united AEI CORPORATION LTD. annual report 2008

Transcription

1 united AEI CORPORATION LTD. annual report

2 contents 01 Introduction 08 CEO s Message 10 Board of Directors 11 Senior Management 12 Operations Review 14 Corporate Governance Report 25 Financial Review 65 Shareholding Statistics 67 Notice of Annual General Meeting 71 Proxy Form IBC Corporate Information

3 AEI is a people oriented organisation. To continually excel in all areas of our business operations, while staying united in the pursuit of our goals and vision.

4 inspiring through leadership and the dedication of our people With inspired leadership and the dedication of our people we will continue to move forward with the same determination and drive that have always defined our company.

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6 growing relationships and commitment to our alliances We remain committed to nurturing long-term and mutually beneficial relationships with all our alliances.

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8 developing our potential and the vision of our future When change happens so fast, we must maintain an open and creative mind to envision the next step to stay ahead.

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10 CEO s Message Dear Fellow Shareholders, The year ended 31 December saw AEI Corp achieving total business turnover of S$ million, down 11.7% compared to the previous year. AEI Corp also incurred its first loss since the Asian Financial Crisis in This was due to a substantial write-down of its raw material inventory and the impairment of its convertible loan with Hoi Po Metal Manufactory Limited ( Hoi Po ). However, our cash position still remains strong and we are proposing a dividend of 0.75 cents per share for FY. Summary of FY In the first half of the year, the Group saw healthy contributions from the Electronic and Precision segment despite the volatility in Aluminium prices. In the 2nd quarter of the year, we installed a new double-action extrusion line to replace an existing aged extrusion line; hence, some production capacity was lost. This resulted in the Group operating with three extrusion lines instead of the usual four, and caused a curtailment of around one quarter of its production capacity in the interim. The second half of the year also saw a drop in global business sentiment as the turmoil which first broke out in the US financial sector developed into a credit crunch, and its impacts being spread to the rest of the world. LME Aluminium prices followed a sharp downtrend from its height of US$3,291 per metric tonne quoted on 11 July to US$1,455 per metric tonne on 31 December. In order to keep our operation going smoothly, we keep a ready stock of raw material inventory to cater for the time lag between placing an order and finally taking delivery of the billet raw materials at the local port. The inventory level is also monitored against customer orders and forecasts to ensure that we do not run out of raw materials to fulfill timely product deliveries to our key customers, many of whom are operating in the fast-paced Electronics sector. However, as in the case of all businesses which carry commodity raw material inventories, the Company is susceptible to financial impact arising from fluctuations in the LME Aluminium price. In the event of a steep drop in Aluminium price, there will be substantial difference in the purchase price of the inventory compared to current market price. The Group has taken steps to reduce inventory level in anticipation of slower customer demands into the new year. In February this year, the Group also announced its decision not to proceed with a joint venture in China with Hoi Po; with whom it had earlier entered into a non-binding MOU for the establishment of a joint venture company to jointly develop the business of manufacture and sale of aluminium products in China, as the recent global financial crisis has affected the prospect of the joint venture business and the values of the mortgaged assets severely. After failing to reach an agreement with the creditor banks of Hoi Po on a reduction in purchase consideration for the facilities and assets, the Board decided it would not be in the best interest of the Group to proceed with the joint venture arrangement, and to pursue vigorously its claims against Hoi Po to repay a convertible loan. In the meantime, the Board has decided to take the prudent step of providing for impairment of the total value of the outstanding convertible loan in the Group s financial results for the year ending 31 December. In July, the Group extended a convertible loan of USD2.5 million to M2B World Asia Pacific Pte Ltd ( M2B ), a broadband media company. The convertible loan will expire July 2010 and bears an interest of 5% per annum. This 2 year period will allow the Group time to assess how the business plans of M2B pan out and decide on conversion. Like all companies after the global financial crisis, M2B has also suffered some set backs and their plans delayed. We understand that they have made inroads into China, Indonesia and Malaysia to establish JV platforms to implement their business models. We believe that they still have very good potential and will likely to succeed in establishing their JV platforms.

11 Going Forward FY came to a close with most of the major global economies were already in or near a recession. The Group foresees further deteriorating market conditions and greater challenges ahead in FY2009. The Group continues to streamline operating costs, rationalize production resources, enhancing our competitiveness, and strengthening our market position as the premier world class supplier of the highest quality precision aluminium extruded products. We continue to explore the option of setting up a manufacturing platform in China with the view of enhancing our competitiveness, broadening our product range and be closer to our customers. But, we will also need to consider other strategic approaches; i.e. develop alternative engines and become a multi-discipline corporation that will generate multiple revenue streams thus enhancing shareholders value and achieving long term sustainable growth. We have assembled a team and are actively looking out for new opportunities. We have weathered many storms before this one. The Group is confident that its strong financial position puts it amongst those companies that are robust to weather this time of adversity, and to be well positioned to meet new challenges when this economic crisis is resolved. For the fifth year running, we will continue to reward shareholders with a dividend payout. TAN CHU EN IAN I, on behalf of the team at AEI Corp, would like to express my appreciation to all our customers, suppliers, business associates, shareholders and board members for all their generous support and look forward to our continued partnership for the challenging years ahead. 9

12 Board of Directors YEUNG KOON SANG ALIAS DAVID YEUNG is the Non-executive Chairman and Independent Director of the Group and was first appointed on 26 December He was last re-elected on 23 April as an Independent Director. He is the Audit Committee Chairman and a member of the Nominating and Remuneration Committees. He is currently a public accountant with David Yeung & Co. which he founded in Mr Yeung has over 20 years experience in public accountancy and had worked previously with Deloitte & Touche, UK and Ernst & Young, Singapore. He was conferred the Public Service Medal by the President of the Republic of Singapore in Mr Yeung holds a Master of Social Science (Accounting) from the University of Birmingham, England. He is also a Fellow of the Institute of Certified Public Accountants of Singapore and a fellow of the Association of Chartered Accountants, United Kingdom. TAN CHU EN IAN is the CEO of our Group. He first joined the Group on 1 January 1995 as a Director of product and market research and oversees the review and implementation of the corporate structure, management systems and policies. He was appointed as a Director of the Board on 22 September 2003 and was subsequently appointed as our CEO on 1 October He was last re-elected on 23 April. He is primarily responsible for the overall management, business strategies and expansion of the Group. He has a Bachelor of Engineering (Honours) from the University of Manchester, Institute of Science and Technology. SINTA MUCHTAR is our Executive Director and was first appointed as a Director on 9 May 1989 and was last re-elected on 28 April She is in charge of the general administration, finance and human resource matters of the Group. She is also a shareholder and Executive Director of Lauw & Sons. She has a Bachelor of Business Administration from the University of Hawaii, USA. She has nearly 24 years of diversified experience ranging from real estate development, to travel, leisure, and management of hotels and a fast-food chain in Singapore, Taiwan, Malaysia, Indonesia and Australia. 10

13 Senior Management DR VASOO SUSHILAN is an Independent Director of the Group and was first appointed on 26 December He was last re-elected on 29 April as an Independent Director. He is the Remuneration Committee Chairman and a member of the Audit and Nominating Committees. He is currently an Associate Professional Fellow (Department of Social Work) with the National University of Singapore, Chairman, Seacare Education Pte Ltd and Director, TauRx Therapeutics Ltd. Dr Vasoo also served as a Member of Parliament from 1984 and retired in TENG CHEONG KWEE is an Independent Director of the Group and was first appointed on 26 December He was last re-elected on 29 April as an Independent Director. He is the Nominating Committee Chairman and a member of the Audit and Remuneration Committees. He also serves as an Independent Director in several companies listed on the Singapore Exchange. Mr Teng started his career in the Singapore Government Administrative Service, and subsequently served as Assistant Director and Deputy Director in the Monetary Authority of Singapore, and as Secretary of the Securities Industry Council. From 1989 to 1999, he was Executive Vice President of the Stock Exchange of Singapore. From 1999 to 2000, Mr Teng was with the Singapore Exchange as Executive Vice President and Head, Risk Management and Regulatory Division. Mr Teng graduated from the University of Newcastle, Australia, in Bachelor of Engineering (Industrial) with the First Class Honours, and Bachelor of Commerce in CHIEN HSIN KUN is our Assistant Operations Director and is primarily responsible for the production and maintenance management of our production facility and equipment. He has been with the Group since Apart from his expertise in aluminium extrusion production and surface finishing, he is also experienced in mechanical and electrical installations. LING RUOH HUEI is our Strategic Planning & Marketing Manager. His portfolio of responsibilities includes strategic planning, overseeing the implementation of overall business and marketing strategies and the development of new businesses for the Group. He has been with the company for more than 11 years. His career experience spanned from the civil service to multi-national corporations. Prior to joining the Group, he was an assistant manager in Coopers & Lybrand Management Consultants where he managed business consultancy projects, specializing in the area of strategic planning for small and medium sized enterprises. He holds a Bachelor of Economics (Honours) from the University of Sydney. LUM SOH PING is our Finance Manager. She oversees the Group s various accounting, financial control and reporting functions, including SGX-ST reporting, budgetary and credit control and effective cash flow planning. She is also responsible for the Group s cost accounting and management information system. She holds a Bachelor of Accountancy degree from Griffith University, Australia, and is currently a member of CPA Australia. 11

14 Operations Review Total Revenue achieved this year was $60.13 million, a decrease of 11.7% compared to $68.12 million last year. This year saw a drop in sales revenue for both the Construction & Infrastructure segment as well as the Electronics & Precision Engineering segment. In the first half of the year, the Group embarked on a short-term project to replace an existing aged extrusion production line. This resulted in a temporary decrease in production capacity, as the Group operated with only three extrusion lines instead of the usual four from April to July. Full production capacity was restored thereafter upon successful completion of the replacement project. Towards the 2nd half of the financial year, financial turmoil broke out within the US financial sector, and subsequently developed into a global credit crunch with the collapse of finance giants like Lehman Brothers & AIG. This resulted in significant negative impact in market sentiment causing drastic reduction in consumer consumption and broad contraction in global business activities. Accordingly the Group also witnessed a significant decrease in sales revenue in the last quarter of the year which is usually best quarter for the industry. This year also saw the Group incurring a Loss Before Tax of $6.16 million, compared to a profit of $5.23 million last year. Loss After Tax was at $5.79 million, versus profit of $4.49 million achieved last year. However, the decrease in financial performance is attributable mainly to inventories write-down to net realizable value, particularly the aluminium billet raw material inventory, following significant downward trend in the LME aluminium price during the 2nd half of the financial year due to faltering global demand following the financial turmoil. The effect of inventories write-down alone for the financial year was $6.44 million. Also contributing to the loss for the year was the impairment of a convertible loan of $4 million granted to Hoi Po Metal Manufactory Company Limited ( Hoi Po ) on 20 June, which was charged to Other Operating Expenses. After several rounds of discussions, the Group is not able to come to an agreement with the financial institutions of Hoi Po on a proposed reduction on a reassessed purchased consideration of the mortgaged assets of Hoi Po given the current market conditions. The Group decided it is in the best interest of the Group not to convert the Convertible Loan into shares in the capital of Hoi Po, but instead to pursue its claims against Hoi Po to repay the Convertible Loan. However, until the total outstanding Convertible Loan has been recovered, the Group has decided to take the prudent step of providing for impairment of the total value of the outstanding Convertible Loan in the financial results for the year ended 31 December. Electronics & Precision Engineering The customers in this segment comprise mainly of component manufacturers for the Electronics, Personal Computers, Hard Disk Drive and Consumer Products industries. Segment revenue for the full year decreased by 10.5% to $52.26 million during the year ended 31 December, down from $58.33 million in the previous year. Contribution from this key segment continues to reach a high of 86.9% of the Group s total business turnover this year. Towards the last quarter of, the Group saw a noticeable slowdown in customer orders from this segment, following the contraction in global business activities and reduction in consumer spending, as a result of the fallout from the global financial turmoil. 12

15 Operations Review Construction & Infrastructure The customers in this segment comprise mainly of fabricators, contractors and stockists who serve the construction, civil engineering and infrastructure building industries. Business turnover for this segment decreased by 19.6% to $7.87 million this year, compared to $9.78 million for the previous year. This year, the Group allocated more of its production capacity to the Electronics & Precision Engineering segment, especially during the period where one of its aged extrusion line was being replaced and the Group had to operate with only 3 extrusion lines and at a lower production capacity. As a result, contribution by this segment to the total business turnover of the Group decreased by 13.1%. AEI Engineering Pte. Ltd. This subsidiary offers a range of downstream value-added services to complement our existing extrusion business, such as precision machining, surface finishing, sub-assembly and packaging work. Aluminium Price For the first half of the year, LME Aluminium price was on an upward trend, moving from US$2,365 per metric tonne ( MT ) on 2 January, to a high of US$3,291 MT on 11 July, before moving downwards at an even swifter pace to reach the year low of US$1,423 MT on 16 December, and shortly after closed the year at $1,455 MT on 31 December. The volatility of aluminium raw material price has the potential to pose complications to the operating results of the Group, as witnessed in the significant inventory write-downs by major manufacturers worldwide like Alcoa and Rusal. Ongoing aluminium price will depend on demand and supply situations, as well as global economic condition and energy prices. Fluctuations in aluminium price will continue to have significant impact on the Group s future financial results going forward. Business turnover for this subsidiary decreased this year with reduced customer orders, given the weak market sentiment following the global financial crisis. The subsidiary however, continued to bring in new customers and work with new business prospects to develop potential new businesses from new geographical markets. 13

16 Corporate Governance Report The Board of Directors of AEI Corporation Ltd. (the Company ), is committed to high standards of corporate governance and has adopted the corporate governance practices contained in the Code of Corporate Governance ( Code ) so as to ensure greater transparency and protection of shareholders interests. This statement outlines the main corporate governance practices that were in place throughout the financial year. 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 Board of Directors currently comprises five Directors, three of whom are independent Directors. The Directors of the Company as at the date of this statement are:- Yeung Koon Sang alias David Yeung Tan Chu En Ian Sinta Muchtar Dr Vasoo Sushilan Teng Cheong Kwee (Non-executive Chairman and Independent Director) (Executive Director and Chief Executive Officer) (Executive Director) (Independent Director) (Independent Director) The Board s primary role is to protect and enhance long-term shareholders value. It sets the overall strategy for the Company and supervises the management. To fulfill this role, the Board is responsible for the overall corporate governance of the Company including setting its strategic direction, establishing goals for management and monitoring the achievement of these goals. The Board has identified a number of areas in which the Board has direct responsibility for decision-making. Major investments and funding decisions are approved by the Board. The Board also meets to consider the following corporate matters:- approval of half-yearly and year-end results announcement; approval of the annual reports and accounts; convening of shareholders meetings; approval of corporate strategies; material acquisitions and disposal of assets; and major investments and funding. Regular meetings are held to deliberate the strategic policies of the Company including significant acquisitions and disposals, review and approve annual budgets, review the performance of the business and approve the public release of periodic financial results. The Board has formed Board Committees namely the Audit Committee, the Nominating Committee, Remuneration Committee and a specialized Committee, namely, the Executive Committee, to assist in carrying out and discharging its duties and responsibilities efficiently and effectively. 14

17 These Committees function within clearly defined terms of references and operating procedures, which are reviewed on a regular basis. The effectiveness of each Committee is also constantly reviewed by the Board. The following table discloses the number of meetings held for Board and Board Committees and the attendance of all Directors for the financial year ended 31 December : - Board Audit Committee Remuneration Committee Nominating Committee Number of meetings held Yeung Koon Sang alias David Yeung Tan Chu En Ian 5 NA NA NA Sinta Muchtar 5 NA NA NA Dr Vasoo Sushilan Teng Cheong Kwee While the Board considers Directors attendance at Board meetings to be important, it should not be the only criterion to measure their contributions. It also takes into account the contributions by board members in other forms including periodical reviews, provision of guidance and advice on various matters relating to the Group. Board Composition and Balance 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. The Board of Directors has three independent Directors. The criteria for independence are based on the definition provided 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 judgment of the Company s affairs. Key information about the Directors is presented in the Board of Directors section of the annual report. Particulars of interests of Directors who held office at the end of the financial year in shares, debentures, warrants and share options in the Company and in related corporations (other than wholly-owned subsidiaries) are set out in the Directors Report on pages 26 and 27 of this annual report. 15

18 Corporate Governance Report 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 separate and distinct, each having his own areas of responsibilities. The Company believes that a distinctive separation of responsibilities between the Chairman and the CEO will ensure an appropriate balance of power, increased accountability and greater capacity of the Board for independent decision-making. Since the Company s listing in 2004, Mr David Yeung has been serving as the Non-executive Chairman of the Board while Mr Ian Tan has been the CEO. Mr David Yeung and Mr Ian Tan are not related to each other. The Non-executive Chairman ensures that the board meetings are held when necessary and sets the board meeting agenda in consultation with the CEO. The Non-executive Chairman reviews the board papers together with the CEO, prior to presenting them to the Board. The Non-executive Chairman and the CEO ensure that Board members are provided with complete, adequate and timely information on a regular basis to enable them to be fully apprised of the affairs of the Company. Board papers incorporating sufficient information from the management are forwarded to the Board Members in advance of a Board Meeting to enable each member to be adequately prepared. In discharging his roles and responsibilities, Mr David Yeung consults with the Board, Audit Committee, Nominating Committee and Remuneration Committee on major issues and as such, the Board believes that there are adequate safeguards in place against any concentration of power and authority in a single individual. As the Company s CEO, Mr Ian Tan is responsible for the day-to-day management affairs of the Group. Mr Ian Tan reports to the Board and is responsible for ensuring that policies and strategies adopted by the Board are implemented. Board Membership Principle 4: There should be a formal and transparent process for the appointment of new directors to the Board. The Nominating Committee ( NC ) was constituted on 25 February 2004 and comprises the following members: Chairman: Mr Teng Cheong Kwee (Independent Director) Members: Mr Yeung Koon Sang alias David Yeung (Independent Director) Dr Vasoo Sushilan (Independent Director) The primary function of the NC is to determine the criteria for identifying candidates and reviewing nominations for the appointment of directors to the Board and also to decide how the Board s performance may be evaluated and to propose objective performance criteria for the Board s approval. 16

19 Its duties and functions are outlined as follows: - a. reviewing and recommending the nomination or re-nomination of Directors (including Independent Directors of the Company); b. determining on an annual basis whether or not a Director is independent; and c. recommend a framework for the evaluation of the Board s performance and individual Director s contribution to the effectiveness of the Board for the approval of the Board, and carry out such evaluation. The Articles of Association of the Company require one-third of the Board to retire from office at each Annual General Meeting ( AGM ). Accordingly, two Directors will retire each year and are eligible for re-nomination and re-election at the forthcoming annual general meeting. The NC reviewed, on an annual basis, the independence of the Independent Directors, using the criteria of independence in the Code, and has determined that they are independent. 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 NC examines the Board s size to assess its appropriateness for effective decision making, taking into account the nature and scope of the Company s operations. The NC will review and evaluate the performance of the Board as a whole, taking into consideration the attendance record at the meetings of the Board and Board Committees and also the contribution of each Director to the effectiveness of the Board. The NC, with the participation of the Executive Directors, reviewed and discussed the performance of the Board during the year, and identified specific areas where improvements might be necessary to enhance the effectiveness of the Board. In the coming year, the NC will be working towards putting in place a framework for the assessment of the performance of each Director. When the need to appoint a new member to the Board arises, the NC will identify and consider each candidate s suitability, and make recommendation to the Board after taking into consideration his qualification and experience against the selection criteria agreed with the Board, and his ability to increase the effectiveness of the Board. 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. All directors are, at set intervals, and from time to time when the need arises, furnished with information concerning the Company to enable them to be apprised of the decisions and actions of the Company s executive management and of major developments in the Group. The Board has unrestricted access to the Company s records and information. 17

20 Corporate Governance Report Senior members of management staff are available to provide explanatory information in the form of briefings to the Directors or formal presentations in attendance at Board meetings, or by external consultants engaged on specific projects. The Board has separate and independent access to the Company Secretaries and to other senior management executives of the Company and of the Group at all times in carrying out their duties. The Company Secretaries attend all Board meetings and meetings of the Board and specialized committees of the Company and ensure that Board procedures are followed and that applicable rules and regulations are complied with. The minutes of all Board and specialized committees meetings are circulated to the Board. Each Director has the right to seek independent legal and other professional advice, at the Company s expense, concerning any aspect of the Group s operations or undertakings in order to fulfill their duties and responsibilities as Directors. 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 was constituted on 25 February 2004 and comprises three members, a majority of whom are Directors who are independent of the management and free from any business or other relationships which may materially interfere with the exercise of their independent judgement. The members of the RC are: Chairman: Dr Vasoo Sushilan (Independent Director) Members: Mr Yeung Koon Sang alias David Yeung (Independent Director) Mr Teng Cheong Kwee (Independent Director) The RC recommends to the Board a framework of remuneration for the Directors and Executive Officers, and determines specific remuneration package for each Executive Director. The recommendations will be submitted for endorsement by the Board. All aspects of remuneration, including but not limited to Directors fees, salaries, allowances, bonuses and benefits in kind, will be reviewed by the RC. Each RC member will abstain from voting on any resolution in respect of his remuneration package. The recommendations of the RC will be submitted to the Board for endorsement. The RC will be provided with access to expert professional advice on remuneration matters as and when necessary. The expense of such services shall be borne by the Company. The Company also has in place a long term incentive scheme under the AEI Share Option Scheme ( the Scheme ) administered by the Share Option Scheme Committee which is also the RC. As at the date of this report, no option to take up un-issued shares of the Company has been granted. 18

21 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. In setting remuneration packages, the Remuneration Committee will take into consideration the pay and employment conditions within the industry and in comparable companies. The remuneration of Non-executive Directors is also reviewed to ensure that the remuneration is commensurate with the contribution and responsibilities of the Directors. The Company will submit the proposed quantum of Directors fee each year to the shareholders for approval at each AGM. The Executive Directors have service agreements. The service agreements cover the terms of employment, salaries and other benefits. Non-executive Directors have no service contracts. Executive Committee (EXCO) The EXCO was constituted on 17 December 2004 and has three members, two of whom are the Executive Directors of the Company and the third member is one of the Company Secretaries. The EXCO comprises the following members: - 1. Mr Ian Tan 2. Ms Sinta Muchtar 3. Mr Ngiam Zee Moey The EXCO s role is to execute strategies approved by the Board, oversee the execution of all operational matters for the attainment of targets and action plans set out in the Annual Plan and Budget and to look into new business ventures that have the prospect to create value for the Group and the shareholders. 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. 19

22 Corporate Governance Report The details of the remuneration of Directors of the Group disclosed in bands for services rendered during the financial year ended 31 December are as follows: Number of directors Above $500, $250,000 to $500, Below $250, Total 5 5 The summary compensation table for the Directors of the Group for the financial year ended 31 December is set out below: Salary & CPF Bonus AWS & CPF Directors Fee Allowances and Other Benefits Total Compensation Directors % % % % % Above $500,000 Tan Chu En Ian $250,000 to $500,000 Sinta Muchtar Below S$250,000 Yeung Koon David Yeung Dr Vasoo Sushilan Teng Cheong Kwee The remuneration of the top five executives, other than Executive Directors, in are set out below in bands of S$250,000. The Board believes that it is in the best interest of the Company that the identity of the top five executives be not disclosed. Above S$250,000 0 Below S$250,000 5 Immediate Family Member of Directors or Substantial Shareholders Save for Mr Ian Tan who is the husband of Ms Sinta Muchtar and Ms Sinta Muchtar who is the wife of Mr Ian Tan, whose remunerations exceeded S$150,000 for the financial year ended 31 December, there are no immediate family members of the Director or Substantial Shareholders whose remuneration exceeds S$150,000 for the financial year ended 31 December. 20

23 ACCOUNTABILITY AND AUDIT Accountability Principle 10: The Board should present a balanced and understandable assessment of the company s performance, position and prospects. The Board is accountable to the shareholders and is mindful of its obligations to furnish timely information and to ensure full disclosure of material information to shareholders in compliance with statutory requirements and the Listing Manual of the SGX-ST. Price sensitive information will be publicly released either before the Company meets with any group of investors or analysts or simultaneously with such meetings. Financial results and annual reports will be announced or issued within legally prescribed periods. Audit Committee (AC) 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 was constituted on 25 February 2004 and comprises the following three independent Directors: Chairman: Mr Yeung Koon Sang alias David Yeung (Non-executive Chairman and Independent Director) Members: Mr Teng Cheong Kwee (Independent Director) Dr Vasoo Sushilan (Independent Director) The roles and functions of the AC are spelt out in the AC s Terms of Reference, which are as follows:- a. to review with the external auditors the audit plan, their evaluation of the system of internal accounting controls, their audit report, their management letter and the management s response; b. to review with the internal auditor its internal audit plans and internal audit findings; c. to review the quarterly or half-yearly, as the case may be, and annual financial statements, and results announcements before submission to the Board for approval, focusing in particular, on changes in accounting policies and practices, major risk areas, significant adjustments resulting from the audit, the going concern statement, compliance with accounting standards as well as compliance with any stock exchange and statutory/regulatory requirements; d. to review the internal control and procedures and ensure co-ordination between the external auditors and the management, review the assistance given by management to the auditors and discuss problems and concerns, if any arising from the interim and final audits, and any matters which the auditors may wish to discuss (in the absence of management where necessary); e. to review and discuss with the external auditors any suspected fraud or irregularity, or suspected infringement of any relevant laws, rules or regulations, which has or is likely to have a material impact on the Company s operating results or financial position, and the management s response; 21

24 Corporate Governance Report f. to consider and recommend the appointment or re-appointment of the external auditors and matters relating to the resignation or dismissal of the auditors; g. to review interested person transactions falling within the scope of Chapter 9 of the SGX-ST Listing Manual ( Listing Manual ); h. to review potential conflicts of interest, if any; i. to undertake such other reviews and projects as may be requested by the Board and report to the Board its findings from time to time on matters arising and requiring the attention of the AC; and j. to generally undertake such other functions and duties as may be required by the statute or the SGX-ST Listing Manual, or by such amendments as may be made thereto from time to time. The Audit Committee has the power to conduct or authorize investigations into any matters within the Audit Committee s scope of responsibility. The Audit Committee is authorized to obtain independent professional advice if it deems necessary in the discharge of its responsibilities. Such expenses are to be borne by the Company. Each member of the Audit Committee shall abstain from voting any resolutions in respect of matters he is interested in. The Audit Committee has full access to and co-operation of the Management and has full discretion to invite any Director or executive officer to attend its meetings, and has been given reasonable resources to enable it to discharge its functions. The Audit Committee meets with both the external and internal auditors without the presence of the Management at least once a year. The Audit Committee reviews the independence of the external auditors annually. Audit Committee, having reviewed the range and value of non-audit services performed by the external Auditors, Ernst & Young, was satisfied that the nature and extent of such services will not prejudice the independence and objectivity of the external auditors. The Audit Committee recommended that Ernst & Young be nominated for re-appointment as Auditors at the forthcoming AGM. The Company is putting in place a whistle-blowing framework where staff of the Company can raise concerns about improprieties to the Audit Committee. The objective for such arrangement is to ensure independent investigation of such matters and for appropriate follow-up action. 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 Audit Committee will ensure that a review of the effectiveness of the Company s material internal controls, including financial, operational and compliance controls and risk management, is conducted annually. In this respect, the Audit Committee will review the audit plans, and the findings of the auditors and will ensure that the Company follows up on the auditors recommendations raised, if any, during the audit process. 22

25 The Group has in place a system of internal control and risk management for ensuring proper accounting records and reliable financial information as well as management of business risks with a view to safeguarding shareholders investments and the Company s assets. The risk management framework implemented provides for systematic and structured review and reporting of the assessment of the degree of risk, evaluation and effectiveness of controls in place and the requirements for further controls. Internal audit Principle 13: The Company should establish an internal audit function that is independent of the activities it audits. The primary objectives of the internal audit reviews are to:- (a) assess if adequate systems of internal controls are in place to protect the funds and assets of the Company and to control commitment and disbursement of expenditure and other outlay and to ensure that such control procedures are complied with; (b) assess if operations of the business processes under review are conducted efficiently and effectively; and (c) identify internal control improvement opportunities. The internal auditors report to the Chairman of the AC. In accordance with the internal audit plan approved by the AC, Nexia TS Public Accounting Corporation has completed an internal audit on the inventory and purchasing systems of the Company and reported no material weakness in internal controls. The internal auditors findings and recommendations were submitted to and have been reviewed and discussed by the AC. COMMUNICATION WITH SHAREHOLDERS Principle 14: Companies should engage in regular, effective and fair communication with shareholders. Principle 15: Companies should encourage greater shareholder participation at AGMs, and allow shareholders the opportunity to communicate their views on various matters affecting the company. In line with continuous obligations of the Company pursuant to the SGX-ST s Listing Rules, the Board s policy is that all shareholders be informed of all major developments that impact the Group. Information is disseminated to shareholders on a timely basis through: (a) SGXNET announcements and news release; (b) Annual Report prepared and issued to all shareholders; (c) Press releases on major developments of the Group; (d) Notices of and explanatory memoranda for AGM and extraordinary general meetings ( EGM ); and (e) Company s website at where shareholders can access information on the Group. 23

26 Corporate Governance Report The Company s AGMs are the principal forums for dialogue with shareholders. The Chairmen of the Audit, Remuneration and Nominating Committees are normally available at the meetings to answer any question relating to the work of these committees. The External Auditors shall also be present to assist the Directors in addressing any relevant queries by the shareholders. Shareholders are encouraged to attend the AGM/EGM to ensure high level of accountability and to stay apprised of the Group s strategy and goals. Notice of the meeting will be advertised in newspapers and announced on SGXNET. Dealing In Securities The Company has in place a policy prohibiting share dealings by Directors and employees of the Company for the period of one month prior to the announcement of the Company s half yearly and yearly results as the case may be, and ending on the date of the announcement of the relevant results. Directors and employees are expected to observe the insider trading laws at all times even when dealing in securities within permitted trading period. Interested Person Transactions Policy The Company has established internal control policies to ensure that transactions with interested persons are properly reviewed and approved and are conducted at arms length basis. The Company will seek annual renewal of general mandate from its shareholders for those recurrent transactions of revenue or trading nature of those necessary for its day-to-day operations. Material Contracts There was no material contracts of the Company involving the interests of the Chief Executive Officer, each Director or controlling shareholder entered into since the end of the previous financial year. 24

27 financial review 26 Directors Report 28 Statement by Directors 29 Independent Auditors Report 31 Consolidated Income Statement 32 Consolidated Balance Sheets 33 Consolidated Statement of Changes in Equity 34 Consolidated Statement of Cash Flows 35 Notes to the Financial Statements

28 Directors Report The directors have pleasure in presenting their report together with the audited consolidated financial statements of AEI Corporation Ltd. (the Company ) and its subsidiaries (the Group ) for the year ended 31 December, and the balance sheet of the Company as at 31 December. Directors The names of the directors in office at the date of this report are :- Yeung Koon Sang alias David Yeung Tan Chu En Ian Sinta Muchtar Dr Vasoo Sushilan Teng Cheong Kwee The directors who held office at the end of the financial year had, according to the register required to be kept under Section 164 of the Singapore Companies Act, Cap. 50, beneficial interests in shares of the Company as stated below:- Name of Director At 1.1. Shares Direct interest Deemed interest At At 1.1. At Tan Chu En Ian 37,092,079 37,092,079 Sinta Muchtar 78,571,314 78,571,314 Yeung Koon Sang alias David Yeung 100, ,000 Dr Vasoo Sushilan 100, ,000 Teng Cheong Kwee 100, ,000 There was no change in any of the above-mentioned interests between the end of the financial year and 21 January Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangements, to which the Company is a party, whereby directors might acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate. Since the end of the previous financial year, no director has received or has become entitled to receive benefits under contracts required to be disclosed by Section 201(8) of the Singapore Companies Act, Cap. 50. Tan Chu En Ian and Sinta Muchtar have employment relationships with the Company and have received remuneration in those capacities. 26

29 Directors Report Options The Company has established the AEI Share Option Scheme to provide an opportunity for its directors and employees to participate in the equity of the Company. The Scheme will be administrated by the Remuneration Committee. No options have been granted to date. Audit Committee The audit committee performed the functions specified in the Singapore Companies Act, Cap. 50. The functions performed are detailed in the Report of Corporate Governance. Auditors Ernst & Young LLP have expressed their willingness to accept re-appointment as auditors. On behalf of the Board, Tan Chu En Ian Director Sinta Muchtar Director Singapore 8 April

30 Statement by Directors Pursuant to Section 201(15) We, Tan Chu En Ian and Sinta Muchtar, being the directors of AEI Corporation Ltd., do hereby state that, in the opinion of the directors : (i) (ii) the accompanying balance sheets, consolidated income statement, consolidated statement of changes in equity, and consolidated cash flow statement together with notes thereto are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December and the results of the business, changes in equity and cash flows of the Group for the year ended on that date, and at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due. On behalf of the Board, Tan Chu En Ian Director Sinta Muchtar Director Singapore 8 April

31 Independent Auditors Report To the Members of AEI Corporation Ltd. We have audited the accompanying financial statements of AEI Corporation Ltd. (the Company ) and its subsidiaries (the Group ) set out on pages 31 to 64, which comprise the balance sheets of the Group and the Company as at 31 December, the statement of changes in equity, income statement and cash flow statement of the Group for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management s responsibility for the financial statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the Act ) and Singapore Financial Reporting Standards. This responsibility includes devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors responsibility Our responsibility is to express an opinion on these financial statements based on our audit. Except as discussed below, 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 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 auditor s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. As at 31 December, the Company has a convertible loan amounting to $3,595,000 due from a third party. As disclosed in Note 13(b) to the financial statements, the directors of the Company consider this amount to be recoverable in full and no impairment is expected. Based on the information available to us, we have not been able to ascertain the recoverability and whether an impairment is required in respect of the convertible loan. 29

32 Independent Auditors Report To the Members of AEI Corporation Ltd. Opinion In our opinion, except for the matters discussed, (i) (ii) the consolidated financial statements of the Group and the balance sheet of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December and the results, changes in equity and cash flows of the Group for the year ended on that date; and the accounting and other records required by the Act to be kept by the Company and by the subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act. Ernst & Young LLP Public Accountants and Certified Public Accountants Singapore 8 April

33 Consolidated Income Statement for the year ended 31 December (In Singapore dollars) Note (Restated) Revenue 3 60,131 68,117 Cost of sales (64,272) (65,618) Gross (loss)/profit (4,141) 2,499 Other operating income 4 9,258 9,425 Selling and distribution costs (1,617) (1,468) Administrative expenses (5,927) (5,455) Other operating expenses 13a (4,038) (Loss)/profit from operating activities 5 (6,465) 5,001 Finance cost 6 (2) (1) Finance income (Loss)/profit before taxation (6,155) 5,232 Taxation (746) (Loss)/profit for the year (5,785) 4,486 Attributable to : Equity holders of the Company (5,753) 4,483 Minority interest (32) 3 (5,785) 4,486 Basic and diluted (loss)/earnings per share (cents) 9 (2.20) 1.86 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 31

34 Consolidated Balance Sheets as at 31 December (In Singapore dollars) Note Group Company Non-current assets Property, plant and equipment 11 16,940 16,612 16,125 15,911 Investment in subsidiaries Convertible loan receivable 13b 3,595 3,595 20,535 16,612 20,676 16,866 Current assets Convertible loan receivable 13a 4,038 4,038 Inventories 14 10,153 11,978 10,138 11,960 Trade receivables 15 7,398 12,203 7,398 12,203 Other receivables Loan to subsidiaries Prepaid operating expenses Cash and cash equivalents 22 22,687 28,466 22,652 28,290 40,350 56,798 40,395 56,578 Current liabilities Trade payables , ,190 Deferred income Other payables 17 2,331 2,200 2,263 2,107 Amounts due to subsidiary Provision for taxation ,359 7,275 3,502 7,497 Net current assets 36,991 49,523 36,893 49,081 Non-current liabilities Deferred income Deferred taxation 19 2,226 2,538 2,159 2,446 2,326 2,538 2,259 2,446 Net assets 55,200 63,597 55,310 63,501 Equity attributable to equity holders of the Company Share capital 20 46,465 46,465 46,465 46,465 Asset revaluation reserve 1,296 1,296 1,296 1,296 Retained profits 23 7,424 15,789 7,549 15,740 55,185 63,550 55,310 63,501 Minority interest Total equity 55,200 63,597 55,310 63,501 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 32

35 Consolidated Statement of Changes in Equity for the year ended 31 December (In Singapore dollars) Attributable to equity holders of the Company Minority interest Total equity Note Share capital *Asset revaluation reserve Retained profits Total At 1 January 39,395 1,296 12,645 53, ,425 Profit for the year 4,483 4, ,486 Total recognised income and expenses for the year 4,483 4, ,486 Dividends on ordinary shares 10 (1,339) (1,339) (1,339) Issue of ordinary shares 7,070 7,070 7,070 Cancellation of shares (45) (45) At 31 December and 1 January 46,465 1,296 15,789 63, ,597 Loss for the year (5,753) (5,753) (32) (5,785) Total recognised income and expenses for the year (5,753) (5,753) (32) (5,785) Dividends on ordinary shares 10 (2,612) (2,612) (2,612) At 31 December 46,465 1,296 7,424 55, ,200 * The asset revaluation reserve represents increases in the fair value of leasehold property and improvements, net of tax, and decreases to the extent that such decrease relates to an increase on the same asset previously recognised in equity. The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 33

36 Consolidated Statement of Cash Flows for the year ended 31 December (In Singapore dollars) Note Cash flows from operating activities : (Loss)/profit before taxation (6,155) 5,232 Adjustments for : Depreciation expense 2,082 2,036 Loss on disposal of property, plant and equipment Impairment loss on property, plant and equipment 109 Impairment loss on convertible loan receivable 4,038 Unrealised exchange gain on convertible loan receivable (182) Interest expense 2 1 Interest income (312) (232) Write-down of inventories to net realisable value 6,440 Impairment for doubtful debts - trade, net Operating profit before reinvestment in working capital 6,576 7,556 Decrease in receivables 4,605 3,057 (Increase)/decrease in inventories (4,615) 3,558 Decrease in payables (3,343) (3,058) Cash generated from operations 3,223 11,113 Interest paid (2) (1) Income tax paid (653) (1,181) Interest received Net cash provided by operating activities 2,834 10,112 Cash flows from investing activities : Advancement of convertible loan receivable, net of interest received (3,071) (4,038) Proceeds from disposal of property, plant and equipment 39 7 Purchase of property, plant and equipment (2,969) (1,063) Net cash used in investing activities (6,001) (5,094) Cash flow from financing activities : Dividends paid (2,612) (1,339) Decrease in finance leases (58) Proceeds from issuance of ordinary shares 7,070 Net cash (used in)/provided by financing activities (2,612) 5,673 Net (decrease)/increase in cash and cash equivalents (5,779) 10,691 Cash and cash equivalents at 1 January 28,466 17,775 Cash and cash equivalents at 31 December 22 22,687 28,466 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. 34

37 1. Corporate information Notes to the Financial Statements 31 December (In Singapore dollars) The Company which is incorporated in Singapore is a limited liability company. The registered office and principal place of business of the Company is located at 12 Penjuru Lane, Jurong Town Industrial Estate, Singapore The principal activities of the Company are those of manufacturers, importers and exporters of aluminium extrusion sections, metal materials and other related products. There have been no significant changes in the nature of these activities during the year. The principal activities of the subsidiaries are disclosed in note 12 to the financial statements. 2. Summary of significant accounting policies 2.1 Basis of preparation The consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company have been prepared in accordance with Singapore Financial Reporting Standards ( FRS ). The financial statements have been prepared on a historical cost basis except as disclosed in the accounting policies below. The financial statements are presented in Singapore Dollars (SGD or $) and all values are rounded to the nearest thousand () except when otherwise indicated. The accounting policies have been consistently applied by the Group and the Company and are consistent with those used in the previous financial year. 2.2 Changes in accounting policies The following INT FRSs are effective for annual period beginning 1 January : INT FRS 111 FRS 102 Group and Treasury Share Transactions INT FRS 112 Service Concession Arrangements INT FRS 114 FRS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and Their Interaction The adoption of the above INT FRS did not result in substantial changes to the Group s accounting policies and did not have any significant impact on the Group. 35

38 Notes to the Financial Statements 31 December (In Singapore dollars) 2. Summary of significant accounting policies (cont d) 2.3 Future changes in accounting policies The Group has not adopted the following FRS and INT FRS that have been issued but not yet effective: Reference Description Effective for annual periods beginning on or after INT FRS 113 Customer Loyalty Programmes 1 July INT FRS 116 Hedges of a Net Investment in a Foreign Operation 1 October INT FRS 117 Distributions of Non-cash Assets to Owners 1 July 2009 FRS 1 Presentation of Financial Statements 1 January 2009 Revised presentation Presentation of Financial Statements 1 January 2009 Amendments relating to Puttable Financial Instruments and Obligations Arising on Liquidation FRS 23 Borrowing Costs 1 January 2009 FRS 27 Consolidated and Separate Financial Statements 1 January 2009 Amendments relating to Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate FRS 32 Financial Instruments: Presentation 1 January 2009 Amendments relating to Puttable Financial Instruments and Obligations Arising on Liquidation FRS 39 Financial Instruments: Recognition and Measurement 1 July 2009 Amendments relating to eligible hedged items FRS101 First-time Adoption of Financial Reporting Standards 1 January 2009 Amendments relating to Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate FRS 102 Share-based payment Vesting conditions and cancellations 1 January 2009 FRS 108 Operating Segments 1 January 2009 The directors expect that the adoption of the above pronouncements will have no material impact to the financial statements in the period of initial application, except for FRS 1 and FRS 108 as indicated below. The revised FRS 1 requires owner and non-owner changes in equity to be presented separately. The statement of changes in equity will include only details of transactions with owners, with all non-owner changes in equity presented as a single line item. In addition, the revised standard introduces the statement of comprehensive income: it presents all items of income and expense recognised in profit or loss, together with all other items of recognised income and expense, either in one single statement, or in two linked statements. The Group is currently evaluating the format to adopt. 36

39 2. Summary of significant accounting policies (cont d) Notes to the Financial Statements 31 December (In Singapore dollars) 2.3 Future changes in accounting policies (cont d) FRS 108 requires entities to disclose segment information based on the information reviewed by the entity s chief operating decision maker. The impact of this standard on the other segment disclosures is still to be determined. As this is a disclosure standard, it will have no impact on the financial position or financial performance of the Group when implemented in Subsidiaries and principles of consolidation (a) Subsidiaries A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities. The Group generally has such power when it, directly or indirectly, holds more than 50% of the issued share capital, or controls more than half of the voting power, or controls the composition of the board of directors. In the Company s separate financial statements, investment in subsidiary is accounted for at cost less impairment losses. (b) Principles of consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the balance sheet date. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the holding company. Consistent accounting policies are applied to like transactions and events in similar circumstances. All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions that are recognised in assets, are eliminated in full. Acquisitions of subsidiaries are accounted for using the purchase method. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. Minority interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group. They are presented in the consolidated balance sheet within equity, separately from the parent shareholders equity, and are separately disclosed in the consolidated income statement. 37

40 Notes to the Financial Statements 31 December (In Singapore dollars) 2. Summary of significant accounting policies (cont d) 2.5 Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. (a) (b) (c) Sale of goods Revenue is recognised upon the transfer of significant risk and rewards of ownership of the goods to the customer, which generally coincides with delivery and acceptance of the goods sold. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods. Rendering of services Revenue from the provision of anodising services is recognised upon rendering of services. Interest income Interest income is recognised using the effective interest method. 2.6 Inventories Inventories are stated at the lower of cost and net realisable value. Costs incurred in bringing the inventories to their present location and condition are accounted for as follows: Raw materials: purchase costs on a weighted average cost basis; Finished goods and work-in-progress: costs of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. These costs are assigned on a weighted average cost basis. Net realisable value is the estimated selling price in the ordinary course of business, less estimated cost necessary to make the sale. 2.7 Foreign currency transactions Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries, and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Exchange differences arising on the settlement of monetary items or on translating monetary items at the balance sheet date are recognised in the income statement. 38

41 2. Summary of significant accounting policies (cont d) Notes to the Financial Statements 31 December (In Singapore dollars) 2.8 Taxation (a) Current tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date. (b) Deferred tax Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets and liabilities are measured using the tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled based on tax rates enacted or substantively enacted at the balance sheet date. At each balance sheet date, the Group re-assesses unrecognised deferred tax assets and the carrying amount of deferred tax assets. The Group recognises a previously unrecognised deferred tax asset to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. The Group conversely reduces the carrying amount of a deferred tax asset to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of the deferred tax asset to be utilised. Deferred tax assets are recognised for all deductible temporary differences and carry-forward of unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and carry-forward of unused tax losses can be utilised. Deferred taxes are recognised in the income statement except that deferred tax relating to items recognised directly in equity is recognised directly in equity. (c) Sales tax Revenues, expenses and assets are recognised net of the amount of sales tax except where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable. The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet. 39

42 Notes to the Financial Statements 31 December (In Singapore dollars) 2. Summary of significant accounting policies (cont d) 2.9 Property, plant and equipment All items of property, plant and equipment are initially recorded at cost. Subsequent to recognition, property, plant and equipment are stated at cost or valuation less accumulated depreciation and accumulated impairment losses. Leasehold property is subsequently revalued on an asset-by-asset basis, to its fair value. Fair value is determined from market-based evidence by appraisal that is undertaken by professionally qualified valuers. Valuations are performed with sufficient regularity to ensure that the carrying amount does not differ materially from the fair value of the leasehold property at the balance sheet date. When an asset is revalued, any increase in the carrying amount is credited directly to the asset revaluation reserve. However, the increase is recognised in the income statement to the extent that it reverses a revaluation decrease of the same asset previously recognised in the income statement. When an asset s carrying amount is decreased as a result of a revaluation, the decrease is recognised in the income statement. However, the decrease is deducted against the asset revaluation reserve to the extent of any balance existing in the reserve in respect of that asset. Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. The revaluation surplus included in the asset revaluation reserve in respect of an asset, is transferred directly to accumulated profits on retirement or disposal of the asset. Depreciation of an asset begins when it is available for use and is computed on a straight-line basis over the estimated useful lives of the assets as follows: Leasehold property and improvements remaining period of lease of 37.5 years Plant, equipment and other assets 7 to 20 years Renovation 4 years The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. The residual value, useful life and depreciation method are reviewed at each financial year-end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in the income statement in the year the asset is derecognised. 40

43 2. Summary of significant accounting policies (cont d) Notes to the Financial Statements 31 December (In Singapore dollars) 2.10 Leases Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to the income statement. Contingent rents, if any, are charged as expenses in the periods in which they are incurred. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term. Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis Impairment of non-financial assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset s recoverable amount. An asset s recoverable amount is the higher of an asset s or cash-generating unit s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses are recognised in the income statement as other operating expenses or treated as a revaluation decrease for assets carried at revalued amount to the extent that the impairment loss does not exceed the amount held in the asset revaluation reserve for that same asset. An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses recognised for an asset may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Reversal of an impairment loss is recognised in the income statement unless the asset is carried at revalued amount, in which case the reversal in excess of impairment loss previously recognised through the income statement is treated as a revaluation increase. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. 41

44 Notes to the Financial Statements 31 December (In Singapore dollars) 2. Summary of significant accounting policies (cont d) 2.12 Financial assets Financial assets are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. The Group determines the classification of its financial assets after initial recognition and, where allowed and appropriate, re-evaluates this designation at each financial year-end. Loans and receivables Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Such assets are carried at amortised cost using the effective interest method, less impairment losses. Gains and losses are recognised in income statement when the loans and receivables are derecognised or impaired, as well as through the amortisation process. The Group classifies the following financial assets as loans and receivables: cash and short-term deposits; trade and other receivables, including amounts due from subsidiary and loan to subsidiary Impairment of financial assets The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. Assets carried at amortised cost If there is objective evidence that an impairment loss on financial assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the financial asset s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. The amount of the loss is recognised in the income statement. When the asset becomes uncollectible, the carrying amount of impaired financial assets is reduced directly or if an amount was charged to the allowance account, the amounts charged to the allowance account are written off against the carrying value of the financial asset. To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the income statement, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. 42

45 2. Summary of significant accounting policies (cont d) Notes to the Financial Statements 31 December (In Singapore dollars) 2.14 Derecognition of financial assets A financial asset is derecognised where the contractual rights to receive cash flows from the asset have expired. On derecognition of a financial asset, the difference between the carrying amount and the sum of (a) the consideration received and (b) any cumulative gain or loss that has been recognised directly in equity is recognised in the income statement Financial liabilities Financial liabilities include trade payables, which are normally settled on day terms, other amounts payable and payables to related parties. Financial liabilities are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. Financial liabilities are initially recognised at fair value of consideration received plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the amortisation process. The liabilities are derecognised when the obligation under the liability is extinguished Employee benefits (a) Defined contribution plan As required by law, the Group makes contributions to the state pension scheme, the Central Provident Fund ( CPF ) in Singapore. CPF contributions are recognised as compensation expenses in the same period as the employment that gives rise to the contribution. (b) Employee leave entitlement Employee entitlements to annual leave are recognised as a liability when they accrue to employees. The estimated liability for leave is recognised for services rendered by employees up to balance sheet date. 43

46 Notes to the Financial Statements 31 December (In Singapore dollars) 2. Summary of significant accounting policies (cont d) 2.17 Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed Cash and cash equivalents Cash and cash equivalents comprises cash at bank and on hand and fixed deposits in banks which are subject to an insignificant risk of changes in value Segment information A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. (i) Business segments The Group mainly operates in the following business segments : Electronic and precision : This segment comprises the manufacture of quality extrusion profiles, with low engineering tolerance for variances in dimensions and finishing, that are used in electronics and precision engineering products. Construction and : This segment comprises the manufacture of mass produced aluminium infrastructure building extrusion profiles that are used in public infrastructure, building construction, interior fixtures, signages and advertising panels. (ii) (iii) Geographical segments The Group s principal markets include : Singapore Malaysia Greater China comprising the People s Republic of China, Hong Kong SAR and Taiwan. Other countries comprising mainly The Philippines, Thailand, Australia, Indonesia, Japan, Vietnam and Sri Lanka. Allocation basis Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets, income tax and deferred tax liabilities, finance income and cost. 44

47 2. Summary of significant accounting policies (cont d) Notes to the Financial Statements 31 December (In Singapore dollars) 2.20 Significant accounting judgements and estimates Estimates and judgements concerning the future are made in the preparation of the financial statements. They affect the application of the Group s accounting policies, reported amounts of revenues, expenses, assets and liabilities, and the disclosures made. They are assessed on an ongoing basis and are based on experience and relevant factors, including expectations of future events that are believed to be reasonable under the circumstances. Judgements made in applying accounting policies In the process of applying the Group s accounting policies, management has made the following judgements, apart from those involving estimations, which has the most significant effect on the amounts recognised in the financial statements: Income taxes Significant judgement is involved in determining the group-wide provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The carrying amount of the Group s tax payables and deferred tax liabilities at 31 December was $nil (: $711,000) and $2,226,000 (: $2,538,000) respectively. Impairment of convertible loans The Group classifies its convertible loans as a financial asset under loans and receivables. Management has in the current year exercised judgement based on the observable data relating to the possible events that may have caused a decline in value to determine whether the decline in value is an impairment that should be recognised in the income statement. For the financial year ended 31 December, the amount of impairment loss recognised for one of the convertible loans was $4,038,000 (: $nil). [Note 13(a)] Key sources of estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: Depreciation of property, plant and equipment The cost of property, plant and equipment for the manufacture of aluminium components is depreciated on a straight-line basis over the assets useful lives. Management estimates the useful lives of these property, plant and equipment to be within 4 to 36.5 years. These are common life expectancies applied in the industry. The carrying amount of the Group s property, plant and equipment at 31 December was $16,940,000 (: $16,612,000). Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised. 45

48 Notes to the Financial Statements 31 December (In Singapore dollars) 3. Revenue Group Sale of goods 59,648 67,500 Rendering of services ,131 68, Other operating income Group Sale of aluminium scrap 8,334 8,676 Sale of metal scrap Sundry income ,258 9,425 46

49 5. (Loss)/profit from operating activities (Loss)/profit from operating activities is stated after charging/(crediting) : Notes to the Financial Statements 31 December (In Singapore dollars) Note Group Non audit fees paid to auditors of the Company Depreciation expense 2,082 2,036 Directors emoluments - fees remuneration Foreign exchange translation loss Loss on disposal of property, plant and equipment Operating lease rentals Impairment/(write-back of impairment) for doubtful debts - trade, net (19) Staff costs (excluding directors remuneration) - Central Provident Fund contributions salaries, bonuses and other wages 7,220 7,293 Impairment on convertible loan receivable 13a 4,038 Inventory write down 14 6, Finance cost Group Interest expense on finance leases 1 Others Finance income Group Interest income on convertible loan receivable 71 Interest income on short-term deposit

50 Notes to the Financial Statements 31 December (In Singapore dollars) 8. Taxation Group Provision for taxation in respect of profit for the year : - current taxation deferred taxation (note 19) (312) (247) (Over)/under provision in respect of previous year - current taxation (58) - deferred taxation 73 Tax (credit)/expense reported in income statement (370) 746 A reconciliation between the tax expense and the product of accounting (loss)/profit multiplied by the applicable tax rate for the years ended 31 December was as follows : (Loss)/profit before taxation (6,155) 5,232 Tax expense on profit before tax at 18% ( : 18%) (1,108) 942 Adjustments : Income not subjected to tax 5 Expenses not deductible for tax purposes Tax relief and rebate (38) Over provision in prior year (58) 73 Effect of reduction in tax rate (233) Others 8 (38) Tax (credit)/expense (370)

51 Notes to the Financial Statements 31 December (In Singapore dollars) 9. (Loss)/earnings per share Basic earnings per share is calculated by dividing the net profit for the year attributable to shareholders of the Company, by the Company s weighted average number of ordinary shares outstanding during each year. Diluted earnings per share is calculated by dividing the net profit for the year attributable to shareholders of the Company, by the Company s weighted average number of shares outstanding during each year (adjusted for the effects of dilutive options, if any). The following reflects the profit and share data used in the earnings per share computation for the year ended 31 December. Group Net (loss)/profit attributable to shareholders for basic and diluted earnings per share (5,753) 4, Weighted average number of ordinary shares for basic and diluted earnings per share computation 261, ,613 Basic and diluted (loss)/earnings per share (cents) (2.20) Dividends Group and Company Declared and paid during the year: Dividends on ordinary shares: - Final exempt (one-tier) dividend for : 1.0 cents (2006: 0.60 cents) per share 2,612 1,339 Proposed but not recognised as a liability as at 31 December: Dividends on ordinary shares: - Final exempt (one-tier) dividend for : 0.75 cents (: 1.0 cents) per share 1,959 2,612 The final dividend to be paid in respect of the financial year 31 December is subject to the approval of the shareholders at the next Annual General Meeting of the Company. 49

52 Notes to the Financial Statements 31 December (In Singapore dollars) 11. Property, plant and equipment At valuation Leasehold property and improvements Plant, equipment and other assets At cost Renovations Total Group Cost or valuation : At 1 January 7,000 35, ,889 Additions 1, ,063 Disposals (833) (833) At 31 December and 1 January 7,000 35, ,119 Additions 2, ,969 Impairment (109) (109) Disposals (1,983) (1,983) At 31 December 7,000 36, ,996 Accumulated depreciation and impairment : At 1 January , ,795 Charge for the year 187 1, ,036 Disposals (324) (324) At 31 December and 1 January , ,507 Charge for the year (note 5) 187 1, ,082 Disposals (1,533) (1,533) At 31 December , ,056 Net carrying amount : At 31 December 6,346 10, ,940 At 31 December 6,533 10, ,612 50

53 Notes to the Financial Statements 31 December (In Singapore dollars) 11. Property, plant and equipment (cont d) At valuation Leasehold property and improvements At cost Plant, equipment and other assets Total Company Cost or valuation : At 1 January 7,000 34,843 41,843 Additions Disposals (829) (829) At 31 December and 1 January 7,000 35,012 42,012 Additions 2,712 2,712 Impairment (109) (109) Disposals (1,983) (1,983) At 31 December 7,000 35,632 42,632 Accumulated depreciation : At 1 January ,241 24,521 Charge for the year 187 1,716 1,903 Disposals (323) (323) At 31 December and 1 January ,634 26,101 Charge for the year 187 1,752 1,939 Disposals (1,533) (1,533) At 31 December ,853 26,507 Net book value : At 31 December 6,346 9,779 16,125 At 31 December 6,533 9,378 15,911 Other assets comprise motor vehicles, furniture and fittings and office equipment. The leasehold property and improvements are stated at Directors valuation at 30 June 2005, based on independent professional valuation carried out by Knight Frank Pte Ltd in July If the leasehold property and improvements stated at valuation had been included in the financial statements at cost less accumulated depreciation, the net carrying amount would have been $4,665,000 ( : $4,805,000). 51

54 Notes to the Financial Statements 31 December (In Singapore dollars) 12. Investment in subsidiaries Company Unquoted shares, at cost Details of the subsidiaries at 31 December are : Name of company (Country of incorporation) Principal activities (Place of business) Cost Percentage of equity interest % % * AEI Engineering Pte Ltd Manufacturing of (Singapore) engineering components (Singapore) * AEI (China) Holdings Pte Ltd Investment holding (Singapore) (Singapore) * Audited by Ernst & Young LLP, Singapore 13. Convertible loan receivable (a) Hoi Po Manufactory Company The Company signed a convertible loan agreement with Hoi Po Manufactory Company Limited (hereafter Hoi Po ) on 20 June. Under the terms of the agreement, the Company granted Hoi Po a convertible loan of HK$20,488,000 (equivalent to RMB20,000,000 or S$4,038,000). On 26 March, the Company announced that instead of converting its loan into shares in the capital of Hoi Po under the agreement, it entered into a non-binding memorandum of understanding (MOU) with Hoi Po for the establishment of a joint venture company to jointly develop the business of manufacture and sale of aluminium products (Joint Venture Business) in the People Republic of China (PRC). Since the execution of the MOU, the parties to the proposed joint venture arrangement had been engaged in discussions on ways in which certain assets essential for the Joint Venture Business could be acquired from the subsidiary companies of Hoi Po. These assets include land, building and machineries which were mostly mortgaged to various financial institutions in Hong Kong (Hong Kong Financiers) and the PRC (PRC Financiers) (Collectively Financial Institutions). The Parties had also commenced discussions with the representatives from the Financial Institutions with the aim of reaching a consensus on the terms and conditions for discharging the mortgages using part of the proceeds from the purchase consideration of the Proposed Assets Acquisition. 52

55 13. Convertible loan receivable (cont d) (a) Hoi Po Manufactory Company (cont d) Notes to the Financial Statements 31 December (In Singapore dollars) The recent global financial crisis has affected the prospect of the Joint Venture Business and the value of the mortgaged assets severely. The Parties, after due and careful consideration of the market conditions, have reassessed the purchase consideration and proposed a reduction thereof. On 19 December, a written offer was made to the Hong Kong Financiers to discharge the mortgage at a discounted rate. No response was received from the Hong Kong financiers. In addition, attempts to obtain the PRC Financiers agreement to discharge the assets mortgaged to them at a lower rate were also unsuccessful. The Board of Directors of the Company (Board), after due and careful consideration of the development of the matter, believes that it would not be in the best interest of the Company to proceed with the joint venture arrangement. The Board has therefore decided to discontinue the Company s negotiation with Hoi Po and to rigorously pursue its claims against Hoi Po to repay the Convertible Loan and other amounts owing under the Convertible Loan Agreement of approximately S$4,038,000 (Total Outstanding Convertible Loan). Until the Total Outstanding Convertible Loan has been recovered, the Board has decided to take the prudent step of providing for impairment of the Total Outstanding Convertible Loan in the Company s financial results for the year ended 31 December. During the financial year, the Group and Company impaired $4,038,000 (: nil) of the convertible loan which is recognised as expense in the income statement. (Note 5) : Group and Company Movement in allowance accounts: At 1 January Charge for the year 4,038 At 31 December 4,038 53

56 Notes to the Financial Statements 31 December (In Singapore dollars) 13. Convertible loan receivable (cont d) (b) M2B World Asia Pacific Pte. Ltd. The Company signed a convertible loan agreement with M2B World Asia Pacific Pte. Ltd (hereafter M2B ) on 8 July. Under the terms of the agreement, the Company granted M2B a convertible loan of US$2,500,000 (S$3,595,000). The convertible loan is made with a warranty by Amaru Holdings Limited, who owns 34,681,964 ordinary shares amounting to approximately 81.7% of the total issued and fully paid-up share capital of M2B, and is a controlling shareholder of M2B. Based on the terms set out in the convertible loan agreement, the company has the option, at any time and from time to time during the loan period, convert fully or a portion of the convertible loan with the interest outstanding to it into shares of M2B at an issue price of US 94.2 cents per share. Further to the terms of the convertible loan agreement, M2B shall repay to the Company all outstanding amounts and interest owing at the rate of 5% per annum in respect of the convertible loan upon the maturity of the convertible loan two years from the date of the convertible loan agreement, such loan period being 8 July. By granting the convertible loan, the Company may, at its option, acquire an equity interest in M2B. The investment will allow the Company to diversify its investment portfolio and give the Company an opportunity to participate in the growing new media broadband industry. Furthermore, the convertible loan will provide the Company an enhanced interest yield of 5% per annum during the loan period which compares favourably to the prevailing USD fixed deposit interest rate. M2B s assets, which include film libraries and licenses, are valued in a recent valuation exercise to be not less than US$90 million (Book value of these film libraries and licenses was US$21 million). As the valued assets far exceeded its liabilities and the Company is its major creditor, the directors of the Company consider this amount to be recoverable in full and no impairment is expected. In addition, M2B s ultimate major shareholder, Amaru, Inc., has an undertaking to repay the convertible loan should M2B fail to repay the convertible loan as stipulated in the Agreement. 14. Inventories Group Company Finished goods 1,821 2,258 1,821 2,258 Work-in-progress 803 1, ,075 Raw materials and consumables 7,529 8,631 7,529 8,627 Total inventories at lower of cost and net realisable value 10,153 11,978 10,138 11,960 During the financial year, the Group and Company wrote-down $6,440,392 ( : $24,457) of inventories which is recognised as expense in the income statement (Note 5). 54

57 Notes to the Financial Statements 31 December (In Singapore dollars) 15. Trade receivables Group and Company Trade receivables 7,398 12,203 Trade receivables are non-interest bearing and are normally settled on average 30 to 120 days terms. They are recognised at their original invoice amounts which represent their fair values on initial recognition. Trade receivables amounting to $777,000 ( : $2,511,000) were factored to a bank and a creditable financial institution without recourse to the Group at the balance sheet date. Included in trade receivables for the Group and of the Company are $4,193,000 ( : $7,821,000) denominated in United States dollars. Receivables that are past due but not impaired The Group has trade receivables amounting to $3,505,000 (: $5,985,000) that are past due at the balance sheet date but not impaired. These receivables are unsecured and the analysis of their aging at the balance sheet date is as follows: Group and Company Trade receivables past due: Lesser than 30 days 2,108 4, to 60 days 1, to 90 days to 120 days More than 120 days ,505 5,985 55

58 Notes to the Financial Statements 31 December (In Singapore dollars) 15. Trade receivables (cont d) Receivables that are impaired The Group s trade receivables that are impaired at the balance sheet date and the movement of the allowance accounts used to record the impairment are as follows: Group and Company Trade receivables nominal amounts Less: Allowance for impairment (160) (17) Movement in allowance accounts: At 1 January (17) (36) Charge for the year (Note 5) (143) (17) Written back 36 At 31 December (160) (17) Trade receivables that are individually determined to be impaired at the balance sheet date relate to debtors that are in significant financial difficulties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancements. 16. Other receivables Group Company Deposits Other receivables

59 Notes to the Financial Statements 31 December (In Singapore dollars) 17. Trade and other payables Group Company Trade payables 857 4, ,190 Other payables 2,331 2,200 2,263 2,107 Trade payables Trade payables are non-interest bearing and are normally settled on 30 to 60-days terms. 3,188 6,564 3,107 6,297 Included in trade payables of the Group and of the Company is an amount of $26,000 (: $3,216,000) denominated in United States dollars. Other payables Other payables are non-interest bearing and have an average term of one month. 18. Amounts due to subsidiary/loan to subsidiaries Company Due to subsidiary - trade non-trade Loan to subsidiary 136 Amounts due to subsidiary and loan to subsidiaries are unsecured, non-interest bearing and is repayable on demand. 57

60 Notes to the Financial Statements 31 December (In Singapore dollars) 19. Deferred taxation Group Company Balance at beginning of year 2,538 2,712 2,446 2,657 Amount credited to income statement (Note 8) (312) (174) (287) (211) Balance at end of year 2,226 2,538 2,159 2,446 The deferred taxation arises as a result of : Deferred tax liabilities arises as a result of : Excess of net book value over tax written down value of property, plant and equipment 1,920 2,130 1,804 2,038 Asset revaluation reserve ,325 2,546 2,209 2,454 Deferred tax assets arises as a result of : Provisions (12) (8) (12) (8) Unutilised tax losses (87) (38) (99) (8) (50) (8) Net deferred tax liabilities 2,226 2,538 2,159 2, Share capital Group and Company Issued and fully paid : At beginning of year 261,196,667 (: 223,196,667) ordinary shares 46,465 39,395 Issuance of nil (: 38,000,000) ordinary shares 7,070 At end of year 261,196,667 (: 261,196,667) ordinary shares 46,465 46,465 The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restriction. 58

61 21. Operating lease commitments Notes to the Financial Statements 31 December (In Singapore dollars) The Group has entered into certain operating lease agreements for buildings. As at 31 December, the Group has aggregate minimum lease commitment as follows: Group Within one year After one year and within five years 1, More than 5 years 6,898 6,762 The lease rental for the above lease is subject to revision every year not exceeding 5.5% ( : 7.6%) of the annual rent for each immediate preceding year. 22. Cash and cash equivalents Group Company Cash at banks and in hand 8,124 13,910 8,089 13,734 Short-term deposits 14,563 14,556 14,563 14,556 Cash at banks does not earn interest in financial year. 22,687 28,466 22,652 28,290 Short-term deposits are made for varying periods of between three months to one year depending on the immediate cash requirements of the Group, and earn interests at the respective short-term deposit rates. The weighted average effective interest rate of short-term deposits is denominated in Singapore dollars and United States dollars are 1.23% (: 2.27%) per annum and 3.3% (: 4.61%) per annum. Cash and cash equivalents denominated in foreign currencies at 31 December are as follows : Group Company United States dollars 3,265 9,897 3,265 9,897 59

62 Notes to the Financial Statements 31 December (In Singapore dollars) 23. Revenue reserves Group Company At 1 January 15,789 12,645 15,740 12,652 (Loss)/profit for the year (5,753) 4,483 (5,579) 4,427 Dividends on ordinary shares (Note 10) (2,612) (1,339) (2,612) (1,339) At 31 December 7,424 15,789 7,549 15, Related party disclosures (a) Sale and purchase of goods and services In addition to the related party information disclosed elsewhere in the financial statements, the following significant transactions between the Company and its subsidiaries took place at terms agreed between the parties during the financial year: Company Purchase of services from subsidiary 1,533 2,004 Interest income received from subsidiary 1 (b) Compensation of key management personnel Group Short-term employee benefits Central Provident Fund contributions Other short-term benefits Total compensation paid to key management personnel 1,059 1,044 Comprise amounts paid to: Directors of the Company 1,059 1,044 60

63 Notes to the Financial Statements 31 December (In Singapore dollars) 25. Segmental information (a) Business segments Electronics and precision engineering Construction and infrastructure building Others Consolidated Revenue 52,260 58,333 7,871 9,784 60,131 68,117 Results : Segment result (2,134) 4,791 (178) 210 (4,153) (6,465) 5,001 Finance income Finance cost (2) (1) Profit before taxation (6,155) 5,232 Taxation 370 (746) Net profit (5,785) 4,486 Assets Segment assets 19,906 23,657 4,415 5,158 3,595 27,916 28,815 Unallocated assets 32,969 44,595 Total assets 60,885 73,410 Liabilities Segment liabilities 536 3, ,102 4,339 Unallocated liabilities 4,583 5,474 Total liabilities 5,685 9,813 Other information Capital expenditure 2, ,969 1,063 Depreciation 1,666 1, ,895 1,849 Unallocated depreciation Total depreciation 2,082 2,036 61

64 Notes to the Financial Statements 31 December (In Singapore dollars) 25. Segmental information (b) Geographical segments Singapore Greater China Malaysia Other countries Consolidated Revenue 14,644 20,277 29,078 28,271 5,854 10,419 10,555 9,150 60,131 68,117 Segment assets 60,885 73,410 60,885 73,410 Capital expenditure 2,969 1,063 2,969 1, Financial risk management objectives and policies The main risks arising from the Group s financial instruments are credit risk, foreign exchange rate risk and interest rate risk. (a) Credit risk Credit risk is the risk that companies and other parties will be unable to meet their obligations to the Group resulting in financial loss to the Group. The Group has adopted the policy of dealing with customers with an appropriate credit history as a means of mitigating the credit risk exposures. The Group has no significant concentrations of credit risk and cash is placed with reliable financial institutions. (b) Foreign currency risk The Group has transactional currency exposures arising from sales or purchases that are denominated in a currency other than the functional currency of the Group. The foreign currency in which these transactions are denominated are in USD. Approximately 79.8% ( : 70.0%) of the Group s sales are denominated in USD whilst almost 99.6% ( : 97.6%) of costs are denominated in USD. The trade receivable and trade payable balances at the balance sheet date have similar exposures. The Group and Company also hold cash and cash equivalents denominated in USD for working capital purposes. At the balance sheet date, USD balances amount to US$2.3 million and US$2.3 million for the Group and the Company respectively. 62

65 26. Financial risk management objectives and policies (cont d) (b) Foreign currency risk (cont d) Notes to the Financial Statements 31 December (In Singapore dollars) Sensitivity analysis for foreign currency risk The following table denominates the sensitivity to a reasonably possible change in the USD, with all other variables held constant, of the Group s profit net of tax and equity. Group United States Dollar : - strengthened 5% weakened 5% (310) (595) (c) Interest rate risk Interest rate risk is the risk that changes in interest rates will have an adverse financial effect on the Group s financial results. The Group is exposed to market risks on changes in interest rates in respect of the Group s cash surpluses. Cash surpluses arising from operations, which are not redeployed as working capital, are placed with reputable banks. At the balance sheet date, if SGD interest rates had been 15 basis points higher with all other variables held constant, the Group s profit net of tax would have been $15,200 ( : $9,500) higher, arising mainly as a result of higher interest income on short-term deposits. Similarly, a 15 basis points lower with all other variables held constant, would have had the equal but opposite effect on the net profit. 27. Financial instruments Fair values The fair value of a financial instrument is the amount at which the instrument could be exchanged or settled between knowledgeable and willing parties in an arm s length transaction, other than in a forced or liquidation sale. Financial instruments whose carrying amount approximates fair value Management has determined that the carrying amounts of cash and short-term deposits, current trade and other receivables, current trade and other payables, other liabilities, reasonably approximate their fair values because these are mostly short-term in nature or are repriced frequently. 63

66 Notes to the Financial Statements 31 December (In Singapore dollars) 28. Capital management The Group s objectives when managing capital are: (1) to safeguard the entity s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders; (2) to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk. The Group aims to obtain an optimal capital structure by balancing capital efficiency and financial flexibility. The Group manages the capital structure in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, issue new shares or raise funds through debt market. 29. Subsequent event In January 2009, the Singapore Government announced the 2009 Budget with a Resilience Package, which provides a number of measures to cushion the impact of the slowing Singapore economy. The Company will benefit for financial year 2009 largely from two key Budget measures, namely the reduction in corporate tax rate from 18% to 17% and the jobs credit scheme. On 20 March 2009, Hoi Po was put into creditors voluntary winding-up. The Company was appointed as a member of the Committee of Inspection. The Group, through the Company, will rigorously pursue its claims against Hoi Po to repay the Convertible Loan and other amounts owing under the Convertible Loan Agreement. 30. Comparative figures Certain comparative figures have been reclassified to conform with the current year s presentation and to better reflect the nature of the transactions. As currently reported Group As previously reported Cost of Sales 65,618 65,365 Selling and distribution costs 1,468 1,029 Administrative expenses 5,455 6, Authorisation of financial statements for issue The financial statements for the year ended 31 December were authorised for issue in accordance with a resolution of the directors on 8 April

67 Shareholding Statistics As at 20 March 2009 DISTRIBUTION OF SHAREHOLDINgs Size of shareholdings No. of shareholders % No. of shares % , ,000 10, ,738, ,001 1,000, ,323, ,000,001 AND ABOVE ,133, TOTAL 1, ,196, PUBLIC FLOAT Based on the information available to the Company as at 20 March 2009, approximately 63.13% of the issued ordinary shares of the Company is held by the public, and therefore Rule 723 of the Listing Manual issued by the Singapore Exchange Securities Trading Limited is complied with. Substantial shareholders Direct Interest Number of shares Deemed Interest Lauw & Sons Holdings Pte Ltd 41,479,235 Treadstone Holdings Pte Ltd 37,092,079 Ong Chin Yew 17,429,000 Tan Chu En Ian (i) 37,092,079 Sinta Muchtar (i)(ii) 78,571,314 (i) (ii) Tan Chu En Ian and Sinta Muchtar are spouses. Tan Chu En Ian and Sinta Muchtar each owns 50% of the issued share capital of Treadstone Holdings Pte Ltd. They are therefore deemed to be interested in Treadstone Holdings Pte Ltd s shareholdings in the Company. Sinta Muchtar owns 12.5% of the issued share capital of Lauw & Sons Holdings Pte. Ltd. She is deemed to be interested in Lauw & Sons Holdings Pte Ltd s shareholdings. 65

68 Shareholding Statistics As at 20 March 2009 TWENTY LARGEST SHAREHOLDERs No. Name No. of shares % 1 LAUW & SONS HOLDINGS PTE LTD 41,479, TREADSTONE HOLDINGS PTE LTD 28,092, UOB KAY HIAN PTE LTD 21,674, LIM & TAN SECURITIES PTE LTD 13,097, DBS NOMINEES PTE LTD 12,520, HONG LEONG FINANCE NOMINEES PTE LTD 11,291, HL BANK NOMINEES (SINGAPORE) PTE LTD 11,000, RAFFLES NOMINEES PTE LTD 10,750, OCBC SECURITIES PRIVATE LTD 9,885, ANG KONG MENG 5,267, DENTI EKAJANTI 5,000, CHEW PECK KHOON 3,928, ENG HUENG FOOK HENRY 3,437, KIM ENG SECURITIES PTE. LTD. 3,398, DBS VICKERS SECURITIES (SINGAPORE) PTE LTD 2,990, GU JIAN LIN 2,419, CHOAH LEONG YEW 2,261, UNITED OVERSEAS BANK NOMINEES (PTE) LTD 1,775, GOH TEOW HEE 1,400, WAY COMPANY PTE LTD 1,270, Total 192,933,

69 Notice of Annual General Meeting AEI Corporation Ltd. (Incorporated in the republic of Singapore) (Registration No G) NOTICE IS HEREBY GIVEN that the Annual General Meeting of the Company will be held at 12 Penjuru Lane, Jurong Town Industrial Estate Singapore on Thursday, 30 April 2009 at 9.00 a.m. to transact the following business:- AS ORDINARY BUSINESS 1. To receive and adopt the Audited Financial Statements of the Company for the financial year ended 31 December and the Reports of the Directors and Auditors thereon. (Resolution 1) 2. To declare a final dividend of 0.75 cent per ordinary share (tax-exempt one-tier) for the financial year ended 31 December. (Resolution 2) 3. To approve the Directors fee of S$160, (: S$185,000.00) for the financial year ended 31 December. (Resolution 3) 4. To re-elect the following Directors: (a) Ms Sinta Muchtar, a Director retiring under Section 104 of the Articles of Association. (Resolution 4) (b) Mr Yeung Koon Sang alias David Yeung, a Director retiring under Section 104 of the Articles of Association. (Resolution 5) Mr Yeung Koon Sang alias David Yeung will, upon re-election as Director of the Company, remain as Non-executive Chairman, Audit Committee Chairman, and a member of the Nominating and Remuneration Committees. He will be considered independent for the purposes of Rule 704(8) of the Listing Manual of the Singapore Exchange Securities Trading Limited (SGX-ST). 5. To re-appoint Ernst & Young LLP as Auditors of the Company and to authorise the Directors to fix their remuneration. (Resolution 6) AS SPECIAL BUSINESS To consider and, if thought fit, to pass the following ordinary resolutions with or without modifications:- 6. Authority to allot and issue shares (a) That pursuant to Section 161 of the Companies Act, and the listing rules of the SGX-ST, approval be and is hereby given to the Directors of the Company at any time to such persons and upon such terms and for such purposes as the Directors may in their absolute discretion deem fit, to: (i) (ii) issue shares in the capital of the Company whether by way of rights, bonus or otherwise; make or grant offers, agreements or options that might or would require shares to be issued or other transferable rights to subscribe for or purchase shares (collectively, Instruments ) including but not limited to the creation and issue of warrants, debentures or other instruments convertible into shares; (iii) issue additional Instruments arising from adjustments made to the number of Instruments previously issued in the event of rights, bonus or capitalisation issues; and 67

70 Notice of Annual General Meeting AEI Corporation Ltd. (Incorporated in the republic of Singapore) (Registration No G) (b) (notwithstanding the authority conferred by the shareholders may have ceased to be in force) issue shares in pursuance of any Instrument made or granted by the Directors while the authority was in force, provided always that (i) the aggregate number of shares to be issued pursuant to this resolution (including shares to be issued in pursuance of Instruments made or granted pursuant to this resolution) does not exceed 50% of the total number of issued shares excluding treasury shares, of which the aggregate number of shares (including shares to be issued in pursuance of Instruments made or granted pursuant to this Resolution) to be issued other than on a pro rata basis to shareholders of the Company does not exceed 20% of the total number of issued shares excluding treasury shares, and for the purpose of this resolution, the total number of issued shares excluding treasury shares shall be the Company s total number of issued shares excluding treasury shares at the time this resolution is passed, after adjusting for; (a) (b) (c) new shares arising from the conversion or exercise of convertible securities, or new shares arising from exercising share options or vesting of share awards outstanding or subsisting at the time this resolution is passed provided the options or awards were granted in compliance with Part VIII of Chapter 8 of the Listing Manual of the SGX-ST, and any subsequent bonus issue, consolidation or subdivision of the Company s shares, (ii) the 50 per cent. limit in sub-paragraph (i) above may be increased to 100% for issues of shares and/or Instruments by way of a renounceable rights issue where shareholders of the Company are entitled to participate in the same on a pro-rata basis; and (iii) such authority shall, unless revoked or varied by the Company at a general meeting, continue in force until the conclusion of the next annual general meeting or the date by which the next annual general meeting of the Company is required by law to be held, whichever is the earlier. (Resolution 7) (See Explanatory Note 1) 7. Authority to issue shares at a discount That subject to and conditional upon the passing of Resolution 7 above, approval be and is hereby given to the directors of the Company at any time to issue shares (other than on a pro-rata basis to shareholders of the Company) at an issue price for each share which shall be determined by the directors of the Company in their absolute discretion provided that such price shall not represent a discount of more than 20 per cent. to the weighted average price of a share for trades done on the SGX-ST (as determined in accordance with the requirements of SGX-ST. (Resolution 8) (See Explanatory Note 2) 68

71 Notice of Annual General Meeting AEI Corporation Ltd. (Incorporated in the republic of Singapore) (Registration No G) 8. Authority to grant options and to issue shares under the AEI Employee Share Option Scheme That authority be and is hereby given to the Directors of the Company to offer and grant options from time to time in accordance with the provisions of the AEI Employee Share Option Scheme (the Scheme ), and, pursuant to Section 161 of the Companies Act, Chapter 50, to allot and issue from time to time such number of shares in the capital of the Company as may be required to be issued pursuant to the exercise of options granted under the Scheme, provided that the aggregate number of shares to be issued pursuant to the Scheme shall not exceed fifteen (15) per cent of the issued share capital of the Company from time to time, as determined in accordance with the provisions of the Scheme. (Resolution 9) (See Explanatory Note 3) 9. To transact any other business which may be properly transacted at an Annual General Meeting. NOTICE OF BOOKS CLOSURE DATE NOTICE IS ALSO HEREBY GIVEN that the Share Transfer Books and Register of Members of the Company will be closed on 8 May 2009 after 5.00 p.m., for the purpose of determining the Members entitlements to the dividends to be proposed at the Annual General Meeting of the Company to be held on 30 April Duly completed registrable transfers in respect of shares of the Company received by the Company s Share Registrar, Boardroom Corporate & Advisory Services Pte. Ltd. of 3 Church Street #08-01, Samsung Hub, Singapore up to 5.00 p.m. on 8 May 2009 will be registered to determine the Members entitlements to such dividends. Members whose Securities Accounts with The Central Depository (Pte) Ltd are credited with shares of the Company as at 5.00 p.m. on 8 May 2009 will be entitled to such proposed dividends. The proposed dividends, if approved by Members at the Annual General Meeting, will be paid on 22 May BY ORDER OF THE BOARD Ngiam Zee Moey Foo Soon Soo Joint Secretaries Singapore, 15 April

72 Notice of Annual General Meeting AEI Corporation Ltd. (Incorporated in the republic of Singapore) (Registration No G) Explanatory Notes on Special Business to be transacted:- EXPLANATORY NOTES 1. (a) The Ordinary Resolution 7 in item 6 is to authorise the Directors of the Company from the date of the above Meeting until the next Annual General Meeting to issue shares and convertible securities in the Company of which (a) the aggregate number of shares (including shares to be issued in pursuance of convertible securities granted) by way of a rights issue does not exceed 100% of the total number of issued shares excluding treasury shares, (b) the aggregate number of shares (including shares to be issued in pursuance of convertible securities granted) to be issued on a pro rata but non-renounceable basis to shareholders of the Company does not exceed 50% of the total number of issued shares excluding treasury shares, and (c) the aggregate number of shares (including shares to be issued in pursuance of convertible securities granted) to be issued other than on a pro rata basis to shareholders of the Company does not exceed 20% of the total number of issued shares excluding treasury shares provided always the aggregate number of shares (including shares to be issued in pursuance of convertible securities granted) under (a), (b) and (c) shall not exceed 100% of the total number of issued shares excluding treasury shares. (b) The increased limit of up to 100% for renounceable rights issue will be effective up to 31 December 2010 pursuant to SGX-ST s notification dated 19 February 2009 and the increased limit is subject to the conditions that the issuer makes periodic announcements on the use of the proceeds as and when the funds are materially disbursed and provides a status report on the use of proceeds in the annual report 2. In the Ordinary Resolution 8 in item 7, the increase in the discount limit of up to 20% for the issue of shares on a non-pro rata issue basis is effective up to 31 December 2010 pursuant to SGX-ST s notification dated 19 February The Ordinary Resolution 9 in item 8, if passed, will empower the Directors of the Company to offer and grant options under the AEI Employee Share Option Scheme and to allot and issue shares pursuant to the exercise of such shares under the Scheme not exceeding fifteen (15) per cent of the issued share capital of the Company from time to time. Notes: 1. A member of the Company entitled to attend and vote at the Meeting is entitled to appoint a proxy in his stead. 2. A proxy need not be a member of the Company. 3. If the appointor is a corporation, the proxy must be executed under seal or the hand of its duly authorised officer or attorney. 4. The instrument appointing a proxy must be deposited at the registered office of the Company at 12 Penjuru Lane Jurong Town Industrial Estate Singapore not later than 48 hours before the time appointed for the Meeting. 70

73 IMPORTANT 1. For investors who have used their CPF monies to buy AEI CORPORATION LTD. shares, the Annual Report is forwarded to them at the request of their CPF Approved Nominees, and is sent FOR INFORMATION ONLY. 2. This proxy form is not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them. Proxy Form AEI Corporation Ltd. (Incorporated in the Republic of Singapore) I/We, of being *a member/members of AEI Corporation Ltd. (the Company ), hereby appoint Name Address NRIC/Passport No Proportion of shareholdings to be represented by proxy (%) *and/or or failing him/her, the Chairman of the Meeting as *my/our *proxy/proxies, to vote for *me/us on *my/our behalf and, if necessary, to demand a poll at the Annual General Meeting of the Company to be held at 12 Penjuru Lane, Jurong Town Industrial Estate Singapore on Thursday, 30 April 2009 at 9.00 a.m. and at any adjournment thereof. *I/We direct *my/our *proxy/proxies to vote for or against the Ordinary Resolutions to be proposed at the Annual General Meeting as indicated with an X in the spaces provided hereunder. If no specified directions as to voting are given, the *proxy/proxies will vote or abstain from voting at *his/their discretion. No. Ordinary Resolutions For Against 1. To receive and adopt the Audited Financial Statements of the Company for the financial year ended 31 December and the Reports of the Directors and Auditors thereon. 2. To declare a final dividend of 0.75 cent per ordinary share (tax-exempt one-tier) for the financial year ended 31 December. 3. To approve the Directors fee of S$160, (: S$185,000.00) for the financial year ended 31 December. 4. To re-elect Ms Sinta Muchtar, a Director of the Company, pursuant to Article 104 of the Company s Articles of Association. 5. To re-elect Mr Yeung Koon Sang alias David Yeung, a Director of the Company, pursuant to Article 104 of the Company s Articles of Association. 6. To re-appoint Ernst & Young LLP as Auditors of the Company and to authorise the Directors to fix their remuneration. 7. To authorize Directors to issue shares pursuant to Section 161 of the Companies Act, Chapter To authorize Directors to issue placement shares at an issue price of up to a maximum discount of 20% to the market price of the shares. 9. To authorize Directors to grant options and to issue shares under the AEI Employee Share Option Scheme. Dated this day of Total Number of Shares Held Signature(s) of Member(s)/Common Seal

74 Notes: 1. A member of the Company entitled to attend and vote at the Annual General Meeting is entitled to appoint not more than two proxies to attend and vote on his stead. Such proxy need not be a member of the Company. 2. Where a member of the Company appoints two proxies, he shall specify the proportion of his shareholding (expressed as a percentage of the whole) to be represented by each such proxy. 3. This instrument appointing a proxy or proxies must be under the hand of the appointor or his attorney duly authorized in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed under its common seal or under the hand of its attorney or duly authorised officer. 4. A corporation which is a member of the Company may authorize by resolution of its directors or other governing body such person as it thinks fit to act as its representative at the Annual General Meeting, in accordance with its Articles of Association and Section 179 of the Companies Act, Chapter 50 of Singapore. 5. The instrument appointing proxy or proxies, together with the power of attorney or other authority (if any) under which it is signed, or notarially certified copy thereof, must be deposited at the registered office of the Company at 12 Penjuru Lane, Jurong Town Industrial Estate, Singapore not later than 48 hours before the time set for the Annual General Meeting. 6. A member should insert the total number of shares held. If the member has shares entered against his name in the Depository Register (as defined in Section 130A of the Companies Act, Chapter 50 of Singapore), he should insert that number of shares. If the member has shares registered in his name in the Register of Members of the Company, he should insert the number of shares. If the member has shares entered against his name in the Depository Register and shares registered in his name in the Register of Members of the Company, he should insert the aggregate number of shares. If no number of shares is inserted, this form of proxy will be deemed to relate to all the shares held by the member of the Company. 7. The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of members of the Company whose shares are entered against their names in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if such members are not shown to have shares entered against their names in the Depository Register 48 hours before the time appointed for holding the Annual General Meeting as certified by The Central Depository (Pte) Limited to the Company. 8. A Depositor shall not be regarded as a member of the Company entitled to attend the Annual General Meeting and to speak and vote thereat unless his name appears on the Depository Register 48 hours before the time set for the Annual General Meeting. fold here Affix Postage Stamp The Company Secretary AEI CORPORATION LTD. 12 Penjuru Lane Jurong Town Industrial Estate Singapore fold here

75 Corporate Information DIRECTORS Yeung Koon Sang alias David Yeung Tan Chu En Ian Sinta Muchtar Dr Vasoo Sushilan Teng Cheong Kwee SECRETARIES Foo Soon Soo Ngiam Zee Moey REGISTERED OFFICE 12 Penjuru Lane Jurong Town Industrial Estate Singapore Tel: (65) Fax: (65) AUDITORS Ernst & Young Alvin Phua Chun Yen Audit Partner (Appointed with effect from financial year 2006) SHARE REGISTRAR AND SHARE TRANSFER OFFICE Boardroom Corporate & Advisory Services Pte. Ltd. 3 Church Street #08-01 Samsung Hub Singapore

76 AEI Corporation Ltd. (Incorporated in the Republic of Singapore) Registration No G 12 Penjuru Lane Singapore Tel: Fax: