billion worth of small and medium-sized public sector construction projects each valued at $50 million or less as part of its targeted approach aimed at helping small and medium-sized contractors. Even then, public sector construction contracts fell from $15.5 billion in 2008 to $13.5 billion last year, according to the BCA. Overall though, on-site construction activity measured by certified progress payments rose to a record level of $30 billion in This construction output reflects a 16% rise from $26.2 billion in the preceding year, and marks the third consecutive year of double-digit growth. OKP has been a beneficiary of public sector projects, garnering a total of $148.6 million in government contracts in Nonetheless, it is surely not by chance or luck that we continue to be a leading player in the public sector arena. Our presence in this sector dates back to the 1960s and over the decades, we have built up a solid reputation and a sound track record. Our clients have come to see OKP as a sturdy, trustworthy and reliable partner, providing high-quality service and completing projects on time and on budget. These qualities, which have held us in good stead in the past, provided a sharp competitive edge for us even as the competition got tougher in recent years. On our part, we work hard to maintain our standards, approaching each tender and every new contract with a fresh eye, always looking out for ways to improve and do better. This is the only way to prevent complacency from setting in and to retain our leading position in this space. Oil and Gas When the recession set in last year, some projects in the Oil and Gas sector were also affected. We secured a $21.7 million project from Foster Wheeler Asia Pacific Pte Ltd and WorleyParsons Pte Ltd to carry out civil works on Jurong Island in the early part of the year. Indeed, our involvement in projects in the Oil and Gas sector has transformed the complexion of our business. These contracts have been a key revenue driver for us and we hope to grow this aspect of our business as we continue to hone our knowledge and prospect for work. Outlook As we exit 2009, the global economic outlook has improved and things are looking markedly better on that front. Back home, the economy appears to have turned the corner. Singapore s Trade Minister Lim Hng Kiang recently asserted that Singapore was unlikely to sink back into recession even though economic recovery this year is expected to be sluggish. 14 GROWING LEADING BECOMING

17 The BCA has forecasted that Singapore s construction demand for 2010 is projected to reach between $21.0 and $27.0 billion this year. The bulk of this year s demand, the BCA said, will come from the public sector which is projected to form 65.0% of total demand, or between $14.0 and $17.9 billion. The Government has said that it will continue to invest in infrastructure works, including the MRT Downtown Line Stage 3, North- South Expressway and the Thomson Line, construction of new HDB flats and upgrading and development of new educational and healthcare facilities. In 2011 and 2012, the average annual construction demand is projected to be between $18.0 and $25.0 billion, with public sector construction demand likely to reach between $10.0 and $14.0 billion a year in 2011 and 2012, with 45.0% coming from building projects and the rest driven by civil engineering projects. In view of our excellent track record and leading position in public sector work, we are optimistic that we can continue to benefit from public sector works. On the external front, we are actively prospecting in the African continent; the Republic of Guinea, Angola and Zimbabwe appear to be the land of promise for us. We hope in this new year to make our mark in these distant markets. We are certain that there will be challenges along the way, but we are prepared for all eventualities, counting on our dexterity to manoeuvre the right moves and to make the necessary decisions when the time comes. These will help us to shape OKP into the strong, vibrant and dynamic organisation that we want it to be. Dividends Our Board of Directors is recommending a first and final dividend of 2 cents per share and a special dividend of 1 cent per share. It is our way of thanking our shareholders for their unstinting support. A Note Of Thanks I would like to thank our customers, suppliers and business partners for their continued encouragement and support. Thanks also to my management team and my staff for their commitment, dedication and invaluable contribution. Finally, we thank you, our shareholder, for your loyalty and unswerving belief in us. Or Kim Peow Group Chairman ANNUAL REPORT

18 BOARD OF DIRECTORS MR OR KIM PEOW, PBM Group Chairman MR OR TOH WAT, PBM Group Managing Director MDM ANG BENG TIN Executive Director Mr Or Kim Peow, PBM, 75, is the founding member of the Group. He was appointed Group Chairman of OKP Holdings Limited on 15 February 2002 and was last re-elected at the 2008 Annual General Meeting on 20 April Mr Or has more than 50 years of experience in the infrastructure and civil engineering business. He is responsible for overseeing the overall management and strategic development of the Group. He founded the Group 43 years ago and was instrumental in growing it and steering the Group through major changes in its history. Mr Or continues to be active, playing an advisory role in the Group s strategic development and planning. Mr Or is also actively involved in community activities and in recognition of his contributions, he was awarded the Public Service Award ( PBM ) in He is currently the Vice-Chairman of Gek Poh Community Club Management Committee and the Patron of Potong Pasir Citizens Consultative Committee. Mr Or Toh Wat, PBM, 42, was appointed Group Managing Director of OKP Holdings Limited on 15 February Mr Or has more than 17 years of experience in the construction industry. He is responsible for setting the Group s corporate directions and strategies, and overseeing the day-to-day management and business development of the Group. Mr Or is also actively involved in community activities and in recognition of his contributions, he was awarded the Public Service Award ( PBM ) in He is currently the Chairman of Potong Pasir Community Club Management Committee and the Vice-Chairman of Jurong West Secondary School Advisory Committee. Mr Or holds a Diploma in Mechanical Engineering from Ngee Ann Polytechnic and a Bachelor of Applied Science (Construction Management) with Honours from the Royal Melbourne Institute of Technology. Mdm Ang Beng Tin, 54, is an Executive Director of OKP Holdings Limited. She was appointed a Director on 20 March 2002 and was last re-elected at the 2008 Annual General Meeting on 20 April Mdm Ang joined the Group in 1979 and has more than 35 years of experience in administration and human resources. She is responsible for managing employee relations, benefi t programmes and insurance claims at Or Kim Peow Contractors (Pte) Ltd, one of the Group s subsidiary companies. Mdm Ang holds GCE O Levels qualifications. 16 GROWING LEADING BECOMING

19 MR OR KIAM MENG Executive Director MR OH ENC NAM Executive Director MR OR LAY HUAT DANIEL Executive Director Mr Or Kiam Meng, 45, is an Executive Director of OKP Holdings Limited. He was appointed a Director on 20 March 2002 and was last re-elected at the 2007 Annual General Meeting on 21 April Mr Or has more than 24 years of experience in the construction industry since joining the Group in He oversees the daily site management and operations of Or Kim Peow Contractors (Pte) Ltd, one of the Group s subsidiary companies. Mr Or is currently the Patron of Anchorvale Community Centre Management Committee. Mr Or holds a Diploma in Building and a Certifi cate in Occupational Safety & Health from Singapore Polytechnic. Mr Oh Enc Nam, 54, is an Executive Director of OKP Holdings Limited. He was appointed a Director on 20 March 2002 and was last re-elected at the 2006 Annual General Meeting on 27 April Mr Oh has more than 30 years of experience in the construction industry since he joined the Group in He is responsible for the day-to-day management and the overall operations of Eng Lam Contractors Co. (Pte) Ltd, one of the Group s subsidiary companies. Mr Oh holds GCE A Levels qualifications. Mr Or Lay Huat Daniel, 32, is an Executive Director of OKP Holdings Limited. He was appointed a Director on 1 August 2006 and was last re-elected at the 2006 Annual General Meeting on 27 April Mr Or joined OKP Holdings Limited in He is currently responsible for overseeing the day-to-day management, business development, investor relations and corporate communications of the Group. Mr Or is also actively involved in community activities. He is currently a member of Tampines GRC and Tampines West Citizen Consultative Committee. Mr Or holds a Bachelor of Commerce majoring in Corporate Finance from the University of Western Australia, Perth. ANNUAL REPORT

20 BOARD OF DIRECTORS (con t d) DR CHEN SEOW PHUN, JOHN Lead Independent Director Dr Chen Seow Phun, John, 56, is an Independent Director of OKP Holdings Limited. He was appointed a Director on 25 June 2002 and currently serves as Chairman of the Audit Committee and a member of the Nominating Committee and Remuneration Committee. He was appointed the Lead Independent Director of the Company on 1 August He was last re-elected as a Director at the 2007 Annual General Meeting on 21 April Dr Chen is currently the Managing Director of JCL Business Development Pte Ltd, a business consulting and investment company, and the Chairman of SAC Capital Pte Ltd, a licensed corporate fi nance fi rm. Dr Chen also sits on the boards of a number of publicly listed companies. He was a Member of Parliament from September 1988 to April From March 1997 to June 1999, he was the Minister of State for Communications. From June 1999 to November 2001, he was the Minister of State for Communications and Information Technology and Minister of State for National Development. Dr Chen has been a Board Member of the Economic Development Board, the Housing & Development Board, the Port of Singapore Authority and Singapore Power Ltd. Dr Chen holds a PhD degree in Electrical Engineering from the University of Waterloo, Canada. List of present and past directorships, other than those held in the Company, as at 31 December 2009 and the preceding 3 years: Present Directorships JCL Business Development Pte Ltd Unigold Asia Limited Thai Village Holdings Ltd HYLYNX Pte Ltd Hiap Seng Engineering Ltd Hongguo International Holdings Limited PSC Corporation Ltd Education Solutions International Pte Ltd Matex International Limited SAC Capital Pte Ltd (previously known as Sirius Asia Capital Pte Ltd) Tat Seng Packaging Group Ltd HLH Group Limited (previously known as PDC Corp Ltd) Fu Yu Corporation Ltd Riverstar Investment Limited Past Directorships SNF Corporation Ltd CNY Capital Pte Ltd (previously known as China Ginseng Industries Pte Ltd) MR NIRUMALAN S/O V KANAPATHI PILLAI Independent Director Mr Nirumalan s/o V Kanapathi Pillai, 57, is an Independent Director of OKP Holdings Limited. He was appointed a Director on 1 June 2005 and currently serves as Chairman of the Remuneration Committee and a member of the Audit Committee and Nominating Committee. He was last re-elected as a Director the 2008 Annual General Meeting on 20 April Mr Pillai is the Senior Director of Global Law Alliance LLC (incorporating Niru & Co). Global Law Alliance LLC is a corporate law fi rm representing leading global banking and fi nancial institutions, major international companies including Fortune 500 companies, private equity groups, venture capitalists and global asset management companies. In the late 1990s, Niru & Co was associated with CMS Cameron McKenna, a top-tier law fi rm with headquarters in London. Mr Pillai has been in legal practice for more than 30 years specialising in insurance, reinsurance, shipping, libel and slander, corporate, commercial and civil litigation. Mr Pillai qualifi ed as a Barrister-at-Law (England and Wales) and was admitted 18 GROWING LEADING BECOMING

21 to the Honourable Society of the Inner Temple in He has been practising as an Advocate and Solicitor of the Supreme Court of Singapore since 1978 and was admitted as a Barrister and Solicitor of the Supreme Court of Victoria, Australia, in Mr Pillai holds a LLM degree from the University of Melbourne, Australia and a LLM degree (with Distinction) from the Nottingham Trent University, United Kingdom. He is also a Fellow of the Chartered Institute of Arbitrators, United Kingdom and the Singapore Institute of Arbitrators. Until 2008, he was also an Adjunct Associate Professor in the Faculty of Engineering, National University of Singapore. List of present and past directorships, other than those held in the Company, as at 31 December 2009 and the preceding 3 years: Present Directorships Nil Past Directorships Nil MR TAN BOEN ENG Independent Director Mr Tan Boen Eng, 77, is an Independent Director of OKP Holdings Limited. He was appointed a Director on 25 June 2002 and currently serves as Chairman of the Nominating Committee and a member of the Audit Committee and Remuneration Committee. He was last re-appointed a Director at the 2008 Annual General Meeting on 20 April Mr Tan has extensive experience in both the public and private sectors. He has held and is currently holding directorships in several listed and unlisted companies from various industries, including business consultancy, training and management consultancy. Mr Tan was the President of the Institute of Certifi ed Public Accountants of Singapore from 1995 to April He was a member of the Nanyang Business School Advisory Committee, Nanyang Technological University and is currently a Board member of Tax Academy of Singapore. He has previously held the positions of Senior Deputy Commissioner of the Inland Revenue Authority of Singapore, Director of Singapore Pools Pte Ltd and Board Member of the Accounting and Corporate Regulatory Authority. He also served as Chairman of the Securities Industries Council and was a Member of the Singapore Sports Council. Mr Tan holds a Bachelor of Arts Degree in Economics (Honours) from the University of Malaya in Singapore. He is also a Fellow of the Institute of Certifi ed Public Accountants of Singapore and CPA Australia. He received the Public Administration Medal (Silver) in List of present and past directorships, other than those held in the Company, as at 31 December 2009 and the preceding 3 years: Present Directorships Association of Taxation Technicians (S) Limited Certifi ed Accounting Technicians (Singapore) Ltd. TEE International Limited Past Directorships AsiaMedic Limited Asiaprime Pte Ltd ANNUAL REPORT

22 KEY MANAGEMENT MS ONG WEI WEI Group Financial Controller OKP Holdings Limited MR OR YEW WHATT Project Director Eng Lam Contractors Co. (Pte) Ltd Ms Ong Wei Wei joined OKP Holdings Limited in She oversees the Group s fi nance and corporate functions covering fi nancial reporting, treasury, tax, legal and corporate secretarial and investor relations. Prior to joining the Group, she was a corporate advisory manager with an accounting fi rm. Ms Ong is a Certifi ed Public Accountant of the Institute of Certifi ed Public Accountants of Singapore. She is also a fellow member of the Association of Chartered Certifi ed Accountants (United Kingdom), member of the Institute of Internal Auditors, Inc. (Singapore Chapter) and Singapore Institute of Directors. Mr Or Yew Whatt joined the Group in He is currently the Project Director of Eng Lam Contractors Co. (Pte) Ltd, one of the Group s subsidiary companies. He is responsible for the supervision of projects, resolving site issues and is involved in the project tender process. He has more than 19 years of experience in the construction industry. Mr Or holds a Certifi cate in Pavement Construction and Maintenance from the Building and Construction Authority. MR OH KIM POY Operations Director Eng Lam Contractors Co. (Pte) Ltd Mr Oh Kim Poy joined the Group in He is currently the Operations Director of Eng Lam Contractors Co. (Pte) Ltd, one of the Group s subsidiary companies. He is responsible for supervising and monitoring of projects. Mr Oh has more than 35 years of experience in the construction industry. 20 GROWING LEADING BECOMING

23 ORGANISATION CHART SHAREHOLDERS BOARD OF DIRECTORS AUDIT COMMITTEE REMUNERATION COMMITTEE NOMINATING COMMITTEE MR OR KIM PEOW Group Chairman MR OR TOH WAT Group Managing Director MDM ANG BENG TIN MR OR KIAM MENG MR OH ENC NAM MR OR LAY HUAT DANIEL Executive Director Administration / Human Resources of OKPC Executive Director Site Management and Operations of OKPC Executive Director Management & Operations of EL Executive Director Business Development / Corporate Communications MS ONG WEI WEI MR OR YEW WHATT MR OH KIM POY Group Financial Controller Financial Reporting / Treasury / Tax / Legal / Corporate Secretarial / Investor Relations Project Director Project Management of EL Operations Director Operations Control of EL OKPC : Or Kim Peow Contractors (Pte) Ltd EL : Eng Lam Contractors Co. (Pte) Ltd ANNUAL REPORT

24 GROUP STRUCTURE Company Reg No.: G SINGAPORE COMMONWEALTH OF NORTHERN MARIANA ISLANDS SUBSIDIARIES OR KIM PEOW CONTRACTORS (PTE) LTD Company Reg No.: R 100% ENG LAM CONTRACTORS CO. (PTE) LTD Company Reg No.: G 100% OKP (CNMI) CORPORATION Tax Reference No.: % OKP (OIL & GAS) INFRASTRUCTURE PTE LTD Company Reg No.: W 55% OKP INVESTMENTS (CHINA) PTE LTD Company Reg No.: G 100% OKP TECHNICAL MANAGEMENT PTE LTD Company Reg No.: E 100% UNITED PAVEMENT SPECIALISTS PTE LTD Company Reg No.: Z 55% UNITED PAVEMENT SPECIALISTS (CNMI) CORPORATION Tax Reference No.: % JOINT VENTURE CIF - OKP CONSTRUCTION AND DEVELOPMENT PTE. LTD Company Reg No.: E 50% 22 GROWING LEADING BECOMING

25 VA LU E A DDED STATEMENT 2009 $' $' $' $' $'000 Revenue 129, , ,660 73,267 61,440 Less: purchase of goods and services (86,689) (63,872) (95,261) (55,142) (49,275) Value added from operations 43,293 37,953 29,399 18,125 12,165 Other income 1, , Gain / (loss) on foreign exchange (49) (200) (225) (86) (17) 1, , Total value added available for distribution 44,706 38,596 30,694 18,599 12,995 Distribution: % % % % % To employees (1) Salaries and other staff costs 21, , , , , To government (1) Corporate and property taxes 2, , , , To providers of capital (1) Finance costs (2) Dividends to shareholders 2,997 2,997 2, , , , Balance retained in the business: (1) Depreciation and amortisation 2,461 2,251 1,947 1,553 1,424 (2) Unappropriated profits 14,442 9,458 10,921 4, (3) Minority interests (4) (88) (10) 16, , , , , Non-production costs and income: (1) Provision for doubtful debts (trade) Total distribution 44, , , , , PRODUCTIVITY ANALYSIS Number of employees Value added per employee ($'000) Value added per dollar of employment cost Value added per dollar of investment in fixed assets (before depreciation) Value added per dollar of revenue Total value-added created by the Group in 2009 amounted to $44.7 million (2008: $38.6 million). In 2009, about $22.0 million or 49% of the value-added was paid to employees in the form of salaries and wages. $2.7 million or 6% was paid to the government in the form of corporate and property taxes while $3.2 million or 7% was paid as dividends and interest to financial institution. Balance of $16.9 million was retained by the Group for its future growth. In 2008, about $20.2 million or 52% of the value-added was paid to employees in the form of salaries and wages. $2.7 million or 7% was paid to the government in the form of corporate and property taxes while $3.2 million or 8% was paid as dividends and interest to financial institution. Balance of $11.8 million was retained by the Group for its future growth. ANNUAL REPORT

26 BECOMING 24 GROWING LEADING BECOMING

27 the INDUSTRY LEADER Even as we stay grounded to our values, OKP also understands the need to evolve with the times in order to grow. We aspire to build upon our achievements that will create value not only for ourselves, but also our staff, suppliers, customers and shareholders. Together, our efforts will lead us towards a common goal to become a leading transport infrastructure and civil engineering company in Singapore, the region and beyond. ANNUAL REPORT

28 FINANCIAL HIGHLIGHTS Financial Year Ended 31 December FOR THE YEAR 2009 $' $' $' $' $'000 Revenue - Construction ($'000) 98,184 70, ,687 53,436 48,758 Revenue - Maintenance ($'000) 31,798 30,915 19,973 19,831 12,682 Total revenue 129, , ,660 73,267 61,440 Revenue - Construction (% of total revenue) 75.5% 69.6% 84.0% 72.9% 79.4% Revenue - Maintenance (% of total revenue) 24.5% 30.4% 16.0% 27.1% 20.6% Gross profit 23,386 21,324 21,845 10,445 3,665 Gross profit (%) 18.0% 20.9% 17.5% 14.3% 6.0% Earnings before interest, taxation, depreciation and amortisation (EBITDA) 19,750 14,672 15,819 6,989 2,040 EBITDA margin (%) 15.2% 14.4% 12.7% 9.5% 3.3% Finance cost (i.e. Interest expense) Profit before income tax 17,103 12,227 13,735 5, Profit before income tax (%) 13.2% 12.0% 11.0% 7.3% 0.8% Profit after income tax 14,438 9,531 11,000 4, Profit after income tax (%) 11.1% 9.4% 8.8% 5.5% 0.4% Profit after taxation and minority interests (PATMI) 14,442 9,458 10,921 4, PATMI margin (%) 11.1% 9.3% 8.8% 5.7% 0.5% AT YEAR END Current assets 105,793 62,955 63,219 37,552 25,426 Total assets 122,378 76,821 76,930 47,956 34,667 Current liabilities 61,194 33,319 40,105 23,471 14,818 Total liabilities 62,863 36,115 42,758 25,275 16,136 Total debt (i.e. financial lease) 2,701 4,174 3,794 2,304 1,502 Shareholders' fund 58,918 40,105 33,644 22,683 18,535 Total equity 59,514 40,706 34,172 22,681 18,531 Operating cashflow 44,634 15,779 12,994 3,763 4,060 Cash and cash equivalents 77,691 35,410 24,862 14,656 12,781 Net tangible assets 57,231 38,418 31,957 20,996 16,848 Number of shares 247, , , , ,261 Adjusted weighted average number of ordinary shares -Basic 238, ,791* 222,668* 204,391* 204,391* -Fully diluted 238, ,791* 222,668* 204,391* 204,391* Share price at year end (cents) Market capitalisation 118,700 31, ,404 13,626 17,714 Capital expenditure 5,201 2,850 4,768 2,748 1,139 * Retrospective adjustment for bonus shares issued in GROWING LEADING BECOMING

29 FINANCIAL RATIOS 2009 $' $' $' $' $'000 Profitability Revenue growth (%) 27.7% (18.3%) 70.1% 19.2% (15.5%) PATMI growth (%) 52.7% (13.4%) 163.3% 1,355.4% (81.8%) Return on assets (%) (PATMI/Total assets) 11.8% 12.3% 14.2% 8.6% 0.8% Return on equity (%) (PATMI/Average shareholders' equity) 29.2% 25.6% 38.8% 20.1% 1.5% Liquidity Current ratio (times) Cash per share (cents) Net tangible assets per share (cents) Leverage Total debt to equity ratio (times) (Total debt/total equity) Interest cover (times) (EBITDA/Finance cost) Investors' ratios Earnings per share (cents) (EPS) -Basic Fully diluted Gross dividend per share (cents)-ordinary (DPS) Gross dividend per share (cents)-special (DPS) 1.0 Gross dividend yield (%) based on year-end share price 6.3% 9.5% 2.9% 15.0% Gross dividend payout (%) (DPS/EPS) 49.5% 47.5% 40.9% 76.4% Productivity Number of employees Revenue/employee ($'000) Improvement to Roadside Drains EUP Batch 5 Contract 3- Opera and East View Garden Estates ( ) Tanglin Halt Outlet Drain at North Buona Vista (8288) ANNUAL REPORT

30 MANAGING DIRECTOR S OVERVIEW OF OPERATIONS We were attentive to market shifts and operational details and these helped us to buttress our market position. At the same time, we enhanced our effort to retain and develop high calibre individuals. These people form a highly qualified team whose enthusiasm and experience continue to play a vital role in the success of our businesses. 28 GROWING LEADING BECOMING

31 Group Managing Director s Overview Of Group Operations Despite a challenging global economic environment, OKP has performed well. We were attentive to market shifts and operational details and these helped us to buttress our market position. At the same time, we enhanced our effort to retain and develop high calibre individuals. These people form a highly qualified team whose enthusiasm and experience continue to play a vital role in the success of our businesses. As a leading home-grown infrastructure and civil engineering company in the region, OKP has two core business segments, Construction and Maintenance. The Group tenders for both public and private civil engineering and infrastructure construction projects, which involve the construction of urban and arterial roads, expressways, vehicular bridges, flyovers, airport runways and taxiways. In the past two years, the Company has taken on projects in the Oil and Gas sector, providing civil construction work for petrochemical plants and oil storage terminals. Public Sector Contracts We tendered aggressively for public sector contracts and the number of wins we secured in 2009 helped to fortify our leading position in this space. Over the last four decades, OKP has carefully built up a strong reputation and today, its name stands for quality, reliability, safety, expertise and value. These qualities no doubt enabled us to seal $148.6 million worth of public sector contracts in the year. We started fiscal 2009 with a contract of $15.4 million from the Public Utilities Board for drainage improvement works. We maintained this momentum by securing four more public sector contracts totalling $133.2 million, comprising: (i) a $119.3 million contract, our largest public sector project by far, from Land Transport Authority to widen the Central Expressway from the Pan Island Expressway to Braddell Interchange; (ii) a $4.8 million contract from the Land Transport Authority to upgrade roads for the Formula One Circuit; (iii) a $3.4 million maiden contract from the Urban Redevelopment Authority; and (iv) a $5.7 million contract from National Parks Board to construct three park connectors. These projects included civil engineering works involving final premix surfacing works, works relating to road kerbs and pavements, de-silting of existing drains, road widening, road re-surfacing, road upgrading and maintenance as well as drainage improvement works. Maintenance: Providing A Recurring Income Stream By and large, maintenance contracts tend to be lower in value and spread over a longer period of time. Nonetheless, we scrupulously grew this business, taking on projects relating to road upgrading works and drainage improvement, among others, as these provide a healthy recurring income stream for OKP. This segment increased by 2.9% over the previous year. While the nature of maintenance work is different from our construction contracts, it is the same qualities that have made it possible for us to win the deals. Indeed, our success and progress continue to be underpinned by our adherence to high quality and a reputation for good service and reliability. Project Operations Good teamwork is the key to the smooth running of our project operations. Seamless co-operation among co-workers, a clear delineation of job roles and a healthy respect for each other have enabled OKP to manage a resilient workforce with a strong work ethic. Our three teams who are specialists in Oil and Gas/Petrochemical; Airport Infrastructure; and Road Construction and Road Maintenance remain in place, with members who are flexible enough to move across disciplines as and when the need arises. Financial Management We continue to guard our margins jealously. We do this by exercising the highest level of financial prudence, cutting down on unnecessary costs and expenses where possible. In good times or bad, being vigilant in this area goes a long way in helping us to maintain a healthy set of numbers. OKP remains committed to improving operational capabilities and efficiencies, achieving higher productivity and controlling internal cost so that we are able to maintain strong financial performance. I would like to express my sincere gratitude to my management team and my staff for their commitment, dedication and support, even as we continue to work together towards becoming the first and preferred civil engineering contractor in Singapore and beyond. Or Toh Wat Group Managing Director ANNUAL REPORT

32 OPER ATING AND FINANCIAL REVIEW OPERATING REVIEW BUSINESS SEGMENTAL BREAKDOWN (i) Construction Completed Construction Projects Widening of Central Expressway from Ang Mo Kio Avenue 1 to Ang Mo Kio Avenue 3 (ER213) During the year in review, we successfully completed three projects. A list of the construction projects completed in 2009 is found below. LIST OF COMPLETED CONSTRUCTION PROJECTS No Description of Completed Construction Projects Customer Date of Commencement Date of Completion Contract Value ($) 1 Widening of Central Expressway from Ang Mo Kio Avenue 1 to Ang Mo Kio Avenue 3 (ER213) 2 Proposed Construction of Roads and Infrastructure for Tukang Estate Phase 1A (JTC C ) 3 Proposed Covered Pedestrian Overhead Bridge Across Tampines Expressway Near Pasir Ris Blk 762 and IKEA/COURTS (ER266) Land Transport Authority Jurong Town Corporation Land Transport Authority February 2008 August ,867,000 September 2008 September ,777,000 June 2008 August ,529,000 Proposed Construction of Roads and Infrastructure for Tukang Estate Phase 1A (JTC C ) On-going Construction Projects In addition to tendering for and securing new wins, OKP also continued to work on a number of on-going projects. This year, we will deliver six completed projects to our clients. These include four projects awarded by the Land Transport Authority, namely the construction of covered linkways, cover to pedestrian overhead bridges and bus shelters [RD247]; the widening of Eunos Link and Jalan Eunos from Airport Road to Sims Avenue [ER194]; Tanglin Halt Outlet Drain at North Buona Vista [8288]; and road works in City Centre (Phase 3) [RD238]. We will also see completion of three park connectors, namely Sungei Pinang Park Connector along Sungei Pinang off Buangkok Drive, Sungei Serangoon Park Connector along Sungei Serangoon off Sengkang East Drive and Tebing Walk and Ang Mo Kio Avenue 5 Park Connector from Ang Mo Kio Town Garden West to existing Buangkok Park Connector along Ang Mo Kio Avenue 5. The client in this instance is the National Parks Board. In the course of this year, we will also complete the civil works for Foster Wheeler Asia Pacifi c Pte Ltd and WorleyParsons Pte Ltd in relation to the Singapore Parallel Train project. 30 GROWING LEADING BECOMING

33 LIST OF ON-GOING CONSTRUCTION PROJECTS No Description of On-going Construction Projects Customer Date of Commencement 1 Term Contract 7 for Construction of Covered Linkways, Cover to Pedestrian Overhead Bridges and Bus Shelters (RD247) Land Transport Authority Date of Completion Contract Value ($) January 2008 July ,067,000 2 Widening of Eunos Link and Jalan Eunos from Airport Road to Sims Avenue (ER194) 3 Tanglin Halt Outlet Drain at North Buona Vista (8288) 4 Widening of Central Expressway from Pan Island Expressway to Braddell Interchange (ER288) Land Transport Authority Land Transport Authority Land Transport Authority April 2008 October ,508,250 December 2008 December ,827,000 January 2009 December ,270,000 5 Selected Civil Works at Jurong Island FWP Joint Venture January 2009 June ,700,000 6 Proposed Development of: (a) Sungei Pinang Park Connector along Sungei Pinang off Buangkok Drive (b) Sungei Serangoon Park Connector along Sungei Serangoon off Sengkang East Drive and Tebing Walk (c) Ang Mo Kio Ave 5 Park Connector from Ang Mo Kio Town Garden West to existing Buangkok Park Connector Along Ang Mo Kio Ave 5 (Nparks/N/142/2008) National Parks Board June 2009 March ,667,000 7 Road works in City Centre (Phase 3) (RD238) Land Transport Authority May 2009 May ,802,000 No Description of Newly-awarded Construction Projects in Early Final Premix Surfacing, Reinstatement and Auxillary Works at Tuas View Extension, Phase 1 (JTC C ) Customer Jurong Town Corporation Date of Commencement Date of Completion Contract Value ($) March 2010 June ,177,000 ANNUAL REPORT

34 OPER ATING AND F I NA NCI A L R E V I E W (con t d) OPERATING REVIEW (con t d) (ii) Maintenance Completed Maintenance Projects We completed a number of maintenance contracts and continued to work on some that were secured previously. In addition to providing a steady and recurring income stream for OKP, our Maintenance segment is an important part of the service that OKP provides to our clients. In 2009, this segment contributed 24.5% (S$31.8 million) to total revenue. LIST OF COMPLETED MAINTENANCE PROJECTS No Description of Completed Maintenance Projects Customer Date of Commencement Date of Completion Contract Value ($) 1 Improvement to Roadside Drains III EUP 4 Contract 1 - East Coast Keris and Macpherson Gardens Estates ( ) 2 Improvement to Roadside Drains III EUP 4 Contract 2 - Hillview and Jalan Tari & Jalan Kayu Estates ( ) Public Utilities Board Public Utilities Board July 2007 July ,327,000 July 2007 March ,257,000 On-going Maintenance Projects During the year in review, we successfully landed our fi rst contract with the Urban Redevelopment Authority for environmental improvement works. The $3.4 million contract involves fi rststage works in Siglap Village that lasted eight months, completing in January Stage 2 will see works at Upper Serangoon Road and along the canal at Kampong Sireh, completing later this year. The scope of work includes demolition and repair works to walkways, pavements and roads, building of new walkway slabs and planter boxes, landscaping works, and maintenance and engineering works. The other maintenance contract OKP won was from the Public Utilities Board to improve road drains in Opera Estate and East View Garden Estate. LIST OF ON-GOING MAINTENANCE PROJECTS No Description of On-Going Maintenance Projects Customer Date of Commencement Date of Completion Contract Value ($) 1 Painting and Cleansing of Road Related Facilities in East Sector For a Period of Two Years (RP126) 2 Ad Hoc Repairs and Upgrading of Roads and Road Related Facilities in Central Sector For a Period of Two Years (RP125) 3 Improvement to Roadside Drains III Western Sector Contract 3 Chin Bee Road and Gul Circle ( ) 4 Improvement to Roadside Drains EUP Batch 5 Contract 3 Opera and East View Garden Estates ( ) 5 Proposed Environmental Improvement Works at Siglap Village and Upper Serangoon Road and Along the Canal at Kampong Sireh (URA/000/CS/0813) Land Transport Authority Land Transport Authority Public Utilities Board Public Utilities Board Urban Redevelopment Authority April 2008 March ,327,000 April 2008 April ,700,000 May 2008 September ,937,000 January 2009 January ,397,000 May 2009 May ,387, GROWING LEADING BECOMING

35 FINANCIAL REVIEW INCOME STATEMENTS 2009 $' $'000 Change % Revenue - Construction 98,184 70, Maintenance 31,798 30, Total revenue 129, , Cost of works (106,596) (80,501) 32.4 Gross profit 23,386 21, Gross profit margin 18.0% 20.9% Other income 1, Expenses - Administrative (7,509) (9,498) (20.9) - Other (49) (249) (80.3) - Finance (186) (193) (3.6) Profit before income tax 17,104 12, Income tax expense (2,666) (2,696) (1.1) Net profit 14,438 9, Net profit margin 11.1% 9.4% Total comprehensive income attributable to: Equity holders of the Company 14,442 9, Minority interests (4) 73 (105.5) 14,438 9, Widening of Eunos Link and Jalan Eunos from Airport Road to Sims Avenue (ER194) Construction works for park connectors at Sungei Pinang, Sungei Serangoon and Ang Mo Kio Avenue 5. ANNUAL REPORT

36 OPER ATING AND F I NA NCI A L R E V I E W (con t d) FINANCIAL REVIEW (con t d) Revenue For the fi nancial year ended 31 December 2009 ( 2009 ), our Group achieved a record revenue of $130.0 million since our listing in This was an increase of 27.7% from the $101.8 million registered in the previous corresponding year ( 2008 ). The rise in revenue was contributed by a strong revenue growth of 38.5% from the construction segment, coupled with the marginal increase in the recurring revenue from the maintenance segment. The strong growth in revenue from the construction segment was attributable to the higher percentage of revenue recognised from a few construction projects which were in full swing and revenue from some new projects secured during The construction segment continued to be the major contributor to our Group s revenue. It accounted for 75.5% (2008:69.6%) of our Group s revenue in 2009, with the maintenance segment making up the remaining 24.5% (2008:30.4%). Gross Profit And Gross Profit Margin In line with the increase in our revenue, our gross profi t increased by $2.1 million from $21.3 million for 2008 to $23.4 million for Our gross profi t margin dropped slightly from 20.9% for 2008 to 18.0% for This was due mainly to the relatively higher costs accrued during the initial stages of a few new projects that started in Other Income The increase in other income of $0.6 million or 73.4% was largely attributable to a non-recurring reversal of allowance for impairment of trade receivables of $1.1 million during 2009, partially offset by lower interest income from bank deposits of $0.2 million and the nonrecurring loss arising from the revaluation of an investment property of $0.2 million in Improvement to Roadside Drains III Western Sector Contract 3-Chin Bee Road and Gul Circle ( ) Widening of Central Expressway from Pan Island Expressway to Braddell Interchange (ER288) 34 GROWING LEADING BECOMING

37 Administrative Expenses The decrease in administrative expenses of $2.0 million or 20.9% was largely attributable to a decrease in professional fees, the absence of allowance for impairment of trade receivables and a decrease in transportation expenses, which were partially offset by higher directors remuneration and staff bonuses to reward staff for achieving the strong fi nancial performance of our Group in Other Expenses Other expenses decreased by $0.2 million to $0.05 million for 2009 due mainly to lower foreign exchange losses resulting from the weakening of the United States Dollar against the Singapore Dollar for Finance Expenses Finance expenses decreased marginally by 3.6% or $0.007 million to $0.19 million due mainly to repayment of fi nance leases in Profit Before Income Tax The Group achieved a profit before income tax of $17.1 million, an increase of $4.9 million or 39.9% from This was due mainly to an increase in our gross profit of $2.1 million and other income of $0.6 million coupled with a decrease in administrative expenses of $2.0 million, other expenses of $0.2 million and finance costs of $0.007 million. Our profit before income tax margin increased from 12.0% for 2008 to 13.2% for Income Tax Expense Income tax expense for 2009 and 2008 remained constant at $2.7 million, representing an effective tax rate of 15.6% for 2009 and 22.0% for The decrease in effective tax rate for 2009 was due mainly to a refund of an overprovision of tax amounting to $0.2 million in the fourth quarter of 2009, a reduction in corporate tax rate from 18% in 2008 to 17% in 2009 and certain income items which were not subject to tax. Minority Interests Minority interests decreased due to losses incurred by a subsidiary for Net Profit Overall, net profi t surged by 51.5% or $4.9 million to $14.4 million compared to 2008 following the increase in profi t before income tax. Our net profi t margin increased from 9.4% for 2008 to 11.1% for Improvement to Roadside Drains EUP Batch 5 Contract 3-Opera and East View Garden Estates ( ) Tanglin Halt Outlet Drain at North Buona Vista (8288) ANNUAL REPORT

38 OPER ATING AND FINANCIAL REVIEW (con t d) FINANCIAL REVIEW (con t d) STATEMENT OF FINANCIAL POSITION 2009 $' $'000 Change % Current assets - Cash and cash equivalents 77,691 35, % - Trade and other receivables 26,201 25, % - Others 1,902 1, % Non-current assets - Property, plant and equipment 13,647 10, % - Others 2,937 2, % Total assets 122,378 76, % Total liabilities (62,863) (36,115) 74.1% Net assets 59,515 40, % Total shareholders' fund 58,918 40, % Minority interests (0.7%) Total equity 59,515 40, % Widening of Eunos Link and Jalan Eunos from Airport Road to Sims Avenue (ER194) Improvement to Roadside Drains at East Coast Keris and MacPherson Gardens Estates ( ) 36 GROWING LEADING BECOMING

39 Total assets Total assets increased by $45.6 million or 59.3%, from $76.8 million as at 31 December 2008 to $122.4 million as at 31 December The increase was attributable to: (a) an increase in cash and cash equivalents of approximately $42.3 million due mainly to the infl ow of proceeds from the issuance of new shares and rights issue exercise during 2009 coupled with higher cash generated from operations as a result of strong operational performance in 2009; Total liabilities Total liabilities increased by $26.7 million or 74.1%, from $36.1 million as at 31 December 2008 to $62.9 million as at 31 December The increase was due mainly to: (a) an increase in trade payables and accrued operating expenses of approximately $25.0 million arising from accrual of construction costs for some on-going projects as at 31 December 2009 and provision of bonuses for both the directors and employees for achieving the strong fi nancial performance of the Group in 2009; Total equity Total equity, comprising share capital, warrants reserve, retained earnings and minority interest increased by $18.8 million, from $40.7 million as at 31 December 2008 to $59.5 million as at 31 December The increase was largely attributable to: (a) the profi t generated from operations of approximately $11.5 million for 2009; (b) the increase in share capital of approximately $6.7 million resulting from the issuance of new shares; and (b) an increase in trade and other receivables of approximately $0.3 million due mainly to higher amount of prepayments balance and advances made to suppliers as at 31 December 2009; and (c) an increase in property, plant & equipment of approximately $2.7 million due mainly to the acquisition of the property at 30 Tagore Lane Singapore for a cash consideration of $2.05 million and the purchase of new plant & equipment to support new and existing projects. (b) an advance received from a customer of approximately $3.0 million for an on-going project during 2009; and (c) a partial offset by the decrease in finance lease liabilities due to repayment during (c) the warrants reserve of approximately $0.6 million in relation to the rights issue exercise during Ad hoc Repairs and Upgrading of Roads and Road-Related Facilities in Central Sector for a Period of Two Years (RP125) Painting and Cleansing of Road Related Facilities in East Sector for a Period of Two Years (RP126) ANNUAL REPORT

40 OPER ATING AND FINANCIAL REVIEW (con t d) FINANCIAL REVIEW (con t d) REVENUE REVENUE ($ Million) REVENUE BY BUSINESS SEGMENTS(%) Maintenance Construction PROFITABILITY PROFIT BEFORE AND AFTER INCOME TAX ($ Million) Profit after income tax Profit before income tax Revenue in 2009 increased by 27.7% from $101.8 million to $130.0 million. The increase was mainly due to increases in both construction and maintenance segments. The construction segment increased by 38.5% to $98.2 million in Revenue from the maintenance segment grew by 2.9% to $31.8 million. The increase in revenue from the construction segment was mainly due to a higher percentage of contribution from a number of public sector projects during Profit before income tax increased by 39.9% to $17.1 million in This was due mainly to an increase in our gross profit coupled with decreases in administrative, other and finance expenses. Profit after income tax increased by 51.5% to $14.4 million compared to 2008 following the increase in profit before income tax. On a segmental basis, our construction business accounted for 75.5% of our revenue while the remaining 24.5% came from the maintenance segment. 38 GROWING LEADING BECOMING

41 PROFIT BY BUSINESS SEGMENT (%) Maintenance Construction BALANCE SHEET SHAREHOLDERS EQUITY AND NET TANGIBLE ASSETS ($ Million) Net tangible assets Shareholders equity CASH AND CASH EQUIVALENTS ($ Million) The construction segment was the main profit contributor in The decrease in the profit contributed by the construction segment was mainly due to the relatively higher cost accrued during the initial stages of a few new construction projects that started in As a result of higher profit generated from operations in 2009, both shareholders equity and net tangible assets increased to $58.9 million and $57.2 million respectively. We continued to enjoy positive cash flow for Our cash and cash equivalents stood at $77.7 million as at 31 December This is a significant increase of $42.3 million, from $35.4 million as at 31 December ANNUAL REPORT

42 OPER ATING AND FINANCIAL REVIEW (con t d) FINANCIAL REVIEW (con t d) BALANCE SHEET CAPITAL EXPENDITURE ($ Million) MARKET CAPITALISATION FINANCIAL RATIOS- PROFITABILITY RETURN ON ASSETS AND EQUITY (%) Return on Equity Return on Assets , , ,714 13,626 31, Capital expenditure for 2009 were mainly related to purchase of new plant and equipment to support existing and newly-awarded projects, as well as the acquisition of the property at 30 Tagore Lane Singapore for a cash consideration of $2.05 million. The Group s market capitalisation stood at $118.7 million as at 31 December 2009, compared to $31.5 million as at 31 December 2008, a robust jump of 277.2%. Return on assets and return on equity stood at 11.8% and 29.2% respectively for GROWING LEADING BECOMING

43 FINANCIAL RATIOS- LIQUIDITY CURRENT RATIO (Times) CASH PER SHARE (Cents) NET TANGIBLE ASSETS PER SHARE (Cents) The Group continued to be strong in its short-term financial position as the current ratio improved at 1.7 times for We maintained a prudent and effective cash management policy. Cash per share improved by 33.1% from 23.6 cents per share in 2008 to 31.4 cents per share in Although Group s net tangible assets increased by 49.0% from $38.4 million to $57.2 million, the net tangible assets per share decreased by 9.8% to 23.1 cents as at 31 December 2009 due to an increase in the number of shares issued as at 31 December ANNUAL REPORT

44 OPER ATING AND FINANCIAL REVIEW (con t d) FINANCIAL REVIEW (con t d) FINANCIAL RATIOS- LEVERAGE DEBT TO EQUITY RATIO (Times) INTEREST COVER (Times) FINANCIAL RATIOS- PRODUCTIVITY REVENUE PER EMPLOYEE ($ 000) Our debt to equity ratio remained constant at 0.1 times in The Group s interest cover remained strong at times in Revenue per employee is $175,651 in GROWING LEADING BECOMING

45 GROUP S QUARTERLY RESULTS First Quarter Second Quarter Third Quarter Fourth Quarter Full Year $'000 % of 2009 $'000 % of 2009 $'000 % of 2009 $'000 % of 2009 $ 000 Revenue , % 31, % 35, % 33, % 129, , % 22, % 23, % 27, % 101,825 EBITDA , % 4, % 5, % 4, % 19, , % 3, % 3, % 4, % 14,672 Profit before income tax , % 4, % 4, % 4, % 17, , % 2, % 2, % 3, % 12,227 Profit attributable to shareholders , % 3, % 4, % 3, % 14, , % 1, % 2, % 3, % 9,458 All quarters in 2009 reported higher revenue compared to their corresponding quarters in 2008 driven by higher percentage of revenue recognition from the construction segment. Higher EBITDA were recorded in all quarters in 2009 compared to their corresponding quarters in All the quarters in 2009 registered higher profit before income tax compared to the corresponding quarters in Better profit before income tax led to higher profit attributable to shareholders for all the quarters in OKP held its Extraordinary General Meeting on 16 November 2009 at its office premise ANNUAL REPORT

46 CORPOR ATE LIQUIDITY AND CASH RESOURCES GROUP S CASH FLOW STATEMENT 2009 $' $' $' $' $'000 Cash fl ows from operating activities 44,635 15,779 12,994 3,286 4,037 Cash fl ows used in investing activities (4,979) (167) (1,908) (1,049) (473) Cash fl ows generated from/(used in) fi nancing activities 2,617 (5,091) (809) (831) (2,805) Net increase in cash and cash equivalents 42,273 10,521 10,277 1, Cash and cash equivalents at beginning of year 29,929 19,408 9,131 7,725 6,966 Cash and cash equivalents at end of year 72,202 29,929 19,408 9,131 7,725 Comprise: Cash at bank and on hand 12,456 11,785 8,754 2,546 6,465 Short-term bank deposits 65,235 23,625 16,109 12,110 6,316 77,691 35,410 24,863 14,656 12,781 Short-term bank deposits pledged to banks (5,489) (5,481) (5,455) (5,525) (5,056) Cash and cash equivalents in consolidated cash flow statements 72,202 29,929 19,408 9,131 7,725 We generated a net cash amount of $44.7 million from operating activities in 2009 on the back of stronger operational performance. This was a signifi cant increase of $28.9 million from $15.8 million in Net cash used in investing activities amounting to $5.0 million was mainly due to purchases of new property, plant and equipment to support new and existing projects in Net cash infl ow from fi nancing activities was $2.6 million. This was mainly due to cash proceeds from the issuance of new shares and warrants exercise of $7.4 million, which was partially offset by repayment of fi nance lease liabilities, interest payments and dividend payments to shareholders in 2009 amounting to $4.8 million. Overall, cash and cash equivalents stood at $72.2 million as at 31 December This is a signifi cant increase of $42.3 million, from $29.9 million as at 31 December The long lowbed trailer hauled by a prime mover was purchased during 2009 to transport machinery and material The rough terrain crane GR-700 EX with a maximum capacity of 70,000 kg at 3.0 metres was purchased during 2009 to support newly awarded projects 44 GROWING LEADING BECOMING

47 NET INDEBTEDNESS 2009 $' $ $ $ $ 000 Due within one year: Financial lease obligations 1,196 1,528 1, Due after one year: Financial lease obligations 1,505 2,646 2,451 1, Total debt 2,701 4,174 3,794 2,304 1,502 The fi nance lease liabilities are secured by way of corporate guarantees issued by the Company and charged over the property, plant and equipment under the fi nance leases. The decrease in debt amount from $4.2 million as at 2008 to $2.7 million as at 2009 was due to repayment of fi nance lease liabilities during Above is one of the hydraulic excavators which was purchased in 2009 to support both new and existing projects The recycle crawler crusher ZR420JC was purchased in 2009 to crush a wide range of material more efficiently ANNUAL REPORT

48 OUR PEOPLE For over 40 years, OKP has taken special care of our employees. This tradition exists even to this day. Today, OKP s staff strength stands at over 740 compared to under 10 in 1967 when we first started. Our team has grown steadily over the years as the Company set out on its expansion path. Our workers come from diverse backgrounds and nationalities with different capabilities, and comprise administrative support staff, corporate executives, project managers, civil engineers, site supervisors and general construction workers. Indeed, our diverse workforce, with their different perspectives and unique wealth of knowledge, has contributed to our growth. It is due in no small part to their sacrifice and contribution that OKP now owns a leading market position, particularly in public sector works. Our priority, going forward, is on people development and promoting work-life balance, building on the existing camaraderie among our employees. As we soldier on, we shall continue to count on them to help us become the organisation we aspire to be. EMPLOYMENT POLICY THAT ATTRACTS THE BEST PEOPLE As an organisation that is still growing, OKP has invested considerable time and resources in boosting our standing as a preferred employer in the construction sector. Indeed, our people are our key asset and the key to our long-term economic success. Attracting the best people, understanding their aspirations, motivating them to progress through the ranks and retaining them are fundamental to the long-term growth and sustainability of our business. Our commitment to attract, retain and develop the best people has always been high in our priorities and this is even more important as the Company continues to grow, leads the market in public sector construction works and becomes a preferred contractor to our clients. Our employment policy spells out the framework for achieving the highest levels of performance in our employees and for treating all staff fairly, equally and consistently. Staff members enjoy a slew of benefits in kind. In addition to medical benefits, including hospitalisation insurance, the Company also provides transportation allowance, subscription benefits to relevant societies, and various other forms of insurance such as personal accident insurance and travel insurance. At OKP, it is not just the women who are entitled to maternity leave when a new baby arrives; the men, too, are entitled to paternity leave in the event of a new addition to the family. We remain committed to promoting teamwork and trust, and achieving the highest levels of health and safety standards for our staff in their respective work environments. To encourage and enhance staff interactions, the Company organises social activities such as annual dinners and New Year celebrations outside of work. Our success depends on a high level of dedication by all employees. It is therefore essential to provide a healthy work environment and at the same time enhance employee skills and performance through continuous training and development programmes. Our training and development courses cover soft skills, technical skills as well as onthe-job training to develop well-rounded employees and increase overall workplace effectiveness and productivity. During the year, we strengthened our talent pipeline and continued to train and develop skilled people. Our focus has also been on developing a positive workplace culture across all levels of the organisation where accountability and performance are recognised and rewarded. OKP Annual Dinner 2009 held at the Grassroot s Club on 19 December 2009 Staff gathering for a Toolbox Meeting 46 GROWING LEADING BECOMING

49 TEAMWORK BEGINS AT THE TOP Teamwork at OKP begins at the top and permeates to every level. Our open and paternal leadership style promotes superior performance, allowing each worker to start the day with a sense of purpose and end it with a feeling of achievement. The people of OKP readily embrace one another s unique differences and are committed to working cohesively as members of a team. This is especially important in an industry where work safety is of the utmost importance. The management takes a special interest in ensuring the well-being of all employees, particularly in matters likely to affect their performance and welfare. A dynamic internal communication process disseminates relevant company information regularly to all staff at all levels and includes a review and feedback process that our staff has found useful. The reporting structure in the Group is relatively fl at and encourages open communication between the management and workers, thus improving effi ciency and enabling a swift decision-making process across the organisation on important matters. Functional Management & Supervisory ("M&S") Local 8% 6% 7% Foreign 1% 1% 1% Finance & Administration ("F&A") Local 1% 2% 1% Foreign 1% 0% 0% Site Operations ("S&O") Local 10% 10% 12% Foreign 79% 81% 79% 100% 100% 100% Years of Service More than 15 years 2% 1% 1% 10 years to 14 years 8% 3% 3% 6 years to 9 years 13% 10% 9% 3 years to 5 years 8% 20% 15% Less than 3 years 69% 66% 72% 100% 100% 100% Educational Qualification Degree & above 10% 8% 9% Diploma & equivalent 6% 6% 6% "O" & "A" Level & Equivalent 3% 3% 3% Trade Certificate & Equivalent 35% 36% 69% Secondary Level & lower 46% 47% 13% 100% 100% 100% Footnote: (1) M&S - Directors, financial controller, managers, engineers and quantity surveyors (2) F&A - Administration clerks and accounts executives (3) S&O - Site supervisors, site clerks, site inspectors, foreman, machine operators, general workers and drivers We strive to produce an environment that allows staff to reach the highest level of performance and to even exceed their own expectations. Our personnel policy sets achievable performance targets for all employees and rewards them accordingly when targets are met. TRAINING AND DEVELOPMENT PHILOSOPHY Staff education and training are vital to us in OKP. Our carefully planned training and development activities equip workers with key competencies and skills necessary to perform effectively in their current job functions as well as meet the future requirements of the business. department regularly evaluates employees training needs and gathers feedback from the directors of the Company to recommend an appropriate training budget and programme that would best meet the aspirations of our people as well as the business needs of the organisation. That s what makes working at OKP so special. Our human resource policy offers our people room to grow. We seek every opportunity to help our people become leaders of tomorrow. Our human resource ANNUAL REPORT

50 OUR SHAREHOLDERS AND INVESTORS We are committed to creating longterm value for our shareholders. OKP s core values of quality, reliability, safety and integrity are also reflected in our practice of sound governance. Indeed, our corporate governance philosophy is rooted in the principles of transparency, responsibility, fairness, accountability and honesty. We believe that sound corporate governance is critical to enhancing and retaining investor trust and confidence, and to this end, we maintain a clearly-structured and robust corporate governance system that aims to create lasting value to shareholders, investors and customers. BEST PRACTICES IN CORPORATE GOVERNANCE Our conduct as a responsible business entity and as a trustworthy corporate citizen is reflected in the formulation of our corporate governance framework. We adopt best practices to: facilitate prompt regulatory and legal compliance; support sensible and informed decision-making in all matters that affect our business; identify and mitigate major economic, market, business and financial risks; secure the trust of all stakeholders; ensure sustainable business practices; promote timely and truthful disclosure of necessary information regarding the financial position and performance of the Company to enable all stakeholders to make meaningful investment decisions; and respond promptly and appropriately to changing market conditions and the business environment. OKP was featured in The Edge Singapore on 6 April 2009 and 5 October 2009 A ROBUST BOARD TO PROMOTE SOUND CORPORATE GOVERNANCE The primary role of the Board of Directors is to oversee the way management serves and protects the interests of all stakeholders. We believe that an active, well-informed and independent Board is necessary to ensure the highest standards of corporate governance. Our Board exercises its fiduciary responsibilities in the widest sense of the term. To do this, the directors have made certain that the Board is independent and fully informed of major risks and strategic concerns confronting the business. While the Board oversees the overall structure and process of governance, each business unit and every staff member is responsible for acting in accordance with sound corporate governance practices. Over the year, the Board held four meetings and deliberated on matters that were important to shareholders and investors, including those relating to strategy, risk management and people. The Audit Committee, comprising entirely of independent directors, conducted four meetings in 2009 to oversee the activities and independence of external auditors and financial reporting activities. PROACTIVE INVESTOR RELATIONS ( IR ) POLICY Our approach with respect to Investor Relations is one of engagement. We have a dedicated IR team that actively works towards the sharing of information to help investors and potential investors to better understand our business, keep abreast of corporate developments and facilitate more informed investment decisions. Our proactive stance is part of our overall efforts to deepen the level of understanding of investors with respect to OKP and our business operations. In the course of our IR work, we are also constantly lifting ourselves to a higher level of performance in terms of our communications with investors, shareholders as well as those in the financial community. 48 GROWING LEADING BECOMING

51 We have an IR link on our company s website, providing IR contact information as well as access to our media releases, research reports and annual reports. In recognition of our excellent investor relations focus, OKP was awarded the Best Investor Relations Award (Gold) at the Singapore Corporate Awards BASIC POLICY FOR INFORMATION DISCLOSURE We work towards active information disclosure to bridge the gap between the Company s true value and market valuation. We seek to provide impartial and fair information, both financial and non-financial, to all shareholders and investors and foster effective communications on all fronts as we believe that effective communication is essential in building strong stakeholder relationships. OKP provides a range of opportunities for communication with shareholders, investors, and other stakeholders and these include: Corporate Announcements Contract wins, strategic initiatives and important information are disseminated through the SGXNET, press releases and alerts. At the same time, the information is also made available on our corporate website. Our Group s quarterly financial results and annual reports are also issued and announced in a timely manner, within the mandatory reporting period, and uploaded on our corporate website. Analyst Briefings The management is available to speak and meet with analysts during the release of our half-year and full-year results. On an ad-hoc basis, we also meet with analysts and fund managers who seek a better understanding of our Group and our operations. Where possible and when appropriate, media interviews are also conducted to give the public a deeper insight into our business as well as management thinking. We were featured in various financial journals and magazines during the financial year 2009, including The Business Times, The Edge, Lianhe Zaobao, ShareInvestor and Pulses. OKP was also featured on Channel News Asia s weekly business programme, Money Mind, on 25 October Annual Report Our annual report is a comprehensive report on our activities in fiscal 2009 and is intended to give all stakeholders and other interested parties important information about our business operations and financial performance. We continually review and improve the content and format to provide shareholders with easy access to key information such as our strategies, activities and policies. Over the past several years, our annual reports have won a number of awards. These are: Best Annual Report Award (Silver) at the Singapore Corporate Awards 2009; Best Annual Report Award (Gold) at the Inaugural Singapore Corporate Awards 2006; and Second runner-up in the SESDAQ-listed companies category at the 30th Annual Report Awards Annual General Meeting The Annual General Meeting (AGM) of shareholders is an invaluable platform for constructive dialogue between shareholders and the Board of Directors. It presents an opportunity for shareholders to ask any questions regarding the decisions the business has taken and will take in the future. The Chairpersons of the Audit, Nomination and Remuneration Committees are available at the AGM to address any issues and answer any questions. After the meeting, shareholders are also given ample opportunity to interact with the management team as well as Board members. Online Communication OKP makes full use of web technology to reach out to our target audience. We use an annual webcast to reach our investors and also take questions online via an Online Management Questionand-Answer forum with investors through Shareinvestor.com. The Group s website also provides the latest information on OKP s business structure and operations. Through this channel, interested parties including investors are able to feedback and queries to management, and be assured of a timely response. OKP was also featured in Focus, a weekly newsletter by ListedCompany.com. Our Executive Director, Mr Or Lay Huat Daniel, receiving the Best Investor Relations Award (Gold) from Mr Lim Chee Onn ANNUAL REPORT

52 OUR SHAREHOLDERS AND INVESTORS (cont d) OKP DIVIDEND POLICY We do not have a formal dividend policy. The form, frequency and amount of future dividend of our shares will depend on our earnings, financial position, results of operations, capital needs, plans for expansion and other factors as our Board of Directors may deem appropriate. INVESTORS RATIOS BASIC EARNINGS PER ORDINARY SHARE (Cents) 4.9* 6.1 GROSS DIVIDEND PER ORDINARY SHARE (Cents) * * * As a result of the increase in profit after tax, earnings per ordinary share increased from 4.2 cents in 2008 to 6.1 cents in The first and final and special dividends in 2009 of 3.0 cents per ordinary share was 1.0 cent or 50% higher than * Retrospective adjustment for bonus shares issued in 2009 GROSS DIVIDEND YIELD (%) GROSS DIVIDEND PAYOUT (%) The gross dividend yield of 6.3% is calculated based on the share price of 48.0 cents as at 31 December We paid the first and final and special dividends of 3.0 cents per share in 2009 representing a dividend payout ratio of 49.5%. 50 GROWING LEADING BECOMING

53 SHARE PERFORMANCE Share Price ($) OKP Share Price STI Index Index Source: Share Price * 2007* 2006* 2005* Highest Price $ $ $ $ $ Lowest Price $ $ $ $ $ December Closing Price $ $ $ $ $ * Restated to take into account the retrospective adjustment of bonus shares issued in 2009 FINANCIAL CALENDAR January Listing and Quotation of Warrants on SGX-ST 25 February Announcement of Full Year Results for Financial Year February Announcement of Full Year Results for Financial Year April Despatch of Annual Report 1 April Despatch of Annual Report 20 April Seventh Annual General Meeting 21 April Eighth Annual General Meeting 7 May Books Closure for Dividend Entitlement 7 May Books Closure for Dividend Entitlement 27 May Proposed Payment of 2009 Dividends (Subject to Shareholders approval at AGM) May Announcement of First Quarter Results for Financial Year 2010 July Announcement of First Half Results for Financial Year 2010 October Announcement of Third Quarter Results for Financial Year May Announcement of first quarter results for financial year May Proposed Payment of 2008 Dividend 27 July Announcement of First Half Results for Financial Year October Announcement of Third Quarter Results for Financial Year November Extraordinary General Meeting 24 November Books Closure for Allotment of Bonus Shares 1 December Listing and Quotation of Bonus Shares on SGX-ST 8 December Books Closure for Provisional Allotments of Warrants ANNUAL REPORT

54 OUR CUSTOMERS At OKP, we are unswerving in our commitment to putting our customers first. It is as we do this that we will build a strong organisation recognised for operating to high standards and one that is built on solid customer relationships. VITAL ELEMENTS IN STRONG CUSTOMER RELATIONSHIPS Over the years, we have established some essential building blocks for maintaining strong customer relationships: Holistic and excellent customer service standards; High standards of service quality that continually exceed customers expectations; Prompt response to customers needs and in developing solutions to their problems; and Honest business practices that put our customers interests first. Our customers consistently demand the highest standards from us, no matter whether it relates to safety or delivery of service. It is in response to them that OKP consistently delivers a service that is second to none, always on time and on budget. To do so, we work closely with customers to garner a deeper understanding of their requirements. This enables us to align our strategies with their needs, resulting in meaningful partnerships that are mutually beneficial. The deep understanding and trust arising from these long-lasting relationships with our customers help us to build a profitable and sustainable business. This is even more critical as we continue on our pathway of growing the business, leading the market and becoming a preferred service provider for existing and potential customers. HOLISTIC CUSTOMER RELATIONSHIP DIFFERENTIATES US IN A COMPETITIVE MARKET OKP views the relationship with our customers as a key differentiator in a highly competitive industry. Our customers come from diverse industries and thus have varied business needs. A thorough knowledge of the challenges they face, a detailed understanding of the environments they operate in, coupled with the strength of our relationships with them, form the basis for our future growth. Customer relationship has also evolved over time due to changing market conditions, rising competition, greater project complexities and growing customer demands. More and more, contracts are being awarded for the entire process in the delivery of an expertise, rather than just a completed piece of work at the end of a project. Reflecting this new integrated and collaborative approach, OKP s traditional customer relationship Our Group Managing Director, Mr Or Toh Wat, with our engineers and customers from the CAAS 52 GROWING LEADING BECOMING

55 has also changed over time into long-term partnerships with our clients whereby our customers are engaged at critical junctures along the entire process of a project from start to finish. GROWING CUSTOMER BASE Our customer base has grown steadily over the years. Our client list now comprises public sector agencies such as Civil Aviation Authority of Singapore, Housing & Development Board, Jurong Town Corporation, Land Transport Authority, National Parks Board, Public Utilities Board and Urban Redevelopment Authority as well as private sector organisations such as Foster Wheeler Asia Pacific Pte Ltd and WorleyParsons Pte Ltd. Many of these customer relationships extend over many years, underlining the trust and confidence our customers have in us. OKP has also inevitably changed and grown alongside our customers through the years. Indeed, we owe our very existence to the continual support of our customers, whom we consider our business partners. Our customers consistently demand the highest standards from us, no matter whether it relates to safety or delivery of service. It is in response to them that OKP consistently delivers a service that is second to none, always on time and on budget. ANNUAL REPORT

56 SAFETY AND ENVIRONMENTAL AWARENESS OKP puts Safety First in all that we do Health, safety and the environment are fundamental to everything that we do at OKP. We believe that all our staff should be able to work safely in a healthy workplace and that our activities should not harm the general public or the environment in which we operate. We believe that good health, safety and environmental performance go hand-inglove with good business performance. Health, safety and the environment are fundamental to everything that we do at OKP. We believe that all our staff should be able to work safely in a healthy workplace and that our activities should not harm the general public or the environment in which we operate. We believe that good health, safety and environmental performance go hand-inglove with good business performance. OKP operates a Quality, Environmental, Health and Safety ( QEHS ) Management System that incorporates the internationally recognised ISO 9001:2000, ISO 14001:2004 and OHSAS 18001:2007. These certifications are also prerequisites for OKP to maintain its status as a Grade A1 and A2 contractor in the Civil Engineering (CW02) category with the Building & Construction Authority ( BCA ). In recognition of our health and safety performance, OKP has received a number of awards, including the Construction Safety Award 2006 from the Housing & Development Board and the Merit Award 2006 from the Land Transport Authority. 54 GROWING LEADING BECOMING

57 SAFETY COMMITMENT At OKP, work safety is of paramount importance. Our comprehensive construction safety programme has multiple facets, which include: A vigorous sub-contractor and supplier selection and approval process to include companies with good safety track records; Risk assessments to identify, among other things, situations and processes that may potentially cause harm to people. After identification is made, we will evaluate how likely and severe the risk will be, and then determine the preventive measures to put in place; and Field safety audits at construction work sites. In recognition of the company s outstanding performance in occupational safety and health management, Or Kim Peow Contractors (Pte) Ltd received a Certificate of Excellence from the Land Transport Authority at the Annual Safety Award 2009 for the Minor Category (Civil Contracts less than $20 million). OKP also mandates the presence of members trained in First Aid for every construction team to ensure that our employees get immediate attention if they are injured or taken ill at work. MINIMISING ENVIRONMENTAL IMPACT Compared to other sectors, construction work can potentially cause serious environmental impact. Construction activities cause air pollution, generate noise and emit by-products that include construction and demolition waste, waste water and other waste from construction sites. With growing public awareness of environmental issues and an increasing emphasis on corporate social responsibility ( CSR ), construction businesses are under increased pressure to ensure that their activities do not damage the environment. thus, OKP is always mindful that our activities are conducted in a responsible manner so as to minimise any harmful impact on the environment. Among the many initiatives we take to protect the environment are: Recycling and reusing construction waste; Proper management and disposal of construction waste; Regular maintenance of construction machinery to reduce carbon emissions; and Treatment of all waste water from construction activities by treatment plants before being released back into public drains. RAISING THE BAR IN SAFETY AND ENVIRONMENTAL AWARENESS We continue to raise our safety and environmental awareness by adopting some healthy practices. Prevention and Control We recognise prevention to be the best way to protect the safety and well-being of our employees, the public and the environment in which we operate. We are committed to identifying and evaluating the health and safety impacts of our operations and we strive to minimise those by adopting best practices to prevent incidents and protect company assets. Communication We promote openness and dialogue with our employees, sub-contractors and suppliers by anticipating and responding to concerns about safety issues in all our operations. In addition to regular safety briefing sessions, safety messages and posters are regularly posted on our message boards to remind and educate our workers and business partners on the importance of a safe work environment. Training We value well-informed and trained staff and view them as essential in achieving safety excellence. We provide appropriate safety education and training programmes, both in-house and external, to our employees to ensure that they are prepared to do their jobs in a safe manner. In addition, we develop the knowledge and skills of our safety professionals, enabling them to keep abreast of the latest legal and other requirements. Our Executive Director, Mr Oh Enc Nam, receiving the Housing & Development Board Safety Award from Senior Minister of State for National Development, Ms Grace Fu Hai Yien Certificate of Excellence from the Land Transport Authority at the Annual Safety Award 2009 ANNUAL REPORT

58 FINANCIAL CONTENTS 57 Risk Assessment and Management 61 Corporate Governance Report 80 Directors Report 84 Statement by Directors 85 Independent Auditor s Report 87 Balance Sheets 88 Consolidated Statement of Comprehensive Income 89 Consolidated Statement of Changes in Equity 90 Consolidated Statement of Cash Flows 91 Notes to the Financial Statements 131 Letter to Shareholders 143 Statistics of Shareholdings 145 Statistics of Warrantholdings 146 Notice of Annual General Meeting Proxy Form 56 GROWING LEADING BECOMING

59 RISK ASSESSMENT AND MANAGEMENT The Group is exposed to a number of possible risks that may arise from economic, business, market and financial factors and developments. As such, our management has put in place various risk management policies and procedures to manage and mitigate the risks arising in the normal course of operations. Outlined below are the risks that we could be exposed to and how we will mitigate them as and when they arise: 2. Dependence on the changes to applicable government policies The services that we provide mainly relate to building safety and design standards in connection with the construction of infrastructure projects such as roads and expressways. Any change to these laws, regulations and policies affecting the construction industry, including the infrastructure market in Singapore, may have an effect on our business and operations. RISKS RELATING TO OUR INDUSTRY 1. Dependence on the construction industry We are exposed to the cyclical fluctuations of the economy as the construction business is dependent on the health of the infrastructure market in Singapore, which is in turn dependent on the general health of the economy of Singapore. A downturn in the economy could dampen general sentiment in the infrastructure market and reduce construction demand. This would invariably have an adverse effect on our business and financial performance. Our business and operations in Singapore are subject to the laws and regulations of the land and any change in Government regulations in the course of a project, for example, increasing controls over worksite safety and building standards could result in our Group incurring additional costs to comply with the new regulations. In addition, any changes in government regulations or policies of those countries where our suppliers are located may impact the supply of construction materials and cause disruptions to the operations of our Group. All these could have an adverse effect on our project costs and financial performance. Since our inception, the Singapore market has been our primary source of revenue. The general economic, political, legal and social conditions prevailing in Singapore would affect our financial performance and operations. As a significant part of our business involves public sector projects, any pump priming by the Government could have a positive impact on us. The reverse is also true and any move by the Government to scale back on expenditure relating to road construction and maintenance could affect our business negatively. To mitigate these risks, we would send our project staff regularly for training to keep them updated on changes in government regulations or policies in Singapore and other countries as well as new safety and building standards imposed by the regulatory authorities or clients. 3. Guidelines and regulations by Building and Construction Authority ( BCA ) We are guided and regulated by the BCA that also functions as an administrative body for tenders relating to public sector construction projects. The BCA grading is stipulated in the BCA Contractors Registry System ( CRS ). There are six major groups of registration heads, namely Construction Workheads ( CW ), Construction Related ( CR ) Workheads, Mechanical & Electrical ( ME ) Workheads, Maintenance Workheads ( MW ), Supply ( SY ) Workheads and Regulatory Workheads ( RW ). Within each workhead, there are financial gradings, which determine a contractor s tender capacity. BCA has also adopted a credit rating system to assess the financial health of companies. This serves as a supplementary indicator of the financial standing of larger construction firms such as those in the top categories of A1, A2 and B1. ANNUAL REPORT

60 RISK ASSESMENT A N D M A NAGE M EN T (con t d) In the event that we are unable to maintain our BCA grading status, our Group would not be able to tender for public projects of the stipulated contract values on the CRS. This could have an adverse impact on our financial performance. However, we have been able to maintain our position over the last several decades. We also continually review our financials and improve our financial management where necessary. Indeed, in September 2009, our wholly owned subsidiary, Eng Lam Contractors Co. (Pte) Ltd was upgraded to an A2 grade contractor, making it eligible to tender for public sector construction projects with contract values of up to S$85 million. Another wholly owned subsidiary, Or Kim Peow Contractors (Pte) Ltd, is an A1 grade contractor. 5. Price fluctuations and availability of construction materials We are exposed to fluctuations in the prices of construction materials, which include granite, cement, ready mix concrete, asphalts and reinforced steel bars. Fluctuations in the prices of these construction materials are a function of demand and supply in the global market as well as the Singapore market. In addition, changes in government policies or regulations and varying levels of supply and demand of construction materials may also result in price movements. In the event that there is significant increase in the prices of construction materials and if the Group is unable to obtain the requisite supply of construction materials at reasonable prices or passes on the increase in construction material cost to customers, the Group s business and profitability will be affected. 4. Increased competition could adversely affect our competitive position Our business is project based and contracts are generally awarded through a tender process. The nature of our business is such that the number and value of projects that we succeed in securing fluctuate from year to year. There is no assurance that we will continue to secure new projects that are profitable. If we are unable to do so, our financial performance will be adversely affected. In addition, as we face increased competition in the tender process, we may be forced to lower our tender prices to secure projects, and this could affect our profit margins. Although price is often a primary factor in determining whom the contract would be awarded to, other factors such as experience, reputation, availability, equipment and safety record are also important. Our Group believes that with our expertise and experience in road construction and road maintenance, we are in a strong position to tender competitively for both government and private sector projects. We have a long operating history and an excellent track record a clear demonstration and testimony of our ability to deliver quality and value added services within or even before the scheduled delivery time. However, in the normal course of our business, we continually strive to source for the most competitive pricing from our suppliers for the raw materials required. Where possible, we would lock in the prices of the raw materials for each project. Otherwise, we would include a fluctuation clause in the contract, granting us the right to adjust raw material prices should a price increase occur in the course of the project. These moves help to limit our exposure in the event of price fluctuations. 6. General risks associated with doing business outside Singapore We currently have operations in Singapore and are looking to grow an external wing beyond Singapore. To grow the business beyond our shores, we may explore acquisitions, joint ventures, strategic alliances or investment opportunities in businesses that are complementary to our businesses. There are risks inherent in doing business overseas, such as unexpected changes in regulatory requirements, difficulties in staffing and managing foreign operations, social and political instability, fluctuations in currency exchange rates, potentially adverse tax consequences, legal uncertainty, tariffs and other trade barriers, variable and unexpected changes in local law and barriers to the repatriation of capital or profits. Any of these could materially affect any overseas operations and consequently, our business and profitability. As such, we continue to adopt a prudent and disciplined approach in the assessment of all business opportunities so as to reduce risks in both local and overseas operations. 58 GROWING LEADING BECOMING

61 RISKS RELATING TO US 7. Dependence on private sector clientele for a portion of our revenue Over the years, we have tapped on the private sector increasingly for more projects in a bid to reduce our reliance on the public sector. Since early 2006, we have secured a number of projects in the oil & gas industry in Singapore. While this move sees us reducing our dependence on public sector clientele, it has conversely increased the uncertainty over the timeliness of collection of trade receivables. Our response to this is to adopt a selective approach to our potential clients favouring those with good credit rating and financial stability and to apply strict control procedures within a credit approval process. Our credit policy is also focused on spreading the risks over various industries, countries and markets. 8. Liability claims and disputes Our Group is exposed to potential claims against defective workmanship, non compliance with contract specifications or disputes over variations. Should we fail to complete the project within a stipulated time, we could be held liable for liquidated damages. In these circumstances, financial compensation may have to be paid to our customers. Our projects usually require retention sums or performance bonds of up to 10% of the contract value to be given in favour of our customers. In the event that our projects are delayed, or if any claims for defects are made, whether due to our fault or that of our suppliers or sub contractors, these retention sums or performance bonds could be forfeited or defaulted. We continue to expend considerable effort to ensure that our projects are managed competently and to the highest quality. One of the ways we do this is to provide our employees with regular and relevant training. We have not had any significant claim made by customers nor have we encountered any material dispute over the last three financial years. 9. Exposure to cost overruns In the course of our operations, we could face cost overruns which may erode our profit margin for a project and this could have an adverse impact on our overall profitability. This could happen in the following circumstances; (i) (ii) when incorrect estimations of costs are made during the tender stage; when unforeseen circumstances such as adverse ground conditions, unfavourable weather conditions, or unanticipated construction constraints at the worksite arise during the course of construction; and/or (iii) when delays are experienced in the execution of projects. To mitigate this risk, cost control measurement is carried out at various stages to ensure that the projects are kept well within budget. Careful monitoring and quality assurance checks are also performed vigilantly to ensure project management risk is mitigated. We believe that with our project management expertise, we are able to manage the costs related to each project effectively. 10. Dependence on foreign workers/exposure to labour shortages The construction industry is highly labour intensive and we rely heavily on skilled foreign workers for our projects. The supply of foreign workers is subject to the policies imposed by the Ministry of Manpower and the policies of the countries in which these foreign workers are domiciled. Any change in the labour policies of these countries of origin may affect the supply and cost of foreign labour and cause disruptions to our operations, resulting in delays in the completion of projects. Any increase in foreign workers levies would also affect us and may have a negative impact on our earnings during that period. While there is currently no shortage of foreign labour in the market, OKP continues to make every effort to derive optimum benefit from those that are currently in our employ, for example, by enhancing their quality through training as well as skill upgrading. ANNUAL REPORT

62 RISK ASSESMENT AND MANAGEMENTW (cont d) 11. Dependence on professional and skilled labour A pool of skilled and experienced engineers and project staff are necessary for the efficient running of our company. If we fail to retain or are unable to recruit our engineers and project staff, our revenue and profitability will be adversely affected. While this issue may surface more critically during times when the labour market is tight, we continually review our remuneration policies to ensure that appropriate remuneration packages are given to retain staff and attract potential recruits. 12. Excessive warranty claims We provide limited warranty for our construction projects for varying periods. Such limited warranty covers defects and any premature wear and tear of the materials used. Rectification and repair works covered under warranty would not be chargeable to the customers. Excessive warranty claims for rectification and repair works would have an adverse effect on our financial performance. However, with our strong focus on quality and workmanship, we have not experienced significant warranty claims for the past three financial years. Our safety policy is based primarily on identifying and applying safe workplace practices for our own as well as subcontractors employees. Seminars on health and safety are held regularly to instil safety knowledge in our employees at all levels, especially new hires. Proper safety knowledge and management have been inculcated through safety and environment control officers, site engineers and site supervisors. We also conduct fire safety exercises at least twice a year in order to ensure readiness of our fire safety personnel in the event of industrial accidents. We remain committed to maintaining our high quality standards, enhancing productivity and improving workplace safety. 13. Financial risks The Group is exposed to a variety of financial risks, namely credit risks, interest rate, foreign currency and liquidity risks. How we manage these risks is outlined on pages 119 to 126 of the Annual Report (under the Notes to the Financial Statements). 14. Industry hazards, especially in the oil & gas industry We place a heavy emphasis on safety in all our projects, especially those work sites in the oil & gas industry, due to the nature of the operating environment. Our safety control guidelines adhere closely to the standards, laws and regulations laid out by our clients as well as the relevant authorities. In the event that we are found to be negligent or non compliant with workplace safety or regulatory requirements, our operations and financial performance may be adversely affected. We may be liable for fines and penalties if we breach workplace safety or regulatory requirements. 60 GROWING LEADING BECOMING

63 CORPOR ATE GOVERNANCE REPORT At OKP, we are committed to ensuring high standards of corporate governance. We believe that sound corporate governance principles and practices will improve corporate transparency, accountability, performance and integrity, and at the same time protect and enhance shareholders value. The Listing Manual of the Singapore Exchange Securities Trading Limited ( SGX ST ) requires all listed companies to describe, in their Annual Reports, their corporate governance practices, with specific reference to the principles of the Singapore Code of Corporate Governance introduced in April 2001 and amended in 2005 ( the Code ). We have presented our corporate governance policies and practices on each of the principles of the Code in a tabular form, stipulating each principle and guideline, and explaining the deviations from the Code. The Board of Directors is pleased to confirm that the Company has adhered to the principles and guidelines of the Code as well as the Listing Manual of the SGX ST where appropriate. 1. BOARD MATTERS The Board s Conduct of its Affairs Principle 1: Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the success of the company. The Board works with Management to achieve this and the Management remains accountable to the Board. Our Policy and Practices: The principal functions of the Board, apart from its statutory responsibilities, are: Reviewing and approving the corporate policies, strategies, budgets and financial plans of the Company; Monitoring financial performance, including approval of the full year and quarterly financial reports of the Company; Approving major investment and funding decisions; Reviewing the process of evaluating the adequacy of internal controls, risk management, financial reporting and compliance; Overseeing the business and affairs of the Company, establishing with the Management the strategies and financial objectives to be implemented by the Management and monitoring the performance of the Management; and Assuming responsibilities for corporate governance. Guideline 1.1 of the Code: The Board s role The Board is made up of one third non Executive Directors who are independent of the Management and have the right core competencies and diversity of experience to enable them, in their collective wisdom, to contribute effectively. Every Director is expected, in the course of carrying out his duties, to act in good faith, provide insights and consider at all times, the interests of the Company. Guideline 1.2 of the Code: Directors to act in the interests of the Company The Board oversees the management of the Company. It focuses on strategies and policies, with particular attention paid to growth and financial performance. It delegates the formulation of business policies and day to day management to the Executive Directors. The Board has established three board committees ( Board Committees ) to assist in the execution Guideline 1.3 of its responsibilities. They are the Audit Committee ( AC ), the Remuneration Committee ( RC ) of the Code: and the Nominating Committee ( NC ). The terms of reference and compositions of each Board Disclosure on Committee are presented in the following sections of this Report. delegation of authority by Board to Board Committees ANNUAL REPORT

64 CORPOR ATE GOVERNANCE R EPORT (cont d) The Board held four scheduled meetings in the financial year ended 31 December Ad hoc Board meetings are also held whenever the Board s guidance or approval is required, outside of the scheduled Board meetings. Guideline 1.4 of the Code: Board to meet regularly The attendance of the Directors at scheduled meetings of the Board and Board Committees during the financial year ended 31 December 2009 is disclosed below: BOARD COMMITTEES Board / Committees Board Audit Remuneration Nominating Number of scheduled meetings held Name of Directors Number of Board Committee meetings attended Mr Or Kim Peow Mr Or Toh Wat Mdm Ang Beng Tin Mr Or Kiam Meng Mr Oh Enc Nam Mr Or Lay Huat Daniel Dr Chen Seow Phun, John Mr Nirumalan s/o V Kanapathi Pillai Mr Tan Boen Eng Dates of Board, Board Committee and annual general meetings are scheduled in advance in consultation with the Directors to assist the Directors in planning their attendance. A Director who is unable to attend a Board meeting can still participate in the meeting via telephone conference, video conference or other means of similar communication. Telephonic attendance and conference via audio communication at Board meetings are allowed under Article 120(2) of the Company s Articles of Association. We believe that contributions from each Director can be reflected in ways other than the reporting of attendances of each Director at Board and/or Board Committee meetings. A Director would have been appointed on the strength of his or her calibre, experience and stature, and his or her potential to contribute to the proper guidance of the Group and its businesses. To focus on a Director s attendance at formal meetings alone may lead to a narrow view of a Director s contribution. It may also not do justice to his or her contribution which can be in many different forms, including Management s access to him or her for guidance or exchange of views outside the formal environment of Board meetings. In addition, he or she may initiate relationships strategic to the interests of the Group. The Company has adopted internal guidelines setting forth matters that require the Board s approval. Under the guidelines, all new investments, any increase in investment in businesses and subsidiaries, and any divestments by any of the Group s companies, and all commitments to term loans and lines of credit from banks and financial institutions by the Company require the approval of the Board. Every Executive Director receives appropriate training to develop individual skills in order to discharge his or her duties. The Group also provides extensive information about its history, mission and values to the Directors. The Directors may, at any time, visit the Group s construction sites in order to gain a better understanding of business operations. There are also update sessions to inform the Directors on new legislation and/or regulations which are relevant to the Group. Changes to regulations and accounting standards are monitored closely by Management. To keep pace with regulatory changes, where these changes have an important bearing on the Company s or Directors disclosure obligations, Directors are briefed at Board meetings. Guideline 1.5 of the Code: Matters requiring Board approval Guidelines 1.6 and 1.8 of the Code: Directors to receive appropriate training 62 GROWING LEADING BECOMING

65 Newly appointed Directors will be briefed on the business and organisation structure of the Group and its strategic plans and objectives. All Directors are appointed to the Board by way of a formal letter of appointment or service agreement setting out the scope of their duties and obligations. Board Composition and Guidance Principle 2: Our Policy and Practices: There should be a strong and independent element on the Board, which is able to exercise objective judgement on corporate affairs independently, in particular, from Management. No individual or small group of individuals should be allowed to dominate the Board s decision making. Guideline 1.7 of the Code: Formal letter to be provided to Directors setting out their duties Currently, the Board consists of nine Directors of whom three are considered independent (1) by the Board. There is a strong independent element on the Board, with independent Directors constituting one third of the Board. This enables Management to benefit from their external, diverse and objective perspective of issues that are brought before the Board. It also allows the Board to interact and work with Management through a constructive exchange of ideas and views to shape the strategic process. The independence of each Director is reviewed by the NC on an annual basis. Annually, each Director is required to complete a checklist to confirm his/her independence. The checklist is drawn up based on the guidelines provided in the Code. The NC adopts the Code s definition of what constitutes an independent Director in its review. One of the Directors, Mr Nirumalan s/o V Kanapathi Pillai is the Senior Director of Global Law Alliance LLC (incorporating Niru & Co) which provides legal and professional services to the Group. The NC is of the view that the business relationship with Global Law Alliance LLC will not interfere with the exercise of independent judgement by Mr Pillai in his role as an Independent Director as matters involving the Group are usually handled by the other directors of Global Law Alliance LLC. The Board has examined its size and is of the view that it is an appropriate size for effective decision making, taking into account the scope and nature of the operations of the Company. The NC is of the view that no individual or small group of individuals dominate the Board s decision making process. The Board comprises businessmen with vast business or management experience, industry knowledge, strategic planning experience and includes professionals with financial, accounting and legal backgrounds. Profiles of the Directors are found in the Board of Directors section of the Annual Report. The NC is of the view that the current Board comprises persons who, as a group, provide capabilities required for the Board to be effective. The Independent Directors did not meet during the financial year ended 31 December 2009 without the presence of the Management as they did not deem it necessary. Note: (1) According to the Code, an independent Director is defined as one who has no relationship with the Company, its related companies or its officers that could interfere, or be reasonably perceived to interfere, with the exercise of the Director s independent business judgement with a view to the best interests of the Company. Guideline 2.1 of the Code: One third of directors to be independent Guideline 2.2 of the Code: Disclosure of Director s relationship Guideline 2.3 of the Code: Board to determine its appropriate size Guideline 2.4 of the Code: Board to comprise Directors with core competencies Guideline 2.5 and 2.6 of the Code: Role of non executive directors and regular meetings of non executive directors ANNUAL REPORT

66 CORPOR ATE GOVERNANCE R EPORT (cont d) Chairman and Chief Executive Officer Principle 3: There should be a clear division of responsibilities at the top of the company the working of the Board and the executive responsibility of the company s business which will ensure a balance of power and authority, such that no one individual represents a considerable concentration of power. Our Policy and Practices: The Company believes that a distinctive separation of responsibilities between the Group s Chairman ( Group Chairman ) and the Group s Managing Director ( Group MD ) will ensure an appropriate balance of power, increased accountability and greater capacity of the Board for independent decision making. The posts of Group Chairman and Group MD are held by Mr Or Kim Peow and Mr Or Toh Wat respectively. Mr Or Toh Wat is the son of Mr Or Kim Peow. Both are Executive Directors. As Group Chairman, Mr Or Kim Peow is primarily responsible for overseeing the overall management and strategic development of the Group. His responsibilities include: Guideline 3.1 of the Code: Chairman and CEO should be separate persons Guideline 3.2 of the Code: Chairman s role Determining the Group s strategies; Promoting high standards of corporate governance; Ensuring effective succession planning for all key positions within the Group; Scheduling of meetings (with the assistance of the Company Secretary) to enable the Board to perform its duties responsibly while not interfering with the flow of the Group s operations; Setting the meeting agenda (in consultation with the Group MD); Assisting in ensuring the Group s compliance with the Code; Ensuring that Board meetings are held when necessary; and Reviewing most board papers before they are presented to the Board. As Group MD, Mr Or Toh Wat is responsible for effectively managing and supervising the day to day business operations in accordance with the strategies, policies and business plans approved by the Board. Mr Or Toh Wat executes the strategic plans set out by the Board and ensures that the Directors are kept updated and informed of the Group s businesses. His responsibilities include: Executing and developing the Group s strategies and business objectives; Reporting to the Board on all aspects of the Group s operations and performance; Providing quality leadership and guidance to employees of the Group; and Managing and cultivating good relationship and effective communication with the media, shareholders, regulators and the public. Both the Group Chairman and the Group MD exercise control over the quality, quantity and timeliness of information flow between the Board and the Management. The Board appointed Dr Chen Seow Phun, John as Lead Independent Director ( LID ) on 1 August 2006 to lead and coordinate the activities of the Independent Directors. The LID aids the Independent Directors to constructively challenge and assist in the development of proposals on strategy, review the performance of management in meeting agreed goals and objectives, and monitor the reporting of performance. The LID also coordinates sessions for the Independent Directors to meet. The LID is available to shareholders where they have concerns for which contact through the normal channels of the Group Chairman or Group MD has failed to resolve or for which such contact is inappropriate. Guideline 3.3 of the Code: Appointment of LID where Chairman and CEO are Executives 64 GROWING LEADING BECOMING

67 Board Membership Principle 4: There should be a formal and transparent process for the appointment of new directors to the Board. Our Policy and Practices: The NC was formed on 10 July 2002 and now comprises Mr Tan Boen Eng, Dr Chen Seow Phun, John, and Mr Nirumalan s/o V Kanapathi Pillai, all of whom are non Executive and Independent Directors. The Chairman of the NC is Mr Tan Boen Eng. Mr Tan is not associated with a substantial shareholder, thus complying with the requirement in Guideline 4.1 of the Code. The main terms of reference of the NC are as follows: Guideline 4.1 of the Code: NC to recommend all Board appointments To review nominations for the appointment and re appointment to the Board and the various Board Committees; To decide on how the Board s performance may be evaluated, and propose objective performance criteria to assess the effectiveness of the Board as a whole and the contribution of each Director; To decide, where a Director has multiple board representations, whether the Director is able to and has been adequately carrying out his duties as Director of the Company; To ensure that all Directors submit themselves for re nomination and re election at regular intervals and at least once every three years; and To determine on an annual basis whether or not a Director is independent. The NC is charged with the responsibility of re nominating the Directors. Pursuant to Article 107 of the Company s Articles of Association, one third of the Directors (except the Group MD) shall retire from office at least once every three years at the Company s Annual General Meeting ( AGM ). In addition, Article 109 provides that the retiring Directors are eligible to offer themselves for re election. Directors of over 70 years of age are required to be re elected every year at the AGM under Section 153(6) of the Companies Act before they can continue to act as a Director. Article 112 provides that each term of appointment of the Group MD shall not exceed five years. The NC is also charged with determining annually whether or not a Director is independent. Annually, each Director is required to complete a checklist to confirm his independence. The checklist is drawn up based on the guidelines provided in the Code. The NC is of the view that the non Executive Directors are independent. When a Director has multiple board representations, the NC also considers whether or not the Director is able to and has adequately carried out his duties as a Director of the Company. The NC is satisfied that sufficient time and attention are being given by the Directors to the affairs of the Company, notwithstanding that some of the Directors have multiple board representations. When the need for a new Director arises, or where it is considered that the Board would benefit from the services of a new Director with particular skills or to replace a retiring Director, the NC, in consultation with the Board, determines the selection criteria and selects candidates with the appropriate expertise and experience for the position. In its search and nomination process for new Directors, the NC has, at its disposal, search companies, personal contacts and recommendations for the right candidates. Guideline 4.2 of the Code: NC responsible for re nomination of Directors Guideline 4.3 of the Code: NC to determine Directors independence annually Guideline 4.4 of the Code: Ensure Directors with multiple board representations give sufficient time and attention to the Company Guideline 4.5 of the Code: Description of process for selection and appointment of new Directors to be disclosed ANNUAL REPORT

68 CORPOR ATE GOVERNANCE R EPORT (cont d) Information required in respect of the academic and professional qualification, directorship or chairmanship both present and those held over the preceding three years in other listed companies is set out in the Board of Directors section of the Annual Report. In addition, information on shareholdings in the Company held by each Director is set out in the Directors Report section of the Annual Report. The dates of initial appointment and last re election of each of the Directors are set out below: Guideline 4.6 of the Code: Key information regarding directors Name Age Position Date of initial appointment Date of last re election Mr Or Kim Peow 75 Group Chairman 15 February April 2009 Mr Or Toh Wat 42 Group Managing Director 15 February 2002 Not Applicable Mdm Ang Beng Tin 54 Executive Director 20 March April 2009 Mr Or Kiam Meng 45 Executive Director 20 March April 2008 Mr Oh Enc Nam 54 Executive Director 20 March April 2007 Mr Or Lay Huat Daniel 32 Executive Director 1 August April 2007 Dr Chen Seow Phun, John 56 Lead Independent Director Mr Nirumalan s/o V Kanapathi Pillai 25 June April Independent Director 1 June April 2009 Mr Tan Boen Eng 77 Independent Director 25 June April 2009 Board Performance Principle 5: Our Policy and Practices: There should be a formal assessment of the effectiveness of the Board as a whole and the contribution by each director to the effectiveness of the Board. We believe that the Board s performance is ultimately reflected in the performance of the Company. The Board should ensure compliance with applicable laws and Board members should act in good faith, with due diligence and care in the best interests of the Company and its shareholders. In addition to these fiduciary duties, the Board is charged with two key responsibilities: setting strategic directions and ensuring that the Company is ably led and managed. The Board s performance is also tested through its ability to lend support to the Management, especially in times of crisis and to steer the Group in the right direction. Based on the recommendations of the NC, the Board has established processes and objective performance criteria for evaluating the effectiveness of the Board as a whole and the effectiveness of individual Directors. (a) Evaluation of the effectiveness of the Board as a whole The NC assesses the Board s effectiveness as a whole by completing a Board Assessment Checklist. The Board Assessment Checklist takes into consideration factors such as the Board s structure, conduct of meetings, risk management and internal control, and the Board s relationship with Management. The NC also assesses the Board s performance based on a set of quantitative criteria and financial performance indicators as well as share price performance. The selected performance criteria will not change from year to year unless they are deemed necessary and the Board is able to justify the changes. Guideline 5.1 of the Code: Board to implement process to address Board s performance and disclose the process in Annual Report (b) Evaluation of the effectiveness of individual Directors At the end of each financial year, the NC will evaluate the performance of each Director. The criteria include the level of participation in the Company such as his commitment of time for the Board and Board Committee meetings and his performance of tasks delegated to him. 66 GROWING LEADING BECOMING

69 The NC is of the view that the primary objective of the assessment exercise is to create a platform for the Board members to encourage exchange of feedback on the Board s strengths and shortcomings with a view to strengthening the effectiveness of the Board as a whole. The NC met once and conducted its assessment in respect of the financial year ended 31 December The individual assesment of Directors has been conducted in The criteria for assesment includes attendance record, intensity of participation at meetings, the equality of intervention and special contributions. Guidelines 5.2, 5.3 and 5.5 of the Code: Evaluation of Board s performance criteria Guideline 5.4 of the code: There should be individual evaluation of Directors effective contributions Access to Information Principle 6: In order to fulfil their responsibilities, Board members should be provided with complete, adequate and timely information prior to board meetings and on an on going basis. Our Policy and Practices: We believe that the Board should be provided with timely and complete information prior to Board meetings and as and when the need arises. The Management provided members of the Board with quarterly management accounts, as well as relevant background information relating to the matters that were discussed at the Board meetings. Detailed board papers are sent out to the Directors before the scheduled meetings so that the Directors may better understand the issues beforehand, allowing for more time at such meetings for questions that Directors may have. However, sensitive matters may be tabled at the meeting itself or discussed without any papers being distributed. All the Independent Directors have unrestricted access to the Company s senior management via telephone, e mail and meetings. Directors have separate and independent access to the Company Secretary. The role of the Company Secretary is clearly defined and includes responsibility for ensuring that the Board s procedures are followed and that applicable rules and regulations are complied with. The Company Secretary administers, attends and prepares minutes of all board meetings and assists the Board in ensuring that the Company complies with the relevant requirements of the Companies Act and the Listing Manual of the SGX ST. He is also the channel of communications between the Company and the SGX ST. The appointment and removal of the Company Secretary are subject to the approval of the Board as a whole. Guidelines 6.1 and 6.2 of the Code: Management obliged to provide Board with adequate and timely information and include background and explanatory information Guideline 6.1 of the Code: Board should have separate and independent access to senior management Guidelines 6.3 and 6.4 of the Code: Directors should have separate and independent access to Company Secretary; role of Company Secretary to be clearly defined and appointment and removal of Company Secretary ANNUAL REPORT

70 CORPOR ATE GOVERNANCE R EPORT (cont d) Each member of the Board has direct access to the Group s independent professional advisors as and when necessary to enable each member to discharge his responsibility effectively. Any cost of obtaining professional advice will be borne by the Company. 2. REMUNERATION MATTERS Guideline 6.5 of the Code: Procedure for Board to take independent professional advice at company s cost Procedures for Developing Remuneration Policies Principle 7: There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration. Our Policy and Practices: We believe that a framework of remuneration for the Board and key executives should be linked to the development of Management s strength and key executives to ensure that there is a continual development of talent and renewal of strong and sound leadership for the continued success of the Company. The RC was formed on 10 July 2002 and comprises entirely Independent Directors, namely: Mr Nirumalan s/o V Kanapathi Pillai (Chairman) Dr Chen Seow Phun, John (Member) Mr Tan Boen Eng (Member) None of the RC members or Directors is involved in deliberations in respect of any remuneration, compensation or any form of benefit to be granted to him. Guideline 7.1 of the Code: RC to consist of entirely non executive Directors The RC recommends to the Board a framework of remuneration for the Board and key executives to ensure that the structure is competitive and sufficient to attract, retain and motivate senior management to run the Company successfully in order to maximise shareholders value. The members of the RC do not participate in any decisions concerning their own remuneration. The main terms of reference of the RC are as follows: To recommend to the Board a framework of remuneration for Board members and key executives which covers all aspects of remuneration including directors fees, salaries, allowances, bonuses and benefits in kind; To determine specific remuneration packages for each Executive Director; To determine the appropriateness of the remuneration of non Executive Directors taking into consideration the level of their contribution; To review and recommend to the Board the terms of renewal of the service agreements of Executive Directors; and To consider the disclosure requirements for Directors and key executives remuneration as required by the SGX ST. The RC members are familiar with executive compensation matters as they manage their own businesses and/or are holding directorships in the boards of other listed companies. The RC has access to appropriate external expert advice in the field of executive compensation if necessary. Guideline 7.2 of the Code: RC to recommend remuneration of Directors and CEO, and review remuneration of senior management Guideline 7.3 of the Code: RC to seek expert advice 68 GROWING LEADING BECOMING

71 Level and Mix of Remuneration Principle 8: The level of remuneration should be appropriate to attract, retain and motivate the directors needed to run the company successfully but companies should avoid paying more than is necessary for this purpose. A significant proportion of executive directors remuneration should be structured so as to link rewards to corporate and individual performance. Our Policy and Practices: The Company has a staff remuneration policy which comprises a fixed component and a variable component. The fixed component comprises basic salary plus other fixed allowances. The variable component is linked to the performance of the Company and individual. In the financial year ended 31 December 2009, variable or performance related income/bonus made up 49% to 61% of the total remuneration of each Director. The remuneration package is designed to enable the Company to stay competitive and allows the Company to better align executive compensation with shareholders value creation. All Independent and non Executive Directors have no service agreements with the Company. They are paid Directors fees, which are determined by the Board based on the effort, time spent and responsibilities of the Independent Directors. The Directors fees are subject to approval by the shareholders at each AGM. Except as disclosed, the Independent and non Executive Directors do not receive any remuneration from the Company. The RC has reviewed and approved the service agreements of all the Executive Directors in the financial year ended 31 December Each of the Executive Directors has a formal service agreement which is automatically renewed on a yearly basis. There are no excessively long or onerous removal clauses in these service agreements. The service agreements may be terminated by the Company giving the Executive Director one month s notice in writing, or in lieu of notice, payment of one month s salary based on the Executive Director s last drawn salary. Executive Directors are not paid directors fees. Currently, the Company does not have any long term incentive schemes. In setting remuneration packages, the RC ensures that the Directors are adequately but not excessively remunerated as compared to the industry and in comparable companies. The Company benchmarks the Directors annual fixed salary at the market median with the variable compensation being performance driven. Guideline 8.1 of the Code: Package should align executive Directors interest with shareholders interest Guideline 8.2 of the Code: Remuneration of independent directors dependent on contribution, effort, time spent and responsibilities Guidelines 8.3 and 8.6 of the Code: Fixed appointment period for executive Directors and notice period for service contract to be 6 months or less Guideline 8.4 of the Code: Long term incentive schemes are encouraged Guideline 8.5 of the Code: Remuneration comparison within industry ANNUAL REPORT

72 CORPOR ATE GOVERNANCE R EPORT (cont d) Disclosure on Remuneration Principle 9: Each company should provide clear disclosure of its remuneration policy, level and mix of remuneration, and the procedure for setting remuneration, in the company s annual report. It should provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to directors and key executives and performance. Our Policy and Practices: The Board has not included a separate annual remuneration report to shareholders in the Annual Report on the remuneration of Directors and the top five key executives (who are not Directors of the Company) as the Board is of the view that the matters which are required to be disclosed in such annual remuneration report have already been sufficiently disclosed in this Corporate Governance Report and in the financial statements of the Company. A breakdown showing the level and mix of each individual Director s remuneration in the financial year ended 31 December 2009 is as follows: Guidelines 9.1 and 9.2 of the Code: Remuneration of Directors and top 5 key executives Remuneration Band & Name of Director Base / fixed salary* Variable or performance related income / bonuses Director s fees** Director s Allowance Benefits in kind $500,000 to $750,000 Mr Or Kim Peow 40% 49% 9% 2% 100% Mr Or Toh Wat 37% 54% 7% 2% 100% Mdm Ang Beng Tin 36% 54% 7% 3% 100% Mr Or Kiam Meng 37% 54% 7% 2% 100% Mr Oh Enc Nam 37% 55% 7% 1% 100% Mr Or Lay Huat Daniel 30% 61% 8% 1% 100% $250,000 to $499,999 Nil Below $250,000 Dr Chen Seow Phun, John 100% 100% Mr Nirumalan s/o 100% 100% V Kanapathi Pillai Mr Tan Boen Eng 100% 100% Notes: * inclusive of Central Provident Fund contributions ** these fees are subject to the approval of the shareholders at the forthcoming AGM Total 70 GROWING LEADING BECOMING

73 A breakdown showing the level and mix of the top five key executives (who are not Directors of the Company) in the financial year ended 31 December 2009 is as follows: Remuneration Band & Name of Key Executive Base / fixed salary* Variable or performance related income / bonuses Benefits in kind Below $250,000 Ms Ong Wei Wei 73% 26% 1% 100% Mr Or Yew Whatt (1), (3) 75% 24% 1% 100% Mr Oh Kim Poy (2), (3) 77% 22% 1% 100% Total * inclusive of Central Provident Fund contributions (1) Mr Or Yew Whatt is the nephew of Mr Or Kim Peow, who is the Group Chairman of the Company. (2) Mr Oh Kim Poy is the brother of Mr Or Kim Peow, who is the Group Chairman of the Company. (3) Both Mr Or Yew Whatt and Mr Oh Kim Poy are directors of a subsidiary of the Company. No employee of the Company and its subsidiaries was an immediate family member of a Director and whose remuneration exceeded $150,000 during the financial year ended 31 December Immediate family member means spouse, child, adopted child, step child, brother, sister and parent. Currently, the Company does not have any employee share schemes. Guideline 9.3 of the Code: Disclosure of remuneration of employees who are immediate family members of Director whose remuneration exceeds $150,000 Guideline 9.4 of the Code: Details of employees share schemes ANNUAL REPORT

74 CORPOR ATE GOVERNANCE R EPORT (cont d) 3. ACCOUNTABILITY AND AUDIT Accountability Principle 10: The Board should present a balanced and understandable assessment of the Company s performance, position and prospects. Our Policy and Practices: The Board has always believed that it should conduct itself in ways that deliver maximum sustainable value to the shareholders. The Board promotes best practices as a means to build an excellent business for the shareholders. The Board is accountable to shareholders for the Company s performance. Prompt fulfilment of statutory reporting requirements is but one way to maintain the shareholders confidence and trust in the Board s capability and integrity. The Board provides the shareholders with a detailed and balanced explanation and analysis of the Company s performance, position and prospects on a quarterly basis. This responsibility extends to reports to regulators. Financial reports and other price sensitive information are disseminated to shareholders through announcements via SGXNET, press releases and the Company s website. The Board will review and approve the financial reports before their release. The Board will also review and approve any press releases concerning the Company s financial results. The Company s Annual Report is available on request and accessible on the Company s website. The Management currently provides the Board with appropriately detailed management accounts of the Group s performance, position and prospects on a quarterly basis. Furthermore, the Management has been providing all the Executive Directors (who represent more than 60% of the Board) with monthly consolidated financial reports. However, such monthly consolidated financial reports may not always be reflective of the true and fair view of the financial position of the Group. Guideline 10.1 of the Code: Board s responsibility to provide balanced, understandable assessment of Company s performance and position on interim basis Guideline 10.2 of the Code: Management should provide Board with management accounts on a monthly basis Audit Committee Principle 11: The Board should establish an Audit Committee ( AC ) with written terms of reference which clearly set out its authority and duties. Our Policy and Practices: The AC has written terms of reference that are approved by the Board and clearly set out its responsibilities. Guideline 11 of the Code: Board to establish AC with written terms of reference 72 GROWING LEADING BECOMING

75 The AC of the Company was formed on 10 July 2002 and comprises entirely Independent Directors; namely : Dr Chen Seow Phun, John (Chairman) Mr Nirumalan s/o V Kanapathi Pillai (Member) Mr Tan Boen Eng (Member) The AC carries out its functions in accordance with the Companies Act and the Code. The terms of reference of the AC are as follows: To review the Company s independent auditors annual audit plan to ensure that the plan covers sufficiently in terms of audit scope in the review of the significant controls of the Company; To review the independent auditor s reports; To review the cooperation given by the Company s officers to the independent auditors; To review the adequacy of the Company s internal controls; To review the significant financial reporting issues and judgements so as to ensure the integrity of the financial statements of the Company and any formal announcements relating to the Company s financial performance; To review the cost effectiveness of the independent audit, and where the independent auditors provide non audit services to the Company, to review the nature, extent and costs of such services so as to avoid an erosion of the independence and objectivity of the independent auditor; To review the Company s quarterly and full year results announcements, the financial year statements of the Company and the consolidated financial statements of the Group before submission to the Board for approval of release of the results announcement to the SGX ST; To recommend to the Board the appointment, re appointment or removal of the independent auditor and approve the remuneration and terms of engagement of the independent auditor; and To review all interested person transactions to ensure that each has been conducted on an arm s length basis. The AC members were selected based on their expertise and prior experience in the area of financial management. Dr Chen Seow Phun, John is a businessman. Mr Nirumalan s/o V Kanapathi Pillai is the Senior Director of a law firm and Mr Tan Boen Eng is a certified public accountant by profession. The Board is of the view that all members of the AC have accounting or related financial management expertise and experience to discharge their responsibilities as members of the committee. Guideline 11.1 of the Code: AC should comprise at least three directors, all non executive, and the majority of whom, including the Chairman, are independent Guidelines 11.4 and 11.8 of the Code: Duties of AC Guideline 11.2 of the Code: Board to ensure AC members are qualified The AC is authorised to investigate any matter within its terms of reference, and has full access to and co operation of the Management. The AC has full discretion to invite any Director or executive officer to attend its meetings, as well as access to reasonable resources to enable it to discharge its function properly. In performing its functions, the AC also reviews the assistance given by the Company s officers to the independent auditors. The AC met four times in the financial year ended 31 December Minutes of AC meetings are circulated to Directors by the Company Secretary. The AC has reviewed and is satisfied with the standard of the independent auditor s work. The AC has also reviewed the volume of non audit services provided to the Company by the independent auditors for which the independent auditor received fees of approximately $91,000, and being satisfied that the nature and extent of such services will not prejudice the independence and objectivity of the independent auditor, has confirmed their re nomination. Guideline 11.3 of the Code: AC to have explicit authority to investigate and have full access to Management and reasonable resources Guideline 11.6 of the Code: AC to review independence of external auditors annually ANNUAL REPORT

76 CORPOR ATE GOVERNANCE R EPORT (cont d) The AC met with the independent auditor four times during the financial year ended 31 December 2009 and once in February 2010 without the presence of the Management. These meetings enable the independent auditors to raise issues encountered in the course of their work directly to the AC. Guideline 11.5 of the Code: AC to meet external auditors without the presence of management, annually Whistle Blowing Policy The Company has put in place a whistle blowing policy in December 2006 to provide employees with an avenue to raise concerns about possible improprieties in financial reporting or other matters, and the AC was satisfied that arrangements are in place for the independent investigation of such matters and for appropriate follow up action. Following the implementation of the whistle blowing policy, a set of fraud policy which was reviewed by the AC and approved by the Board, was issued to assist the AC in managing allegations of fraud, corruption, dishonest practices or other misconduct which may be made, so that: Guideline 11.7 of the Code: AC to review arrangements for staff to raise concerns/ possible improprieties to AC (a) (b) (c) All cases reported are objectively investigated, treated fairly and, to the extent possible, be protected from reprisal; Appropriate remedial measures are taken where warranted; and Appropriate action is taken to correct the weaknesses in the existing system of internal processes and policies which allowed the perpetration of the fraud and/or misconduct, and to prevent a recurrence. A whistle blower address is created for reporting suspected fraud, corruption, dishonest practices or other similar matters. Details of the whistle blowing policies and arrangements have been made available to all employees of the Company. Internal Controls Principle 12: The Board should ensure that the Management maintains a sound system of internal controls to safeguard the shareholders investment and the company s assets. Our Policy and Practices: We believe in the need to put in place a system of internal controls to safeguard shareholders interests and Group s assets, and to manage risks. The AC acknowledges that the Group s system of internal and operational controls has a key role in the identification and management of risks that are significant to the achievement of its business objectives. While no cost effective internal control system can provide absolute assurance against loss or mis statement, the Group s internal controls and systems have been designed to provide reasonable assurance that assets are safeguarded, operational controls are in place, business risks are suitably protected, proper accounting records are maintained and financial information used within the business and for publication, are reasonable and accurate. Procedures are in place to identify major business risks and evaluate potential financial effects. In addition, the AC reviews the effectiveness of internal and operational controls and risk management on an annual basis. Guideline 12.1 of the Code: AC to review adequacy of financial, operational and compliance controls and risk management policies The Company s independent auditor, Nexia TS Public Accounting Corporation, has carried out, during the course of their audit, a review of the effectiveness of the Company s material internal controls, including financial, operational and compliance controls. Based on the information provided to the AC, nothing has come to the AC s attention to cause the AC to believe that the system of internal controls and risk management is inadequate. Guideline 12.2 of the Code: Board to comment on adequacy of the internal controlss 74 GROWING LEADING BECOMING

77 Internal Audit Principle 13: The company should establish an internal audit function that is independent of the activities it audits. Our Policy and Practices: Due to the relatively small size and operations of the Group, the Company is of the view that the engagement of internal auditors would incur unnecessary expense. As such, the Company has requested the independent auditor to perform financial audits and the audit of other management processes to ensure compliance with the Company s system of internal controls. Guideline 13.1 of the Code: IA to report to AC Chairman, and to CEO administratively Guideline 13.3 of the Code: AC to ensure IA is adequately resourced Guideline 13.4 of the Code: AC to ensure adequacy of IA function annually The independent auditor, Nexia TS Public Accounting Corporation, are a member of the Institute of Internal Auditors ( IIA ) and have adopted the Standards for Professional Practice of Internal Auditing set by the IIA. Guideline 13.2 of the Code: IA should meet standards set by internationally recognised professional bodies The independent auditor has direct access to the AC. 4. COMMUNICATIONS WITH SHAREHOLDERS Principle 14: Companies should engage in regular, effective and fair communication with shareholders. Our Policy and Practices: The Company believes in regular and timely communication with shareholders as part of its organisational development to provide clear and fair disclosure of information about the Group s business developments and financial performance. Guideline 14.1 of the Code: Company to regularly convey pertinent information ANNUAL REPORT

78 CORPOR ATE GOVERNANCE R EPORT (cont d) The Board is mindful of the obligation to provide shareholders with information on all major developments that affect the Group in accordance with the SGX ST s Listing Rules and the Companies Act. Information is communicated to shareholders on a timely basis through: Annual reports that are prepared and issued to all shareholders within the mandatory period; SGXNET and the press; The Company s website at at which shareholders can access information on the Group; and Online Question & Answer forum via the investor relations channel on financial portal at Guideline 14.2 of the Code: Company to disclose information on a timely basis The Investor Relations ( IR ) team regularly communicates with analysts or investors through e mail communication and telephone to update them on the latest corporate development and at the same time address their queries. For details on the Group s IR activities, please refer to the IR sections of the Annual Report. Principle 15: Companies should encourage greater shareholder participation at AGMs, and allow shareholders the opportunity to communicate their views on various matters affecting the company. Our Policy and Practices: The Articles of Association allow a shareholder to appoint up to two proxies to attend and vote in his or her place at general meetings. The Board notes that there should be separate resolutions at general meetings on each substantially separate issue and supports the Code s principle as regards bundling of resolutions. In the event that there are resolutions which are interlinked, the Board will explain the reasons and material implications. The Company strives to maintain a high standard of transparency and to promote better investor communications. The Board supports active shareholder participation at AGMs and Extraordinary General Meetings and views such General Meetings as the principal forum for dialogue with shareholders. Shareholders are encouraged to attend the AGMs to ensure a high level of accountability and to stay informed of the Group s strategies and goals. The full Annual Report is available to all shareholders on the corporate website or upon request. Notices of General Meetings will also be published in the Business Times. The Group Chairman, Group Managing Director, Board Members, Group Financial Controller and Company Secretary are in attendance at AGMs to take questions and feedback from shareholders. The members of the AC, NC and RC are also present at AGMs to answer questions relating to the work of these committees. The independent auditor, Nexia TS Public Accounting Corporation, are also invited to attend AGMs and will assist in addressing queries from shareholders relating to the conduct of audit and the preparation and content of the auditors report. Guideline 15.1 of the Code: Shareholders should be allowed to vote in absentia Guideline 15.2 of the Code: Company should avoid bundling resolutions Guideline 15.3 of the Code: Committee Chairman and external auditors to be present at AGM 76 GROWING LEADING BECOMING

79 Currently, the Articles of Association limit the number of proxies for nominee companies. Guideline 15.4 of the Code: Companies encouraged to amend Articles to avoid imposing limit on number of proxies for nominee companies 5. SECURITIES TRANSACTIONS The Company has adopted an Internal Code of Conduct on Dealing in the Company s securities. The Code has been modelled along the rules in the Listing Manual of the SGX ST in respect of dealings in securities. Directors and all key executives are advised not to deal in the Company s shares on short term considerations or when they are in possession of unpublished price sensitive information. They are not allowed to deal in the Company s shares during the period commencing two weeks before the announcement of the Company s quarterly results or one month before the announcement of the Company s full year results, and ending on the date of the announcement of the results. Directors and all key executives are also reminded to be mindful of the law on insider trading and to ensure that their dealings in securities do not contravene the laws on insider trading under the Securities and Futures Act, and the Companies Act. 6. MATERIAL CONTRACTS Pursuant to Rule 1207(8) of the Listing Manual of the SGX ST, the Company confirms that there have been no material contracts of the Group involving the interests of any Director or controlling shareholder, either still subsisting at the end of 2009 or if not then subsisting, entered into since the end of the financial year ended 31 December INTERESTED PERSON TRANSACTION The Company has adopted an internal policy in respect of any transactions with interested persons and has procedures established for the review and approval of the Group s interested person transactions. The AC meets quarterly to review if the Company will be entering into any interested person transaction. The AC reviewed the following interested person transactions for the financial year ended 31 December 2009 in accordance with its existing procedures: ANNUAL REPORT

80 CORPOR ATE GOVERNANCE R EPORT (cont d) Nature of interested person Global Law Alliance LLC (incorporating Niru & Co) Nature of transaction Provision of legal services Aggregate value of all interested person transactions Aggregate value of all interested person transactions conducted under shareholders mandate pursuant to Rule 920 $ 000 $ Not applicable. The Company does not have a shareholders mandate under Rule 920 Note: (1) Mr Nirumalan s/o V Kanapathi Pillai, who is an independent Director of the Company, is the Senior Director of Global Law Alliance LLC. The Board confirms that the above interested person transaction was entered into on an arm s length basis, on normal commercial terms and was not prejudicial to the shareholders. 8. RISK MANAGEMENT AND PROCESSES The Board reviews the Group s business and operational activities to identify areas of significant business risk as well as appropriate measures to control and mitigate these risks within the Group s policies and strategies. Information relating to risk management policies and processes are set out on pages 57 to 60 of the Annual Report. 9. UTILISATION OF PROCEEDS (i) Placement of 13.6 million new ordinary shares completed in February 2007 raising net proceeds of $2.20 million Use of proceeds To fund expansion of the Group s oil, petrochemical and gas related business in Singapore Amount allocated ($ million) Amount utilised ($ million) Balance amount ($ million) The balance unutilised proceeds are deposited with a bank pending deployment. (ii) Placement of 15.0 million new ordinary shares completed in May 2009 raising net proceeds of $6.75 million Use of proceeds To be used as working capital for the Company s overseas business expansion Amount allocated ($ million) Amount utilised ($ million) Balance amount ($ million) The balance unutilised proceeds are deposited with a bank pending deployment. 78 GROWING LEADING BECOMING

81 (iii) Issuance of 61,822,852 warrents at $0.01 completed in January 2010 raising net proceeds of $0.62 million. Use of proceeds To be used as general working capital for the Company Amount allocated ($ million) Amount utilised ($ million) Balance amount ($ million) The balance unutilised proceeds are deposited with a bank pending deployment. ANNUAL REPORT

82 DIRECTORS REPORT for the financial year ended 31 December 2009 The directors present their report to the members together with the audited financial statements of the Group for the financial year ended 31 December 2009 and the balance sheet of the Company as at 31 December DIRECTORS The directors of the Company in office at the date of this report are as follows: Or Kim Peow Or Toh Wat Ang Beng Tin Or Kiam Meng Oh Enc Nam Or Lay Huat Daniel Chen Seow Phun, John Nirumalan s/o V Kanapathi Pillai Tan Boen Eng ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE SHARES AND DEBENTURES Neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose object was to enable the directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate. DIRECTORS INTERESTS IN SHARES OR DEBENTURES According to the register of directors shareholdings, none of the directors holding office at the end of the financial year had any interest in the shares or debentures of the Company or its related corporations, except as follows: The Company No. of ordinary shares Holdings in which director is Holdings registered in name of director deemed to have an interest As at As at As at As at As at As at Or Kim Peow 2,430,000 3,645,000 3,645,000 89,901, ,852, ,852,910 Or Toh Wat 1,238,000 1,857,000 1,857,000 Ang Beng Tin 1,239,000 1,858,500 1,858,500 Or Kiam Meng 1,238,000 1,857,000 1,857,000 Oh Enc Nam 444, , ,000 Or Lay Huat Daniel 1,238,000 1,857,000 1,857,000 Chen Seow Phun, John 20,000 30,000 30, GROWING LEADING BECOMING

83 Directors interests in shares or debentures (Cont d ) The Company No. of warrants Holdings in which director is Holdings registered in name of director deemed to have an interest As at As at As at As at As at As at Or Kim Peow 912,000 33,714,000 Or Toh Wat 465,000 Ang Beng Tin 465,500 Or Kiam Meng 465,000 Oh Enc Nam 167,000 Or Lay Huat Daniel 465,000 Chen Seow Phun, John 8,000 Immediate and Ultimate Holding Corporation Or Kim Peow Investments Pte. Ltd. No. of ordinary shares Or Kim Peow 97,091 97,091 97,091 Or Toh Wat 58,255 58,255 58,255 Ang Beng Tin 60,272 60,272 60,272 Or Kiam Meng 58,255 58,255 58,255 Oh Enc Nam 21,436 21,436 21,436 Or Lay Huat Daniel 58,255 58,255 58,255 By virtue of Section 7 of the Singapore Companies Act (Cap. 50) (the Act ), Or Kim Peow is deemed to have an interest in the shares of all the subsidiaries, at the beginning and at the end of the financial year. DIRECTORS CONTRACTUAL BENEFITS Since the end of the previous financial year, no director has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member or with a company in which he has a substantial financial interest, except as disclosed in the accompanying financial statements and in this report. ANNUAL REPORT

84 DIRECTORS R EPORT (cont d) for the financial year ended 31 December 2009 SHARE OPTIONS AND WARRANTS Share options There were no options granted during the financial year to subscribe for unissued shares of the Company or its subsidiaries. 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 or its subsidiaries. As at the end of the financial year, there were no unissued shares of the Company under option. Warrants As at the end of the financial year, there were no share warrants outstanding. On 6 January 2010, the Company had completed a renounceable and non underwritten rights issue of up to 61,822,852 warrants, at an issue price of $0.01 for each warrant, with each warrant carrying the right to subscribe for one new share at an exercise price of $0.20 for each new share, on the basis of one warrant for every four shares held by the entitled shareholders. The warrants will expire on 5 January The warrants were subsequently listed and quoted on the Official List of the SGX ST on 8 January AUDIT COMMITTEE The members of the Audit Committee at the end of the financial year were as follows: Dr Chen Seow Phun, John (Chairman) Mr Nirumalan s/o V Kanapathi Pillai Mr Tan Boen Eng All members of the Audit Committee were independent and non executive directors. The Audit Committee carried out its functions in accordance with Section 201B (5) of the Act and the Code of Corporate Governance. The main functions of the Audit Committee are as follows: To review the Company s independent auditor s audit plan and any recommendations on internal accounting controls arising from the statutory audit. To review the balance sheet of the Company and the consolidated financial statements of the Group for the financial year ended 31 December 2009 before their submission to the Board of Directors as the independent auditor s report on the balance sheet of the Company. To review the assistance given by the Company s officers to the independent auditor. To review the adequacy of the Company s internal controls. To review the significant financial reporting issues and judgements so as to ensure the integrity of the financial statements of the Company and any formal announcements relating to the Company s financial performance. To review the cost effectiveness of the independent audit and, where the independent auditor provides non audit services to the Company, to review the nature, extent and costs of such services so as to avoid an erosion of the independence and objectivity of the independent auditor. 82 GROWING LEADING BECOMING

85 AUDIT COMMITTEE (CONT D ) To review the Company s quarterly and full year results announcements, the financial year statements of the Company and the consolidated financial statements of the Group before submission to the Board for approval of release of the results announcement to the SGX ST. To recommend to the Board the appointment, re appointment or removal of the independent auditor and approve the remuneration and terms of engagement of the independent auditor. To review all interested person transactions to ensure that each has been conducted on an arm s length basis. The Audit Committee met four times in The Audit Committee has met with the independent auditor without the presence of Management, to discuss issues of concern to them. In addition, the Audit Committee has, in accordance with Chapter 9 of the Singapore Exchange Listing Manual, reviewed the requirements for approval and disclosure of interested party transactions, reviewed the internal procedures set up by the Company to identify and report and, where necessary, seek approval for interested person transactions and, with the assistance of the independent auditor, reviewed interested person transactions. The Audit Committee has reviewed the quantum and nature of fees, expenses and emoluments paid to the independent auditor for non audit services and is satisfied that the provision of such services does not affect their independence. The Audit Committee has recommended that Nexia TS Public Accounting Corporation be nominated for re appointment as Company s independent auditor at the forthcoming Annual General Meeting. INDEPENDENT AUDITOR The independent auditor, Nexia TS Public Accounting Corporation, has expressed its willingness to accept re appointment. On behalf of the directors Or Kim Peow Director Or Toh Wat Director Singapore 22 March 2010 ANNUAL REPORT

86 STATEMENT BY DIRECTORS for the financial year ended 31 December 2009 In the opinion of the directors: (a) the balance sheet of the Company and the consolidated financial statements of the Group as set out on pages 87 to 130 are drawn up so as to give a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2009 and of the results of the business, changes in equity and cash flows of the Group for the financial year then ended; and (b) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due. The Board of Directors has, on the date of this statement, authorised these financial statements for issue. On behalf of the directors Or Kim Peow Director Or Toh Wat Director Singapore 22 March GROWING LEADING BECOMING

87 INDEPENDENT AUDITOR S REPORT to the Members of OKP Holdings Limited We have audited the accompanying financial statements of OKP Holdings Limited (the Company ) and its subsidiaries (the Group ) set out on pages 87 to 130, which comprise the balance sheets of the Company and of the Group as at 31 December 2009, and the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated cash flow statement of the Group for the financial year then ended, and a summary of significant accounting policies and other explanatory notes. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of the Singapore Companies Act (Cap. 50) (the Act ) and Singapore Financial Reporting Standards. This responsibility includes: (a) devising and maintaining a system of internal accounting control sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets; (b) selecting and applying appropriate accounting policies; and (c) making accounting estimates that are reasonable in the circumstances. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. ANNUAL REPORT

88 INDEPENDENT AUDITOR S R EPORT (cont d) to the Members of OKP Holdings Limited Opinion In our opinion: (a) (b) the balance sheet of the Company and the consolidated financial statements of the Group are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2009 and the results, changes in equity and cash flows of the Group for the financial year ended on that date; and the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditor, have been properly kept in accordance with the provisions of the Act. Nexia TS Public Accounting Corporation Public Accountants and Certified Public Accountants Director in charge: Kristin YS Kim Appointed from financial year ended 31 December 2007 Singapore 22 March GROWING LEADING BECOMING

89 BALANCE SHEETS as at 31 December 2009 Group Company Note ASSETS $ $ $ $ Current assets Cash and cash equivalents 4 77,690,771 35,409,785 10,482,243 3,366,834 Trade and other receivables 5 26,200,535 25,873,300 11,956,852 6,391,661 Construction contract work in progress 6 1,902,150 1,672, ,793,456 62,955,112 22,439,095 9,758,495 Non current assets Investments in subsidiaries 7 14,576,089 14,476,094 Investment in joint venture 8 50,000 Investment property 9 1,200,000 1,200,000 Property, plant, and equipment 10 13,646,599 10,978,203 2,289,288 13,082 Intangible assets 11 1,687,551 1,687,551 16,584,150 13,865,754 16,865,377 14,489,176 Total assets 122,377,606 76,820,866 39,304,472 24,247,671 LIABILITIES Current liabilities Trade and other payables 12 57,089,342 28,920,096 5,861,182 3,210,750 Finance lease liabilities 13 1,196,028 1,527,839 Current income tax liabilities 24 2,908,504 2,871,494 73,482 72,812 61,193,874 33,319,429 5,934,664 3,283,562 Non current liabilities Finance lease liabilities 13 1,505,177 2,646,330 Deferred income tax liabilities , ,354 1,669,323 2,795,684 Total liabilities 62,863,197 36,115,113 5,934,664 3,283,562 NET ASSETS 59,514,409 40,705,753 33,369,808 20,964,109 EQUITY Capital and reserve attributable to equity holders of the Company Share capital 15 23,993,071 17,243,071 23,993,071 17,243,071 Warrants reserve , ,229 Retained profits 17 34,306,979 22,862,161 8,758,508 3,721,038 58,918,279 40,105,232 33,369,808 20,964,109 Minority interests 596, ,521 Total equity 59,514,409 40,705,753 33,369,808 20,964,109 The accompanying notes form an integral part of these financial statements ANNUAL REPORT

90 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the financial year ended 31 December 2009 Group Note $ $ Revenue ,981, ,825,408 Cost of works 19 (106,596,087) (80,501,230) Gross profit 23,385,663 21,324,178 Other income 20 1,461, ,444 Expenses Administrative (7,509,359) (9,498,222) Other (49,042) (248,669) Finance 23 (186,024) (193,490) Profit before income tax 17,103,149 12,227,241 Income tax expense 24 (2,665,503) (2,695,853) Total comprehensive income, representing net profit 14,437,646 9,531,388 Total comprehensive income, representing net profit, attributable to: Equity holders of the Company 14,442,037 9,458,099 Minority interests ( 4,391) 73,289 14,437,646 9,531,388 Earnings per share attributable to equity holders of the Company (cents per share) 25 Basic Diluted The accompanying notes form an integral part of these financial statements 88 GROWING LEADING BECOMING

91 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the financial year ended 31 December 2009 Group Share Warrants Retained Minority Total Note capital reserve profits Total interests equity $ $ $ $ $ $ 2009 Beginning of financial year 17,243,071 22,862,161 40,105, ,521 40,705,753 Total comprehensive income for the year 14,442,037 14,442,037 (4,391) 14,437,646 Pursuant to warrants issue exercise 618, , ,229 Issue of shares 6,750,000 6,750,000 6,750,000 Dividend relating to 2008 paid 26 (2,997,219) (2,997,219) (2,997,219) End of financial year 23,993, ,229 34,306,979 58,918, ,130 59,514, Beginning of financial year 17,243,071 16,401,281 33,644, ,232 34,171,584 Total comprehensive income for the year 9,458,099 9,458,099 73,289 9,531,388 Dividend relating to 2007 paid 26 (2,997,219) (2,997,219) (2,997,219) End of financial year 17,243,071 22,862,161 40,105, ,521 40,705,753 The accompanying notes form an integral part of these financial statements ANNUAL REPORT

92 CONSOLIDATED STATEMENT OF CASH FLOWS for the financial year ended 31 December 2009 Group Note $ $ Cash flows from operating activities Net profit 14,437,646 9,531,388 Adjustments for: Income tax expense 2,665,503 2,695,853 Depreciation of property, plant, and equipment 2,460,774 2,251,222 Net fair value loss on investment property 200,000 Gain on disposal of property, plant and equipment (55,226) (159,999) Interest income (70,987) (246,974) Interest expense 186, ,490 Operating cash flow before working capital changes 19,623,734 14,464,980 Change in working capital Trade and other receivables (335,688) 10,652,280 Construction contract work in progress (230,123) 133,084 Trade and other payables 28,119,246 (6,856,301) Cash generated from operations 47,177,169 18,394,043 Interest income 70, ,974 Income tax paid (2,613,701) (2,862,451) Net cash provided by operating activities 44,634,455 15,778,566 Cash flows from investing activities Additions of property, plant and equipment (5,106,147) (570,037) Disposal of property, plant and equipment 127, ,090 Net cash used in investing activities (4,978,944) (165,947) Cash flows from financing activities Repayment of finance lease liabilities (1,567,964) (1,900,209) Interest expense (186,024) (193,490) Dividends paid to equity holders of the Company (2,997,219) (2,997,219) Proceeds from issuance of shares 6,750,000 Proceeds from warrants issue 618,229 Net cash generated from/ (used in) financing activities 2,617,022 (5,090,918) Net increase in cash and cash equivalents 42,272,533 10,521,701 Cash and cash equivalents at beginning of financial year 29,929,238 19,407,537 Cash and cash equivalents at end of financial year 4 72,201,771 29,929,238 The accompanying notes form an integral part of these financial statements 90 GROWING LEADING BECOMING

93 NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2009 These notes form an integral part of and should be read in conjunction with the accompanying financial statements. The financial statements of the Group for the financial year ended 31 December 2009 were authorised for issue in accordance with resolution of the directors on 22 March GENERAL INFORMATION OKP Holdings Limited (the Company ) is listed on the Singapore Exchange Securities Trading Limited and incorporated Securities Trading Limited and domiciled in Singapore. The address of its registered office is No. 6 Tagore Drive #B1 06 Tagore Building, Singapore The principal activities of the Company are those relating to investment holding and the provision of management services to its subsidiaries. The principal activities of the subsidiaries are set out in Note 8 to the financial statements. The Company s immediate and ultimate holding corporation is Or Kim Peow Investments Pte. Ltd., incorporated in Singapore. 2. SIGNIFICANT ACCOUNTING POLICIES 2.1 Basis of preparation These financial statements have been prepared in accordance with Singapore Financial Reporting Standards ( FRS ). The financial statements have been prepared under the historical cost convention, except as disclosed in the accounting policies below. The preparation of financial statements in conformity with FRS requires management to exercise its judgement in the process of applying the Group s accounting policies. It also requires the use of certain critical accounting estimates and assumptions. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Note 3. Interpretations and amendments to published standards effective in 2009 On 1 January 2009, the Group adopted the new or amended FRS and Interpretations to FRS ( INT FRS ) that are mandatory for application from that date. Changes to the Group s accounting policies have been made as required, in accordance with the transitional provisions in the respective FRS and INT FRS. The following are the new or revised FRS and INT FRS that are relevant to the Group: FRS 1 (revised) Presentation of Financial Statements (effective from 1 January 2009).The revised standard prohibits the presentation of items of income and expenses (that is, non owner changes in equity ) in the statement of changes in equity. All non owner changes in equity are shown in a performance statement, but entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income). The Group has chosen to adopt the former alternative. Where comparative information is restated or reclassified, a restated balance sheet is required to be presented as at the beginning comparative period. There is no restatement of the balance sheet as at 1 January 2008 in the current financial year. ANNUAL REPORT

94 NOTES TO THE F I NA NCI A L STAT E M EN TS (con t d) for the financial year ended 31 December SIGNIFICANT ACCOUNTING POLICIES (CONT D ) 2.1 Basis of preparation (Cont d ) FRS 108 Operating segments (effective from 1 January 2009) replaces FRS 14 Segment reporting, and requires a management approach, under which segment information is presented on the same basis as that used for internal reporting purposes. This has resulted in an increase in the number of reportable segments presented. Segment revenue, segment profits and segment assets are also measured on a basis that is consistent with internal reporting. Amendment to FRS 107 Improving disclosures about financial statements (effective from 1 January 2009). The amendment requires enhanced disclosures about fair value measurements and liquidity risk. The adoption of the amendment results in additional disclosures but does not have an impact on the accounting policies and measurement bases adopted by the Group. 2.2 Group accounting (i) Subsidiaries Subsidiaries are entities over which the Group has power to govern the financial and operating policies, generally accompanied by a shareholding giving rise to the majority of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values on the date of acquisition, irrespective of the extent of non controlling interest. Please refer to the paragraph Intangible assets Goodwill for the accounting policy on goodwill on acquisition of subsidiaries. Subsidiaries are consolidated from the date on which control is transferred to the Group. They are de consolidated from the date on which control ceases. In preparing the consolidated financial statements, transactions, balances and unrealised gains on transactions between group entities are eliminated. Unrealised losses are also eliminated but are considered an impairment indicator of the assets transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Minority interests are that part of net results of operations and of net assets of a subsidiary attributable to the interests which are not owned directly or indirectly by the Group. They are measured at the minorities share of fair value of the subsidiaries identifiable assets and liabilities at the date of acquisition by the Group and the minorities share of changes in equity since the date of acquisition, except when the minorities share of losses in a subsidiary exceeds its interests in the equity of that subsidiary. In such cases, the excess and further losses applicable to the minorities are attributed to the equity holders of the Company, unless the minorities have a binding obligation to, and are able to, make good the losses. When that subsidiary subsequently reports profits, the profits applicable to the minority interests are attributed to the equity holders of the Company until the minorities share of losses previously absorbed to the equity holders of the Company are fully recovered. Please refer to the paragraph Investments in subsidiaries and joint venture for the accounting policy on investments in subsidiaries in the separate financial statements of the Company. 92 GROWING LEADING BECOMING

95 2 SIGNIFICANT ACCOUNTING POLICIES (CONT D ) 2.2 Group accounting (Cont d ) (ii) Transactions with minority interests The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group. Disposals to minority interests result in gains and losses for the Group that are recognised in profit or loss. Purchases from minority interests result in goodwill, being the difference between any consideration paid and the Group s incremental share of the carrying value of identifiable net assets of the subsidiary. (iii) Joint venture The Group s joint venture is an entity over which the Group has contractual arrangements to jointly share the control over the economic activity of the entity with another party. The Group s interest in joint venture is accounted for in the consolidated financial statements using the equity method. Investment in joint venture is initially recognised at cost. The cost of investment is measured at the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the joint venture. In applying the equity method of accounting, the Group s share of its joint venture s profits or losses are recognised in profit or loss and its share of post acquisition movements in reserves is recognised in equity directly. These post acquisition movements are adjusted against the carrying amount of the investment. When the Group s share of losses in a joint venture equals or exceeds its interest in the joint venture, including any other unsecured non current receivables, the Group does not recognise further losses, unless it has obligations or has made payments on behalf of the joint venture. Unrealised gains on transactions between the Group and its joint venture company are eliminated to the extent of the Group s interest in the joint venture. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The accounting polices of joint venture have been changed where necessary to ensure consistency with the accounting policies adopted by the Group. Dilution gains and losses arising from investment in joint ventures are recognised in profit or loss. Please refer to the paragraph Investments in subsidiaries and joint venture for the accounting policy on investment in joint venture in the separate financial statements of the Company. 2.3 Property, plant and equipment (i) Measurement Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. (ii) Components of costs The cost of an item of property, plant and equipment initially recognised includes its purchase price and any cost that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. ANNUAL REPORT

96 NOTESTOTHE F I NA NCI A L STAT E M EN TS (con t d) for the financial year ended 31 December SIGNIFICANT ACCOUNTING POLICIES (CONT D ) 2.3 Property, plant and equipment (Cont d ) (iii) Depreciation Building under construction is not depreciated. Depreciation of property, plant and equipment is calculated using the straight line method to allocate their depreciable amounts over their estimated useful lives as follows: Freehold properties Plant and machinery Motor vehicles Office equipment Furniture and fittings Useful Lives 50 years 10 years 5 years 5 10 years 5 10 years The residual values, estimated useful lives and depreciation method of property, plant and equipment are reviewed, and adjusted as appropriate, at each balance sheet date. The effects of any revision are recognised in profit or loss when the changes arise. (iv) Subsequent expenditure Subsequent expenditure relating to property, plant and equipment that has already been recognised is added to the carrying amount of the asset only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repair and maintenance expense is recognised in the profit or loss when incurred. (v) Disposal On disposal of an item of property, plant and equipment, the difference between the disposal proceeds and its carrying amount is recognised in the profit or loss. 2.4 Intangible assets Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group s share of the net identifiable net assets and contingent liabilities of the acquired subsidiaries at the date of acquisition. Goodwill on subsidiaries are recognised separately as intangible assets and carried at cost less accumulated impairment losses. Gains and losses on the disposal of subsidiaries include the carrying amount of goodwill relating to the entity sold. 2.5 Investment property Investment property relates to a freehold property that is held for long term rental yields and/or for capital appreciation. Investment property is initially recognised at cost and subsequently carried at fair value, determined annually by independent professional valuers on the highest and best use basis. Changes in fair values are recognised in profit or loss. 94 GROWING LEADING BECOMING

97 2 SIGNIFICANT ACCOUNTING POLICIES (CONT D ) 2.5 Investment property (Cont d ) Investment property is subject to renovations or improvements at regular intervals. The cost of major renovations and improvements is capitalised as addition and the carrying amounts of the replaced components are in profit or loss. The cost of maintenance, repairs and minor improvement is recognised in profit or loss when incurred. On disposal of an investment property, the difference between the disposal proceeds and the carrying amount is recognised in profit or loss. 2.6 Investments in subsidiaries and joint venture Investments in subsidiaries and joint venture are carried at cost less accumulated impairment losses in the Company s balance sheet. On disposal of investments in subsidiaries and joint venture, the difference between disposal proceeds and the carrying amounts of the investments are recognised in profit or loss. 2.7 Impairment of non financial assets (i) Goodwill Goodwill is tested for impairment annually and whenever there is indication that the goodwill may be impaired. For the purpose of impairment testing of goodwill, goodwill is allocated to each of the Group s cash generating units ( CGU ) expected to benefit from synergies arising from the business combination. An impairment loss is recognised when the carrying amount of a CGU, including the goodwill, exceeds the recoverable amount of the CGU. The recoverable amount of a CGU is the higher of the CGU s fair value less cost to sell and value in use. The total impairment loss of a CGU is allocated first to reduce the carrying amount of goodwill allocated to the CGU and then to the other assets of the CGU pro rata on the basis of the carrying amount of each asset in the CGU. An impairment loss on goodwill is recognised as an expense and is not reversed in a subsequent period. (ii) Property, plant and equipment Investments in subsidiaries and joint venture Property, plant and equipment and investments in subsidiaries and joint venture are tested for impairment whenever there is any objective evidence or indication that these assets may be impaired. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value in use) is determined on an individual asset basis unless the asset does not generate cash in flows that are largely independent of those from other assets. If this is the case, the recoverable amount is determined for the CGU to which the asset belongs. If the recoverable amount of the asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. The difference between the carrying amount and recoverable amount is recognised as an impairment loss in profit or loss. ANNUAL REPORT

98 NOTES TO THE F I NA NCI A L STAT E M EN TS (con t d) for the financial year ended 31 December SIGNIFICANT ACCOUNTING POLICIES (CONT D ) 2.7 Impairment of non financial assets (Cont d ) (ii) Property, plant and equipment Investments in subsidiaries and joint venture (Cont d ) 2.8 Financial assets An impairment loss for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to determine the asset s recoverable amount since the last impairment loss was recognised. The carrying amount of this asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an asset other than goodwill is recognised in profit or loss. (i) Classification The Group classifies its financial assets in the following categories: at fair value through profit or loss and loans and receivables. The classification depends on the purpose for which the assets were acquired. Management determines the classification of its financial assets at initial recognition. The Group only has loans and receivables. Loans and receivables Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are presented as current assets, except for those maturing later than 12 months after the balance sheet date which are presented as non current assets. The loans and receivables are presented as trade and other receivables on balance sheet. (ii) Recognition and derecognition Regular way purchases and sales of financial assets are recognised on trade date the date on which the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. On disposal of a financial asset, the difference between the carrying amount and the sale proceeds is recognised in profit or loss. (iii) Initial measurement Financial assets are initially recognised at fair value plus transaction costs. (iv) Subsequent measurement Loans and receivables are subsequently carried at amortised cost using the effective interest method. 96 GROWING LEADING BECOMING

99 2 SIGNIFICANT ACCOUNTING POLICIES (CONT D ) 2.8 Financial assets (Cont d ) (v) Impairment The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired and recognises an allowance for impairment when such evidence exists. Loans and receivables Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy, and default or significant delay in payments are objective evidence that these financial assets are impaired. The carrying amount of these assets is reduced through the use of an impairment allowance account which is calculated as the difference between the carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. When the asset becomes uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are recognised against the same line item in profit or loss. The allowance for impairment loss account is reduced through profit or loss in a subsequent period when the amount of impairment loss decreases and the related decrease can be objectively measured. The carrying amount of the asset previously impaired is increased to the extent that the new carrying amount does not exceed the amortised cost had no impairment been recognised in prior periods. 2.9 Financial guarantees The Company has issued corporate guarantees to banks for banking facilities of its subsidiaries. These guarantees are financial guarantees as they require the Company to reimburse the banks if the subsidiaries fail to make principal or interest payments when due in accordance with the terms of their borrowings. Financial guarantees are initially recognised at their fair values plus transaction costs in the Company s balance sheet. Financial guarantees are subsequently amortised to profit or loss over the period of the subsidiaries banking facilities, unless it is probable that the Company will reimburse the bank for an amount higher than the unamortised amount. In this case, the financial guarantees shall be carried at the expected amount payable to the bank in the Company s balance sheet. Intra group transactions are eliminated on consolidation Construction contracts Construction costs include all direct material, labour costs and any overheads that are directly attributable to the construction contracts. When the outcome of a construction contract can be estimated reliably, revenue and costs are recognised to the stage of completion of the contract activity at the balance sheet date, as measured by surveys of work performed. ANNUAL REPORT

100 NOTESTOTHE F I NA NCI A L STAT E M EN TS (con t d) for the financial year ended 31 December SIGNIFICANT ACCOUNTING POLICIES (CONT D ) 2.10 Construction contracts (Cont d ) When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that are probably recoverable. Contract costs are recognised as expenses in the period in which they are incurred. When it is probable that total construction costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. At the balance sheet date, the aggregated costs incurred plus recognised profit (less recognised loss) on each is compared against the progress billings. Where costs incurred plus the recognised profits (less recognised losses) exceed progress billings, the balance is presented as due from customers on construction contracts. Where progress billings exceed costs incurred plus recognised profit (less recognised losses), the balance is presented as due to customers on construction contracts. Progress billings not yet paid by customers and retention monies are included within trade receivables Trade and other payables Trade and other payables are initially recognised at fair value, and subsequently carried at amortised cost using the effective interest method Fair value estimation of financial assets and liabilities The fair values of current financial assets and liabilities carried at amortised cost approximate their carrying amounts Leases (i) When the Group is the lessee: The Group leases motor vehicles and certain plant and machinery under finance leases. Lessee Finance leases Leases where the Group assumes substantially all risks and rewards incidental to ownership of the leased assets are classified as finance leases. The leased assets and the corresponding lease liabilities (net of finance charges) under finance leases are recognised on the balance sheet as plant and machinery and borrowings respectively, at the inception of the leases based on the lower of the fair value of the leased assets and the present value of the minimum lease payments. Each lease payment is apportioned between the finance expense and the reduction of the outstanding lease liability. The finance expense is recognised in profit or loss on a basis that reflects a constant periodic rate of interest on the finance lease liability. 98 GROWING LEADING BECOMING

101 2 SIGNIFICANT ACCOUNTING POLICIES (CONT D ) 2.13 Leases (Cont d ) (ii) When the Group is the lessor: The Group leases investment property under operating leases to non related parties. Lessor Operating leases Leases of investment property where the Group retains substantially all risks and rewards incidental to ownership are classified as operating leases. Rental income from operating leases (net of any incentives given to the lessees) is recognised in profit or loss on a straight line basis over the lease term. Initial direct costs incurred by the Group in negotiating and arranging operating leases are added to the carrying amount of the leased assets and recognised as an expense in profit or loss over the lease term on the same basis as the lease income Revenue recognition Revenue comprises the fair value of the consideration received or receivable for rendering of services in the ordinary course of the Group s activities. Revenue is presented, net of value added tax, rebates and discounts, and after eliminating transactions within the Group. The Group recognises revenue when the amount of revenue and related cost can be reliably measured, it is probable that collectibility of the related receivables is reasonably assured and when the specific criteria for each of the Group s activities are met as follows: (i) Revenue from construction contracts Revenue from construction contracts is recognised based on the percentage of completion method as disclosed in Note (ii) Interest income Interest income is recognised using the effective interest method. (iii) Rental income 2.15 Income taxes Rental income from operating lease on investment property is recognised on a straight line basis over the lease term. Current income tax for current and prior periods is recognised at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Deferred income tax is recognised for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except when the deferred income tax arises from the initial recognition of goodwill or an assets or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction. ANNUAL REPORT

102 NOTES TO THE F I NA NCI A L STAT E M EN TS (con t d) for the financial year ended 31 December SIGNIFICANT ACCOUNTING POLICIES (CONT D ) 2.15 Income taxes (Cont d ) A deferred income tax liability is recognised on temporary differences arising on investments in subsidiaries, associated companies and joint ventures, except where the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. A deferred income tax asset is recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilised. Deferred income tax is measured: (i) (ii) at the tax rates that are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date; and based on the tax consequence that will follow from the manner in which the Group expects, at the balance sheet date, to recover or settle the carrying amounts of its assets and liabilities. Current and deferred income taxes are recognised as income or expense in the profit or loss, except to the extent that the tax arises from a business combination or a transaction which is recognised directly in equity. Deferred tax arising from a business combination is adjusted against goodwill on acquisition Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past event, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated Employee compensation (i) Defined contribution plan Defined contribution plans are post employment benefit plans under which the Group pays fixed contributions into separate entities such as the Central Provident Fund on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The Group s contributions are recognised as employee compensation expense when they are due, unless they can be capitalised as an asset. (ii) Employee leave entitlements Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for estimated liabilities for annual leave as a result of services rendered up to the balance sheet date. (iii) Profit sharing and bonus plan The Group recognises a liability and an expense for bonuses and profit sharing, based on a formula that takes into consideration the profit attributable to the Company s shareholders after certain adjustments. The Group recognises a provision when contractually obliged to pay or when there is a past practice that has created a constructive obligation to pay. 100 GROWING LEADING BECOMING

103 2 SIGNIFICANT ACCOUNTING POLICIES (CONT D ) 2.18 Currency translation (i) Functional and presentation currency Items included in the financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates ( functional currency ). The financial statements are presented in Singapore Dollars. (ii) Transactions and balances Transactions in a currency other than the functional currency ( foreign currency ) are translated into the functional currency using the exchange rates at the dates of the transactions. Currency translation differences from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the closing rates at the balance sheet date are recognised in profit or loss, unless they arise from borrowings in foreign currencies, other currency instruments designated and qualifying as net investment hedges and net investment in foreign operations. Those currency translation differences are recognised in the currency translation reserve in the consolidated financial statements and transferred to profit or loss as part of the gain or loss on disposal of the foreign operation. Non monetary items measured at fair values in foreign currencies are translated using the exchange rates at the date when the fair values are determined. (iii) Translation of Group entities financial statements The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: (i) (ii) Assets and liabilities are translated at the closing exchange rates at the reporting date; Income and expenses are translated at average exchange rates (unless the average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated using the exchange rates at the dates of the transactions); and (iii) All resulting currency translation differences are recognised in the currency translation reserve Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the Board of Directors whose members are responsible for allocating resources and assessing performance of the operating segments Contingent liabilities Determination of the treatment of contingent liabilities in the financial statements is based on management s view of the expected outcome of the applicable contingency. Contingent liabilities are possible but not probable obligations whose existence will be confirmed only by the occurrence or non occurrence of one or more uncertain event not wholly within the control of the Group. The Group consults with legal counsel on matters related to litigation and other experts both within and outside the Group with respect to matters in the ordinary course of business. Details of litigation are disclosed in Note 30. ANNUAL REPORT

104 NOTES TO THE F I NA NCI A L STAT E M EN TS (con t d) for the financial year ended 31 December SIGNIFICANT ACCOUNTING POLICIES (CONT D ) 2.21 Cash and cash equivalents For the purpose of presentation in the consolidated cash flow statement, cash and cash equivalents include cash on hand, deposits with financial institutions which are subject to an insignificant risk of change in value Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares are deducted against the share capital account Dividends to Company s shareholders Dividends to Company s shareholders are recognised when the dividends are approved for payments Government grant Government grant relating to expenses is deducted directly from the related expense. 3 CRITICAL ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGEMENTS Estimates, assumptions and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. 3.1 Critical accounting estimates and assumptions (a) Estimated impairment of goodwill Goodwill is tested for impairment annually and whenever there is indication that the goodwill may be impaired. The recoverable amount of goodwill, and where applicable, cash generating units, have been determined based on value in use calculations. These calculations require the use of estimates (Note 11). (b) Impairment of investments and financial assets The Group and the Company follow the guidance of FRS 36 Impairment of Assets and FRS 39 Financial Instruments: Recognition and Measurement in determining when an investment or financial asset is other than temporary impaired and this requires significant judgement. The Group and the Company evaluate, among other factors, the duration and extent to which the fair value of an investment or financial asset is less than its cost; and the financial health and near term business outlook for the investment of financial asset, including factors such as industry and sector performance, changes in technology and operational and financing cash flow. (c) Depreciation of property, plant and equipment Property, plant and equipment are depreciated on a straight line basis over their estimated useful lives. Management estimates the useful lives of these assets to be within 5 to 50 years. The carrying amounts of the Group s property, plant and equipment as at 31 December 2009 were $13,646,599 (2008: $10,978,203). Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised. 102 GROWING LEADING BECOMING

105 3 CRITICAL ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGEMENTS (CONT D ) 3.1 Critical accounting estimates and assumptions (Cont d ) (d) Construction contracts The Group recognises contract revenue to the extent of contract costs incurred where it is probable those costs will be recoverable or based on the stage of completion method. The stage of completion is measured by surveys of work performed. Significant judgement is required in determining the stage of completion, the extent of the contract cost incurred, the estimated total contract revenue and contract cost, as well as the recoverability of the contracts. Total contract revenue also includes an estimation of the recoverable variation works that are recoverable from the customers. In making the judgement, the Group evaluates by relying on past experience. (e) Income taxes The Group has exposure to income taxes in two jurisdictions. Significant judgement is involved in determining the group wide provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The carrying amounts of the Group s current income tax liabilities and deferred income tax liabilities as at 31 December 2009 were $2,908,504 (2008: $2,871,494) and $164,146 (2008: $149,354) respectively. 4 CASH AND CASH EQUIVALENTS Group Company $ $ $ $ Cash at bank and on hand 12,455,283 11,785,081 1,380,252 1,830,097 Short term bank deposits 65,235,488 23,624,704 9,101,991 1,536,737 77,690,771 35,409,785 10,482,243 3,366,834 Bank deposits pledged (5,489,000) (5,480,547) Cash and cash equivalents per consolidated cash flow statement 72,201,771 29,929,238 10,482,243 3,366,834 Bank deposits of $5,489,000 (2008: $5,480,547) are pledged to banks for banking facilities of certain subsidiaries. ANNUAL REPORT

106 NOTES TO THE F I NA NCI A L STAT E M EN TS (con t d) for the financial year ended 31 December TRADE AND OTHER RECEIVABLES Group Company $ $ $ $ Trade receivables Non related parties 7,354,839 6,406,382 Minority shareholder of a subsidiary 233, ,951 Subsidiaries 11,948,580 6,416,220 7,588,480 6,764,333 11,948,580 6,416,220 Less: Allowance for impairment of receivables (52,704) (1,195,729) (531,000) (531,000) Trade receivables net 7,535,776 5,568,604 11,417,580 5,885,220 Construction contracts Due from customers (Note 6) 14,721,063 17,571,632 Retentions (Note 6) 1,642,800 1,870,617 16,363,863 19,442,249 Non trade receivables Minority shareholder of a subsidiary 6,377 6,377 Subsidiaries 1,578,017 1,504,662 6,377 6,377 1,578,017 1,504,662 Less: Allowance for impairment of receivables (1,094,443) (1,021,065) Non trade receivables net 6,377 6, , ,597 Deposit 281, ,815 36,500 2,786 Prepayments 804, ,321 18,449 19,951 Other receivables 1,208, , ,200,535 25,873,300 11,956,852 6,391,661 The non trade amounts due from subsidiaries and minority shareholder of a subsidiary are unsecured, interest free and are repayable on demand. 6 CONSTRUCTION CONTRACT WORK IN PROGRESS Group $ $ Construction contract work in progress Beginning of financial year 1,672,027 1,805,111 Contract costs incurred 106,826,210 80,368,146 Contract expenses recognised in profit or loss (106,596,087) (80,501,230) End of financial year 1,902,150 1,672,027 Aggregate costs incurred and profits recognised (less losses recognised) to date on uncompleted construction contracts 243,326, ,094,210 Less: Progress billings (228,605,146) (148,522,578) 14,721,063 17,571,632 Presented as: Due from customers on construction contracts (Note 5) 14,721,063 17,571,632 Advances received on construction contract (Note 12) 2,981,751 Retentions on construction contracts (Note 5) 1,642,800 1,870, GROWING LEADING BECOMING

107 7 INVESTMENTS IN SUBSIDIARIES Company $ $ Equity investments at cost Beginning of financial year 14,749,986 14,749,986 Additional investment in a subsidiary 99,995 nd of financial year 14,849,981 14,749,986 Less: Allowance for impairment (273,892) (273,892) 14,576,089 14,476,094 Country of Equity holding Name of subsidiaries Principal activities incorporation Held by the Company # Or Kim Peow Contractors (Pte) Ltd # Eng Lam Contractors Co. (Pte) Ltd # OKP Technical Management Pte Ltd Business of road and building construction and maintenance Business of road construction and maintenance Provision of technical management and consultancy services Singapore 100% 100% Singapore 100% 100% Singapore 100% 100% # OKP Investments (China) Pte Ltd Investment holding Singapore 100% 100% # United Pavement Specialists Pte Ltd # OKP (Oil & Gas) Infrastructure Pte Ltd Provision of rental services and investment holding Business of carrying out civil engineering projects in respect of oil, petrochemical and gas related businesses in Singapore Singapore 55% 55% Singapore 55% OKP (CNMI) Corporation Business of general construction Saipan, Commonwealth of the Northern Mariana Islands 96% Held by subsidiary United Pavement Specialists (CNMI) Corporation Business of general construction, subcontractor Saipan, Commonwealth of the Northern Mariana Islands 99% 99% # Audited by Nexia TS Public Accounting Not required to be audited under the laws of the country of incorporation. However, the financial statements were audited by Nexia TS Public Accounting Corporation for consolidation purposes. ANNUAL REPORT

108 NOTES TO THE F I NA NCI A L STAT E M EN TS (con t d) for the financial year ended 31 December INVESTMENT IN A JOINT VENTURE Group $ $ Equity investment at cost 50,000 On 1 December 2009, OKP Technical Management Pte Ltd ( OKPTM ), a wholly owned subsidiary, entered into a joint venture agreement with CIF Singapore Pte Ltd ( CIF ), incorporated in Singapore and a subsidiary of China Sonangol International Limited, to form a 50:50 joint venture company. On the same date, the joint venture company, CIF OKP Construction and Development Pte Ltd ( CIF OKP ) was incorporated in Singapore with a share capital of $100,000 consisting of 100 ordinary shares. The principal activities of CIF OKP are the design, construction and execution of urban developments (including road infrastructure developments) in countries outside of Singapore such as the Republic of Angola, the Republic of Zimbabwe and such other country or countries as may be mutually agreed between OKPTM and CIF. As at the balance sheet date, CIF OKP remains inactive. 9 INVESTMENT PROPERTY Group $ $ Beginning of financial year 1,200,000 1,400,000 Net fair value loss recognised in profit or loss (Note 20) (200,000) End of financial year 1,200,000 1,200,000 The following amounts are recognised in profit or loss: $ $ Gross rental income (Note 20) 47,716 51,802 Direct operating expenses arising from investment property that generated rental income (6,280) (6,911) Details of the investment property are as follows: Location Description Existing use Tenure Unexpired term of lease Fair value $ $ Moulmein Road, Singapore Apartment unit Residential Freehold 1,200,000 1,200,000 The investment property is carried at fair value at the balance sheet date as determined by an independent professional valuer. Valuation is made annually based on the property s highest and best use using the Direct Market Comparison Method. The investment property is leased to third party under cancellable operating lease (Note 2.13). 106 GROWING LEADING BECOMING

109 10 PROPERTY, PLANT AND EQUIPMENT Building under construction Freehold properties Plant and machinery Motor vehicles Office equipment Furniture and fittings Total $ $ $ $ $ $ $ Group 2009 Cost Beginning of financial year 3,040,982 14,403,378 7,540, , ,688 25,994,791 Additions 2,224,928 2,002, ,339 7,980 5,201,147 Disposals (53,000) (326,536) (379,536) End of financial year 2,224,928 3,040,982 16,353,278 8,178, , ,688 30,816,402 Accumulated depreciation Beginning of financial year 1,133,777 7,651,346 5,309, , ,323 15,016,588 Depreciation charge (Note 21) 40,168 1,463, ,251 11,413 33,511 2,460,774 Disposals (21,200) ( 286,359) (307,559) End of financial year 1,173,945 9,093,577 5,935, , ,834 17,169,803 Net book value at end of financial year 2,224,928 1,867,037 7,259,701 2,242,958 26,121 25,854 13,646, Cost Beginning of financial year 3,040,982 13,089,278 6,501, , ,169 23,724,103 Additions 1,514,100 1,324,667 11,440 2,850,207 Disposals (200,000) (286,206) (3,392) (89,921) (579,519) End of financial year 3,040,982 14,403,378 7,540, , ,688 25,994,791 Accumulated depreciation Beginning of financial year 1,093,195 6,461,913 4,641, , ,279 13,100,794 Depreciation charge (Note 21) 40,582 1,275, ,452 13,312 48,443 2,251,222 Disposals (86,000) (204,917) (1,112) (43,399) (335,428) End of financial year 1,133,777 7,651,346 5,309, , ,323 15,016,588 Net book value at end of financial year 1,907,205 6,752,032 2,230,047 29,554 59,365 10,978,203 ANNUAL REPORT

110 NOTES TO THE F I NA NCI A L STAT E M EN TS (con t d) for the financial year ended 31 December PROPERTY, PLANT AND EQUIPMENT (CONT D ) Building under construction Motor vehicle Office equipment Furniture and fittings Total $ $ $ $ $ Company 2009 Cost Beginning of financial year 10,886 8,247 19,133 Additions 2,224,929 66,488 2,291,417 End of financial year 2,224,929 66,488 10,886 8,247 2,310,550 Accumulated depreciation Beginning of financial year 3,038 3,013 6,051 Depreciation charge 13,297 1, ,211 End of financial year 13,297 4,126 3,839 21,262 Net book value at end of financial year 2,224,929 53,191 6,760 4,408 2,289, Cost Beginning of financial year 10,886 6,007 16,893 Additions 2,240 2,240 End of financial year 10,886 8,247 19,133 Accumulated depreciation Beginning of financial year 1,949 2,189 4,138 Depreciation charge 1, ,913 End of financial year 3,038 3,013 6,051 Net book value at end of financial year 7,848 5,234 13, GROWING LEADING BECOMING

111 10 PROPERTY, PLANT AND EQUIPMENT (CONT D ) (i) As at 31 December 2009, the details of the Group and the Company s building under construction with a freehold tenure are as follows: Location Description Intended use Stage of completion Expected date of completion Site area (sq. m) Gross floor area (sq. m) Group's effective interest in the property 30 Tagore Lane Singapore storey building Office 1% December % (ii) As at 31 December 2009, the details of the Group s freehold properties are as follows: Freehold properties/ Location Purpose Approximate Built in area (in square feet) Net carrying value $ $ No. 6 Tagore Drive #B1 05 Tagore Building Singapore Office 2, , ,785 No. 6 Tagore Drive #B1 06 Tagore Building Singapore Office 2, ,252 1,008,420 (iii) Included in additions in the consolidated financial statements are plant and machinery, and motor vehicles acquired under finance leases amounting to $95,000 (2008: $955,500) and Nil (2008: $1,324,670) respectively. The carrying amount of plant and machinery, and motor vehicles held under finance leases are $3,226,510 (2008: $4,618,592) and $580,983 (2008: $1,639,588) respectively at the balance sheet date. (iv) Finance lease liabilities are secured on freehold properties of the Group and the Company with carrying amounts of $988,252 (2008: $1,008,420). ANNUAL REPORT

112 NOTES TO THE F I NA NCI A L STAT E M EN TS (con t d) for the financial year ended 31 December INTANGIBLE ASSETS This represents goodwill on consolidation which is the excess of the cost of acquisition over the fair value of the Group s share of the identifiable net assets acquired. Group $ $ Goodwill arising on consolidation cost Beginning and end of financial year 1,687,551 1,687,551 Impairment tests for goodwill Goodwill is allocated to the Group s cash generating units ( CGUs ) identified according to business segments. A segment level summary of the goodwill allocation is as follows: $ $ Construction 1,417,525 1,417,525 Maintenance 270, ,026 1,687,551 1,687,551 The recoverable amount of a CGU was determined based on value in use calculations. Cash flow projections used in these calculations were based on financial budgets approved by management covering a five year period. Cash flows beyond the five year period were extrapolated using the estimated growth rates stated below. The growth rates did not exceed the long term average growth rates for the business in which the CGU operates. Key assumptions used for value in use calculations Construction Maintenance Gross margin 15% 20% 5% 9% Growth rate 5% 10% 3% 6% Discount rate 6% 6% These assumptions were used for the analysis of each CGU within the business segment. Management determined budgeted gross margin based on past performance and its expectations of the market development. The average growth rates used were consistent with the forecasts included in industry reports. The discount rates used were pre tax and reflected specific risks relating to the relevant segments. 110 GROWING LEADING BECOMING

113 12 TRADE AND OTHER PAYABLES Group Company $ $ $ $ Trade payables 38,155,796 19,206, , ,129 Non trade payables Subsidiaries 3,038,094 1,318,131 Minority shareholder of a subsidiary 646, , , ,376 3,038,094 1,318,131 Construction Contracts Advances received ( Note 6) 2,981,751 Accrued operating expenses 15,189,101 9,092,158 2,625,345 1,727,490 Other payables 115,818 33,498 4,969 57,089,342 28,920,096 5,861,182 3,210,750 The non trade amounts due to subsidiaries and minority shareholder of a subsidiary are unsecured, interest free and are repayable on demand. 13 FINANCE LEASE LIABILITIES The Group leases certain plant and machinery, and motor vehicles from non related parties under finance leases. The lease agreements do not have renewal clauses but provide the Group with options to purchase the leased assets at nominal value at the end of the lease term. Group Company $ $ $ $ Minimum lease payments due: Not later than one year 1,343,334 1,712,273 Between one and five years 1,697,289 2,981,638 3,040,623 4,693,911 Less: Future finance charges (339,418) (519,742) Present value of finance lease liabilities 2,701,205 4,174,169 The present values of finance lease liabilities are analysed as follows: Group Company $ $ $ $ Not later than one year 1,196,028 1,527,839 Between one and five years 1,505,177 2,646,330 Total 2,701,205 4,174,169 ANNUAL REPORT

114 NOTES TO THE F I NA NCI A L STAT E M EN TS (con t d) for the financial year ended 31 December FINANCE LEASE LIABILITIES (CONT D ) Security granted Finance lease liabilities of the Group are effectively secured over the leased plant and machinery, and motor vehicles (Note 10), as the legal title is retained by the lessor and will be transferred to the Group upon full settlement of the finance lease liabilities. 14 DEFERRED INCOME TAXES Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current income tax assets against current income tax liabilities and when the deferred income taxes relate to the same fiscal authority. The amounts, determined after appropriate offsetting, are shown on the balance sheet as follows: Group $ $ Deferred income tax assets to be recovered within one year (44,239) (52,599) Deferred income tax liabilities to be settled after one year 208, , , ,354 Movement in deferred income tax account is as follows: Group $ $ Beginning of financial year 149, ,513 Effects of change in Singapore tax rate in profit or loss (Note 24) (8,297) Tax credited to profit or loss (Note 24) 23,089 (52,159) End of financial year 164, ,354 The movement in deferred income tax assets and liabilities (prior to offsetting of balances within the same tax jurisdiction) is as follows: Group Accelerated tax depreciation Provisions and allowances Total $ $ $ 2009 Beginning of financial year 221,781 (72,427) 149,354 Effects of change in Singapore (12,321) 4,024 (8,297) Tax charged/ (credited) to profit or loss 88,299 (65,210) 23,089 End of financial year 297,759 (133,613) 164, Beginning of financial year 264,322 (62,809) 201,513 Tax credited to profit or loss (42,541) (9,618) (52,159) End of financial year 221,781 (72,427) 149, GROWING LEADING BECOMING

115 15 SHARE CAPITAL Group and Company No. of ordinary shares Amount $ 2009 Beginning of financial year 149,860,940 17,243,071 Issue of new shares 15,000,000 6,750,000 Issue of Bonus Shares 82,430,468 End of financial year 247,291,408 23,993, Beginning and end of financial year 149,860,940 17,243,071 All issued ordinary shares are fully paid. There is no par value for these ordinary shares. On 26 May 2009, the Company issued 15 million new ordinary shares for a total consideration of $6,750,000 for cash pursuant to the Subscription Agreement dated 17 April The newly issued shares ranked pari passu in all respects with the previously issued shares. On 30 November 2009, the Company issued 82,430,468 new ordinary shares as Bonus Shares pursuant to the bonus issue exercise on the basis of one Bonus Share for every two ordinary shares held by the entitled shareholders. The newly issued shares ranked pari passu in all respects with the previously issued shares. 16 WARRANTS RESERVE Movement in warrants reserve for the Group and the Company is as follows: Group Company $ $ $ $ Beginning of financial year Warrants issue 618, ,229 End of financial year 618, ,229 On 6 January 2010, the Company had completed a renounceable and non-underwritten rights issue of up to 61,822,852 warrants, at an issue price of $0.01 for each warrant, with each warrant carrying the right to subscribe for one new share at an exercise price of $0.20 for each new share, on the basis of one warrant for every four shares held by the entitled shareholders. The warrants will expire on 5 January The warrants were subsequently listed and quoted on the Official List of the SGX-ST on 8 January The warrants reserve represents the amount of cash received from the subscribers as at 31 December 2009 prior to the issuance of warrants. Subsequent to the balance sheet date, 8,153,625 warrants were exercised and 8,153,625 ordinary shares were issued pursuant to the exercise of the warrants. ANNUAL REPORT

116 NOTES TO THE F I NA NCI A L STAT E M EN TS (con t d) for the financial year ended 31 December RETAINED PROFITS (a) Retained profits of the Group and the Company are distributable. (b) Movement in retained profits for the Company is as follows: Company $ $ Beginning of financial year 3,721,038 3,371,564 Net profit 8,034,689 3,346,693 Dividends paid (Note 26) (2,997,219) (2,997,219) End of financial year 8,758,508 3,721, REVENUE Group $ $ Revenue from construction 98,184,123 70,910,588 Revenue from maintenance 31,797,627 30,914, ,981, ,825, COST OF WORKS Included in the cost of works are the following: Group $ $ Depreciation of property, plant and equipment 2,208,880 1,990,839 Employee compensation costs Salaries and bonuses 15,032,457 13,614,948 Employer s contribution to defined contribution plans including Central Provident Fund 1,592,229 1,445, GROWING LEADING BECOMING

117 20 OTHER INCOME/ (LOSS) NET Group $ $ Rental income from an investment property (Note 9) 47,716 51,802 Gain on disposal of property, plant and equipment 55, ,999 Net fair value loss on investment property (Note 9) (200,000) Interest income from bank deposits 70, ,974 Rental income of machinery 24, ,070 Reversal of allowance for impairment of trade receivables 1,087,724 Other 175, ,599 1,461, , EXPENSES BY NATURE Group $ $ Purchase of materials 19,270,424 25,503,459 Sub contractors cost 60,576,167 32,050,872 Depreciation of property, plant and equipment (Note 10) 2,460,774 2,251,222 Employees compensation (Note 22) 21,949,078 20,181,695 Professional fees 2,311,810 2,265,113 Property tax 9,493 11,459 Worksite expenses 1,593,911 1,291,383 Rental charges 1,481, ,934 Other expenses 4,500,869 5,859,984 Total cost of works, administrative and other expenses 114,154,488 90,248, EMPLOYEE COMPENSATION Group $ $ Salaries and bonuses 20,638,560 18,555,994 Employer s contribution to defined contribution plans including Central Provident Fund 1,751,996 1,625,701 Government Grant Job credit scheme (441,478) 21,949,078 20,181,695 The Jobs credit scheme is a cash grant introduced in the Singapore Budget 2009 to help businesses preserve jobs in the economic downturn. The Jobs credit will be paid to eligible employers in 2009 in four payments and the amount an employer can receive would depend on the fulfillment of the conditions as stated in the scheme. ANNUAL REPORT

118 NOTES TO THE F I NA NCI A L STAT E M EN TS (con t d) for the financial year ended 31 December FINANCE EXPENSES Group $ $ Interest expense Finance lease liabilities 186, , INCOME TAXES Income tax expense Group $ $ Tax expense attributable to profit is made up of: Profit from current financial year: Current income tax Singapore 2,818,000 2,782,250 Deferred income tax (Note 14) 14,792 (52,159) 2,832,792 2,730,091 Over provision of current income tax in prior financial years (167,289) (34,238) 2,665,503 2,695,853 The tax expense on profit differs from the amount that would arise using the Singapore standard rate of income tax is as explained below: Group $ $ Profit before income tax 17,103,149 12,227,241 Tax calculated at a tax rate of 17% (2008: 18%) 2,907,535 2,200,903 Effects of: Change in Singapore tax rate (Note 14) (8,297) Income not subject to tax (96,931) Expenses not deductible for tax purposes 33, ,244 Deferred income tax assets not recognised 30,522 44,442 Tax exemption (77,775) (99,498) Other 44,627 2,832,792 2,730, GROWING LEADING BECOMING

119 24 INCOME TAXES (CONT D ) During the financial year, the Singapore Corporate tax rate was reduced from 18% to 17% for the year of assessment 2009 and onwards. Movement in current income tax liabilities Group Company $ $ $ $ Beginning of financial year 2,871,494 2,985,933 72, ,102 Income tax paid (2,613,701) (2,862,451) (57,539) (294,435) Tax expense 2,818,000 2,782,250 67,000 67,000 Over provision in prior financial years (167,289) (34,238) (8,791) (81,855) End of financial year 2,908,504 2,871,494 73,482 72, EARNINGS PER SHARE Basic earnings per share Basic earnings per share is calculated by dividing the net profit attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the financial year. Group $ $ Net profit attributable to equity holders of the Company 14,442,037 9,458,099 Weighted average number of ordinary shares outstanding for basic earnings per share 238,291, ,791,408 Basic earnings per share (cents per share) Diluted earnings per share For the purpose of calculating diluted earnings per share, profit attributable to equity holders of the Company and the weighted average number of ordinary shares outstanding are adjusted for the effects of all dilutive potential shares. The Company has warrants as potential dilutive ordinary shares. ANNUAL REPORT

120 NOTES TO THE F I NA NCI A L STAT E M EN TS (con t d) for the financial year ended 31 December EARNINGS PER SHARE (CONT D ) Diluted earnings per share(cont d ) The weighted average number of shares on issue has been adjusted as if all dilutive warrants were exercised. The number of shares that could have been issued upon the exercise of all dilutive warrants less the number of shares that could have been issued at fair value (determined as the Company s average share price for the financial year) for the same total proceeds is added to the denominator as the number of shares issued for no consideration. No adjustment is made to the net profit. Group $ $ Net profit attributable to equity holders of the Company 14,442,037 9,458,099 Weighted average number of ordinary shares outstanding for basic earnings per share 238,291, ,791,408 Adjustments for Warrants 28, ,320, ,791,408 Diluted earnings per share (cents per share) DIVIDENDS Group and Company $ $ Ordinary dividends paid First and final one tier tax exempt dividend paid in respect of the previous financial year of 2.0 cents (2008: 2.0 cents) per share 2,997,219 2,997,219 At the Annual General Meeting on 21 April 2010, a first and final tax exempt (one tier) dividend of 2.0 cents per share and a special tax exempt (one tier) dividend of 1.0 cent per share amounting to a total of $7,663,351 will be recommended. These financial statements do not reflect these dividends, which will be accounted for in shareholders equity as an appropriation of retained profits in the financial year ending 31 December GROWING LEADING BECOMING

121 27 RELATED PARTY TRANSACTIONS In addition to the information disclosed elsewhere in the financial statements, the following transactions took place between the Group and related parties at terms agreed between the parties: (i) Services rendered Group $ $ Professional fees paid to Global Law Alliance LLC 3,500 (incorporating Niru & Co.) Mr. Nirumalan s/o Kanapathi Pillai, who is an independent director of the Company, is the Senior Director of Global Law Alliance LLC. ( GLA ). The professional fee paid to GLA is according to prevailing market rates as compared to other legal firms providing similar services. (ii) Key management personnel compensation Key management personnel compensation is as follows: Group $ $ Wages and salaries 4,513,530 3,599,372 Employer s contribution to defined contribution plans including Central Provident Fund 79,675 79,223 4,593,205 3,678,595 Included in the above is total compensation to directors of the Company amounting to $3,711,944 (2008: $3,208,684). 28 FINANCIAL RISK MANAGEMENT Financial risk factors The Group s activities expose it to market risk (including currency risk and interest rate risk), credit risk and liquidity risk. The Group s overall risk management strategy seeks to minimise adverse effects from the unpredictability of financial markets on the Group s financial performance. The Board of Directors is responsible for setting the objectives and underlying principles of financial risk management for the Group. The Board of Directors then establishes the detailed policies such as authority levels, oversight responsibilities, risk identification and measurement and exposure limits, in accordance with the objectives and underlying principles approved by the Board of Directors. ANNUAL REPORT

122 NOTES TO THE F I NA NCI A L STAT E M EN TS (con t d) for the financial year ended 31 December FINANCIAL RISK MANAGEMENT (CONT D ) Financial risk factors (Cont d ) (i) Market risk (a) Currency risk The Group s exposure to foreign exchange rate risk is kept at minimal level as its costs and revenues are predominately denominated in Singapore Dollar. The Group is also exposed to currency translation risk on the net assets in foreign operations. Currency exposure to the net assets of the Group s foreign operations in Saipan, Commonwealth of the Northern Mariana Islands is not significant to the Group. The Group s currency exposure based on the information provided to key management is as follows: SGD USD Total $ $ $ At 31 December 2009 Financial assets Cash and cash equivalents 75,732,659 1,958,112 77,690,771 Trade and other receivables 25,389,645 6,377 25,396,022 Inter company balances 9,534,060 4,107,630 13,641, ,656,364 6,072, ,728,483 Financial liabilities Finance lease liabilities 2,701,206 2,701,206 Inter company balances 9,534,060 4,107,630 13,641,690 Other financial liabilities 55,750,775 1,338,568 57,089,343 67,986,040 5,446,198 73,432,238 Net financial assets 42,670, ,921 43,296,245 Add: Net non financial assets 16,311,796 (93,632) 16,218,164 Currency profile including non financial assets and liabilities 58,982, ,289 59,514,409 Currency exposure 14,363 1,948,352 1,962, GROWING LEADING BECOMING

123 28 FINANCIAL RISK MANAGEMENT (CONT D ) (i) Market risk (Cont d ) (a) Currency risk (Cont d ) SGD USD Total $ $ $ At 31 December 2008 Financial assets Cash and cash equivalents 32,698,287 2,711,498 35,409,785 Trade and other receivables 25,444,322 6,657 25,450,979 Inter company balances 9,358,495 4,179,236 13,537,731 67,501,104 6,897,391 74,398,495 Financial liabilities Finance lease liabilities 4,174,169 4,174,169 Inter company balances 9,358,495 4,179,236 13,537,731 Other financial liabilities 27,570,938 1,349,158 28,920,096 41,103,602 5,528,394 46,631,996 Net financial assets 26,397,502 1,368,997 27,766,499 Add: Net non financial assets 13,032,886 (93,632) 12,939,254 Currency profile including non financial assets and liabilities 39,430,388 1,275,365 40,705,753 Currency exposure 63,410 2,526,294 2,589,704 ANNUAL REPORT

124 NOTES TO THE F I NA NCI A L STAT E M EN TS (con t d) for the financial year ended 31 December FINANCIAL RISK MANAGEMENT (CONT D ) (i) Market risk (Cont d ) (a) Currency risk (Cont d ) The Company s currency exposure based on the information provided to key management is as follows: < 2009 > < 2008 > SGD USD Total SGD USD Total Financial assets Cash and cash equivalents 9,660, ,786 10,482,243 2,524, ,834 3,366,834 Trade and other receivables 11,938,403 11,938,403 6,371,710 6,371,710 21,598, ,786 22,420,646 8,895, ,834 9,738,544 Financial liabilities Other financial liabilities 5,861,182 5,861,182 3,210,750 3,210,750 Net financial assets 15,737, ,786 16,559,464 5,684, ,834 6,527,794 Add: Net non financial assets 16,810,344 16,810,344 14,436,315 14,436,315 Currency profile including non financial assets and liabilities 32,548, ,786 33,369,808 20,121, ,834 20,964,109 Currency exposure 15,701, ,786 16,522,964 5,682, ,834 6,525,008 If the USD has strengthened/weakened by 2% (2008: 2%) against the SGD with all other variables including tax rate being held constant, the impact to the equity and net profit of the Group and the Company arising from currency translation gains/losses to the remaining USD denominated financial instruments will not be significant. (b) Cash flow and fair value interest rate risks Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the fair value of a financial instrument will fluctuate due to changes in market interest rates. As the Group has no significant interest bearing assets and liabilities, the Group s income and operating cash flows are substantially independent of changes in market interest rates. 122 GROWING LEADING BECOMING

125 28 FINANCIAL RISK MANAGEMENT (CONT D ) (ii) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. For trade receivables, the Group adopts the policy of focusing on government bodies as its customers due to their low default risk on billings and payments. Credit exposure to an individual counterparty is restricted by credit limits that are approved by the Group Managing Director based on ongoing credit evaluation. The counterparty s payment profile and credit exposure are continuously monitored at the entity level by the respective management and at the Group level by the Group Managing Director. The Group s and Company s trade receivables comprise 2 customers (2008: 3 customers) and 2 customers (2008: 2 customers) respectively that individually represented more than 10% of trade receivables. As the Group and the Company do not hold any collateral, the maximum exposure to credit risk for each class of financial instruments is the carrying amount of that class of financial instruments presented on the balance sheet. The Group s and Company s major classes of financial assets are bank deposits and trade receivables. The credit risk for trade receivables based on the information provided to key management is as follows: Group Company $ $ $ $ By geographical areas Singapore 7,535,776 5,568,604 11,417,580 5,885,220 By types of customers Non related parties Government bodies 4,416,440 4,214,242 Non government bodies 2,885, ,411 Minority shareholder of a subsidiary 233, ,951 Subsidiaries 11,417,580 5,885,220 7,535,776 5,568,604 11,417,580 5,885,220 (a) Financial assets that are neither past due nor impaired Bank deposits that are neither past due nor impaired are mainly deposits with banks with high credit ratings assigned by international credit rating agencies. Trade receivables that are neither past due nor impaired are substantially companies with a good collection track record with the Group. There were no trade receivables past due or impaired that were re negotiated during the financial year. ANNUAL REPORT

126 NOTES TO THE F I NA NCI A L STAT E M EN TS (con t d) for the financial year ended 31 December FINANCIAL RISK MANAGEMENT (CONT D ) (ii) Credit risk (Cont d ) (b) Financial assets that are past due and/or impaired The age analysis of trade receivables past due but not impaired is as follows: Group Company $ $ $ $ Past due 0 to 3 months 75,209 2,928,278 Past due 3 to 6 months 39,875 79,040 The carrying amount of trade receivables individually determined to be impaired and the movement in the related allowance for impairment is as follows: Group Company $ $ $ $ Gross amount 52,548 1,195, , ,000 Less: Allowance for impairment (52,548) (1,195,729) (531,000) (531,000) Beginning of financial year 1,195, , , ,720 Allowance made/(utilised) (1,143,181) 735,183 (12,720) End of financial year 52,548 1,195, , ,000 The impaired trade receivables arise mainly from construction contracts customers and advances to subsidiaries which have suffered significant losses in its operations and ceased their operations. 124 GROWING LEADING BECOMING

127 28 FINANCIAL RISK MANAGEMENT (CONT D ) (iii) Liquidity risk The table below analyses the maturity profile of the Group s and Company s financial liabilities based on contractual undiscounted cash flows. Less than 1 year Between 1 and 2 years Between 2 and 5 years $ $ $ Group At 31 December 2009 Trade and other payables 57,089,342 Finance lease liabilities 1,343,334 1,525, ,249 58,432,676 1,525, ,249 At 31 December 2008 Trade and other payables 28,920,096 Finance lease liabilities 1,712,273 2,200, ,302 30,632,369 2,200, ,302 Company At 31 December 2009 Trade and other payables 5,861,182 At 31 December 2008 Trade and other payables 3,210,750 The Group and the Company manage the liquidity risk by maintaining sufficient cash and cash equivalents and having an adequate amount of committed credit facilities to enable them to meet their normal operating commitments. (iv) Capital risk The Group s objectives when managing capital are to safeguard the Group s ability to continue as a going concern and to maintain an optimal capital structure so as to maximise shareholder s value. In order to maintain or achieve an optimal capital structure, the Group may adjust the amount of dividend payment, return capital to shareholders, issue new shares, buy back issued shares, obtain new borrowings or sell assets to reduce borrowings. The Group s and Company s strategies in monitoring their capital, which were unchanged from 2008, are to maintain gearing ratios within 25% to 30% and 4% to 10% respectively. The gearing ratio is calculated as net debt divided by total capital. Net debt is calculated as borrowings plus trade and other payables less cash and cash equivalents. Total capital is calculated as equity plus net debt. ANNUAL REPORT

128 NOTESTOTHE F I NA NCI A L STAT E M EN TS (con t d) for the financial year ended 31 December FINANCIAL RISK MANAGEMENT (CONT D ) (iv) Capital risk (Cont d ) Group Company $ $ $ $ Net debt Total equity 59,514,409 40,705,753 33,369,808 20,964,109 Total capital 59,514,409 40,705,753 33,369,808 20,964,109 Gearing ratio 29 SEGMENT INFORMATION (a) Business segments Management has determined the operating segments based on the reports reviewed by the Board of Directors that are used to make strategic decisions. The Group s operating segments are its strategic business units which offer different services and are managed separately. The reportable segment presentation is based on the Group s management and internal reporting structure used for its strategic decision making purposes. Currently, the business segments operate only in Singapore. Other service included in Singapore is investment holding, which is not included within the reportable operating segments, as this is not included in the reports provided to the Board of Directors. The result of this operation, if any, is included in the all other segments column. The Group s activities comprise the following reportable segments: Construction It relates to the construction of urban and arterial roads, expressways, vehicular bridges, flyovers and buildings, airports infrastructure, and oil and gas related infrastructure for petrochemical plants and oil storage terminals. Maintenance It relates to re construction work performed on roads, road reserves, pavements, footpaths and kerbs, guardrails, drains, signboards as well as bus bays and shelters. 126 GROWING LEADING BECOMING

129 29 SEGMENT INFORMATION (CONT D ) (a) Business Segments (Cont d ) 31 December December 2008 Construction Maintenance All other segments Total Construction Maintenance All other segments Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Group Sales Total segment sales Inter segment sales Sales to external parties 98,187 35, ,415 76,186 33, ,548 (3) (3,430) (3,433) (5,276) (2,447) (7,723) 98,184 31, ,982 70,910 30, ,825 Gross profit 16,336 7,050 23,386 18,946 2,378 21,324 Other 1, income Unallocated (7,559) (9,747) costs 17,289 12,420 Finance expense (186) (193) Profit before 17,103 12,227 income tax Income tax (2,666) (2,696) expense Net profit 14,438 9,531 Total Assets 21,569 6,937 28,506 19,233 9,143 28,376 Total Liabilities 39,702 11,774 51,476 17,856 7,537 25,393 Sales between segments are carried out at arm s length. The revenue from external parties reported to the Board of Directors is measured in a manner consistent with that in the statement of comprehensive income. The Board of Directors assesses the performance of the operating segments based on gross profit. Administrative and finance expenses, and other income are not allocated to segments. ANNUAL REPORT

130 NOTESTOTHE F I NA NCI A L STAT E M EN TS (con t d) for the financial year ended 31 December SEGMENT INFORMATION (CONT D ) (a) Business Segments (Cont d ) Reportable segments assets are reconciled to total assets as follows: The amounts provided to the Board of Directors with respect to total assets are measured in a manner consistent with that of the financial statements. For the purposes of monitoring segment performance and allocating resources between segments, the Board of Directors monitors the intangible asset, construction contract work in progress, and trade receivables. All assets are allocated to reportable segments other than cash and cash equivalents, deposits, prepayments, other receivables, investment in joint venture, investment property, and property, plant and equipment $ 000 $ 000 Segment assets for reportable segments 28,506 28,376 Unallocated: Cash and cash equivalent 77,691 35,409 Deposits, prepayments, and other receivables 1, Investment in joint venture 50 Investment property 1,200 1,200 Property, plant and equipment 13,647 10, ,377 76,821 Reportable segments liabilities are reconciled to total liabilities as follows: The amounts provided to the Board of Directors with respect to total liabilities are measured in a manner consistent with that of the financial statements. These liabilities are allocated based on the operations of the segment. All liabilities are allocated to the reportable segments other than other payables, income tax liabilities, deferred income tax liabilities, and finance lease liabilities $ 000 $ 000 Segment liabilities for reportable segments 51,476 25,393 Unallocated: Other payables 5,613 3,528 Income tax liabilities 2,909 2,871 Deferred income tax liabilities Finance lease liabilities 2,701 4,174 62,863 36, GROWING LEADING BECOMING

131 30 CONTINGENT LIABILITIES Litigations One of the subsidiaries is currently engaged in certain legal proceedings with third parties who are alleging certain breaches of contract and/or related tort claims. The information usually required by FRS 37 Provisions, Contingent Liabilities and Contingent Assets is not disclosed on the grounds that it can be expected to prejudice seriously the outcome of the proceedings. The subsidiary has been advised by its legal counsel that the claims made in the aforesaid proceedings are without merit. As such, the Company does not consider the proceedings to be significant and it is unlikely that any significant liability will arise there from. As the litigations are pending trial, it is not practicable to state the timing and amount of potential losses, if any. The directors of the Company are of the view that no material losses will arise in respect of the legal claim at the date of these financial statements. 31 COMMITMENTS Capital Commitments Capital expenditures contracted for at the balance sheet date but not recognised in the financial statements are as follows: Group Company $ $ $ $ Property, plant and equipment 19, NEW OR REVISED ACCOUNTING STANDARDS AND INTERPRETATIONS Certain new standards, amendments and interpretations to existing standards have been published and are mandatory for the Group s accounting periods beginning on or after 1 January 2010 or later periods and which the Group has not early adopted. The Group s assessment of the impact of adopting those standards, amendments and interpretations that are relevant to the Group is set out below: (a) Amendments to FRS 39 Financial Instruments: Recognition and Measurement Eligible Hedged Items (effective for annual periods beginning on or after 1 July 2009) This amendment clarifies how the principles that determine whether a hedged risk or portion of cash flows is eligible for designation should be applied in particular situations. The Group will apply this amendment from 1 January 2010, but it is not expected to have a material impact on the financial statements. ANNUAL REPORT

132 NOTES TO THE F I NA NCI A L STAT E M EN TS (con t d) for the financial year ended 31 December NEW OR REVISED ACCOUNTING STANDARDS AND INTERPRETATIONS (CONT D ) (b) INT FRS 117 Distributions of Non Cash assets to Owners (effective for annual periods beginning on or after 1 July 2009) INT FRS 117 clarifies how the Group should measure distributions of assets, other than cash, to its owners. INT FRS 117 specifies that such a distribution should only be recognised when appropriately authorised, and that the dividend should be measured at the fair value of the assets to be distributed. The difference between the fair value and the carrying amount of the assets distributed should be recognised in profit or loss. INT FRS 117 applies to pro rata distributions of non cash assets except for distributions to a party or parties under common control. The Group will apply INT FRS 117 from 1 January 2010, but it is not expected to have a material impact on the financial statements. (c) INT FRS 118 Transfer of assets to Customers (effective for annual periods beginning on or after 1 July 2009) INT FRS 118 prescribes the accounting requirements for arrangements where the Group receives an item of property, plant and equipment from a customer which must be used to provide an ongoing service to the customer. It also applies to cash received from a customer that must be used to acquire or construct such property, plant and equipment. The Group will apply INT FRS 118 from 1 January 2010, but it is not expected to have a material impact on the financial statements. (d) FRS 27 (revised) Consolidated and Separate Financial Statements (effective for annual periods beginning on or after 1 July 2009) FRS 27 (revised) requires the effects of all transactions with non controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re measured to fair value, and a gain or loss is recognised in profit or loss. The Group will apply FRS 27 (revised) prospectively to transactions with minority interests from 1 January (e) FRS 103 (revised) Business Combinations (effective for annual periods beginning on or after 1 July 2009) FRS 103 (revised) continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re measured through the income statement. There is a choice on an acquisition by acquisition basis to measure the non accounting interest in the acquiree either at fair value or at the non controlling interest s proportionate share of the acquiree s net assets. All acquisition related costs should be expensed. The Group will apply FRS 103 (revised) prospectively to all business combinations from 1 January GROWING LEADING BECOMING

133 LETTER TO SHAREHOLDERS (Incorporated in the Republic of Singapore) (Company Registration No G) Board of Directors: Mr Or Kim Peow (Group Chairman) Mr Or Toh Wat (Group Managing Director) Mdm Ang Beng Tin (Executive Director) Mr Or Kiam Meng (Executive Director) Mr Oh Enc Nam (Executive Director) Mr Or Lay Huat Daniel (Executive Director) Dr Chen Seow Phun, John (Lead Independent Director) Mr Nirumalan s/o V Kanapathi Pillai (Independent Director) Mr Tan Boen Eng (Independent Director) Registered Office: No. 6 Tagore Drive, #B1 06 Tagore Building, Singapore April 2010 To: The Shareholders of OKP Holdings Limited ( Shareholders ) Dear Sir/Madam PROPOSED RENEWAL OF THE SHARE PURCHASE MANDATE We refer to the Notice of the Annual General Meeting (the 2010 AGM ) of OKP Holdings Limited (the Company, and together with its subsidiaries, the Group ) dated 1 April 2010 in respect of the AGM to be held on Wednesday, 21 April 2010 at 3.00 pm at No. 6 Tagore Drive, #B1 06 Tagore Building, Singapore and resolution 11 set out under Special Business in the Notice of the said AGM. 1. INTRODUCTION Shareholders had approved a mandate (the Share Purchase Mandate ) at the extraordinary general meeting held on 20 April 2009 to enable the Company to purchase or otherwise acquire issued ordinary shares in the capital of the Company ( Shares ). The authority conferred on the directors of the Company (the Directors ) under the Share Purchase Mandate will expire at the forthcoming Eighth AGM (2010 AGM) to be held on 21 April Accordingly, the Directors propose to seek the approval of Shareholders for the renewal of the Share Purchase Mandate. The purpose of this letter ( Letter ) is to provide Shareholders with information in relation to the renewal of the Share Purchase Mandate. ANNUAL REPORT