LAFE CORPORATION LIMITED

Transcription

1 LAFE CORPORATION LIMITED ANNUAL REPORT 2008

2

3 ANNUAL REPORT 2008 LAFE CORPORATION LIMITED

4 CONTENTS

5 Corporate Information 5 Message to Shareholders 7 Shareholdings Statistics 9 Report on Corporate Governance 11 Directors Report 19 Statement of Directors 22 Independent Auditors Report 23 Consolidated Income Statement 25 Income Statement 26 Consolidated Balance Sheet 27 Balance Sheet 29 Statement of Changes in Equity 30 Consolidated Cash Flow Statement 31 Notes to the Financial Statements 33 Financial Summary 72 Interested Person Transactions 73 Notice of Annual General Meeting 74 Appendix to the Notice of Annual General Meeting 77 Annexure A 79 Annexure B 81

6 CORPORATE INFORMATION

7 BOARD OF DIRECTORS Mr. Christopher Ho Wing-On Chairman Mr. Adrian Ma Chi Chiu Mr. Michael Andrew Barclay Binney Encik Mirzan Bin Mahathir Mr. Lew Syn Pau Mr. Shum Sze Keong AUDIT COMMITTEE Mr. Lew Syn Pau Chairman Encik Mirzan Bin Mahathir Mr. Shum Sze Keong NOMINATING COMMITTEE Encik Mirzan Bin Mahathir Chairman Mr. Lew Syn Pau Mr. Shum Sze Keong Mr. Christopher Ho Wing-On REMUNERATION COMMITTEE Mr. Lew Syn Pau Chairman Encik Mirzan Bin Mahathir Mr. Shum Sze Keong KEY EXECUTIVES Mr. Christopher Ho Wing-On Chairman Mr. Law Kwok Fai Paul Head of Manufacturing and Operations Mr. Christopher Chiang Tat-On Chief Financial Offi cer Mr. Fok Kam Tong Vice President of Operations Mr. Tang Hang To Director of Operations Mr. Wong Tak Shing Director of Development Mr. Chan King Shan Director of Development AUDITORS Moore Stephens LLP 10 Anson Road #29-15 International Plaza Singapore Partner-in-charge: Mr. Chris Johnson (Appointed with effect from fi nancial year ended 31 December 2006) COMPANY SECRETARY Ms. Lee Yen Kee Ruby ASSISTANT COMPANY SECRETARY Ms. Linda Longworth International Managers Bermuda Ltd. CORPORATE OFFICE IN SINGAPORE 8 Commonwealth Lane Grande Building Singapore Tel: (65) Fax: (65) REGISTERED OFFICE #2 Reid Street Hamilton HM 11, Bermuda BERMUDA REGISTRAR AND SHARE TRANSFER OFFICE International Managers Bermuda Ltd. #2 Reid Street Hamilton HM 11, Bermuda SINGAPORE SHARE TRANSFER AGENT M & C Services Private Limited 138 Robinson Road #17-00 The Corporate Offi ce Singapore Tel: (65) COMPANY S WEBSITE

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9 MESSAGE TO SHAREHOLDERS I am pleased to present the results of the Group for the fi nancial year ended 31 December BUSINESS REVIEW The Group s turnover for 2008, apart from rental revenue, was US$80.8 million which was comparable to US$79.2 million for Cost of sales as a percentage of turnover for the manufacturing operation was 93.3% for 2008 which was comparable to 93.9% for The Group s profi t before taxation for 2008 was US$4.4 million, as compared to US$16.4 million for The Group made full provision against the tax reserve certificates of US$7.5 million previously purchased by certain subsidiaries that had been disposed of during the year. In last year, there was a negative goodwill arising from acquisition of subsidiaries of US$14.0 million. Trade receivables declined due to the tighter credit terms allowed to the customers. DIVIDENDS The Board is pleased to recommend a fi nal dividend of US 0.15 cents amounting to US$1.5 million for the fi nancial year ended 31 December PROSPECTS Keen competition continues among companies in the magnetic storage industry as well as cautious capital spending at the enterprise level on storage solutions. The construction work for the Emerald Hill development commenced on 11 July 2008 with the demolition of the old property. This was completed on 31 October 2008 after which the piling work commenced. Construction should take around 30 months to complete. 7

10 MESSAGE TO SHAREHOLDERS The property market in Singapore continues to be challenging, management will continue to monitor and benchmark the market demand and sentiments against comparable projects by other developers, while proceeding with the development program. The Directors expect that the property development, investment and related services will result in an increasing contribution to the Group going forward. APPRECIATION On behalf of the Board, I would like to extend my appreciation to the management and the staff of the Group for their loyalty and commitment. I would also like to thank our shareholders, customers, suppliers and business associates for their continuing support and confidence. Christopher Ho Wing-On Chairman 8

11 SHAREHOLDINGS STATISTICS AS AT 16 MARCH 2009 Authorised share capital : Issued and fully paid-up : US$100,000,000 US$40,000,000 Class of shares : Ordinary shares of US$0.04 each Voting rights : 1 vote per ordinary share ANALYSIS OF SHAREHOLDINGS Range of Shareholdings No. of Shareholders % No. of Shares % , ,000-10,000 9, ,209, ,001-1,000,000 3, ,782, ,000,001 and above ,882, , ,000,000, SUBSTANTIAL SHAREHOLDERS S/No. Name Number of Shares held Direct interest Deemed interest % 1. CHRISTOPHER HO WING-ON - 528,098,637* 52.81* 2. CLARENDON INVESTMENTS CAPITAL LTD 527,829, CTI LIMITED 80,543, * Mr. Christopher Ho Wing-On had 100% benefi cial interest in Clarendon Investments Capital Ltd. His indirect shareholdings in the Company are through Clarendon Investments Capital Ltd and The Grande Group Limited, the wholly owned subsidiary of The Grande Holdings Limited. 9

12 SHAREHOLDINGS STATISTICS AS AT 16 MARCH 2009 TOP 20 SHAREHOLDERS No. Name of Shareholder No. of Shares % 1 Clarendon Investments Capital Ltd 527,829, CTI Limited 80,543, UOB Kay Hian Pte Ltd 35,972, Great Aspiration Holdings Co Ltd 28,350, HSBC (Singapore) Nominees Pte Ltd 19,214, DBS Vickers Securities (S) Pte Ltd 16,874, OCBC Securities Private Ltd 10,332, Dr Ho Lai Ching Sabrina 9,013, Citibank Nominees Singapore Pte Ltd 6,647, Kim Eng Securities Pte. Ltd. 6,341, Raffl es Nominees Pte Ltd 5,607, Nomura Singapore Limited 3,538, Choo Ah Seng 3,502, CIMB Bank Nominees (S) Sdn Bhd 3,000, Law Kwok Hung 2,872, Chok Ng Fong 2,850, Kinetic Asia Capital Limited 2,800, Vibrant Capital Pte Ltd 2,764, DBS Nominees Pte Ltd 2,673, Phillip Securities Pte Ltd 2,591, PUBLIC SHAREHOLDERS 773,316, Based on information available to the Company as at 16 March 2009, 38.68% of the issued ordinary shares of the Company is held by the public and therefore Rule 723 of the Listing Manual is complied with. 10

13 REPORT ON CORPORATE GOVERNANCE Lafe Corporation Limited (formerly known as Lafe Technology Limited) (the Company ) is committed to ensuring that effective self-regulatory corporate practices exist to protect the interests of its shareholders and maximise long term shareholder value. The Company is also committed to maintaining a high standard of corporate governance by complying with the Code of Corporate Governance (the Code ) issued by the Corporate Governance Committee to promote investors confi dence and protect the interest of all shareholders. This report outlines the Company s corporate governance processes and structure that were in place with specifi c reference made to the Code. BOARD OF DIRECTORS Principle 1: Effective Board To Lead And Control The Company The Board comprises two executive directors, one non-executive director and three independent directors, all with the right core competencies and diversity of experience which enable them to effectively contribute to the Company. The independent members of the Board include business leaders and professionals with broad experience in government and fi nancial services a mixture of knowledge and expertise to contribute to the Company s performance. We believe that this will enable the Company to deliver product excellence for our customers and superior returns to its shareholders. The Board comprises: Mr. Christopher Ho Wing-On Chairman Date of Appointment: 9 April 1999 (Re-elected in 2008) Mr. Christopher Ho Wing-On, aged 58, graduated with a Bachelor of Commerce degree from the University of Toronto in He is also Chairman of The Grande Holdings Limited, a company listed on the Stock Exchange of Hong Kong. Before joining The Grande Holdings Limited in 1991, he was a senior partner in a major accounting fi rm in Hong Kong. Mr. Christopher Ho has extensive experience in manufacturing, corporate fi nance, international trade, and the hotel industry. Encik Mirzan Bin Mahathir Independent & Non-Executive Date of Appointment: 9 April 1999 (Re-elected in 2007) Encik Mirzan Bin Mahathir, aged 50, holds a MBA from Wharton School, University of Pennsylvania, Philadelphia, USA and a Bachelor of Science (Honours) degree in Computer Science from Brighton Polytechnic, England. Encik Mirzan has extensive experience in investment banking, having spent several years with leading investment banks in New York and Hong Kong. He is presently a director of several public listed companies in Malaysia. Encik Mirzan chairs the Nominating Committee for the Company. Mr. Lew Syn Pau Independent & Non-Executive Date of Appointment: 8 March 2000 (Re-elected in 2008) Mr. Lew Syn Pau, aged 55, holds a MBA from Stanford University, as well as a Bachelor and a Masters degrees in Engineering from Cambridge University. He is currently Chairman of Stanbridge International Pte. Ltd. and is a director of several public listed companies in Singapore. Mr. Lew was actively involved in the trade union movement and was a Member of Parliament from 1988 to He also has extensive experience in the management of a transport company, a supermarket cooperative, a resort and a foreign full licence bank in Singapore. Mr. Lew chairs the Audit Committee and Remuneration Committee for the Company. 11

14 REPORT ON CORPORATE GOVERNANCE Mr. Michael Andrew Barclay Binney Non-Independent & Non-Executive Date of Appointment: 30 November 2001 (Re-elected in 2008) Mr. Michael Andrew Barclay Binney, aged 49, holds a Certifi cate in Accountancy from Coventry University, England. He is a fellow member of the Institute of Chartered Accountants in England and Wales and a fellow member of the Hong Kong Institute of Certifi ed Public Accountants. Mr. Michael Binney was a professional accountant for several years before joining the computer and consumer electronics industry. He relinquished his position as Executive Director and remains as Non-Executive Director in the beginning of Mr. Adrian Ma Chi Chiu Non-Independent Date of Appointment: 3 June 2002 (Standing for re-election in 2009) Mr. Adrian Ma Chi Chiu, aged 64, graduated with a Bachelor of Commerce degree from the University of Birmingham, England. He is a fellow member of the Institute of Chartered Accountants in England and Wales. Mr. Adrian Ma is the Managing Director of The Grande Holdings Limited, a company listed on the Stock Exchange of Hong Kong. He has over 20 years of management experience in the electronics industry. Mr. Shum Sze Keong Independent & Non-Executive Date of Appointment: 19 March 2007 (Re-elected in 2007) Mr. Shum Sze Keong, aged 46, holds a Bachelor of Science in Aeronautical Engineering from Embry Riddle Aeronautical University, USA. Mr Shum has extensive experience in strategic development and restructuring in Heavy Engineering, Electronic Components and Aerospace sectors. He is currently involved in property investment both in the industrial and agricultural sectors. INFORMATION ON KEY EXECUTIVES (NON-DIRECTOR) Mr. Law Kwok Fai Paul, aged 52, is Head of Manufacturing and Operations. He holds Bachelor of Science degree, majoring in Computer Science & Mathematics from The University of Western Ontario, Canada. He has over 30 years of working experience with wide-exposure and knowledge in manufacturing, operations, information technology, project management and extensive exposure in PRC manufacturing. Mr. Christopher Chiang Tat-On, age 52, is Group Chief Financial Offi cer. He holds a Masters degree in Management Sciences from the University of Manchester, England and a MBA from the Southern Cross University, Australia. He is currently a member of the Hong Kong Institute of Certifi ed Public Accountants, CPA Australia and Association of Chartered Certifi ed Accountants. Mr. Chiang has extensive experience in corporate accounting and management in the consumer electronics industry. Mr. Fok Kam Tong, aged 48, is Vice President of Operations. He holds a Higher Diploma in Production and Industrial Engineering from the Hong Kong Polytechnic University. He has over 23 years of experience in the magnetic head industry. Mr. Tang Hang To, aged 50, is Director of Operations. He holds a Higher Diploma in Production and Industrial Engineering from the Hong Kong Polytechnic University and a Masters of Science degree in Engineering Business Management from the University of Warwick. He has over 24 years of experience in Engineering and Manufacturing Management. Mr. Wong Tak Shing, aged 42, is Director of Development. He holds a Higher Diploma in Manufacturing Engineering from the Hong Kong Polytechnic University. He has over 19 years of experience in Manufacturing Management. 12

15 REPORT ON CORPORATE GOVERNANCE INFORMATION ON KEY EXECUTIVES (NON-DIRECTOR) (continued) Mr. Chan King Shan, aged 47, is Director of Development. He holds an Associateship in Production and Industrial Engineering from the Hong Kong Polytechnic University and two Master of Science Degrees in Engineering and Engineering Business Management from the City University of Hong Kong and the University of Warwick. He has over 22 years of experience in Engineering and Manufacturing Management. ROLE OF THE BOARD Principle 2: Strong And Independent Element on The Board The Board meets regularly on a quarterly basis and ad-hoc Board meetings are convened as and when deemed necessary. Besides carrying out its statutory responsibilities, the Board oversees the formulation of the Group s business strategies and directions, review fi nancial performance including approval of the annual and quarterly results, approve the nomination of directors and appointments to the various Board Committees, review the adequacy and integrity of internal control, and assume responsibility for corporate governance. With three independent directors out of six, the Board is able to exercise independent judgment on corporate affairs and provide the Management with a diverse and objective perspective on issues. Apart from formal meetings, the members regularly contribute by providing guidance and advice to the Management. To assist in the execution of its responsibilities, a number of Board Committees are established including an Audit Committee, a Nominating Committee and a Remuneration Committee. These committees function within clearly defined terms of references and operating procedures, which are reviewed regularly. The effectiveness of each committee is also constantly monitored. ATTENDANCE AT BOARD AND COMMITTEE MEETINGS IN 2008 Board Meetings Audit Committee Nominating Committee Remuneration Committee Christopher Ho Wing-On Lam Chuck Fai * Michael Andrew Barclay Binney Adrian Ma Chi Chiu Mirzan Bin Mahathir Lew Syn Pau Shum Sze Keong No. of Meetings Held * Resigned on 31 December

16 REPORT ON CORPORATE GOVERNANCE CHAIRMAN, CHIEF EXECUTIVE OFFICER ( CEO ) AND CHIEF OPERATING OFFICER ( COO ) Principle 3: Chairman, CEO and COO To Be Separate To Ensure Appropriate Balance of Power and Authority, Such That No One Individual Represents A Considerable Concentration of Power. There is a distinctive separation of responsibilities between the Chairman, CEO and the COO, which ensures appropriate balance of power and authority at the top of the Company. The Chairman and CEO delegates the major operational functions to the COO. The Chairman and CEO ensures that the members of the Board work together with the COO and the Management with the capability and moral authority to engage the Management in constructive debate on various matters, including strategic issues and business planning processes. The Chairman and CEO have full executive responsibilities over the business directions and operational decision of the Company and the major decisions are reviewed by the Audit Committee. The performance of the Chairman and CEO is reviewed by the Board which includes the independent directors of the Company. The position of COO is vacant presently as the Board is evaluating and considering suitable candidate to fill the position. The Company currently has not appointed a CEO and the Chairman is currently acting CEO. ACCESS TO INFORMATION / ACCOUNTABILITY Principle 6: Principle 10: Board Members To Have Complete, Adequate And Timely Information The Board Is Accountable To Shareholders; Management Is Accountable To The Board All Board members are provided with timely notices and information prior to board meetings as and when the need arises. Most of the formal board meetings are held overseas. The Bye-laws of the Company provide for directors to convene meetings by teleconferencing or videoconferencing. Where a physical Board meeting is not possible, timely communication with members of the Board is effected through electronic means which include electronic mail, teleconferencing and videoconferencing. EXECUTIVE COMMITTEE The Executive Committee comprises two Executive Directors as at the date of this report namely: Mr. Christopher Ho Wing-On Mr. Adrian Ma Chi Chiu The aim of the Executive Committee is to generally act for the Board in the day to day management of the Company, within the limits of the Companies Act 1981 of Bermuda (as amended from time to time) and the Memorandum of Association and Bye-laws of the Company, and excluding the approval of any single corporate guarantee exceeding US$10 million or its equivalent and submission of financial results to the Singapore Exchange Securities Trading Limited. If there are any resolutions approved by the Executive Committee, the resolutions approved are tabled at the next quarterly physical meeting of the Board of Directors, for information. The Board has separate and independent access to the Company Secretary and senior management executives of the Company at all times in carrying out their duties. 14

17 REPORT ON CORPORATE GOVERNANCE REMUNERATION COMMITTEE Principle 7: Principle 8: Principle 9: Formal And Transparent Procedure For Fixing Remuneration Packages of Directors Remuneration of Directors Should Be Adequate But Not Excessive Disclosure On Remuneration Policy, Level And Mix Of Remuneration, And Procedure For Setting Remuneration The Remuneration Committee comprises three independent directors (including the Chairman) as at the date of this report, namely: Mr. Lew Syn Pau (Chairman) Encik Mirzan Bin Mahathir Mr. Shum Sze Keong The aim of the Remuneration Committee is to set a policy framework of remuneration for the Board 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 business and the Company. Apart from fees and salaries, the Remuneration Committee will also examine all elements of the remuneration, terms of employment, allowances, reward structure and other benefi ts in kind. The remuneration of directors and key executives are set out below: Fee % Salary % Bonus % Allowances & benefit % a) Directors of the Company i) S$250,000 to S$499,999 Christopher Ho Wing-On Lam Chuck Fai* Total % ii) Below S$250,000 Adrian Ma Chi Chiu Michael Andrew Barclay Binney Lew Syn Pau Mirzan Bin Mahathir Shum Sze Keong b) Key Executives of the Group Below S$250,000 Law Kwok Fai Paul Fok Kam Tong Tang Hang To Wong Tak Shing Chan King Shan * Resigned on 31 December 2008 The Group has no employee share option scheme as of the date of the report. 15

18 REPORT ON CORPORATE GOVERNANCE NOMINATING COMMITTEE Principle 4: Principle 5: Formal And Transparent Process For Appointment Of New Directors Formal Assessment Of The Effectiveness Of The Board As A Whole And The Performance Of Individual Directors The Nominating Committee comprises three independent directors (including the Chairman) and one executive director as at the date of this report, namely: Encik Mirzan Bin Mahathir (Chairman) Mr. Lew Syn Pau Mr. Shum Sze Keong Mr. Christopher Ho Wing-On The Nominating Committee s objective is to ensure that the Directors of the Board will provide the required mix of responsibilities, skills and experience. The Nominating Committee will also assist the Board in reviewing on an annual basis the appropriate balance and size of Non-Executive participation and in establishing procedures and processes towards an annual assessment of the effectiveness of the Board as a whole and contribution of each individual Director and Board Committee member. The Nominating Committee shall conduct a formal assessment of the effectiveness of the Board as a whole and the contribution by each director to the effectiveness of the Board. Pursuant to the Company s Bye-laws 86(1) and 86(2), each Director shall retire at least once every three (3) years and a retiring Director shall be eligible for re-election at the annual general meeting of the Company. In addition, the Company s Bye-law 85(6) provides that any Director appointed by the Board shall retire at the next annual general meeting of the Company and shall then be eligible for re-election at that meeting. AUDIT COMMITTEE Principle 11: Establishment Of Audit Committee with Written Terms Of Reference The Audit Committee comprises three independent directors (including the Chairman) as at the date of this report, they are: Mr. Lew Syn Pau (Chairman) Encik Mirzan Bin Mahathir Mr. Shum Sze Keong The Audit Committee oversees all aspects of the external audit process, particularly the cost effectiveness and the independence of the external auditors. Annually, the Audit Committee meets with the external auditors separately without the presence of Management to review the adequacy of audit arrangements, with particular emphasis on the observation of the auditors, the scope and quality of their audit and objectivity of the auditors. The Audit Committee will recommend to the Board on appointment or reappointment of external auditors. The Audit Committee is satisfi ed with the objectivity and independence of the external auditors, and they recommend the re-appointment of Moore Stephens LLP. For the fi nancial year ended 31 December 2008, Moore Stephens LLP had not been engaged for any non-audit work with the Group. 16

19 REPORT ON CORPORATE GOVERNANCE AUDIT COMMITTEE (Continued) To provide the shareholders with a balanced and understandable assessment of the Company s performance, position and prospects, annual and quarterly fi nancial statements and announcements to shareholders are reviewed by the Audit Committee before submission to the Board for adoption. The Audit Committee reviews the fi nancial statements with emphasis on (i) changes in accounting policies and practices, if any; (ii) significant matters arising from the audit, if any; and (iii) compliance with relevant accounting standards and legal requirements. The Audit Committee also reviews Interested Person Transactions to ensure that they are conducted on normal commercial terms and not prejudicial to the interests of the Company or its shareholders. The Audit Committee is authorised to investigate any matter within its terms of reference, and has full access to the Management and resources which are necessary to enable it to discharge its functions properly. It also has full discretion to invite any executive director or executive to attend its meetings. INTERNAL CONTROLS Principle 12: Sound System Of Internal Controls The Board recognises the need to put in place a system of internal controls of the Company s procedures and processes to safeguard shareholders interests and the Company s assets. In this regard, the internal audit function is responsible for identifying defi ciencies in internal control and reports directly to the Audit Committee. The Board believes that the system of internal controls that has been maintained by the Company s management throughout the fi nancial year is adequate to meet the needs of the Company in its current business environment. INTERNAL AUDIT Principle 13: Independent Internal Audit Function The internal audit function of the Company is outsourced to a third party. The internal auditors report to the Audit Committee. In this regard, the Audit Committee is empowered to review any of the accounting, auditing and fi nancial practices with access to records and management personnel, to enable it to discharge its functions. The Internal Auditors submit their annual audit schedule for approval by the Audit Committee and report their fi ndings direct to the Audit Committee. The Audit Committee ensures that the internal audit function is adequately resourced and has appropriate standing within the Group. In the year under review, the Internal Auditors carried out review on certain areas to assess and evaluate: 1) if adequate systems of internal control are in place and functioning as management intended; 2) if operations of the business processes under review are conducted effi ciently and effectively; and 3) identify internal control improvement opportunities. 17

20 REPORT ON CORPORATE GOVERNANCE COMMUNICATION WITH SHAREHOLDERS Principle 14: Principle 15: Regular, Effective And Fair Communication With Shareholders Greater Shareholder Participation At Annual General Meetings We strive for timeliness in the dissemination of fi nancial results and corporate developments to the shareholders and the fi nancial community by broadcasting through SGXNET. In addition, the Company s website keeps the public informed about developments in the Company s products and services. Shareholders are informed of shareholders meetings through notices published in the newspapers and reports or circulars sent to all shareholders. At shareholders meetings, each distinct issue is proposed as a separate resolution. The Chairmen of the Audit, Nominating and Remuneration Committees are present to address questions at the Annual General Meeting. External auditors are also present at the Annual General Meeting to assist the Directors to address shareholders queries, if necessary. DEALINGS IN SECURITIES Directors and all officers involved in the preparation of the Company s fi nancial results were reminded not to deal in the Company s shares during the period commencing two weeks before the announcement of the Company s fi nancial statements for each of the fi rst three quarters of its fi nancial year and one month before the announcement of its full year fi nancial statements. The Company has its own internal compliance code to provide guidance for both Directors and employees on their dealings with the Company s securities. CORPORATE DISCLOSURE The Company believes that a high level of disclosure is essential to enhance the standard of corporate governance. Hence, the Company gives full disclosure in all public announcements, press releases and annual reports. The Board is satisfi ed with the Company s commitment to comply with the Code of Corporate Governance, and on the adequacy of internal controls within the Company. 18

21 DIRECTORS REPORT The directors have pleasure in presenting their report to the members together with the audited financial statements of the Company and of the Group for the financial year ended 31 December DIRECTORS The directors of the Company in office at the date of this report are: Executive directors: Christopher Ho Wing-On Adrian Ma Chi Chiu Non-Independent & Non-executive director: Michael Andrew Barclay Binney Independent & Non-executive directors: Mirzan Bin Mahathir Lew Syn Pau Shum Sze Keong In accordance with the provisions of the Company s Bye-laws, Mr. Adrian Ma Chi Chiu will retire. Mr. Adrian Ma Chi Chiu, being eligible, will offer himself for re-election. All other directors continue in office. The term of office of each non-executive director is the period up to his re-appointment or retirement by rotation in accordance with the Company s Bye-laws. PRINCIPAL ACTIVITIES The Company acts as an investment holding company. The principal activities of the Group s subsidiaries are described in Note 37 to the financial statements. There have been no significant changes in the nature of these activities during the financial year. ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES During the financial year, there were disposals and acquisitions of certain subsidiaries, the details of which are described in Note 17 to the financial statements. RESULTS FOR THE FINANCIAL YEAR Group Company Net profit for the year 3,258 3,517 Accumulated profits at the beginning of the year 66,212 69,387 Profits available for appropriation 69,470 72,904 Dividend paid (5,000) (5,000) Accumulated profits at the end of the year 64,470 67,904 19

22 DIRECTORS REPORT MATERIAL TRANSFERS TO/FROM RESERVES AND PROVISIONS There were no material transfers to or from reserves and provisions during the financial year except as disclosed in the accompanying financial statements. ISSUE OF SHARES AND DEBENTURES During the financial year there were no shares or debentures issued by the Company and its subsidiaries. ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE SHARES OR DEBENTURES Neither at the end of the financial year nor at any time during the financial year was the Company a party to any arrangement whose object is to enable the directors of the Company to acquire benefits by means of the acquisition of shares or debentures of the Company or any other body corporate. DIRECTORS INTERESTS IN SHARES AND DEBENTURES Particulars of interests of directors, who held office at the end of the financial year, in shares of the Company are stated below: 1 Jan 2008 Ordinary shares of US$0.04 each Shareholdings registered in the name of the directors 31 Dec Jan Jan 2008 Shareholdings in which directors are deemed to have an interest 31 Dec Jan 2009 Christopher Ho Wing-On ,091,261* 528,098,637** 528,098,637** Lam Chuck Fai ^ 150, ,040 NA 1,000,000# 1,000,000 NA Lew Syn Pau 1,000,000 1,000,000 1,000,000 1,285,000 3,000,000 3,000,000 Adrian Ma Chi Chiu - 109, * Mr. Christopher Ho Wing-On had 100% benefi cial interest in The Grande International Holdings Limited ( GIHL ), which owned a majority interest in the share capital of The Grande Holdings Limited through its wholly owned subsidiary, Barrican Investments Corporation. His indirect shareholdings in the Company are through Barrican Investments Corporation and Clarendon Investments Capital Ltd, the wholly owned subsidiaries of GIHL and The Grande Group Limited, the wholly owned subsidiary of The Grande Holdings Limited. ** Mr. Christopher Ho Wing-On had 100% beneficial interest in Clarendon Investments Capital Ltd. His indirect shareholdings in the Company are through Clarendon Investments Capital Ltd and The Grande Group Limited, the wholly owned subsidiary of The Grande Holdings Limited. # Mr. Lam Chuck Fai owned 303,600 ordinary shares of HK$0.10 each in The Grande Holdings Limited. ^ Mr. Lam Chuck Fai resigned as a Director of the Company on 31 December Mr. Adrian Ma Chi Chiu owned 78,000 ordinary shares of HK$0.10 each in The Grande Holdings Limited. 20

23 DIRECTORS REPORT DIVIDENDS Dividends paid or declared since the end of the Company s last financial year were as follows: A final dividend in respect of the financial year ended 31 December 2007 of US 0.5 cents per ordinary share of US$0.04 each amounting to approximately US$5,000,000 was paid on 30 May The directors now recommend that a final dividend of US 0.15 cents per ordinary share of US$0.04 each of the ordinary shares of the Company amounting to US$1,500,000 to be paid in DIRECTORS RECEIPT AND ENTITLEMENT TO CONTRACTUAL BENEFITS Since the beginning of the 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 interest except that certain directors have received remuneration from related corporations in their capacity as directors and/or executives of those related corporations and except as disclosed in the financial statements. DIRECTORS RIGHTS TO ACQUIRE SHARES OR DEBENTURES At no time during the year was the Company, any of its holding companies, subsidiaries or fellow subsidiaries a party to any arrangements 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. OPTIONS TO TAKE UP UNISSUED SHARES During the financial year, no option to take up unissued shares of the Company or any corporation in the Group was granted nor were there issue of shares from the exercise of any option to take up unissued shares. At the end of the financial year, there were no unissued shares of the Company or any corporation in the Group under option. INDEPENDENT AUDITORS A resolution will be submitted at the annual general meeting to re-appoint the auditors, Messrs. Moore Stephens LLP, as the independent auditors of the Company for the coming financial year. On behalf of the Board Christopher Ho Wing-On Chairman 26 March 2009 Adrian Ma Chi Chiu Executive Director 21

24 STATEMENT OF DIRECTORS In the opinion of the directors, the financial statements set out on pages 25 to 71 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 2008 and of the results of the business, changes in equity of the Company and of the Group and of the cash flows of the Group for the financial year then ended. 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. On behalf of the Board Christopher Ho Wing-On Chairman 26 March 2009 Adrian Ma Chi Chiu Executive Director 22

25 INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF LAFE CORPORATION LIMITED (formerly known as Lafe Technology Limited) (Incorporated in Bermuda with limited liability) We have audited the accompanying consolidated fi nancial statements of Lafe Corporation Limited (formerly known as Lafe Technology Limited) (the Company ) and its subsidiaries (collectively referred to as the Group ) set out on pages 25 to 71, which comprise the consolidated and Company balance sheets as at 31 December 2008, the consolidated and Company income statements, the consolidated and Company statements of changes in equity and the consolidated cash fl ow statement for the fi nancial year then ended, and a summary of signifi cant accounting policies and other explanatory notes. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these fi nancial statements in accordance with International Financial Reporting Standards. This responsibility includes designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of fi nancial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors Responsibility Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with International 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 fi nancial statements are free from material misstatement. An audit involves performing procedures to obtain evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditors judgment, 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 auditors consider internal control relevant to the entity s preparation and fair presentation of the fi nancial 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 controls. An audit also includes evaluating the appropriateness of accounting policies used and reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the fi nancial statements. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion. 23

26 INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF LAFE CORPORATION LIMITED (formerly known as Lafe Technology Limited) (Incorporated in Bermuda with limited liability) (continued) Opinion In our opinion, the accompanying financial statements of the Company and the consolidated financial statements of the Group are properly drawn up in accordance with International Financial Reporting Standards so as to give a true and fair view of the fi nancial position of the Group and of the Company as at 31 December 2008 and of the Group s and Company s results, changes in equity and the Group s cash fl ows for the year then ended. Moore Stephens LLP Public Accountants and Certifi ed Public Accountants Singapore 26 March

27 CONSOLIDATED INCOME STATEMENT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2008 GROUP NOTES Revenue 7 81,671 79,327 Cost of sales (75,426) (74,395) Gross profi t 6,245 4,932 Other income 8 4,018 17,366 Distribution costs (1,242) (1,346) Administrative costs (3,937) (4,476) Finance costs 9 (699) (72) Profi t before taxation 10 4,385 16,404 Taxation 11 (1,127) (271) Net profi t for the year 3,258 16,133 Dividend 12 1,500 5,000 Basic earnings per share (US cent) Diluted earnings per share (US cent) See accompanying notes to the financial statements on pages 33 to

28 INCOME STATEMENT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2008 COMPANY NOTES Revenue 7 4,000 42,940 Administrative costs (483) (165) Profi t before taxation 10 3,517 42,775 Taxation Net profi t for the year 3,517 42,775 Dividend 12 1,500 5,000 See accompanying notes to the financial statements on pages 33 to

29 CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2008 GROUP NOTES ASSETS Non-current assets Property, plant and equipment 14 9,059 9,009 Prepaid lease payments 15 16,355 13,349 Investment properties 16 41,155 38,883 Investment in associate Available-for-sale investment Deferred income tax assets ,656 61,417 Current assets Development properties 20 96,223 90,028 Inventories 21 3,193 11,037 Trade receivables 22 16,759 26,541 Other receivables 23 6,115 9,056 Prepaid lease payments Tax recoverable - 3 Trade receivables from related companies and associate Non-trade receivables from related companies and associate Cash and cash equivalents 25 16,598 10, , ,877 Total assets 207, ,294 27

30 CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2008 GROUP NOTES EQUITY AND LIABILITIES Capital and reserves Share capital 31 40,000 40,000 Reserves* 91,794 93,020 Total equity 131, ,020 Non-current liabilities Long term bank loans 28 37,971 39,591 Provision for staff benefi ts Deferred income tax liabilities 30 9,893 8,793 48,395 48,771 Current liabilities Trade payables 26 21,217 19,949 Other payables 27 2,666 5,966 Trade payable to related companies and associate Non-trade payables to related companies Short-term bank loans 28 2,336 2,127 Current tax liability ,041 28,503 Total liabilities 75,436 77,274 Total equity and liabilities 207, ,294 *Please refer to page 30 for movement of reserves. See accompanying notes to the fi nancial statements on pages 33 to

31 BALANCE SHEET AT 31 DECEMBER 2008 COMPANY NOTES 2008 ASSETS Non-current assets 2007 Investments in subsidiaries 17 79,045 79,045 Current assets Non-trade receivables from subsidiaries 24 55,833 57,333 Non-trade receivables from related companies Bank balances ,876 57,347 Total assets 134, ,392 EQUITY AND LIABILITIES Capital and reserves Share capital 31 40,000 40,000 Reserves* 94,795 96,278 Total equity 134, ,278 Current liabilities Other payables Non-trade payables to related companies Total liabilities Total equity and liabilities 134, ,392 *Please refer to page 30 for movement of reserves. See accompanying notes to the financial statements on pages 33 to

32 STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2008 GROUP Share capital Share premium Capital reserve Reserves Exchange reserve Asset revaluation reserve Accumulated profits Total Balance at 1 January ,000 26, , ,130 Revaluation gain on transfer of property, plant and equipment/prepaid lease payments to investment property Currency translation differences (418) - - (418) Net (loss) / income recognised directly in equity (418) (243) Net profi t ,133 16,133 Total recognised (loss) / income (418) ,133 15,890 Dividend relating to 2006 paid (8,000) (8,000) Balance at 31 December ,000 26, (282) , ,020 Currency translation differences Net profi t ,258 3,258 Total recognised income ,258 3,774 Dividend relating to 2007 paid (5,000) (5,000) Balance at 31 December ,000 26, , ,794 COMPANY Reserves Share capital Share premium Accumulated profits Total Balance at 1 January ,000 26,891 34, ,503 Total recognised income - net profi t ,775 42,775 Dividend relating to 2006 paid - - (8,000) (8,000) Balance at 31 December ,000 26,891 69, ,278 Total recognised income - net profi t - - 3,517 3,517 Dividend relating to 2007 paid - - (5,000) (5,000) Balance at 31 December ,000 26,891 67, ,795 See accompanying notes to the financial statements on pages 33 to

33 CONSOLIDATED CASH FLOW STATEMENT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER CASH FLOWS FROM OPERATING ACTIVITIES Profi t before income tax 4,385 16,404 Adjustments for: Depreciation of property, plant and equipment (Note 10, 14) 963 1,041 Amortisation of prepaid lease payments (Note 10) Write back of accrual of services income (Note 8) - 2,331 Write back of provision for warranty (net) (Note 8) - (730) Write back of provision for staff welfare (Note 8) (1,969) - Write back of provision for inventories obsolescence (Note 8) (1,374) - Provision for investment in associate (Note 8) Changes in fair value of held-for-trading investment (Note 8) - 3,295 Increase in fair value of investment properties (Note 8) (6,130) (301) Negative goodwill arising from acquisition of subsidiaries (Note 8) - (13,972) Provision for impairment on receivables (Note 8) 7,483 - Gain on disposal of subsidiaries (1) - Loss on disposal of property, plant and equipment (Note 10) - 10 Interest expense (Note 9) Interest income (Note 8) (344) (2,881) Operating cash flows before working capital changes 4,271 6,600 Change in working capital, net of effects from acquisition and disposal of subsidiaries Trade and other receivables 5,240 (10,581) Inventories 9,218 6,276 Amounts due from related companies (226) (200) Trade and other payables 63 1,615 Amounts due to related companies 63 (182) Provision for staff benefi ts 144 (30) Cash generated from operations 18,773 3,498 Taxation paid (28) (367) Interest paid (699) (72) Interest received 344 2,881 Net cash generated from operating activities 18,390 5,940 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (Note 14) (247) (353) Additions to development properties (Note 20) (6,033) (5,856) Proceeds from disposal of subsidiaries 1 - Proceeds from disposal of held-for-trading investment - 1,417 Acquisition of subsidiaries, net of cash acquired ** - (57,077) Net cash used in investing activities (6,279) (61,869) CASH FLOWS FROM FINANCING ACTIVITIES Dividend paid (5,000) (8,000) (Decrease) / Increase in bank loans (1,411) 8,863 Net cash (used in) / generated from financing activities (6,411) 863 Net effect of exchange rate changes on consolidation 55 (302) NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS 5,755 (55,368) Cash and cash equivalents at the beginning of the financial year 10,843 66,211 CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR 16,598 10,843 31

34 CONSOLIDATED CASH FLOW STATEMENT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2008 * The effects of the disposal of subsidiaries on the cash fl ow of the Group in 2008 were :- At fair values Net assets of subsidiaries disposed - Gain on disposal of subsidiaries 1 Cash consideration received 1 The subsidiaries acquired during the year had no material effect on the operating profi t and cash fl ow of the Group. The subsidiaries disposed of during the year contributed US$8,934,000 and US$7,713,000 to the Group's turnover and loss for the year respectively. ** The effects of the acquisition of subsidiaries on the cash fl ow of the Group in 2007 were: At fair values Identifi able assets and liabilities: Property, plant and equipment 1,097 Prepaid lease payments 4,912 Investment properties 22,925 Development properties 84,172 Cash and cash equivalents 63 Other receivables 193 Other liabilities (675) Bank loans (32,855) Deferred tax (8,720) Identifi able net assets acquired 71,112 Negative goodwill arising from acquisition of subsidiaries (13,972) Cash consideration paid 57,140 Less: Cash and cash equivalents in subsidiaries acquired (63) Net cash outfl ow on acquisition 57,077 The carrying amounts of identifiable assets and liabilities are adjusted to their fair values at the date of acquisition. The cash and cash equivalents of the Group comprise solely cash and bank balances. See accompanying notes to the financial statements on pages 33 to

35 NOTES TO THE FINANCIAL STATEMENTS 1. GENERAL The Company was incorporated on 8 April 1999 as an exempted company with limited liability in Bermuda under the Companies Act 1981 of Bermuda with its registered office at #2 Reid Street, Hamilton HM11, Bermuda and principal place of business at Lafe Industrial Park Panyu, Guangdong Province, The People s Republic of China. The shares of the Company are listed on the Singapore Exchange Securities Trading Limited (the SGX-ST ). Pursuant to the group reorganisation of The Grande International Holdings Limited, the former holding company, in the opinion of the directors, the Company's immediate and ultimate holding company with effect from 7 April 2008 is Clarendon Investments Capital Ltd, a company incorporated in the British Virgin Islands. The ultimate deemed interest in shareholding is shown in shareholdings statistics on page 9. The name of the Company changed from Lafe Technology Limited to Lafe Corporation Limited with effect from 7 May The Company acts as an investment holding company. Details of the principal activities of the subsidiaries are set out in Note 37. The fi nancial statements of the Company and the consolidated fi nancial statements of the Group as at and for the fi nancial year ended 31 December 2008 were authorised for issue by the Board of Directors on 26 March ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS In the current year, the Group has adopted all the revised Standards and new Interpretations issued by the International Accounting Standards Board (the IASB ) and the International Financial Reporting Interpretations Committee ( IFRIC ) of the IASB that are relevant to its operations and effective for annual periods beginning on 1 January 2008 as follows: IFRIC 11 IFRIC 12 IFRS 2 Group and Treasury Share Transactions Service Concession Arrangements The adoption of the above Interpretations did not result in any signifi cant changes to the Group s accounting policies nor any signifi cant impact on these fi nancial statements. At the date of authorisation of these fi nancial statements, the Group has not applied the following Standards and Interpretations that have been issued but are not yet effective: Effective for accounting periods beginning on or after IFRS 3 (Revised 2008) Business Combinations 1 January 2009 IFRS 8 Operating Segments 1 January 2009 IAS 1 (Revised 2007) Presentation of Financial Statements- Comprehensive revision 1 January 2009 Presentation of Financial Statements- Puttable instruments and liquidation (Revised 2008) obligation disclosures 1 January

36 NOTES TO THE FINANCIAL STATEMENTS 2. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (continued) IAS 23 (Revised 2007) Borrowing Costs-Comprehensive revision 1 January 2009 IAS 27 (Revised 2008) Consolidated and Separate Financial Statements-Consequential amendments from IFRS 3 1 July 2009 IAS 28 (Revised 2008) Investment in Associates-Consequential amendments from IFRS 3 1 July 2009 IAS 32 (Revised 2008) Financial Instruments: Presentation-Puttable instruments and liquidation obligation disclosures 1 January 2009 IFRIC 13 Customer Loyalty Programmes 1 July 2008 IFRIC 16 Hedges of a Net Investment in a Foreign Operation 1 October 2008 The directors anticipate that the adoption of these standards and interpretations in future periods will not have any material impact on the fi nancial statements of the Group. The revisions are detailed as follows: IFRS 3 / IAS 27 (Revised 2008) / IAS 28 (Revised 2008) The revised IFRS 3 applies to combinations of mutual entities and combinations without consideration (dual listed shares). These are excluded from the existing IFRS 3. The revised IFRS 3 does not apply to combination of entities under common control. These revisions to IFRS 3 will result in consequential revisions / amendments to IAS 27 and IAS 28. IAS 1 (Revised 2007) The main changes from the previous version are to require that an entity must present all nonowner changes in equity and disclosure on income tax and reclassifi cation adjustments relating to components of other comprehensive income. A detailed statement of fi nancial position would be required to be presented when the entity applies an accounting policy retrospectively. IAS 1 (Revised 2008) The amendments to IAS 1 requires quantitative disclosures that enable users of the fi nancial statements to evaluate the significance of the Group s puttable instruments and liquidation obligations, and the objectives, policies and procedures for managing its related obligation. IAS 23 (Revised 2007) Revision to IAS 23 is the removal of the option of immediately recognising as an expense borrowing costs that relate to assets that take a substantial period of time to get ready for use or sale. This is applicable to borrowing costs relating to qualifying assets for which the commencement date for capitalisation is on or after 1 January IFRS 8 This standard requires additional disclosures of information about the Group s operating segments and also about the entity s products and services, the geographical areas in which it operates, and its major customers. IAS 32 (Revised 2008) IAS 32 was amended with respect to the balance sheet classification of puttable fi nancial instruments and obligations arising only on liquidation. As a result of the amendments, some fi nancial instruments that currently meet the definition of a fi nancial liability will be classifi ed as equity because they represent the residual interest in the net assets of the entity. 34