30 June The Directors KPM Holding Limited. Grand Vinco Capital Limited. Dear Sirs,

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1 The following is a text of a report, prepared for the purpose of incorporation in this prospectus, received from the independent reporting accountants, Deloitte Touche Tohmatsu, Certified Public Accountants, Hong Kong. 30 June 2015 The Directors KPM Holding Limited Grand Vinco Capital Limited Dear Sirs, We set out below our report on the financial information relating to KPM Holding Limited (the Company ) and its subsidiaries (hereinafter collectively referred to as the Group ) for each of the two years ended 31 December 2014 (the Track Record Period ), for inclusion in the prospectus of the Company dated 30 June 2015 in connection with the initial listing of the shares of the Company on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the Stock Exchange ) (the Prospectus ). The Company was incorporated and registered as an exempted company in the Cayman Islands with limited liability on 10 March 2015, with headquarter located in Singapore. The Company is an investment holding company. The principal activities of its operating subsidiary are engaged in design, fabrication, installation and maintenance of signage products. Pursuant to a group reorganisation, as more fully explained in the section headed History, Reorganisation and Group structure Reorganisation in the Prospectus (the Group Reorganisation ), the Company became the holding company of the entities comprising the Group on 23 June I-1

2 As at 31 December 2013 and 2014 and the date of this report, the Group has equity interests in the following subsidiaries: Name of subsidiaries Place of incorporation Legal form Date of incorporation Issued and fully paid share capital Equity interest attributable to the Company Principal activities 31 December Date of the report Direct Sino Promise Investments Limited ( Sino Promise ) British Virgin Islands ( BVI ) Limited liability company 12 January 2015 US$1 N/A N/A 100% Investment holding Indirect Signmechanic Pte. Ltd. ( Signmechanic Singapore ) Singapore Limited liability company 2 September 1997 S$500, % 100% 100% Engaged in the design, fabrication, installation and maintenance of signage products All entities now comprising the Group adopted 31 December as their financial year end date. The statutory financial statements of Signmechanic Singapore for the years ended 31 December 2013 and 2014 were prepared in accordance with the Singapore Financial Reporting Standards ( SFRSs ) issued by Accounting Standards Council in Singapore and were audited by BSPL PAC and Deloitte & Touche LLP Singapore, respectively. No audited financial statements have been prepared for the Company and Sino Promise since their respective dates of incorporation as they were incorporated in the jurisdictions where there are no statutory audit requirements. For the purpose of this report, the directors of Signmechanic Singapore have prepared the financial statements of Signmechanic Singapore for the Track Record Period in accordance with International Financial Reporting Standards ( IFRSs ) (the Underlying Financial Statements ). We have undertaken an independent audit on the Underlying Financial Statements in accordance with the Hong Kong Standards of Auditing issued by the Hong Kong Institute of Certified Public Accountants (the HKICPA ) and have examined the Underlying Financial Statements in accordance with Auditing Guideline Prospectuses and the Reporting Accountant as recommended by the HKICPA. The financial information for the Track Record Period ( Financial Information ) set out in this report has been prepared from the Underlying Financial Statements on the basis of presentation set out in note 2 to Section A below. No adjustments are considered necessary to the Underlying Financial Statement in the preparation of this report for inclusion in the Prospectus. The Underlying Financial Statements are the responsibility of the directors of Signmechanic Singapore who approved their issue. The directors of the Company are responsible for the contents of the Prospectus in which this report is included. It is our responsibility to compile the Financial Information set out in this report from the Underlying Financial Statements, to form an independent opinion on the Financial Information and to report our opinion to you. I-2

3 In our opinion, on the basis of presentation set out in note 2 to Section A below, the Financial Information gives, for the purpose of this report, a true and fair view of the state of affairs of the Group as at 31 December 2013 and 2014 and the results and cash flows of the Group for the Track Record Period. I-3

4 A. FINANCIAL INFORMATION STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Year ended 31 December NOTES Revenue 6 7,827,042 11,850,088 Cost of sales (4,952,092) (6,307,276) Gross profit 2,874,950 5,542,812 Other income 7 71, ,193 Other gains and losses 8 (263,571) (109,873) Selling and administrative expenses (1,800,235) (2,638,320) Other expense (63,250) Finance costs 9 (66,923) (111,351) Profit before tax 815,419 2,828,211 Income tax expense 10 (203,938) (262,996) Profit for the year ,481 2,565,215 Other comprehensive income (expense) Items that may be reclassified subsequently to profit or loss: Available-for-sale investments Fair value gain (loss) on available-for-sale investments 22,203 (12,809) Reclassification of cumulative gains from investment valuation reserve to profit or loss upon disposal of available-for-sale investments (9,394) Other comprehensive income (expense) for the year 22,203 (22,203) Total comprehensive income for the year 633,684 2,543,012 I-4

5 STATEMENTS OF FINANCIAL POSITION At 31 December NOTES NON-CURRENT ASSETS Property, plant and equipment , ,373 Available-for-sale investments , Deferred tax assets 27 12, , ,393 CURRENT ASSETS Inventories , ,661 Trade and other receivables 19 2,359,598 2,441,845 Amount due from a related party 25 24,401 44,860 Amount due from a director 26 7,006 Pledged bank deposits 20 79, ,564 Bank balances and cash 20 2,818,571 5,087,491 5,619,790 8,783,427 Asset classified as held for sale 21 8,848,283 14,468,073 8,783,427 CURRENT LIABILITIES Trade payables 22 1,181, ,656 Bills payables , ,841 Other payables and accruals ,435 1,803,726 Amounts due to related parties , ,193 Amounts due to directors ,582 1,999 Obligations under finance leases 24 76,019 91,825 Income tax payable 208, ,543 3,784,971 4,293,783 Liability directly associated with asset classified as held for sale 21 3,283,657 7,068,628 4,293,783 NET CURRENT ASSETS 7,399,445 4,489,644 TOTAL ASSETS LESS CURRENT LIABILITIES 7,978,045 5,169,037 I-5

6 At 31 December NOTES NON-CURRENT LIABILITY Obligations under finance leases , ,170 NET ASSETS 7,842,440 5,013,867 CAPITAL AND RESERVES Share capital , ,000 Reserves 7,342,440 4,513,867 TOTAL EQUITY 7,842,440 5,013,867 I-6

7 STATEMENTS OF CHANGES IN EQUITY Share capital Investment valuation reserve Accumulated profits Total At 1 January ,000 6,808,756 7,308,756 Profit for the year 611, ,481 Fair value gain on availablefor-sale investments 22,203 22,203 Total comprehensive income for the year 22, , ,684 Dividend declared (Note 13) (100,000) (100,000) At 31 December ,000 22,203 7,320,237 7,842,440 Profit for the year 2,565,215 2,565,215 Fair value loss on availablefor-sale investments (12,809) (12,809) Reclassification of cumulative gains from investment valuation reserve to profit or loss upon disposal of available-for-sale investments (9,394) (9,394) Total comprehensive (expense) income for the year (22,203) 2,565,215 2,543,012 Dividend declared (Note 13) (5,371,585) (5,371,585) At 31 December ,000 4,513,867 5,013,867 I-7

8 STATEMENTS OF CASH FLOWS Years ended 31 December OPERATING ACTIVITIES Profit before tax 815,419 2,828,211 Adjustments for: Bank interest income (22) (496) Depreciation of property, plant and equipment 250, ,367 Finance costs 66, ,351 Fair value gain on available-for-sale investments (9,394) Allowance on doubtful debts 106,398 Impairment loss on a freehold property upon reclassified as held for sale 263,571 Loss on disposal of property, plant and equipment 5,021 Write-offofproperty,plantandequipment 7,848 Operating cash flows before movements in working capital 1,396,238 3,284,306 Increase in inventories (254,362) (278,005) (Increase) decrease in trade and other receivables (1,041,919) 11,355 Increase in amount due from a related party (3,087) (20,459) Increase (decrease) in trade payables 780,875 (492,203) Increase in other payables and accrual 315,679 1,111,227 Increase in amounts due to related parties 142, ,028 Cash generated from operations 1,335,833 3,755,249 Corporate income taxes paid (130,879) (9,488) NET CASH FROM OPERATING ACTIVITIES 1,204,954 3,745,761 INVESTING ACTIVITIES Advance to a director (7,006) Placement of pledged bank deposits (54,501) (507,000) Proceeds from disposal of available-for-sale investments 256,676 Purchase of property, plant and equipment (196,444) (490,346) Proceeds from disposal of asset classified as held for sale 8,558,283 Deposit received on disposal of asset classified as held for sale 90,000 Interest received NET CASH (USED IN) FROM INVESTING ACTIVITIES (160,923) 7,811,103 I-8

9 Years ended 31 December FINANCING ACTIVITIES Advance from directors 37,509 Repayment to directors (6,108) (820,583) Raised in bills payables 529, ,841 Repayment of bills payables (50,998) (529,880) Obligations under finance leases interest paid (11,549) (23,666) Repayment of bank loan (192,854) (3,283,657) Bank loan interest paid (46,983) (48,127) Repayment of obligations under finance leases (85,661) (80,729) Trade finance interest paid (8,391) (39,558) Dividend paid (100,000) (5,371,585) NET CASH FROM (USED IN) FINANCING ACTIVITIES 64,845 (9,287,944) NET INCREASE IN CASH AND CASH EQUIVALENTS 1,108,876 2,268,920 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,709,695 2,818,571 CASH AND CASH EQUIVALENTS AT END OF YEAR, represented by bank balances and cash 2,818,571 5,087,491 I-9

10 NOTES TO THE FINANCIAL INFORMATION 1. GENERAL The Company was incorporated and registered as an exempted company in the Cayman Islands with limited liability on 10 March 2015 and its registered office is Clifton House, 75 Fort Street, P.O. Box 1350, Grand Cayman KY1-1108, Cayman Islands. The principal place of business is at 424 Tagore Industrial Avenue, Sindo Industrial Estate, Singapore The Company is an investment holding company and the principal activities of its operating subsidiary are engaged in the design, fabrication, installation and maintenance of signage products. The Financial Information is presented in Singapore Dollar ( S$ ), which is also the functional currency of the Company. 2. GROUP REORGANISATION AND BASIS OF PRESENTATION OF FINANCIAL INFORMATION Prior to the commencement of the Group Reorganisation in 2015, throughout the Track Record Period, Signmechanic Singapore is under control of two independent individuals, Mr. Tan Thiam Kiat and Mr. Tan Kwang Hwee (together referred to as the Controlling Shareholders ). Mr. Tan Thiam Kiat and Mr. Tan Kwang Hwee held 50% respectively of the issued share capital of Signmechanic Singapore immediately prior to the implementation of the Group Reorganisation. On 23 March 2015, Mr. Tan Thiam Kiat and Mr. Tan Kwang Hwee have executed an acting in concert confirmatory deed in respect of Signmechanic Singapore whereby they confirmed the existence of their acting in concert arrangements during the Track Record Period and for so long as they remain interests in Signmechanic Singapore to collectively control over Signmechanic Singapore. The Group Reorganisation comprised of the following steps:. On 12 January 2015, Sino Promise was incorporated in the BVI. The authorised share capital of Sino Promise was US$50,000 divided into 50,000 shares of US$1.00 each and its issued and paid-up share capital was US$1, which has been allotted and issued to the Company on 10 March On 10 March 2015, the Company was incorporated in the Cayman Islands under the Companies Law, with an authorised share capital of HK$380,000 divided into 38,000,000 shares of HK$0.01 each.. On 23 June 2015, the Controlling Shareholders transferred the entire issued share capital of Signmechanic Singapore to Sino Promise in the consideration of HK$38,106,550, which was satisfied by (i) the Company allotting and issuing 999,999 new shares of the Company to the Controlling Shareholders, credited as fully paid and (ii) the crediting of the one nil-paid share of the Company, which was registered in the name of Absolute Truth Investments Limited (a company controlled by the Controlling Shareholders), as fully paid. The total issued shares of the Company has been increased to 1,000,000 shares since then. The Company had nominated Sino Promise to hold the entire issued share capital of Signmechanic Singapore. The Controlling Shareholders had nominated Absolute Truth Investments Limited to hold the 999,999 new shares of the Company. In consideration of the Company nominating Sino Promise to hold the entire issued share capital of Signmechanic Singapore, on 23 June 2015, Sino Promise allotted and issued 9 new shares to the Company, credited as fully paid. I-10

11 Since the Controlling Shareholders interest in Signmechanic Singapore is the same before and after the above transactions, the Group, comprising the Company, Sino Promise and Signmechanic Singapore, resulting from the group reorganisation is regarded as a continuing entity. The Financial Information of the Group has been prepared as if the Company had been the holding company of Sino Promise and Signmechanic Singapore throughout the Track Record Period. As the Company and Sino Promise are incorporated subsequent to the Track Record Period, the Financial Information was prepared based on the financial statements of Signmechanic Singapore for the Track Record Period. 3. APPLICATION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS For the purpose of preparing and presenting the Financial Information for the Track Record Period, the Group has consistently adopted IFRSs, International Accounting Standards ( IASs ), amendments and interpretations which are mandatorily effective for the Group s accounting period beginning on 1 January 2014 throughout the Track Record Period. At the date of this report, the following new and revised IFRSs have been issued but are not yet effective. The Group has not early applied these standards and amendments. IFRS 9 Financial Instruments 1 IFRS 14 Regulatory Deferral Accounts 2 IFRS 15 Revenue from Contracts with Customers 3 Amendments to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations 5 Amendments to IAS 1 Disclosure Initiative 5 Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation 5 Amendments to IAS 19 Defined Benefit Plans: Employee Contributions 4 Amendments to IFRSs Annual Improvements to IFRSs Cycle 6 Amendments to IFRSs Annual Improvements to IFRSs Cycle 4 Amendments to IFRSs Annual Improvements to IFRSs Cycle 5 Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants 5 Amendments to IAS 27 Equity Method in Separate Financial Statements 5 Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture 5 Amendments to IFRS 10, Investment Entities: Applying the Consolidation Exception 5 IFRS 12 and IAS Effective for annual periods beginning on or after 1 January 2018 Effective for first annual IFRS financial statements beginning on or after 1 January 2016 Effective for annual periods beginning on or after 1 January 2017 Effective for annual periods beginning on or after 1 July 2014 Effective for annual periods beginning on or after 1 January 2016 Effective for annual periods beginning on or after 1 July 2014, with limited exceptions IFRS 9 Financial Instruments IFRS 9 issued in 2009 introduces new requirements for the classification and measurement of financial assets. IFRS 9 was subsequently amended in 2010 to include the requirements for the classification and measurement of financial liabilities and for derecognition, and further amended in 2013 to include the new requirements for hedge accounting. Another revised version of IFRS 9 was issued in 2014 mainly to include a) impairment requirements for financial assets and b) limited amendments to the classification and measurement by introducing a fair value through other comprehensive income (FVTOCI) measurement category. I-11

12 Key requirements of IFRS 9 are described below:. All recognised financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement are subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. Debt instruments that are held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets, and that have contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, are measured at FVTOCI. All other debt investments and equity investments are measured at their fair value at the end of subsequent accounting periods. In addition, under IFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.. With regard to the measurement of financial liabilities designated as at fair value through profit or loss, IFRS 9 requires that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value of financial liabilities attributable to changes in the financial liabilities credit risk are not subsequently reclassified to profit or loss. Under IAS 39, the entire amount of the change in the fair value of the financial liability designated as fair value through profit or loss was presented in profit or loss.. In relation to the impairment of financial assets, IFRS 9 requires an expected credit loss model, as opposed to an incurred credit loss model under IAS 39. The expected credit loss model requires an entity to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognised.. The new general hedge accounting requirements retain the three types of hedge accounting. However, greater flexibility has been introduced to the types of transactions eligible for hedge accounting, specifically broadening the types of instruments that qualify for hedging instruments and the types of risk components of non-financial items that are eligible for hedge accounting. In addition, the effectiveness test has been overhauled and replaced with the principle of an economic relationship. Retrospective assessment of hedge effectiveness is also no longer required. Enhanced disclosure requirements about an entity s risk management activities have also been introduced. The management of the Group considers that the adoption of IFRS 9 in the future may have an impact on the amounts reported in respect of the Group s financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of the financial effect on the Group s financial information until a detailed review has been completed. IFRS 15 Revenue from Contracts with Customers In 2014, IFRS 15 was issued which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. IFRS 15 will supersede the current revenue recognition guidance including IAS 18 Revenue, IAS 11 Construction Contracts and the related Interpretations when it becomes effective. I-12

13 The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the Standard introduces a 5- step approach to revenue recognition:. Step 1: Identify the contract(s) with a customer. Step 2: Identify the performance obligations in the contract. Step 3: Determine the transaction price. Step 4: Allocate the transaction price to the performance obligations in the contract. Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation Under IFRS 15, an entity recognises revenue when (or as)aperformanceobligationissatisfied,i.e. when control of the goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has beenaddedinifrs15todealwithspecificscenarios. Furthermore, extensive disclosures are required by IFRS 15. The management of the Group has yet to perform a detailed review on the potential impacts of IFRS 15. Hence, it is not practicable to provide a reasonable estimate of the financial effect and the relevant disclosures at this juncture. Except as described above, the management of the Group considers that the application of the other new and revised standards is unlikely to have a material impact on its financial position and performance as well as disclosure. 4. SIGNIFICANT ACCOUNTING POLICIES The Financial Information has been prepared on the historical cost basis, except for certain financial instruments that are measured at fair values, and in accordance with the following accounting policies which conform to IFRSs. In addition, the Financial Information includes applicable disclosures required by the Rules Governing the Listing of Securities on the Growth Enterprise Market of the Stock Exchange. In addition, the Financial Information includes applicable disclosures required by the Hong Kong Companies Ordinance which for the Track Record Period continue to be those of the predecessor Companies Ordinance (Cap. 32), in accordance with transitional and saving arrangements for Part 9 of the Hong Kong Companies Ordinance (Cap. 622), Accounts and Audit, which are set out in sections 76 to 87 of Schedule 11 to that ordinance. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in the Financial Information is determined on such a basis, except leasing transactions that are within the scope of IAS 17 Leases and measurements that have some similarities to fair value but are not fair value, such as net realisable value in IAS 2 Inventories or value in use in IAS 36 Impairment of assets. I-13

14 In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;. Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and. Level 3 inputs are unobservable inputs for the asset or liability. The principal accounting policies are set out below. Merger accounting for business combination involving entities under common control The Financial Information incorporate the financial statements items of the combining entities or businesses in which the common control combination occurs as if they had been combined from the date when the combining entities or businesses first came under the control of the controlling party. The net assets of the combining entities or businesses are consolidated using the existing book values from the controlling party s perspective. No amount is recognised in respect of goodwill or excess of acquirer s interest in the net fair value of acquiree s identifiable assets, liabilities and contingent liabilities over cost at the time of common control combination, to the extent of the continuation of the controlling party s interest. The statement of profit or loss and other comprehensive income includes the results of each of the combining entities or businesses, as appropriate, from the earliest date presented or since the date when the combining entities or businesses first came under the common control, where this is a shorter period, regardless of the date of the common control combination. Non-current assets held for sale Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset and its sale is highly probable. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification. Non-current assets classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs of disposal. Revenue recognition Revenue is measured at the fair value of the consideration received or receivable for goods sold and services provided in the normal course of business, net of discounts and sales related taxes. Revenue from the sales of goods including signage, bollard, variable-message signs and aluminum railings is recognised when goods are delivered to and accepted by the customers. Service income is recognised when services are provided. I-14

15 Interest income is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset s net carrying amount on initial recognition. Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. The Group as lessor Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of the relevant lease. The Group as lessee Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned between finance expenses and reduction of the lease obligations so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss. Operating lease payments are recognised as an expense on a straight-line basis over the lease term. Foreign currencies In preparing the financial information of the Group, transactions in currencies other than the functional currency of the Group (foreign currencies) are recorded in the respective functional currency (i.e. the currency of the primary economic environment in which the Group operates) at the rates of exchanges prevailing on the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences on monetary items are recognised in profit or loss in the period in which they arise. Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. Government grants Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received. I-15

16 Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate. Retirement benefit costs Payments made to Central Provident Fund ( CPF ) in Singapore which is a defined contribution retirement plan are recognised as an expense when employees have rendered service entitling them to the contributions. Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the statement of profit or loss and other comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of each reporting period. Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the Financial Information and the corresponding tax base used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary difference to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business consolidation) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the assets to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of each reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of each reporting period, to recover or settle the carrying amount of its assets and liabilities. Current and deferred tax is recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Property, plant and equipment Property, plant and equipment, including freehold property held for use in production or supply of goods or services or for administrative purposes are stated in the statements of financial position at cost less subsequent accumulated depreciation and accumulated impairment losses, if any. Other than freehold property, depreciation is recognised so as to write off the cost of items of property, plant and equipment less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. I-16

17 Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. However, when there is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. Impairment of tangible assets At the end of each reporting period, the Group reviews the carrying amounts of its tangible assets with finite useful lives to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or a cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset (or a cashgenerating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or a cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately. Inventories Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on a first-in, first-out method. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. Financial instruments Financial assets and financial liabilities are recognised in the statements of financial position when a group entity becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. I-17

18 Financial assets The Group s financial assets are classified as loans and receivables and available-for-sale ( AFS ) financial assets. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Effective interest method The effective interest method is a method of calculating the amortised cost of a financial debt instrument and of allocating interest income over the Track Record Period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the finance assets, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Interest income is recognised on an effective interest basis for debt instruments. AFS financial assets AFS financial assets are non-derivatives that are either designated as available-for-sale or are not classified as (a) loans and receivables; (b) held-to-maturity investments; or (c) financial assets at FVTPL. Equity securities held by the Group that are classified as AFS financial assets and are traded in an active market are measured at fair value at the end of each reporting period. Other changes in the carrying amount of AFS financial assets are recognised in other comprehensive income and accumulated under the heading of investment revaluation reserve. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investment revaluation reserve is reclassified to profit or loss (see the accounting policy in respect of impairment loss on financial assets below). Dividends on AFS equity instruments are recognised in profit or loss when the Group s right to receive the dividends is established. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including trade and other receivables, amounts due from a related party and a director, pledged bank deposits and bank balances and cash) are carried at amortised cost using effective interest method, less any identified impairment losses (see accounting policy on impairment of financial assets below). Interest income is recognised by applying the effective interest rate, except for short-term receivables where the recognition of interest would be immaterial. Impairment of financial assets Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been affected. For AFS equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment. I-18

19 For loans and receivables, objective evidence of impairment could include:. significant financial difficulty of the issuer or counterparty;. breach of contract, such as a default or delinquency in interest or principal payments; or. it becoming probable that the borrower will enter bankruptcy or financial re-organisation. For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, observable changes in national or local economic conditions that correlate with default on receivables. When an AFS financial asset is considered to be impaired, cumulative losses previously recognised in other comprehensive income are reclassified to profit or loss in the period. For financial assets carried at amortised cost, the amount of impairment loss recognised is the difference between the asset s carrying amount and the present value of the estimated future cash flows discounted at the financial asset s original effective interest rate. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss. For financial assets measured at amortised cost, if, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. In respect of AFS equity investments, impairment losses previously recognised in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income and accumulated under the heading of investment revaluation reserve. Financial liabilities and equity instruments Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. Equity instrument An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instrument issued by the Company is recognised at the proceeds received, net of direct issue costs. Financial liabilities Financial liabilities including trade and bills payables, other payables, amounts due to related parties and directors and property loan are subsequently measured at amortised cost, using the effective interest method. I-19

20 Effective interest method The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the Track Record Period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Interest expense is recognised on an effective interest basis. Derecognition The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. On derecognition of a financial asset, the difference between the asset s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss. The Group derecognises financial liabilities when, and only when, the Group s obligations are discharged, cancelled or expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss. 5. KEY SOURCES OF ESTIMATION UNCERTAINTY The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of each reporting period, that has a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year from the end of each reporting period. Useful lives and impairment assessment of property, plant and equipment Property, plant and equipment (other than freehold property) are stated at cost less accumulated depreciation and accumulated impairment loss in the statement of financial position. The estimation of their useful lives is the key element for the annual depreciation expense. Property, plant and equipment are evaluated for any possible impairment on a specific asset basis or group of similar assets basis, as applicable. This process requires the management s estimate of future cash flows generated by each asset or group of assets. For any instance where this evaluation process indicates impairment, the appropriate asset s carrying value would be written down to the recoverable amount and the impairment loss recognised would be charged to profit or loss. As at 31 December 2013 and 2014, the carrying amount of property, plant and equipment amounted to S$296,099 and S$679,373, respectively. The details of impairment on property, plant and equipment were set out in Note 21. Estimated impairment of trade receivables When there is objective evidence of impairment loss, the Group takes into consideration the estimation of future cash flows. The amount of the impairment loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset s original effective interest rate (i.e. the effective interest rate computed at initial recognition). When the actual future cash flows are less than expected, a material impairment loss may arise. As at 31 December 2013 and 2014, the carrying amount of I-20

21 trade receivables of the Group amounted to S$1,277,551 and S$1,490,534, respectively, net of impairment loss recognised of S$23,210 and S$129,608 respectively. The details of allowance provided for on doubtful debts were set out in Note 19. Estimated allowance for write-down of inventories to net realisable value The Group makes allowance for inventories based on assessments of the net realisable values of existing inventories. Allowances are applied to inventories where events or changes in circumstances indicate that the net realisable value of certain items is lower than the cost of those items. The identification of obsolete inventories requires the use of estimation of the net realisable value of items of inventory and estimates on the conditions and usefulness of items of inventories. Where the estimated net realisable value is lower than the cost of the inventory items, an impairment may arise. As at 31 December 2013 and 2014, the carrying amount of inventories amounted to S$337,656 and S$615,661, respectively. 6. REVENUE AND SEGMENT INFORMATION The Group operates in a single segment which mainly including sale of signage, bollard, variable-message signs and aluminium railing to customers located in Singapore. Information is reported to the Controlling Shareholders, being the chief operating decision maker ( CODM ) of the Group, for the purposes of resource allocation and performance assessment. The accounting policies are the same as Group s accounting policies described in Note 4. The CODM reviews revenue by nature of contracts, i.e. Public and Private and profit for the year as a whole. No analysis of the Group s assets and liabilities is regularly provided to the CODM for review. Accordingly, only entity-wide disclosures on products, major customers and geographical information are presented in accordance with IFRS 8 Operating Segments. An analysis of the Group s revenue for the Track Record Period provided to the CODM for resource allocation and performance assessment is as follows: Public 5,220,488 9,561,824 Private 2,606,554 2,288,264 Entity-wide disclosures Major products 7,827,042 11,850,088 Revenue during the Track Record Period represents sale of signage, bollard, variable-message signs and alluminum railing in Singapore. No information in respect of revenues from external customers for each product and service was presented, as the necessary information is not available and the cost to develop it would be excessive in the opinion of the management of the Group. I-21