Tat Seng Packaging Group Ltd.

Transcription

1 Annual Report 2005

2 Unfolding a New Beginning Exciting times are abound for Tat Seng. With the synergistic injection from PSC Corporation Ltd, the Company is unfolding a new beginning in the Company's history. A new beginning that holds promising challenges and growth potential ahead. Striving to be the preferred corrugated products supplier, Tat Seng will continue to create greater value to its shareholders, business associates, management and staff. 01 Our Mission 02 Executive Chairman s Message 04 Board of Directors 06 Financial Highlights 07 Corporate Information 08 Financial Statements

3 Our Mission To be the preferred corrugated products supplier Unfolding a New a Begining New Beginning Tat Seng Packaging Group Ltd Annual Report

4 Executive Chairman s Message Dr. Allan Yap Executive Chairman Introduction It is my pleasure to present my first message as Executive Chairman of the Group, and the Annual Report for the financial period ended 31 December While this was a short, six -month financial period, the Group saw a major change in ownership interest and an outstanding growth mainly from the China operations. Unfolding A New Beginning This was an eventful half year for the Group. In October 2005, following the sale of a majority stake of 51% of the Company by the Group's two major shareholders and directors to PSC Corporation Ltd ( PSC ), PSC launched a take-over offer for the remaining shares of the Company. At the close of its offer in November 2005, PSC held a 64% stake in the Company. At the conclusion of the take-over, the two directors who sold their shares to PSC stepped down and two independent directors resigned from the Board of Directors ( The Board ). The Board was then reformed with the appointment of new directors. At this juncture, I would like to welcome the new directors to the Board and I am confident that the new Board would work well together to bring the Group to new heights. Subsequent to the take-over by PSC, the Board decided to change the financial year end from 30 June to 31 December, to enable the Company's financial year end to be coterminous with that of PSC and to facilitate reporting requirements. The audited accounts presented in this Annual Report shall thus cover the first financial period after the change, from 1 July 2005 to 31 December Financial Review The Group's turnover for this financial period increased $7.3 million or 39.2% from $18.7 million to $26.0 million as compared to the previous corresponding period. This was mainly contributed by the growth in the China operations, where turnover soared 81%. Group profit before tax increased $0.2 million or 17.9% as compared to the previous corresponding period. This disparity as compared to the growth in turnover was attributed to a $6.3 million increase in cost of sales. Cost of sales rose on the back of increase in raw materials prices and the higher depreciation cost of new machines in the China operations. The $0.5 million increase in selling and distribution expenses was attributed to the increase in sales administration costs in China. Administration costs increased $0.6 million, mainly due to a one-time expense of $0.3 million pertaining to the take-over exercise and a general increase of $0.3 million in administrative expenses in China. The net effect of exchange differences on the USD loan resulted in an exchange gain of $0.1 million as compared to an exchange loss of $0.3 million in the previous corresponding period. The value of the Group's fixed assets increased $5.1 million, mainly due to a revaluation of the leasehold land and building by $5.2 million, net off by an accumulated depreciation of $1.6 million and a capital expenditure of $1.4 million for the expansion of China operations. Despite the Company's dividend payout of $1.3 million and a capital expenditure of $1.4 million, the $6.1 million cash generated from operations led to an increase in cash and cash equivalents of $3.2 million. Business Review Singapore operations: Singapore economy grew 6.4% 1 and the manufacturing sector grew 9.3% 1 in Growth in the manufacturing sector was contributed mainly by transport engineering, biomedical and electronics. The growth in electronics however, slowed by 6% as compared to Turnover from Singapore operations dipped marginally by $0.3 million or 3.2%. This was attributed to intense price competition, which also moderated our margins. We are cautiously optimistic of our prospects in 2006 as the economy is projected for 2 Annual Report MTI, Economic Survey of Singapore 2005

5 continued growth. However, intense competition for business in a small market would continue to impair our performance and restrain the ability to pass costs increases in raw materials to our customers. China operations: The strategy adopted for the China operations worked well as shown in this financial period. The enlarged sales team and two sales offices in Shanghai contributed much to the superb growth in turnover as they focused on bringing in high volume board orders. This tied in with our interim objective of utilizing the new production line's enlarged capacity quickly. As projected, these high volume orders with low margins could not contribute much to the bottom line. This could be expected in the short term as we strive to increase the utilization of the enlarged capacity of the new production line. The World Bank projected that the world economy, which was estimated to have grown 3.2% 2 in 2005, to stabilize in 2006, but China's economy would continue to grow robustly in excess of 9%. OECD projected that the Chinese economy would grow by 9.4% 3 in We are thus optimistic about our prospects in the China operations. We would continue to use high volume board sales to take up the current capacity gap, while we progressively acquire higher value-added products orders to improve our margin. Looking Ahead Going forward, the Group would continue to strive for better performance. Singapore operations would review its strategies and approaches to acquire more business and increase its customer base. The Company would tap on PSC's extensive local network to improve its market reach. It would also be looking at strategic alliances in nearby markets, exploring potential export markets in the region, and opportunities for growth by acquisition. With a larger sales team, China operations would see the establishment of a new sales office in Wuxi. The objective is to serve the plethora of industrial users and MNCs located in Wuxi, the second largest city in the Jiangsu province, where two major industrial parks in the Yangtze River Delta are located. Our China plant would be looking at extending its factory space by 12,000 square meters to house a 2.8 meter wide, high speed coating machine. Through the water-based coating, we would be able to improve the appearance and function of the paper and products in accordance to customers' requirements. It could augment our production operations and create additional revenue streams for the China operations. Acknowledgements On behalf of the Board of Directors, Management and staff of the Group, I would like to thank our former Managing Director, Dr. Low See Pong and Executive Director, Ms. Lim Lee, for their hard work in developing and growing the Group from a soleproprietorship to a well established organization today. I would also like to thank Mr. Chua Keng Hiang and Mr. U Kean Seng, two of our former Independent Directors, for their contributions to the Board. To our valued shareholders, customers, suppliers and business partners, my gratitude for your continuous trust and support. My appreciation also extends to the Management and staff of the Group for their dedication and contributions. I am certain that with your commitment, we shall bring the Group to greater heights as we continue to work towards being the preferred corrugated products supplier in Singapore and China. Dr. Allan Yap Executive Chairman 2 The World Bank, Global Economic Prospects - Overview and Global Outlook OECD, OECD Economic Outlook No. 78 Annual Report

6 Board of Directors Dr. Allan Yap Dr. John Chen Seow Phun Mr. Loh See Moon Mr. Foo Der Rong Ms. Cheong Poh Hua Dr. Allan Yap Executive Chairman Dr. Allan Yap was appointed as an Executive Chairman of our Group on 21 November His portfolio includes 23 years of experience in finance, investment and banking. Dr. Yap is also the Executive Chairman of PSC Corporation Ltd and Intraco Limited. He is an Executive Director of Wing On Travel (Holdings) Limited, the Managing Director of Hanny Holdings Limited and Vice Chairman and Director of China Strategic Holdings Limited, all of which are Hong Kong-listed companies. He is also a Director of MRI Holdings Limited, an Australian-listed company and the Chairman, CEO and Director of China Enterprises Limited, a company whose shares are traded on the OTC Bulletin Board in the United States of America. Dr. Yap is the Chairman and Chief Executive Officer of Burcon NutraScience Corporation, a Canada-listed company. He received an Honorary Degree of Doctor of Law from the University of Victoria, Canada. Dr. John Chen Seow Phun Deputy Chairman Dr. John Chen joined our Company on 21 November 2005 as a Non-Executive Director and was concurrently appointed as Deputy Chairman of our Board. Dr. Chen has been a Member of Parliament since 1988 and sits on the Board of a number of publicly listed companies. He served as the Assistant Secretary General of the National Trades Union Congress from 1991 to He was a Minister of State from 1997 to He is presently the Managing Director of JCL Business Development Pte Ltd, the Executive Chairman of SAC Capital Private Limited, the Deputy Chairman and Non-Executive Director of PSC Corporation Ltd. 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. Loh See Moon Managing Director Mr. Loh See Moon was appointed as the Managing Director of our Group on 21 November Prior to his current appointment, Mr. Loh was the Deputy Managing Director of our Group. He mainly oversees our China operations and sets the strategies and policies for our Group's business development. Mr. Loh has been in the corrugated products industry since He was appointed as an Executive Director and concurrently as the Factory Manager of our Company in In 1981, he was promoted to the position of General Manager. In 1989, he was appointed as the Deputy Managing Director. Mr. Loh graduated from the Nanyang University in 1971 with a Bachelor of Science Degree. He has more than 25 years of experience in the corrugated products industry. Foo Der Rong Executive Director Mr. Foo graduated with a Bachelor of Commerce from Nanyang University and was appointed as an Executive Director of our Group on 21 November He is currently the MD/CEO of PSC Corporations Limited and Executive Director of Intraco Limited, both Singapore - listed companies. Mr. Foo has wealth of experience and knowledge in business development, corporate restructuring, investment strategies and operations management in the FMCG, Service and Manufacturing industries. Cheong Poh Hua Executive Director Ms. Cheong Poh Hua, is an Executive Director of our Group. Ms. Cheong joined our Company in September 1981 and was later promoted to Finance and Administration Manager in Ms. Cheong is responsible for all the financial and administrative affairs of our Group. She was appointed as an Executive Director of our Group on 1 July Between 1978 to 1981, Ms. Cheong was an auditor in S.L. Chua & Company. Ms. Cheong graduated from Nanyang University in 1978 with a Bachelor of Commerce Degree in Accountancy. Ms. Cheong is a Certified Public Accountant and a nonpractising member of the Institute of Certified Public Accountants of Singapore ("ICPAS"). She was admitted to the status of Fellow of both CPA Australia and ICPAS in November Annual Report 2005

7 Lim Seng Chai Executive Director Mr. Lim Seng Chai is an Executive Director of our Group. He is responsible for the business performance of the Group's Singapore operations. Mr. Lim served in the Singapore Armed Forces ("SAF") for 23 years from 1971 to 1994 and attained the rank of Major while in service. He graduated from the Singapore Command and Staff College in 1991 and held various instructional, command and staff appointments in the SAF. He had been an Instructor in Officer Cadet School, a Battalion Commander, a Brigade General Staff Officer and a Division Deputy General Staff Officer for operation. Mr. Lim joined our Company in May 1994 as a Senior Manager. He was promoted to General Manager in July 1998 and was appointed as an Executive Director of our Group on 3 October Mr. Lim holds a Master of Business Administration Degree from Charles Sturt University, Australia. Kuik See Juan Independent Director Mr. Kuik See Juan was appointed as an Independent Director of our Group on 14 February Since 1969, he has been an Associate Member of the Chartered Institute of Bankers, U.K., currently known as Institute of Financial Services. From 1972 to 1981, he held various senior officer positions with Bank of America NT & SA in Singapore and Jakarta. He joined the Goldvein Holdings Group in 1982 and was made Group Executive Director of Bonvests Holding Ltd, a public company listed on SGX, for the period from 1983 to Between 1989 to 1992, he was an Associate Director with Kay Hian James Capel Ltd. Mr. Kuik subsequently became the Deputy Managing Director of L&M Group Investments Ltd from 1992 to From 1994 to December 2000, he was the Executive Director of Super Coffeemix Manufacturing Ltd. Currently, he remains an Independent Director of Super Coffeemix Manufacturing Ltd. He is also presently the Chairman and Chief Executive Officer (since January 2001) of Inchone Pte Ltd. Chee Teck Kwong Independent Director Mr. Chee, PBM, was appointed as an Independent Director and Chairman of the Remuneration Committee of our Group on 24 November Mr. Chee holds a Bachelor of Laws (Hons) Degree from the University of Singapore. He is the Managing Partner of Messrs. Chee & Teo Advocates and Solicitors and has been in private legal practice since Mr. Chee is a notary Public and a Commissioner Institute for Oaths. He is a member of Singapore Institute of Arbitrators and Singapore Institute of Directors. He also sits on the Board of other public listed Companies including PSC Corporation Ltd, CSC Holdings Limited, Richland Group Limited and King's Safetywear Limited. Mr. Chee is the recipient of the National Day Awards The Public Service Medal (Pingat Bakti Masayarakat) from the President of Republic of Singapore. Lien Kait Long Independent Director Mr. Lien Kait Long was appointed as an Independent Director and Chairman of the Audit Committee of our Group on 24 November Mr. Lien has over 30 years of experience in finance, corporate management and business investment. He has held a number of senior management positions as well as executive directorships in various public and private corporations in Singapore, Hong Kong and China. He currently serves as an independent director on the boards of several Singapore and Chinese companies listed on the Singapore Exchange. Mr. Lien holds a Bachelor of Commerce degree from Nanyang University, and is a fellow member of the Institute of Certified Public Accountants of Singapore and CPA Australia. Mr. Lim Seng Chai Mr. Chee Teck Kwong Mr. Kuik See Juan Mr. Lien Kait Long Annual Report

8 Financial Highlights Earnings per share (cents) Turnover ($ million) /06/02 30/06/03 30/06/04 30/06/05 31/12/ Shareholders equity ($ million) /06/02 30/06/03 30/06/04 30/06/05 31/12/05 Profit after taxation ($ million) /06/02 30/06/03 30/06/04 30/06/05 31/12/05 Sales analysis by customer service for FY % 22% /06/02 30/06/03 30/06/04 30/06/05 31/12/05 4% 4% 5% 7% 21% Printing, Publishers & Converters 37% Medical, Pharmaceutical & Chemical 22% Electronics & Electrical 21% Plastic & Metal Stamping 7% Computer Industries 5% Food & Beverage 4% Others 4% 6 Annual Report 2005

9 Corporate Information BOARD OF DIRECTORS Dr. Allan Yap Dr. John Chen Seow Phun Loh See Moon Foo Der Rong Cheong Poh Hua Lim Seng Chai Kuik See Juan Chee Teck Kwong Lien Kait Long Executive Chairman Deputy Chairman Managing Director Executive Director Executive Director Executive Director Independent Director Independent Director Independent Director COMPANY SECRETARY Lotus Isabella Lim Mei Hua (appointed on 13 February 2006) Lee Bee Fong (appointed on 13 February 2006) Cheong Poh Hua (resigned on 13 February 2006) AUDIT COMMITTEE Lien Kait Long Chairman Kuik See Juan Chee Teck Kwong Dr. John Chen Seow Phun REMUNERATION COMMITTEE Chee Teck Kwong Chairman Kuik See Juan Lien Kait Long NOMINATING COMMITTEE Kuik See Juan Chairman Chee Teck Kwong Lien Kait Long REGISTERED OFFICE 28 Senoko Drive, Singapore Tel : (65) Fax : (65) general@tatseng-packaging.com Website : Company Registration Number : M REGISTRAR AND SHARE TRANSFER OFFICE Tricor Barbinder Share Registration Services 8 Cross Street # 11-00, PWC Building, Singapore AUDITORS Ernst & Young Certified Public Accountants 10 Collyer Quay, #21-01, Ocean Building, Singapore Partner-in-charge: Philip Ling (Since financial year ended 30 June 2005) PRINCIPAL BANKERS United Overseas Bank Limited 80 Raffles Place, UOB Plaza, Singapore DBS Bank Ltd 6 Shenton Way, DBS Building Tower One, Singapore Annual Report

10 Financial Statements 09 Corporate Governance Report 14 Directors Report 17 Statement by the Directors 18 Auditors Report 19 Balance Sheets 20 Consolidated Profit and Loss Account 21 Consolidated Statement of Changes in Equity 22 Consolidated Cash Flow Statement 24 Notes to the Financial Statements 53 Land & Buildings 54 Statistics of Shareholdings 55 Notice of Annual General Meeting Proxy Form 8 Annual Report 2005

11 Corporate Governance Report (the Company ) is committed to upholding good standards of corporate governance to promote corporate transparency and to protect the interests of shareholders and other stakeholders. Our Company has adopted practices based on the Code of Corporate Governance (the Code ) and the Best Practices Guide issued by the Singapore Exchange Securities Trading Limited (the SGX-ST ). This report describes our Company s corporate governance practices during the financial period from 1 July 2005 to 31 December 2005 as the Company changed its financial year end from 30 June to 31 December. 1. Board s Conduct of its Affairs The principal roles of the Board of Directors (the Board ) include the following: a) review and approve the corporate policies, strategies and financial objectives of the Company; b) oversee the process of evaluating the adequacy of internal controls, financial reporting and compliance; c) monitor the Group s financial performance by approving the annual and interim financial reports as well as the release of the half year and full financial results announcements; d) approval of the appointment and nomination of Board of Directors; e) authorization of major transactions including acquisitions, investments and capital expenditure. The Board held one meeting during the financial period. The Articles allow a Board meeting to be conducted by way of a tele-conference. The Board delegates certain decision making to the Audit Committee, Nominating Committee and Remuneration Committee. The details of the number of Board meetings held as well as the attendance of each Board member at those meetings and meetings of the various Board Committees are disclosed below: Meeting Board Audit Nominating Remuneration Committee Committee Committee Name of No. No. No. No. No. No. No. No. Director Held Attendance Held Attendance Held Attendance Held Attendance 1 Dr. Low See Pong Mr. Loh See Moon Ms. Lim Lee Ms. Cheong Poh Hua Mr. Lim Seng Chai Mr. Kuik See Juan Mr. Chua Keng Hiang Mr. U Kean Seng Dr. Allan Yap Dr. John Chen Seow Phun Mr. Foo Der Rong Mr. Chee Teck Kwong Mr. Lien Kait Long Dr. Low See Pong resigned as Managing Director and member of the Nominating Committee on 21 November Ms. Lim Lee resigned as Executive Director on 21 November Mr. Chua Keng Hiang and Mr. U Kean Seng resigned as Independent Directors on 19 November There was no meeting since the appointment of Dr. Allan Yap and Mr. Foo Der Rong as Executive Directors and Dr. John Chen as Non-Executive Director on 21 November There was no meeting since the appointment of Mr. Chee Teck Kwong and Mr. Lien Kait Long as Independent Directors on 24 November Annual Report

12 2. Board Composition and Balance Currently, the Board comprises 9 directors, with independent directors making up one-third of the Board. The Board members have extensive business, financial, accounting and management experience. As such, it is able to exercise objective judgement on corporate affairs independently from the management. The independence of each director is reviewed annually by the Nominating Committee (NC). The Board of Directors are as follows: a) Dr. Allan Yap (Executive Chairman) b) Dr. John Chen Seow Phun (Non-Executive Deputy Chairman) c) Mr. Loh See Moon (Managing Director) d) Mr. Foo Der Rong (Executive Director) e) Ms. Cheong Poh Hua (Executive Director) f ) Mr. Lim Seng Chai (Executive Director) g) Mr. Kuik See Juan (Independent Director) h) Mr. Chee Teck Kwong (Independent Director) i) Mr. Lien Kait Long (Independent Director) 3. Chairman and Chief Executive Officer The functions of Chairman and Chief Executive Officer are separate. The Chairman is Dr. Allan Yap who bears responsibility for the workings of the Board, while Mr. Loh See Moon is the Chief Executive Officer (CEO) who bears executive responsibility for the Company s business. This ensures that there is an appropriate balance of power between the Board and CEO, thereby allowing increased accountability and greater independent decision-making ability. The Chairman and CEO are not related. 4. Board Memberships and Performance The NC comprises 3 non-executive directors who are independent of management. They are: a) Mr. Kuik See Juan (Chairman and Independent Director) b) Mr. Chee Teck Kwong (Member and Independent Director) c) Mr. Lien Kait Long (Member and Independent Director) The NC s principal functions are: a) to identify candidates and review all nominations for the appointment or re-appointment of members of the Board of Directors; for the purpose of proposing such nomination to the Board for its approval; b) to recommend directors who are retiring by rotation to be put forward for re-election by shareholders at the Annual General Meeting; c) be responsible for accessing the effectiveness of the Board as a whole and for accessing the contribution of individual directors to the effectiveness of the Board; d) to review the independence of the independent Directors on an annual basis. 5. Access to Information In order to ensure that the Board is able to fulfil its responsibilities, the Management provides the Board with complete, adequate and timely information in the form of financial summary reports prior to the board meetings on an on-going basis. The Board has separate and independent access to the management and the company secretary at all times. The company secretary attends all board meetings and is responsible to ensure that board procedures are followed and the Company complies with the requirements of the Companies Act and all other rules and regulations that are applicable to the Company. 10 Annual Report 2005

13 6. Remuneration Matters & Level and Mix of Remuneration The Remuneration Committee (RC) currently comprises 3 Directors, all of whom are independent and non-executive. The members of the RC are: a) Mr. Chee Teck Kwong (Chairman and Independent Director) b) Mr. Kuik See Juan (Member and Independent Director) c) Mr. Lien Kait Long (Member and Independent Director) The RC s principal responsibilities are: a) to recommend to the Board a framework of remuneration for the Board and key executives; b) to determine specific remuneration package and terms of employment for each executive director and the CEO; c) to decide on all aspects of remuneration, including but not limited to directors fees, salaries, allowances and bonuses. The Group has a formal and transparent process for determining the directors fees for Non-Executive Directors, which is subject to shareholders approval at the Annual General Meeting (AGM) of the Group. 7. Disclosure of Remuneration A breakdown, showing the level and mix of each Director s remuneration is set out below: Remuneration Band and Director s Salary/ Bonus/Profit Benefits- Name of Director Fees Allowance Sharing in-kind Total % % % % % $250,000 to below $500,000 Mr. Loh See Moon Below $250,000 Dr. Low See Pong Ms. Lim Lee Ms. Cheong Poh Hua Mr. Lim Seng Chai Mr. Kuik See Juan Mr. Chua Keng Hiang Mr. U Kean Seng Dr. Allan Yap Dr. John Chen Seow Phun Mr. Foo Der Rong Mr. Chee Teck Kwong Mr. Lien Kait Long Note: i. Dr. Low See Pong and Ms. Lim Lee are husband and wife. Dr. Low See Pong is the brother of Mr. Loh See Moon. ii. Mr. Lim Seng Chai is the brother of Ms. Lim Lee and the brother-in-law of Dr. Low See Pong. iii. Directors fees are subjected to approval of the shareholders at the forthcoming Annual General Meeting. Save as disclosed above, the Group does not have any employee who is an immediate family of the CEO or any Directors. For competitive reasons, the Company is not disclosing the identity of the Key Executives. Annual Report

14 8. Accountability The responsibility of the Board to shareholders, members of the public and regulators is to provide a balanced and understandable assessment of the Group s performance, position and prospects. The Management of the Company is accountable to the Board and present to the Board the half year and full year results and the Audit Committee reports on the results for review and approval. The Board approves the results and authorises the release of the results to the SGX-ST and the public through SGXNET. 9. Audit Committee The Audit Committee ( AC ) comprises 3 independent and 1 non-executive directors as follows: a) Mr. Lien Kait Long (Chairman and Independent Director) b) Mr. Kuik See Juan (Member and Independent Director) c) Mr. Chee Teck Kwong (Member and Independent Director) d) Dr. John Chen Seow Phun (Member and Deputy Chairman) The principal functions of the AC are: a) to review annual audit plans and audit reports of internal and external auditors; b) to review the auditors evaluation of the system of internal accounting controls; c) to review the financial statements and the auditors reports and the half year and annual results announcements before they are presented to the Board; d) to review with the management, the scope, results and adequacy of the internal audit function, procedure and its cost effectiveness; e) to review the interested person transactions; f ) to recommend to the Board the appointment of the external auditor. The AC conducted reviews of all non-audit services provided by the external auditors. The AC is satisfied that the nature and extent of such services will not prejudice the independence and objectivity of the external auditor and is pleased to confirm their re-nomination. 10. Internal Audit The Board ensures that the Management maintains a sound system of internal controls to safeguard the shareholders investments and the Group s assets. The Group has outsourced the internal audit function to KPMG as Internal Auditors of the Group s Singapore and China operations. The internal auditor reports directly to the Chairman of the AC. The objective of the internal audit is to determine whether the Group s risk management, control and governance processes, as designed by the Group, are adequate and functioning in the required manner. For the financial period ended 31 December 2005, the Audit Committee is of the view that there were no material internal control weakness found in the processes based on the internal auditor s findings and recommendations for improvement. As KPMG are the external auditors of PSC Corporation Ltd; the Group s holding company, KPMG is precluded from acting as internal auditors to the Company. The Company is actively sourcing and will appoint an appropriate firm to be its internal auditors in due course. 12 Annual Report 2005

15 11. Internal Controls The Group s internal and external auditors have conducted an annual review in accordance with their audit plans, on the effectiveness of the Company s material internal controls, which consists of financial, operational and compliance controls, and risk management. The Board believes that, in the absence of evidence to the contrary, the system of internal controls maintained by the Management and that was in place throughout the financial period ended 31 December 2005, provides reasonable assurance, but not absolute guarantee against material financial misstatements or loss, and the safeguarding of assets, the maintenance of proper accounting records, the reliability of financial information, compliance with appropriate legislation, regulations and best practices, and operational controls are in place and business risks are protected. 12. Communication with Shareholders The Group practices equal information access for all shareholders and does not practise selective disclosure. Price-sensitive information is publicly released through SGXNET. Results and annual reports are announced and issued respectively within the mandatory periods and available on the Company s website, at All shareholders will receive the Annual Report and Notice of AGM. The Notice is also advertised in a daily newspaper. At AGMs, all Directors including Chairmen of the Audit, Remuneration, Nominating Committees and the external auditor are in attendance to allow shareholders the opportunity to communicate their views and to ask questions. The Group allows a shareholder to appoint one or two proxies to attend and vote at general meetings on his/her behalf. 13. Dealing with Securities The Group has its own internal compliance code modelled after the Best Practices Guide issued by SGX-ST to provide guidance for both the Directors and employees on the dealings in the Company s securities. The Directors and employees are not allowed to deal in the Group s shares during the period commencing one month before the announcements of the Group s half year and full year results. Directors and employees are expected to observe the insider trading laws at all times even when dealing in securities within the permitted trading period. 14. Material Contracts There were no material contracts entered into by the Group or any of its subsidiaries involving the interest of the CEO, any Director, or controlling shareholder. 15. Interested Person Transactions During the take-over exercise in October 2005, the Company appointed Shooklin & Bok, a legal firm in which an Independent Director is a partner, to review the Offeree Document pertaining to the take-over. The review was undertaken by another partner of Shooklin & Bok. Professional fees paid to Shooklin & Bok for this engagement amounted to S$110, The Independent Director has resigned since 19 November Other than as disclosed above, there were no other interested person transaction for the financial period from 1 July 2005 to 31 December Aggregate value of all interested person transactions Aggregate value of all interested person Name of during the financial year excluding transactions less transactions conducted under shareholders interested than $100,000 and transactions conducted under mandate pursuant to Rule 920 person shareholder s mandate pursuant to Rule 920 (excluding transactions less than $100,000) Mr. U Kean Seng $110, Nil Annual Report

16 Directors Report The Directors are pleased to present their report to the members together with the audited consolidated financial statements of (the Company ) and its subsidiary (collectively, the Group ) and the balance sheet of the Company for the financial period from 1 July 2005 to 31 December Directors The Directors of the Company in office at the date of this report are: Allan Yap (Chairman) (appointed on 21 November 2005) John Chen Seow Phun (Deputy Chairman) (appointed on 21 November 2005) Loh See Moon (Managing Director) Foo Der Rong (appointed on 21 November 2005) Cheong Poh Hua Lim Seng Chai Kuik See Juan Chee Teck Kwong (appointed on 24 November 2005) Lien Kait Long (appointed on 24 November 2005) In accordance with Articles 91 and 97 of the Company s Articles of Association, Ms. Cheong Poh Hua, Dr. Allan Yap, Dr. John Chen Seow Phun, Mr. Foo Der Rong, Mr. Chee Teck Kwong and Mr. Lien Kait Long shall retire, and being eligible, offer themselves for re-election. Change of financial year end The Company has changed its financial year end from 30 June to 31 December to be conterminous with that of its holding company. Accordingly, the financial statements are prepared for the 6 months from 1 July 2005 to 31 December The comparatives are those for the 12 months of the preceding financial year ended 30 June Issue of shares, debentures or options No shares or debentures or options to take up unissued shares of the Company and its subsidiary were issued or granted during the financial period. As at 31 December 2005, no options over the unissued shares of the Company and its subsidiary were outstanding. Arrangements to enable Directors to acquire shares or debentures Neither at the end of nor at any time during the financial period was the Company a party to any arrangement whose object was, or one of whose object was, 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. 14 Annual Report 2005

17 Directors interests in shares or debentures The following Directors, who held office at the end of the financial period, had, according to the register of Directors shareholdings required to be kept under Section 164 of the Singapore Companies Act, Cap. 50, an interest in shares of the Company and related corporations (other than wholly-owned subsidiary), as stated below: Direct interest Deemed interest At the At the beginning of At the end of beginning of At the end of financial period financial period At 21 Jan 2006 financial period financial period At 21 Jan 2006 The Company (ordinary shares of $0.20 each) Low See Pong 57,240, ,580, Loh See Moon 23,580,000 23,580,000 23,580, Lim Lee 22,580, ,240, Cheong Poh Hua 516, , , , , ,000 Lim Seng Chai 500, , , , , ,000 Except as disclosed in this report, no Director who held office at the end of the financial period had interests in shares, share options, warrants or debentures of the Company or related corporations either at the beginning of the financial period, or at the end ofthe financial period or at 21 January Directors contractual benefits Except as disclosed in the financial statements, since the end of the previous financial year, no Director of the Company 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 the Director is a member, or with a company in which the Director has a substantial financial interest. Audit committee The Audit Committee comprises three independent non-executive Directors and one non-executive Director. The members of the Audit Committee as at the date of this report are as follows: Lien Kait Long (Chairman) Kuik See Juan Chee Teck Kwong John Chen Seow Phun The Audit Committee ( AC ) carries out its functions in accordance with section 201B(5) of the Singapore Companies Act, Cap. 50, including the following: Reviews the audit plans of the internal and external auditors of the Company and ensures the adequacy of the Company s system of accounting controls and the co-operation given by the Company s management to the internal and external auditors; Reviews the half yearly and annual financial statements and the auditors report on the annual financial statements of the Company before their submission to the Board of Directors; Reviews effectiveness of the Company s material internal controls, including financial, operational and compliance controls and risk management via reviews carried out by the internal auditors; Annual Report

18 Audit committee (cont d) Meets with the external auditors, other committees, and management in separate executive sessions to discuss any matters that these groups believe should be discussed privately with the AC; Reviews legal and regulatory matters that may have a material impact on the financial statements, related compliance policies and programmes and any reports received from regulators; Reviews the cost effectiveness and the independence and objectivity of the external auditors; Reviews the nature and extent of non-audit services provided by the external auditors; Recommends to the Board of Directors the external auditors to be nominated, approves the compensation of the external auditors, and reviews the scope and results of the audit; Reports actions and minutes of the AC to the Board of Directors with such recommendations as the AC considers appropriate; and Reviews interested person transactions in accordance with the requirements of the Singapore Exchange Securities Trading Limited s Listing Manual. The AC, having reviewed all non-audit services provided by the external auditors to the Group, is satisfied that the nature and extent of such services would not affect the independence of the external auditors. The AC has also conducted a review of interested person transactions. The AC has met with external auditors, without the presence of the Company s management, at least once a year. Further details regarding the Audit Committee are disclosed in the Report on Corporate Governance. Auditors Ernst & Young have expressed their willingness to accept re-appointment as external auditors. On behalf of the Board of Directors, Loh See Moon Director Cheong Poh Hua Director Singapore 20 February Annual Report 2005

19 Statement by the Directors We, Loh See Moon and Cheong Poh Hua, being two of the Directors of, do hereby state that, in the opinion of the Directors, i) the accompanying balance sheets, consolidated profit and loss account, consolidated statement of changes in equity and consolidated cash flow statement together with notes thereto 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 2005 and of the results, changes in equity and cash flows of the Group for the financial period from 1 July 2005 to 31 December 2005, and ii) 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 of Directors, Loh See Moon Director Cheong Poh Hua Director Singapore 20 February 2006 Annual Report

20 Auditors Report to the Members of We have audited the accompanying financial statements of (the Company ) and its subsidiary (collectively, the Group ) set out on pages 19 to 52 for the financial period from 1 July 2005 to 31 December These financial statements are the responsibility of the Company s Directors. 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 plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, a) the consolidated financial statements of the Group and the balance sheet of the Company are properly drawn up in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the Act ) and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2005 and the results, changes in equity and cash flows of the Group for the financial period from 1 July 2005 to 31 December 2005; and b) the accounting and other records required by the Act to be kept by the Company have been properly kept in accordance with the provisions of the Act. ERNST & YOUNG Certified Public Accountants Singapore 20 February Annual Report 2005

21 Balance Sheets as at 31 December 2005 Note Group Company As at As at As at As at $ $ $ $ ASSETS LESS LIABILITIES Non-current assets Property, plant and equipment 3 38,046,240 32,953,040 12,173,302 12,766,312 Investment in subsidiary ,390,710 7,390,710 Intangible asset 5 30,000 35,000 30,000 35,000 Investment securities 6 7,297 6,963 7,297 6,963 Loans to subsidiary ,428,000 7,708,000 Current assets Inventories 8 4,969,543 5,924,645 2,366,281 3,121,550 Trade receivables 9 9,528,990 8,026,415 2,513,450 2,935,566 Other receivables, deposits and prepayments , , ,566 91,810 Due from subsidiary , ,681 Short-term investments 12 1,414,250 2,669,250 1,414,250 2,669,250 Fixed deposits 13 6,450,843 1,250,000 2,000,000 1,250,000 Cash and bank balances 2,315,953 3,100,957 1,185,971 1,079,331 24,928,669 21,273,279 10,497,689 11,801,188 Current liabilities Trade payables 5,106,616 4,830, , ,386 Bills payable 14 5,833,724 2,310,596-74,397 Short term loan , , Other payables and accruals 16 3,599,267 3,239,584 1,394,186 1,307,681 Tax payable 1,049, , , ,419 16,001,784 12,293,777 2,800,442 3,033,883 Net current assets 8,926,885 8,979,502 7,697,247 8,767,305 Non-current liabilities Deferred tax liabilities 24 3,625,671 2,360,429 2,261,863 2,360,429 Net assets 43,384,751 39,614,076 33,464,693 34,313,861 EQUITY Share capital 17 31,440,000 31,440,000 31,440,000 31,440,000 Accumulated profits 18 1,505,819 2,807,523 1,203,014 2,138,182 Capital reserve 3,745,523 2,736, Revaluation reserve 18 4,598, , , ,679 Reserve fund , , Translation reserve 1,156,342 1,065, Total equity 43,384,751 39,614,076 33,464,693 34,313,861 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. Annual Report

22 Consolidated Profit and Loss Account for the financial period from 1 July 2005 to 31 December 2005 Note 6 months ended Year ended $ $ Revenues Sales of goods 26,025,920 38,129,972 Other income 42, ,883 26,068,283 38,437,855 Costs and expenses Cost of sales (20,448,425) (28,923,871) Distribution and selling expenses (1,635,448) (2,351,017) General and administrative expenses (2,527,358) (3,749,401) Other operating expenses (103,099) (225,928) (24,714,330) (35,250,217) Profit from operating activities 20 1,353,953 3,187,638 Financial income ,895 77,007 Financial expenses 23 (41,149) (180,572) Profit before taxation 1,465,699 3,084,073 Taxation 24 (391,560) (593,987) Net profit for the financial period/year 1,074,139 2,490,086 Basic earnings per share (cents) Diluted earnings per share (cents) The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 20 Annual Report 2005

23 Consolidated Statement of Changes in Equity for the financial period from 1 July 2005 to 31 December 2005 Share Accumulated Capital Revaluation Reserve Translation capital profits reserve reserve fund reserve Total $ $ $ $ $ $ $ At 1 July ,440,000 6,632, , , ,458 1,315,346 41,146,819 Appropriation to reserve fund (Note 19) - (59,886) , Net profit for the financial year - 2,490, ,490,086 Dividends (Note 25) - (3,772,800) (3,772,800) Capitalisation of accumulated profits of subsidiary - (2,482,241) 2,482, Translation difference (250,029) (250,029) At 30 June ,440,000 2,807,523 2,736, , ,344 1,065,317 39,614,076 Appropriation to reserve fund (Note 19) - (108,933) , Net profit for the financial period - 1,074, ,074,139 Dividends (Note 25) - (1,257,600) (1,257,600) Capitalisation of accumulated profits of subsidiary - (1,009,310) 1,009, Revaluation of leasehold land and buildings ,863, ,863,111 Translation difference ,025 91,025 At 31 December ,440,000 1,505,819 3,745,523 4,598, ,277 1,156,342 43,384,751 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. Annual Report

24 Consolidated Cash Flow Statement for the financial period from 1 July 2005 to 31 December months ended Year ended $ $ Cash flows from operating activities Profit before taxation 1,465,699 3,084,073 Adjustments: Depreciation of property, plant and equipment 1,610,225 2,395,499 Write-off of property, plant and equipment 6,020 7,441 Bad debts written off 22,250 1,156 Gain on disposal of property, plant and equipment (39,725) (122,800) Impairment/(write-back of impairment) in value of club membership 5,000 (7,000) Write-back of allowance for doubtful trade debts, net (39,671) (95,026) Allowance/(write-back of allowance) of stock obsolescence, net 8,579 (136,774) Change in fair value of quoted investments (334) 68 Interest expense 24,751 21,053 Interest income (47,385) (77,007) Net effect of exchange differences (100,470) 40,148 Operating profit before working capital changes 2,914,939 5,110,831 Stocks 946,523 (1,522,196) Trade and other receivables, deposits and prepayments (1,432,232) (2,146,107) Trade and other payables and accruals 4,158,621 4,757,280 Cash generated from operations 6,587,851 6,199,808 Interest paid (24,751) (21,053) Income taxes paid (440,880) (643,362) Net cash generated from operating activities 6,122,220 5,535,393 Cash flows from investing activities Proceeds from sale of property, plant and equipment 140, ,737 Purchase of property, plant and equipment (Note B) (1,361,789) (5,165,419) Interest received 47,385 77,007 Net cash used in investing activities (1,173,776) (4,929,675) Cash flows from financing activities Payment of dividends to shareholders (1,257,600) (3,772,800) (Repayment of)/proceeds from short term loan (530,005) 526,205 Net cash used in financing activities (1,787,605) (3,246,595) Net increase/(decrease) in cash and cash equivalents 3,160,839 (2,640,877) Cash and cash equivalents at beginning of financial period/year (Note A) 7,020,207 9,661,084 Cash and cash equivalents at end of financial period/year (Note A) 10,181,046 7,020, Annual Report 2005

25 Consolidated Cash Flow Statement for the financial period from 1 July 2005 to 31 December 2005 (cont d) Note A: Cash and cash equivalents Cash and cash equivalents included in the consolidated cash flow statement comprise the following balance sheet amounts: Group As at As at $ $ Short-term investments 1,414,250 2,669,250 Fixed deposits 6,450,843 1,250,000 Cash and bank balances 2,315,953 3,100,957 10,181,046 7,020,207 Note B: Analysis of capital expenditure cash flow Group 6 months ended Year ended $ $ Purchase of property, plant and equipment 1,361,789 5,307,761 Adjustments for purchases not paid as at financial year end - (142,342) Cash invested in property, plant and equipment 1,361,789 5,165,419 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. Annual Report

26 Notes to the Financial Statements - 31 December Corporate information (the Company ) is a public limited liability company domiciled and incorporated in the Republic of Singapore and listed on the Mainboard of Singapore Exchange Securities Trading Limited. The registered office and principal place of business of the Company is located at 28 Senoko Drive, Singapore The principal activities of the Company and its subsidiary are the manufacture and sales of corrugated paper products and sales of other packaging products. There have been no significant changes in the nature of these activities during the financial period. In October 2005, Dr. Low See Pong and Ms. Lim Lee sold their interests in the Company to PSC Corporation Limited. Since then, PSC Corporation Limited has become the immediate and ultimate holding company of the Company. 2. Summary of significant accounting policies 2.1 Basis of preparation The consolidated financial statements of the Group and the balance sheet of the Company have been prepared in accordance with Singapore Financial Reporting Standards ( FRS ). The financial statements have been prepared on a historical cost basis except for leasehold land and buildings stated at valuation and financial assets which are held for trading that have been measured at their fair values. The financial statements are presented in Singapore Dollars (SGD or $). 2.2 Changes in accounting policies The accounting policies have been consistently applied by the Group and the Company and are consistent with those used in the previous financial year, except for the changes in accounting policies discussed below. a) Adoption of new FRS On 1 July 2005, the Group and the Company adopted the following standard mandatory for annual financial periods beginning on or after 1 January FRS 39 - Financial instruments: Recognition and Measurement The Group and the Company had adopted FRS 39 prospectively on 1 July At that date, financial assets within the scope of FRS 39 were classified as either financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments or available-for-sale financial assets, as appropriate. Financial assets that were classified as financial assets at fair value through profit or loss and available-forsale financial assets were measured at fair value while loans and receivables and held-to-maturity investments were measured at amortised cost using the effective interest method. At 1 July 2005, differences between the carrying values and fair values of financial assets at fair value through profit or loss were recognised in accumulated profits while the differences between carrying values and fair values of availablefor-sale financial assets were recognised in the fair value adjustment reserve. For investments carried at amortised cost, any differences between the carrying values and amortised costs as at 1 July 2005 were recognised in accumulated profits. 24 Annual Report 2005

27 2.2 Changes in accounting policies (cont d) At 1 July 2005, financial liabilities within the scope of FRS 39 were measured at amortised costs using the effective interest method. Any difference between the carrying values and amortised costs as at 1 July 2005 were recognised in accumulated profits. The adoption of FRS 39 has no material impact on the financial statements for the financial period from 1 July 2005 to 31 December (b) Adoption of revised FRS The Group and the Company adopted the following revised standards mandatory for annual financial periods beginning on or after 1 January 2005 which did not result in any significant change in accounting policies: (c) FRS 1 (revised), FRS 2 (revised), FRS 8 (revised), FRS 10 (revised), FRS 16 (revised), FRS 17 (revised), FRS 21 (revised), FRS 24 (revised), FRS 27 (revised), FRS 32 (revised), FRS 33 (revised), FRS and INT FRS not yet effective Presentation of Financial Statements Inventories Accounting Policies, Changes in Accounting Estimates and Errors Events after the Balance Sheet Date Property, Plant and Equipment Leases The Effects of Changes in Foreign Exchange Rates Related Party Disclosures Consolidated and Separate Financial Statements Financial Instruments: Disclosure and Presentation Earnings Per Share The Group and the Company have not applied the following FRS and INT FRS that have been issued but are not yet effective. (i) FRS Financial Instruments: Disclosures (effective for annual financial periods on or after 1 January 2007) FRS 107 will supersede the current FRS 32 on the disclosure requirements for financial instruments. (ii) INT FRS Determining Whether an Arrangement Contains a Lease (effective for annual financial periods on or after 1 January 2006) This interpretation requires the determination of whether an arrangement is, or contains a lease to be based on the substance of the arrangement and requires an assessment of whether the arrangement is dependent on the use of a specific asset or assets and whether the arrangement conveys a right to use the asset. The Group expects that the adoption of the pronouncements listed above will have no material impact on the financial statements in the period of initial application. 2.3 Significant accounting estimates and judgements Estimates, assumptions concerning the future and judgements are made in the preparation of the financial statements. They affect the application of the Group s accounting policies, reported amounts of assets, liabilities, income and expenses, and disclosures made. They are assessed on an on-going basis and are based on experience and relevant factors, including expectations of future events that are believed to be reasonable under the circumstances. Annual Report

28 2.3 Significant accounting estimates and judgements (cont d) Key sources of estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. a) Depreciation of plant and machinery The cost of plant and machinery for the manufacture of finished goods is depreciated on a straight-line basis over their useful lives. Management estimates the useful lives of these plant and machinery to be within 5 to 10 years. These are common life expectancies applied in the packaging industry. The carrying amount of the Group s plant and machinery at 31 December 2005 was $15,134,152 (30 June 2005: $14,652,913). 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. b) 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 income and deferred tax payables were $1,049,977 and $3,625,671, respectively (30 June 2005: $970,583 and $2,360,429, respectively). 2.4 Functional and foreign currency a) Functional currency The management has determined the currency of the primary economic environment in which the Company operates i.e. functional currency, to be SGD. Sales prices and major costs of providing goods and services including major operating expenses are primarily influenced by fluctuations in SGD. The functional currency of the subsidiary in the People s Republic of China (the PRC ) is determined to be RMB. b) Foreign currency transactions Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiary and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the closing rate of exchange ruling at the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Exchange differences arising on the settlement of monetary items or on translating monetary items at the balance sheet date are recognised in the profit and loss account. 26 Annual Report 2005

29 2.4 Functional and foreign currency (cont d) c) Foreign currency translation The results and financial position of the subsidiary in the PRC are translated into SGD using the following procedures: Assets and liabilities for each balance sheet presented are translated at the closing rate ruling at that balance sheet date; and Income and expenses for each income statement are translated at average exchange rates for the year, which approximates the exchange rates at the dates of the transactions. All resulting exchange differences are recognised in a separate component of equity as translation reserve. 2.5 Subsidiaries and principles of consolidation a) Subsidiaries A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities. The Group generally has such power when it directly or indirectly, holds more than 50% of the issued share capital, or controls more than half of the voting power, or controls the composition of the Board of Directors. In the Company s separate financial statements, investment in subsidiary is accounted for at cost less any impairment losses. b) Principles of consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiary as at the balance sheet date. The financial statements of the subsidiary are prepared for the same reporting date as the Company. Consistent accounting policies are applied for like transactions and events in similar circumstances. All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions that are recognised in assets, are eliminated in full. The subsidiary is fully consolidated from the date of which control is transferred to the Group, and continue to be consolidated until the date that such control ceases. Acquisition of subsidiary is accounted for using the purchase method. 2.6 Property, plant and equipment All items of property, plant and equipment are initially recorded at cost. Subsequent to initial recognition, property, plant and equipment are stated at cost or valuation less accumulated depreciation and any accumulated impairment losses. Leasehold land and buildings are subsequently revalued on an asset-by-asset basis, to their fair values. Fair value is determined from market-based evidence by appraisal that is undertaken by professionally qualified valuers. Revaluations are made regularly to ensure that their carrying amount does not differ materially from their fair value at the balance sheet date. Annual Report

30 2.6 Property, plant and equipment (cont d) When an asset is revalued, any increase in the carrying amount is credited directly to the revaluation reserve. However, the increase is recognised in the profit and loss account to the extent that it reverses a revaluation decrease of the same asset previously recognised in the profit and loss account. When an asset s carrying amount is decreased as a result of a revaluation, the decrease is recognised in the profit and loss account. However, the decrease is debited directly to the revaluation reserve to the extent of any credit balance existing in the reserve in respect of that asset. Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. The revaluation surplus included in the revaluation reserve in respect of an asset, is transferred directly to accumulated profits on retirement or disposal of the asset. Depreciation of an asset begins when it is available for use and is computed on a straight-line basis over the estimated useful life of the asset as follows: Leasehold land and buildings Boat and cabin cruisers Plant and machinery Furniture and fittings Motor vehicles years 5 years 5-10 years 5-10 years 5 years Installation-in-progress is not depreciated as these assets are not available for use. The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. The residual values, useful life and depreciation method are reviewed at each financial year-end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in the profit and loss account in the year the asset is derecognised. 2.7 Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised on a straight-line basis over the estimated economic useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial yearend. The amortisation expense on intangible assets with finite lives is recognised in the profit and loss account. 28 Annual Report 2005

31 2.7 Intangible assets (cont d) Intangible assets with indefinite useful lives are tested for impairment annually or more frequently if the events or changes in circumstances indicate that the carrying value may be impaired either individually or at the cashgenerating unit level. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether the useful life assessment continues to be supportable. Gain or loss arising from derecognition of an intangible asset is measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the profit and loss account when the asset is derecognised. 2.8 Impairment of non-financial assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset (i.e. an intangible asset with an indefinite useful life) is required, the Group makes an estimate of the asset s recoverable amount. An asset s recoverable amount is the higher of an asset s or cash-generating unit s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses of continuing operations are recognised in the profit and loss account as impairment losses or treated as a revaluation decrease for assets carried at revalued amount to the extent that the impairment loss does not exceed the amount held in the revaluation reserve for that same asset. An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses recognised for an asset other than goodwill may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed 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. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Reversal of an impairment loss is recognised in the profit and loss account unless the asset is carried at revalued amount, in which case the reversal in excess of impairment loss previously recognised through the profit and loss account is treated as a revaluation increase. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. 2.9 Financial assets Financial assets within the scope of FRS 39 are classified as either financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale financial assets, as appropriate. Financial assets are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. The Group determines the classification of its financial assets after initial recognition and, where allowed and appropriate, re-evaluates this designation at each financial year-end. Annual Report

32 2.9 Financial assets (cont d) All regular way purchases and sales of financial assets are recognised on the trade date i.e. the date that the Group commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned. a) Financial assets at fair value through profit or loss Financial assets classified as held for trading are included in the category financial assets at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Gains or losses on investments held for trading are recognised in the profit and loss account. The Group does not designate any financial assets not held for trading as financial assets at fair value through profit and loss. b) Loans and receivables Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in profit and loss account when the loans and receivables are derecognised or impaired, as well as through the amortisation process Investment securities Investment securities are classified as financial assets at fair value through profit or loss. The accounting policies are stated in Note Trade and other receivables Receivables, including amounts due from subsidiary and loans to subsidiary are classified and accounted for as loans and receivables under FRS 39. The accounting policy for this category of financial assets is stated in Note 2.9. An allowance is made for uncollectible amounts when there is objective evidence that the Group will not be able to collect the debt. Bad debts are written off when identified. Further details on the accounting policy for impairment of financial assets are stated in Note Cash and cash equivalents Cash and cash equivalents comprise cash on hand and with banks, bank deposits and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Cash and cash equivalents carried in the balance sheets are classified and accounted for as loans and receivables under FRS 39. The accounting policy for this category of financial assets is stated in Note Annual Report 2005

33 2.13 Impairment of financial assets The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset or group of financial assets is impaired. Assets carried at amortised cost If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced through the use of an allowance account. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the profit and loss account, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date Trade and other payables Liabilities for trade and other amounts payable, which are normally settled on day terms, are initially recognised at fair value and subsequently measured as amortised cost using the effective interest method. Gains and losses are recognised in the profit and loss account when liabilities are derecognised as well as through the amortisation process Derecognition of financial assets and liabilities (a) Financial assets A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised where: The contractual rights to receive cash flows from the asset have expired; The Group retains the contractual rights to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a pass-through arrangement; or The Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. Where the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay. Annual Report

34 2.15 Derecognition of financial assets and liabilities (cont d) Where continuing involvement takes the form of a written and/or purchased option on the transferred asset, the extent of the Group s continuing involvement is the amount of the transferred asset that the Group may repurchase, except that in the case of a written put option on an asset measured at fair value, the extent of the Group s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of (a) the consideration received (including any new asset obtained less any new liability assumed) and (b) any cumulative gain or loss that has been recognised directly in equity is recognised in the profit and loss account. (b) Financial liabilities A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired Inventories Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the profit and loss account. Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing the inventories to their present location and condition are accounted for as follows: Raw materials - purchase costs determined on a specific identification basis. Finished goods and work-in-progress - costs of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) where, as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the profit and loss account net of any reimbursement. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed. 32 Annual Report 2005

35 2.18 Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: a) Sales of goods Revenue is recognised net of goods and services tax, discounts and returns upon the transfer of significant risks and rewards of ownership of the goods to the customer which generally coincides with delivery and acceptance of the goods sold. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods. The Group s sales of goods excludes intercompany transactions. b) Interest income Interest income is recognised as interest accruals (using the effective interest method) unless collectibility is in doubt. c) Dividend income 2.19 Income taxes Dividend income is recognised when the Group s rights to receive payment is established. a) Current tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date. b) Deferred tax Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences, except: Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and In respect of taxable temporary differences associated with investment in subsidiary, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Annual Report

36 2.19 Income taxes (cont d) Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilised except: Where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and In respect of deductible temporary differences associated with investment in subsidiary, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Income tax relating to items recognised directly in equity is recognised in equity. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. c) Sales tax Revenues, expenses and assets are recognised net of the amount of sales tax except: Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and Receivables and payables that are stated with the amount of sales tax included. The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet. 34 Annual Report 2005

37 2.20 Employee benefits a) Defined contribution plan The Company makes contributions to the Central Provident Fund ( CPF ) scheme in Singapore, a defined contribution pension scheme. These contributions are recognised as an expense in the period in which the related service is performed. CPF contributions are recognised as compensation expense in the same period as the employment that gives rise to the contributions. b) Retirement benefits In accordance with the regulations of the People s Republic of China (the PRC ) Government, the subsidiary is required to contribute employee retirement benefits to the Suzhou Bureau of Labour and Social Security. The contributions are calculated based on directives issued by the Bureau and are charged to the profit and loss accounts when incurred. c) Employee leave entitlement 2.21 Leases (as lessee) Employee entitlements to annual leave are recognised as a liability when they accrue to employees. The estimated liability for leave is recognised for services rendered by employees up to the balance sheet date. Leases where the lessor effectively retains substantially all the risks and rewards of ownership of the assets are classified as operating lease. Operating lease payments are recognised as an expense in the profit and loss account on a straight-line basis over the lease term Segments For management purposes, the Group is organised on a geographical basis, into two major geographical segments, Singapore and the PRC. The divisions are the basis on which the Group reports its primary segment information. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Segment capital expenditure is the total cost incurred during the financial year to acquire segment assets that are expected to be used for more than one financial year. Annual Report

38 3. Property, plant and equipment At valuation At cost Leasehold Leasehold Boat and land and Plant and land and cabin Plant and Furniture Motor Construction Installation Group buildings machinery buildings cruisers machinery and fittings vehicles -in-progress -in-progress Total $ $ $ $ $ $ $ $ $ $ Cost or valuation At ,000,000 26,370 6,027, ,703 26,886,321 1,971,125 1,154,301 1,087,787 6,850,664 53,579,237 Additions - - 9,785 1, ,779 77, ,084-4,910,603 5,307,761 Disposals/write-offs (330,312) (13,281) (233,919) - - (577,512) Reclassification - - 2,156,887-8,495, (1,046,472) (9,605,513) - Translation differences - - (93,597) - (12,597) (5,009) (14,764) (41,315) (228,410) (395,692) At and ,000,000 26,370 8,101, ,703 35,176,289 2,030,345 1,076,702-1,927,344 57,913,794 Additions 23, ,262 58, ,305 1,361,789 Disposals/write-offs (575,703) (133,387) (13,160) (149,667) - - (871,917) Revaluation surplus 107,500-5,149, ,256,996 Elimination of accumulated depreciation on revaluation (607,500) - (1,277,261) (1,884,761) Reclassification 12,336,085 (26,370) (12,144,452) - 794, (959,872) - Translation differences (125,577) - 171, ,196 3,108 4,854-31, ,808 At ,734, ,758,512 2,079, ,889-1,546,828 62,050, Annual Report 2005

39 3. Property, plant and equipment (cont d) At valuation At cost Leasehold Leasehold Boat and land and Plant and land and cabin Plant and Furniture Motor Construction Installation Group buildings machinery buildings cruisers machinery and fittings vehicles -in-progress -in-progress Total $ $ $ $ $ $ $ $ $ $ Accumulated depreciation At ,000 26, , ,833 19,345,909 1,518, , ,204,465 Charge for the financial year 270, ,999 7,219 1,580, , , ,395,499 Disposals/write-off (330,248) (9,178) (194,708) - - (534,134) Translation differences - - (16,120) - (73,047) (4,053) (11,856) - - (105,076) At and ,000 26,365 1,164, ,052 20,523,381 1,618, , ,960,754 Charge for the financial period 261,085-88,041-1,132,414 56,637 72, ,610,225 Disposals/write-off (569,052) (129,788) (9,780) (56,374) - - (764,994) Elimination of accumulated depreciation on revaluation (607,500) - (1,277,261) (1,884,761) Reclassification - (26,365) ,893 (18,528) Translation differences (1,061) - 24,607-53,460 2,823 3, ,245 At , ,624,360 1,649, , ,004,469 Net carrying amount At ,460, ,936,428 6,651 14,652, , ,969-1,927,344 32,953,040 At ,541, ,134, , ,066-1,546,828 38,046,240 Annual Report

40 3. Property, plant and equipment (cont d) At valuation At cost Leasehold Boat and land and Plant and cabin Plant and Furniture Motor Company building machinery cruisers machinery and fittings vehicles Total $ $ $ $ $ $ $ Cost or valuation At ,000,000 26, ,703 19,587,053 1,727, ,110 31,524,857 Additions - - 1,000 80,094 59, , ,968 Disposals/write-offs (330,312) (10,995) - (341,307) At and ,000,000 26, ,703 19,336,835 1,776, ,005 31,436,518 Additions ,380 35,157-36,537 Disposals/write-offs - - (575,703) (124,000) (6,193) (111,895) (817,791) Revaluation surplus 107, ,500 Elimination of accumulated depreciation on revaluation (607,500) (607,500) Reclassification - (26,370) - 26, At ,500, ,240,585 1,805, ,110 30,155,264 Accumulated depreciation At ,000 26, ,833 15,371,945 1,318, ,822 17,670,687 Charge for the financial year 270,000-7, ,919 95, ,201 1,337,283 Disposals/write-offs (330,248) (7,516) - (337,764) At and ,000 26, ,052 15,861,616 1,407, ,023 18,670,206 Charge for the financial period 131, ,425 46,987 60, ,573 Disposals/write-offs - - (569,052) (123,998) (3,888) (22,379) (719,317) Elimination of accumulated depreciation on revaluation (607,500) (607,500) Reclassification - (26,365) - 26, At , ,163,408 1,450, ,555 17,981,962 Net carrying amount At ,460, ,651 3,475, , ,982 12,766,312 At ,436, ,077, , ,555 12,173, Annual Report 2005

41 3. Property, plant and equipment (cont d) (a) The revaluation of plant and machinery of the Company acquired prior to April 1980 was performed by a firm of professional valuers, General Appraisal Associates, on an open market basis as at 29 April The Group and the Company have engaged Robert Khan & Co Pte Ltd, an independent professional valuer, to determine the fair value of its leasehold land and buildings. Fair value is determined by reference to market value in continued use. The date of the valuation was 14 October If the following property, plant and equipment were measured using the cost model, the net carrying amount would have been as follows: Group Company As at As at As at As at $ $ $ $ Leasehold land and building 10,653,000 3,704,000 3,590,000 3,704,000 Plant and machinery b) The leasehold land and building of the Company, with net book value of approximately $8,436,000 (30 June 2005: $8,460,000) is mortgaged to a bank for banking facilities granted to the Company. (Notes 14, 15 and 27) The leasehold land and certain buildings of the subsidiary with net book values of approximately Rmb58,737,000 or $12,106,000 (30 June 2005: Rmb31,764,000 or $6,464,000) are pledged to a bank to secure banking facilities granted to the subsidiary. (Notes 14, 15 and 27) 4. Investment in subsidiary Company As at As at $ $ Unquoted equity, at cost 7,390,710 7,390,710 Details of the subsidiary are as follows: Cost of investment Country of As at As at As at As at incorporation and Name of company Principal activities place of business % % $ $ Tat Seng Packaging Manufacture and The People s ,390,710 7,390,710 (Suzhou) Co., Ltd. sales of corrugated Republic boards, corrugated of China cartons and other ( PRC ) packing products Audited by Ernst & Young, PRC. Annual Report

42 5. Intangible asset Group and Company As at As at $ $ Cost: At beginning and end of period/year 95,000 95,000 Accumulated impairment: At beginning of period/year 60,000 67,000 Impairment loss/(reversal of impairment loss) 5,000 (7,000) At end of period/year 65,000 60,000 Net carrying amount 30,000 35,000 This represents investment in a transferable corporate club membership with indefinite life. The recoverable amount is determined by reference to market price as at 31 December In the last financial year ended 30 June 2005, the investment in club membership was classified as non-current other investment and was stated at cost less provision for impairment in value. 6. Investment securities These represent quoted equity shares held for trading. The fair value is determined by reference to market price as at 31 December In the last financial year ended 30 June 2005, these investment securities were stated at the lower of cost and market value determined on an individual basis. 7. Loans to subsidiary These amounts are unsecured and are not expected to be repaid within the next twelve months after the financial period end. Interest is charged at 3.063% (30 June 2005: 3.063%) per annum. $6,628,000 (30 June 2005: $6,708,000) of these loans are denominated in US Dollars. 40 Annual Report 2005

43 8. Inventories Group Company As at As at As at As at $ $ $ $ At cost: Finished goods 469, , , ,716 Work-in-progress 142, ,166 87,849 96,528 Raw materials 4,171,390 4,993,674 1,884,114 2,456,128 Goods-in-transit 186, , , ,178 At net realisable value: Raw materials Total inventories at lower of cost and net realisable value 4,969,543 5,924,645 2,366,281 3,121,550 Inventories are stated after deducting allowance for obsolescence (162,875) (153,412) (142,973) (103,791) Movements in allowance for obsolescence during the financial period/year are as follows: At beginning of period/year 153, , ,791 42,168 Charge for the period/ year 305, , , ,308 Write back (296,459) (275,082) (245,789) (76,685) Translation difference 884 (8,931) - - At end of period/year 162, , , , Trade receivables Group Company As at As at As at As at $ $ $ $ Trade receivables 9,704,016 8,240,975 2,667,713 3,135,566 Less allowance for doubtful trade debts (175,026) (214,560) (154,263) (200,000) 9,528,990 8,026,415 2,513,450 2,935,566 Movements in allowance for doubtful trade debts during the financial period/year are as follows: At beginning of period/year 214, , , ,183 Charge for the period/year 310,329 80, ,263 80,256 Write back (350,000) (175,282) (350,000) (171,439) Write off - (95,699) - - Translation difference 137 (2,591) - - At end of period/year 175, , , ,000 Bad debts written-off directly to profit and loss account 22,250 1, Trade receivables are non-interest bearing and are generally on days credit terms. They are recognised at their original invoice amounts which represent their fair values on initial recognition. Annual Report

44 10. Other receivables, deposits and prepayments Group Company As at As at As at As at $ $ $ $ Other receivables 137, ,495 28,771 42,336 Deposits 44,162 35,883 44,162 35,252 Prepayments 67,830 79,634 62,633 14, , , ,566 91, Due from subsidiary This amount is non-trade related, unsecured, interest-free and is repayable on demand. 12. Short-term investments These represent investments in commercial papers issued by a bank, which bear interest ranging from 2.2% to 4.2% (30 June 2005: 1.05% to 3.19%) per annum and mature within 1 month from the financial period end. These financial assets are classified and accounted for as loans and receivables. 13. Fixed deposits Fixed deposits have an average maturity of 120 days and bear effective interest rates ranging from 1.5% to 1.6% (30 June 2005: % to 1.650%) per annum. 14. Bills payable The bills payable are secured by the leasehold land and building of the Company and the leasehold land and certain leasehold buildings of the subsidiary (Note 3 and Note 27). These bills will mature within 1 to 6 months from the financial period end. 15. Short term loan The short term loan is secured by the leasehold land and certain leasehold buildings of the subsidiary (Note 3 and Note 27) and is repayable within 3 months after the financial period end. Interest is payable at 5.22% (30 June 2005: 5.22%) per annum. 42 Annual Report 2005

45 16. Other payables and accruals Group Company As at As at As at As at $ $ $ $ Other payables 1,864,695 1,345, , ,871 Accrued operating expenses 1,456,488 1,665,759 1,085, ,810 Provision for employee reward 278, , ,599,267 3,239,584 1,394,186 1,307,681 Movements in provision for employee reward during the financial period/year are as follows: At beginning of period/year 228, , Provision for the period/year 54,467 29, Utilisation of provision (7,415) (69,465) - - Translation difference 2,533 (6,612) - - At end of period/year 278, , Provision for employee reward Pursuant to the relevant laws and regulations of the PRC, the subsidiary is required to appropriate to an employee reward fund at least 5% of its statutory net profit for the year to this fund. This fund can only be utilised for bonuses or rewards of the subsidiary s employees. Appropriation to this fund has been charged to the profit and loss account. 17. Share capital Group and Company As at As at $ $ Authorised At beginning and end of financial period/year - 250,000,000 ordinary shares of $0.20 each 50,000,000 50,000,000 Issued and fully paid At beginning and end of financial period/year - 157,200,000 ordinary shares of $0.20 each 31,440,000 31,440,000 The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restriction. Annual Report

46 18. Accumulated profits and revaluation reserve Accumulated profits Group Company As at As at As at As at $ $ $ $ At beginning of period/year 2,807,523 6,632,364 2,138,182 4,090,279 Appropriation to reserve fund (Note 19) (108,933) (59,886) - - Net profit for the financial period/year 1,074,139 2,490, ,432 1,820,703 Dividend (Note 25) (1,257,600) (3,772,800) (1,257,600) (3,772,800) Capitalisation of accumulated profit of subsidiary (1,009,310) (2,482,241) - - At end of period/year 1,505,819 2,807,523 1,203,014 2,138,182 Revaluation reserve Group Company As at As at As at As at $ $ $ $ At beginning of period/year 735, , , ,679 Revaluation surplus 5,256, ,500 - Deferred tax thereof (Note 24) (1,393,885) - (21,500) - At end of period/year 4,598, , , , Reserve fund In accordance with the relevant PRC regulations and the articles of association, the subsidiary is required to appropriate at least 10% of its profit after tax, as determined in accordance with PRC accounting standards and regulations applicable to the subsidiary, to the reserve fund until such reserve reaches 50% of the registered capital. The appropriation for reserve fund will be made based on its profit after tax of the annual statutory financial statements of the subsidiary. 44 Annual Report 2005

47 20. Profit from operating activities Profit from operating activities is determined after charging (crediting) the following: Group 6 months Year ended ended $ $ Non-audit fee to auditors of the Company 3,504 3,500 Bad trade debts written-off 22,250 1,156 Depreciation of property, plant and equipment 1,610,225 2,395,499 Dividend income from quoted investments - (249) Directors fees 37,535 58,333 Directors remuneration 817,774 1,649,534 Property, plant and equipment written-off 6,020 7,441 Gain on disposal of property, plant and equipment (39,725) (122,800) Impairment/(write-back of impairment) in value of club membership 5,000 (7,000) Write-back of allowance for doubtful trade debts, net (39,671) (95,026) Allowance/(write-back of allowance) for inventory obsolescence, net 8,579 (136,774) Change in fair value of quoted investments (334) 68 Operating lease expenses 92, ,851 Personnel expenses including Directors remuneration (Note 21) 3,814,982 7,092,360 The management considers that there were no key management personnel other than the members of the Board of Directors. 21. Personnel expenses Group 6 months Year ended ended $ $ Wages, salaries and bonuses 3,487,506 6,348,026 Pension contributions 203, ,050 Other personnel expenses 123, ,284 The above includes Directors remuneration shown in Note 20. 3,814,982 7,092,360 Annual Report

48 22. Directors remuneration The number of Directors, including those appointed and resigned during the financial period, of the Company whose emoluments fall within the following bands are as follows: Group 6 months Year ended ended $500,000 and above - 2 $250,000 to $499, Below $250, Financial income and financial expenses Group 6 months Year ended ended $ $ Financial income Interest income - fixed deposits 37,037 63,712 - others 10,348 13,295 Foreign exchange gain 105, ,895 77,007 Financial expenses Interest expense (24,751) (21,053) Bank charges (16,398) (41,415) Foreign exchange loss - (118,104) (41,149) (180,572) 46 Annual Report 2005

49 24. Taxation Major components of income tax expense for the financial period/year ended were: Group 6 months Year ended ended $ $ Current tax - current year 520, ,819 Deferred tax - current year (128,714) (40,832) 391, ,987 Pursuant to the Income Tax Law of the PRC concerning Foreign Investment Enterprises and Foreign Enterprises and various local income tax laws, foreign investment enterprises in the PRC are subject to the statutory income tax rate of 33% (30% state income tax plus 3% local income tax) unless the enterprises are located in specially designated regions or cities in the PRC in which more favourable tax rates will apply. The subsidiary is located in a region in the PRC where a preferential tax rate applies and currently qualifies for a reduced tax rate of 27% (24% state income tax plus 3% local income tax). The subsidiary is also entitled to income tax exemption for the two years commencing from the first profit making year (after deducting losses incurred in previous years) and full exemption of the local income tax and 50% reduction in the state income tax for the succeeding three years. The above tax incentive period ceased on 31 December 2004 and the subsidiary is subject to the corporate tax rate of 27% from 1 January The reconciliation of the tax expense and the product of accounting profit multiplied by the applicable rate is as follows: Group 6 months Year ended ended $ $ Accounting profit 1,465,699 3,084,073 Tax at applicable rate of 20% (30 June 2005: 20%) 293, ,815 Tax effect of expenses that are not deductible in determining taxable profit 33,793 27,036 Tax exemption for the Company (10,500) (10,500) Tax exemption for subsidiary - (69,805) Tax effect of different tax rate for subsidiary 75,127 32,575 Others - (2,134) 391, ,987 Annual Report

50 24. Taxation (cont d) The deferred income tax directly charged to equity was related to the surplus on revaluation of leasehold land and building of the Group and Company of $1,393,885 (30 June 2005: Nil) and $21,500 (30 June 2005: Nil) respectively. Group Company 6 months ended Year ended 6 months ended Year ended $ $ $ $ Deferred tax liabilities Excess of net book value over tax written down value of property, plant and equipment 1,305,445 1,424,069 1,305,445 1,424,069 Revaluation reserve 2,464,025 1,098,783 1,100,217 1,098,783 Deferred tax assets Provisions (125,455) (146,094) (125,455) (146,094) Others (18,344) (16,329) (18,344) (16,329) Net deferred tax liabilities 3,625,671 2,360,429 2,261,863 2,360, Dividends Group and Company 6 months Year ended ended $ $ A final dividend of $0.01 per share, less tax at 20% paid in respect of the financial year ended 30 June ,257,600 A special dividend of $0.02 per share, less tax at 20% paid in respect of the financial year ended 30 June ,515,200 A first and final dividend of $0.01 per share less tax at 20% paid in respect of the financial period ended 30 June ,257,600-1,257,600 3,772,800 The Directors do not propose any dividend for the financial period from 1 July 2005 to 31 December 2005 (30 June 2005: 1 cent per share less tax at 20% amounting to $1,257,600). 26. Earnings per share Basic earnings per share is calculated by dividing the Group s net profit attributable to shareholders of $1,074,139 (30 June 2005: $2,490,086) by the weighted average number of shares in issue during the financial period of 157,200,000 (30 June 2005: 157,200,000) shares of $0.20 each. As there are no share options and warrants in issue as at the financial period end, the basic and fully diluted earnings per share are the same. 48 Annual Report 2005

51 27. Banking facilities The banking facilities of the Group and of the Company as at period/year end were as follows: Group Company As at As at As at As at $ $ $ $ Trade finances 5,100,000 5,100,000 5,100,000 5,100,000 Overdraft facilities 4,000,000 4,000,000 4,000,000 4,000,000 Term loan 5,698,000 5,698, Foreign exchange contracts 2,500,000 2,500,000 2,500,000 2,500,000 The banking facilities of the Company are secured by the leasehold land and building of the Company (Note 3). The bank loan facilities of the subsidiary are secured by the leasehold land and certain leasehold buildings of the subsidiary (Note 3). 28. Commitments and contingencies a) Non-cancellable operating lease commitments Lease terms do not contain restrictions on the Group s activities concerning dividends, additional debt or further leasing. The operating lease payments will increase at a rate of 7.6% per annum. Non-cancellable operating lease commitments in respect of leasehold property as at 31 December 2005 are as follows: Group and Company As at As at $ $ Within one year 198, ,000 After one year but not more than five years 955, ,000 More than five years 7,440,000 7,434,000 b) Capital expenditure commitments 8,593,000 8,547,000 Group As at As at $ $ Capital expenditure as at 31 December 2005 not provided for in the financial statements - commitments in respect of purchase of plant and machinery 547, ,549 Annual Report

52 28. Commitments and contingencies (cond t) c) Guarantees Group and Company As at As at $ $ Banker s guarantees issued for foreign workers 105, , Related party disclosures An entity or individual is considered a related party of the Group for the purposes of the financial statements if: i) it possesses the ability (directly or indirectly) to control or exercise significant influence over the operating and financial decisions of the Group or vice versa; or ii) it is subject to common control or common significant influence. In addition to those related party information disclosed elsewhere in the financial statements, the following significant transaction between the Group and a related party who is not member of the Group took place during the financial period at terms agreed between the parties: Fees of $110,956 paid to a legal firm in which a former independent non-executive director is a partner in connection with the take-over circular work performed. 30. Segment information a) Analysis by geographical segments The Group is organised into two main geographical segments, namely: i) Singapore ii) People s Republic of China ( PRC ) 50 Annual Report months ended Singapore PRC Eliminations Group $ $ $ $ Sales of goods External sales 8,987,917 17,038,003-26,025,920 Segment results 334,343 1,019,610-1,353,953 Financial income 152,895 Financial expenses (41,149) Taxation (391,560) Net profit for the financial period 1,074,139 Assets 38,526,999 41,425,823 (16,940,616) 63,012,206 Liabilities 1,951,023 14,075,049 (1,074,265) 14,951,807 Unallocated liabilities 4,675,648 Total liabilities 19,627,455 Capital expenditure 36,537 1,325,252-1,361,789 Depreciation 638, ,652-1,610,225

53 30. Segment information (cont d) Year ended Singapore PRC Eliminations Group $ $ $ $ Sales of goods External sales 18,730,292 19,399,680-38,129,972 Segment results 2,171,515 1,016,123-3,187,638 Financial income 77,007 Financial expenses (180,572) Taxation (593,987) Net profit for the financial year 2,490,086 Assets 39,708,173 30,552,235 (15,992,126) 54,268,282 Liabilities 2,131,464 10,030,293 (838,563) 11,323,194 Unallocated liabilities 3,331,012 Total liabilities 14,654,206 Capital expenditure 252,968 5,177,932 (123,139) 5,307,761 Depreciation 1,337,283 1,058,216-2,395,499 b) Business segments The Group has only one principal activity which is the manufacture and sales of packaging products. Accordingly, no segmental reporting by business segments is presented. 31. Financial risk management objectives and policies The main risks arising from the operations of the Group are interest rate risk, liquidity risk, credit risk and foreign exchange risk. The policies for managing each of these risks are summarised below. Interest rate risk The Group obtains additional financing through bank borrowings. The Group s policy is to maintain the bank borrowings to the minimum, and to obtain the most favourable interest rates available without increasing its foreign exchange exposure. Surplus funds in the Group are placed in deposits with banks and subject to interest rate risk. Liquidity risk Liquidity risk arises in the general funding of the Group s operating activities. It includes the risk of not being able to fund operating activities at settlement dates and liquidate positions in a timely manner at a reasonable price. The Group has no significant exposure to liquidity risk. Short-term fundings will be obtained from financial institutions, when required. Annual Report

54 31. Financial risk management objectives and policies (cont d) Credit risk The Group s maximum exposure to credit risk in the event of the counterparties failure to perform their obligations as at 31 December 2005 in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the balance sheet. The carrying amounts of trade and other receivables represent the Group s main exposure to credit risk. Credit risk is managed through the application of credit approvals, credit limits and monitoring procedures. As at 31 December 2005, the Group s concentration of credit risk by geographical locations is mainly in Singapore and the People s Republic of China. The Group has no significant concentration of credit risk in relation to any single customer. Foreign exchange risk The Group is exposed to foreign exchange risk on sales and purchases that are denominated in a currency other than Singapore dollar. The currency giving risk to this risk is primarily the United States dollar. The Group does not enter into any derivative foreign exchange contracts and foreign currency borrowings to hedge its foreign exchange risk. Foreign currencies received are kept in foreign currency bank accounts and are used to make foreign currency payments so as to minimise the foreign exchange exposure. Fair values Fair value is defined as the amount at which the financial instrument could be exchanged in a current transaction between knowledgeable willing parties in an arm s length transaction, other than in a forced or liquidation sale. The following methods and assumptions are used to estimate the fair value of each class of financial instruments: a) Cash and cash equivalents, other current financial assets and liabilities except for amount due from subsidiary The carrying amounts approximate their fair values due to the relatively short-term maturity of these financial assets and liabilities. b) Loans to and amount due from subsidiary The Directors are of the view that it is not practicable to determine, with sufficient reliability without incurring excessive costs, the fair value of the loans to and amount receivable from the subsidiary as there are no fixed terms of repayment. 32. Change of financial year end The Company has changed its financial year from 30 June to 31 December to be conterminous with that of its holding company. Accordingly, the financial statements are prepared for the 6 months from 1 July 2005 to 31 December The comparatives are those for the 12 months of the preceding financial year ended 30 June Authorisation of financial statements for issue The financial statements for the financial period from 1 July 2005 to 31 December 2005 were authorised for issue in accordance with a resolution of the Directors on 20 February Annual Report 2005

55 Land & Buildings SINGAPORE OPERATIONS Location : 28 Senoko Drive, Singapore Usage : Factory premises, office building Land Area : 20,071 square metres Tenure : Leasehold - 30 years from 16 December 1979, - extended for an additional 30 years with effect from the maturity of the first lease Ownership : 100% owned by Value as at 31 Dec 2005 (Book value) : S$8.4 million (Note A) Note A Revaluations were made on Singapore s leasehold land & building on the following dates: 30 April 1996 Revalued by : Asian Appraisal Company Pte Ltd Valuation : S$15.0 million 30 April 1998 Revalued by : Directors of the Company Valuation : S$13.0 million 30 June 2003 Revalued by : Asian Appraisal Company Pte Ltd Valuation : S$9.0 million 14 October 2005 Revalued by : Robert Khan & Co Pte Ltd Valuation : S$8.5 million CHINA OPERATIONS Location : Suzhou Jiangsu Province, Wanting Town, 88 Wendu Road Usage : Factory premises, Office Building, Dormitory, Development (Note B) Land Area : 58,798 square metres Tenure : Leasehold - 50 years lease of 33,333 square metres from 15 October years lease of 12,667 square metres from 23 September years lease of 12,798 square metres from 13 February 2001 Ownership : 100% owned by Tat Seng Packaging Suzhou Co., Ltd. Value as at 31 Dec 2005 (Book value) : S$12.1 million (Note C) Note B The detailed usage of land is as follows: 38,798 square metres have been utilized for phase 1 of our plant, an office building and a dormitory 20,000 square metres have been utilized for phases 2 and 3 of our plant in line with the expansion Note C Revaluations were made on China s leasehold land & building on the following date: 14 October 2005 Revalued by : Robert Khan & Co Pte Ltd Valuation : S$12.2 million Annual Report

56 Statistics of Shareholdings As at 9 March 2006 Class of Share : Ordinary Shares Voting Right : One Vote Per Share DISTRIBUTION OF SHAREHOLDINGS Size of Shareholdings No. of Shareholders % No. of Shares % ,000-10, ,863, ,001-1,000, ,323, ,000,001 and above ,013, Total 1, ,200, TWENTY LARGEST SHAREHOLDERS No. Name No. Of Shares % 1 PSC CORPORATION LTD 100,529, LOH SEE MOON 23,580, PHILLIP SECURITIES PTE LTD 2,542, SBS NOMINEES PTE LTD 1,362, KIM TOON PRIVATE LIMITED 800, KOH SER KIONG 738, UOB KAY HIAN PTE LTD 618, OCBC NOMINEES SINGAPORE PTE LTD 598, DBS NOMINEES PTE LTD 543, CHEONG POH HUA 516, LIM SENG CHAI 500, LOW CHENG YEE (LU JINGYI) 500, FONG BENG 450, LEE CHENG MEI-MAN 416, SEAH TENG TENG 400, HANS SCHNIEWIND 347, FONG LAI LEONG 330, LIM CHOONG SOONG 310, NG KIAT SENG 300, WU TIAK PONG 300, Total 135,679, SUBSTANTIAL SHAREHOLDERS No. Name Direct Interest % of Shares Deemed Interest % of Shares 1 PSC CORPORATION LTD 100,529, LOH SEE MOON 23,580, Based on the information available to the Company as at 9 March 2006, approximately 20% of the issued ordinary shares of the Company is held by the public, and therefore, Rule 723 of the Listing Manual issued by the Singapore Exchange Securities Trading Limited is compiled with. 54 Annual Report 2005

57 Notice of Annual General Meeting NOTICE IS HEREBY GIVEN that the Annual General Meeting of the Company will be held at 28 Senoko Drive, Singapore on 24 April 2006 at 9.00 a.m. to transact the following business:- AS ORDINARY BUSINESS 1. To receive and consider the Audited Accounts of the Company for the financial period ended 31 December 2005 and the Directors Report and the Auditors Report thereon. (Resolution 1) 2. To approve the Directors fees of S$37,535 for the financial period ended 31 December 2005 (30 June 2005: S$58,333). (Resolution 2) 3. To re-elect Ms. Cheong Poh Hua retiring pursuant to Article 91 of the Company s Articles of Association. (Resolution 3) 4. To re-elect the following Directors retiring pursuant to Article 97 of the Company s Articles of Association:- Dr. Allan Yap (Resolution 4) Mr. Foo Der Rong (Resolution 5) Dr. John Chen Seow Phun (Resolution 6) Mr. Lien Kait Long (Resolution 7) Mr. Chee Teck Kwong (Resolution 8) Mr. Lien Kait Long will, upon re-election as Director of the Company, remain as Chairman of the Audit Committee and a member of the Remuneration Committee and Nominating Committee respectively, and will be considered independent for the purposes of Rule 704(8) of the Listing Manual of the Singapore Exchange Securities Trading Limited. Mr. Chee Teck Kwong will, upon re-election as Director of the Company, remain as Chairman of the Remuneration Committee and a member of the Audit Committee and Nominating Committee respectively, and will be considered independent for the purposes of Rule 704(8) of the Listing Manual of the Singapore Exchange Securities Trading Limited. 5. To re-appoint Messrs Ernst & Young as auditors of the Company and to authorise the Directors to fix their remuneration. (Resolution 9) AS SPECIAL BUSINESS To consider and, if thought fit, to pass the following ordinary resolutions with or without modifications:- 6. Authority to allot and issue shares a) That, pursuant to Section 161 of the Companies Act, Chapter 50, and the listing rules of the Singapore Exchange Securities Trading Limited, approval be and is hereby given to the Directors of the Company at any time to such persons and upon such terms and for such purposes as the Directors may in their absolute discretion deem fit, to: i) issue shares in the capital of the Company whether by way of rights, bonus or otherwise; ii) iii) make or grant offers, agreements or options that might or would require shares to be issued or other transferable rights to subscribe for or purchase shares (collectively, Instruments ) including but not limited to the creation and issue of warrants, debentures or other instruments convertible into shares; issue additional Instruments arising from adjustments made to the number of Instruments previously issued in the event of rights, bonus or capitalisation issues; and Annual Report

58 b) (Notwithstanding the authority conferred by the shareholders may have ceased to be in force) issue shares in pursuance of any Instrument made or granted by the Directors while the authority was in force, provided always that i) the aggregate number of shares to be issued pursuant to this resolution (including shares to be issued in pursuance of Instruments made or granted pursuant to this resolution) does not exceed 50% of the Company s issued share capital, of which the aggregate number of shares (including shares to be issued in pursuance of Instruments made or granted pursuant to this resolution) to be issued other than on a pro rata basis to shareholders of the Company does not exceed 20% of the issued share capital of the Company, and for the purpose of this resolution, the issued share capital shall be the Company s issued share capital at the time this resolution is passed, after adjusting for; a) new shares arising from the conversion or exercise of convertible securities, or ii) b) new shares arising from exercising share options or vesting of share awards outstanding or subsisting at the time this resolution is passed provided the options or awards were granted in compliance with Part VIII of Chapter 8 of the Listing Manual of the Singapore Exchange Securities Trading Limited, and c) any subsequent consolidation or subdivision of the Company s shares, and such authority shall, unless revoked or varied by the Company at a general meeting, continue in force until the conclusion of the next Annual General Meeting or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier. (Resolution 10) (See Explanatory Note 1) 7. To transact any other ordinary business which may be properly transacted at an Annual General Meeting. BY ORDER OF THE BOARD Lotus Isabella Lim Mei Hua Company Secretary 6 April Annual Report 2005

59 Notes: 1) A member of the Company entitled to attend and vote at the Meeting is entitled to appoint a proxy in his stead. 2) A proxy need not be a member of the Company. 3) If the appointor is a corporation, the proxy must be executed under seal or the hand of its duly authorised officer or attorney. 4) The instrument appointing a proxy must be deposited at the registered office of the Company at 28 Senoko Drive, Singapore not later than 48 hours before the time appointed for the Meeting. Explanatory Notes: 1. The ordinary resolution in item no. 6 is to authorise the Directors of the Company from the date of the above Meeting until the next Annual General Meeting to issue shares and convertible securities in the Company up to an amount not exceeding in aggregate 50 percent of the issued share capital of the Company of which the total number of shares and convertible securities issued other than on a pro rata basis to existing shareholders shall not exceed 20 percent of the issued share capital of the Company at the time the resolution is passed, for such purposes as they consider would be in the interests of the Company. This authority will, unless revoked or varied at a general meeting, expire at the next Annual General Meeting of the Company. Annual Report

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61 Proxy Form Company Registration number: M (Incorporated in the Republic of Singapore) IMPORTANT 1. For investors who have used their CPF monies to buy shares, the Annual Report is forwarded to them at the request of their CPF Approved Nominees and is sent FOR INFORMATION ONLY. 2. This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them. *I/We of being *a member/members of (the Company ), hereby appoint Name Address NRIC/Passport No. Proportion of shareholdings to be represented by proxy (%) *and/or as *my/our *proxy/proxies to vote for *me/us on *my/our behalf and, if necessary, to demand a poll, at the Annual General Meeting of the Company to be held at 28 Senoko Drive, Singapore on 24 April 2006 at 9.00 a.m. and at any adjournment thereof. *I/we direct *my/our *proxy/proxies to vote for or against the Ordinary Resolutions to be proposed at the Annual General Meeting as indicated with an X in the spaces provided hereunder. If no specified directions as to voting are given, the *proxy/proxies will vote or abstain from voting at *his/their discretion. No. Ordinary Resolutions For Against 1. To receive and consider the Accounts for the financial period ended 31 December 2005 and the Reports of Directors and Auditors thereon. 2. To approve the Directors fees of S$37,535 for the financial period ended 31 December (30 June 2005 : S$58,333) 3. To re-elect Ms. Cheong Poh Hua pursuant to Article 91 of the Company s Articles of Association. 4. To re-elect Dr. Allan Yap pursuant to Article 97 of the Company s Articles of Association. 5. To re-elect Mr. Foo Der Rong pursuant to Article 97 of the Company s Articles of Association. 6. To re-elect Dr. John Chen Seow Phun pursuant to Article 97 of the Company s Articles of Association. 7. To re-elect Mr. Lien Kait Long pursuant to Article 97 of the Company s Articles of Association. 8. To re-elect Mr. Chee Teck Kwong pursuant to Article 97 of the Company s Articles of Association. 9. To re-appoint Messrs Ernst & Young as auditors of the Company and to authorise the Directors to fix their remuneration. 10. To authorise Directors to issue shares pursuant to Section 161 of the Companies Act, Chapter 50. Dated this day of 2006 Total Number of Shares Held Signature(s) of Member(s)/Common Seal *Delete accordingly IMPORTANT. Please read notes overleaf Annual Report

62 (3rd fold) Notes:- 1. A member of the Company entitled to attend and vote at the Annual General Meeting is entitled to appoint not more than two proxies to attend and vote in his stead. Such proxy need not be a member of the Company. 2. Where a member of the Company appoints two proxies, he shall specify the proportion of his shareholding (expressed as a percentage of the whole) to be represented by each such proxy. 3. The instrument appointing a proxy or proxies must be under the hand of the appointor or his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed under its common seal or under the hand of its attorney or duly authorised officer. 4. A corporation which is a member of the Company may authorise by resolution of its directors or other governing body such person as it thinks fit to act as its representative at the Annual General Meeting, in accordance with its Articles of Association and Section 179 of the Companies Act, Chapter 50 of Singapore. 5. The instrument appointing proxy or proxies, together with the power of attorney or other authority (if any) under which it is signed, or notarially certified copy thereof, must be deposited at the registered office of the Company at 28 Senoko Drive, Singapore not later than 48 hours before the time set for the Annual General Meeting. 6. A member should insert the total number of shares held. If the member has shares entered against his name in the Depository Register (as defined in Section 130A of the Companies Act, Chapter 50 of Singapore), he should insert that number of shares. If the member has shares registered in his name in the Register of Members of the Company, he should insert the number of shares. If the member has shares entered against his name in the Depository Register and shares registered in his name in the Register of Members of the Company, he should insert the aggregate number of shares. If no number is inserted, this form of proxy will be deemed to relate to all the shares held by the member of the Company. 7. The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of members of the Company whose shares are entered against their names in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if such members are not shown to have shares entered against their names in the Depository Register 48 hours before the time appointed for holding the Annual General Meeting as certified by The Central Depository (Pte) Limited to the Company. 8. A Depositor shall not be regarded as a member of the Company entitled to attend the Annual General Meeting and to speak and vote thereat unless his name appears on the Depository Register 48 hours before the time set for the Annual General Meeting. (2nd fold) AFFIX STAMP The Company Secretary TAT SENG PACKAGING GROUP LTD. 28 Senoko Drive, Singapore (1st fold) 60 Annual Report 2005

63 Tat Seng Packaging Group Ltd Annual Report a New Begining