COSMOSTEEL HOLDINGS LIMITED ANNUAL REPORT 2009

Transcription

1 COSMOSTEEL HOLDINGS LIMITED ANNUAL REPORT To be a world-class provider of industrial hardware and related services that surpasses expectations of our customers through consistent product quality, competitive pricing, reliable on-time delivery, and service excellence with a strong commitment to social and environmental responsibility.

2 OUR OBJECTIVES To achieve an adequate level of profitability in line with market conditions and in the process, enhance shareholder value. To continually strive for improvements in quality of products and to consistently provide timely services to customers. To focus on productivity improvements in order to achieve a leading position in price competitiveness. To secure the health and safety of our employees and all concerning parties, and also protect the environment in the course of our operations. To be a people developer by promoting performance excellence through a continuous process of learning and training. CORPORATE PROFILE Backed by almost 30 years of stellar track record, CosmoSteel Holdings Limited, the parent company of Kim Seng Huat Hardware Pte Ltd, has a strong reputation as a supplier and distributor of piping system components to the Energy, Marine, Water infrastructure and other industries. Product quality, timeliness and reliable customer deliveries are the foundation of our business. Through years of business, CosmoSteel has built strong working relationships and received reliable support from major manufacturers in Europe, US, Japan and the PRC to supply consistent quality products to our customers. CosmoSteel dedicates its business to the pursuit of achieving total customer satisfaction by offering quality products and services at competitive prices and seeking continuous improvement in our quality management system. Over the years, our Group has developed strategic alliances with both suppliers and customers, regionally and internationally and has successfully established our reputation as a service-oriented and reliable solution provider in the sourcing and distribution of piping system components. Today, CosmoSteel s strength lies in our commitment to exceed customer s expectations and requirements, placing focus on quality and reliability as our service beacon. Attesting to our unwavering commitment to these values, our Group has received numerous world-class certifications over the years including ISO9002:1994 in 2000; ISO9001:2000 in 2003; and in, ISO9001:, ISO14001:2004 and OHSAS18001:2007.

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4 OUR PRODUCTS OUR VALUE-ADDED SERVICES We offer an extensive inventory of approximately 10,000 line items across three main product categories of pipes, fi ttings and fl anges, comprising mainly of carbon steel and stainless steel. Our product line items are differentiated on various product attributes such as design, size, thread dimensions and strength, and are categorised based on international standards promulgated by API, ANSI, ASME, ASTM and/or EN. CosmoSteel provides complementary fabrication and machining services to customise the products that we distribute to meet specifi c requirements of customers. Through the use of our fabrication capabilities, we are able to modify the size and thread dimensions of our products to cater to your specifi c engineering and fabrication designs. We also provide validation and testing services. CONTENTS Our Certifi cation Milestones Quality, Environmental and Occupational Health and Safety (QEHS) Policy Financial Highlights in FY Corporate Highlights in FY Message from the CEO Operating and Financial Review Board of Directors Corporate Information Corporate Governance Directors Report Statement by Directors Independent Auditors Report Consolidated Statement of Comprehensive Income Statements of Financial Position Statements of Changes in Equity Consolidated Statement of Cash Flows Notes to the Financial Statements Shareholders Information Notice of Annual General Meeting Proxy Form

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6 Attesting to CosmoSteel s world-class standards in Quality, Environmental and Occupational Health and Safety ( QEHS ), we have received a number of certifi cations for the sale, supply and machining of piping system components from Bureau Veritas Quality International (BVQI) over the years. Quality, Environment, Occupational Health and Safety have always been important cornerstones in the way we conduct our business and, as such, we have invested much time and effort to inculcate this mindset throughout our organisation. More than just paper certifi cations, our many accreditations reaffi rm CosmoSteel s unwavering commitment and innate sense of corporate responsibility to our various stakeholders. For our customers, we want to enhance our quality standards so as to extend the highest level of service excellence. For our employees and business partners, we want to protect and keep them safe in the workplace. For Mother Earth, we want to uphold and preserve the integrity of the environment. While the benefi ts of our accreditations may not be immediately apparent, in the long term, they translate into tangible benefi ts for CosmoSteel. These include, amongst many others, sustained improvement in productivity and operational effi ciency of our workforce, signifi cant cost savings to the organisation, and an improved corporate image in the eyes of stakeholders and the business community. At the end of the day, our international accreditations serve to elevate our stature as a worldclass organisation and strategically position CosmoSteel to become a preferred business partner to our customers and other stakeholders.

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8 OUR CERTIFICATION MILESTONES YEAR 2000 Awarded ISO9002:1994 (Quality Management System) for sales, supply and machining of fl anges, steel fi ttings, tubings and pipes by BVQI. YEAR 2003 Awarded ISO9001:2000 (Quality Management System), which replaced the Group s earlier ISO9002:1994. WHAT IS ISO9001:2000? ISO9001, combines the three standards 9001, 9002, and 9003 into one, and is by far the world s most established quality framework, currently being used by around 897,000 organisations in 170 countries worldwide, and sets the standard not only for quality management systems, but management systems in general. The difference with ISO9001:2000: Places process management, namely the monitoring and optimizing of a company s tasks and activities, front and centre, instead of just inspecting the fi nal product. Demands involvement by upper executives, in order to integrate quality into the business system and avoid delegation of quality functions to junior administrators. Improves effectiveness via process performance metrics ie. numerical measurement of the effectiveness of tasks and activities. Expectations of continual process improvement and tracking customer satisfaction were made explicit. WHAT IS ISO9001:? ISO9001: was developed in order to introduce clarifi cations to the existing requirements of ISO9001:2000 and changes that are intended to improve compatibility with ISO14001:2004. It does not introduce additional requirements nor does it change the intent of the ISO9001:2000 standard. As with ISO9001:2000, the ISO9001: standard provides a tried and tested framework for taking a systematic approach to managing the organisation s processes so that they consistently turn out products that satisfy customers expectations. WHAT IS ISO14001:2004? ISO14001:2004 is an environmental management standard that specifi es a set of environmental management requirements for environmental management systems. The purpose of this standard is to help all types of organisations to protect the environment, to prevent pollution, and to improve their environmental performance. WHAT IS OHSAS18001:2007? Many organisations are implementing an Occupational Health and Safety Management System (OHSMS) as part of their risk management strategy to address changing legislation and protect their workforce. An OHSMS promotes a safe and healthy working environment by providing a framework that allows your organisation to consistently identify and control its health and safety risks, reduce the potential for accidents, aid legislative compliance and improve overall performance. OHSAS18001 is the internationally recognised assessment specifi cation for occupational health and safety management systems. It was developed by a selection of leading trade bodies, international standards and certifi cation bodies to address a gap where no third-party certifi able international standard exists. OHSAS18001 has been designed to be compatible with ISO9001 and ISO14001.

9 06 07 YEAR Awarded multiple certifi cations for the sales, supply and machining of piping system components including: ISO9001: (Quality Management System) ISO14001:2004 (Environment Management System) OHSAS18001:2007 (Occupational Health and Safety Management System)

10 QUALITY, ENVIRONMENTAL AND OCCUPATIONAL HEALTH AND SAFETY (QEHS) POLICY Our QEHS guiding principles: Knowing and communicating safety and health incident preventions to all concerning parties Securing environmental preservation, protection and prevention of pollution

11 08 09 Having quality products and services that meets or exceeds customers expectations Harnessing a systematic approach to QEHS management to ensure compliance with all applicable laws and regulations

12 QUALITY, ENVIRONMENTAL AND OCCUPATIONAL HEALTH AND SAFETY (QEHS) POLICY Implementing our Group s QEHS integrated management system through 5Cs: Communication of our policy and practices to all our employees and other concerning parties to prevent injury and ill health Conserving resources, by reducing, reusing and recycling where possible

13 10 11 Compliance with applicable legal requirements and with other requirements to which the organisation subscribes that relates to the quality, environmental aspect and occupational health and safety hazards Conducting appropriate training to instill a sense of duty in every employee towards personal safety and health and environmental preservation Continually reviewing and improving the integrated management system to ensure its relevance and appropriateness

14 FINANCIAL HIGHLIGHTS IN FY REVENUE (S$ m) GROSS PROFIT (S$ m) GROSS PROFIT MARGIN (%) NET PROFIT (S$ m) FY07 FY08 FY09 FY07 FY08 FY09 FY07 FY08 FY09 FY07 FY08 FY CAGR: +37.5% CAGR: +38.8% CAGR: +34.3% FY REVENUE BREAKDOWN BY CUSTOMERS (%) FY REVENUE BREAKDOWN BY GEOGRAPHICAL MARKETS (%) Energy 75% Marine 11% Water 8% Trading 3% Others 3% Singapore 46% Indonesia 1% Middle East 22% Brunei 9% Vietnam 2% Malaysia 1% Europe 14% Thailand 1% Others 4%

15 12 13 Group Note ASSETS Non-Current Assets Properties, Plant and Equipment 13 12,153 14,863 Investment in Subsidiary 14 Other Receivables 18 Other Assets Total Non-Current Assets 12,283 14,999 Current Assets Inventories 17 71,250 51,336 Trade and Other Receivables 18 25,764 27,005 Other Assets Cash and Cash Equivalents 20 24,599 8,797 Total Current Assets 122,167 87,483 Total Assets 134, ,482 EQUITY AND LIABILITIES Equity Share Capital 21 42,062 25,489 Retained Earnings 28,853 15,541 Other Reserves 22 1,561 2,776 Total Equity 72,476 43,806 Non-Current Liabilities Deferred Tax Liabilities ,101 Finance Leases Other Financial Liabilities 24 10,786 3,318 Total Non-Current Liabilities 11,966 5,131 Current Liabilities Income Tax Payable 2,858 2,373 Trade and Other Payables 23 8,101 8,329 Finance Leases Other Financial Liabilities 24 38,509 42,306 Total Current Liabilities 50,008 53,545 Total Liabilities 61,974 58,676 Total Equity and Liabilities 134, ,482 * The accompanying notes on pages 48 to 88 of this annual report form an integral part of these fi nancial statements.

16 CORPORATE HIGHLIGHTS IN FY DELIVERING A TRACK RECORD OF PROFITABILITY CosmoSteel has delivered sustainable profi ts since our listing and achieved our strongest ever set of fi nancial results in FY, with revenue and earnings up 28.2% and 40.9% year-on-year to S$136.9 million and S$13.7 million respectively. Our gross profi t margins in FY also improved marginally to 25.1% from 25% previously. MAINTAINING A HEALTHY BALANCE SHEET Through a share placement exercise, our balance sheet was strengthened substantially with total shareholders equity of S$72.5 million as at FY, an improvement of 65.4% from S$43.8 million a year ago. Our cash reserves were also boosted to S$24.6 million from S$8.8 million, placing us in a strong position to capitalise on future business opportunities. RECEIVING TOP INTERNATIONAL ACCREDITATIONS CosmoSteel was awarded ISO9001:2000, ISO14001:2004 and OHSAS18001:2007 certifi cations for the sales, supply and machining of piping system components in September, testifying to our strict compliance with the highest standards in Quality, Environment and Occupational Health and Safety standards respectively. The certifi cations underscore CosmoSteel s unwavering commitment to uphold world-class standards in our operations, and over the longer term, strategically position us to become a preferred business partner to our customers.

17 14 15 ENERGY CUSTOMERS FUELLING GROWTH In FY, sales from our Energy customers doubled to S$103.1 million, from S$50.4 million a year ago, on the back of robust orders from existing customers and the clinching of new customers. MIDDLE EAST, BRUNEI AND EUROPE TAKING OFF Sales momentum in our key markets continued to be robust in FY. While Singapore continued to account for the largest slice of the revenue pie, our Group enjoyed substantially higher revenue contribution from Brunei, the Middle East and Europe due to buoyant sales from existing and new customers. Together, these markets contributed 46% of FY revenue compared to 3% in FY. PENETRATING NEW REGIONS In September, we successfully made our fi rst foray into New Zealand - thanks to our established ties with our customer, a global group of energy and petrochemicals companies. This penetration was accomplished when we secured our maiden steel products order from The New Zealand Refi ning Company Ltd, the country s only oil refi nery and the leading supplier of refi ned petroleum products to the New Zealand market. RENEWING PARTNERSHIPS WITH KEY CUSTOMERS In July, our Group renewed our long-term supply agreement to supply pipes, fi ttings and fl anges at revised prices to ExxonMobil Asia Pacifi c Pte. Ltd. The extension, up to 31 July 2010, is signifi cant as it provides a longer-term and stable revenue source for CosmoSteel. RAISING CAPITAL FOR FUTURE GROWTH CosmoSteel completed a private placement of 35 million new shares in September at S$0.494 per share, representing approximately 16.6% of our enlarged issued and paid-up share capital of 211,200,000 shares. The capital exercise successfully raised S$17.3 million in gross proceeds, which our Group plans to use as working capital to support the growth of our business.

18 MESSAGE FROM THE CEO Dear Shareholders and Stakeholders of CosmoSteel, On behalf of the Board and Management of CosmoSteel Holdings Limited, it gives me great pleasure to present to you our Annual Report. While the aftermath of the global economic crisis continues to pose challenges for businesses in, I am pleased to report that CosmoSteel has scored yet another winning performance. Our successes are achieved both on the fi nancial and corporate fronts. A RECORD FINANCIAL PERFORMANCE CosmoSteel recorded our strongest ever fi nancial performance in, and this was achieved despite a business environment that was, and still is, weakened from the global crisis. For the 12 months ended 30 September (FY), we posted a 28.2% increase in revenue to S$136.9 million, with our earnings rising 40.9% to S$13.7 million. I am heartened by our performance as it speaks volumes about our Group s astute business strategies and our resilience in the face of adversity. A COMMITMENT TO ENDURING QUALITY In addition to our fi nancial accomplishments, our Group also strove hard to improve internal processes, policies and standards of our business operations, with the aim of becoming a worldclass organisation in the provision of piping system components. To this end, I am pleased to announce that CosmoSteel achieved two international accreditations in, namely the ISO14001:2004 and OHSAS18001:2007 for the sales, supply and machining of piping system components. More than just paper qualifi cations, we believe these certifi cations serve to elevate our stature as an environmentally and socially responsible world-class organisation and hence, allow us to continue to command loyalty from our portfolio of multi-national customers as well as strengthen our ability to win new ones. A TRIBUTE TO OUR SHAREHOLDERS Our continued robust performance in FY calls for a sharing of our rewards and our Board of Directors is pleased to propose a fi nal cash dividend of S$0.01 per share. At this juncture, I would also like to extend my heartfelt appreciation, on behalf of the Board and Management, to all of our loyal shareholders for your support and faith in CosmoSteel. Your belief in us has been invaluable and has helped us to stand tall and strong during the diffi cult months of the global crisis. I thank you for that and I reiterate our Group s life mission to deliver long-term and sustainable performance and value to our shareholders. A LOOK AHEAD With an established heritage of almost 30 years behind us, I have every confi dence in CosmoSteel and our prospects.

19 16 17 CosmoSteel recorded our strongest ever financial performance in, and this was achieved despite a business environment that was, and still is, weakened from the global crisis. We have a lot going for us a robust business model that is generating a diversifi ed and sustainable revenue stream for us, proven strategies that have time and again paid off handsomely for us, continued enhancements of our business processes and standards that help us command customer loyalty now and will capture margins in our value chain in the longer-term, and lastly, a united management team and workforce that is committed to delivering performance and value to all our stakeholders. Our confi dence, however, is tempered by caution as the economy is still recovering from the blow dealt by the global crisis. We will be mindful of this in our efforts to steer CosmoSteel to the next stage of growth. Thank you and I wish one and all a successful year ahead. Yours sincerely ONG CHIN SUM Chief Executive Offi cer

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22 OPERATING AND FINANCIAL REVIEW A RECORD PERFORMANCE IN FY Fiscal year was a successful year for CosmoSteel Holdings Limited in spite of a frail global economy that is only beginning to show signs of stabilisation from the fi nancial crisis. Indeed, our Group achieved many milestones in fi scal which included, amongst others, an unparalleled fi nancial performance, a successful capital raising exercise to support our future business expansion initiatives, a signifi cant expansion of our customer base and market presence, and last but not least, receiving international accreditations. REVENUE (S$ m) GROSS PROFIT (S$ m) FY FY FY FY % Change: +28.2% % Change: +28.7% GROSS PROFIT MARGIN (%) NET PROFIT (S$ m) FY FY FY FY % Point Change: +0.1 % Change: +40.9% For the 12 months ended 30 September (FY), CosmoSteel reported a 40.9% surge in earnings to S$13.7 million on the back of a 28.2% hike in revenue to S$136.9 million. This compared with earnings and revenue of S$9.7 million and S$106.8 million respectively for the corresponding period a year ago (FY).

23 20 21 CosmoSteel s top-line in FY was underpinned by buoyant sales orders from our Energy industry business, which doubled impressively to S$103.1 million, from S$50.4 million in FY. Revenue growth during the year was also thanks to the Group s strategy to expand our inventory range to better meet customers demand. In line with revenue growth, gross profi t of the Group improved 28.7% to hit S$34.3 million in FY while our margins increased marginally to a healthy 25.1%, versus S$26.7 million and 25.0% respectively a year ago. Costs incurred by the Group were generally higher in FY vis-à-vis FY, corresponding to our higher revenue base. Specifi cally, our fi nancial expense was up 40.5% to S$1.8 million, distribution costs rose 29.6% to S$5.1 million; administrative expenses increased 13.3% to S$8.9 million; and other charges spiked 49.5% to S$2.5 million. The rise in other charges was largely the result of stock impairment for a certain category of inventory after taking into account market conditions. With our FY results, our Group s Earnings Per Share (EPS) increased to 7.75 Singapore cents from 5.51 Singapore cents in FY based on 176,487,671 and 176,200,000 of weighted average shares in issue respectively. At the same time, our Group recorded a Net Asset Value (NAV) per ordinary share of Singapore cents as at 30 September compared to Singapore cents a year ago. CosmoSteel also ended the year with a much stronger balance sheet made possible by the successful completion of our share placement exercise in September, which raised gross proceeds totaling S$17.3 million through the issue of 35 million new shares priced at S$0.494 per share. As a result of this, our Group s total shareholders equity as at the end of the period improved 65.4% to S$72.5 million, from S$43.8 million a year ago. In addition, the capital raising exercise also saw us sitting on a healthy cash hoard of S$24.6 million, signifi cantly building up our fi nancial resources for future business expansion. This compared to a cash position of S$8.8 million in FY. CosmoSteel achieved many milestones in fiscal which included, amongst others, an unparalleled financial performance, a successful capital raising exercise to support our future business expansion initiatives, a significant expansion of our customer base and market presence, and last but not least, receiving international accreditations.

24 OPERATING AND FINANCIAL REVIEW ENERGY SEGMENT FUELLING GROWTH REVENUE BREAKDOWN BY CUSTOMERS (%) Energy 75% Marine 11% Water 8% Trading 3% Others 3% FY FY Energy 47% Marine 18% Water 23% Trading 5% Others 7% With the exception of our Energy segment, the Group saw revenue from our various customer groups in FY decline, an unsurprising occurrence in view of the hard knocks delivered to many sectors across the board by the fi nancial crisis. Revenue contribution from our Energy segment, however, soared 104.5% to S$103.1 million in FY as the Group enjoyed strong sales from our existing customers and orders from new customers. Among our current stable of reputable key customers are the Keppel group, SembCorp, the Alstom group, ExxonMobil, Chevron and the Shell group. In July, our Group renewed our long-term supply agreement to supply pipes, fi ttings and fl anges to ExxonMobil Asia Pacifi c Pte. Ltd., one of our major customers. The extension, up to 31 July 2010, is signifi cant as it provides a longer-term and stable revenue source for CosmoSteel. Group revenue from our Water segment in FY was not repeated in FY as we had completed the bulk of our pipe supply project with a large public sector customer in FY. With the completion of that project, we are currently exploring opportunities in the Water infrastructure industry that include local projects up for tender as well as overseas projects. REVENUE BY CUSTOMERS ENERGY (S$ m) FY08 FY09 % Change: % WATER (S$ m) 50.4 MARINE (S$ m) FY FY09 % Change: (21.0)% 15.5 TRADING (S$ m) FY FY08 FY FY09 % Change: (57.7)% % Change: (17.7)% OTHERS (S$ m) FY08 FY09 % Change: (49.4)%

25 22 23 MIDDLE EAST, BRUNEI AND EUROPE TAKING OFF REVENUE BREAKDOWN BY GEOGRAPHICAL MARKETS (%) FY Singapore 46% Indonesia 1% Middle East 22% Brunei 9% Vietnam 2% Malaysia 1% Europe 14% Thailand 1% Others 4% FY Singapore 74% Indonesia 2% Middle East 3% Vietnam 10% Malaysia 2% Thailand 7% Others 2% While sales from our Group s other markets trended down, our combined revenue from Brunei, Middle East and Europe in FY surged more than 20 times to S$62.6 million, from S$3.1 million in FY. In Brunei, CosmoSteel s revenue growth in FY was spurred by new customers who collectively contributed S$13.1 million to the Group s topline, from just S$1,000 a year ago. This boosted Brunei s share of revenue from a negligible amount to 9% in FY. At the same time, our Middle East and Europe markets benefited from robust sales orders from existing customers which hit S$29.7 million and S$19.8 million from S$3.0 million and S$15,000 respectively a year ago. In view of this, the Middle East and Europe accounted for 22% and 14% of Group revenue in FY as compared to a mere 3% and negligible amount in FY respectively. While Singapore continued to be the major revenue generator, accounting for S$63.5 million or 46% of our Group s total revenue in FY, revenue from the island was 19.8% lower than a year ago. Thanks to our established ties with an international oil major, CosmoSteel also successfully broke into New Zealand for the fi rst time. In September, we successfully secured a contract to supply pipes and fi ttings to The New Zealand Refi ning Company Ltd (NZRC), the country s only oil refi nery and the leading supplier of refi ned petroleum products to the New Zealand market.

26 OPERATING AND FINANCIAL REVIEW REVENUE BY GEOGRAPHICAL MARKETS SINGAPORE (S$ m) MIDDLE EAST (S$ m) FY FY FY FY % Change: (19.8)% % Change: % EUROPE (S$ m) BRUNEI (S$ m) FY08 NM* FY08 NM* FY FY % Change: NM* % Change: NM* VIETNAM (S$ m) INDONESIA (S$ m) FY FY FY FY % Change: (80.3)% % Change: (15.2)% MALAYSIA (S$ m) THAILAND (S$ m) FY FY FY FY % Change: (45.2)% % Change: (91.0)% OTHERS (S$ m) FY FY % Change: +85.8% * Not Meaningful

27 24 25 PROSPECTS AND FUTURE PLANS Energy and Marine sectors: Capex revival, higher oil prices and easing credit markets According to a report issued by CIMB in November, Singapore s offshore and marine sector may be heading for another boom in 2010, bolstered by positive industry dynamics such as a capital expenditure revival, higher oil prices and easing credit markets. Singapore rig builders and service operators should be prime benefi ciaries of order awards from Brazil, Australia, the Middle East and India. Petrobras, one of the world s largest integrated energy companies, has announced large spending plans for the next fi ve years, which include 28 ultra-deepwater rigs for US$20 billion. Our key customers, Keppel O&M and SembMarine, who are the world s Number 1 and Number 2 rig builders respectively, are contenders for these projects as they have a presence in Brazil through existing yards and strategic partnerships. With oil prices stabilising at US$70/bbl and easing fi nancing conditions, there has been a series of new contracts from the Middle East and North Africa (MENA) in the oil and gas and petrochemical industries. Over US$40 billion of Engineering Procurement Construction projects have been awarded since June versus just one US$500 million contract between October 08 and January 09 (Source: Middle East Economic Digest (MEED)). It is estimated that the refi ning and petrochemical sector would award close to US$180 billion contracts by end In addition, many oil and gas projects have been revived on the back of shrinking construction costs. Though these developments augur well for the Energy and Marine sectors which we serve, it may not necessarily translate ate into tangible benefits for us given the escalating competition we face. Nevertheless, ertheless, CosmoSteel will continue to strive hard to overcome this challenge.

28 OPERATING AND FINANCIAL REVIEW Also, in view of the recovery of the global economy, CIMB believes that governments in the Middle East will roll out more industrial diversifi cation, urban development and infrastructure projects. Proleads, a research company in MENA, estimates that US$3.8 trillion will be spent in mainly in the civil, power, oil and gas and petrochemical sectors with Saudi Arabia and UAE accounting for more than half of the spending at a combined US$2 trillion. The availability of capital, which has been the cause of bottlenecks for new orders in the offshore and marine sector during the Financial Crisis, has eased substantially. In the second half of, US$8.5 billion of long-term borrowings and notes have been issued globally for the oil and gas sector. This suggests that upstream spending (exploration, drilling and production) could be on its way to a recovery after the drought last year. Though these developments augur well for the Energy and Marine sectors which we serve, it may not necessarily translate into tangible benefi ts to the Group given the escalating competition we face. Nevertheless, CosmoSteel will continue to strive hard to overcome this challenge.

29 26 27 Water sector: two thirds of the world s population will face water shortages by 2025 The Organization for Economic Cooperation and Development (OECD) estimates that there will be more than US$1 trillion per annum investment for water-related infrastructure around the world by According to the OECD, the amount of fresh water readily available for human consumption is growing scarcer. Some 97.5% of the water on the planet is made up of sea water whilst only 0.008% comprises fresh water suitable for human consumption in the form of rivers, lakes, and marshes. Water shortages are becoming an increasingly severe problem globally due to the uneven geographical distribution of water resources, as well as the fact that the inhabitants of developing nations do not have regular access to safe drinking water or improved sanitation. In addition, according to the UN s World Population Prospects (2006 revision), global population is projected to grow from 6.7 billion in 2007 to 9.2 billion by 2050 and this is expected to drive the continued demand for water to cater to industrial, residential and agricultural purposes. In view of the above, CosmoSteel will strive towards strengthening our Water infrastructure business as one of our future growth engines. IN CONCLUSION The worst of the fi nancial crisis is seemingly behind us. Along with it, not only are the local and global economies showing signs of stabilisation, sentiments on the industries we cater to are generally upbeat. Notwithstanding this, CosmoSteel is adopting a conservative stance and expects a challenging FY2010. Barring unforeseen circumstances, our Group is cautiously optimistic about our performance in United Nations Human Development Report 2006

30 BOARD OF DIRECTORS Leading The Way Our experienced and committed management team is united behind one common goal to deliver sustainable and long-term value to our shareholders.

31 28 29 From Left: Low Beng Tin Ong Chin Sum Ong Tong Hai Geraldine Ong Jovenal R. Santiago Tan Siok Chin Ong Tong Yang Tatsuro Mori

32 BOARD OF DIRECTORS LOW BENG TIN, Chairman and Non-Executive Director Our Non-Executive Chairman since the incorporation of CosmoSteel, Mr Low is also the Executive Chairman and Managing Director of Oakwell Engineering Limited, a SGXSESDAQ listed company which he founded in Mr Low has more than 30 years of engineering experience in the oil and gas, petrochemical, chemical and marine industries. In, he was conferred the Bintang Bakti Masyarakat (The Public Service Star) by the President of Singapore in recognition of his contribution to the community. He holds a Diploma in Electrical Engineering from Singapore Polytechnic and a Diploma in Management Studies from Singapore Institute of Management and a Master in Business Administration (Chinese Programme) from the National University of Singapore. ONG CHIN SUM, Chief Executive Offi cer and Executive Director A founding member of CosmoSteel in 1984, Mr Ong has been instrumental in growing the business to our present scale. He is responsible for spearheading and driving CosmoSteel s corporate and business strategies. Mr Ong has more than 30 years of experience in the hardware supply industry. His background includes considerable expertise and know-how in warehousing management, technical requirements and specifi cations and pricing of products and services, and a wide network of manufacturers and suppliers within the industry. ONG TONG YANG, Executive Director Mr Ong Tong Yang, who joined CosmoSteel in 1999, is responsible for developing and setting the strategic directions for our sales, marketing and purchasing functions. His area of focus and responsibility has largely been in sales and marketing (in particular for projects-based contracts), as well as purchasing and quality control and certifi cation processes. Since joining our Group, he has spearheaded the growth of CosmoSteel s customer base, both in Singapore and in the region, and our range of product offerings. Mr Ong Tong Yang holds a Diploma in Mechanical Engineering from Ngee Ann Polytechnic. ONG TONG HAI, Executive Director Mr Ong Tong Hai, who joined CosmoSteel in 1998, spearheads the development and implementation of policies and procedures to enhance the effectiveness and effi ciency of the Group s logistics and operation functions. Since joining our Group, he has been largely involved in inventory and warehousing logistics and management, information systems and technology management and administration. Of signifi cance, Mr Ong Tong Hai spearheaded the implementation of the ERP system for our subsidiary, Kim Seng Huat, which enabled our Group to monitor and keep track of our inventory on a realtime basis. He holds a Bachelor of Business (Accountancy) from the Royal Melbourne Institute of Technology, Australia.

33 30 31 TATSURO MORI, Executive Director Mr Mori joined CosmoSteel in 2006 and was appointed as an Executive Director on 28 March With more than 25 years of experience in the steel manufacturing and supply industry, he is responsible for the business development and strategic planning of our Group. Mr Mori comes from a strong background in the steel industry having held key managerial positions in steel related companies such as Benkan Corporation, Canadoil Asia Limited and Dana Spicer (Thailand) Limited. Mr Mori graduated with a Bachelor of Arts degree in English from the Takushoku University in Japan. JOVENAL R. SANTIAGO, Independent Director Mr Santiago was appointed as our Independent Director on 28 March Mr Santiago is a Certifi ed Public Accountant in the Philippines, and has more than 40 years of experience in the accounting and auditing profession in Singapore and the Philippines before his retirement in From 1971 to 1998, he was an audit principal of Deloitte & Touche, Singapore, where he was in charge of audit engagements of a wide portfolio of clients including several publicly listed companies. He holds a Bachelor of Science degree in Commerce from the University of Santo Tomas, Philippines and a Master of Business Administration degree from New York University, USA. Mr Santiago is also an independent director of several other companies listed in Singapore. GERALDINE ONG, Independent Director Appointed as our Independent Director on 28 March 2007, Ms Ong is an Advocate and Solicitor of the Supreme Court of Singapore and is currently a Consultant with M/s KhattarWong. Ms Ong has over 20 years experience in the legal fi eld spanning corporate, conveyancing and commercial practice areas and has represented clients in cross border transactions. Ms Ong is an independent director and audit committee member in another Singapore publicly listed company and is also the legal advisor to The Singapore Glass Association of Singapore. Ms Ong graduated from the National University of Singapore with a Bachelor of Laws (Honours) degree. TAN SIOK CHIN, Independent Director Appointed as our Independent Director on 28 March 2007, Ms Tan is an Advocate and Solicitor of the Supreme Court of Singapore with over 14 years of experience in legal practice. Her main areas of practice are corporate fi nance, mergers and acquisitions, capital markets and commercial matters. Ms Tan is currently a Director of ACIES Law Corporation heading its corporate practice group. Prior to joining ACIES Law Corporation, she was a partner in the Corporate and Capital Market practice group in Messrs Rajah & Tann. Ms Tan graduated from the National University of Singapore with a Bachelor of Laws (Honours) degree.

34 corporate information BOARD OF DIRECTORS Low Beng Tin (Chairman and Non-Executive Director) Ong Chin Sum (Chief Executive Offi cer and Executive Director) Ong Tong Yang (Executive Director) Ong Tong Hai (Executive Director) Tatsuro Mori (Executive Director) Geraldine Ong Siew Ting (Independent Director) Jovenal R. Santiago (Independent Director) Tan Siok Chin (Independent Director) AUDIT COMMITTEE Jovenal R. Santiago (Chairman) Geraldine Ong Siew Ting Tan Siok Chin REMUNERATION COMMITTEE Geraldine Ong Siew Ting (Chairman) Jovenal R. Santiago Tan Siok Chin NOMINATING COMMITTEE Tan Siok Chin (Chairman) Geraldine Ong Siew Ting Jovenal R. Santiago COMPANY SECRETARY Lee Pih Peng, MBA, LLB REGISTERED OFFICE 5 Shenton Way #07-00 UIC Building Singapore PRINCIPAL PLACE OF BUSINESS 14 Lok Yang Way, Singapore SHARE REGISTRAR Boardroom Corporate & Advisory Services Pte Ltd 3 Church Street #08-01 Samsung Hub Singapore AUDITORS RSM Chio Lim LLP 8 Wilkie Road #03-08 Wilkie Edge Singapore Partner-in-Charge: Peter Jacob (a member of the Institute of Certifi ed Public Accountants of Singapore) LEGAL ADVISORS Lee & Lee 5 Shenton Way #07-00 UIC Building Singapore PRINCIPAL BANKERS Oversea-Chinese Banking Corporation Limited 65 Chulia Street OCBC Centre Singapore Standard Chartered Bank 6 Battery Road Singapore United Overseas Bank Limited 80 Raffl es Place UOB Plaza Singapore

35 CORPORATE GOVERNANCE The Company is committed to good standards of corporate governance to enhance corporate performance and accountability. The Company has adopted principles and practices of corporate governance in line with the recommendations of the Code of Corporate Governance 2005 (the Code ) issued by the Corporate Governance Committee, details of which are as set out below. BOARD MATTERS PRINCIPLE 1: BOARD S CONDUCT OF ITS AFFAIRS The board of directors of the Company (the Board ) effectively leads the Company, working together with Management to achieve success for the Company and its subsidiaries (the Group ). Management remains accountable to the Board. In addition to its statutory duties, the Board's principal functions are:- (a) (b) (c) to provide guidance and entrepreneurial leadership for the purposes of the Group's strategic plans, key operational initiatives, major investments and divestments and funding requirements and to ensure that the necessary fi nancial and human resources are in place for the Group to meet its objectives; to approve the budget, review the performance of the business and the release of the fi nancial results of the Group to shareholders; to provide guidance in the overall management of the business and affairs of the Group and to review Management s performance; (d) to establish a framework of prudent and effective controls to assess, manage and oversee processes for risk management, fi nancial reporting and compliance; (e) (f) (g) to set and adopt, from time to time, internal guidelines for the relevant matters and the type of material transactions that require Board approval, on a case by case basis as applicable; to set the Company s values and standards and to provide guidance to Management to ensure that the Company s obligations to its shareholders and the public are met; and to approve the recommended framework of remuneration for the Board and key executives proposed by the Remuneration Committee. No new Directors have been appointed to the Board since the initial public offering of the Company s shares in June Newly appointed Directors, if any, will be briefed on the history and business operations and corporate governance practices of the Group. All Directors will, if necessary, be briefed on or memoranda will be circulated to the Directors to update them from time to time on regulatory changes, where such changes have a material bearing on the Company. The Company will issue a formal letter of appointment to new Directors setting out their duties and obligations when they are appointed. The Board and sub-committees of the Board ( Committees ) meet regularly throughout the year. Ad hoc meetings are convened when circumstances require. Details relating to the number of Board and Committee meetings held during the fi nancial year and the attendance of the Directors are set out on page 36 of this Report.

36 CORPORATE GOVERNANCE PRINCIPLE 2: BOARD COMPOSITION AND GUIDANCE The Board exercises objective judgment independently from Management on corporate affairs of the Group and no individual or small group of individuals dominate the decisions of the Board. As at the date of this Report, the Board comprises eight Directors, four of whom are non-executive Directors ( Non-Executive Directors ). Of the four Non-Executive Directors, three are independent Directors ( Independent Directors ), representing at least one-third of the Board. The criterion for independence is based on the defi nition given in the Code. The Board considers an Independent Director as one who has no relationship with the Company, its related companies or its offi cers that could interfere, or be reasonably perceived to interfere, with the exercise of the Director s independent business judgement with a view to the best interests of the Company. The Nominating Committee reviews the independence of each Director annually and applies the Code s defi nition of who qualifi es as an Independent Director in its review. Non-Executive Directors, when presented with proposals for their consideration, evaluate the proposals made by Management and these Directors also provide guidance to Management on different aspects of the Group s business. The Board is supported by three Committees, namely the Audit Committee, the Nominating Committee and the Remuneration Committee, whose powers, functions and duties are described below. The Directors in offi ce at the date of this Report are: Executive Directors Non-Executive Director Independent Directors Mr Ong Chin Sum Mr Low Beng Tin Ms Geraldine Ong Siew Ting Mr Ong Tong Yang Mr Jovenal R. Santiago Mr Ong Tong Hai Ms Tan Siok Chin Mr Tatsuro Mori There are no permanent alternate Directors. Key information about each Director is detailed under the section on Board of Directors on pages 28 to 31 of this Report. The Board is of the view that given the nature and scope of the Group s operations the present Board size of eight members is appropriate for the Company and to provide for effective decision-making. The Board is also of the opinion that the current Board members possess the relevant skills, experience and expertise for effective direction for the Group. As a team, the Board collectively provides core competencies, qualifi cations, skills and experience in the areas of strategic business decision-making, fi nance and accounting, risk management, legal and regulatory matters. PRINCIPLE 3: CHAIRMAN AND CHIEF EXECUTIVE OFFICER The Non-Executive Chairman and the Chief Executive Offi cer of the Company are separate individuals. As the most senior executive in the Company, the Chief Executive Offi cer, Mr Ong Chin Sum, assumes executive responsibilities for the Group s performance and the Group s business. As the Chairman, Mr Low Beng Tin leads the Board, ensures that the Directors receive accurate, timely and clear information, encourages constructive relations between the Board and Management, as well as between Board members, ensures effective communication with shareholders and promotes high standards of corporate governance. The Chairman also ensures that Board meetings are held regularly and, when necessary, sets the Board meeting agendas in consultation with the Chief Executive Offi cer. The Chairman presides each Board meeting and ensures full discussion of agenda items. Management staff, as well as external experts who can provide additional insights into the matters to be discussed, are invited when necessary, to attend at the relevant time during the Board meetings. In assuming their roles and responsibilities, the Chairman and the Chief Executive Offi cer consult with the Board and the Committees on major issues.

37 CORPORATE GOVERNANCE PRINCIPLE 4: BOARD MEMBERSHIP The Company has established a Nominating Committee. The Nominating Committee comprises three Directors, all of whom, including its Chairman, are Independent Directors. As at the date of this Report, the members of the Nominating Committee are: Ms Tan Siok Chin Ms Geraldine Ong Siew Ting Mr Jovenal R. Santiago Chairman The Nominating Committee is governed by written terms of reference under which it is responsible for: (a) making recommendations to the Board on all board appointments, including re-nomination of Directors, having regard to each Director s contribution and performance. All Directors are required to submit themselves for re-nomination and re-election at least once every three years; (b) determining annually whether or not a Director is independent; (c) deciding whether or not a Director is able to and has been adequately carrying out his duties as a Director; (d) (e) deciding on how the Board s performance may be evaluated and to propose objective criteria for evaluation and assessment of the effectiveness and performance of the Board as a whole and for evaluation and assessment of the contribution by each individual Director to the effectiveness of the Board; and reviewing any new employment of employees related to the Directors and substantial shareholders and the proposed terms of their employment. The Board has implemented performance criteria and process recommended by the Nominating Committee for evaluation and assessment of the effectiveness and performance of the Board as a whole and for evaluation and assessment of the contribution by each individual Director. Each member of the Nominating Committee will abstain from voting on any resolution in respect of the assessment of his performance or re-nomination as Director. The Nominating Committee has decided that, given the current size of the Board, the background, experience and expertise of each Director and their general participation in Board and Committee Meetings and matters arising, it would not be necessary to evaluate the individual performance of each Director. However, the Nominating Committee has evaluated the performance of the Board as a whole. The performance criteria which the Nominating Committee has used include the Board s ability to discharge their duties in terms of timeliness and effective communications with third parties such as shareholders and the regulatory authorities and each individual Director s commitment of time to attending Board and Committee meetings and the discharge of his duties in relation to the affairs of the Group. The search for new Directors, if any, will be made through executive search companies, contacts and recommendations and shortlisted persons will be evaluated by the Nominating Committee before being recommended to the Board for consideration. The Company s Articles of Association ( Articles ) require at least one-third of the Directors, or if their number is not a multiple of three, the number nearest to but not less than one-third of the Directors, to retire from offi ce by rotation once every three years and shall then be eligible for re-election at the meeting at which he retires.

38 CORPORATE GOVERNANCE PRINCIPLE 5: BOARD PERFORMANCE The Nominating Committee has, with the approval of the Board, established performance criteria and evaluation procedures for evaluation and assessment of the effectiveness and performance of the Board collectively on the basis of accountability as a whole, as the Board is of the opinion that the financial indicators or performance criteria such as return on equity or return on assets as set out in the Code are less appropriate for assessment of non-executive Directors and the Board s performance as a whole. The Nominating Committee will recommend to the Board performance criteria and evaluation procedures for evaluation and assessment of the contribution by each individual Director to the effectiveness of the Board, including any recommendation in respect of a Director s re-nomination (if applicable). Each Director will be evaluated on the basis of his attendance at Board and Committee meetings and contribution to discussions at such meetings and the discharge of his duties in relation to the affairs of the Group. In addition, the Nominating Committee will have regard to whether a Director has adequate time and attention to devote to the Company, in the case of Directors with multiple board representations. Although some of the Directors have other board representations, the Nominating Committee is satisfi ed that these Directors are able to and have adequately carried out their duties as Directors of the Company. The record of the Directors attendance at meetings of the Board and Committees between 25 November and the date of this Report is set out below: Board Meetings Audit Committee Meetings Number of Meetings Nominating Committee Meetings Remuneration Committee Meetings Name Held Attended Held Attended Held Attended Held Attended Low Beng Tin * 2 2* 2 2* Ong Chin Sum * 2 2* 2 2* Ong Tong Yang * 2 1* 2 1* Ong Tong Hai * 2 2* 2 2* Tatsuro Mori * 2 2* 2 2* Geraldine Ong Siew Ting Jovenal R. Santiago Tan Siok Chin Note: * The Directors are not members of the respective Committees but have attended the meetings by invitation. PRINCIPLE 6: ACCESS TO INFORMATION As a general rule, Board papers are sent to Directors in advance in order for Directors to be adequately prepared for meetings. The Board has separate and independent access to senior Management of the Company ( Senior Management ). Requests for the Company s information by the Board are dealt with promptly. The Board is informed on all material events and transactions as and when they occur. Professional advisors may be invited to advise the Board, or any of its members, if the Board or any individual member thereof needs independent professional advice. The Company Secretary attends all Board and Committee meetings and is responsible for ensuring that Board procedures are followed and recording and circulating to the Board and the Committees the minutes of all Board and Committees meetings.

39 CORPORATE GOVERNANCE Under the direction of the Chairman, the Company Secretary facilitates the information fl ow within the Board and its Committees and between Senior Management and Non-Executive Directors. The Company Secretary also advises the Board on legal and regulatory issues when required. The appointment and the removal of the Company Secretary are decisions taken by the Board as a whole. PRINCIPLES 7, 8 AND 9: PROCEDURES FOR DEVELOPING REMUNERATION POLICIES, LEVEL AND MIX OF REMUNERATION, AND DISCLOSURE OF REMUNERATION The Company has established a Remuneration Committee which comprises three Directors, all of whom, including its Chairman, are independent. As at the date of this Report, the Remuneration Committee members are: Ms Geraldine Ong Siew Ting Ms Tan Siok Chin Mr Jovenal R. Santiago Chairman The Remuneration Committee is governed by written terms of reference under which it is responsible for: (a) reviewing annually the remuneration of each of the Directors and key executives and making recommendations to the Board; and (b) recommending to the Board a framework of remuneration for the Directors and key executives. In setting the remuneration framework, the Remuneration Committee takes into account the performance of the Group as well as the Directors and key executives. As part of its review, the Remuneration Committee ensures that the remuneration packages are comparable within the industry and that the remuneration packages of Executive Directors and controlling shareholders of the Group and employees who are related to such persons are in line with the Group s staff remuneration guidelines and commensurate with their respective job scopes and level of responsibilities. Any bonuses, pay increases and/or promotions for any employees who are related to the Directors and substantial shareholders will also be subject to the review and approval of the Remuneration Committee. If required, the Remuneration Committee will seek expert professional advice. All aspects of remuneration of the Directors, including but not limited to Directors fees, salaries, allowances, bonuses, options and benefits-in-kind are considered by the Remuneration Committee. Each member of the Remuneration Committee will abstain from reviewing and approving his own remuneration and the remuneration packages of persons related to him. The Remuneration Committee s recommendations are submitted for endorsement by the Board. The payment of Directors fees is subject to the approval of shareholders. The framework for Directors fees is basic fees which are commensurate with the duties and responsibilities of the Directors. Details of the remuneration paid to the Directors disclosed in bands of S$250,000 for the fi nancial year ended 30 September are as follows. For the fi nancial year ended 30 September (Number of Directors) Below S$250,000 4 Between S$250,000 and S$499,999 - S$500,000 and above 4 Total 8

40 CORPORATE GOVERNANCE For the fi nancial year ended 30 September, the top fi ve key executives (who are not also Directors) of the Group are Mr Hor Siew Fu, Mr Ong Kong Hoe Bernard, Mr Loh Ngiap Boon, Ms Laura Ng Hai Ow and Ms Chong Siew Kuen. A breakdown of the remuneration of each of the Directors and the top fi ve key executives of the Group for the fi nancial year ended 30 September is set out below: Remuneration of Directors Directors Fees Salary Bonus Allowances and Others Total Compensation (%) (%) (%) (%) (%) Below S$250,000 Ms Geraldine Ong Siew Ting Mr Jovenal R. Santiago Mr Low Beng Tin Ms Tan Siok Chin S$500,000 and above Mr Ong Chin Sum Mr Ong Tong Yang Mr Ong Tong Hai Mr Tatsuro Mori Remuneration of Top Five Key Executives Salary Bonus Allowances and Others Total Compensation (%) (%) (%) (%) Below S$250,000 Mr Hor Siew Fu Mr Ong Kong Hoe Bernard Mr Loh Ngiap Boon Ms Laura Ng Hai Ow Ms Chong Siew Kuen Mr Ong Chin Sum is the father of Messrs Ong Tong Yang and Ong Tong Hai, and they are Executive Directors of the Company. One of the Company s employees, who draws an annual salary of more than S$150,000 but below S$250,000, is an immediate family member of Messrs Ong Chin Sum, Ong Tong Yang and Ong Tong Hai. Salary details of this employee are set out below: Base Salary Bonus Allowances and Others Total Compensation (%) (%) (%) (%) Save for the Cosmosteel Employee Share Option Scheme, the Company s employees share option scheme approved by Shareholders in general meeting held on 28 March 2007, the Company does not have any employee share schemes.

41 CORPORATE GOVERNANCE PRINCIPLE 10: ACCOUNTABILITY In presenting the annual fi nancial statements and announcements of fi nancial results to shareholders, it is the aim of the Board to provide shareholders with a balanced and understandable assessment of the Company s and Group s performance, position and prospects. In this respect, Management provides the Board with balanced and understandable accounts of the Company s performance, position and prospects on a regular basis. PRINCIPLE 11: AUDIT COMMITTEE The Audit Committee comprises three Directors, all of whom, including its Chairman, are independent. As at the date of this Report, the Audit Committee members are: Mr Jovenal R. Santiago Ms Geraldine Ong Siew Ting Ms Tan Siok Chin Chairman The Audit Committee is governed by written terms of reference under which it is responsible for: (a) reviewing the audit plans of external auditors; (b) reviewing external auditors reports; (c) reviewing the co-operation given by the Company s offi cers to external auditors; (d) reviewing the fi nancial statements of the Company and the Group before their submission to the Board; (e) reviewing the independence and objectivity of external auditors and nominate external auditors for re-appointment and approving the remuneration and terms of engagement of external auditors; (f) reviewing and ratifying all interested person transactions, if any, to ensure that they comply with the approved internal control procedures and have been conducted on an arm s length basis; (g) reviewing, together with externally appointed internal audit professionals, the Group s internal control procedures; (h) regularly advising the Board on whether to commission reviews by external auditors or a suitable accounting fi rm to review the adequacy and effectiveness of the Group s system of internal controls, including the procedures and systems for selection and evaluation of suppliers and sub-contractors; (i) (j) reviewing and approving the procedures put in place in relation to the Group s policy in relation to hedging transactions; and generally, perform such other functions and duties as may be required by the relevant laws or provisions of the Listing Manual of the Singapore Exchange Securities Trading Limited (as may be amended from time to time) (the Listing Manual ). Apart from the above functions, the Audit Committee will also commission and review the findings of internal investigations into matters where there is any suspected fraud or irregularity, failure of internal controls or infringement of any law, rule or regulation which has or is likely to have a material impact on the Group s operating results and/or financial position, as well as the procedures of such arrangements to ensure independent investigations of such matters and appropriate follow-up action. In the event that a member of the Audit Committee is interested in any matter being considered by the Audit Committee, he will abstain from reviewing or voting on that particular resolution.

42 CORPORATE GOVERNANCE PRINCIPLES 12 AND 13: INTERNAL CONTROLS AND INTERNAL AUDIT The Audit Committee has appointed and commissioned Nexia TS Public Accounting Corporation as internal auditors to assist Management in evaluating and assessing the effectiveness of internal controls implemented by the Company, including review of the adequacy and effectiveness of the Group s systems of internal controls, including the procedures and systems for (i) selection and evaluation of suppliers and sub-contractors; (ii) controls to ensure no potential infringement of intellectual property rights of third parties; and (iii) controls over inventory identifi cation and traceability and physical inventory (including quality of inventory). The internal auditors have submitted a report dated 3 March to the Audit Committee, reporting, inter alia, that (i) having performed the system review procedures of the Company s internal controls, they did not identify any defi ciencies or non-compliance of controls or measures implemented by Management under such procedures and systems and (ii) save for certain matters highlighted to the Company which have been duly noted by Management, based on their review of the adequacy and effectiveness of the Company s system of internal controls and measures, they did not identify any defi ciencies or non-compliance of controls or measures implemented by Management under such system. Based on the internal auditors report, the Board is satisfied that the internal controls of the Group are reasonably adequate. The Company has also put in place a whistle blowing policy and relevant procedures, as approved by the Audit Committee and adopted by the Board, for the purposes of handling complaints, concerns or issues relating to activities or affairs relating to the business, customers, suppliers, partners or associates, activities or affairs of the Group or conduct of any offi cer, Senior Management or employee of the Group. Staff of the Group may, in confi dence, raise concerns about possible improprieties in any such corporate matters. PRINCIPLES 14 AND 15: COMMUNICATION WITH SHAREHOLDERS The Company s results are published through the SGXNET. Results and annual reports are announced or issued within the mandatory period. All shareholders of the Company with an address in Singapore will be able to receive a copy of the Company s annual report and notices of general meetings. At general meetings, shareholders are given the opportunity to air their views and ask Directors or Management questions regarding the Company and the Group. The Board and Management are present at these meetings to address any questions that shareholders may have. External auditors are also present to assist the Board in addressing queries by shareholders. The Articles allow a member of the Company to appoint a proxy to attend and vote at general meetings. For the time being, the Board is of the view that this is adequate to enable shareholders to participate in general meetings of the Company. Separate resolutions on each distinct issue are tabled at general meetings. DEALINGS IN SECURITIES In line with the rules of the Listing Manual, the Company has adopted a policy prohibiting its offi cers from dealing in the Company s shares whilst they are in possession of unpublished material price sensitive information and during the period commencing one month before the release of the Company s half year and full year results, if it is not required to announce quarterly fi nancial statements, and two weeks before the release of quarterly results, if it is required to announce quarterly fi nancial statements. The Company also discourages trading on short-term considerations.

43 CORPORATE GOVERNANCE DISCLOSURE ON USE OF PROCEEDS FROM INITIAL PUBLIC OFFERING The net proceeds raised from the initial public offering ( IPO ) of the Company net of costs and expenses was approximately S$8 million. It was disclosed in the IPO prospectus that the net proceeds will be utilised in the following manner: Purpose Amount of Net Proceeds (S$ million) (a) To set up representative offi ces overseas to expand the Group s sales and marketing and purchasing or procurement activities 0.5 (b) To increase and widen the Group s product range 5.0 (c) To enhance the Group s value-added service capabilities 0.5 (d) Working capital 2.0 Total 8.0 As at the date of this report, the proceeds of IPO has been fully utilised by the Group for each of the abovementioned purposes, as further elaborated upon below. In relation to (a), although the Group has not proceeded to establish overseas representative offi ces in Bangkok, Thailand and in Shanghai, PRC as earlier mentioned in the Company s IPO prospectus, due to, inter alia, changes in the political and economic climate in Thailand and the inability to fi nd suitable business opportunities and suitable business partners, the Group has nevertheless proceeded with its overseas expansion plans and setting-up of overseas offi ce(s) through the setting up of a subsidiary company known as CosmoSteel (Australia) Pty Ltd in Victoria, Australia in October for the purposes of expanding the Group s business in the Asia Pacifi c region and exploring new business opportunities in the energy and energyrelated industries. In relation to (c), due to substantial cost-savings achieved in the course of the Group s acquisition of the relevant equipment to enhance its value-added capabilities, the Group only expended S$0.15 million out of the $0.5 million originally earmarked for such purpose, and the balance S$0.35 million has been re-deployed as working capital of the Group. DISCLOSURE ON USE OF PROCEEDS FROM PLACEMENT As earlier announced, the Company has on 28 September issued and allotted 35,000,000 new ordinary shares in its capital by way of a private placement pursuant to Section 272B of the Securities and Futures Act (Cap. 289) of Singapore (the "Placement"). The proceeds raised from the Placement, net of costs and expenses, was approximately S$16.58 million. This has been deployed principally as working capital in accordance with the Company s earlier announcement dated 17 September. MATERIAL CONTRACTS There were no material contracts of the Company or any of its subsidiaries involving the interests of the Chief Executive Offi cer or any Director or controlling shareholder, either still subsisting at the end of the fi nancial year or if not then subsisting, entered into since the end of the previous fi nancial year.

44 DIRECTORS REPORT The directors of the company are pleased to present their report together with the audited fi nancial statements of the company and of the group for the fi nancial year ended 30 September. 1. DIRECTORS AT DATE OF REPORT The directors of the company in offi ce at the date of this report are: Ong Chin Sum Ong Tong Yang (Weng Dongyang) Ong Tong Hai (Weng Donghai) Low Beng Tin Tatsuro Mori Geraldine Ong Siew Ting Jovenal R Santiago Tan Siok Chin 2. ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE BENEFITS BY MEANS OF THE ACQUISITION OF SHARES AND DEBENTURES Neither at the end of the fi nancial year nor at any time during the fi nancial year did there subsist any arrangement whose object is to enable the directors of the company to acquire benefi ts by means of the acquisition of shares or debentures in the company or any other body corporate except for the option rights mentioned below. 3. DIRECTORS INTERESTS IN SHARES AND DEBENTURES The directors of the company holding offi ce at the end of the fi nancial year had no interests in the share capital and options of the company and related corporations as recorded in the register of directors shareholdings kept by the company under section 164 of the Companies Act, Cap. 50 except as follows: Name of directors and company in which interests are held At beginning of year At end of year Cosmosteel Holdings Limited The company Number of shares of no par value Ong Chin Sum 62,263,986 44,263,986 Ong Tong Yang (Weng Dongyang) 13,159,997 13,159,997 Ong Tong Hai (Weng Donghai) 13,159,997 13,159,997 Low Beng Tin 2,632,000 Geraldine Ong Siew Ting 100, ,000 Tan Siok Chin 100, ,000 By virtue of section 7 of the Companies Act, Cap. 50, Mr Ong Chin Sum is deemed to have an interest in the subsidiary of the company. The directors interests as at 21 October were the same as those at the end of the year.

45 DIRECTORS REPORT CONTRACTUAL BENEFITS OF DIRECTORS Since the beginning of the fi nancial year, no director of the company has received or become entitled to receive a benefi t which is required to be disclosed under section 201(8) of the Companies Act, Cap. 50, by reason of a contract made by the company or a related corporation with the director or with a fi rm of which he is a member, or with a company in which he has a substantial fi nancial interest. There were certain transactions (shown in the fi nancial statements under related party transactions) with corporations in which certain directors have an interest. 5. OPTIONS TO TAKE UP UNISSUED SHARES The company has an employee share option scheme known as the CosmoSteel Employee Share Option Scheme ( the ESOS ). The ESOS complies with the rules of the SGX-ST as set out in Chapter 8 of the Listing Manual. The ESOS provides eligible participants with an opportunity to participate in the equity of the company and to motivate them towards better performance through increased dedication and loyalty. The ESOS, which forms an integral and important component of its employee compensation plan, is designed to primarily reward and retain Executive Directors, Non-Executive Directors and employees of the group whose services are vital to its well being and success. Under the rules of the ESOS, Executive Directors, Non-Executive Directors (including Independent Directors) and employees of the group, who are not Controlling Shareholders or their Associates, are eligible to participate in the ESOS. Under the terms of the Service Agreements of the Chief Executive Offi cer, Mr Ong Chin Sum, and the Executive Directors, Mr Ong Tong Yang and Mr Ong Tong Hai, they are entitled to participate in an annual profi t sharing incentive bonus. As such, they have volunteered to be excluded from participating in the ESOS. In addition, in order to minimise any potential confl ict of interest, all immediate family (as defi ned in the Listing Manual) members of Mr Ong Chin Sum, Mr Ong Tong Yang and Mr Ong Tong Hai, will also not be eligible to participate in the ESOS. The ESOS is administered by the remuneration committee with powers to determine, inter alia, the following: (a) (b) (c) persons to be granted Options; number of Options to be offered; and recommendations for modifi cations to the ESOS. The remuneration committee comprises Ms Geraldine Ong Siew Ting, Mr Jovenal R Santiago and Ms Tan Siok Chin. The remuneration committee consists of directors (including directors who may be participants of the ESOS). A member of the remuneration committee who is also a participant of the ESOS must not be involved in its deliberation in respect of Options granted or to be granted to him. The aggregate number of shares over which the remuneration committee may grant Options on any date, when added to the number of shares issued and issuable in respect of all Options granted under the ESOS shall not exceed 15.0% of the issued share capital of the company on the day immediately preceding the date of the relevant grant.

46 DIRECTORS REPORT 5. OPTIONS TO TAKE UP UNISSUED SHARES (CONT D) The aggregate number of shares comprised in any Option to be offered to a participant under the ESOS shall be determined at the absolute discretion of the remuneration committee, which shall take into account (where applicable) criteria such as rank, past performance, years of service, potential for future development of that participant. The Options that are granted under the ESOS may have exercise prices that are, at the remuneration committee s discretion, set at a price (the Market Price ) equal to the average of the last dealt prices for the shares on the Offi cial List of the SGX-ST for the fi ve consecutive Market Days immediately preceding the relevant date of grant of the relevant Option; or at a discount to the Market Price (subject to a maximum discount of 20.0%). Options which are fi xed at the Market Price ( Market Price Option ) may be exercised after the fi rst anniversary of the date of grant of that Option while Options exercisable at a discount to the Market Price ( Discounted Option ) may only be exercised after the second anniversary from the date of grant of the Option. Options granted under the ESOS will have a life span of 10 years. The ESOS shall continue in operation for a maximum duration of 10 years and may be continued for any further period thereafter with the approval of shareholders by ordinary resolution in general meeting and of any relevant authorities which may then be required. During the fi nancial year, no option to take up unissued shares of the company or any corporation in the group was granted. 6. OPTIONS EXERCISED During the fi nancial year, there were no shares of the company or any corporation in the group issued by virtue of the exercise of an option to take up unissued shares. 7. UNISSUED SHARES UNDER OPTION At the end of the fi nancial year, there were no unissued shares under option. 8. AUDIT COMMITTEE The members of the audit committee at the date of this report are as follows: Jovenal R Santiago Geraldine Ong Siew Ting Tan Siok Chin (Chairman of audit committee and Independent Director) (Independent Director) (Independent Director) The audit committee performs the functions specifi ed by section 201B(5) of the Companies Act. Among others, it performed the following functions: Reviewed with the independent external auditors their audit plan; Reviewed with the independent external auditors their evaluation of the company s internal accounting control, and their report on the fi nancial statements and the assistance given by the company s offi cers to them; Reviewed the fi nancial statements of the group and the company prior to their submission to the directors of the company for adoption; and Reviewed the interested person transactions (as defined in Chapter 9 of the Listing Manual of SGX).

47 DIRECTORS REPORT AUDIT COMMITTEE (CONT D) Other functions performed by the audit committee are described in the report on corporate governance included in the annual report. It also includes an explanation of how independent auditor objectivity and independence is safeguarded where the independent auditors provide non-audit services. The audit committee has recommended to the board of directors that the independent auditors, RSM Chio Lim LLP, be nominated for re-appointment as independent auditors at the next annual general meeting of the company. 9. INDEPENDENT AUDITORS The independent auditors, RSM Chio Lim LLP, have expressed their willingness to accept re-appointment. 10. SUBSEQUENT DEVELOPMENTS There are no signifi cant developments subsequent to the release of the group s and the company s preliminary fi nancial statements, as announced on 11 November, which would materially affect the group s and the company s operating and fi nancial performance as of the date of this report. On Behalf of the Directors Ong Chin Sum Director Ong Tong Hai (Weng Donghai) Director 2 December

48 STATEMENT BY DIRECTORS In the opinion of the directors, the fi nancial statements set out on pages 48 to 88 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 30 September and the results, changes in equity and cash fl ows of the group and the changes in equity of the company 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 Directors Ong Chin Sum Director Ong Tong Hai (Weng Donghai) Director 2 December

49 INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF COSMOSTEEL HOLDINGS LIMITED (REGISTRATION NO: Z) We have audited the accompanying fi nancial statements of Cosmosteel Holdings Limited and its subsidiary (the group) set out on pages 48 to 88, which comprise the statements of fi nancial position of the group and the company as at 30 September, and the statement of comprehensive income, statement of changes in equity and statement of cash fl ows of the group, and statement of changes in equity of the company for the year then ended, and a summary of signifi cant accounting policies and other explanatory notes. MANAGEMENT S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS Management is responsible for the preparation and fair presentation of these fi nancial statements in accordance with the provisions of the Singapore Companies Act, Cap. 50 ( the Act ) and Singapore Financial Reporting Standards. This responsibility includes: (a) (b) (c) devising and maintaining a system of internal accounting controls suffi cient 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 statement of comprehensive income and statements of fi nancial position and to maintain accountability of assets; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. INDEPENDENT AUDITORS RESPONSIBILITY Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with 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 fi nancial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the fi nancial 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 fi nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal 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 fi nancial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. OPINION In our opinion, (a) (b) the consolidated fi nancial statements of the group and the statement of fi nancial position and the statement of changes in equity of the company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the group and of the company as at 30 September and the results, changes in equity and cash fl ows of the group and the changes in equity of the company 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 subsidiary incorporated in Singapore of which we are the independent auditors have been properly kept in accordance with the provisions of the Act. RSM Chio Lim LLP Public Accountants and Certifi ed Public Accountants Singapore 2 December Partner in charge of audit: Peter Jacob Effective from year ended 30 September 2006

50 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME YEAR ENDED 30 SEPTEMBER Group Note Revenue 5 136, ,766 Cost of Sales (102,603) (80,090) Gross Profit 34,320 26,676 Other Items of Income Interest Income Other Credits Other Items of Expense Marketing and Distribution Costs (5,145) (3,971) Administrative Expenses 7 (8,890) (7,848) Finance Costs 8 (1,821) (1,296) Other Charges 6 (2,522) (1,687) Profit Before Tax from Continuing Operations 16,487 11,931 Income Tax Expense 9 (2,803) (2,221) Profit from Continuing Operations, Net of Tax 13,684 9,710 Other Comprehensive Income (Losses) / Gains on Property Revaluation, Net of Tax (700) 2,259 (Losses) / Gains on Other Assets, Net of Tax (6) 16 Other Comprehensive Income for the Year, Net of Tax 9 (706) 2,275 Total Comprehensive Income for the Year 12,978 11,985 Earnings Per Share Earnings per Share Currency Unit Cents Cents Basic and Diluted Continuing Operations The accompanying notes form an integral part of these fi nancial statements.

51 STATEMENTS OF FINANCIAL POSITION AS AT 30 SEPTEMBER Group Company Note ASSETS Non-Current Assets Properties, Plant and Equipment 13 12,153 14,863 Investment in Subsidiary 14 18,811 18,092 Other Receivables 18 17,510 7,000 Other Assets Total Non-Current Assets 12,283 14,999 36,321 25,092 Current Assets Inventories 17 71,250 51,336 Trade and Other Receivables 18 25,764 27,005 3,573 3,798 Other Assets Cash and Cash Equivalents 20 24,599 8,797 15,172 1,150 Total Current Assets 122,167 87,483 18,773 4,962 Total Assets 134, ,482 55,094 30,054 EQUITY AND LIABILITIES Equity Share Capital 21 42,062 25,489 42,062 25,489 Retained Earnings 28,853 15,541 4,843 2,690 Other Reserves 22 1,561 2,776 Total Equity 72,476 43,806 46,905 28,179 Non-Current Liabilities Deferred Tax Liabilities ,101 Finance Leases Other Financial Liabilities 24 10,786 3,318 3,795 Total Non-Current Liabilities 11,966 5,131 3,795 Current Liabilities Income Tax Payable 2,858 2, Trade and Other Payables 23 8,101 8,329 3,106 1,783 Finance Leases Other Financial Liabilities 24 38,509 42,306 1,205 Total Current Liabilities 50,008 53,545 4,394 1,875 Total Liabilities 61,974 58,676 8,189 1,875 Total Equity and Liabilities 134, ,482 55,094 30,054 The accompanying notes form an integral part of these fi nancial statements.

52 STATEMENTS OF CHANGES IN EQUITY YEAR ENDED 30 SEPTEMBER Share Revaluation Retained Total Capital Reserve Earnings Equity Group Current Year: Opening Balance at 1 October 25,489 2,776 15,541 43,806 Issue of Shares (Note 21) 17,290 17,290 Share Issue Expenses (Note 21) (717) (717) Dividends Paid (Note 12) (881) (881) Total Comprehensive Income for the Year (706) 13,684 12,978 Transfer to Retained Earnings Difference Between Depreciation on Carrying Revalued Amount and Depreciation Based on Original Cost (509) 509 Closing Balance at 30 September 42,062 1,561 28,853 72,476 Previous Year: Opening Balance at 1 October , ,593 33,583 Dividends Paid (Note 12) (1,762) (1,762) Total Comprehensive Income for the Year 2,275 9,710 11,985 Closing Balance at 30 September 25,489 2,776 15,541 43,806 Share Retained Total Capital Earnings Equity Company Current Year: Opening Balance at 1 October 25,489 2,690 28,179 Issue of Shares (Note 21) 17,290 17,290 Share Issue Expenses (Note 21) (717) (717) Dividends Paid (Note 12) (881) (881) Total Comprehensive Income for the Year 3,034 3,034 Closing Balance at 30 September 42,062 4,843 46,905 Previous Year: Opening Balance at 1 October ,489 2,049 27,538 Dividends Paid (Note 12) (1,762) (1,762) Total Comprehensive Income for the Year 2,403 2,403 Closing Balance at 30 September 25,489 2,690 28,179 The accompanying notes form an integral part of these fi nancial statements.

53 CONSOLIDATED STATEMENT OF CASH FLOWS YEAR ENDED 30 SEPTEMBER Group Cash Flows From Operating Activities Profi t Before Tax 16,487 11,931 Adjustments for: Interest Income (19) (28) Interest Expense 1,821 1,296 Depreciation of Properties, Plant and Equipment 1,400 1,061 Impairment Losses on Properties, Plant and Equipment 750 1,104 Gains on Disposal of Plant and Equipment (6) Fair Value (Gains) / Losses on Derivative Financial Instruments (504) 517 Operating Cash Flows before Changes in Working Capital 19,929 15,881 Inventories (19,914) (26,228) Trade and Other Receivables 1,241 (2,443) Other Assets (209) (201) Bills Payable (7,097) 20,093 Trade and Other Payables (228) 1,788 Net Cash Flows (Used in) / From Operations Before Interest and Tax (6,278) 8,890 Income Tax Paid (2,249) (1,717) Net Cash Flows (Used in) / From Operating Activities (8,527) 7,173 Cash Flows From Investing Activities Purchase of Plant and Equipment (Note 20B) (279) (3,538) Disposal of Plant and Equipment 6 Interest Received Net Cash Used in Investing Activities (254) (3,510) Cash Flows From Financing Activities Dividends Paid to Equity Shareholders (Note 12) (881) (1,762) Cash Restricted in Use Over 3 Months (115) Issue of Shares (Note 21) 16,573 Increase in Other Financial Liabilities 11, Decrease in Finance Leases (560) (385) Interest Paid (1,821) (1,296) Net Cash Flows From / (Used in) Financing Activities 24,468 (2,757) Net Increase in Cash and Cash Equivalents 15, Cash and Cash Equivalents, Cash Flow Statement, Beginning Balance 8,797 7,891 Cash and Cash Equivalents, Cash Flow Statement, Ending Balance (Note 20A) 24,484 8,797 The accompanying notes form an integral part of these fi nancial statements.

54 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER 1. GENERAL The company is incorporated in Singapore. The fi nancial statements are presented in Singapore dollars and they cover the parent and the group entities. The financial statements were approved and authorised for issue by the board of directors on 2 December. The company is an investment holding company. It is listed on the Singapore Exchange Securities Trading Limited. The principal activities of the subsidiary are described in Note 14 below. The registered offi ce is: 5 Shenton Way #07-00 UIC Building Singapore The company is domiciled in Singapore. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Accounting Convention The fi nancial statements have been prepared in accordance with the Singapore Financial Reporting Standards ( FRS ) as well as all related Interpretations to FRS ( INT FRS ) as issued by the Singapore Accounting Standards Council and the Companies Act, Cap 50. The fi nancial statements are prepared on a going concern basis under the historical cost convention except where an FRS requires an alternative treatment (such as fair values) as disclosed where appropriate in these fi nancial statements. Basis of Preparation of the Financial Statements The preparation of fi nancial statements in conformity with generally accepted accounting principles requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the fi nancial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The estimates and assumptions are reviewed on an ongoing basis. Apart from those involving estimations, management has made judgements in the process of applying the entity s accounting policies. The areas requiring management s most diffi cult, subjective or complex judgements, or areas where assumptions and estimates are signifi cant to the fi nancial statements, are disclosed at the end of this footnote, where applicable.

55 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) Basis of Presentation The consolidation accounting method is used for the consolidated fi nancial statements that include the fi nancial statements made up to the end of the reporting year each year of the company and all of its directly and indirectly controlled subsidiaries. Consolidated fi nancial statements are the fi nancial statements of the group presented as those of a single economic entity. The consolidated fi nancial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances. All signifi cant intragroup balances and transactions, including income, expenses and dividends, are eliminated in full on consolidation. The proportionate consolidation accounting method is used for the joint ventures whereby the group s share of each of the assets, liabilities, income and expense is combined on a line-by-line basis with similar items in the fi nancial statements. The results of the investees acquired or disposed of during the fi nancial year are accounted for from the respective dates of acquisition or up to the dates of disposal which is the date on which effective control is obtained of the acquired business until that control ceases. On disposal the attributable amount of goodwill if any is included in the determination of the gain or loss on disposal. The company s fi nancial statements have been prepared on the same basis, and as permitted by the Companies Act, Cap. 50, no statement of comprehensive income is presented for the company. Revenue Recognition The revenue amount is the fair value of the consideration received or receivable from the gross infl ow of economic benefi ts during the year arising from the course of the ordinary activities of the entity and it is shown net of any related sales taxes, estimated returns, discounts and volume rebates. Revenue from the sale of goods is recognised when signifi cant risks and rewards of ownership are transferred to the buyer, there is neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, and the amount of revenue and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Revenue from rendering of services that are of short duration is recognised when the services are completed. Interest is recognised using the effective interest method. Employee Benefits Contributions to defi ned contribution retirement benefi t plans are recorded as an expense as they fall due. The entity s legal or constructive obligation is limited to the amount that it agrees to contribute to an independently administered fund which is the Central Provident Fund in Singapore (a government managed retirement benefi t plan). For employee leave entitlement the expected cost of short-term employee benefi ts in the form of compensated absences is recognised in the case of accumulating compensated absences, when the employees render service that increases their entitlement to future compensated absences; and in the case of non-accumulating compensated absences, when the absences occur. A liability for bonuses is recognised where the entity is contractually obliged or where there is constructive obligation based on past practice.

56 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) Share-Based Compensation For the equity-settled share-based compensation transactions, the fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed on a straight-line basis over the vesting period is determined by reference to the fair value of the options granted excluding the effect of non-market conditions such as profi tability and sales growth targets. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Fair value is measured using the Black-Scholes pricing model. The expected lives used in the model are adjusted, based on management s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. At each end of the reporting year, a revision is made of the number of options that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the statement of comprehensive income. The proceeds received net of any directly attributable transaction costs are credited to share capital when the options are exercised. Cancellations of grants of equity instruments during the vesting period (other than a grant cancelled by forfeiture when the vesting conditions are not satisfi ed) are accounted for as an acceleration of vesting, therefore any amount unrecognised that would otherwise have been charged is recognised immediately in the statement of comprehensive income. Income Tax The income taxes are accounted using the asset and liability method that requires the recognition of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequence of events that have been recognised in the fi nancial statements or tax returns. The measurements of current and deferred tax liabilities and assets are based on provisions of the enacted or substantially enacted tax laws; the effects of future changes in tax laws or rates are not anticipated. Income tax expense represents the sum of the tax currently payable and deferred tax. Current and deferred income taxes are recognised in the statement of comprehensive income. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same income tax authority. The carrying amount of deferred tax assets is reviewed at each end of the reporting year and is reduced, if necessary, by the amount of any tax benefi ts that, based on available evidence, are not expected to be realised. A deferred tax amount is recognised for all temporary differences, unless the deferred tax amount arises from the initial recognition of an asset or liability in a transaction which (i) is not a business combination; and (ii) at the time of the transaction, affects neither accounting profi t nor taxable profi t (tax loss). A deferred tax liability is not recognised for all taxable temporary differences associated with investments in subsidiaries and interests in joint ventures because (a) the company is able to control the timing of the reversal of the temporary difference; and (b) it is probable that the temporary difference will not reverse in the foreseeable future. Foreign Currency Transactions The functional currency is the Singapore dollar as it refl ects the primary economic environment in which the entity operates. Transactions in foreign currencies are recorded in the functional currency at the rates ruling at the dates of the transactions. At each end of the reporting year, recorded monetary balances and balances measured at fair value that are denominated in non-functional currencies are reported at the rates ruling at the balance sheet and fair value dates respectively. All realised and unrealised exchange adjustment gains and losses are dealt with in the statement of comprehensive income. The presentation is in the functional currency.

57 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) Borrowing Costs All borrowing costs are interest and other costs incurred in connection with the borrowing of funds that are directly attributable to the acquisition, construction or production of a qualifying asset that necessarily take a substantial period of time to get ready for their intended use or sale are capitalised as part of the cost of that asset until substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete. Other borrowing costs are recognised as an expense in the period in which they are incurred. The interest expense is calculated using the effective interest rate method. Property, Plant and Equipment Depreciation is provided on a straight-line basis to allocate the gross carrying amounts less their residual values over their estimated useful lives of each part of an item of these assets. The annual rates of depreciation are as follows: Leasehold properties Over the remaining terms of respective leases that are 4.2% to 9.0% Leasehold properties improvements 10% to 66.7% Plant and equipment 10% to 33.3% An asset is depreciated when it is available for use until it is derecognised even if during that period the item is idle. Fully depreciated assets still in use are retained in the fi nancial statements. Property, plant and equipment are carried at cost on initial recognition and after initial recognition at cost less any accumulated depreciation and any accumulated impairment losses except for the revalued items as described below. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item and is recognised in the statement of comprehensive income. The residual value and the useful life of an asset is reviewed at least at each fi nancial year-end and, if expectations differ signifi cantly from previous estimates, the changes are accounted for as a change in an accounting estimate, and the depreciation charge for the current and future periods are adjusted. Cost also includes acquisition cost, any cost directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Subsequent cost are recognised as an asset only when it is probable that future economic benefi ts associated with the item will fl ow to the entity and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of comprehensive income when they are incurred. If fair value can be measured reliably, after the initial recognition as an asset at cost, an item of property is carried at a revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations are made with suffi cient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting year and the entire class of property, plant and equipment to which that asset belongs is revalued. When an asset s carrying amount is increased as a result of a revaluation, the increase is recognised in other comprehensive income and accumulated in equity under the heading of revaluation surplus except that the increase is recognised in profi t or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profi t or loss. When an asset s carrying amount is decreased, the decrease is recognised in other comprehensive income to the extent of any credit balance existing in the revaluation surplus in respect of that asset. The decrease recognised in other comprehensive income reduces the amount accumulated in equity under the heading of revaluation surplus. The revaluation surplus included in equity is transferred directly to retained earnings when the asset is derecognised.

58 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) Property, Plant and Equipment (Cont d) However, some of the surplus is realised as the asset is used as the difference between depreciation based on the revalued carrying amount of the asset and depreciation based on the asset s original cost and these transfers from revaluation surplus to retained earnings are not made through the statement of comprehensive income. When an item of property, plant and equipment is revalued, any accumulated depreciation at the date of the revaluation is eliminated against the gross carrying amount of the asset and the net amount restated to the revalued amount of the asset. Leased Assets Leases are classifi ed as fi nance leases if substantially all the risks and rewards of ownership are transferred to the lessee. All other leases are classifi ed as operating leases. At the commencement of the lease term, a fi nance lease is recognised as an asset and as a liability in the balance sheet at amounts equal to the fair value of the leased asset or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease. The discount rate used in calculating the present value of the minimum lease payments is the interest rate implicit in the lease, if this is practicable to determine, if not the lessee s incremental borrowing rate is used. Any initial direct costs of the lessee are added to the amount recognised as an asset. The excess of the lease payments over the recorded lease liability are treated as fi nance charges which are allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents are charged as expenses in the periods in which they are incurred. The assets are depreciated as owned depreciable assets. Leases where the lessor effectively retains substantially all the risks and benefi ts of ownership of the leased assets are classifi ed as operating leases. For operating leases, lease payments are recognised as an expense in the statement of comprehensive income on a straight-line basis over the term of the relevant lease unless another systematic basis is representative of the time pattern of the user s benefi t, even if the payments are not on that basis. Lease incentives received are recognised in the statement of comprehensive income as an integral part of the total lease expense. Segment Reporting A business segment is a distinguishable component of an enterprise that is engaged in providing an individual product or service or a group of related products or services and that is subject to risks and returns that are different from those of other business segments. A geographical segment is a distinguishable component that is engaged in providing products or services within a particular economic environment and that is subject to risks and returns that are different from those of components operating in other economic environments. Subsidiaries A subsidiary is an entity including unincorporated and special purpose entity that is controlled by the group. Control is the power to govern the fi nancial and operating policies of an entity so as to obtain benefi ts from its activities accompanying a shareholding of more than one half of the voting rights or the ability to appoint or remove the majority of the members of the board of directors or to cast the majority of votes at meetings of the board of directors. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity.

59 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) Subsidiaries (Cont d) In the company s own separate fi nancial statements, the investments in subsidiaries are stated at cost less any provision for impairment in value. Impairment loss recognised in profi t or loss for a subsidiary 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. The net book values of the subsidiaries are not necessarily indicative of the amounts that would be realised in a current market exchange. Joint Ventures A joint venture is a contractual arrangement with other parties to undertake an economic activity that is subject to joint control. In the company s own fi nancial statements, an investment in joint venture is stated at cost less any provision for impairment in value. Impairment loss recognised in profi t or loss for a joint venture 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. The net book values of the joint ventures are not necessarily indicative of the amounts that would be realised in a current market exchange. Business Combinations Business combinations are accounted for by applying the purchase method of accounting. There were none during the year. Impairment of Non-Financial Assets Irrespective of whether there is any indication of impairment, an annual impairment test is performed at the same time every year on an intangible asset with an indefi nite useful life or an intangible asset not yet available for use. The carrying amount of other non-fi nancial assets is reviewed at each reporting date for indications of impairment and where an asset is impaired, it is written down through the statement of comprehensive income to its estimated recoverable amount. The impairment loss is the excess of the carrying amount over the recoverable amount and is recognised in the statement of comprehensive income unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use. In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifi able cash fl ows (cash-generating units). At each reporting date non-fi nancial assets other than goodwill with impairment loss recognised in prior periods are assessed for possible reversal of the impairment. An impairment loss is reversed only to the extent that the asset s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. However, an impairment loss on a revalued asset is recognised directly against any revaluation surplus for the asset to the extent that the impairment loss does not exceed the amount in the revaluation surplus for that same asset.

60 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) Financial Assets Initial recognition and measurement and derecognition of fi nancial assets: A fi nancial asset is recognised on the balance sheet when, and only when, the entity becomes a party to the contractual provisions of the instrument. The initial recognition of fi nancial assets is at fair value normally represented by the transaction price. The transaction price for fi nancial asset not classifi ed at fair value through statement of comprehensive income includes the transaction costs that are directly attributable to the acquisition or issue of the fi nancial asset. Transaction costs incurred on the acquisition or issue of fi nancial assets classifi ed at fair value through profi t or loss are expensed immediately. The transactions are recorded at the trade date. Irrespective of the legal form of the transactions performed, fi nancial assets are derecognised when they pass the substance over form based derecognition test prescribed by FRS 39 relating to the transfer of risks and rewards of ownership and the transfer of control. Subsequent measurement: Subsequent measurement based on the classifi cation of the fi nancial assets in one of the following four categories under FRS 39 is as follows: 1. Financial assets at fair value through profi t or loss: As at year end date there were no fi nancial assets classifi ed in this category. 2. Loans and receivables: Loans and receivables are non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market. Assets that are for sale immediately or in the near term are not classifi ed in this category. These assets are carried at amortised costs using the effective interest method (except that short-duration receivables with no stated interest rate are normally measured at original invoice amount unless the effect of imputing interest would be signifi cant) minus any reduction (directly or through the use of an allowance account) for impairment or uncollectibility. Impairment charges are provided only when there is objective evidence that an impairment loss has been incurred as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash fl ows of the fi nancial asset or group of fi nancial assets that can be reliably estimated. The methodology ensures that an impairment loss is not recognised on the initial recognition of an asset. Losses expected as a result of future events, no matter how likely, are not recognised. For impairment, the carrying amount of the asset is reduced through use of an allowance account. The amount of the loss is recognised in the statement of comprehensive income. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. Typically the trade and other receivables are classifi ed in this category. 3. Held-to-maturity fi nancial assets: As at year end date there were no fi nancial assets classifi ed in this category. 4. Available for sale fi nancial assets: As at year end date there were no fi nancial assets classifi ed in this category.

61 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) Cash and Cash Equivalents Cash and cash equivalents include bank and cash balances, on demand deposits and any highly liquid debt instruments purchased with an original maturity of three months or less. For the cash fl ow statement the item includes cash and cash equivalents less cash subject to restriction and bank overdrafts payable on demand that form an integral part of cash management. Other fi nancial assets and fi nancial liabilities at fair value through profi t or loss are presented within the section on operating activities as part of changes in working capital in the cash fl ow statement. Hedging The entity is exposed to currency and interest rate risks. The policy is to reduce currency and interest rate exposures through derivatives and other hedging instruments. From time to time, there may be borrowings and foreign exchange arrangements or interest rate swap contracts or similar instruments entered into as hedges against changes in interest rates, cash fl ows or the fair value of the fi nancial assets and liabilities. These arrangements are not used for trading or speculative purposes. The gain or loss from remeasuring these hedging or other arrangement instruments at fair value are recognised in the statement of comprehensive income. The derivatives and other hedging instruments used are described below in the notes to the fi nancial statements. Derivatives All derivatives are initially recognised and subsequently carried at fair value. Certain derivatives are entered into in order to hedge some transactions and all the strict hedging criteria prescribed by FRS 39 are not met. In those cases, even though the transaction has its economic and business rationale, hedge accounting cannot be applied. As a result, changes in the fair value of those derivatives are recognised directly in the statement of comprehensive income and the hedged item follows normal accounting policies. Financial Liabilities Initial recognition and measurement: A fi nancial liability is recognised on the balance sheet when, and only when, the entity becomes a party to the contractual provisions of the instrument. The initial recognition of fi nancial liability is at fair value normally represented by the transaction price. The transaction price for fi nancial liability not classifi ed at fair value through statement of comprehensive income includes the transaction costs that are directly attributable to the acquisition or issue of the fi nancial liability. Transaction costs incurred on the acquisition or issue of fi nancial liability classifi ed at fair value through profi t or loss are expensed immediately. The transactions are recorded at the trade date. Financial liabilities including bank and other borrowings are classifi ed as current liabilities unless there is an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting year.

62 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) Financial Liabilities (Cont d) Subsequent measurement: Subsequent measurement based on the classifi cation of the fi nancial liabilities in one of the following two categories under FRS 39 is as follows: 1. Liabilities at fair value through profi t or loss: Liabilities are classifi ed in this category when they are incurred principally for the purpose of selling or repurchasing in the near term (trading liabilities) or are derivatives (except for a derivative that is a designated and effective hedging instrument) or have been classifi ed in this category because the conditions are met to use the fair value option and it is used. All changes in fair value relating to liabilities at fair value through profi t or loss are charged to the statement of comprehensive income as incurred. 2. Other fi nancial liabilities: All liabilities, which have not been classifi ed as in the previous category fall into this residual category. These liabilities are carried at amortised cost using the effective interest method. Trade and other payables and borrowings are classifi ed in this category. Items classifi ed within current trade and other payables are not usually re-measured, as the obligation is usually known with a high degree of certainty and settlement is short-term. Financial Guarantees A fi nancial guarantee contract requires that the issuer makes specifi ed payments to reimburse the holder for a loss when a specifi ed debtor fails to make payment when due. Financial guarantee contracts are initially recognised at fair value and are subsequently measured at the greater of (a) the amount determined in accordance with FRS 37 and (b) the amount initially recognised less, where appropriate, cumulative amortisation recognised in accordance with FRS 18. Fair Value of Financial Instruments The carrying values of current fi nancial instruments approximate their fair values due to the short-term maturity of these instruments. Disclosures of fair value are not made when the carrying amount of current fi nancial instruments is a reasonable approximation of fair value. The fair values of non-current fi nancial instruments may not be disclosed separately unless there are signifi cant items at the end of the reporting year and in the event the fair values are disclosed in the relevant notes. The maximum exposure to credit risk is the fair value of the fi nancial instruments at the end of the reporting year. The fair value of a fi nancial instrument is derived from an active market. The appropriate quoted market price for an asset held or liability to be issued is usually the current bid price without any deduction for transaction costs that may be incurred on sale or other disposal and, for an asset to be acquired or liability held, the asking price. If there is no market, or the markets available are not active, the fair value is established by using a valuation technique. Valuation techniques include using recent arm s length market transactions between knowledgeable, willing parties, if available, reference to the current fair value of similar instruments and incorporates all factors that market participants would consider in setting a price and is consistent with accepted economic methodologies for pricing fi nancial instruments.

63 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) Inventories Inventories are measured at the lower of cost (weighted average method) and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. A write down on cost is made for where the cost is not recoverable or if the selling prices have declined. Cost includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Equity Equity instruments are contracts that give a residual interest in the net assets of the company. Ordinary shares are classifi ed as equity. Equity instruments are recognised at the amount of proceeds received net of incremental costs directly attributable to the transaction. The shares have no par value. Dividends on equity are recognised as liabilities when they are declared. Interim dividends are recognised when paid. Provisions A liability or provision is recognised when there is a present obligation (legal or constructive) as a result of a past event, it is probable that an outfl ow of resources embodying economic benefi ts will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are made using best estimates of the amount required in settlement and where the effect of the time value of money is material, the amount recognised is the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that refl ects current market assessments of the time value of money and the risks specifi c to the obligation. The increase in the provision due to passage of time is recognised as interest expense. Changes in estimates are refl ected in the statement of comprehensive income in the period they occur. Critical Judgements, Assumptions and Estimation Uncertainties The critical judgements made in the process of applying the accounting policies that have the most signifi cant effect on the amounts recognised in the fi nancial statements and the key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year are discussed below. These estimates and assumptions are periodically monitored to make sure they incorporate all relevant information available at the date when fi nancial statements are prepared. However, this does not prevent actual fi gures differing from estimates. Allowance for doubtful trade accounts: An allowance is made for doubtful accounts for estimated losses resulting from the subsequent inability of the customers to make required payments. If the fi nancial conditions of the customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required in future periods. Management generally analyses trade accounts receivables and analyses historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful trade accounts. To the extent that it is feasible impairment and uncollectibility is determined individually for each item. In cases where that process is not feasible, a collective evaluation of impairment is performed. At the end of the reporting year, the trade receivables carrying amount approximates the fair value and the carrying amounts might change materially within the next fi nancial year but these changes would not arise from assumptions or other sources of estimation uncertainty at the end of the reporting year.

64 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) Critical Judgements, Assumptions and Estimation Uncertainties (Cont d) Net realisable value of inventories: A review is made periodically on inventory for excess inventory, obsolescence and declines in net realisable value below cost and an allowance is recorded against the inventory balance for any such declines. These reviews require management to consider the future demand for the products. In any case the realisable value represents the best estimate of the recoverable amount and is based on the most reliable evidence available at the end of the reporting year and inherently involves estimates regarding the future expected realisable value. The usual considerations for determining the amount of allowance or write-down include ageing analysis, technical assessment and subsequent events. In general, such an evaluation process requires signifi cant judgment and materially affects the carrying amount of inventories at the end of the reporting year. Possible changes in these estimates could result in revisions to the stated value of the inventories. The carrying amount of inventories at the end of the reporting year was $71,250,000 (: $51,336,000). Plant and equipment: There is equipment stated at carrying value of $1,000,000. No depreciation is charged on this equipment as it has not been put in use. An assessment is made at each reporting date whether there is any indication that the asset may be impaired. Management has estimated the fair value of the equipment by obtaining a valuation for the equipment. The fair value is as disclosed in Note 13. Useful lives of plant and equipment: The estimates for the useful lives and related depreciation charges for plant and equipment is based on commercial and production factors which could change signifi cantly as a result of technical innovations and competitor actions in response to severe market conditions. The depreciation charge is increased where useful lives are less than previously estimated lives, or the carrying amounts written off or written down for technically obsolete or non-strategic assets that have been abandoned or sold. It is impracticable to disclose the extent of the possible effects. It is reasonably possible, based on existing knowledge, that outcomes within the next fi nancial year that are different from assumptions could require a material adjustment to the carrying amount of the balances affected. The carrying amount of the specifi c assets affected by the assumption is $2,664,000 (: $2,910,000). Determination of functional currency: The group measures foreign currency transactions in the respective functional currencies of the company and its subsidiaries. In determining the functional currencies of the entities in the group, judgement is required to determine the currency that mainly infl uences sales prices for goods and services and of the country whose competitive forces and regulations mainly determines the sales prices of its goods and services. The functional currencies of the entities in the group are determined based on management s assessment of the economic environment in which the entities operate and the entities process of determining sales prices. 3. RELATED PARTY TRANSACTIONS FRS 24 defi nes a related party as an entity or person that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common or joint control with, the entity in governing the fi nancial and operating policies, or that has an interest in the entity that gives it signifi cant infl uence over the entity in fi nancial and operating decisions. It also includes members of the key management personnel or close members of the family of any individual referred to herein and others who have the ability to control, jointly control or signifi cantly infl uence by or for which signifi cant voting power in such entity resides with, directly or indirectly, any such individual. The defi nition includes parents, subsidiaries, fellow subsidiaries, associates, joint ventures and post-employment benefi t plans, if any.

65 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER RELATED PARTY TRANSACTIONS (CONT D) 3.1. Related companies: Related companies in these fi nancial statements include the members of the company s group of companies. There are transactions and arrangements between the company and members of the group and the effects of these on the basis determined between the parties are refl ected in these fi nancial statements. The current intercompany balances are unsecured without fi xed repayment terms and interest unless stated otherwise. For non-current balances an interest in imputed unless stated otherwise based on the prevailing market interest rate for similar debt less the interest rate if any provided in the agreement for the balance. Intragroup transactions and balances that have been eliminated in these consolidated fi nancial statements are not disclosed as related party transactions and balances below. 3.2 Other related parties: There are transactions and arrangements between the company and related parties and the effects of these on the basis determined between the parties are refl ected in these fi nancial statements. The current related party balances are unsecured without fi xed repayment terms and interest unless stated otherwise. Signifi cant related party transactions: In addition to the transactions and balances disclosed elsewhere in the notes to the fi nancial statements, this item includes the following: Other related parties Group Revenue Key management compensation: Group Salaries and other short-term employee benefi ts 4,137 3,627 The above amounts are included under employee benefi ts expense. Included in the above amounts are the following items: Group Remuneration of directors of the company 3,587 3,062 Fees to directors of the company

66 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER 3. RELATED PARTY TRANSACTIONS (CONT D) 3.3. Key management compensation (Cont d): Key management personnel are the directors and those persons having authority and responsibility for planning, directing and controlling the activities of the company, directly or indirectly. The above amounts for key management compensation are for all the directors and other key management personnel. Further information about the remuneration of individual directors is provided in the report on corporate governance Other receivables from and other payables to related parties: The trade transactions and the trade receivables and payables balances arising from sales and purchases of goods and services are disclosed elsewhere in the notes to the fi nancial statements. The movements in other receivables from and other payables to related parties are as follows: Group Joint Venture Other receivables / (other payables) : Balance at beginning of year 6 Amounts paid in and settlement of liabilities on behalf of the company (22) Amounts paid out and settlement of liabilities on behalf of another party (6) 16 Balance at end of year net credit (6) 4. FINANCIAL INFORMATION BY SEGMENTS For management purposes, revenue generated is derived from sales, supply and machining of fl anges, steel fi ttings, tubings and pipes for the fi ve main industries Energy, Marine, Trading, Water and Others which form the basis on which the group reports its primary segment information. The fi ve main industries are as follows: Energy Oil and gas, engineering and construction, petrochemical and power. Marine Shipbuilding and repair. Trading Traders who purchase goods to on-sell to their customers who are end-users. Water Water industry. Others Other industries such as the manufacturing and pharmaceutical sectors. Unallocated items comprise cash and cash equivalents, trade and other receivables, properties, plant and equipment, other fi nancial liabilities, trade and other payables, current tax payable, fi nance leases, deferred tax liabilities, interest income, marketing and distribution costs, administrative expenses, fi nance costs, other credits/(charges) and income tax expense. It is not meaningful to allocate these amounts by business segments.

67 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER FINANCIAL INFORMATION BY SEGMENTS (CONT D) Segment information about these businesses is presented below: Year ended 30 September Energy Marine Trading Water Others Consolidated REVENUE Total revenue 103,088 15,484 4,552 10,173 3, ,923 Segment results 25,870 3,882 1,139 2, ,320 Unallocated expenses (14,035) Profi t from operations 20,285 Interest income 19 Finance costs (1,821) Other (charges) / credits (1,996) Profi t before income tax 16,487 Income tax expense (2,803) Profi t for the year 13,684 Balance Sheet As at 30 September ASSETS Unallocated assets 134,450 LIABILITIES Unallocated liabilities 61,974 Year ended 30 September Energy Marine Trading Water Others Consolidated REVENUE Total revenue 50,411 19,612 5,533 24,048 7, ,766 Segment results 13,471 5,578 1,779 3,425 2,423 26,676 Unallocated expenses (11,819) Profi t from operations 14,857 Interest income 28 Finance costs (1,296) Other (charges) / credits (1,658) Profi t before income tax 11,931 Income tax expense (2,221) Profi t for the year 9,710 Balance Sheet As at 30 September ASSETS Unallocated assets 102,482 LIABILITIES Unallocated liabilities 58,676

68 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER 4. FINANCIAL INFORMATION BY SEGMENTS (CONT D) Geographical segments The group s operations are located in Singapore. The following table provides an analysis of the revenue by geographical market (1), irrespective of the origin of the goods/services: Revenue by geographical market Total Singapore 63,454 79,128 Middle East 29,699 3,041 Europe 19, Brunei 13,133 1 Vietnam 2,073 10,526 Indonesia 1,685 1,988 Malaysia 1,045 1,906 Thailand 652 7,250 Others (2) 5,410 2, , ,766 (1) Based on the location of customers. (2) Customers in others are primarily located in Japan, Philippines and Central Asia. The group has not identifi ed profi t before tax by industries or by geographical markets as the allocation of costs cannot be allocated in a similar manner with reasonable accuracy. This is because the operating expenses and administrative expenses incurred for industries or geographical markets such as marketing expenses, remuneration and facilities-related costs are general costs which are accounted for on a group-wide basis. It is not meaningful to track operating costs and administrative expenses by industries or geographical markets. 5. REVENUE Group Sale of goods 136, ,765 Other Total 136, ,766

69 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER OTHER CREDITS AND (OTHER CHARGES) Group Allowance for impairment on trade receivables - reversal Bad debt written off trade receivables (131) (33) Foreign exchange adjustments losses (386) (33) Forward contract gains / (losses): transactions not qualifying as hedges (Note 26) 504 (517) Gains on disposal of plant and equipment 6 Impairment losses on properties, plant and equipment (750) (1,104) Inventories written down (1,255) Net (1,996) (1,658) Presented in the statement of comprehensive income as: Other Credits Other Charges (2,522) (1,687) Net (1,996) (1,658) 7. ADMINISTRATIVE EXPENSES The major components including the following: Group Depreciation of property, plant and equipment 1, Bank charges Professional and consultancy fees Employee benefits expense 4,861 4,236 Non-audit fee to independent auditors FINANCE COSTS Group Interest expense 1,821 1,296

70 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER 9. INCOME TAX Group Current tax 2,734 2,295 Deferred tax 69 (74) Total income tax expense 2,803 2,221 The income tax expense varied from the amount of income tax expense determined by applying the Singapore income tax rate of 17.0% ( : 18.0%) to profi t before income tax as a result of the following differences: Group Tax rate reconciliation: Profit before tax 16,487 11,931 Income tax expense at the above rate 2,803 2,148 Not deductible items Change in tax rates 3 Tax exemptions (52) (55) Under adjustments to tax in respect of previous periods 1 4 Other minor items less than 3% each (6) Total income tax expense 2,803 2,221 Effective tax rate 17.0% 18.6% There are no income tax consequences of dividends to shareholders of the company. In, the government enacted a change in the national income tax rate from 18.0% to 17.0%. Temporary differences arising in connection with interests in subsidiary and joint venture are insignifi cant. Disclosure of tax effects relating to each component of other comprehensive income: Before-tax amount Tax (expense) / income Net-of-tax amount : Losses on property revaluation (920) 220 (700) Losses on other assets (6) (6) Other comprehensive income (926) 220 (706) : Gains on property revaluation 2,755 (496) 2,259 Gains on other assets Other comprehensive income 2,771 (496) 2,275

71 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER INCOME TAX (CONT D) Deferred tax: The deferred tax amounts and movements in the year are as follows: Group Balance sheet Net change in consolidated statement of comprehensive income Deferred tax liabilities: Excess of net book value of plant and equipment over tax values (121) (15) 106 (45) Amount on revalued depreciable assets (a) (933) (1,153) Depreciation on revalued assets (37) (29) Total deferred tax liabilities (949) (1,101) 69 (74) (a) Movement of $220,000 ( : $496,000) has been included in other comprehensive income. It is impracticable to estimate the amount expected to be settled or used within one year. 10. EMPLOYEE BENEFITS EXPENSE Group Employee benefits expense 6,904 6,132 Contributions to defined contribution plan Other benefi ts Total employee benefi ts expense 7,343 6, EARNINGS PER SHARE The earnings per share is calculated by dividing the group s profi t attributable to shareholders by the weighted number of shares of no par value in issue during the year. Group The calculation of the earnings per share is based on the following: Profi t for the year attributable to the equity holders of the company for the purposes of basic and diluted earnings per share 13,684 9,710

72 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER 11. EARNINGS PER SHARE (CONT D) Number of shares Number Group Number Weighted average number of ordinary shares for the purposes of basic and diluted earnings per share 176,487, ,200,000 Earnings fi gures are calculated as follows: Earnings per share cents The fully diluted earnings per ordinary share is the same as the basic earnings per ordinary share as there were no options granted or outstanding during the fi nancial year. 12. DIVIDENDS ON EQUITY SHARES Group Final exempt (1-tier) dividend paid of 0.5 cent (: 1.0 cent) 881 1,762 In respect of the current year, the directors propose that a fi nal exempt (1-tier) dividend of $0.01 per share totalling $2,112,000 be paid to shareholders after the annual general meeting. There are no income tax consequences. This dividend is subject to approval by shareholders at the next annual general meeting and has not been included as a liability in these fi nancial statements. The proposed dividend for is payable in respect of all ordinary shares in issue at the balance sheet date and including any new qualifying shares issued up to the date the dividend becomes payable. 13. PROPERTIES, PLANT AND EQUIPMENT Leasehold properties and improvements Plant and equipment Group Cost or valuation: At 1 October ,439 1,983 8,422 Additions 3,827 3,414 7,241 Disposals (10) (10) Revaluation increase 2,246 2,246 At 30 September 12,512 5,387 17,899 Additions Disposals (49) (49) Revaluation defi cit (2,650) (2,650) At 30 September 9,870 5,691 15,561 Total Represented by: Cost 5,691 5,691 Valuation 9,870 9,870 Total 9,870 5,691 15,561

73 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER PROPERTIES, PLANT AND EQUIPMENT (CONT D) Leasehold properties and improvements Plant and equipment Total Accumulated depreciation and impairment: At 1 October ,390 Depreciation for the year ,061 Impairment loss 15 1,089 1,104 Disposals (10) (10) Reversal of depreciation on revaluation (509) (509) At 30 September 559 2,477 3,036 Depreciation for the year ,400 Disposals (49) (49) Reversal of depreciation on revaluation (979) (979) At 30 September 381 3,027 3,408 Net book value : At 1 October ,998 1,034 7,032 At 30 September 11,953 2,910 14,863 At 30 September 9,489 2,664 12,153 For each revalued class of property, plant and equipment, the carrying amount that would have been recognised had the assets been carried under the cost model: Leasehold properties and improvements Cost 6,620 6,612 Net book amount 4,649 5,954 The depreciation expense and impairment loss on revaluation of a property is charged as follows: Marketing and distribution costs Administrative expenses Other credits / (other charges) Total 173 1, , ,104 2,165 Certain items are under fi nance lease agreements (see Note 25). The leasehold properties are pledged to a bank to secure bank loans granted to the group (Note 24). A leasehold property located at 14 Lok Yang Way, was revalued by Jones Lang LaSalle Property Consultants Pte Ltd, a fi rm of independent professional valuers in August based on the existing use basis to refl ect the actual market state and circumstances as of the end of the reporting year and not as of either a past or future date. Revaluations are made with suffi cient regularity such that the carrying amount does not differ materially from that which would be determined using fair value at the balance sheet date and the entire class of property, plant and equipment to which that asset belongs is revalued. The loss on revaluation, net of change in statutory income tax effect and applicable deferred income tax, of $700,000 has been debited to other comprehensive income.

74 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER 13. PROPERTIES, PLANT AND EQUIPMENT (CONT D) The other leasehold property located at 21 Neythal Road, with a carrying amount of $2,663,000 was subject to an impairment allowance of $750,000. The impairment loss was determined based on a valuation by Jones Lang LaSalle Property Consultants Pte Ltd independent professional valuers. The value was determined in August based on the existing use basis to refl ect the actual market state and circumstances of this asset as the end of the reporting year and not as of either a past or future date. The valuation for each leasehold property was based on direct comparison with recent transactions of comparable properties within the vicinity taking into consideration prevailing market conditions and other comparable information affecting their values. The fair value is regarded as a level 3 fair value measurement as it is from valuation techniques that include inputs for the asset that are not based on observable market data (unobservable inputs). Included in plant and equipment is a spiral welded machine with a carrying value of $1,000,000 which was determined by management based on a valuation by GoIndustry DoveBid, a fi rm of independent professional valuers. The value was determined in August. No depreciation has been charged on the equipment as it has not been put in use. 14. INVESTMENT IN SUBSIDIARY Company Unquoted shares at cost 17,494 17,494 Fair value of corporate guarantee 1, ,811 18,092 Net book value of subsidiary 44,201 33,732 The subsidiary held by the company is listed below: Name of subsidiary, country of incorporation, place of operations and principal activities Cost in books of company Effective percentage of equity held by company % % Kim Seng Huat Hardware Pte Ltd (a) Singapore Sales, supply and machining of fl anges, steel fi ttings, tubings and pipes for the shipbuilding and repairing industry, manufacturing, petrochemical industry and power energy plants 17,494 17, (a) Audited by RSM Chio Lim LLP in Singapore.

75 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER INVESTMENT IN JOINT VENTURE The joint venture held by the subsidiary at a carrying value of $1 is listed below: Group KVA Energy Pte Ltd (a) A 50 per cent share in the ownership of the share capital of the company. The group is entitled to a proportionate share of the income received and bears a proportionate share of the outgoings. 50% 50% (a) KVA Energy Pte Ltd ( KVA ) is jointly controlled with the other party, Alton International Pte Ltd, as a result of a contractual agreement involving sharing of control over strategic, fi nancial and operating decisions relating to KVA. KVA has been dormant since incorporation. The joint venture is consolidated into the consolidated fi nancial statements by using the proportional consolidation method and included the amounts below: Group Current assets 26 Current liabilities (38) Costs and expenses OTHER ASSETS, NON-CURRENT Group Club memberships at fair value The fair value of club memberships is based on current bid prices in an active market. The change in fair value is included in other comprehensive income. 17. INVENTORIES Group Goods for resale 71,250 51,336 Inventories are stated after allowance. Movements in allowance: Balance at beginning of year (Reversed) / charged to statement of comprehensive income included in cost of sales (52) 401 Charged to statement of comprehensive income included in other credits / (charges) 1,255 Balance at end of year 1,

76 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER 17. INVENTORIES (CONT D) Group The write-down of inventories charged to statement of comprehensive income included in cost of sales The write-down of inventories charged to statement of comprehensive income included in other credits / (charges) 1,255 The amount of inventories included in cost of sales 96,344 73,495 There are no inventories pledged as security for liabilities. 18. TRADE AND OTHER RECEIVABLES Group Company Trade receivables: Outside parties 25,764 26,943 Less allowance for impairment (a) (16) Subsidiary (Note 3) 1,573 1,798 Related parties (Note 3) 62 Subtotal 25,764 26,989 1,573 1,798 Other receivables: Joint venture (Note 3) 16 Subsidiary (Note 3) 19,510 9,000 Subtotal 16 19,510 9,000 Total trade and other receivables 25,764 27,005 21,083 10,798 Presented in the statement of fi nancial position as follows: Current 25,764 27,005 3,573 3,798 Non-current portion of other receivable due from subsidiary 17,510 7,000 25,764 27,005 21,083 10,798 Movements in above allowance: Balance at beginning of year Reversed for trade receivables to statement of comprehensive income included in other credits / (charges) (16) (29) Balance at end of year 16 (a) Amount less than $500 The allowance is based on individual accounts totalling $500 (: $16,000) that are determined to be impaired at the year end date. These are not secured. The loan to the subsidiary bears interest at 5.5% per annum.

77 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER OTHER ASSETS, CURRENT Group Company Advance payments to suppliers 158 Deposits to secure services Prepayments CASH AND CASH EQUIVALENTS Group Company Not restricted in use 24,484 8,797 15,172 1,150 Restricted in use over 3 months #a 115 Cash at end of year 24,599 8,797 15,172 1,150 #a. This is for amounts held by bankers to cover the bank guarantees issued. The interest earning balances are not signifi cant. 20A. Cash and Cash Equivalents in the Consolidated Statement of Cash Flows: Group As shown above 24,599 8,797 Cash restricted in use (115) Cash and cash equivalents for cash fl ow statement purposes at end of year 24,484 8,797 20B. Non-cash transactions: During the year, there were acquisitions of plant and equipment with a total cost of $82,000 (: $735,000) acquired by means of fi nance leases. 21. SHARE CAPITAL Number of shares Group and company Issued share capital Ordinary shares of no par value: Balance at beginning of year 1 October ,200,000 25,489 Balance at end of year 30 September 176,200,000 25,489 Issue of shares 35,000,000 17,290 Share issue expense (717) Balance at end of year 30 September 211,200,000 42,062 The ordinary shares of no par value which are fully paid carry no right to fi xed income. The company is not subject to any externally imposed capital requirements.

78 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER 21. SHARE CAPITAL (CONT D) In order to maintain its listing on the Singapore Stock Exchange, the company has to have at least a free fl oat of 10% of the shares. The company met the capital requirement on its initial listing and the rules limiting treasury share purchases mean it will automatically continue to satisfy that requirement, as it did throughout the year. Management receive a report from the registrars monthly on substantial share interests showing the non-free fl oat and it demonstrated continuing compliance with the 10% limit throughout the year. The objectives when managing capital are to safeguard the entity s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefi ts for other stakeholders, and to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk. The management sets the amount of capital in proportion to risk. There were no changes in the approach to capital management during the year. The management manages the capital structure and makes adjustments to it where necessary or possible in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the management may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt. On 28 September, the company issued 35,000,000 ordinary shares of no par value by way of a private placement for a consideration of $17,290,000. The proceeds were used as working capital. The share issue expenses totaled $717,000. The management monitors the capital on the basis of the debt-to-adjusted capital ratio. This ratio is calculated as net debt / adjusted capital. Net debt is calculated as total debt (as shown in the balance sheet) less cash and cash equivalents. Adjusted capital comprises all components of equity (i.e. share capital, and retained earnings). Group Net debt: All current and non-current borrowings including fi nance leases 50,053 46,356 Less cash and cash equivalents (24,599) (8,797) Net debt 25,454 37,559 Net capital: Equity 72,476 43,806 Net capital 72,476 43,806 Debt-to-adjusted capital ratio 35.1% 85.7% 22. OTHER RESERVES The revaluation reserve (net of deferred tax) arises from the annual revaluation of properties and club memberships. It is not distributable until it is transferred to retained earnings on the disposal of the properties and club memberships. All the reserves classifi ed on the face of the balance sheet as retained earnings represents past accumulated earnings and are distributable. The other reserves are not available for cash dividends unless realised.

79 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER TRADE AND OTHER PAYABLES Group Company Trade payables: Outside parties and accrued liabilities 8,098 8,307 3,095 1,777 Subsidiary (Note 3) 11 6 Subtotal 8,098 8,307 3,106 1,783 Other payables: Joint venture (Note 3) 22 Other payables 3 Subtotal 3 22 Total trade and other payables 8,101 8,329 3,106 1, OTHER FINANCIAL LIABILITIES Group Non-current: Bank loans (secured) 10,786 3,318 Non-current, total 10,786 3,318 Current: Bank loans (secured) 5, Bills payable to bank (secured) 33,148 40,245 Factoring company, advance from (secured) (Note 27C) 1,082 Derivatives financial instruments (Note 26) Current, total 38,509 42,306 Total 49,295 45,624 The non-current portion is payable as follows: Due within 2 to 5 years 10,054 2,018 After 5 years 732 1,300 Total non-current portion 10,786 3,318 Company Non-current: Bank loans (secured) 3,688 Guarantee liability 107 Non-current, total 3,795 Current: Bank loans (secured) 1,124 Guarantee liability 81 Current, total 1,205 Total 5,000 The non-current portion is payable as follows: Due within 2 to 5 years 3,795 After 5 years Total non-current portion 3,795

80 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER 24. OTHER FINANCIAL LIABILITIES (CONT D) Group All the amounts are at fixed interest rates except the following that are at floating interest rates: Bank loans (secured) 2.28% % 3.50% % The range of fi xed interest rates paid were as follows: Bank loans (secured) 1.68% % 2.91% % Advances from factoring company 2.65% % 5.50% Company Fixed rate: Bank loans (secured) 5.50% The carrying amounts of the current portions and non-current portions are assumed to be a reasonable approximation of fair values. All borrowings are interest bearing. The borrowings are measured using the effective interest method. The bills payable to banks represent bills for purchases of inventories. The bank loan agreements for certain of the bank loans and other credit facilities provide among other matters for the following: 1. Legal mortgage on the leasehold properties (Note 13) of the company; 2. Corporate guarantee by the company; 3. Compliance with certain fi nancial covenants. The bank loans are repayable by equal monthly instalments over the following periods: i) Ten years commencing on 10 October 2005 ii) Eight years commencing on 1 January iii) Two years commencing on 5 April iv) Four years commencing on 5 April v) Four years commencing on 1 September

81 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER FINANCE LEASES LIABILITIES Group Minimum payments Finance charges Present value Minimum lease payments payable: Due within one year 619 (79) 540 Due within 2 to 5 years 259 (28) 231 Total 878 (107) 771 Net book value of plant and equipment under fi nance leases 1,292 Minimum payments Finance charges Present value Minimum lease payments payable: Due within one year 618 (81) 537 Due within 2 to 5 years 814 (102) 712 Total 1,432 (183) 1,249 Net book value of plant and equipment under fi nance leases 1,498 It is the company s policy to lease certain of its plant and equipment under fi nance leases. The average lease term is 2 7 years. The rate of interest for fi nance leases is about 2.6% to 4.5% ( : 2.6% to 4.5%) per year. All leases are on a fi xed repayment basis and no arrangements have been entered into for contingent rental payments. All lease obligations are denominated in S$. The obligations under fi nance leases are secured by the lessor s charge over the leased assets and joint and several personal guarantees of certain directors of the company. 26. DERIVATIVE FINANCIAL INSTRUMENTS The table below summarises the fair value of derivatives engaged in cash fl ow hedge relationships at end of year. Group Liabilities - Derivatives with negative fair values: Non-hedging instruments Forward foreign exchange contracts (Note 26A) Current portion The movements during the year were as follows: Fair value at beginning of year 517 (Gains) / losses included in statement of comprehensive income (Note 6) (504) 517 Total net balance at end of year The fair values of the derivatives are estimated based on market values of equivalent instruments at the end of the reporting year.

82 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER 26. DERIVATIVE FINANCIAL INSTRUMENTS (CONT D) 26A. Forward Currency Contracts This includes the gross amount of all notional values for contracts that have not yet been settled or cancelled. The amount of notional value outstanding is not necessarily a measure or indication of market risk, as the exposure of certain contracts may be offset by that of other contracts. Principal Reference currency Maturity Fair value $ Forward currency contract 135,358 USD 05 Oct (3) Forward currency contract 141,310 USD 29 Oct (1) Forward currency contract 176,543 USD 09 Nov (4) Forward currency contract 38,935 USD 24 Nov (1) Forward currency contract 126,357 USD 16 Nov (1) Forward currency contract 83,748 USD 25 Nov Forward currency contract 56,488 EUR 16 Oct Forward currency contract 46,300 STG 23 Mar 2010 (1) Forward currency contract 226,229 USD 31 Dec (2) 1,031,268 (13) 27. FINANCIAL INSTRUMENTS: INFORMATION ON FINANCIAL RISKS 27A. Carrying Amount of Financial Assets and Liabilities The following table summarises the carrying amount of fi nancial assets and liabilities recorded at the end of the reporting year by FRS 39 categories: Group Financial assets: Cash and cash equivalents 24,599 8,797 Trade and other receivables 25,764 27,005 At end of year 50,363 35,802 Financial liabilities: Borrowings at amortised cost 50,053 46,356 Derivatives fi nancial instruments at fair value through the statement of comprehensive income Trade and other payables at amortised cost 8,101 8,329 At end of year 58,167 55,202

83 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER FINANCIAL INSTRUMENTS: INFORMATION ON FINANCIAL RISKS (CONT D) 27A. Carrying Amount of Financial Assets and Liabilities (Cont d) Company Financial assets: Cash and cash equivalents 15,172 1,150 Trade and other receivables 21,083 10,798 At end of year 36,255 11,948 Financial liabilities: Borrowings at amortised cost 5,000 Trade and other payables at amortised cost 3,106 1,783 At end of year 8,106 1,783 Further quantitative disclosures are included throughout these fi nancial statements. 27B. Financial Risk Management The main purpose for holding or issuing fi nancial instruments is to raise and manage the fi nances for the entity s operating, investing and fi nancing activities. The main risks arising from the entity s fi nancial instruments are credit risk, interest risk, liquidity risk, foreign currency risk and market price risk comprising interest rate and currency risk exposures. The management has certain practices for the management of fi nancial risks. The guidelines set up the short and long term objectives and action to be taken in order to manage the fi nancial risks. The guidelines include the following: 1. Minimise interest rate, currency, credit and market risks for all kinds of transactions. 2. Maximise the use of natural hedge : favouring as much as possible the natural off-setting of sales and costs and payables and receivables denominated in the same currency and therefore put in place hedging strategies only for the excess balance. The same strategy is pursued with regard to interest rate risk. 3. Enter into derivatives or any other similar instruments solely for hedging purposes. 4. All financial risk management activities are carried out and monitored by senior management staff. 5. All fi nancial risk management activities are carried out following good market practices. 6. May consider investing in shares or similar instruments only in the case of temporary excess of liquidity and such transactions have to be authorised by the board of directors. 27C. Credit Risk on Financial Assets Financial assets that are potentially subject to concentrations of credit risk and failures by counterparties to discharge their obligations in full or in a timely manner consist principally of cash balances with banks, cash equivalents and receivables. The maximum exposure to credit risk is the fair value of the fi nancial instruments at the end of the reporting year. Credit risk on cash balances with banks and derivative fi nancial instruments is limited because the counter-parties are banks with acceptable credit ratings. All unencumbered bank deposits with the banks licensed by the Monetary Authority of Singapore are guaranteed by the Singapore Government until 31 December Credit risk on other fi nancial assets is limited because the other parties are entities with acceptable credit ratings. For credit risk on receivables an ongoing credit evaluation is performed of the debtors fi nancial condition and a loss from impairment is recognised in the statement of comprehensive income. There is no signifi cant concentration of credit risk, as the exposure is spread over a large number of counter-parties and customers unless otherwise disclosed in the notes to the fi nancial statements. The exposure to credit risk is controlled by setting limits on the exposure to individual customers and these are disseminated to the relevant persons concerned and compliance is monitored by management.

84 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER 27. FINANCIAL INSTRUMENTS: INFORMATION ON FINANCIAL RISKS (CONT D) 27C. Credit Risk on Financial Assets (Cont d) As disclosed in Note 20, cash and cash equivalents balances represent amounts with a less than 90 day maturity other than the amounts held by bankers to cover the bank guarantees issued. As part of the process of setting customer credit limits, different credit terms are used. The average credit period generally granted to trade receivable customers is between days (: days). But some customers take a longer period to settle the amounts. The table below illustrates the ageing analysis: Group Company Trade receivables Less than 60 days 18,703 17,454 1,573 1, days 1,870 2, days 624 1,269 Over 120 days 4,567 5,705 At end of year 25,764 26,989 1,573 1,798 The total of overdue accounts was 14,832 17, ,045 Other receivables are normally with no fi xed terms and therefore there is no maturity. Group Company Concentration of trade receivables customers: Top 1 customer 3,919 3,930 1,573 1,798 Top 2 customer 7,504 6,061 Top 3 customer 10,527 8,137 Included within trade receivables are factored receivables of nil (: $1,811,000). The related advance from the factoring company of nil (: $1,082,000) is included in borrowings. The transaction has been accounted for as a collateralised borrowing as the factoring company has full recourse to the subsidiary in the event of default by the debtors (Note 24).

85 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER FINANCIAL INSTRUMENTS: INFORMATION ON FINANCIAL RISKS (CONT D) 27D. Liquidity Risk The liquidity risk is managed on the basis of expected maturity dates of the fi nancial liabilities. The following table analyses fi nancial liabilities by remaining contractual maturity (contractual and undiscounted cash fl ows): Trade and other Borrowings Derivatives payables Total Group : Less than 1 year 39, ,101 47, years 11,234 11,234 Over 5 years At end of year 51, ,101 59,886 Trade and other Borrowings Derivatives payables Total Group : Less than 1 year 42, ,329 51, years 3,305 3,305 Over 5 years 1,371 1,371 At end of year 47, ,329 56,085 Trade and other Financial Borrowings payables guarantee Total Company : Less than 1 year 1,382 3,106 46,368 50, years 4,035 4,035 At end of year 5,417 3,106 46,368 54,891 Trade and other Financial Borrowings payables guarantee Total Company : Less than 1 year 1,783 47,756 49, years At end of year 1,783 47,756 49,539 The average credit period taken to settle non-related party trade payables is about 30 to 60 days (: 30 to 60 days). The other payables are with short-term durations. The carrying amounts are assumed to be a reasonable approximation of fair values. It is expected that all the liabilities will be paid at their contractual maturity. In order to meet such cash commitments the operating activity is expected to generate suffi cient cash infl ows.

86 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER 27. FINANCIAL INSTRUMENTS: INFORMATION ON FINANCIAL RISKS (CONT D) 27D. Liquidity Risk (Cont d) Bank facilities: Group Undrawn borrowing facilities 106,969 84,192 The undrawn borrowing facilities are available for operating activities and to settle other commitments. Borrowing facilities are maintained to ensure funds are available for the budgeted operations. A monthly schedule showing the maturity of fi nancial liabilities and unused bank facilities is provided to management to assist them in monitoring the liquidity risk. 27E. Interest Rate Risk The following table analyses the breakdown by type of interest rate: Group Company Financial liabilities: Fixed rate 46,755 42,576 5,000 Floating rate 3,298 3,780 Non-interest bearing 8,114 8,846 3,106 1,783 At end of year 58,167 55,202 8,106 1,783 The interest rate risk exposure is mainly from changes in interest rates. The interest rate risk on fi nancial assets is not signifi cant. The interest rates are disclosed in the respective notes. Sensitivity analysis: Group A hypothetical increase in interest rates by 50 basis points would have an adverse effect on profi t before tax of A hypothetical increase in interest rates by 100 basis points would have an adverse effect on profi t before tax of A hypothetical increase in interest rates by 150 basis points would have an adverse effect on profi t before tax of A hypothetical increase in interest rates by 200 basis points would have an adverse effect on profi t before tax of The analysis has been performed separately for fi xed interest rate and fl oating interest rate fi nancial liabilities. The impact of a change in interest rates on fi xed interest rate fi nancial instruments has been assessed in terms of changing of their fair value. The impact of a change in interest rates on fl oating interest rate fi nancial instruments has been assessed in terms of changing of their cash fl ows and therefore in terms of the impact on net expenses. In management s opinion, the above effective interest rates are unrepresentative of the inherent interest risks as the historical exposure does not refl ect the exposure in future.

87 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER FINANCIAL INSTRUMENTS: INFORMATION ON FINANCIAL RISKS (CONT D) 27F. Foreign Currency Risks Analysis of amounts denominated in non-functional currencies: Group Financial assets: Cash Receivables Total At 30 September : USD 2,875 5,686 8,561 Euro 188 5,363 5,551 At 30 September 3,063 11,049 14,112 Group Financial assets: Cash Receivables Total At 30 September : USD 885 8,046 8,931 AUD Euro 305 1,887 2,192 GBP NZD At 30 September 1,448 10,160 11,608 Group Financial liabilities: Trade and other Borrowings payables Total At 30 September : USD 224 1,170 1,394 Euro 2, ,118 Brunei dollar GBP At 30 September 3,051 1,575 4,626 Group Financial liabilities: Trade and other Borrowings payables Total At 30 September : USD 491 2,144 2,635 Euro GBP THB At 30 September 491 2,399 2,890 There is exposure to foreign currency risk as part of its normal business.

88 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER 27. FINANCIAL INSTRUMENTS: INFORMATION ON FINANCIAL RISKS (CONT D) 27F. Foreign Currency Risks (Cont d) Sensitivity analysis: Group A hypothetical 10% increase in the exchange rate of the functional currency $ against the USD would have an adverse effect on profi t before tax of (717) (561) A hypothetical 10% increase in the exchange rate of the functional currency $ against the AUD would have an adverse effect on profi t before tax of (20) A hypothetical 10% increase in the exchange rate of the functional currency $ against the NZD would have an adverse effect on profi t before tax of (23) A hypothetical 10% increase in the exchange rate of the functional currency $ against the Euro would have an adverse effect on profi t before tax of (243) (184) A hypothetical 10% increase in the exchange rate of the functional currency $ against the Brunei dollar would have a favourable effect on profi t before tax of 10 A hypothetical 10% increase in the exchange rate of the functional currency $ against other currencies would have a favourable effect on profi t before tax of 1 7 The sensitivity analysis is disclosed for each currency to which the entity has signifi cant exposure. The analysis above has been carried out without taking into consideration hedged transactions. In management s opinion, the above sensitivity analysis is unrepresentative of the foreign currency risks as the historical exposure does not refl ect the exposure in future. 28. BANK FACILITIES Group Shipping guarantees 1 Letters of credit 1,503 12,645 Banker s guarantees 683 Performance guarantees 3,789 2,400 The above facilities are covered by a corporate guarantee of the company.

89 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER CAPITAL COMMITMENTS Estimated amounts committed at the balance sheet date for future capital expenditure but not recognised in the fi nancial statements are as follows: Group Commitments to purchase goods 511 Commitments to purchase plant and equipment OPERATING LEASE PAYMENTS COMMITMENTS At the balance sheet date the total of future minimum lease payments under non-cancellable operating leases are as follows: Group Not later than one year 981 1,155 Later than one year and not later than five years 1,221 1,181 Later than five years 3,241 3,384 Rental expense for the year 1,616 1,149 Operating lease payments represent rentals payable for certain staff accommodation and leasehold properties. The leases from Jurong Town Corporation for the leasehold properties are for 27 years from 9 September 2005 and 12 years from 19 September 2007 respectively. The lease rental terms are negotiated for an average term of three years and rentals are subject to an escalation clause but the amount of the rent increase is not to exceed a certain percentage. Such increase are not included in the above amounts. 31. CONTINGENT LIABILITIES Company Guarantee in favour of a subsidiary 46,368 47,756

90 NOTES TO THE FINANCIAL STATEMENTS 30 SEPTEMBER 32. CHANGES AND ADOPTION OF FINANCIAL REPORTING STANDARDS For the year ended 30 September the following new or revised Singapore Financial Reporting Standards were adopted for the fi rst time. The new or revised standards did not require any material modifi cation of the measurement method or the presentation in the fi nancial statements. FRS No. Title FRS1 (Revised) Presentation of Financial Statements INT FRS 111 FRS102 - Group and Treasury Share Transactions (*) INT FRS 112 Service Concessions Arrangements (*) INT FRS 113 Customer Loyalty Programs (*) INT FRS 114 FRS 19 The Limit on a Defi ned Benefi t Asset, Minimum Funding Requirements and their Interaction. INT FRS 116 Hedges of a Net Investment in a Foreign Operation (*) (*) Not relevant to the entity. The company opted to apply FRS1 (Revised) Presentation of Financial Statements effective from 1.1. for the year ended 30 September. The adoption of FRS1 has resulted in some changes in the presentation of items of income and expenses in the statement of changes in equity. However, it has no impact on the reported results or fi nancial position of the company. 33. FUTURE CHANGES IN FINANCIAL REPORTING STANDARDS The following new or revised Singapore Financial Reporting Standards that have been issued will be effective in future. The transfer to the new or revised standards from the effective dates is not expected to result in material adjustments to the fi nancial position, results of operations, or cash fl ows for the following year. FRS No. Title Effective date for periods beginning on or after FRS 23 Borrowing Costs 1.1. FRS 103 (Revised) Business Combinations and consecutive 1.1. amendments in other Standards (*) FRS 108 Operating Segments 1.1. (*) Not relevant to the entity. 34. EVENTS AFTER THE END OF THE REPORTING YEAR Subsequent to 30 September, the company has incorporated in Victoria, Australia, a subsidiary known as CosmoSteel (Australia) Pty Ltd for the purpose of expanding the group s business in the Asia Pacifi c region and exploring new business opportunities in the energy and energy-related industries. The proposed initial paid-up capital of CosmoSteel (Australia) Pty Ltd is AUD500,000 comprising 500,000 ordinary shares of AUD1.00 each, all of which will be directly held by the company.

91 SHAREHOLDERS INFORMATION 30 SEPTEMBER DISTRIBUTION OF SHAREHOLDERS BY SIZE OF SHAREHOLDINGS AS AT 11 DECEMBER Class of shares : Ordinary shares Voting rights : One vote per share STATISTICS OF SHAREHOLDINGS Size of Shareholdings No. of Shareholders % No. of Shares % ,000-10, ,877, ,001-1,000, ,375, ,000,001 And Above ,948, Total 1, ,200, LIST OF TOP 20 MAJOR SHAREHOLDERS AS AT 11 DECEMBER Name No. Of Shares % 1 Ong Chin Sum 44,263, Teo Chin Whatt 22,583, Ong Tong Hai 13,159, Ong Tong Yang 13,159, DBS Nominees Pte Ltd 10,955, Kim Eng Securities Pte. Ltd. 9,416, Jeffrey Hing Yih Peir 9,075, Chow Kok Kee 4,899, Hong Leong Finance Nominees Pte Ltd 3,858, Ho Su Chin 3,500, Phillip Securities Pte Ltd 2,294, Lim Chwee Kim 2,150, Ng Boon Teck 1,745, OCBC Securities Private Ltd 1,508, Timothy Seah How Ming (Timothy Xie Xiaoming) 1,300, Ngo Yuen Yin 1,078, Chua Kok Leong 1,000, Lee Chee Wee 912, United Overseas Bank Nominees Pte Ltd 837, Goh Hoon Pur 790, Total 148,487,

92 SHAREHOLDERS INFORMATION 30 SEPTEMBER SUBSTANTIAL SHAREHOLDERS (As recorded in the Register of Substantial Shareholders) Name of Shareholders Number of Shares Direct Interest % Deemed Interest % Ong Chin Sum 44,263, Teo Chin Whatt 22,583, Ong Tong Yang 13,159, Ong Tong Hai 13,159, Notes:- Mr Ong Chin Sum is the father of Mr Ong Tong Yang and Mr Ong Tong Hai. Mr Teo Chin Whatt is the brother-in-law of Mr Ong Chin Sum. PERCENTAGE OF SHAREHOLDING IN PUBLIC S HANDS As at 11 December, approximately 66% of the Company s shares were held by the public. Accordingly, the Company is in compliance with Rule 723 of the SGX-ST Listing Manual.

93 NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the Fourth Annual General Meeting of CosmoSteel Holdings Limited (the Company ) will be held at Shan Shui Palace, 450 Jalan Ahmad Ibrahim, Raffl es Country Club, Singapore on Monday, 25 January 2010 at 10 a.m. to transact the following business:- ORDINARY BUSINESS AS ORDINARY RESOLUTIONS 1. To receive and adopt the Directors Report, the Auditors Report and the Audited Accounts of the Company for the fi nancial year ended 30 September. (Resolution 1) 2. To declare a final dividend of 1 cent per ordinary share for the financial year ended 30 September. (Resolution 2) 3. To approve the payment of S$200,000 as Directors Fees for the fi nancial year ending 30 September 2010, to be paid quarterly in arrears. (Resolution 3) 4. To re-elect Ms Tan Siok Chin, the Director retiring by rotation pursuant to Article 99 of the Articles of Association of the Company. (Resolution 4) 5. To re-elect Mr Ong Tong Yang, the Director retiring by rotation pursuant to Article 99 of the Articles of Association of the Company. (Resolution 5) 6. To re-elect Mr Ong Tong Hai, the Director retiring by rotation pursuant to Article 99 of the Articles of Association of the Company. (Resolution 6) 7. To re-appoint Mr Jovenal R. Santiago, the Director retiring to hold offi ce from the date of this Annual General Meeting until the next Annual General Meeting of the Company pursuant to Section 153(6) of the Companies Act, Chapter 50. (Resolution 7) 8. To re-appoint RSM Chio Lim LLP as Auditors of the Company and to authorise the Directors to fi x their remuneration. (Resolution 8)

94 NOTICE OF ANNUAL GENERAL MEETING SPECIAL BUSINESS AS ORDINARY RESOLUTIONS To consider and, if thought fi t, to pass the following Ordinary Resolutions, with or without modifi cations:- 9. Authority to issue shares That pursuant to Section 161 of the Companies Act, Chapter 50 and Rule 806 of the Listing Manual of the Singapore Exchange Securities Trading Limited ( SGX-ST ), authority be and is hereby given to the Directors of the Company (the Share Issue Mandate ) to: (A) (i) issue shares in the capital of the Company ( Shares ) whether by way of rights, bonus or otherwise; and/or (ii) make or grant offers, agreements or options (collectively, Instruments ) that might or would require Shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) warrants, debentures, convertible securities or other instruments convertible into Shares; and/or (iii) notwithstanding that such authority conferred by this Resolution may have ceased to be in force at the time the Instruments are to be issued, issue additional Instruments arising from adjustments made to the number of Instruments previously issued in the event of rights, bonus or other capitalisation issues, at any time and upon such terms and conditions and for such purposes and to such persons as the Directors may in their absolute discretion deem fi t; and (B) issue Shares in pursuance of any Instrument made or granted by the Directors pursuant to (A)(ii) and/or (A)(iii) above, notwithstanding that such authority may have ceased to be in force at the time the Shares are to be issued, provided 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 fi fty per cent. (50%) of the total number of issued Shares (excluding treasury shares) (as calculated in accordance with sub-paragraph (II) below), of which the aggregate number of Shares to be issued other than on a pro rata basis to shareholders of the Company (including Shares to be issued in pursuance of Instruments made or granted pursuant to this Resolution) does not exceed twenty per cent. (20%) of the total number of issued Shares (excluding treasury shares) (as calculated in accordance with sub-paragraph (II) below); (II) for the purpose of determining the aggregate number of Shares that may be issued under sub-paragraph (I) above, the percentage of issued Shares shall be based on the Company s total number of issued Shares (excluding treasury shares) at the time of the passing of this Resolution after adjusting for: (a) new Shares arising from the conversion or exercise of any convertible securities; (b) new Shares arising from exercise of share options or vesting of share awards which are outstanding or subsisting at the time of the passing of this Resolution; and (c) any subsequent bonus issue, consolidation or subdivision of Shares;

95 NOTICE OF ANNUAL GENERAL MEETING (III) in exercising such authority, the Company shall comply with the provisions of the Listing Manual of the SGX-ST for the time being in force (unless such compliance has been waived by the SGX-ST) and the Articles of Association for the time being of the Company; and (IV) the fi fty per cent. (50%) limit in (I) above may be increased to one hundred per cent. (100%) for the Company to undertake pro rata renounceable rights issues and unless revoked or varied by the Company in general meeting by ordinary resolution, such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, or the expiration of such other period as may be prescribed by the Companies Act, Chapter 50, and every other legislation for the time being in force concerning companies and affecting the Company, whichever is the earliest. (Resolution 9) 10. That without prejudice to the generality of, and pursuant and subject to the Share Issue Mandate set out in Ordinary Resolution 9 being obtained, authority be and is hereby given to the Directors of the Company to issue new Shares other than on a pro rata basis to shareholders of the Company at an issue price per new Share which shall be determined by the Directors in their absolute discretion provided that such Share shall not be issued at a discount exceeding twenty per cent. (20%) to the weighted average price per Share for trades done on the SGX-ST (as determined in accordance with the requirements of the SGX-ST) at any time and upon such terms and conditions and for such purposes and to such persons as the Directors may in their absolute discretion deem fi t, provided that: (A) in exercising the authority conferred by this Ordinary Resolution 10, the Company shall comply with the requirements imposed by the SGX-ST from time to time and the provisions of the Listing Manual of the SGX-ST for the time being in force (in each case, unless such compliance has been waived by the SGX-ST) all applicable legal requirements under the Companies Act, Chapter 50 and the Articles of Association for the time being of the Company; and (B) unless revoked or varied by the Company in general meeting, the authority conferred by this Ordinary Resolution 10 shall continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next AGM of the Company is require by law to be held or the expiration of such other period as may be prescribed by the Companies Act, Chapter 50, and every other legislation for the time being in force concerning companies and affecting the Company, whichever is the earliest. (Resolution 10) 11. That authority be and is hereby given to the Directors of the Company to offer and grant share options in accordance with the provisions of the Cosmosteel Employee Share Option Scheme approved by shareholders in general meeting held on 28 March 2007 (the Scheme ) and to allot and issue from time to time such number of Shares as may be required to be issued pursuant to the exercise of the share options under the Scheme (notwithstanding that such allotment and issue may occur after the conclusion of the next or any ensuing Annual General Meeting of the Company). (Resolution 11) 12. To transact any other ordinary business of an Annual General Meeting.

96 NOTICE OF ANNUAL GENERAL MEETING NOTICE OF BOOKS CLOSURE AND DIVIDEND PAYMENT DATE NOTICE IS ALSO HEREBY GIVEN that the Share Transfer Books and Register of Members of the Company will be closed on 2 March 2010 for determining the shareholders entitlements to the proposed fi nal dividends. Duly completed transfers received by the Company s Share Registrar, Boardroom Corporate & Advisory Services Pte. Ltd., 3 Church Street #08-01 Samsung Hub Singapore , up to 5.00 p.m. on 1 March 2010 will be registered to determine shareholders entitlements to the proposed fi nal dividends. Shareholders whose securities accounts with The Central Depository (Pte) Limited are credited with ordinary shares in the capital of the Company as at 5.00 p.m. on 1 March 2010 will be entitled to the dividends. The proposed fi nal dividends, if approved by shareholders at the Annual General Meeting, will be paid on 15 March BY ORDER OF THE BOARD Lee Pih Peng Company Secretary 8 January 2010 Singapore

97 NOTICE OF ANNUAL GENERAL MEETING EXPLANATORY NOTES ON ORDINARY AND SPECIAL BUSINESSES TO BE TRANSACTED:- ORDINARY BUSINESS (i) Ordinary Resolution 3, if passed, will allow the Company to pay Directors Fees to Directors (on a quarterly basis in arrears) as services are rendered by Directors during the course of the fi nancial year ending 30 September This will facilitate Directors compensation for services rendered in a timelier manner. (ii) Ordinary Resolution 4, if passed, will re-appoint Ms Tan Siok Chin as Director of the Company. Ms Tan will, upon the re-appointment, remain as the chairperson of the Nominating Committee, and a member of each of the Audit Committee and the Remuneration Committee. She will be considered independent for the purposes of Rule 704(8) of the Listing Manual of the SGX-ST. (iii) Ordinary Resolution 7, if passed, will re-appoint Mr Jovenal R. Santiago as Director of the Company to hold offi ce until the next Annual General Meeting of the Company. Mr Santiago will, upon the re-appointment, remain as the chairperson of the Audit Committee, and a member of each of the Remuneration Committee and the Nominating Committee. He will be considered independent for the purposes of Rule 704(8) of the Listing Manual of the SGX-ST. SPECIAL BUSINESS (iv) Ordinary Resolution 9, if passed, will empower the Directors of the Company to, from the date of the above Annual General Meeting until 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, or the expiration of such other period as may be prescribed by the Companies Act, Chapter 50, and every other legislation for the time being in force concerning companies and affecting the Company, whichever is the earliest, allot and issue Shares, to make or grant Instruments, and to issue Shares in pursuance of such Instruments for such purposes as they consider in the interests of the Company. The aggregate number of Shares that the Directors may allot and issue under this Resolution (including Shares to be issued in pursuance of Instruments made or granted) shall not exceed fi fty per cent. (50%) of the total number of issued Shares (excluding treasury shares), of which the aggregate number of Shares to be issued other than on a pro rata basis shall not exceed twenty per cent. (20%) of the total number of issued Shares (excluding treasury shares) (including Shares to be allotted and issued in pursuance of Instruments made or granted pursuant to this Resolution), to shareholders. For the purpose of determining the aggregate number of Shares that may be issued, the percentage of issued Shares shall be calculated based on the total number of issued Shares (excluding treasury shares) at the time this Resolution is passed, after adjusting for: (1) new Shares arising from the conversion or exercise of any convertible securities; (2) new Shares arising from exercise of share options or vesting of share awards which are outstanding or subsisting at the time of the passing of this Resolution; and (3) any subsequent bonus issue, consolidation or sub-division of Shares.

98 NOTICE OF ANNUAL GENERAL MEETING This proposed ordinary resolution, if passed, will also empower the Directors of the Company to issue up to one hundred per cent. (100%) of the issued Shares (excluding treasury shares) via a pro rata renounceable rights issue. This is one of the new measures introduced by the Singapore Exchange Limited, in consultation with the Monetary Authority of Singapore, which took effect on 20 February to accelerate and facilitate listed issuers fund raising efforts and will be in effect until 31 December This mandate will provide the Directors with an opportunity to raise funds and avoid prolonged market exposure by reducing the time taken for shareholders approval, in the event the need arises. Minority shareholders interests are mitigated as all shareholders have equal opportunities to participate and can dispose their entitlements through trading of nil-paid rights if they do not wish to subscribe for their rights shares. This Share Issue Mandate is conditional upon the Company: (a) making periodic announcements on the use of the proceeds as and when the funds are materially disbursed; and (b) providing a status report on the use of proceeds in the annual report. (v) Ordinary Resolution 10, if passed, will empower the Directors of the Company to issue Shares by way of placements of new shares on a non pro rata basis at an issue price at up to twenty per cent. (20%) discount to the weighted average price for trades done on the SGX-ST. This is also one of the new measures introduced by the Singapore Exchange Limited, in consultation with the Monetary Authority of Singapore, which took effect on 20 February, to accelerate and facilitate listed issuers fund raising efforts and will be in effect until 31 December (vi) Ordinary Resolution 11, if passed, will empower the Directors of the Company to allot and issue from time to time such number of Shares as may be required to be issued pursuant to the exercise of the share options under the Scheme, notwithstanding that such allotment and issue may occur after the conclusion of the next or any ensuing Annual General Meeting of the Company. This authority is in addition to the general authority to issue shares sought under Resolution 9. Note:- A member of the Company entitled to attend and vote at the Annual General Meeting is entitled to appoint not more than two (2) proxies to attend and vote in his stead. A proxy need not be a member of the Company. The instrument appointing the proxy must be deposited at the registered offi ce of the Company at 5 Shenton Way #07-00, UIC Building, Singapore , not less than forty-eight (48) hours before the time set for holding the Annual General Meeting.

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101 PROXY FORM ANNUAL GENERAL MEETING COSMOSTEEL HOLDINGS LIMITED (Incorporated in the Republic of Singapore) (Company Registration Number Z) IMPORTANT: 1 For investors who have used their CPF monies to buy ordinary shares in the capital of CosmoSteel Holdings Limited, this Annual Report is forwarded to them at the request of their CPF Approved Nominees and is sent solely FOR INFORMATION ONLY. 2 This Proxy Form is not valid for use by such CPF Investors and shall be ineffective for all intents and purposes if used or purported to be used by them. I/We, (Name) (NRIC/Passport No.) of being a shareholder/shareholder(s) of CosmoSteel Holdings Limited (the Company ), hereby appoint: (Address) Name Address NRIC / Passport No. Proportion of Shareholding (%) to be Represented by Proxy and/or (delete as appropriate) Name Address NRIC / Passport No. Proportion of Shareholding (%) to be Represented by Proxy as my/our proxy/proxies to attend and to vote on my/our behalf and, if necessary, to demand a poll, at the Annual General Meeting ( AGM ) of the Company to be held at Shan Shui Palace, 450 Jalan Ahmad Ibrahim, Raffl es Country Club, Singapore on Monday, 25 January 2010 at 10 a.m. and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the resolutions to be proposed at the AGM as indicated hereunder. If no specifi c direction as to voting is given, my/our proxy/proxies will vote or abstain from voting at his/ their discretion, as he/they will on any other matter arising at the AGM and at any adjournment thereof. NO. ORDINARY RESOLUTIONS FOR AGAINST ORDINARY BUSINESS 1 To adopt Directors Report, Auditors Report and Audited Accounts 2 To declare a fi nal dividend 3 To approve Directors fees for the fi nancial year ending 30 September 2010 To re-elect Ms Tan Siok Chin, the Director retiring pursuant to Article 99 of the 4 Company s Articles of Association To re-elect Mr Ong Tong Yang, the Director retiring pursuant to Article 99 of the 5 Company s Articles of Association To re-elect Mr Ong Tong Hai, the Director retiring pursuant to Article 99 of the 6 Company s Articles of Association To re-appoint Mr Jovenal R. Santiago, the Director retiring pursuant to Section 7 153(6) of the Companies Act, Chapter 50 To re-appoint RSM Chio Lim LLP as Auditors of the Company and to authorise 8 the Directors to fi x their remuneration SPECIAL BUSINESS 9 To authorise directors to issue ordinary shares 10 To authorise directors to issue shares at a greater discount 11 To authorise directors to offer and grant share options (Please indicate your vote For or Against with an X within the box provided.) Dated this day of 2010 Total Number of Shares Held Signature(s) of Shareholder(s) or Common Seal Important: Please read notes overleaf

102 Notes:- 1. A shareholder of the Company ( Shareholder ) entitled to attend and vote at the AGM is entitled to appoint not more than two (2) proxies to attend and vote in his stead. Where a Shareholder appoints two (2) proxies, the appointments shall be invalid unless he specifi es the proportion of his shareholding (expressed as a percentage of the whole) to be represented by each proxy. 2. A Shareholder should insert the total number of shares held by him. If he has shares entered against his name in the Depository Register (as defi ned in Section 130A of the Companies Act, (Cap. 50) of Singapore s Companies Act), he should insert that number of shares. If he has shares registered in his name in the Register of Members, he should insert that number of shares. If he has shares entered against his name in the Depository Register and shares registered in his name in the Register of Members, he should insert the aggregate number of shares entered against his name in the Depository Register and registered in his name in the Register of Members. If no number is inserted, the instrument of proxy shall be deemed to relate to all the shares held by him. 3. The instrument of proxy must be under the hand of the Shareholder or of his attorney duly authorised in writing. Where the Shareholder is a corporation, the instrument of proxy must be executed under its common seal or under the hand of its attorney duly authorised in writing. 4. The instrument of proxy (together with the power of attorney, if any, under which it is signed or a duly certifi ed copy thereof) must be deposited at the registered offi ce of the Company at 5 Shenton Way #07-00, UIC Building, Singapore not less than fortyeight (48) hours before the time appointed for the AGM. 5. A corporation which is a Shareholder may authorise by resolution of its directors or other governing body such person as it thinks fi t to act as its representative at the AGM, in accordance with Section 179 of the Companies Act. 6. The Company shall be entitled to reject an instrument of proxy if it is incomplete, improperly completed or illegible or where the true intentions of the Shareholder are not ascertainable from the instructions specifi ed in the instrument of proxy. In addition, in the case of shares entered in the Depository Register, the Company may reject any instrument of proxy lodged if the Shareholder, being the appointor, is not shown to have shares entered against his name in the Depository Register forty-eight (48) hours before the time appointed for the AGM, as certifi ed by The Central Depository (Pte) Limited to the Company.

103 A META FUSION DESIGN