corporate profile Piping Services Heatec Chariot Envirobotics Heat Exchangers Services Chem-Grow

Transcription

1 ANNUAL REPORT 2012

2 Our Mission To provide value-added solutions, enabling our customers to operate their vessels and plants efficiently, and in turn produce value-added products and services for others. Our Vision To be the premium heat transfer and piping system products, services and solutions provider in the marine, oil and gas and related industries. Quality Policy To achieve and enhance customer satisfaction through on-time delivery of quality products, services and solutions through using resources efficiently. Contents 01 Corporate Profile 02 Key Milestones 06 Chairman s Statement 08 Board of Directors 12 Operations Review 14 Financial Review 17 Financial Contents This annual report has been prepared by the Company and its contents have been reviewed by the Company s sponsor, PrimePartners Corporate Finance Pte Ltd. (the Sponsor ) for compliance with the relevant rules of the Singapore Exchange Securities Trading Limited (the SGX-ST ). The Sponsor has not independently verified the contents of this annual report. This annual report has not been examined or approved by the SGX-ST and the SGX-ST assumes no responsibility for the contents of this annual report, including the correctness of any of the statements or opinions made or reports contained in this annual report. The contact person for the Sponsor is Mr Mark Liew, Managing Director, Corporate Finance, at 20 Cecil Street #21-02 Equity Plaza, Singapore , telephone (65)

3 corporate profile 1 Heatec Jietong Holdings Ltd. (the Company or Heatec ) is one of the leaders in piping and heat exchanger services for the marine and oil and gas industries. Piping Services We perform a variety of piping services which include:- fabrication and installation of all types of piping restoration and installation of all types of pipes and systems, including marine piping process piping for floating, production, storage and offloading ( FPSO ) conversions Our piping works are used in, among others, offshore structures such as FPSOs, oil rigs, restoration of ship piping systems, routine docking maintenance of ships, and other types of ship conversions and ship lengthening. In recent times, we expanded our piping services to include turnkey project management which encompasses:- procurement construction fabrication commissioning overall project management Heat Exchangers Services We provide the full range of heat exchanger services on a 24 by 7 basis. We service any heat exchangers that are utilised on board marine and offshore vessels, such as plate heat exchangers, charged air coolers (shell & tube heat exchangers) and pressure vessels. Our heat exchanger services include:- engineering consultancy services on-site inspection fabrication and restoration of heat transfer devices - heaters - condensers - main engine charged air coolers - fresh water generators We design, sell and fabricate heat exchangers, as well as provide related services to major players in the offshore marine, oil and gas and shipping industries. We also provide land-based heat exchanger services to the process and chemical plants conducting routine shut-down maintenance. The heat exchangers that we service include plate heat exchangers and shell and tube heat exchangers. Heatec is a member of the Heat Transfer Research Inc. and hence is able to design and manufacture Shell and Tube Heat Exchangers and Charged Air Coolers to meet the stringent requirements of any certification parties and is in compliance with ASME Section VIII Div 1 and API 661, 660. Heatec is also both an ASME-U & ASME-U2 Stamps, and National Board R Stamp certified fabricator which further enhances our commitment to quality and excellence in all the products and services that we provide. The ability of Heatec to conduct the entire stream of heat transfer and related services, from design, fabrication to restoration, repair, and final on-site removal and installation, allows us to be a one-stop centre for client s heat exchanger needs. This further reinforces Heatec s commitment to our customers, enabling them to operate their vessel and plants efficiently with quality products. Heatec Chariot Envirobotics Our 72.5% owned subsidiary, Heatec Chariot Envirobotics Pte Ltd, which was formed pursuant to a joint venture agreement entered into by the Group s wholly-owned subsidiary, Heatec Jietong Pte Ltd, in August 2009, will provide services to remove heavy-duty marine coatings and corrosion on the decks and hulls of ships as well as repainting and other related services. Our services include:- full coating removal ultrasweep maneuverability - flat bottom and sides hull industrial application pollution control These services will be performed using a wireless robot, the Envirobot, which utilises a patented air-gap ultra high water pressure water-jetting system for the removal of heavy duty marine and industrial coatings. The Envirobot also includes a custom vacuum system for the collection and disposal of effluent from the paint removal process. The system will offer significant advantages over traditional grit blast or manual ultra high pressure ( UHP ) processes, and at the same time, bring little or no environmental consequence. Chem-Grow Our 70% owned subsidiaries, Chem-Grow Pte Ltd and Chem Grow Engineering Pte Ltd ( Chem-Grow ) are wellestablished companies since 1981 that serve the marine, oil & gas, food, chemical industries in chemical cleaning of boilers, coolers and pipelines. Chem-Grow services includes:- Chemical cleaning (Heat exchangers, Pipelines Engine parts, pressure vessel etc) Stainless steel passivation Tank cleaning Hot oil flushing up to NAS/ISO standard for pipeline/oil Pigging for pipeline or hose Chemical sales Rental of portable steam boiler/borescope/particle counter/hydro-jetting machines Chem-Grow currently occupies a land of 10,500 square feet with its own building which includes a warehouse and a waste treatment facility. Annual Report 2012

4 2 Key MILESTONES Heatec Jietong Holdings Ltd. Jie Tong Engineering Pte. Ltd. was formed with fourteen (14) members to render piping services to local shipyards, mainly in Keppel Shipyard 1991 Heatec (Asia Pacific) Pte. Ltd. was founded with ten (10) employees to provide heat exchanger services to the local marine industry JieTong Engineering Pte. Ltd. acquired 100% share of Heatec (Asia Pacific) Pte. Ltd. Jie Tong Engineering Pte. Ltd. transferred all operations to Heatec (Asia Pacific) Pte. Ltd. and ceased all operations Heatec (Asia Pacific) Pte. Ltd. was renamed Heatec Jietong Pte. Ltd., which specialises in heat transfer and piping Achieved the ISO 9001:2000 certification in recognition of the Company s high quality standards in piping structure fabrication and heat exchanger manufacturing and repair Received various awards and accolades due to our dedication to observing safety practices in all projects undertaken by the Company Established Heat Transfer Services Pte. Ltd., a strategic alliance with Invensys APV (the inventor of plate heat exchangers) Awarded the ASME-U certification by the American Society of Mechanical Engineers and National Board-R by the National Board Awarded the OHSAS 18001:2007 certification by Det Norske Veritas Achieved the bizsafe level STAR status by Workplace Safety and Health Council for efforts to maintain workplace safety standards Listed on the SGX-Catalist on 8th July 2009 Awarded the Investors Choice Awards 2009 Heatec Chariot Envirobotics was formed in a joint venture between Heatec Jietong and Chariot Robotics to provide coating removal services

5 3 JieTong Engineering Pte. Ltd. acquired 75% share of Heatec (Asia Pacific) Pte. Ltd. Heatec Shanghai Co., Ltd. was set up in China Annual Report Moved to its present facility at 18, Tuas Ave 18A to accommodate the Company s rapid business growth Established Heatec IMC-YY Engineering Co. Ltd. in Zhoushan IMC-YongYue Shipyard Formed Heatec Marine Phils Inc in the Philippines Awarded the ENTERPRISE 50 Award by Accenture and The Business Times Awarded the Investors Choice Awards 2010 Acquired a 51% equity interest in each of Chem-Grow Pte Ltd and Chem Grow Engineering Pte Ltd; Venture into chemical cleaning business Incorporated wholly-owned subsidiary HJT Engineering & Construction Pte Ltd Awarded the ASME-U2 certificate DNV-Approved Manufacturer NKK-Approved Manufacturer Acquired additional 19% equity interest in each of Chem-Grow Pte Ltd and Chem Grow Engineering Pte Ltd.

6 4 Heatec Jietong Holdings Ltd. Leveraging ON core competencies to emerge stronger Heatec preserves our core strength as we expand our business foothold in the market and redefine our business model.

7 5 Annual Report 2012

8 6 Chairman s STATEMENT Heatec Jietong Holdings Ltd. Johnny Soon Chairman and Chief Executive Officer We believe that the move to the new waterfront workshop located in Tuas South Street 15 in the second half of 2013 would gear up its production capacity for the Heat Exchanger segment. Dear Shareholders, On behalf of the Board, I am pleased to present you with the Annual Report for Heatec Jietong Holdings Ltd ( Heatec or the Company ) for the financial year ended 31 December 2012 ( FY2012 ). The Year In Review Despite the challenging business conditions during FY2012, especially in the marine industry, the Company s efforts to improve project and cost management had resulted in better profit margins for FY2012. In FY2012, the Company managed to pare down its net loss to S$2.55 million, an improvement from a loss of S$3.56 million in the financial year ended 31 December 2011 ( FY2011 ). In FY2012, Heatec posted revenue of S$35.15 million, a slight decrease of 5% from S$37.13 million recorded in FY2011. The decrease was attributable to lower sales contribution from the Piping and Heat Exchanger segments, albeit an increase in sales from the Blasting and Chemical Cleaning segments. The Blasting segment saw an increase in demand for its services in FY2012, while the Chemical Cleaning segment enjoyed the recognition of the full year financial results of its newly-acquired subsidiaries in FY2012. Sales of the Piping segment were affected by the tightening labour market as well as the lull period from April to June Revenue of the Heat Exchanger segment was dragged down by the slowdown in the marine industry and the consequential shrinking of demand from vessel owners.

9 7 Heatec s overall profitability increased, albeit with lower revenue. Gross profit margin improved from 17% in FY2011 to 27% in FY2012, translating into an increase in gross profit of S$3.20 million or 51% from FY2011. The increase in profitability was largely due to improved quality of our deliverables and general improvement in productivity. The cost structure for both the Piping and Heat Exchanger segments was kept lean through implementation of better cost control procedures, which led to cost savings for labour-related expenses. For Blasting segment, the utilisation of more manual hydroblasting machines instead of Envirobotics machines resulted in lower maintenance costs and hence, improved gross profit. The recognition of full-year financial results of the Company s newly acquired subsidiaries, Chem-Grow Pte Ltd and Chem Grow Engineering Pte Ltd in FY2012, as compared to only two months of financial results in FY2011, yielded higher profit for the Chemical Cleaning segment. As at 31 December 2012, Heatec s net asset value per share stood at Singapore cents. Disposal of JTC Property at Tuas In January 2012, Heatec announced the acceptance of JTC Corporation s offer in relation to the lease of a private plot of land, with an estimated area of 10,000 square metres and a waterfront boundary length of approximately metres, located in Tuas South Street 15 in Tuas View Industrial Estate (the Land ). In January 2013, Heatec disposed of its existing leasehold building and workshop (the Property ) located at 18 Tuas Ave 18A for a cash consideration of S$5.80 million (the Disposal ). Following the Disposal, Heatec entered into a tenancy agreement to lease the Property from the buyer at the rental rate of $45,000 per month from 24 January 2013 to 31 July 2013 (the Initial Period ), with an option to extend the lease period for another two months after the Initial Period. Going Forward In FY2013, the global economic climate is likely to remain uncertain and the marine industry is expected to remain sluggish. Heatec will continue to face intense price competition in the marine Heat Exchanger business segment. Against this backdrop, Heatec is stepping up efforts to integrate design, piping and fabrication capabilities to move up the value chain to skid fabrication. We believe that the move to the Land in the second half of FY2013 would gear up its production capacity for the Heat Exchanger segment. To complement its organic growth, the Company shall actively explore avenues to increase its exposure in the onshore and offshore industries in FY2013 so as to capitalise on growth opportunities. As we brace ourselves for greater challenges tomorrow, the Company shall continue to pursue operational excellence and enhance our competitive edge. Acknowledgements On behalf of the Board, I would like to express my sincere gratitude and appreciation to all our stakeholders our customers, partners, suppliers and staff, for their unflagging patience as well as unstinting support and contributions, as we navigate through challenging times. I also wish to thank my fellow Board members for their precious guidance and advice during this period. Based on the Company s FY2012 performance, we are of the view that we have made progress in our efforts to turn the Company around. As we continue to exercise prudence in our business and in keeping our costs down, we have also put in place focused growth strategies to strengthen our business model. We believe we are now well-poised to Meet Tomorrow s Challenges Today. Johnny Soon Chairman and Chief Executive Officer Annual Report 2012 Heatec will be recognising a one-off gain from the Disposal of S$3.67 million in the current financial year ending 31 December 2013 ( FY2013 ). Heatec intends to use the proceeds to fund building and civil works on the Land, invest in new plant and machineries and as collateral for banking facilities that are currently secured by the Property.

10 8 Board of Directors Heatec Jietong Holdings Ltd. From left to right row: 1st row: Johnny Soon, Jimmy Yong, Yong Yeow Sin 2nd row: Richard Ong, Seah Kian Peng, Phillip Lee 3rd row: Michael Seow

11 9 Johnny Soon Chairman & CEO Johnny Soon is our Executive Chairman and Chief Executive Officer ( CEO ) and was appointed to our Board on 26 September As the Executive Chairman and CEO, he oversees all day-to-day operations and determines the Group s strategic direction for business growth. Seah Kian Peng Lead Independent Director Seah Kian Peng is our Lead Independent Director and was appointed to our Board on 22 June He chairs our RC and NC, and is a member of our AC. He is currently the Chief Executive Officer of NTUC Fairprice Co-operative Limited, and a member of Parliament for Marine Parade GRC. Annual Report 2012 Jimmy Yong Executive Director Jimmy Yong is our Executive Director and was appointed to our Board on 26 September As an Executive Director, he is incharge of all aspects of our Company s piping and steelwork operations at Keppel Tuas Shipyard. Yong Yeow Sin Executive Director Yong Yeow Sin is our Executive Director and was appointed to our Board on 26 September As an Executive Director, he is in-charge of all aspects of our Company s piping and steelwork operations at Keppel Gul, Keppel Benoi, and ST Shipyards. Richard Ong Independent Director Richard Ong is our Independent Director and was appointed to our Board on 22 June He is a member of our Audit Committee ( AC ), Nominating Committee ( NC ) and Remuneration Committee ( RC ). He is currently a director of Appleton Global Private Limited and Group Financial Controller of Higson International Pte Ltd. He is also currently serving as an Independent Director of three (3) other companies listed on the SGX-ST. Phillip Lee Independent Director Phillip Lee is our Independent Director and was appointed to our Board on 22 June He is a member of our AC and NC. He is currently the Managing Director of Phillip Lee Management Consultants Pte Ltd. He is also an Independent Director of a public trust company, four (4) companies listed on the SGX-ST, as well as three (3) companies listed on the Main Market of Bursa Malaysia Securities Berhad. Michael Seow Independent Director Michael Seow is our Independent Director and was appointed to our Board on 22 June He chairs our AC and is a member of our RC. He is currently an Associate Director at Engelin Teh Practice LLC, and has more than twenty (20) years of experience in the areas of conveyancing and property law, landlord and tenant law as well as general corporate and commercial work.

12 10 Heatec Jietong Holdings Ltd. Capitalising on growth opportunities Heatec is stepping up efforts to integrate design, piping and fabrication capabilities to move up the value chain to skid fabrication.

13 11 Annual Report 2012

14 12 Operations REVIEW Heatec Jietong Holdings Ltd. Piping segment The Company has been providing various type of piping works, including the fabrication and installation of piping systems, floating, production, storage and offloading turrets and ship conversion. Due to the labour-intensive nature of these services, the tightening labour market has affected the volume of work that can be undertaken by the Company. Coupled with the lull period from April to June 2012, sales generated from the Piping segment dropped by 20% to S$14.98 million in FY2012 from S$18.73 million in FY2011. Heat Exchanger segment During the year under review, the Company continued to expand into providing heat exchanger services for the oil and gas sector and has undertaken such projects with Engineering, Procurement and Construction companies for the regional market. As the oil and gas heat exchanger business is expected to be a growth driver for the Company, the Company has stepped up its marketing efforts for this segment in a bid to expand its market share. However, as the Heat Exchanger segment was hit by the slowdown in the marine industry, and shrinking demand from vessel owners, sales dipped 12% to S$14.96 million in FY2012 from S$17.08 million in FY2011. The Company exercised better cost control procedures in the oil and gas Heat Exchanger segment reduced direct material costs and improved work processes, and hence achieved higher quality of deliverables in the Heat Exchanger segment in FY2012. During the year under review, the Company progressed towards integrating its existing range of products vertically to move up the value-chain into skid fabrication.

15 13 Blasting segment During the year under review, there was an increase in demand for manual blasting services in FY2012 compared to FY2011. The Blasting segment achieved sales of S$0.69 million, representing an increase of 81% or S$0.31 million, as compared to S$0.38 million recorded in FY2011. Annual Report 2012 Chemical Cleaning segment The Chemical Cleaning segment of the Company serves the maritime and petroleum industries, petrochemical industry and industries of varied product offerings such as oil contamination test, chemical sales and chemical cleaning, and hydro-jetting up to 20,000 PSI for all types of systems at anchorage, shipyard, refinery, construction and industries premises. The Company also provides pipeline pigging, stainless steel passivation, and oil flushing up to NAS/ ISO Standard. The Company s Chemical Cleaning segment contributed 13% or S$4.53 million of the Company s revenue in FY2012.

16 14 Financial Review Heatec Jietong Holdings Ltd. A.Profitability Analysis Revenue by segments FY2012 FY2011 Variance S$ % S$ % S$ % Piping 14,975, ,725, (3,749,246) (20.0) Heat Exchanger 14,955, ,080, (2,124,548) (12.4) Blasting 692, , , Chemical Cleaning 4,530, , ,585, ,154, ,133, (1,979,657) (5.3) The Company recorded S$35.15 million in revenue in FY2012. Compared to FY2011, the Company s total revenue dropped by 5.3% or S$1.98 million, mainly as a result of the following: 1. Piping revenue dropped by 20.0% to S$14.98 million compared to S$18.73 million in FY2011. While the Piping segment continued to be affected by tightening labour market, the lull period from April to June 2012 intensified the level of revenue erosion in FY Revenue from the Heat Exchanger segment dropped by 12.4% to S$14.96 million as compared to S$17.08 million in FY2011. While the Company s marketing effort in the oil & gas industry was realised, the Heat Exchanger segment was affected by the slowdown in the marine industry. This decline in revenue was largely attributable to financial strains of and shrinking demand from vessel owners for marine heat exchanger services works. 3. The Blasting segment accounted for $0.69 million of the Company s revenue in FY2012, representing an increase of 80.6% or S$0.31 million, as compared to S$0.38 million in FY2011. The increase was due to an increase in demand for blasting services in FY2012 compared to FY2011. The revenue of the Company s Blasting segment was mainly attributable to manual blasting services. 4. The Company s Chemical Cleaning segment contributed 12.9% or S$4.53 million of the Company s revenue in FY2012. This increase is mainly as a result of the Company sharing full year financial results of newly acquired subsidiaries Chem-Grow Pte Ltd and Chem Grow Engineering Pte Ltd ( Chem Grow Company ) in FY2012 as compared to only two months of financial results in FY2011. Overall profitability FY2012 S$ FY2011 Variance S$ S$ % Gross Profit 9,482,199 6,278,997 3,203, Other Operating Income 409, ,764 (115,497) (22.0) Administrative Expenses (9,984,541) (10,218,186) 233,645 (2.3) Other Operating Expenses (1,803,119) (1,278,616) (524,503) 41.0 Share of (Loss) Profit of Associates (284,410) 171,004 (455,414) (266.3) Finance Costs (647,058) (591,002) (56,056) 9.5 Loss Before Income Tax (2,827,662) (5,113,039) 2,285,377 (44.7) Income Tax (Expense) Benefit (166,678) 885,656 (1,052,334) n.m Loss For The Year (2,994,340) (4,227,383) 1,233,043 (29.2)

17 15 At gross operating profit level, the Company s gross profit margin improved from 16.9% in FY2011 to 27.0% in FY2012, translating into an increase in gross profit by S$3.20 million or 51.0% from FY2011. The increase was largely due to: 1. Improved productivity in the Piping segment. In addition, the Company closely monitored labour related miscellaneous expenses, resulting in cost savings for labour related expenses. 2. The Company exercised better cost control procedures in the land-based Heat Exchanger segment, reduced direct material costs and reduced cost from reworks by improving the quality of deliverables in the Heat Exchanger segment. 3. The Company utilised more manual hydro-blasting machines to generate revenue in the Blasting segment rather than utilising the Envirobotics machines. Lower maintenance costs for manual hydro-blasting machines contributed to improved gross profit in the Blasting segment. 4. Complemented by contribution from the Chemical Cleaning segment, the Company shared full year financial results of Chem Grow Company in FY2012 as compared to only 2-month financial results in FY2011. Other significant factors that affected the Company s profitability were as follows: 1. Due to under utilisation of Envirobotic machines recorded in Heatec Chariot Envirobotics Pte Ltd, a subsidiary of the Company, the Company recorded an impairment loss amounting to a total of S$1.25 million for its 4 units of Envirobotic machines. 2. The Company recorded provision for doubtful debts amounting to S$0.40 million for customers who were put under judicial management, as well as specific provision for certain long overdue receivables. 3. The Company recorded a share of losses from associates amounting to S$0.28 million in FY2012 as compared to a share of profit from associates of S$0.17 million in FY2011. The financial performance of Heat Transfer Services Pte Ltd ( HTS ), an associate of the Company was affected by the downturn in the Marine Industry. As a result, HTS recorded a drop in revenue from the sales and services of plate heat exchangers. 4. The Company performs revaluation on its plant and machineries every 3 years in accordance with existing accounting standards. As a result of a revision of the expected useful life for certain fixed assets and the revaluation of the Envirobotic machines recorded in Heatec Chariot Envirobotics Pte Ltd, a subsidiary of the Company, the Company s depreciation of property, plant and equipment decreased from S$1.21 million in FY2011 to S$1.03 million in FY Non-controlling interests in FY2011 relates to noncontrolling shareholders share of profits and losses in the Chemical Cleaning segment and Blasting segment respectively. Decrease in loss attributable to noncontrolling interest was directly associated with decrease in losses reported by the Blasting segment. Finance costs The Company s cashflows were affected by long overdue repayment from customers since the fourth quarter of FY2011. Thus, the Company heavily relied on bank overdraft and factoring facilities to meet its working capital requirements before a lump sum repayment from a major customer was received in end-april As a result, finance costs increased from S$0.59 million in FY2011 to S$0.65 million in FY2012. Income tax expense In FY2012, the Company recognised tax expenses amounting to S$0.17 million, including prior year s underprovision of deferred income tax of S$0.32 million. B. Balance Sheet Analysis Non-current assets There are a few major factors contributing to the decrease in non-current assets by 17.7% or S$2.56 million from S$14.49 million as at 31 December 2011 to S$11.93 million as at 31 December 2012: a) b) c) The Company was in the midst of completing the disposal of its leasehold building and workshop located at 18 Tuas Avenue 18A, Singapore ( Property ) as at 31 December Correspondingly, the Company reclassified S$2.06 million, being carrying amount of the Property, to current assets as non-current asset held-forsale. The Company had completed the disposal of the Property on 23 January 2013 and a gain on disposal amounting to S$3.67 million has been recognised for the financial year ending 31 December The construction for the Company s new workshop located at Tuas South Street 15 is in progress. The Company recognised S$1.33 million as construction-inprogress as at 31 December Decrease in investment in associates was attributed to sharing of losses of associates in FY2012 amounting to S$0.28 million, offset by dividends received from associate company of S$67,000 against cost of Annual Report 2012

18 16 Financial Review Heatec Jietong Holdings Ltd. d) e) investment, provision for impairment loss in investment in an associate amounting to S$48,000 and unrealised exchange loss recognized for profits shared in prior years amounting to S$30,000 due to appreciation of Chinese Yuan Renminbi against Singapore Dollars. Fixed deposit amounting S$0.18 million which was longterm in nature in FY2011 was reclassified to current assets in FY2012. The Company invested excess cash in bonds amounting to S$0.26 million in FY2012. Current assets Trade and other receivables of the Company decreased from S$31.06 million as at 31 December 2011 to S$23.16 million as at 31 December 2012 mainly due to the receipt of a block settlement for long overdue projects from a major customer and general improvement in collectability. The Company improved its debtor turnover days by 67 days from 289 days as at 31 December 2011 to 222 days as at 31 December The Company s inventory balance remained at similar levels, from S$1.42 million as at 31 December 2011 to S$1.17 million as at 31 December Non-current liabilities Total bank loans decreased by S$1.11 million from S$1.93 million as at 31 December 2011 to S$0.82 million as at 31 December Non-current portion of finance leases decreased from S$1.44 million as at 31 December 2011 to S$0.51 million as at 31 December 2012 due mainly to the repayment of the non-current portion of finance leases amounting to S$0.93 million in FY2012. Trade and other payables decreased by S$2.66 million from S$11.45 million as at 31 December 2011 to S$8.79 million as at 31 December 2012, due mainly to the settlement of trade and other payables of S$1.46 million. C. Cashflow Analysis The Company reported a net cash inflow from operating activities of S$6.30 million in FY2012, due mainly to the decrease in trade and other receivables of S$8.06 million, which was partially offset by a decrease in trade and other payables of S$1.45 million. The Company s net cash used in investing activities was S$2.23 million in FY2012, which was due mainly to the investment in the construction of a new workshop which is in progress and located at Tuas South Street 15 amounting to S$1.33 million and plant and machineries amounting to S$0.71 million, to facilitate the Company s business operations. In FY2012, the Company s net cash used in financing activities was S$4.89 million, due mainly to net repayments of factoring loans amounting to S$2.78 million, repayment of bank loans amounting to S$1.11 million, repayment of finance lease amounting to S$1.09 million and acquistion of additional interests in subsidiaries from non-controlling shareholders at S$1.08 million. The cash outflow was partially offset by proceeds from bank loans amounting to S$1.30 million, mainly to finance the second and third tranche of payments in relation to the acquisition of the Chem Grow Company in FY2011 and a decrease in fixed deposit pledged amounting to S$0.01 million in FY2012. Current liabilities Current bank borrowings decreased by 18.0% from S$9.28 million as at 31 December 2011 to S$7.62 million as at 31 December This decrease was in tandem with the decrease in trade receivables, due to the reduced need for factoring and bank overdraft facilities. The Company had reduced reliance on bank overdraft facilities since May 2012.

19 Financial Contents 18 Corporate Governance Report 32 Report of the Directors 35 Statement of Directors 36 Independent Auditor s Report 37 Statements of Financial Position 38 Consolidated Income Statement 39 Consolidated Statement of Comprehensive Income 40 Statements of Changes in Equity 42 Consolidated Statement of Cash Flows 44 Notes to Financial Statements 86 Statistics of Shareholdings 88 Notice of Sixth Annual General Meeting Proxy Form

20 18 CORPORATE GOVERNANCE REPORT Heatec Jietong Holdings Ltd. The Board of Directors (the Board or the Directors ) of Heatec Jietong Holdings Ltd. (the Company and together with its subsidiaries, the Group ) is committed to maintaining a high standard of corporate governance within the Company by complying with the principles and guidelines of the Code of Corporate Governance 2005 (the Code ) and where applicable, to the Group. This report outlines the corporate governance framework and practices adopted by the Company with specific reference made to the principles of the Code throughout the financial year ended 31 December 2012 ( FY2012 ). 1. BOARD MATTERS The Board s Conduct of its Affairs Principle 1: Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the success of the company. The Board works with Management to achieve this and the Management remains accountable to the Board. The Company is headed by an effective Board to lead and control its operations and affairs. The Board is entrusted with the responsibility for the overall management of the Group. The Board s key responsibilities include charting and reviewing the Group s overall business strategy, supervising management and reviewing the Group s financial performance and managerial performance. The Board is also responsible for the approval of major investment and divestment proposals. The Executive Directors play a very important role in the management of the Group and the formulation of corporate strategies and are also responsible for the day-to-day operations and administration of the Group. As at the date of this report, the Board comprises the following Directors:- Johnny Soon Yeow Kwee - Chairman and Chief Executive Officer Jimmy Yong Li Vien - Executive Director Yong Yeow Sin - Executive Director Seah Kian Peng - Lead Independent Director Phillip Lee Soo Hoon - Independent Director Michael Seow Teo Tiew - Independent Director Richard Ong Beng Chye - Independent Director To assist the Board in the execution of its responsibilities and to provide independent oversight of the management, the Board has established a number of board committees, namely the Audit Committee (the AC ), the Nominating Committee (the NC ) and the Remuneration Committee (the RC ) (collectively, the Board Committees ). The Board Committees function within clearly defined terms of references and operating procedures, which will be reviewed on a regular basis. The effectiveness of each committee is also constantly reviewed by the Board. The Board meets at least twice yearly and whenever warranted by particular circumstances. However, ad-hoc, non-scheduled Board meetings may be convened to deliberate on urgent substantial matters. In addition to these meetings, corporate events and actions requiring the Board approval may be discussed over the telephone and Directors resolutions in writing may be passed. Article 104(4) of the Company s Articles of Association (the Articles ) provides for telephonic and videoconference meetings.

21 CORPORATE GOVERNANCE REPORT 19 The attendance of the members of the Board and Board Committee meetings during FY2012 is set out in the table below:- Board Meetings Audit Committee Meetings Nominating Committee Meetings Remuneration Committee Meetings Name of Directors Held Attended Held Attended Held Attended Held Attended Johnny Soon Yeow Kwee 2 2 N.A. N.A. N.A. N.A. N.A. N.A. Jimmy Yong Li Vien 2 2 N.A. N.A. N.A. N.A. N.A. N.A. Yong Yeow Sin 2 2 N.A. N.A. N.A. N.A. N.A. N.A. Seah Kian Peng Phillip Lee Soo Hoon N.A. N.A. Michael Seow Teo Tiew N.A. N.A. 1 1 Richard Ong Beng Chye Annual Report 2012 Matters Requiring Board s Approval The Company has in place internal guidelines on a number of corporate events and actions for which the Board s approval is required. They include the following:- (a) (b) (c) (d) (e) (f) (g) (h) approval of financial results announcements; approval of annual reports and accounts; declaration of interim and/or final dividends; authorisation of transactions; authorisation of new banking facilities; approval of change in corporate strategy; convening of shareholders meeting; and approval of acquisitions and disposals and funding of investments. The Company does not have a formal training programme for the Directors but all new Directors will undergo an orientation in order to be provided with background information about the Group s history, strategic direction and industry-specific knowledge. The Directors will also have the opportunity to visit the Group s operational facilities and meet with the management to gain a better understanding of the Group s business operations. Upon appointment, the newly appointed Directors will be provided a formal letter setting out their duties and obligations. The Directors, Mr Johnny Soon, Mr Jimmy Yong, Mr Yong Yeow Sin and Mr Michael Seow, have attended the SGX Listed Companies Development Programme Understanding the Regulatory Environment in Singapore course, conducted by the Singapore Institute of Directors (the SID ), and are aware of the roles and responsibilities of a director of a public-listed company in Singapore. Mr Seah Kian Peng, Mr Richard Ong and Mr Phillip Lee are directors of other public-listed companies and therefore have the appropriate experience and are familiar with the roles and responsibilities of a director of a public-listed company in Singapore. The Company encourages the Directors to attend training courses organised by the SID or other training institutions in connection with their duties. All Directors are provided with regular updates on changes in the relevant laws and regulations to enable them to make well-informed decisions and to ensure that the Directors are competent in carrying out their expected roles and responsibilities.

22 20 CORPORATE GOVERNANCE REPORT Heatec Jietong Holdings Ltd. Board Composition and Guidance Principle 2: There should be a strong and independent element on the Board, which is able to exercise objective judgement on corporate affairs independently, in particular, from Management. No individual or small group of individuals should be allowed to dominate the Board s decision making. Currently, the Board consists of three (3) Executive Directors and four (4) Non-Executive Independent Directors, all of whom, collectively, possess the right core competencies and diversity of experience that enable them to effectively contribute to the Board. Their varied experiences are particularly important in ensuring that the strategies proposed by the management are fully discussed and examined, taking into account the long-term interests of the Company, the Group and its shareholders. Independent Members of the Board The Board has four (4) Independent Directors, representing the majority of the Board. They are Mr Seah Kian Peng, Mr Phillip Lee, Mr Michael Seow and Mr Richard Ong. The requirement of the Code that at least one third (1/3) of the Board comprises Independent Directors is satisfied. The criterion for independence is based on the definition set out in the Code. The Board considers an independent Director as one who has no relationship with the Company, its related companies or its officers that could interfere, or be reasonably perceived to interfere, with the exercise of the Director s independent business judgment. The independence of each Director is reviewed annually by the NC. The Independent Directors have confirmed that they do not have any relationship with the Company or its related companies or its officers that could interfere, or be reasonably perceived to interfere, with the exercise of the Directors independent business judgment with a view to the best interests of the Company. The NC has reviewed and determined that the said Directors are independent. Mr Johnny Soon, Mr Jimmy Yong and Mr Yong Yeow Sin are the Executive Directors of the Company. Although all Directors have equal responsibility for the performance of the Group, the role of the Non-Executive Directors is particularly important in ensuring that the strategies proposed by the executive management are fully discussed and rigorously examined, taking into account the long-term interests of the shareholders and the employees, customers and suppliers of the Group. The Board has considered its present size and is satisfied that the current Board size has the appropriate mix of expertise and experience for facilitating effective decision making and is appropriate for the nature and scope of the Group s operations. Each Director has been appointed based on his calibre, experience and stature, and is expected to bring forth his experience and expertise to the Board for the continuous development of the Group. Chairman and Chief Executive Officer Principle 3: There should be a clear division of responsibilities at the top of the company the working of the Board and the executive responsibility of the company s business which will ensure a balance of power and authority, such that no one individual represents a considerable concentration of power. The roles of the Chairman and the Chief Executive Officer ( CEO ) are currently held by Mr Johnny Soon. The Board is of the opinion that it is not necessary to separate the roles of the Chairman and the CEO after taking into account the size, scope and the nature of the operations of the Group together with the strong presence of our Independent Directors. Mr Johnny Soon, being one of the founders of the Group, has played an instrumental role in developing the business of the Group and has provided the Group with strong leadership and vision. It is hence the view of the Board that it is currently in the best interests of the Group to adopt a single leadership structure.

23 CORPORATE GOVERNANCE REPORT 21 The Chairman remains involved in significant corporate matters, especially those of strategic nature. In addition, he is responsible for the effective functioning of the Board and exercises control over the quality, quantity and timeliness of information flow between the Board and the management. The Chairman s responsibilities in respect of Board proceedings include:- (a) (b) scheduling of meetings (with the assistance of the Company Secretary) to enable the Board to perform its duties responsibly while not interfering with the flow of the Group s operations; and assisting in ensuring the Group s compliance with the Code. Annual Report 2012 Although the roles of Chairman of the Board and CEO are not separated, the Board is of the view that there are sufficient safeguards and checks to ensure that the process of decision making by the Board is independent and based on collective decisions without any individual or group of individuals exercising any considerable concentration of power or influence and there is accountability for good corporate governance. All the Board Committees are chaired by Independent Directors and a majority of the Board consists of Independent Directors. For good corporate governance, Mr Seah Kian Peng had been appointed as the Lead Independent Director of the Company. As the Lead Independent Director, he shall be available to address the concerns of the shareholders and employees of the Company and when contact through the normal channels to the Chairman and CEO or the Group Financial Controller has failed to satisfactorily resolve their concerns or for when such contact is considered inappropriate. Board Membership Principle 4: There should be a formal and transparent process for the appointment of new directors to the Board. The NC comprises three (3) Non-Executive Directors, all of whom (including the Chairman) are independent. The NC members are:- 1. Seah Kian Peng (Chairman) 2. Phillip Lee Soo Hoon 3. Richard Ong Beng Chye The Chairman of the NC, Mr Seah Kian Peng is not directly associated 1 with any substantial shareholder of the Company. The responsibilities of the NC include the re-nomination of Directors, taking into consideration the Director s contribution and performance, and also the review of the independence of each Director annually. The NC also considers and makes recommendations to the Board concerning the appropriate size and needs of the Board, having regard to the appropriate skill mix, personal qualities and experience required for effective Board performance. The NC also recommends the appointment and retirement of Directors. In appointing new Directors, the Board considers the range of skills and experience required in the light of:- (a) (b) (c) (d) the geographical spread and diversity of the Group s businesses; the strategic direction and progress of the Group; the current composition of the Board; and the need for independence. 1 A director will be considered directly associated to a substantial shareholder when the director is accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the substantial shareholder.

24 22 CORPORATE GOVERNANCE REPORT Heatec Jietong Holdings Ltd. Where a vacancy arises pursuant to an expansion of the Board or such other circumstances as they may occur, or where it is considered that the Board would benefit from the services of a new Director with particular skills, the NC, in consultation with the Board, determines the selection criteria and identifies candidates with the appropriate expertise and experience for the position. The NC, having assessed each candidate based on the essential and desirable competence for a particular position, will nominate the most suitable candidate for the appointment to the Board. Where a Director has multiple board representations, the NC will evaluate whether or not the Director is able to and has been adequately carrying out his duties as a Director. The NC will then make recommendations to the Board for approval. The evaluation of the Board is conducted annually. As part of the process, the Directors will complete the board performance evaluation forms and the summary of the evaluation will be presented to the NC for review and reported to the Board. The Board s composition is also reviewed annually by the NC to ensure that the Board has the appropriate mix of expertise and experience. The NC is of the view that the current Board comprises persons whose diverse skills, experience and attributes provide for an effective Board. The Board members also collectively possess the necessary core competencies for the effective functioning of the Board and an effective decision-making process. The NC is of the view that the current Board comprises persons who as a group provide capabilities required for the Board to be effective. Article 98 of the Company s Articles provides that at each annual general meeting, at least one third (1/3) of the Directors for the time being shall retire from office by rotation and submit themselves for re-election, provided that all Directors shall retire from office at least once every three (3) years. Article 99 of the Company s Articles provides that the Directors to retire by rotation shall include (so far as necessary to obtain the number required) any Director who is due to retire at the meeting by reason of age or who wishes to retire and not to offer himself for re-election. Any further Directors so to retire shall be those of the other Directors subject to retirement by rotation who have been longest in office since their last re-election or appointment or have been in office for the three (3) years since their last election. However as between persons who became or were last re-elected Directors on the same day, those to retire shall (unless they otherwise agree among themselves) be determined by the drawing of lots. A retiring Director shall be eligible for re-election. The NC recommended to the Board that Mr Yong Yeow Sin, who is retiring by rotation pursuant to Articles 98 and 99 of the Company s Articles, be nominated for re-election at the forthcoming Annual General Meeting of the Company ( AGM ). The NC also recommended to the Board, the re-appointment of Mr Phillip Lee Soo Hoon, who is vacating under Section 153(2) of the Companies Act, Cap. 50 of Singapore (the Act ) at the AGM. Mr Phillip Lee Soon Hoon, of the age of 70 years, will upon re-appointment as a Director of the Company pursuant to Section 153(6) of the Act, remain as a member of the AC and the NC. In making the recommendation, the NC had considered the Directors overall contributions and performance. Mr Phillip Lee Soon Hoon has abstained from making any recommendation and/or participating in any deliberation of the NC in respect of the assessment of his own performance or re-election as a director.

25 CORPORATE GOVERNANCE REPORT 23 As at the date of this report, the members of the Board and their details are set out below:- Date of last Nature of Functions/ Board Committee Academic and professional Directorships or Chairmanships both present and held over last 3 years in other listed companies and other major Name of Director re-election appointment served qualifications appointments Johnny Soon Yeow Kwee 27 April 2011 Executive CEO and Secondary school. - Chairman Jimmy Yong Li Vien 16 April 2012 Executive - Primary school. - Yong Yeow Sin 28 April 2010 Executive - Primary school. - Seah Kian Peng 16 April 2012 Non-Executive/ Member of AC, Bachelor of Building Present Directorship Independent Chairman of (First Class Honours). Skywest Airlines Ltd NC and RC Fellow of Chartered Institute of Marketing. Past Directorship - Phillip Lee Soo Hoon 28 April 2010 Non-Executive/ Member of AC Certified Public Present Directorship Independent and NC Accountant. CSE Global Limited Fellow of the G. K. Goh Holdings Institute of Certified Limited Public Accounts of IPC Corporation Singapore and the Limited Institute of Chartered Kluang Rubber Accountants of Company (Malaya) England and Wales, Berhad UK. Kuchai Development Member of the Berhad Malaysian Association Sungei Bagan of Certified Public Rubber Company Accountants, the (Malaya) Berhad Malaysian Institute Transview Holdings of Accountants and Limited Stanford Club of Singapore. Past Directorship - Michael Seow Teo Tiew 16 April 2012 Non-Executive/ Chairman Bachelor of Law, - Independent of AC and National University of Member of RC Singapore. Annual Report 2012 Richard Ong Beng Chye 27 April 2011 Non-Executive/ Member of AC, Bachelor of Science Present Directorship Independent NC and RC (Economics). Hafary Holdings A fellow of Chartered Limited Accountants of Kitchen Culture England and Wales, Holdings Ltd UK. Geo Energy Member of The Resources Ltd Institute of Chartered Financial Analyst. Past Directorship Non-practising - member of the Institute of Certified Public Accountants of Singapore.

26 24 CORPORATE GOVERNANCE REPORT Heatec Jietong Holdings Ltd. Information of the interests of Directors who held office at the end of the financial year in shares, debentures and share options in the Company and its related corporations (other than the wholly-owned subsidiaries) are set out in the Directors Report on page 32 of this Annual Report. Board Performance Principle 5: There should be a formal assessment of the effectiveness of the Board as a whole and the contribution by each director to the effectiveness of the Board. The Board recognises the merit of having some degree of formal assessment of the effectiveness of the Board as a whole and the contribution by each Director to the effectiveness of the Board. The NC, together with the Board, have considered the guidelines contained in the Code and formulated a plan to evaluate the performance of the Board as a whole as well as using a set of performance criteria. The NC conducts a formal review of the Board performance annually, by way of a board performance evaluation form which is circulated to the Board members for completion, to evaluate and assess the effectiveness of the Board as a whole on the following parameters: (A) (B) (C) (D) (E) (F) Size and composition of the Board; Board s access to information; Appropriateness of Board procedures; Board accountability; Communications with the CEO and top management; and Standard of conduct of Board members. The NC in assessing the contribution of an individual Director, has considered each Director s level of participation and attendance at Board and Board Committee Meetings, his qualification, experience and expertise and the time and effort dedicated to the Group s business and affairs including the management s access to the Directors for guidance or exchange of views as and when necessary. In assessing the effectiveness of the Board as a whole, both quantitative and qualitative criteria are considered. The NC has assessed the current Board s overall performance to-date and is of the view that the performance of the Board as a whole was satisfactory. Although some of the Board members have multiple board representations, the NC is satisfied that sufficient time and attention has been given by the Directors to the Group. The NC will continue to review the formal assessment processes for evaluating Board performance, as well as the contribution of individual Directors to the effectiveness of the Board. Each member of the NC shall abstain from voting on any resolutions in respect of the assessment of his performance or his re-nomination as Director. Access to Information Principle 6: In order to fulfill their responsibilities, Board members should be provided with complete, adequate and timely information prior to board meetings and on an on-going basis. Detailed Board papers are prepared and circulated to the Directors before each Board meeting. The Board papers include sufficient information on financial, business and corporate issues to enable the Directors to be properly briefed on issues to be considered at the Board meetings. However, sensitive matters may be tabled at the meeting itself or discussed without any papers being distributed. Managers who can provide additional insight into the matters at hand would be present at the relevant time during the Board meeting.

27 CORPORATE GOVERNANCE REPORT 25 All Directors have unrestricted access to the Company s records and information. The Directors may also liaise with the senior management as and when required to seek additional information. In addition, the Board also has separate and independent access to the Company s management and the Company Secretary, who is responsible to the Board for ensuring that established procedures and relevant statutes and regulations are complied with. The Company Secretary attends all the Board meetings. The appointment and removal of the Company Secretary is decided by the Board as a whole. Should Directors need to seek independent professional advice concerning any aspect of the Group s operations or undertakings in order to fulfill their duties and responsibilities as Directors, the Board will appoint at the Company s expense, professional adviser(s) to assist such Directors. Annual Report REMUNERATION MATTERS Procedures for Developing Remuneration Policies Principle 7: There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration. The RC comprises three (3) Non-Executive Directors, all of whom (including the Chairman) are independent. The RC members are:- 1. Seah Kian Peng (Chairman) 2. Michael Seow Teo Tiew 3. Richard Ong Beng Chye The RC ensures that a formal and transparent procedure is in place for fixing the remuneration packages of individual Directors and key management executives. The RC reviews and approves recommendations on the remuneration packages for the Chairman and the other Executive Directors based on the performance of the Group and the individual Director. No Director individually decides or is involved in the determination of his own remuneration. The RC also reviews and approves recommendations on remuneration policies and packages for the key executives. The RC s review covers all aspects of remuneration, including but not limited to Directors fees, salaries, allowances, bonuses, and benefits-in-kind. The RC has access to advice from the internal human resource department and, if necessary, external expert advice of which the expenses will be borne by the Company. The RC s recommendations are submitted for endorsement by the Board. The Company has a share option scheme known as Heatec Employee Share Option Scheme (the Heatec ESOS ) and a performance share plan known as Heatec Performance Share Plan (the Performance Share Plan ) which were approved by shareholders of the Company on 18 June The Heatec ESOS and Performance Share Plan comply with the relevant rules as set out in Chapter 8 of the Listing Manual Section B: Rules of Catalist (the Catalist Rules ) of the Singapore Exchange Securities Trading Limited (the SGX-ST ). The Heatec ESOS and Performance Share Plan will provide eligible participants with an opportunity to participate in the equity of the Company and to motivate them towards better performance through increased dedication and loyalty. Both the Heatec ESOS and Performance Share Plan are administered by the RC. Details of the Heatec ESOS and Performance Share Plan were set out in the Company s Offer Document dated 30 June 2009.

28 26 CORPORATE GOVERNANCE REPORT Heatec Jietong Holdings Ltd. Level and Mix of Remuneration Principle 8: The level of remuneration should be appropriate to attract, retain and motivate the directors needed to run the company successfully but companies should avoid paying more than is necessary for this purpose. A significant proportion of executive directors remuneration should be structured so as to link rewards to corporate and individual performance. The Group s remuneration policy is to provide compensation packages at market rates which reward successful performance and to attract, retain and motivate Directors and senior management. The remuneration packages take into account the performance of the Group and the individual Directors. The Non-Executive Independent Directors receive Directors fees in accordance with their contributions. Directors fees for the Non-Executive Independent Directors are proposed by the Executive Directors and reviewed and recommended by the RC, based on the effort and time spent and the responsibilities of the Non-Executive Independent Directors. The total remuneration of the Non-Executive Independent Directors is recommended for shareholders approval at each annual general meeting. The Executive Directors do not receive Directors fees. The remuneration for the Executive Directors comprises a basic salary and a variable component which is the annual bonus. The performance-related component of remuneration is designed to align interests of Executive Directors with those of the shareholders and link rewards to the Group s financial performance. The service agreements dated 8 June 2009 entered into by the Company with the three (3) Executive Directors, namely Mr Johnny Soon, Mr Jimmy Yong and Mr Yong Yeow Sin had expired on 31 December These service agreements had been renewed with each of the aforementioned Executive Directors on 16 March 2012, for a period of three (3) years from 1 January 2012, under the same terms and conditions, save for certain terms under the profit sharing incentive scheme. Disclosure on Remuneration Principle 9: Each company should provide clear disclosure of its remuneration policy, level and mix of remuneration, and the procedure for setting remuneration in the company s annual report. It should provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to directors and key executives, and performance. Details of remuneration and fees paid to the Directors and key executives for FY2012 are set out below:- Remuneration Band Number of Directors Number of Key Executives (who are not Directors) S$500,000 and above - - S$250,000 to below S$500, Below S$250, Total 4 7

29 CORPORATE GOVERNANCE REPORT 27 A summary compensation table of the Directors remuneration for FY2012 is set out below:- Name of Director Salary (%) Bonus (%) Fee (%) Allowances and other benefits (%) Total (%) Johnny Soon Yeow Kwee Jimmy Yong Li Vien Yong Yeow Sin Seah Kian Peng Phillip Lee Soo Hoon Michael Seow Teo Tiew Richard Ong Beng Chye Annual Report 2012 The remuneration of the top five (5) key executives (excluding Executive Directors) of the Group for FY2012 is set out below:- Name of Key Executive Salary (%) Bonus (%) Allowances and other benefits (%) Total (%) Foo Quek Cheng Koh Lay Cheng Soon Jeffrey Soon Jenson Wong Chow Yew Resigned with effect from 15 March 2013 The RC will review the remuneration of the Directors and the key executives from time to time. There were no employees who are immediate family members of a Director and the CEO whose remuneration exceeds S$150,000 in FY2012. Immediate family means the spouse, child, adopted child, step-child, brother, sister and parent. As at the date of this report, the Company has not granted any options under the Heatec ESOS nor awarded any shares under the Performance Share Plan since the date of approval of the Heatec ESOS and Performance Share Plan respectively. The Heatec ESOS and Performance Share Plan are administered by the RC. 3. ACCOUNTABILITY AND AUDIT Accountability Principle 10: The Board should present a balanced and understandable assessment of the company s performance, position and prospects. In presenting the annual financial statements and half-year and full-year financial result announcements to shareholders of the Company, it is the aim of the Board to provide the shareholders with a balanced assessment of the Group s performance, position and prospects. The management currently provides the Executive Directors with detailed management accounts of the Group performance, position and prospects on a regular basis. Non-Executive Independent Directors are also briefed on significant matters when required and will receive management reports on a half-yearly basis.

30 28 CORPORATE GOVERNANCE REPORT Heatec Jietong Holdings Ltd. Audit Committee Principle 11: The Board should establish an Audit Committee ( AC ) with written terms of reference which clearly set out its authority and duties. The AC comprises four (4) Non-Executive Directors, all of whom (including the Chairman) are independent. The AC members are:- 1. Michael Seow (Chairman) 2. Seah Kian Peng 3. Phillip Lee Soo Hoon 3. Richard Ong Beng Chye The Board is of the view that the members of the AC are appropriately qualified to discharge their responsibilities. The AC meets periodically with the Group s external auditors to review accounting, auditing and financial reporting matters so as to ensure that an effective control environment is maintained in the Group. The duties of the AC includes: (a) (b) (c) (d) (e) (f) (g) reviews and evaluates financial and operating results and accounting policies; reviews the audit plans and scope of audit examination of the external audit; reviews the annual and interim financial statements and announcements before submission to the Board for adoption; reviews interested person transactions falling within the scope of Chapter 9 of the Catalist Rules; considers the appointment/re-appointment of external auditors; examine the scope of internal audit procedures and the results of the internal audit; and review the adequacy of the Company s internal financial controls, operational and compliance controls, and ensure that a review of the effectiveness of the Company s internal controls is conducted at least annually and such a review can be carried out by the internal and/or external auditors. The AC is also tasked to conduct an annual review of the independence of external auditors and the total fees for non-audit compared with audit services to satisfy itself that the nature and volume of non-audit services will not prejudice the independence and objectivity of the external auditors before confirming their re-nomination. There were no non-audit services provided to the Group by the external auditors, Deloitte & Touche LLP in FY The AC is pleased to recommend their re-appointment at the forthcoming AGM. The Company confirms that it is in compliance with Rules 712 and 715 of the Catalist Rules in relation to its external auditors. The AC has full access to the management and also full discretion to invite any Director or executive officer to attend its meetings. The AC meets with the internal and external auditors, without the presence of the Company s management as recommended by the Code at least once a year. The AC has reasonable resources to enable it to discharge its functions properly. The Company has implemented a Whistle Blowing Policy which provides the mechanism for which staff of the Company may in confidence, raise concerns about possible improprieties. The AC oversees the administration of the policy. Periodic reports will be submitted to the AC stating the number and the complaints received, the results of the investigations, follow-up actions and unresolved complaints.

31 CORPORATE GOVERNANCE REPORT 29 Internal Controls Principle 12: The Board should ensure that the Management maintains a sound system of internal controls to safeguard the shareholders investments and the company s assets. The Board acknowledges that it is responsible for the Company s overall internal control framework, but recognises that no cost effective internal control system will preclude all errors and irregularities, as a system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can provide only reasonable and not absolute assurance against material misstatement or loss. Annual Report 2012 The AC has reviewed, with the assistance of the internal and external auditors and the finance team of the Company, the effectiveness of the Company s material internal controls, including operational controls. Based on the review and concurrence of the AC, the Board is of the view that, in the absence of any evidence to the contrary and from due enquiries, the system of internal controls maintained by the Company s management that was in place throughout the financial year under review and up to the date of this Report, is adequate to meet the needs of the Group in its current business environment. The Board will review periodically the effectiveness of all internal controls, including operational controls and compliance risks. Based on the internal controls established and maintained by the Group, work performed by the internal and external auditors, and reviews performed by the management, various Board committees and the Board, the Board, with the concurrence of the AC, is of the opinion that the Group s internal controls, addressing financial, operational and compliance risks were adequate as at 31 December Internal Audit Principle 13: The Company should establish an internal audit function that is independent of the activities it audits. The internal audit function of the Company is outsourced to RSM Ethos Pte. Ltd. The internal auditors report to the AC on audit matters and the AC is empowered to review any of the accounting, auditing and financial practices of the Company. The internal auditors will submit their annual audit plan for approval by the AC and report their findings to the AC. In FY2012, the internal auditors carried out the review on certain key areas to assess and evaluate:- (a) (b) (c) whether adequate systems of internal controls are in place; whether operations of the business processes under review are conducted efficiently and effectively; and internal control improvement opportunities. The AC has reviewed with the internal auditors their audit plan and their evaluation of the system of internal controls, and has evaluated their audit findings and management s responses to those findings; the effectiveness of material internal controls, including financial, operational and compliance controls and overall risk management of the Company and the Group for FY2012. As such, the AC is satisfied that the internal audit is adequately resourced and has the appropriate standing within the Group. The annual audits conducted by the internal auditors aim to assess the effectiveness of the Group s internal control procedures and to provide reasonable assurances to the AC and the management that the Group s risk management, controls and governance processes are adequate and effective.

32 30 CORPORATE GOVERNANCE REPORT Heatec Jietong Holdings Ltd. 4. COMMUNICATION WITH SHAREHOLDERS Principle 14: Principle 15: Companies should engage in regular, effective and fair communication with shareholders. Companies should encourage greater shareholder participation at AGMs, and allow shareholders the opportunity to communicate their views on various matters affecting the company. The Company believes in timely and accurate dissemination of information to its shareholders. The Board makes every effort to comply with continuous disclosure obligations of the Company under the Catalist Rules and the Act. Where there is inadvertent disclosure made to a selected group, the Company will make the same disclosure publicly as soon as practicable. Communication to shareholders is normally made through:- (a) (b) (c) (d) (e) annual reports that are prepared and issued to all shareholders; annual and half-yearly financial results containing a summary of the financial information and affairs of the Group for the period; notices and explanatory memoranda for general meetings; disclosures to the SGX-ST via SGXNET; and press releases. In addition, shareholders are encouraged to attend the annual general meetings to ensure a high level of participation and accountability. The annual general meeting is the principal forum for dialogue with shareholders. The Company recognises the value of feedback from shareholders. During the annual general meetings, shareholders are given ample time and opportunities to air their views and concerns. All the Directors will endeavour to attend the annual general meetings and extraordinary general meetings, and shareholders will be given the chance to share their thoughts and ideas or ask questions relating to the resolutions to be passed or on other corporate and business issues. The Company s management, the Chairmen of the AC, RC and NC as well as the external auditors will be present and on hand to address all issues raised by shareholders at such general meetings. The Company allows members to appoint not more than two (2) proxies to attend and vote at general meetings, as required under Section 181 of the Act and Article 77 of the Company s Articles. Separate resolutions are proposed at general meetings for each distinct issue. 5. INTERESTED PERSON TRANSACTIONS The Company has established procedures to ensure that all transactions with interested persons are reported in a timely manner to the AC and that the transactions are conducted at arms length basis and will not be prejudicial to the interests of the Company and its minority shareholders. The Company confirms that there were no interested person transactions of S$100,000 or more during FY MATERIAL CONTRACTS There were no material contracts (including loans) entered into by the Company or any of its subsidiaries involving the interests of the CEO, any Director or controlling shareholder which are either still subsisting as at the end of FY2012 or if not then subsisting, entered into since the end of the previous financial year.

33 CORPORATE GOVERNANCE REPORT DEALINGS IN SECURITIES In line with Rule 1204(19) of the Catalist Rules, the Company has issued an internal compliance code relating to dealing in securities of the Company to Directors and employees (including employees with access to price sensitive, financial or confidential information) of the Group and which sets out the implications of insider trading and guidance on such dealings. Directors and employees are expected to observe insider trading laws at all times. Further, Directors and employees (including employees with access to price sensitive, financial or confidential information) are not permitted to deal in the Company s shares during the periods commencing one (1) month before the announcement of the Group s annual or half-yearly financial results and ending on the date of announcement of such results, or when they are in possession of unpublished price-sensitive information on the Group. In addition, Directors and employees (including employees with access to price sensitive, financial or confidential information) have also been discouraged from dealing in the Company s shares on short term considerations. Annual Report NON-SPONSOR FEES No non-sponsor fees were paid to the Company s sponsor, PrimePartners Corporate Finance Pte. Ltd., in FY AUDIT AND NON-AUDIT FEES The amount of audit fees paid to the external auditors of the Company in FY2012 is S$159,000. There were no non-audit fees paid to the external auditors of the Company in FY2012.

34 32 REPORT OF DIRECTORS Heatec Jietong Holdings Ltd. The directors present their report together with the audited consolidated financial statements of the Group and statement of financial position and statement of changes in equity of the Company for the financial year ended December 31, DIRECTORS The directors of the Company in office at the date of this report are: Johnny Soon Yeow Kwee Jimmy Yong Li Vien Yong Yeow Sin Seah Kian Peng Phillip Lee Soo Hoon Michael Seow Teo Tiew Richard Ong Beng Chye 2 ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE BENEFITS BY MEANS OF THE ACQUISITION OF SHARES AND DEBENTURES Neither at the end of the financial year nor at any time during the financial year did there subsist any arrangement whose object is to enable the directors of the Company to acquire benefits by means of the acquisition of shares or debentures in the Company or any other body corporate. 3 DIRECTORSʼ INTERESTS IN SHARES AND DEBENTURES The directors of the Company holding office at the end of the financial year had no interests in the share capital and debentures of the Company and related corporations as recorded in the register of directorsʼ shareholdings kept by the Company under Section 164 of the Singapore Companies Act except as follows: Shareholdings in Shareholdings registered which directors are in name of director deemed to have an interest Name of directors and companies At beginning At end At beginning At end in which interests are held of year of year of year of year Heatec Jietong Holdings Ltd. Ordinary shares Ordinary shares Johnny Soon Yeow Kwee 9,530,146 9,530,146 57,928,438 (1) 57,928,438 (1) Jimmy Yong Li Vien 9,530,146 9,530,146 57,928,438 (1) 57,928,438 (1) Yong Yeow Sin 9,530,146 9,530,146 57,928,438 (1) 57,928,438 (1) Richard Ong Beng Chye 2,148,445 2,148, (1) The directors are deemed interested in the shares held by: (a) Armstrong Holdings of 53,112,360 (December 31, 2011 : 53,112,360) shares, of which the directors have an interest; (b) their individual spouseʼs shares of 4,816,078 (December 31, 2011 : 4,816,078). By virtue of Section 7 of the Singapore Companies Act, Mr Jimmy Yong Li Vien, Mr Yong Yeow Sin, Mr Johnny Soon Yeow Kwee are deemed to have an interest in the Company and all the related corporations of the Company. The directorsʼ interests in the shares of the Company at January 21, 2013 were the same at December 31, 2012.

35 REPORT OF DIRECTORS 33 4 DIRECTORSʼ RECEIPT AND ENTITLEMENT TO CONTRACTUAL BENEFITS Since the beginning of the financial year, no director has received or become entitled to receive a benefit which is required to be disclosed under Section 201(8) of the Singapore Companies Act, by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest except for salaries, bonuses and other benefits as disclosed in the financial statements. Annual Report SHARE OPTIONS (a) Options to take up unissued shares The Company has adopted the Heatec Employee Share Option Scheme (the Scheme ) and the Heatec Performance Share Plan which were approved by the shareholders at an Extraordinary General Meeting held on June 18, During the financial year, no options have been granted under the Scheme and no performance shares have been awarded under the Heatec Performance Share Plan. (b) Options exercised During the financial year, there were no shares of the Company or any corporation in the Group issued by virtue of the exercise of an option to take up unissued shares. (c) Unissued shares under option At the end of the financial year, there were no unissued shares of the Company or any corporation in the Group under option. 6 AUDIT COMMITTEE The Audit Committee of the Company, consisting all independent non-executive directors, is chaired by Mr Michael Seow Teo Tiew, and includes Mr Seah Kian Peng, Mr Philip Lee Soo Hoon and Mr Richard Ong Beng Chye. The Audit Committee has met two times since the last Annual General Meeting ( AGM ) and has reviewed the following, where relevant, with the executive directors and external and internal auditors of the Company: (a) (b) (c) (d) (e) (f) (g) (h) the audit plans and scope of audit examination of the external audit; the Groupʼs financial and operating results and accounting policies; the half-yearly and annual announcements as well as the related press releases on the results and financial position of the Company and the Group before submission to the Board for adoption; the co-operation and assistance given by the management to the Groupʼs external auditors; the review of interested person transactions falling within the scope of Chapter 9 of the Catalist Rules; the scope of internal audit procedures and the results of the internal audit; the review of adequacy of the Companyʼs internal financial controls, operational and compliance controls, and ensure that a review of the effectiveness of the Companyʼs internal controls is conducted at least annually and such a review can be carried out by the internal auditor and/or external auditors; and the re-appointment of the external auditors of the Group.

36 34 REPORT OF DIRECTORS Heatec Jietong Holdings Ltd. 6 AUDIT COMMITTEE (contʼd) The Audit Committee has full access to and has the co-operation of the management and has been given the resources required for it to discharge its function properly. It also has full discretion to invite any director and executive officer to attend its meetings. The external and internal auditors have unrestricted access to the Audit Committee. The Audit Committee has recommended to the directors the nomination of Deloitte & Touche LLP for re-appointment as external auditors of the Group at the forthcoming AGM of the Company. 7 AUDITORS The auditors, Deloitte & Touche LLP, have expressed their willingness to accept re-appointment. ON BEHALF OF THE DIRECTORS Johnny Soon Yeow Kwee Yong Yeow Sin March 19, 2013

37 STATEMENT OF DIRECTORS 35 In the opinion of the directors, the consolidated financial statements of the Group and the statement of financial position and statement of changes in equity of the Company as set out on pages 37 to 85 are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at December 31, 2012, and of the results, changes in equity and cash flows of the Group and changes in equity of the Company for the financial year then ended and at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts when they fall due. Annual Report 2012 ON BEHALF OF THE DIRECTORS Johnny Soon Yeow Kwee Yong Yeow Sin March 19, 2013

38 36 INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF HEATEC JIETONG HOLDINGS LTD. Heatec Jietong Holdings Ltd. Report on the Financial Statements We have audited the accompanying financial statements of Heatec Jietong Holdings Ltd. (the Company ) and its subsidiaries (the Group ) which comprise the statements of financial position of the Group and the Company as at December 31, 2012, and the income statement, statement of comprehensive income, statement of changes in equity and statement of cash flows of the Group and the statement of changes in equity of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 37 to 85. Managementʼs Responsibility for the Financial Statements Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Singapore Companies Act (the Act ) and Singapore Financial Reporting Standards and for devising and maintaining a system of internal accounting controls sufficient to provide reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets. Auditorsʼ Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditorʼs judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entityʼs preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entityʼs internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements of the Group and the statement of financial position and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at December 31, 2012 and of the results, changes in equity and cash flows of the Group and changes in equity of the Company for the financial year ended on that date. Report on Other Legal and Regulatory Requirements In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act. Deloitte & Touche LLP Public Accountants and Certified Public Accountants Singapore March 19, 2013

39 STATEMENTS OF FINANCIAL POSITION December 31, ASSETS Group Company Note $ $ $ $ Non-current assets Property, plant and equipment 6 9,493,529 11,595,750 1,327,239 - Subsidiaries ,623,614 6,623,614 Associates 8 1,658,482 2,087, Available-for-sale investment 9 275,810 13, Long-term fixed deposits , Deferred tax assets , , Total non-current assets 11,927,823 14,488,834 7,950,853 6,623,614 Annual Report 2012 Current assets Inventories 10 1,171,355 1,422, Trade receivables 11 21,439,248 29,425, Other receivables 13 1,716,535 1,630,351 3,491,152 3,862,949 Cash and bank balances 14 2,600,518 3,454, , ,851 26,927,656 35,931,731 3,664,242 4,217,800 Non-current assets held-for-sale 15 2,055, ,982,863 35,931,731 3,664,242 4,217,800 Total assets 40,910,686 50,420,565 11,615,095 10,841,414 EQUITY AND LIABILITIES Capital and reserves Share capital 16 11,368,567 11,368,567 11,368,567 11,368,567 Reserves 9,000,269 10,340,132 (767,220) (801,040) Equity attributable to owners of the Company 20,368,836 21,708,699 10,601,347 10,567,527 Non-controlling interests 986,388 2,878, Total equity 21,355,224 24,586,994 10,601,347 10,567,527 Non-current liabilities Bank loans ,066 1,927, Finance leases ,470 1,443, Deferred tax liabilities , , Total non-current liabilities 1,945,408 4,011, Current liabilities Bank overdrafts and loans 17 7,617,355 9,284, Trade payables 20 3,445,790 4,222,135-41,917 Other payables 21 5,343,835 7,231,860 1,013, ,970 Current portion of finance leases 18 1,128,362 1,038, Income tax payable 74,712 44, Total current liabilities 17,610,054 21,821,925 1,013, ,887 Total equity and liabilities 40,910,686 50,420,565 11,615,095 10,841,414 See accompanying notes to financial statements.

40 38 CONSOLIDATED INCOME STATEMENT Financial year ended December 31, 2012 Heatec Jietong Holdings Ltd. Group Note $ $ Revenue 22 35,154,341 37,133,998 Cost of sales (25,672,142) (30,855,001) Gross profit 9,482,199 6,278,997 Other operating income , ,764 Administrative expenses (9,984,541) (10,218,186) Other operating expenses 24 (1,803,119) (1,278,616) Share of (loss) profit of associates 8 (284,410) 171,004 Finance costs 25 (647,058) (591,002) Loss before income tax (2,827,662) (5,113,039) Income tax (expense) benefit 26 (166,678) 885,656 Loss for the year 27 (2,994,340) (4,227,383) Loss attributable to: Owners of the Company (2,549,557) (3,561,361) Non-controlling interests (444,783) (666,022) (2,994,340) (4,227,383) Basic and diluted loss per share (cents) 28 (2.10) (2.94) See accompanying notes to financial statements.

41 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Financial year ended December 31, Group Note $ $ Loss for the year 27 (2,994,340) (4,227,383) Other comprehensive (loss) income: Annual Report 2012 Exchange differences on translation of foreign operations (92,032) 42,257 Revaluation surplus of plant and equipment - 229,570 Available-for-sale investment 1,700 - Other comprehensive (loss) income for the year, net of tax (90,332) 271,827 Total comprehensive loss for the year (3,084,672) (3,955,556) Total comprehensive loss attributable to: Owners of the Company (2,639,889) (3,289,534) Non-controlling interests (444,783) (666,022) (3,084,672) (3,955,556) See accompanying notes to financial statements.

42 40 Heatec Jietong Holdings Ltd. STATEMENTS OF CHANGES IN EQUITY Financial year ended December 31, 2012 Attributable to equity Non Share Revaluation Other Translation Merger Retained holders of controlling Note capital reserve reserve reserve reserve earnings the Company interests Total $ $ $ $ $ $ $ $ $ (Note 30) Group Balance at January 1, ,368,567 1,006,245 - (57,540) (3,913,614) 18,582,300 26,985, ,287 27,300,245 Total comprehensive income (loss) for the year - 229,570-42,257 - (3,561,361) (3,289,534) (666,022) (3,955,556) Effect of put option liability from acquisition of subsidiaries (1,078,820) (1,078,820) - (1,078,820) Non-controlling interests arising from acquisition of subsidiaries ,230,030 3,230,030 Transfer - (188,588) , Dividends (908,905) (908,905) - (908,905) Balance at December 31, ,368,567 1,047,227 (1,078,820) (15,283) (3,913,614) 14,300,622 21,708,699 2,878,295 24,586,994 Total comprehensive income (loss) for the year - 1,700 - (92,032) - (2,549,557) (2,639,889) (444,783) (3,084,672) Effect of exercising put option from acquisition of subsidiaries - - 1,078, ,078,820 (1,078,820) - Acquisition of additional interests in subsidiaries , ,206 (221,206) - Dividends paid to non-controlling shareholders (147,098) (147,098) Balance at December 31, ,368,567 1,048, ,206 (107,315) (3,913,614) 11,751,065 20,368, ,388 21,355,224

43 STATEMENTS OF CHANGES IN EQUITY Financial year ended December 31, Company Retained earnings Share (Accumulated Capital loss) Total $ $ $ Balance at January 1, ,368, ,026 11,851,593 Annual Report 2012 Total comprehensive loss for the year - (375,161) (375,161) Dividends (Note 29) - (908,905) (908,905) Balance at December 31, ,368,567 (801,040) 10,567,527 Total comprehensive income for the year - 33,820 33,820 Balance at December 31, ,368,567 (767,220) 10,601,347 See accompanying notes to financial statements.

44 42 CONSOLIDATED STATEMENT OF CASH FLOWS Financial year ended December 31, 2012 Heatec Jietong Holdings Ltd. Group $ $ Operating activities Loss before income tax (2,827,662) (5,113,039) Adjustments for: Interest income (37,671) (44,721) Interest expenses 647, ,002 Dividend income from available-for-sale investment (740) - Allowance for doubtful debts 400,605 34,495 (Reversal) Allowance for sales discount (544,806) 2,533,918 Bad debts written off - 12,937 Depreciation of property, plant and equipment 1,031,158 1,214,665 Plant and equipment written off (Note A) 5, (Gain) Loss on disposal of property, plant and equipment (3,138) 144,432 Revaluation loss on plant and equipment - 1,084,109 Impairment loss on plant and equipment 1,250,000 - Share of loss (profit) of associates 284,410 (171,004) Bargain purchase (Note 32) - (466,087) Impairment loss on available-for-sale investment - 2,410 Impairment loss on investment in an associate company 47,940 - Unrealised exchange differences (15,818) 27,199 Provision for foreseeable losses 18,813 - Gain on settlement of payable (113,731) - Operating cash flows before movements in working capital 141,767 (149,451) Trade and other receivables 8,056, ,437 Inventories 250,782 (261,239) Trade and other payables (1,450,619) (1,497,969) Cash from (used in) operations 6,998,263 (1,027,222) Interest received 37,671 44,721 Interest paid (647,058) (591,002) Income tax paid (85,536) (571,156) Net cash from (used in) operating activities 6,303,340 (2,144,659) Investing activities Purchase of property, plant and equipment (Note B) (2,044,215) (613,651) Proceeds from disposal of property, plant and equipment 6, ,953 Purchase of available-for-sale investment (260,500) - Acquisition of subsidiaries (Note 32) - 445,950 Dividend received from available-for-sale investment Dividends received from an associate 66,947 50,763 Net cash used in investing activities (2,230,122) (11,985)

45 CONSOLIDATED STATEMENT OF CASH FLOWS Financial year ended December 31, Group $ $ Financing activities Decrease (Increase) in pledged fixed deposit 13,946 (381,148) Acquisition of additional interests in subsidiaries (1,078,820) - Dividends paid to non-controlling shareholders (147,098) (908,905) Proceeds from bank loans 1,300,000 1,300,000 Repayments of bank loans (1,114,302) (614,010) Net proceeds from factoring loans (2,776,572) 624,992 Repayment of finance leases (1,085,449) (1,030,364) Net cash used in financing activities (4,888,295) (1,009,435) Annual Report 2012 Net decrease in cash and cash equivalents (815,077) (3,166,079) (Overdrafts) Cash and cash equivalents at beginning of the year (414,809) 2,746,264 Effect of exchange rate changes on the balance of cash held in foreign currencies (23,162) 5,006 Net overdrafts at end of the year (1,253,048) (414,809) Cash at bank (Note 14) 1,834,840 2,408,175 Fixed deposits (Note 14) 765,678 1,224,367 Sub-total 2,600,518 3,632,542 Fixed deposit pledged as a collateral for overdraft loan (477,373) (491,319) Bank overdrafts (Note 17) (3,376,193) (3,556,032) Net overdrafts (1,253,048) (414,809) Note A: In 2012, the Group returned the plant and equipment with cost of $21,200 to supplier which offset with amount payable to the supplier. Note B: In 2012, the Group acquired property, plant and equipment with an aggregate cost of $2,287,892 of which $243,667 was acquired by means of finance leases. Cash payments of $2,044,215 were made to purchase such property, plant and equipment. See accompanying notes to financial statements.

46 44 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, 2012 Heatec Jietong Holdings Ltd. 1 GENERAL The Company (Registration No Z) is incorporated in Singapore with its principal place of business and registered office at 18 Tuas Avenue 18A, Singapore The Company is listed on Catalist of the Singapore Exchange Securities Trading Limited. The financial statements are expressed in Singapore dollars. The principal activity of the Company is to carry on the business of an investment holding company. The principal activities of the subsidiaries are disclosed in Note 7 to the financial statements. The consolidated financial statements of the Group and statement of financial position and statement of changes in equity of the Company for the financial year ended December 31, 2012 were authorised for issue by the Board of Directors on March 19, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING - The financial statements have been prepared in accordance with the historical cost convention as disclosed in the accounting policies below, and are drawn up in accordance with the provisions of the Singapore Companies Act and Singapore Financial Reporting Standards ( FRS ). ADOPTION OF NEW AND REVISED STANDARDS On January 1, 2012, the Group adopted all the new and revised FRSs and Interpretations of FRS ( INT FRS ) that are effective from that date and are relevant to its operations. The adoption of these new/revised FRSs and INT FRSs does not result in changes to the Groupʼs and Companyʼs accounting policies and has no material effect on the amounts reported for the current or prior years. At the date of authorisation of these financial statements, the following FRSs and amendments to FRS that are relevant to the Group and the Company were issued but not effective: Amendments to FRS 1 Presentation of Financial Statements Amendments relating to Presentation of Items of Other Comprehensive Income FRS 27 Revised Separate Financial Statements FRS 28 (Revised) Investments in Associates and Joint Ventures FRS 110 Consolidated Financial Statements FRS 112 Disclosure of Interests in Other Entities FRS 113 Fair Value Measurement Annual Improvements to FRS 2012 Consequential amendments were also made to various standards as a result of these new/revised standards. The management anticipates that the adoption of the above FRSs and amendments to FRS in future periods will not have a material impact on the financial statements of the Group and of the Company in the period of their initial adoption, except for the following: Amendments to FRS 1 Presentation of Financial Statements - Amendments relating to Presentation of Items of Other Comprehensive Income ( OCI ) The amendment on Other Comprehensive Income ( OCI ) presentation will require the Group to present in separate groupings, OCI items that might be recycled i.e., reclassified to profit or loss (e.g., those arising from cash flow hedging, foreign currency translation) and those items that would not be recycled (e.g. revaluation gains on property, plant and equipment under the revaluation model). The tax effects recognised for the OCI items would also be captured in the respective grouping, although there is a choice to present OCI items before tax or net of tax. Changes arising from these amendments to FRS 1 will take effect from financial years beginning on or after July 1, 2012, with full retrospective application. When the entity adopts the amendments, it will have to present revaluation gains on property, plant and equipment and the corresponding tax effects separately from other OCI items that might be recycled to profit or loss.

47 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (contʼd) FRS 112 Disclosure of Interests in Other Entities FRS 112 requires an entity to provide more extensive disclosures regarding the nature of and risks associated with its interest in subsidiaries, associates, joint arrangements and unconsolidated structured entities. FRS 112 will take effect from financial years beginning on or after January 1, 2014, and the Group is currently estimating extent of additional disclosures needed. Annual Report 2012 FRS 113 Fair Value Measurement FRS 113 is a single new standard that applies to both financial and non-financial items. It replaces the guidance on fair value measurement and related disclosures in other Standards, with the exception of measurement dealt with under FRS 102 Share-based Payment, FRS 17 Leases, net realisable value in FRS 2 Inventories and value-in-use in FRS 36 Impairment of Assets. FRS 113 provides a common fair value definition and hierarchy applicable to the fair value measurement of assets, liabilities, and an entityʼs own equity instruments within its scope, but does not change the requirements in other Standards regarding which items should be measured or disclosed at fair value. The disclosure requirements in FRS 113 are more extensive than those required by the current standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only under FRS 107 Financial Instruments: Disclosures will be extended by FRS 113 to cover all assets and liabilities within its scope. FRS 113 will be effective prospectively from annual periods beginning on or after January 1, Comparative information is not required for periods before initial application. The management anticipates that the application of FRS 113 may affect certain amounts reported in the financial statements and result in more extensive disclosures in the financial statements BASIS OF CONSOLIDATION - The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. Non-controlling interests in subsidiaries are identified separately from the Groupʼs equity therein. The interest of non-controlling shareholders that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation may be initially measured (at date of original business combination) either at fair value or at the non-controlling interestsʼ proportionate share of the fair value of the acquireeʼs identifiable net assets. The choice of measurement basis is made on an acquisition-by-acquisition basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another FRS. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interestsʼ share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.

48 46 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, 2012 Heatec Jietong Holdings Ltd. 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (contʼd) Changes in the Groupʼs interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the Groupʼs interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the noncontrolling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the company. In the Companyʼs financial statements, investments in subsidiaries and associates are carried at cost less any impairment in net recoverable value that has been recognised in profit or loss. BUSINESS COMBINATIONS The acquisition of subsidiaries under common control is accounted for using the merger accounting method. Under this method, the Company has been treated as the holding company of the subsidiaries for the financial years presented rather than from the date of acquisition of the subsidiaries. The acquisition of subsidiaries from a party other than common control shareholders is accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the acquisition date fair values of assets given, liabilities incurred by the Group to the former owners of the acquiree, and equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred. Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments (see below). The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with FRS 39 Financial Instruments: Recognition and Measurement, or FRS 37 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognised in profit or loss. Where a business combination is achieved in stages, the Groupʼs previously held interests in the acquired entity are remeasured to fair value at the acquisition date (i.e. the date the Group attains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of. The acquireeʼs identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under the FRS are recognised at their fair value at the acquisition date, except that: deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with FRS 12 Income Taxes and FRS 19 Employee Benefits respectively; liabilities or equity instruments related to share-based payment transactions of the acquiree or the replacement of an acquireeʼs share-based payment awards transactions with share-based payment awards transactions of the acquirer in accordance with the method in FRS 102 Share-based Payment at the acquisition date; and assets (or disposal groups) that are classified as held for sale in accordance with FRS 105 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see below), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date.

49 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (contʼd) The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and circumstances that existed as of the acquisition date and is subject to a maximum of one year from acquisition date. The accounting policy for initial measurement of non-controlling interests is described above. The policy described above is applied to all business combinations that take place on or after January 1, Annual Report 2012 FINANCIAL INSTRUMENTS - Financial assets and financial liabilities are recognised on the Groupʼs statement of financial position when the Group becomes a party to the contractual provisions of the instrument. Effective interest method The effective interest method is a method of calculating the amortised cost of a financial instrument and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial instrument, or where appropriate, a shorter period. Income and expense is recognised on an effective interest rate basis for debt instruments. Financial assets Available-for-sale investment Certain shares held by the Group are classified as being available for sale and are stated at fair value. Fair value is determined in the manner described in Note 4. Gains and losses arising from changes in fair value are recognised in other comprehensive income with the exception of impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets which are recognised directly in profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in other comprehensive income and accumulated in revaluation reserve is reclassified to profit or loss. Dividends on available-for-sale equity instruments are recognised in profit or loss when the Groupʼs right to receive payments is established. The fair value of available-for-sale monetary assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at end of the reporting period. The change in fair value attributable to translation differences that result from a change in amortised cost of the asset is recognised in profit or loss, and other changes are recognised in other comprehensive income. Trade and other receivables Trade and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest method, except for shortterm receivables when the recognition of interest would be immaterial. Impairment of financial assets Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been impacted. For available-for-sale equity instruments, a significant or prolonged decline in fair value of the investment below its cost is considered to be objective evidence of impairment.

50 48 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, 2012 Heatec Jietong Holdings Ltd. 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (contʼd) For all other financial assets, objective evidence of impairment could include: significant financial difficulty of the issuer or counterparty; or default or delinquency in interest or principal payments; or it becoming probable that the borrower will enter bankruptcy or financial re-organisation. For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Groupʼs past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 60 to 90 days, as well as observable changes in national or local economic conditions that correlate with default on receivables. For financial assets carried at amortised cost, the amount of the impairment is the difference between the assetʼs carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognised in other comprehensive income are reclassified to profit or loss. With the exception of equity availablefor-sale instruments, 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 loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. In respect of available-for-sale equity instruments, impairment losses previously recognised in profit or loss are not reversed through profit or loss. Any subsequent increase in fair value after an impairment loss is recognised in other comprehensive income. Derecognition of financial assets The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. Financial liabilities and equity instruments Classification as debt or equity Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of the liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs.

51 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (contʼd) Other financial liabilities Trade and other payables are initially measured at fair value, net of transaction costs, and are subsequently measured at amortised cost, using the effective interest method, with interest expense recognised on an effective yield basis. Interest-bearing bank loans and overdrafts are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the Groupʼs accounting policy for borrowing costs. Annual Report 2012 Financial guarantee contract liabilities are measured initially at their fair values and, if not designated as at fair value through profit or loss, subsequently at the higher of the amount of obligation under the contract recognised as a provision in accordance with FRS 37 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less cumulative amortisation in accordance with FRS 18 Revenue. Derecognition of financial liabilities The Group derecognises financial liabilities when, and only when, the Groupʼs obligations are discharged, cancelled or they expire. Derivative financial instruments Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss immediately. Further details of derivative financial instruments are disclosed in Note 34 to the financial statements. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 12 months. LEASES - Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. The Group as lessee Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to profit or loss. Contingent rentals are recognised as expenses in the periods in which they are incurred. Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

52 50 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, 2012 Heatec Jietong Holdings Ltd. 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (contʼd) NON-CURRENT ASSETS HELD FOR SALE - Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification. Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell. INVENTORIES - Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using first-in first-out method. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. PROPERTY, PLANT AND EQUIPMENT Certain plant and equipment are stated in the statement of financial position at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the end of the reporting period. Any revaluation increase arising on the revaluation of such plant and equipment is recognised in other comprehensive income and accumulated in revaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset previously recognised in profit or loss, in which case the increase is credited to profit or loss to the extent of the decrease previously charged. A decrease in carrying amount arising on the revaluation of such plant and equipment is charged to profit or loss to the extent that it exceeds the balance, if any, held in the revaluation reserve relating to a previous revaluation of that asset. Building in the course of construction for production, supply or administrative purposes are carried at cost, less any recognised impairment loss. Cost includes professional fees and for qualifying assets, borrowing costs capitalised in accordance with the Groupʼs accounting policy. Depreciation of these assets commences when the assets are ready for their intended use. Leasehold properties and other plant and equipment are stated at cost, less accumulated depreciation and any accumulated impairment losses where the recoverable amount of the asset is estimated to be lower than its carrying amount. Depreciation is charged so as to write off the cost or valuation of assets over their estimated useful lives, using the straight-line method, on the following bases: Leasehold properties - 1.8% to 2% Plant and equipment % to 33% Motor vehicles - 10% to 20% Renovation - 10% The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis. Fully depreciated property, plant and equipment still in use are retained in the financial statements. Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, if there is no certainty that the lessee will obtain ownership by the end of the lease term, the asset shall be fully depreciated over the shorter of the lease term and its useful life.

53 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (contʼd) The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. On the subsequent sale or retirement of a revalued asset, the attributable revaluation surplus remaining in the revaluation reserve is transferred directly to retained earnings. No transfer is made from the revaluation reserve to retained earnings except when an asset is derecognised. Annual Report 2012 IMPAIRMENT OF TANGIBLE ASSETS - At the end of each reporting period, the Group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest Group of cashgenerating units for which a reasonable and consistent allocation basis can be identified. Recoverable amount is the higher of fair value less costs to sell and value in use. 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 for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. ASSOCIATES - An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting. Under the equity method, investments in associates are carried in the statement of financial position at cost as adjusted for post-acquisition changes in the Groupʼs share of the net assets of the associate, less any impairment in the value of individual investments. Losses of an associate in excess of the Groupʼs interest in that associate (which includes any long-term interests that, in substance, form part of the Groupʼs net investment in the associate) are not recognised, unless the Group has incurred legal or constructive obligations or trade payments on behalf of the associate. Any excess of the cost of acquisition over the Groupʼs share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of the investment. Any excess of the Groupʼs share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss. Where a Group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the Groupʼs interest in the relevant associate.

54 52 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, 2012 Heatec Jietong Holdings Ltd. 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (contʼd) PROVISIONS - Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. MERGER RESERVE - Merger reserve represents the difference between the nominal amount of the share capital of the subsidiaries at the date on which they were acquired by the Group and the nominal amount of the share capital issued as consideration for the acquisition. REVENUE RECOGNITION - Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated sales discount allowance. Rendering of services Revenue from contract to provide services is recognised by reference to the stage of completion and the outcome of such work can be reliably estimated, unless the service is short term and revenue is recognised upon completion of the service. The percentage of completion is measured by reference to the percentage of costs incurred to-date to the estimated total costs for each contract, with due consideration made to include only those costs that reflect work performed. Provision is made where applicable for anticipated losses on contracts in progress. When losses are expected, full provision is made in the financial statements after adequate allowance has been made for estimated costs to completion. Any expenditure incurred on abortive projects is written off in profit or loss. Interest income Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable. Dividend income Dividend income from investments is recognised when the shareholdersʼ rights to receive payment have been established. RETIREMENT BENEFIT COSTS - Payments to defined contribution retirement benefit plans are charged as an expense when employees have rendered the services entitling them to the contributions. Payments made to statemanaged retirement benefit schemes, such as the Singapore Central Provident Fund, are dealt with as payments to defined contribution plans where the Groupʼs obligations under the plans are equivalent to those arising in a defined contribution retirement benefit plan. EMPLOYEE LEAVE ENTITLEMENT - Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the end of the reporting period.

55 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (contʼd) BORROWING COSTS - Borrowing costs directly attributable to the construction of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for intended use, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. INCOME TAX - Income tax expense represents the sum of the tax currently payable and deferred tax. Annual Report 2012 The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not taxable or tax deductible. The Groupʼs liability for current tax is calculated using tax rates (and tax laws) that have been enacted or substantively enacted in countries where the Company and subsidiaries operate by the end of the reporting period. Deferred tax is recognised on the differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised on taxable temporary differences arising on investments in subsidiaries and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments are only recognised to the extent that it is probable that there will be sufficient taxable profit against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised based on the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items credited or debited outside profit or loss (either in other comprehensive income or directly in equity), in which case the tax is also recognised outside profit or loss (either in other comprehensive income or directly in equity, respectively), or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is taken into account in calculating goodwill or determining the excess of the acquirerʼs interest in the net fair value of the acquireeʼs identifiable assets, liabilities and contingent liabilities over cost. FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION - The individual financial statements of each Group entity are measured and presented in the currency of the primary economic environment in which the entity operates (its functional currency). The consolidated financial statements of the Group and the statement of financial position of the Company are presented in Singapore dollars, which is the functional currency of the Company and the presentation currency for the consolidated financial statements.

56 54 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, 2012 Heatec Jietong Holdings Ltd. 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (contʼd) In preparing the financial statements of the individual entities, transactions in currencies other than the entityʼs functional currency are recorded at the rate of exchange prevailing on the date of the transaction. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the end of the reporting period. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on retranslation of monetary items are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised in other comprehensive income. For such non-monetary items, any exchange component of that gain or loss is also recognised in other comprehensive income. For the purpose of presenting consolidated financial statements, the assets and liabilities of the Groupʼs foreign operations (including comparatives) are expressed in Singapore dollars using exchange rates prevailing at the end of the reporting period. Income and expense items (including comparatives) are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in a separate component of equity under the header of foreign currency translation reserve. On consolidation, exchange differences arising from the translation of the net investment in foreign entities (including monetary items that, in substance, form part of the net investment in foreign entities), and of borrowings and other currency instruments designated as hedges of such investments, are recognised in other comprehensive income and accumulated in a separate component of equity under the header of foreign currency translation reserve. CASH AND CASH EQUIVALENTS IN THE STATEMENT OF CASH FLOWS - Cash and cash equivalents comprise cash on hand and demand deposits, bank overdrafts, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. 3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Groupʼs accounting policies, which are described in Note 2, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. (i) Critical judgements in applying the entityʼs accounting policies Management is of the opinion that there are no critical judgements involved that have a significant effect on the amounts recognised in the financial statements, except for those involving estimation uncertainties as disclosed below.

57 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (contʼd) (ii) Key sources of estimation uncertainty The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, 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: Annual Report 2012 Allowance for doubtful receivables and sales discount The policy for allowances for doubtful receivables and sales discount of the Group is based on the evaluation of collectibility and on managementʼs judgement. A considerable amount of judgement is required in assessing the ultimate realisation of these receivables, including the current creditworthiness, the past collection history of each customer and ongoing dealings with these parties. If the financial conditions of the counterparties with which the Group were to deteriorate, resulting in an impairment of their ability to make payments, additional allowance may be required. Allowances for sales discount to customers are based upon the Groupʼs historical rates and specific identification of customer discounts. The actual amount of sales discount may differ from managementʼs estimates. The carrying amount of trade and other receivables at the end of the reporting period as disclosed in Notes 11 and 13 to the financial statements respectively, approximate their recoverable amounts as there has not been a significant change in their credit quality since the statement of financial position date. Revenue and costs of contracts Revenue and costs associated with a project are recognised as revenue and expenses respectively by reference to the stage of completion of a project activity at the end of the reporting period, using engineersʼ estimates. When it is probable that the total project costs will exceed the total project revenue, the expected loss is recognised as an expense immediately. These computations are based on the presumption that the outcome of a project can be estimated reliably. Management has performed the cost studies, taking into account the costs to date and costs to complete each project. Management has also reviewed the physical proportion of the contract work completed of such projects and is satisfied that the estimates to complete are realistic, and the estimates of total project costs and sales proceeds indicate full project recovery. The carrying amount of work-in-progress is disclosed in Note 12 to the financial statements. Depreciation The Group depreciates the property, plant and equipment over their estimated useful lives and after taking into account of their estimated residual values, using the straight line method. The estimated useful life reflects the managementʼs estimate of the periods that the Group intends to derive future economic benefits from the use of the Groupʼs property, plant and equipment. The residual values reflect the managementʼs estimated amount that the Group would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the assets were already of the age and in the condition expected at the end of its useful life. The carrying amount of property, plant and equipment at the end of the reporting period are disclosed in Note 6 to the financial statements.

58 56 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, 2012 Heatec Jietong Holdings Ltd. 3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (contʼd) Impairment of property, plant and equipment For the purpose of determining whether property, plant and equipment are impaired, management has reviewed the carrying amount of the property, plant and equipment by cash-generating unit ( CGU ). Certain property, plant and equipment of the CGUʼs recoverable amount requires an estimation of the value in use of the assets. The value in use calculation requires the Group to estimate the future cash flows expected from the CGU and an appropriate discount rate in order to calculate the present value of the future cash flows. Certain property, plant and equipment of the CGUʼs recoverable amount is based on fair value less costs to sell of the assets since the CGU has been incurring consecutive losses and the future cash flows expected from the CGU is not certain. Management has evaluated the carrying amount of those assets based on such estimates and determined an impairment loss of $1,250,000 for certain plant and equipment is necessary. The impairment loss was determined by comparing the carrying amount of the certain plant and equipment against fair value by reference to market offer price. The carrying amount of property, plant and equipment at the end of the reporting period after recognition of the impairment loss during the financial year is disclosed in Note 6 to the financial statements. Valuation of plant and equipment The policy of obtaining independent valuation of plant and equipment once every three years is based on managementʼs experience and condition of the plant and equipment. The evaluation of the condition of the plant and equipment is based on the utilisation rate and frequency of maintenance of plant and equipment. As disclosed in Note 6, certain plant and equipment are stated at revalued amount based on the valuation performed by an independent professional valuer in In determining the fair values, the valuer has made reference to market-based evidence and if not available, based on depreciated replacement cost approach. As at December 31, 2012, no separate independent valuation has been carried out in accordance to the Groupʼs policy. The management, after taking into consideration of the condition of the plant and equipment, is of the opinion that the carrying amount approximates its fair value.

59 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (a) Categories of financial instruments The following table sets out the financial instruments as at the end of the reporting period: Financial assets Group Company $ $ $ $ Annual Report 2012 Available-for-sale investment 275,810 13, Loans and receivables at amortised cost: Trade receivables 17,809,092 25,869, Other receivables 1,302, ,433 3,450,876 3,857,101 Cash and cash equivalents 2,600,518 3,632, , ,851 21,988,005 30,313,882 3,623,966 4,211,952 Financial liabilities Financial liabilities at amortised cost: Trade payables 3,388,790 4,222,135-41,917 Other payables 5,250,848 7,231,860 1,013, ,970 Bank overdrafts and loans 8,441,421 11,212, Finance leases 1,640,832 2,482, ,721,891 25,148,733 1,013, ,887 (b) Financial risk management policies and objectives The financial risk management of the Group is handled by management of the Company as part of the operations of the Group. Management seeks to mitigate risk through monitoring of exposures to financial risks arising in the normal course of operations. The Group does not hold or issue derivative financial instruments for speculative purposes. (i) Foreign exchange risk management The Groupʼs currency exposures are in United States dollars, Australian dollars, Euro, Great Britain Pound and Malaysian Ringgit. The Company also has investments in foreign subsidiaries, whose net assets are exposed to currency translation risk. The Group does not hedge against foreign exchange exposure as the currency risk is not expected to be significant. At the end of the reporting period, the carrying amounts of monetary assets and monetary liabilities denominated in currencies other than the respective Group entitiesʼ functional currencies are as follows: Liabilities Assets $ $ $ $ United States dollars 871,194 1,007,552 1,142,215 1,597,026 Australian dollars ,603 Euro 140, , Great Britain Pound - 88, Malaysian Ringgit 1,864 1,

60 58 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, 2012 Heatec Jietong Holdings Ltd. 4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (contʼd) Foreign currency sensitivity The following table details the sensitivity to a 10% increase and decrease in the relevant foreign currencies against the functional currency of each Group entity. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents managementʼs assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. The sensitivity analysis includes external loans as well as loans to foreign operations within the Group where they gave rise to an impact on the Groupʼs profit or loss. If the relevant foreign currency weakens by 10% against the functional currency of each Group entity, loss will increase (decrease) by: Group United States Australian Great Britain Malaysian dollar impact dollar impact Euro impact pound impact ringgit impact $ $ $ $ $ $ $ $ $ $ Loss (27,102) (58,947) - (55,460) 14,047 15,745-8, If the relevant foreign currency strengthens by 10% against the functional currency of each group entity, profit will (decrease) increase by: Group United States Australian Great Britain Malaysian dollar impact dollar impact Euro impact pound impact ringgit impact $ $ $ $ $ $ $ $ $ $ Loss 27,102 58,947-55,460 (14,047) (15,745) - (8,848) (186) (194) (ii) Interest rate risk management The Groupʼs exposures to market risk for changes in interest rate relates to the Groupʼs long term and short term debt obligations. The Group does not use derivative financial instruments to hedge its exposure to interest rate fluctuation. However, it is the Groupʼs policy to obtain the most favourable interest rates available whenever the Group obtains additional financing through bank borrowings. The interest rates and terms of maturity and repayment of borrowings of the Group are disclosed in Notes 17 and 18 to the financial statements. Interest rate sensitivity The sensitivity analyses below have been determined based on the exposure to interest rates for nonderivative instruments at the end of the reporting period and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of instruments that have floating rates. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents managementʼs assessment of the reasonably possible change in interest rates.

61 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (contʼd) If interest rates had been 50 basis points higher or lower and all other variables were held constant, the Groupʼs profit for the financial year ended December 31, 2012 would decrease/increase by $48,767 (2011 : decrease/increase by $67,475). This is mainly attributable to the Groupʼs exposure to interest rates on its variable rate borrowings. Annual Report 2012 (iii) Credit risk management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group performs ongoing credit evaluation of its customersʼ financial condition and may require certain customers to furnish letters of credit from creditworthy institutions. This evaluation includes the assessment and valuation of customersʼ credit reliability. As at year end, the Group has 3 major customers which accounted for $10,614,411 or 60% (2011 : $17,674,159 or 68%) of the net trade receivable balance. The Group places its cash and cash equivalents with creditworthy institutions. The maximum amount the Company could be forced to settle under the corporate guarantee in Note 34, if the full guaranteed amount is claimed by the counterparty to the guarantee is $9.5 million (2011 : $10.0 million). Based on expectations at the end of the reporting period, the Company consider that it is more likely than not that no amount will be payable under the arrangement. However, this estimate is subject to change depending on the probability of the counterparty claiming under the guarantee which is a function of the likelihood that the financial receivables held by the counterparty which are guaranteed suffer credit losses. The carrying amount of financial assets recorded in the financial statements, grossed up for any allowances for losses, and the exposure to defaults from corporate guarantees above, represents the Group and Companyʼs maximum exposure to credit risk without taking account of the value of any collateral obtained. Further details of credit risks on trade and other receivables are disclosed in Notes 11 and 13. (iv) Liquidity risk management Liquidity risk refer to the risk that the Group is unable to pay its obligations when they fall due. The Group maintains sufficient cash and cash equivalents via internally generated cash flows and adequate amount of committed credit facilities to finance their activities. Short-term funding is obtained mainly from bank overdraft, factoring and short-term loan facilities. The Group projects cash flow requirements using various assumptions to assess and monitor the ability of the Group to repay the borrowings from financial institutions as and when they fall due and also maintains a mixture of short-term borrowings and medium/long term loans to fund working capital requirements. Due to the Groupʼs nature of business, it maintains flexibility in funding by ensuring that adequate working capital lines are available at any one time. As at December 31, 2012, the Group has $3,856,632 (2011 : $4,496,744) of undrawn committed bank credit facilities for working capital purposes.

62 60 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, 2012 Heatec Jietong Holdings Ltd. 4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (contʼd) Liquidity and interest risk analyses Non-derivative financial liabilities The following tables detail the remaining contractual maturity for non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date the Group can be required to pay. The table includes both interest and principal cash flows. The adjustment column represents the possible future cash flows attributable to the instrument included in the maturity analysis which is not included in the carrying amount of the financial liability on the statement of financial position. Group Weighted On average demand Within effective or within 2 to After interest rate 1 year 5 years 5 years Adjustments Total % $ $ $ $ $ 2012 Non-interest bearing - 8,639, ,639,638 Finance lease liability (fixed rate) , ,355 - (19,501) 328,918 Finance lease liability (variable rate) ,016, ,675 - (23,934) 1,311,914 Variable interest rate instruments ,076, , ,015 (502,750) 8,441,421 17,878,671 1,041, ,015 (546,185) 18,721, Non-interest bearing - 11,453, ,453,995 Finance lease liability (fixed rate) , ,145 - (16,438) 204,011 Finance lease liability (variable rate) ,015,789 1,333,879 - (71,075) 2,278,593 Variable interest rate instruments ,879,411 1,710, ,506 (888,939) 11,212,134 22,429,499 3,184, ,506 (976,452) 25,148,733 Company 2012 Non-interest bearing - 1,013, ,013, Non-interest bearing - 273, ,887

63 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (contʼd) The maximum amount the Company could be forced to settle under the corporate guarantee in Note 34, if the full guaranteed amount is claimed by the counterparty to the guarantee is $9.5 million (2011 : $10.0 million). The earliest period that the guarantee could be called is within 1 (2011 : 1) year from the end of the reporting period. As mentioned in Note 4b(iii), the Company consider that it is more likely than not that no amount will be payable under the arrangement. Annual Report 2012 Non-derivative financial assets All the non-derivative financial assets are expected to be repayable within one year and non-interest bearing except for the interest bearing fixed deposits (Note 14) and unquoted debt securities (Note 9). (v) Fair value of financial instruments The carrying amounts of cash and cash equivalents, trade and other current receivables and payables and other liabilities approximate their respective fair values due to the relatively short-term maturity of these financial instruments. The fair value of other classes of financial assets and liabilities are disclosed in the respective notes to financial statements and below. The fair value of financial assets and financial liabilities are determined as follows: the fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices; the fair value of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions and dealer quotes for similar instruments; and the fair value of derivative instruments are calculated using quoted prices. Where such prices are not available, discounted cash flow analysis is used, based on the applicable yield curve of the duration of the instruments for non-optional derivatives, and option pricing models for optional derivatives. The Group classifies fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels: (a) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1); (b) (c) inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) (Level 2); and inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).

64 62 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, 2012 Heatec Jietong Holdings Ltd. 4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (contʼd) Financial instruments measured at fair value Group Total Level 1 Level 2 Level 3 Financial Assets $ $ $ $ 2012 Available-for-sale investment: - Quoted equities 13,610 13, Unquoted debt securities 262, ,200 - Total 275,810 13, , Available-for-sale investment: - Quoted equities 13,610 13, There were no significant transfers between Level 1 & Level 2 of the fair value hierarchy in Financial liabilities The Group had no financial liabilities carried at fair value in 2011 and Company The Company had no financial assets and liabilities carried at fair value in 2011 and Significant assumptions in determining the fair value of financial assets Unquoted debt securities available-for-sale Fair value is based on indicative bid price of the bond, provided by various institutions. (c) Capital risk management policies and objectives The Group manages its capital to ensure that the entities in the Group will be able to continue as going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance, and to ensure that all externally imposed capital requirements are complied with. The capital structure of the Group consists of debt, which includes the borrowings disclosed in Notes 17 and 18, and equity attributable to equity holders of the parent, comprising share capital, reserves and retained earnings. The Group is required to maintain net worth of a specified amount in order to comply with covenant in loan agreements with banks. During the financial year, the Group has not complied with such externally imposed requirement. Hence, the relevant long term portion of loan amounting to $1.3 million has been reclassified as current liabilities and the Group has received waiver from the banks subsequent to year end to meet the financial covenant. Management reviews the capital structure on a semi-annual basis. As a part of this review, management considers the cost of capital and the risks associated with each class of capital. The Groupʼs overall strategy remains unchanged from The Group is in compliance with externally imposed capital requirements for the financial years ended December 31, 2011 and 2012, except as disclosed above.

65 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, RELATED PARTY TRANSACTIONS Some of the Companyʼs transactions and arrangements are with related parties and the effect of these on the basis determined between the parties is reflected in this financial statements. The intercompany balances are unsecured, interest-free and repayable on demand unless otherwise stated. Details of transactions between the Group and related parties are disclosed below: Associates $ $ Annual Report 2012 Rendering of services (1,192,627) (1,522,783) Other operating income (18,000) (380,994) Purchase of services 1,060,025 3,066,077 Company owned by a director Professional services - 25,800 Company in which a director act as a consultant Commission paid 3,000 - Compensation of directors and key management personnel The remuneration of directors and other members of key management during the year was as follows: $ $ Short-term benefits 1,588,374 1,753,168 Post-employment benefits 92,064 96,467 1,680,438 1,849,635

66 64 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, 2012 Heatec Jietong Holdings Ltd. 6 PROPERTY, PLANT AND EQUIPMENT Building Leasehold Plant and Motor under properties equipment vehicles Renovation construction Total $ $ $ $ $ $ Group Cost or valuation At January 1, ,420,000 9,068, ,567 1,416,369-12,867,320 Exchange translation - 24,624 6,778 12,611-44,013 Additions - 360,802 10, , ,651 Written off - (2,600) (2,600) Disposals - (839,051) (270,473) (2,700) - (1,112,224) Acquired on acquisition of subsidiaries (Note 32) 3,800, ,647 42, ,061,730 Revaluation adjustment - (2,661,086) (2,661,086) At December 31, ,220,000 6,169, ,633 1,668,451-13,810,804 Exchange translation - (30,432) (8,412) (12,628) - (51,472) Additions - 877,039 33,648 49,966 1,327,239 2,287,892 Written off - (111,027) (111,027) Disposals - - (37,675) - - (37,675) Reclassified as asset held for sale (1,420,000) (337,000) - (1,404,568) - (3,161,568) At December 31, ,800,000 6,568, , ,221 1,327,239 12,736,954 Comprising: December 31, 2011 At cost 5,220, ,633 1,668,451-7,641,084 At valuation - 6,169, ,169,720 5,220,000 6,169, ,633 1,668,451-13,810,804 December 31, 2012 At cost 3,800, , ,221 1,327,239 6,168,654 At valuation - 6,568, ,568,300 3,800,000 6,568, , ,221 1,327,239 12,736,954 Accumulated depreciation: At January 1, ,000 2,221, , ,067-3,644,892 Exchange translation - 13,349 5,174 2,336-20,859 Written off - (2,367) (2,367) Disposals - (601,357) (260,309) (1,173) - (862,839) Depreciation 34, , , ,233-1,214,665 Revaluation adjustment - (1,800,156) (1,800,156) At December 31, , , , ,463-2,215,054 Exchange translation - (17,546) (6,698) (3,797) - (28,041) Written off - (84,478) (84,478) Disposals - - (33,907) - - (33,907) Depreciation 67, ,080 83, ,359-1,031,158 Reclassified as asset held for sale (198,800) (25,026) - (882,535) - (1,106,361) At December 31, ,133 1,267, , ,490-1,993,425

67 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, PROPERTY, PLANT AND EQUIPMENT (contʼd) Building Leasehold Plant and Motor under properties equipment vehicles Renovation construction Total $ $ $ $ $ $ Impairment: Impairment loss recognised in the year ended December 31, (1,250,000) (1,250,000) Annual Report 2012 Carrying amount: At December 31, ,043,010 5,451, , ,988-11,595,750 At December 31, ,753,867 4,051, , ,731 1,327,239 9,493,529 Company Building under construction $ Cost: At January 1, 2011 and December 31, Additions 1,327,239 At December 31, ,327,239 Accumulated depreciation: At January 1, 2011, December 31, 2011 and December 31, Carrying amount: At December 31, At December 31, ,327,239 Leasehold properties with carrying amount of $3,753,867 (2011 : $5,043,010) are pledged to secure certain banking facilities granted to the Group (Note 17). Motor vehicles and certain plant and equipment with carrying amount of $3,078,377 (2011 : $3,238,744) are secured in respect of assets held under finance leases (Note 18). In addition, certain plant and equipment with carrying amount of $2,990,481 (2011 : $3,106,750) are secured for corporate guarantee by a subsidiary and the Company. Certain plant and equipment were revalued as at October 31, 2011 by an independent valuer not connected to the Group, by reference to market-based evidence of fair value and if not available, the estimated fair value using the depreciated replacement cost approach. As at December 31, 2012, had the plant and equipment been carried at historical cost less accumulated depreciation and deemed impairment loss, their carrying amounts would have been approximately $3,270,000 (2011 : $5,099,000).

68 66 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, 2012 Heatec Jietong Holdings Ltd. 7 SUBSIDIARIES Company $ $ Unquoted equity shares, at cost 6,623,614 6,623,614 The details of the subsidiaries of the Group are set out below: Proportion of Country of ownership incorporation interest and Name of subsidiary and operation voting power held Principal activity % % Heatec Jietong Pte. Ltd. (1) Singapore Provision of marine services including piping and heat exchanger services JJY Engineering & Construction Singapore To carry on the businesses of Pte. Ltd. (1) repairing ships, tankers and other sea-going vessels HJT Engineering & Construction Singapore To carry on the businesses of Pte. Ltd. (1) repairing ships, tankers and other sea-going vessels Held by Heatec Jietong Pte. Ltd. Heatec (Shanghai) Peopleʼs Manufacture and repair of Co., Ltd. (2) Republic of air cooler(s) evaporator, China heat exchanger and related auxiliaries Heatec Chariot Envirobotics Singapore To remove coating and Pte. Ltd. (1) corrosion of ship hull using envirobotic technology Chem-Grow Pte Ltd (1) (3) Singapore Provide chemical cleaning services to ships and tankers Chem Grow Engineering Singapore Provide repair services to (1) (3) Pte. Ltd. ships, tankers and other going vessels, and chemical cleaning services to ships and tankers (1) (2) (3) Audited by Deloitte & Touche LLP, Singapore. Audited by Shanghai Zhong Chuang & Hai Jia Certified Public Accountants Co., Ltd., Peopleʼs Republic of China, for consolidation purposes. Acquired in 2011 (Note 32).

69 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, ASSOCIATES Group $ $ Cost of investment in associates 664, ,617 Share of post-acquisition reserves, net of dividend received 1,041,806 1,422,783 Impairment loss (47,940) - 1,658,482 2,087,400 Annual Report 2012 Included in the cost of investment in associates is goodwill of $72,000 (2011 : $72,000). The details of the associates of the Group are set out below: Country of Proportion of incorporation ownership interest Name of associate and operation and voting power held Principal activity % % Held by Heatec Jietong Pte. Ltd. Heat Transfer Services Singapore Supply, installation, Pte. Ltd. (1) maintenance and repair of plate heat exchangers Zhoushan Heatec IMC-YY Peopleʼs Service and repair, Engineering Co., Ltd. (1) Republic of all kinds of China heat exchangers and piping works Heatec Marine Phils Philippines Maintenance of vessels, Construction other related activities and Inc. (1) contracting and subcontracting, ship repair Ipromar (Pte) Ltd. (1) Singapore Dormant (1) Not audited by Deloitte & Touche LLP, Singapore, for consolidation purposes as management is of the opinion that the results of the associates are insignificant during the year.

70 68 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, 2012 Heatec Jietong Holdings Ltd. 8 ASSOCIATES (contʼd) Summarised financial information in respect of the Groupʼs associates is set out below: $ $ Total assets 6,536,436 6,806,798 Total liabilities (2,476,747) (1,738,606) Net assets 4,059,689 5,068,192 Groupʼs share of associatesʼ net assets 1,634,422 2,015,400 Revenue 2,764,111 4,976,746 (Loss) Profit for the year (871,758) 818,805 Groupʼs share of associatesʼ (loss) profit for the year (284,410) 171,004 9 AVAILABLE-FOR-SALE INVESTMENT Group $ $ Quoted equity shares, at fair value 13,610 13,610 Unquoted debt securities, at fair value 262, ,810 13,610 In 2011, the investments in quoted equity securities at fair value included an impairment loss of $2,410. The above investments in quoted equity shares offer the Group the opportunity for return through dividend income and fair value gains. They have no fixed maturity or coupon rate. The fair values of these securities are based on the quoted closing market prices on the last market day of the financial year. The above investment in unquoted debt securities have fixed coupon rate of 4.15% per annum and maturity date on October 27, The average effective interest rate is 3.06% (2011 : Nil) per annum. The Groupʼs available-for-sale investment is denominated in Singapore dollars.

71 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, INVENTORIES Group $ $ Raw materials and supplies 1,171,355 1,422, TRADE RECEIVABLES Group $ $ Annual Report 2012 Outside parties 21,065,397 29,215,504 Unbilled revenue 815,928 1,377,954 Associates (Note 8) 731, ,017 Allowance for doubtful debts - outside parties (470,841) (70,236) Allowance for sales discount - outside parties (4,333,136) (4,877,942) 17,809,092 25,869,297 Amount due from customers for contract work (Note 12) 3,630,156 3,555,853 21,439,248 29,425,150 The average credit period on rendering of services is 60 to 90 days (2011 : 60 to 90 days). No interest is charged on the trade receivables. Trade receivables amounting to $683,509 (2011 : $7,531,116) are assigned to secure the factoring loan facilities (Note 17). Included in the Groupʼs trade receivables balance are debtors with a carrying amount of $9,948,052 (2011 : $11,552,876) which are past due at the reporting date for which the Group has not provided as there has not been a significant change in credit quality and the amounts are still considered recoverable. The Group does not hold any collateral over these balances. In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. Accordingly, the management believes that there is no further credit provision required in excess of the allowance for doubtful debts. An allowance has been made for estimated irrecoverable amounts from outside parties of $470,841 (2011 : $70,236). This allowance has been determined by reference to past default experience. The impairment recognised represents the difference between the carrying amount of the specific trade receivable and expected proceeds. The Group does not hold any collateral over these balances. The table below is an analysis of trade receivables as at December 31: Group $ $ Not past due and not impaired 7,861,040 14,316,421 Past due but not impaired (i) 9,948,052 11,552,876 17,809,092 25,869,297 Impaired receivables - collectively assessed (ii) 470,841 70,236 Less: Provision for impairment (470,841) (70,236) - - Total trade receivables, net 17,809,092 25,869,297

72 70 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, 2012 HEATEC JIETONG HOLDINGS LTD. 11 TRADE RECEIVABLES (contʼd) (i) Aging of receivables that are past due but not impaired: Group $ $ < 3 months 5,174,745 3,350,193 3 months to 6 months 4,186,328 5,584,728 6 months to 12 months 466,387 1,590,477 > 12 months 120,592 1,027,478 9,948,052 11,552,876 (ii) These amounts are stated before any deduction for impairment losses. Movement in the allowance for doubtful debts as at December 31: Group $ $ Balance at beginning of the year 70, ,541 Additional provision in the year 400,605 34,495 Amount written off during the year - (79,800) Balance at the end of the year 470,841 70,236 The Groupʼs trade receivables that are not denominated in the functional currencies of the respective entities are as follows: Group $ $ United States dollars 609, , WORK-IN-PROGRESS Group $ $ Work-in-progress at end of reporting period: Amount due from contract customers included in trade receivables (Note 11) 3,630,156 3,555,853 Amount due to customers for contract work included in trade payables (Note 20) (57,000) - Contract costs incurred plus recognised profits 7,006,254 9,562,911 Less: Progress billings (3,414,285) (6,007,058) Less: Provision for foreseeable losses (18,813) - 3,573,156 3,555,853

73 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, OTHER RECEIVABLES Group Company $ $ $ $ Subsidiary (Note 7) - - 3,372,713 3,857,007 Associates (Note 8) 373, , Non-controlling shareholder of a subsidiary (Note 5) 31, Other receivables 469, ,548 78, Tax receivable 31, Deposit 396, , Prepayments 413, ,918 40,276 5,848 Total 1,716,535 1,630,351 3,491,152 3,862,949 Annual Report 2012 Amount receivable from subsidiary, associates and non-controlling shareholder of a subsidiary are unsecured, interest-free and repayable on demand. Other receivables as at year end are within their cash collection cycles and are not past due. The Groupʼs and Companyʼs other receivables are denominated in Singapore dollars. 14 CASH AND BANK BALANCES Group Company $ $ $ $ Cash at bank 1,834,840 2,408, , ,851 Fixed deposits 765,678 1,224, ,600,518 3,632, , ,851 Presented as: Non-current assets Long-term fixed deposits - 178, Current assets Cash and bank balances 2,600,518 3,454, , ,851 Cash and bank balances comprise cash and fixed deposits held by the Group. Short-term fixed deposits have original maturity of twelve months or less. The carrying amounts of these assets approximate their fair values. Short-term fixed deposits bear average interest rate of 0.1% to 2.85% (2011 : 0.05% to 4.245%) per annum and for a tenure of approximately 3 to 12 months (2011 : 3 to 12 months), without significant risk of changes in value. As at December 31, 2012, fixed deposits of $477,373 (2011 : $491,319) are pledged to secure banking facilities granted to the Group (Note 17).

74 72 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, 2012 Heatec Jietong Holdings Ltd. 14 CASH AND BANK BALANCES (contʼd) The Groupʼs and Companyʼs cash and bank balances that are not denominated in the functional currencies of the respective entities are as follows: Group Company $ $ $ $ United States dollars 533, , Australian dollars - 554, NON-CURRENT ASSETS HELD-FOR-SALE On September 12, 2012, the Group has granted an option to an independent third party (the Buyer ) to purchase one of its subsidiariesʼ leasehold building and workshop located at 18 Tuas Avenue 18A, Singapore for a cash consideration of $5.8 million (the Disposal ). The option has been exercised by the Buyer on September 17, As such, the carrying amount of the assets relating to the Disposal, as disclosed in Note 6, is classified as held for sale as at year end. Management has announced the completion of Disposal on January 23, The assets held for sale are not allocated to an operating segment in Note SHARE CAPITAL Group and Company Number of ordinary shares $ $ Issued and paid up: At beginning of year and end of year 121,187, ,187,345 11,368,567 11,368,567 Fully paid ordinary shares, which have no par value, carry one vote per share and carry a right to dividends as and when declared by the Company. 17 BANK OVERDRAFTS AND LOANS Group $ $ Bank overdrafts 3,376,193 3,556,032 Short-term loans - 290,859 Term loans 2,957,420 2,480,863 Factoring loans 2,107,808 4,884,380 8,441,421 11,212,134 The borrowings are repayable as follows: On demand or within one year 7,617,355 9,284,261 Within two years to five years 483,053 1,329,925 More than five years 341, ,948 8,441,421 11,212,134 Less: Amount due for settlement within 12 months (shown under current liabilities) (7,617,355) (9,284,261) Amount due for settlement after 12 months 824,066 1,927,873

75 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, BANK OVERDRAFTS AND LOANS (contʼd) The effective interest rates per annum are as follows: Group Bank overdrafts 4.33% to 5.64% 4.33% to 5.90% Short-term loans % to 6.12% Term loans 4.33% to 4.73% 5.50% to 6.06% Factoring loans 5.12% to 6.17% 5.12% to 6.17% Annual Report 2012 Certain term loans are subject to contractual interest rate repricing annually. Such term loans are arranged at floating rates, thus exposing the Group to cash flow interest rate risk. The fair value of the Groupʼs borrowings approximate the carrying amounts of the borrowings. The Groupʼs bank overdrafts and loans are denominated in the functional currencies of the respective entities. (a) Bank overdrafts are repayable on demand and secured by a charge over the following: (i) legal mortgage over the Groupʼs leasehold property (Note 6); (ii) (iii) legal mortgage over the properties of the directors of a subsidiary; joint and several guarantees of the directors of a subsidiary for all the monies owing; and (iv) pledge of certain fixed deposits (Note 14). (b) The Group has 2 term loans as follows: (i) A loan of $2,017,263 (2011 : $1,282,389). The loan was raised in October 18, Repayment commenced on December 1, 2011 and repayable over 48 months. The loan is secured by: (a) (b) a corporate guarantee by the Company; and statutory charge over 70% shares in Chem-Grow Pte Ltd and Chem-Grow Engineering Pte. Ltd. The loan carries interest at 1.25% plus prime rate per annum. (ii) A loan of $940,157 (2011 : $1,049,102). The loan was raised in July 27, Repayment commenced on September 1, 2000 and repayable over 20 years. The loan is secured by: (a) a first legal mortgage over the Groupʼs leasehold property (Note 6); (b) (c) pledged on certain fixed deposits (Note 14); and joint and several guarantees of certain directors of a subsidiary. The loan carries interest at 1% plus effective financing rate per annum.

76 74 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, 2012 Heatec Jietong Holdings Ltd. 17 BANK OVERDRAFTS AND LOANS (contʼd) (c) The factoring facilities are secured by: (i) (ii) legal mortgage over the properties of certain directors of the Group; a corporate guarantee by the Company pursuant to the deed of guarantee and indemnity dated April 5, 2010; and (iv) joint charge on the receivables of subsidiaries (Note 11). 18 FINANCE LEASES Minimum Present value of lease payments minimum lease payments $ $ $ $ Amounts payable under finance leases: Within one year 1,212,377 1,096,847 1,128,362 1,038,747 In the second to fifth years inclusive 471,890 1,473, ,470 1,443,857 Less: Future finance charges (43,435) (87,513) - - Present value of lease obligations 1,640,832 2,482,604 1,640,832 2,482,604 Less: Amount due for settlement within 12 months (shown under current liabilities) (1,128,362) (1,038,747) Amount due for settlement after 12 months 512,470 1,443,857 It is the Groupʼs policy to lease certain of its plant and equipment under finance leases. The average lease term is 5 years. For the financial year ended December 31, 2012, the average effective borrowing rate was 4.21% (2011 : 2.80%) per annum. Interest rates are fixed and variable at the contract date and the Group is expose to fair value interest rate risk for its fixed rate lease contracts. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. All lease obligations are denominated in Singapore dollars. The fair value of the Groupʼs lease obligations approximates their carrying amount. The Groupʼs obligations under finance leases are secured by the lessorʼs title to the leased assets (Note 6) and corporate guarantee by a subsidiary and the Company.

77 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, DEFERRED TAXATION The following are the major deferred tax liabilities and assets recognised by the Group, and the movements thereon, during the current and prior reporting periods: Accelerated Revaluation tax of plant and Group depreciation equipment Tax losses Others Total $ $ $ $ $ Annual Report 2012 At January 1, , ,883 (190,140) - 290,059 Charge to other comprehensive income for the year - (6,391) - - (6,391) Charge (Credit) to profit or loss for the year (Note 26) (613,625) - (613,199) Acquisition of subsidiaries (Note 32) 355, ,822 At December 31, , ,492 (803,765) - 26,291 (Over) Under provision in prior year (Note 26) (55,749) - 389,566 (10,448) 323,369 Charge (Credit) to profit or loss for the year (Note 26) 7,568 - (248,358) - (240,790) At December 31, , ,492 (662,557) (10,448) 108,870 Group $ $ Deferred tax liabilities 608, ,916 Deferred tax assets (500,002) (613,625) 20 TRADE PAYABLES Group Company $ $ $ $ Outside parties 2,367,249 3,267,743-41,917 Non-controlling shareholder of a subsidiary (Note 5) 55, Associate (Note 8) 965, , Amount due to customers for contract work (Note 12) 57, ,445,790 4,222,135-41,917 The average credit period on purchases of goods is 60 days (2011 : 60 days). No interest is charged on the trade payables except those under trade financing. As at year end, the trade payables under trade financing amounted to $718,177 (2011 : $870,775) with an interest rate ranging from 2.10% to 2.49% (2011 : 2.62% to 6.89%) per annum. The trade financing facilities are secured by a corporate guarantee pursuant to the deed of guarantee and indemnity dated April 5, 2010.

78 76 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, 2012 Heatec Jietong Holdings Ltd. 20 TRADE PAYABLES (contʼd) The Groupʼs and Companyʼs trade payables that are not denominated in the functional currencies of the respective entities are as follows: Group Company $ $ $ $ United States dollars 838,091 1,007, Euro 140, , Great Britain Pound - 88, Malaysian Ringgit - 1, OTHER PAYABLES Group Company $ $ $ $ Associates (Note 8) 3, Accruals 3,758,381 3,229, , ,970 Other payables 1,488,834 2,923, ,210 - Advance deposits received 92, Put option liability (Note 32) - 1,078, ,343,835 7,231,860 1,013, ,970 The Groupʼs and Companyʼs trade payables that are not denominated in the functional currencies of the respective entities are as follows: Group Company $ $ $ $ United States dollars 33, Malaysian Ringgit 1, REVENUE Group $ $ Rendering of services 35,154,341 37,133, OTHER OPERATING INCOME Group $ $ Sundry income 235,987 5,088 Gain on foreign exchange - 8,868 Bargain purchase arising from acquisition of subsidiaries (Note 32) - 466,087 Interest income 37,671 44,721 Management fee income 18,000 - Dividend income from available-for-sale investment Gain on disposal of property plant and equipment 3,138 - Gain on settlement of payable 113, , ,764

79 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, OTHER OPERATING EXPENSES Group $ $ Allowance for doubtful debts 400,605 34,495 Bad debts written off - 12,937 Loss on disposal of property, plant and equipment - 144,432 Impairment loss: - Available-for-sale investment - 2,410 - Investment in an associate 47, Plant and equipment 1,250,000 - Plant and equipment written off 5, Revaluation loss - 1,084,109 Net foreign exchange loss 99,225-1,803,119 1,278,616 Annual Report FINANCE COSTS Group $ $ Interest on bank overdrafts 282, ,996 Interest on bank loans 153,725 65,421 Interest on hire purchases 66,006 84,930 Factoring charges 144, , , , INCOME TAX EXPENSE (BENEFIT) Group $ $ Current tax expense 65,077 44,922 Overprovision for current tax in prior years (978) (317,379) Under provision for deferred tax in prior year (Note 19) 323,369 - Deferred tax benefit (Note 19) (240,790) (613,199) Withholding tax 20,000 - Income tax expense (benefit) for the year 166,678 (885,656) Domestic income tax is calculated at 17% (2011 : 17%) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.

80 78 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, 2012 Heatec Jietong Holdings Ltd. 26 INCOME TAX EXPENSE (BENEFIT) (contʼd) The total tax charge (benefit) for the financial year can be reconciled to the accounting loss as follows: Group $ $ Loss before income tax (2,827,662) (5,113,039) Income tax benefit at statutory rate (480,703) (869,217) Tax effect of share of results of associates 48,350 (29,071) Effect of income not subject to tax (222,866) (402) Effect of expenses that are not deductible for tax purpose 357, ,478 Effect of partial tax exempt income (26,307) (62,335) Deferred tax benefits on tax losses not recognised 158, ,764 Under (Over) provision in prior years 322,391 (317,379) Utilisation of carried forward tax losses (5,749) (4,549) Effect of different tax rates of subsidiary operating in other jurisdiction (4,074) 1,988 Withholding tax 20,000 - Others - (933) Total income tax expense (benefit) 166,678 (885,656) Subject to the agreement by the tax authorities, at the end of the reporting period, the Group has unutilised tax losses of $6,543,158 (2011 : $4,672,053) available for offset against future profits. A deferred tax asset has been recognised in respect of $3,897,394 (2011 : $3,609,559) of such losses. No deferred tax asset has been recognised in respect of the remaining $2,645,764 (2011 : $1,062,494) due to the unpredictability of future profit streams. Consequently, the deferred tax asset not recorded is $451,593 (2011 : $183,764). The realisation of the future income tax benefits from tax losses carry forward is available for an unlimited future period subject to the conditions imposed by law including the retention of majority shareholders as defined. Income tax relating component of other comprehensive income Group $ $ Deferred tax Revaluation on plant and equipment - (6,391)

81 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, LOSS FOR THE YEAR Loss for the year is arrived at after charging (crediting): Group $ $ Depreciation of property, plant and equipment (1) 1,031,158 1,214,665 Directorsʼ remuneration 1,165,500 1,199,217 Employee benefits expense (including directorsʼ remuneration) (2) 20,788,584 23,282,957 Costs of defined contribution plans (included in employee benefits expense) 563, ,239 Cost of inventories recognised as expense 4,278,658 5,774,615 Plant and equipment written off 5, (Gain) Loss on disposal of property, plant and equipment (3,138) 144,432 Allowance for doubtful debts 400,605 34,495 (Reversal) Allowance for sales discount (544,806) 2,533,918 Bargain purchase (Note 32) - (466,087) Gain on settlement of payable (113,731) - Impairment loss on investment for associate 47,940 - Impairment loss on available-for- sale investment - 2,410 Net foreign exchange loss 99,225 6,509 Annual Report 2012 (1) (2) Included in cost of sales and administrative expenses. Employee benefits expense amounting to $6,391,142 (2011 : $6,394,617) is included in administrative expenses. 28 LOSS PER SHARE Basic loss per share is calculated by dividing the loss for the year attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the financial year. The following reflects the income and share data used in the basic and diluted loss per share computation for the financial year ended December 31: Group $ $ Loss for the year attributable to owners of the Company (2,549,557) (3,561,361) Weighted average number of ordinary shares for the purpose of basic loss per share 121,187, ,187,345 The diluted loss per share is equivalent to the basic loss per share. There have been no other transactions involving ordinary shares or potential ordinary shares since the reporting date and before the completion of these financial statements. 29 DIVIDENDS On May 2011, a one-tier tax exempt dividend of 0.75 cent per share (total dividend $908,905) was paid to shareholders. In respect of the current year, no dividend have been declared and recommended.

82 80 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, 2012 Heatec Jietong Holdings Ltd. 30 REVALUATION RESERVE The revaluation reserve arose mainly on the revaluation of plant and equipment. Where revalued plant and equipment are sold, the portion of the revaluation reserve that relates to that asset, and is effectively realised, is transferred directly to retained earnings. The revaluation reserve is not available for distribution to the Companyʼs shareholders. 31 SEGMENT INFORMATION Services from which reportable segments derive their revenue For the purpose of the resource allocation and assessment of segment performance, the Groupʼs chief operating decision makers have focused on the business operating units which in turn, are segregated based on their services. This forms the basis of identifying the operating segments of the Group under FRS 108. Operating segments are aggregated into a single operating segment if they have similar economic characteristics. The Groupʼs reportable operating segments under FRS 108 are as follows: Segment Piping Heat Exchanger Blasting Chemical cleaning Principal activities Fabrication and installation of all types of piping Servicing and fabrication of Heat Exchangers Removal of coating and corrosion using envirobotic technology Provision of chemical cleaning services to ships and marine vessels Segment revenue represents revenue generated from external and internal customers. Segment profits represents the profit earned by each segment without allocation of general and central administration expenses and income, share of profit (loss) of associates, finance costs and income tax expenses. This is the measure reported to the chief operating decision makers for the purpose of resource allocation and assessment of segment performance. For the purpose of monitoring segment performance and allocating resources, the chief operating decision makers monitor the tangible and financial assets attributable to each segment. All assets are allocated to reportable segments. Assets, if any, used jointly by reportable segments are allocated on the basis of the revenue earned by individual reportable segments. Segment liabilities include all operating liabilities and consist principally of trade payable, accruals and finance lease. Information regarding the Groupʼs reportable segments is presented below: Revenue Net Loss $ $ $ $ Piping 14,975,892 18,725,138 (934,452) (2,973,046) Heat Exchanger 14,955,915 17,080, , ,413 Blasting 692, ,394 (2,353,056) (1,077,452) Chemical Cleaning 4,530, , , ,540 35,154,341 37,133,998 (1,785,619) (3,562,545) Other operating income 409, ,764 Other operating expenses (553,119) (1,278,616) Unallocated income (expenses) 33,277 (376,644) Share of (loss) profit of associates (284,410) 171,004 Finance costs (647,058) (591,002) Loss before income tax (2,827,662) (5,113,039) Income tax (expense) benefit (166,678) 885,656 Loss for the year (2,994,340) (4,227,383)

83 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, SEGMENT INFORMATION (contʼd) Segment assets $ $ Piping 11,795,131 19,271,549 Heat Exchanger 10,172,330 10,526,245 Blasting 2,497,057 4,252,610 Chemical Cleaning 8,310,125 6,735,340 Total segment assets 32,774,643 40,785,744 Unallocated assets 8,136,045 9,634,821 Consolidated total assets 40,910,688 50,420,565 Annual Report 2012 Segment liabilities Piping 2,877,336 2,065,982 Heat Exchanger 2,079,919 3,203,057 Blasting 2,205,706 3,502,068 Chemical Cleaning 1,560,203 1,814,874 Total segment liabilities 8,723,164 10,585,981 Unallocated liabilities 10,832,298 15,247,590 Consolidated total liabilities 19,555,462 25,833,571 Other segment information Chemical Piping Heat Exchanger Blasting Cleaning $ $ $ $ $ $ $ $ (Reversal) Allowance for sales discount (671,212) 2,376,627 (141,762) 7,916 75,617 (48,888) 192, ,263 Bad debts written off , Capital additions 1, , , ,167 56, ,633 93,425 Impairment loss on plant and equipment ,250, Plant and equipment written off - - 5, Depreciation of property, plant and equipment 138, , , , , , ,678 19,225 Geographical information The Groupʼs operations are primarily carried out in Singapore. Accordingly, no geographical segment assets and revenue from external customers information are presented.

84 82 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, 2012 Heatec Jietong Holdings Ltd. 31 SEGMENT INFORMATION (contʼd) Major customer information The Groupʼs revenue derived from customers who individually account for 10% or more of the Group revenue is detailed below: $ $ Piping segment Customer A 8,479,418 13,855,562 Customer B 3,214,234 3,599,849 11,693,652 17,455, ACQUISITION OF SUBSIDIARIES (i) Acquisition of subsidiaries in 2011 On October 28, 2011, a wholly-owned subsidiary of the Company, Heatec Jietong Pte. Ltd., acquired 51% voting equity interest each of Chem-Grow Pte Ltd and Chem Grow Engineering Pte. Ltd., ( Chem Grow entities ) for a total cash consideration of $2,895,780. The subsidiaries are considered as one cash generating unit. This transaction has been accounted for by the acquisition method of accounting. The Group acquired the subsidiaries to tap on the expertise in chemical cleaning for heat exchangers, and diversify the Groupʼs existing business portfolio. Management is of the view that chemical cleaning business compliments the Groupʼs expertise in piping fabrication. a) Consideration transferred (at acquisition date fair values) $ Cash 1,447,890 Amount payable 1,447,890 Total 2,895,780 The acquisition-related costs are not material and have been recognised as an expense in the period, within administrative expenses line item in the consolidated income statement.

85 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, ACQUISITION OF SUBSIDIARIES (contʼd) b) Assets acquired and liabilities assumed at the date of acquisition 2011 Carrying amount and fair value $ Annual Report 2012 Non-current assets Property, plant and equipment 4,061,730 Available for sale investment 16,020 Current assets Trade receivables 2,609,861 Other receivables 33,093 Cash and cash equivalents 1,893,840 Total assets 8,614,544 Non-current liabilities Deferred tax liabilities (355,822) Current liabilities Bank overdrafts and loans (1,065,672) Trade payables (341,761) Other payables (243,117) Income tax payable (16,275) Total liabilities 2,022,647 Net assets acquired and liabilities assumed 6,591,897 c) Non-controlling interests The non-controlling interests (49%) in each of Chem-Grow Pte Ltd and Chem-Grow Engineering Pte. Ltd. recognised at the acquisition date was measured by at the non-controlling interestsʼ proportionate share of the fair value of the acquireeʼs identifiable assets. d) Bargain purchase arising on acquisition $ Consideration transferred 2,895,780 Add: Non-controlling interests 3,230,030 Less: Fair value of identifiable net assets acquired (6,591,897) Bargain purchase from acquisition (466,087) Bargain purchase represents the excess of the fair value of the net assets acquired over the purchase consideration. As the purchase consideration was originally fixed and agreed upon with the vendors based on a certain multiple of the net assets of the subsidiaries prior to the date of acquisition ( acquisition contract date ), the increase in fair value of the net assets acquired during the period from the acquisition contract date to the date of acquisition has resulted in the bargain purchase gain.

86 84 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, 2012 Heatec Jietong Holdings Ltd. 32 ACQUISITION OF SUBSIDIARIES (contʼd) e) Net cash inflow on acquisition of subsidiaries Consideration paid in cash 1,447,890 Less: Cash and cash equivalents acquired (1,893,840) Net cash inflow (445,950) f) Impact of acquisitions on the results of the Group The subsidiaries acquired in 2011 contributed $945,003 and $99,795 to the Groupʼs revenue and profit respectively, for the year for the period between the date of acquisition and the end of the reporting period. $ Had the business combination during the year been effected at January 1, 2011, total Groupʼs revenue for the year would have been $41,338,052 and the loss for the year would have been $3,805,755. g) Put option liability Put option liability arose as a result of the acquisition of subsidiaries as disclosed in above whereby the vendors of the subsidiaries have been granted the right to sell a portion of their remaining shares to Heatec Jietong Pte. Ltd. The put option represents 19% of the issued share capital ( Put Option Shares ) in each of Chem-Grow Pte Ltd and Chem-Grow Engineering Pte. Ltd. for a total fixed consideration of $1,078,820. The put option may only be exercised in respect of all (and not some only) of the Put Option Shares at any time during the twelve-month period commencing from January 1, 2012, failing which the put option will lapse if it remains unexercised. As at December 31, 2011, the Group has accounted for the gross obligation under the put option as a current liability in the statement of financial position and correspondingly to the reserve as separate component of equity. (ii) Acquisition of non-controlling interest in 2012 On October 31, 2012, the vendors of the subsidiaries exercised the put option for Heatec Jietong Pte. Ltd. to purchase the Put Option Shares for a cash consideration of $1,078,820. Following the exercise of put option, the Groupʼs shareholdings increase from 51% to 70% each in Chem-Grow Pte Ltd and Chem-Grow Engineering Pte. Ltd., as disclosed in Note 7. The carrying amount and fair value of Chem Grow entitiesʼ net assets in the Groupʼs financial statement on the date of acquisition was $6,842,243. As at December 31, 2012, the Group reversed the gross obligations under the put option recognised as current liability and other reserve in The difference between the fair value of the consideration paid and the non-controlling interests amounted to $221,206, is recognised directly in equity.

87 NOTES TO FINANCIAL STATEMENTS Financial year ended December 31, OPERATING LEASE ARRANGEMENTS Group $ $ Minimum lease payments under operating leases recognised as an expense during the year 2,115,187 2,646,595 At the end of the reporting period, the Group has outstanding commitments under non-cancellable operating leases, which fall due as follows: Group $ $ Annual Report 2012 Within one year 861, ,840 In the second to fifth year inclusive 286, ,702 After five years - 301,965 1,148,878 1,785,507 Operating lease payments represent rentals payable by the Group for residential premises, equipment and leasehold land. Rental are fixed for a term of one to five (2011 : one to five) years. 34 CONTINGENT LIABILITIES Company $ $ Corporate guarantees for credit facilities granted to subsidiaries 9,479,944 10,043,035 The management is of the opinion that the fair value of the above corporate guarantees is not material. 35 COMMITMENTS Group and Company $ $ Commitments for construction of leasehold building 1,327, EVENTS AFTER THE REPORTING PERIOD As disclosed in Note 15 to the financial statements, the disposal transaction was completed on January 23, The Group subsequently leased back the property at the rental rate of $45,000 per month to July 31, 2013 with an option to extend the lease period for another two months.

88 86 STATISTICS OF SHAREHOLDINGS As at 13 March 2013 Heatec Jietong Holdings Ltd. Issued and fully paid-up capital : S$12,006,387 Number of issued and paid-up shares : 121,187,345 Class of shares : Ordinary Share Voting rights : One vote per ordinary share SUBSTANTIAL SHAREHOLDERS AS AT 13 MARCH 2013 (as shown in the Company s Register of Substantial Shareholders) Name of Substantial Shareholders No. of shares (Direct Interest) Percentage (%) No. of shares (Deemed Interest) Percentage (%) Soon Yeow Kwee Johnny 1 9,530, ,928, Yong Li Vien 2 9,530, ,928, Yong Yeow Sin 3 9,530, ,928, Armstrong Holdings Limited 53,112, Mr Johnny Soon is deemed to have an interest in the 4,816,078 shares held by his spouse, Madam Jasmine Ow Ah Foong. He is also deemed to have an interest in the 53,112,360 shares held by Armstrong Holdings Limited whereby the Soon Family Trust in which he is one of the beneficial owners, is a shareholder. 2 Mr Jimmy Yong is deemed to have an interest in the 4,816,078 shares held by his spouse, Madam Ong Ah Mooi. He is also deemed to have an interest in the 53,112,360 shares held by Armstrong Holdings Limited whereby the Jimmy Yong Trust in which he is one of the beneficial owners, is a shareholder. 3 Mr Yong Yeow Sin is deemed to have an interest in the 4,816,078 shares held by his spouse, Madam Ng Guick Kim. He is also deemed to have an interest in the 53,112,360 shares held by Armstrong Holdings Limited whereby Summer Family Trust in which he is one of the beneficial owners, is a shareholder. DISTRIBUTION OF SHAREHOLDINGS NO. OF NO. OF SIZE OF SHAREHOLDINGS SHAREHOLDERS % SHARES % ,000-10, , ,001-1,000, ,662, ,000,001 AND ABOVE ,100, TOTAL ,187,

89 STATISTICS OF SHAREHOLDINGS As at 13 March TWENTY LARGEST SHAREHOLDERS NO. OF NO. NAME SHARES % 1 ARMSTRONG HOLDINGS LIMITED ^ 53,053, SOON YEOW KWEE JOHNNY 9,530, YONG LI VIEN 9,530, YONG YEOW SIN 9,530, HONG LEONG FINANCE NOMINEES PTE LTD 4,855, NG GUICK KIM 4,816, ONG AH MOOI 4,816, OW AH FOONG JASMINE 4,816, ONG BENG CHYE 2,148, MOHAMED ABDUL JALEEL S/O MUTHUMARICAR SHAIK MOHAMED 2,000, CHIANG SOK YANG 1,005, DBS VICKERS SECURITIES (SINGAPORE) PTE LTD 800, LEOW SAU CHING HELENA 770, LOW CHEE WEE 700, WANG JIAN GUO 603, CIMB SECURITIES (SINGAPORE) PTE LTD 581, MAYBANK KIM ENG SECURITIES PTE LTD 565, OCBC SECURITIES PRIVATE LTD 478, YONG LAY CHOO 360, CHEAH HEE CHONG ROBIN 305, TOTAL 111,263, Annual Report 2012 ^ An Additional 59,000 shares beneficially owned by Armstrong Holdings Limited are held through its nominee, Citibank Noms S pore Pte. Ltd. SHAREHOLDINGS HELD IN HANDS OF PUBLIC Based on the information available to the Company as at 13 March 2013, approximately 18.89% of the issued shares of the Company is held by the public. Therefore, Rule 723 of the Rules of Catalist has been complied with. The Company had no treasury shares as at 13 March 2013.

90 88 NOTICE OF SIXTH ANNUAL GENERAL MEETING Heatec Jietong Holdings Ltd. HEATEC JIETONG HOLDINGS LTD. Registration No Z (Incorporated in the Republic of Singapore) NOTICE IS HEREBY GIVEN that the Sixth Annual General Meeting ( AGM ) of Heatec Jietong Holdings Ltd. (the Company ) will be held at 18 Tuas Avenue 18A, Singapore on Friday, 19 April 2013 at a.m. for the following purposes: As Ordinary Business 1. To receive and adopt the Directors Report and Audited Accounts for the financial year ended 31 December 2012, together with the Auditors Report thereon. (Resolution 1) 2. To re-elect Mr. Yong Yeow Sin who is retiring by rotation pursuant to Articles 98 and 99 of the Company s Articles of Association and who, being eligible, offer himself. 3. To pass the following Ordinary Resolutions pursuant to Section 153(6) of the Companies Act, Cap. 50:- (Resolution 2) (Resolution 3) That pursuant to Section 153(6) of the Companies Act, Cap. 50 of Singapore (the Act ), Mr. Phillip Lee Soo Hoon be re-appointed a Director of the Company to hold office until the next Annual General Meeting. [see Explanatory Note (i)] 4. To approve the payment of directors fees of S$170,000 payable by the Company for the financial year ended 31 December 2012 (2011: S$160,000). 5. To re-appoint Deloitte & Touche LLP as Auditors of the Company for the financial year ending 31 December 2013, and to authorise the directors to fix their remuneration. (Resolution 4) (Resolution 5) 6. To transact any other ordinary business that may properly be transacted at an annual general meeting. As Special Business To consider and, if thought fit, to pass, with or without modifications, the following resolutions as ordinary resolutions:- 7. Authority to allot and issue shares (Resolution 6) That, pursuant to section 161 of the Act and Rule 806(2) of the Listing Manual Section B: Rules of Catalist of the Singapore Exchange Securities Trading Limited (the SGX-ST ) (the Catalist Rules ), authority be and is hereby given to the Directors of the Company to:- (a) (i) allot and issue shares in the capital of the Company ( Shares ) whether by way of rights, bonus or otherwise; and/or (ii) make or grant offers, agreements or options (collectively Instruments ) that might or would require Shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) warrants, debentures, convertible securities or other instruments convertible into Shares; at any time and upon such terms and conditions and for such purposes and to such persons as the Directors may in their absolute discretion deem fit; and (b) (notwithstanding that the authority conferred by this Resolution may have ceased to be in force) issue Shares in pursuance of any Instruments made or granted by the Directors while this Resolution was in force,

91 NOTICE OF SIXTH ANNUAL GENERAL MEETING 89 provided always that:- (1) 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 one hundred per cent. (100%) of the total issued Shares (excluding treasury shares) (as calculated in accordance with sub-paragraph (2) below) or such other limit as may be prescribed by the Catalist Rules as at the date this Resolution is passed, of which the aggregate number of Shares to be issued other than on a pro-rata basis to the shareholders of the Company (including Shares to be issued in pursuance of Instruments made or granted pursuant to this Resolution) does not exceed fifty per cent. (50%) of the total issued Shares (excluding treasury shares) (as calculated in accordance with subparagraph (2) below) or such other limit as may be prescribed by the Catalist Rules as at the date this Resolution is passed; Annual Report 2012 (2) (subject to such manner of calculation and adjustments as may be prescribed by the SGX- ST) for the purpose of determining the aggregate number of Shares that may be issued under sub-paragraph (1) above, the percentage of the total issued Shares (excluding treasury shares) shall be based on the total issued Shares, excluding treasury shares, if any, at the time of the passing of this Resolution, after adjusting for: (a) new Shares arising from the conversion or exercise of any convertible securities outstanding and/or subsisting at the time this authority is given; (b) (c) new Shares arising from the exercise of share options or vesting of share awards outstanding or subsisting at the time of the passing of this Resolution, provided the options or awards were granted in compliance with Part VIII of Chapter 8 of the Catalist Rules and any subsequent bonus issue, consolidation or subdivision of Shares. (3) in exercising the authority conferred by this Resolution, the Directors shall comply with the requirements imposed by the SGX-ST from time to time and the provisions of the Catalist Rules for the time being in force (unless such compliance has been waived by the SGX-ST), all applicable legal requirements under the Act, and otherwise, and the Articles of Association for the time being of the Company; and (4) (unless revoked or varied by the Company in general meeting), such authority conferred by this Resolution shall continue in full force until the conclusion of the next annual general meeting of the Company or the date by which the next annual general meeting is required by law to be held, whichever is earlier. [See Explanatory Note (ii)] 8. Authority to offer and grant options and to allot and issue shares under the Heatec Employee Share Option Scheme (Resolution 7)

92 90 NOTICE OF SIXTH ANNUAL GENERAL MEETING Heatec Jietong Holdings Ltd. That approval be and is hereby given to the directors:- (i) (ii) to offer and grant options from time to time in accordance with the provisions of the Heatec Employee Share Option Scheme (the ESOS ); and pursuant to section 161 of the Act, to allot and issue from time to time such number of ordinary shares in the capital of the Company (the Scheme Shares ) as may be required to be issued pursuant to the exercise of options granted under the ESOS, as the case may be, and to do all such acts and things as may be necessary or expedient to carry the same into effect, provided always that the number of Scheme Shares to be issued, when aggregated together with the number of ordinary shares issued and/or issuable pursuant to the Heatec Performance Share Plan and any other existing share schemes of the Company, shall not exceed fifteen per cent. (15%) of the total number of issued shares of the Company (excluding treasury shares) from time to time. (iii) (unless revoked or varied by the Company in general meeting), such authority conferred by this Resolution shall continue in full force until the conclusion of the next annual general meeting of the Company or the date by which the next annual general meeting is required by law to be held, whichever is earlier. [See Explanatory Note (iii)] 9. Authority to grant awards and to allot and issue shares under the Heatec Performance Share Plan (Resolution 8) That approval be and is hereby given to the Directors to grant awards from time to time in accordance with the provisions of the Heatec Performance Share Plan (the Share Plan ), and, pursuant to section 161 of the Act, to allot and issue from time to time such number of shares in the capital of the Company (the Award Shares ) as may be required to be allotted, issued, and/or delivered pursuant to the vesting of the Awards Shares under the Share Plan, provided always that the aggregate number of Award Shares issued and/or issuable pursuant to the Share Plan, when aggregated together with the number of ordinary shares to be allotted and issued pursuant to the Heatec Employee Share Option Scheme and any other existing share schemes of the Company shall not exceed fifteen per cent. (15%) of the total number of issued shares of the Company (excluding treasury shares) from time to time. (unless revoked or varied by the Company in general meeting), such authority conferred by this Resolution shall continue in full force until the conclusion of the next annual general meeting of the Company or the date by which the next annual general meeting is required by law to be held, whichever is earlier. [See Explanatory Note (vi)] On Behalf of the Board Johnny Soon Yeow Kwee Chairman and CEO 4 April 2013 Singapore

93 NOTICE OF SIXTH ANNUAL GENERAL MEETING 91 Explanatory Notes (i) The effect of the Ordinary Resolution 3 proposed in item 3 above is to re-appoint a director who is over 70 years of age. Mr. Phillip Lee Soo Hoon will, upon re-appointment as Director of the Company, remain as a member of the Audit Committee and the Nominating Committee. He will be considered independent for the purposes of Rule 704(7) of the Catalist Rules. Annual Report 2012 (ii) The Ordinary Resolution 6 proposed in item 7 above, if passed, will empower the Directors from the date of the AGM until the date of the next Annual General Meeting, or the date by which the next Annual General Meeting is required by law to be held or when varied or revoked by the Company in general meeting, whichever is the earlier, to allot and issue Shares (whether by way of rights, bonus or otherwise) and/or convertible securities in the Company. The aggregate number of Shares and/or convertible securities that the Directors may allot and issue under this resolution shall not exceed one hundred per cent (100%) of the total number of issued Shares at the time of the passing of this resolution. For issue of Shares and/or convertible securities other than on a pro-rata basis to all shareholders, the aggregate number of Shares and/or convertible securities to be issued shall not exceed fifty per centum (50%) of the total number of issued Shares. For the purpose of this resolution, the percentage of issued Shares is based on the Company s issued Shares at the time this proposed Ordinary Resolution is passed after adjusting for new Shares arising from the conversion or exercise of convertible securities, the exercise of share options or the vesting of share awards outstanding or subsisting at the time when this proposed Ordinary Resolution is passed and any subsequent consolidation or subdivision of shares. (iii) (iv) The Resolution 7 proposed in item 8 above, if passed, will empower the Directors, from the date of the AGM until the date of the next Annual General Meeting, or the date by which the next Annual General Meeting is required by law to be held or when varied or revoked by the Company in general meeting, whichever is the earlier, to offer and grant options under the ESOS (which was approved at the extraordinary general meeting of the Company held on 18 June 2009) and to allot and issue Scheme Shares, pursuant to the exercise of options under the ESOS, provided that the aggregate number of Scheme Shares to be issued under the ESOS and any other existing share incentive schemes of the Company does not exceed fifteen per cent (15%) of the total number of issued Shares (excluding treasury shares) of the Company for the time being. The Resolution 8 proposed in item 9, if passed, will empower the Directors, from the date of the AGM until the date of the next Annual General Meeting, or the date by which the next Annual General Meeting is required by law to be held or when varied or revoked by the Company in general meeting, whichever is the earlier, to offer and grant awards under the Share Plan (which was approved at the extraordinary general meeting of the Company held on 18 June 2009), and to allot and issue Award Shares, pursuant to the vesting of the awards under the Share Plan provided that the aggregate number of Award Shares to be issued under the Share Plan and any other existing share incentive schemes of the Company does not exceed fifteen per cent (15%) of the total number of issued Shares (excluding treasury shares) of the Company for the time being. Notes: 1. A member of the Company entitled to attend and vote at the above AGM may appoint not more than two proxies to attend and vote on his behalf. 2. A proxy need not be a member of the Company and where there is more than one proxy, the proportion (expressed as a percentage of the whole) of his shareholding to be represented by each proxy must be stated. 3. The instrument appointing a proxy must be deposited at the registered office of the Company at 18 Tuas Avenue 18A, Singapore , not less than 48 hours before the time appointed for holding the AGM.

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95 HEATEC JIETONG HOLDINGS LTD. Registration No Z (Incorporated in the Republic of Singapore) PROXY FORM (Please see notes overleaf before completing this form) IMPORTANT 1. For investors who have used their CPF monies to buy the Company s shares, this Annual Report is forwarded to them at the request of their CPF Approved Nominees and is sent solely FOR THEIR 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. 3. CPF investors who wish to vote should contact their CPF Approved Nominee I/We, (Name) (*NRIC/Passport No.) of being a *member/members of HEATEC JIETONG HOLDINGS LTD. (the Company ) hereby appoint: (Address) Name NRIC/Passport No. Proportion of Shareholdings No. of Shares % Address and/or (delete as appropriate) Name NRIC/Passport No. Proportion of Shareholdings No. of Shares % Address or failing *him/they, the Chairman of the Meeting as *my/our *proxy/proxies to vote for *me/us and on *my/our behalf, at the Annual General Meeting ( AGM ) of the Company, to be held at 18 Tuas Avenue 18A, Singapore on Friday, 19 April 2013 at a.m. and at any adjournment thereof. *I/We direct *my/our *proxy/proxies to vote for or against the Resolutions to be proposed at the AGM of the Company as indicated hereunder. If no specific direction as to voting is given or in the event of any other matter arising at the AGM of the Company and at any adjournment thereof, the *proxy/ proxies will vote or abstain from voting at *his/their discretion. The authority herein includes the right to demand or to join in demanding a poll and to vote on a poll. (Please indicate your vote For or Against with a tick [ ] within the box provided.) No. Ordinary Resolutions For Against Ordinary Business 1. To receive and adopt the Directors Report and Audited Accounts for the financial year ended 31 December 2012, together with the Auditors Report thereon. 2. To re-elect Mr Yong Yeow Sin as a Director of the Company (under Articles 98 and 99 of the Company s Articles of Association). 3. To re-appoint Mr Phillip Lee Soo Hoon as a Director of the Company pursuant to Section 153(6) of the Companies Act, Chapter. 50 of Singapore (the Act ). 4. To approve Directors fees for the financial year ended 31 December To re-appoint Messrs Deloitte & Touche LLP as Auditors of the Company. Special Business 6. To authorise Directors to allot and issue shares pursuant to Section 161 of the Act. 7. To authorise Directors to offer and grant options and to allot and issue shares in accordance with the provisions of the Heatec Employee Share Option Scheme. 8. To authorise Directors to grant awards and to allot and issue shares in accordance with the provisions of the Heatec Performance Share Plan. Dated this 2013 Signature of Shareholder(s)/Common Seal of Corporate Shareholder *Delete where inapplicable Total Number of Shares in: CDP Register Register of Members No. of Shares

96 Notes: 1. Please insert the total number of shares held by you. If you have shares entered against your name in the Depository Register (as defined in Section 130A of the Act), you should insert that number of shares. If you have shares registered in your name in the Register of Members, you should insert that number of shares. If you have shares entered against your name in the Depository Register and shares registered in your name in the Register of Members, you should insert the aggregate number of shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the shares held by you. 2. A member of the Company entitled to attend and vote at the above meeting is entitled to appoint one or two proxies to attend and vote in his stead. A proxy need not be a member of the Company. 3. Where a member appoints more than one proxy, he shall specify the proportion of his shareholding to be represented by each proxy. If no such proportion or number is specified the first named proxy may be treated as representing 100% of the shareholding and any second named proxy as an alternate to the first named. 4. The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at 18 Tuas Avenue 18A, Singapore , not less than 48 hours before the time appointed for the AGM of the Company. 5. The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of an officer or attorney duly authorised. Where the instrument appointing a proxy or proxies is executed by an attorney on behalf of the appointor, the letter or power of attorney or a duly certified copy thereof must be lodged with the instrument. 6. A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks fit to act as its representative at the AGM of the Company, in accordance with Section 179 of the Act. General: 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 shares entered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the member, being the appointor, is not shown to have shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding the AGM of the Company, as certified by The Central Depository (Pte) Limited to the Company.

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99 CORPORATE INFORMATION BOARD OF DIRECTORS Johnny Soon (Chairman and Chief Executive Officer) Jimmy Yong (Executive Director) Yong Yeow Sin (Executive Director) Seah Kian Peng (Lead Independent Director) Phillip Lee (Independent Director) Michael Seow (Independent Director) Richard Ong (Independent Director) COMPANY SECRETARIES Chan Lai Yin Tay Chee Wah REGISTERED OFFICE 18 Tuas Avenue 18A Singapore AUDITORS Deloitte & Touche LLP Certified Public Accountants 6 Shenton Way #32-00 Tower Two Singapore Tay Hwee Ling Engagement Partner Date of Appointment: 14 September 2011 PRINCIPAL BANKERS Oversea-Chinese Banking Corporation Limited 65 Chulia Street #29-02/04 OCBC Centre Singapore DBS Bank Ltd Enterprise Banking 12 Marina Boulevard #43-04 DBS Asia MBFC Tower 3 Singapore SHARE REGISTRAR AND SHARE TRANSFER OFFICE Boardroom Corporate & Advisory Services Pte. Ltd. 50 Raffles Place #32-01 Singapore Land Tower Singapore SPONSOR PrimePartners Corporate Finance Pte. Ltd. 20 Cecil Street #21-02 Equity Plaza Singapore