Company Registration Number: 39151

Transcription

1 Company Registration Number: Weaving The Future Annual Report 2009

2 Contents 01 About Foreland Fabrictech 02 Focus on Functional Fabrics 03 Our Range of Functional Fabrics 04 Chairman s Message 06 Our Capabilities and Our Achievement 08 Our Production Process 09 Financial Highlights 10 Board of Directors 12 Senior Management 13 Corporate Governance Report 23 Financial Statements 60 Statistics of Shareholdings 62 Notice of Annual General Meeting

3 FORELAND FABRICTECH annual report About Foreland Fabrictech Established in 1988, Foreland Fabrictech Holdings Limited is a vertically integrated manufacturer of functional and normal fabrics, based in Jinjiang City, Fujian Province the PRC. We are engaged in the weaving, dyeing, coating and fi nishing of fabrics mostly marketed under our award-winning Fulian ( ) brand. Our quality functional and normal fabrics are primarily used by PRC apparel manufacturers to produce sports, leisure and business apparel under various reputable brands, including Li-Ning ( ), Anta ( ) and Edenbo ( ). Our fabrics are also sold to textile traders, who in turn sell these products to domestic markets or export to overseas markets. Through collaborations with world-renowned international technology partners such as Bayer ( ), Ciba ( ), Evermore Chemical ( ), Farbchemie ( ), Zschimmer ( ) and Daiwa Chemical ( ), together with our internal R&D capabilities Foreland Fabrictech has developed a wide range of functional fabrics with the desired functions and characteristics. Since we started research and development into functional fabrics in 2003, we have successfully developed 17 functional fabrics with different characteristics. Over the years, we have built a strong reputation an credible track record for our quality products and services to customers. Our products conform to various standards such as AATCC, ASTM and DIN, as well as product labellings such as the Oeko-Tex100 and the China Environmental Labelling ( ). The Group has also obtained quality assurance certifi cations including ISO9001:2000 and ISO14001:2004. We were conferred one of China s most prestigious and respected industry qualifi cations - the Fabrics China Pioneer Plant Chemical Fibre Functional Fabric Qualifi cation issued by the China Textiles Development Center and the China Textile Information Center.

4 2 FORELAND FABRICTECH annual report 2009 Focus on Functional Fabrics 2009 Ultra light, thin and fine fabric Water-printed fabric High colour fastness II Cold feel 2008 Fluorescent 2007 Anti-insect Memory fabric Anti-radiation Biodegradable compound fabric Anti-bacteria & anti-odour High colour fastness I Chlorine resistant Dust, oil & stain resistant Moisture absorbent Combustion resistant Moisture & air breathability UV protection

5 FORELAND FABRICTECH annual report Our Range of Functional Fabrics Characteristic / Function Moisture & air breathability UV protection Dust, oil & stain resistant Moisture absorbent Combustion resistant Anti-bacteria & anti-odour High colour fastness I & II Chlorine resistant Cold feel Anti-insect Anti-radiation Biodegradable compound Fluorescen Memory fabric Ultra light, thin and fine fabric Water-printed fabric Description Allows moisture from perspiration and body heat to dissipate. Used for sports, winter and leisure apparel. Reduces the penetration of harmful UV rays. Used for sports, leisure and business apparel. Fabric is resistant to dust, oil and stain. Used for uniforms and business apparel. Absorbs perspiration and facilitates rapid vapourisation of perspiration. Used for sports and leisure apparel. Does not combust when in contact with fi re. Used for fi refi ghting and military uniforms, tentages and home textiles. Prevents bacteria growth and odour. Used for sports, leisure and business apparel. Retains colour under conditions such as prolonged washing and abrasion. Used for various types of apparel. Retains original colour over a longer period of time. Used for sports and leisure apparel (swimwear and beachwear). Cools the body. Used for sports and leisure apparel. Guards against pests effectively. Used for apparel, tentages and home textiles that are able to repel insects. Reduces wearer s exposure to radiation. Used for maternity clothes, uniforms for computer users or X-ray machine operators, etc. Environmental friendly and biodegradable, and has a unique texture and quality. Used for army uniforms, golfwear, mountainclimbing and skiing attire, as well as bags and luggage. Increases visibility. Used for apparel which are worn in places with limited lighting. The fabric has a wide range of uses, such as for security, traffi c and transportation purposes. Fabric remembers the initial shape and pattern it was endowed with during the production process, and is able to maintain it even after it undergoes further fabric processing. Fabric made of ultra fi ne loom-state fabric. Thickness and weight of fabric is effectively reduced while maintaining a smooth surface and resistant to water. Used for high-grade umbrella with ultra-light weight. Customed designed pattern will appear when fabric gets in touch with water or rain. Used for high-grade umbrella.

6 4 FORELAND FABRICTECH annual report 2009 Chairman s Message Mr Tsoi Kin Chit, the founder and Executive Chairman Dear Shareholders, On behalf of the Board of Directors, it is my great pleasure to present to you Foreland Fabrictech Holdings Limited and its subsidiaries (the Group ) annual report for the financial year ended 31 December 2009 ( FY 2009 ). Review of FY2009 FY2009 was, by far, the most challenging year for the Group. The global fi nancial turmoil and the credit crunch which swept the worldwide economy over in 2008 had resulted in economic slowdown for many developed countries around the world and led to a remarkable drop in consumers demand and purchasing power for textile products. All these have had a direct negative impact on textile producers in the People s Republic of China ( PRC ). Compared to last year, the decrease in orders for high grade products in FY2009 was signifi cant. Competition was more intense and prices for raw materials were constantly remaining at the high side. In this diffi cult environment, the Group had adopted various measures to maintain the Group s profi tability and ensure its healthy fi nancial position. These measures include reduction in expenses, tighter credit control and exploration of new markets. Through the Group s efforts, I am pleased to announce that the Group has managed to remain profi table for each quarter of FY2009 with healthy operating cash flows. Financial Performance Speaking of fi nancial performance, our revenue decreased by 39%, from RMB million in fi nancial year ended 2008 ( FY2008 ) to RMB million in FY2009. This was mainly due to the sluggish demand for textile products, especially products with higher grade, as compared to last year. On a segmental basis, the revenue generated from the Group s key business segment manufacturing and sale of fabrics had decreased by 38% to RMB274.9 million in FY2009, which represented 97.5% of the Group s total revenue in the fi nancial year under review. Average selling price for the manufacturing and sale of fabrics was reduced by approximately 18%, from RMB 13.1 per yard a year ago to RMB 10.8 per yard in FY2009. Sales volume for this segment was also decreased by 24% from 33.6 million yards a year ago to 25.5 million yards in FY2009. Although the Group managed to partially pass on the effects of fl uctuating raw material prices to our customers, the persistently high prices of raw material and production-related overheads, weaker demand for higher grade products and lower operational effi ciency as a result of the reduced scale of operation had posed pressure on the Group s profi t margins. Our overall gross profi t margin in FY2009 was lowered to 22.2%, compared to 37.3% of last year. The Group maintained a sound fi nancial position with RMB100.7 million in cash and cash equivalents and with no bank borrowings as at 31 December 2009.

7 FORELAND FABRICTECH annual report Earnings per share was 7.31 RMB cents, compared to RMB cents in FY As at 31 December 2009, the net asset value per ordinary share was RMB cents (based on 452,339,150 shares), compared to RMB cents (based on 440,429,520 shares) in the preceding fi nancial year. Dividend Although it was stated in the Company s Prospectus dated 17 April 2007 that we intended to recommend and distribute dividends of not less than 20% of our FY2009 net profi ts, the Board, having taken into account the tough and challenging business environment and after prudent consideration, has decided to take a more conservative approach for this year and would not be declaring any dividend to shareholders for FY2009. In resolving this decision, the Board believes that more fi nancial resources should be reserved and applied to the Group s operating capital with an aim to maintaining the Group s operations and fi nancial strength. By doing so, we hope we can create more value to our shareholders on a long-term basis. Growth Opportunities Despite the challenging business environment, we will continue to strive to do our best. One of the Group s main objectives is to research and develop new products and enhance the existing product s quality. We have launched our Ultra light, thin and fi ne fabric and waterprinted fabric during the year under review. Given that our niche lies in higher grade and functional fabrics, we are confi dent that enhancing higher product quality and maintaining our strong product development capability will stand us in good stead. Since the second half of FY2009, the Group has been the supplier of high grade umbrella fabrics for a few prominent umbrella producers in the PRC, such as Hangzhou Paradise Umbrella Group Co., Ltd., Susino Umbrella Co.,Ltd. and Fulong Umbrella Co., Ltd. We hope that these new businesses could help to improve our profi tability in view of the declining demand of high grade apparel fabrics. We are maintaining our sales representative offi ces in Fuzhou and Shishi in Fujian Province, Guangzhou in Guangdong Province, and Shanghai in order to maintain the relationship with the existing customers and establish the connections with the potential customers. As disclosed in our previous announcements, the construction of the new factory at Andong Industrial Area in Jinjiang City has been affected by various factors. However, we are confi dent that we are able to get through all the obstacles. The completion of the new factory is expected to provide the Group with additional factory area for future development and opportunity. As a result, it would expand the production facilities and greater profi ts on a longer term basis. In addition, we will continue to actively seek other profi table opportunities for the Group. Our aim is to diversify and enlarge our business, while retaining our essential business model. Ultimately, we want to entrench our market position and drive further growth. Appreciation I would like to express my deepest appreciation to the Board of Directors for their invaluable contribution and support. I would also like to thank my employees for their hard work, dedication and contribution and, last but not least, the unrelenting support of all shareholders, customers and business partners. Mr Tsoi Kin Chit Executive Chairman

8 6 FORELAND FABRICTECH annual report 2009 Our Capabilities and...

9 FORELAND FABRICTECH annual report Our Achievement

10 8 FORELAND FABRICTECH annual report 2009 Our Production Process Textile Chain Vertically Integrated Production Process Textile Machinery Manufacturers Spinning of Fibres Fabric Manufacturers Knitting Warping and Slashing Weaving Utilise yarns mainly made of polyester and nylon Garment Manufacturers Textile Traders Printing Dyeing High temperature roll dyeing process High temperature overfl ow dyeing process Coating The mixing proportions of chemicals and additives, and their application in the production process are our proprietary know-how Retailers Finishing Consumers Packaging and Delivery

11 FORELAND FABRICTECH annual report Financial Highlights Revenue () 150, , , , ,966 Profit Margin 37.5% 35.1% 23.9% 20.6% 38.4% 24.0% 37.3% 23.2% 22.2% 11.6% Gross Margin Net Margin Net Profit () 30,941 75, , ,896 32,638 Revenue by Business Segment 3.0% % 2009 Production Capacity Maximum annual capacity in million yards Utilisation in % 4.0% 96.5% 92.0% 86.4% 84.9% % % 2008 Manufacturing and sale of fabrics Provision of fabric processing services

12 10 FORELAND FABRICTECH annual report 2009 Board of Directors Tsoi Kin Chit Executive Chairman Mr Tsoi is our founder and Executive Chairman and was appointed to our Board on 15 November With more than 18 years of experience in the textile industry, he is responsible for formulating the strategies and steering the directions of our Group. Prior to the founding of our Group, he served in the army from January 1969 to June 1976, handling clerical work for the 31st Radar Regiment, Shanghai Air Force, Chinese People Liberation Army. Thereafter, from June 1976 to June 1979, he served as the secretary for Dongshi Politics and Law Committee, Jinjiang District Dongshi Community, Fujian Province. He then joined Jinjiang Second Welfare Factory, a state-owned shoe-manufacturing enterprise, in June 1979 and held the position of factory manager where he was responsible for the construction of the factory as well as in charge of the manufacturing operations. In October 1988, while holding the position of factory manager at Jinjiang Second Welfare Factory, he founded Fulian Knitting and has been the chairman and managing director of Fulian Knitting since then. He ceased to be the factory manager of Jinjiang Second Welfare Factory in June Mr Tsoi is presently a member of the Jinjiang City Executive Committee of the Chinese People s Political Consultative Conference; a member of the Quanzhou City Textile and Garment Chamber of Commerce; the deputy chairman of the China Chamber of International Commerce, Jinjiang City; the chairman of the Returned Overseas Chinese Federation of Dongshi township, Jinjiang City; deputy chairman of Jinjiang City Labour Model Association; and deputy chairman of the Chamber of Commerce and Industry, Jinjiang City. He was also awarded the Quanzhou City Public Donation Special Contribution Prize by the Quanzhou City People s Government in September 2006 for his signifi cant donations to the city of Quanzhou. He obtained his degree in Enterprise Management from Fujian Province Radio Broadcasting Television University in Cai Fengquan Executive Director Mr Cai is our Executive Director and was appointed to our Board on 1 February Mr Cai is the son of our Executive Chairman, Mr Tsoi Kin Chit. He is primarily responsible for the overall administrative management of our operations. From October 2006 to April 2007, he was a software developer at Techcom Solutions, and was responsible for software development and engineering. Since June 2007, he has assisted our Executive Chairman, Mr Tsoi Kin Chit, in the management and administration of Fulian Knitting. He obtained his Master of Information Technology degree and Bachelor in Information Technology (Software Engineering and Data Communications) degree from the Queensland University of Technology, Australia in 2006 and 2003, respectively.

13 FORELAND FABRICTECH annual report Lim Siang Kai Lead Independent Director Mr Lim is our Lead Independent Director and was appointed to our Board on 7 March He is currently an independent director of China Angel Food Limited, Natural Cool Holdings Limited, Texchem-Pack Holdings (S) Ltd, Joyas International Holdings Limited and the chairman and independent director of ISDN Holdings Ltd and China Print Power Group Limited, all of which are listed companies in Singapore. Prior to joining the Board, Mr Lim held various positions in banks, fi nancial services companies and a fund management company and has over 25 years of experience in the securities, private and investment banking, as well as fund management industries. He holds a Bachelor of Arts Degree from the University of Singapore, a Bachelor of Social Sciences (Honours) Degree from the National University of Singapore, and a Master of Arts Degree in Economics from the University of Canterbury, New Zealand. Yeap Wai Kong Independent Director Mr Yeap is our Independent Director and was appointed to our Board on 15 January He is the cofounder of Atom Capital Limited, a regional focused investment and corporate advisory group. Mr Yeap has more than a decade worth of experience working in banks and international accounting and consultancy fi rms. He was working in the corporate fi nance department of a Singapore based investment bank between 2000 and Between 2002 and 2004, Mr Yeap worked with 2 local consulting fi rms providing accounting and fi nancial advisory services to small and medium enterprises. From 2004 to 2005, Mr Yeap was the chief fi nancial offi cer of a company listed on the SGX-ST which engaged in the manufacturing of aluminium panels. In 2006, he took up the position of executive director and chief fi nancial offi cer at another company listed on the SGX-ST which engaged in the manufacturing of farm equipment. In 2007, he cofounded Atom Capital Limited and has remained as its executive director since. Mr Yeap holds a Bachelor of Business (Accounting) degree from Monash University, Australia and a Masters Degree in Applied Finance from Melbourne University, Australia. He has also a Special Diploma in Strategic Brand Management from Nanyang Polytechnic, Singapore. He is currently a member of the Institute of Certifi ed Public Accountants of Singapore and CPA Australia. Chen Yan Non-Executive Director Ms Chen is our Non-Executive Director and was appointed to our Board on 7 March She started her career in July 2001 as an executive with KPMG Singapore s corporate restructuring services department where she served until April From August 2003 to December 2006, she was with the corporate fi nance department of Westcomb Capital Pte Ltd where she last held the position of senior associate, providing capital markets advisory services to local and overseas corporations in various industries for their listings on the SGX-ST. Ms Chen received a Bachelor of Science in Accounting (First Class Honours) degree from The University of North Carolina at Greensboro, USA in May 1998 and a Master in Professional Accounting degree from The University of Texas at Austin, USA in December Ms Chen is a Certifi ed Public Accountant and member of the Texas State Board of Public Accountancy as well as a Certifi ed Internal Auditor and member of the Institute of Internal Auditors.

14 12 FORELAND FABRICTECH annual report 2009 Senior Management Cai Lian Yong General Manager Mr Cai is our General Manager and is responsible for the procurement as well as sales and marketing functions of our Group. Mr Cai is the brother-in-law of our Executive Chairman, Mr Tsoi Kin Chit, and uncle of our Executive Director, Mr Cai Fengquan. He has more than 13 years of experience in sales and marketing in the textile business. He joined Fulian Knitting in August 1990 and held the position of business supervisor where he was responsible for the business development of Fulian Knitting until December From January 1996 to December 2002, he assumed the position of sales and marketing manager of Fulian Knitting. From January 2003 till present, he has been the general manager of Fulian Knitting where he is responsible for the sourcing and procurement as well as sales and marketing functions. He obtained a degree in business management from Huaqiao University in Zhang Hong Lai Deputy General Manager Mr Zhang is our Deputy General Manager and is responsible for the production and research and development functions of our Group. He has more than 13 years of experience in the printing and dyeing industry. From November 1997 to April 2002, he was the on-site supervisor for dyeing in Huamao (Xiamen) Weaving, Dyeing & Finishing Co., Ltd., where he was in charge of the dyeing process in the production of fabrics. From May 2002 to October 2002, he was the factory manager of the dyeing factory of Fujian Xiaoxing Textile Dyeing & Printing Co., Ltd. and was responsible for the dyeing process. In November 2002, he joined Fulian Knitting as the deputy general manager in charge of the production department. Mr Zhang obtained his professional diploma in printing and dyeing from Wuhan Technological Institute in Wong Shing Mun Chief Financial Officer Mr Wong is our Chief Financial Offi cer and has been with our Group since October He is responsible for the financial and accounting functions of our Group. Mr Wong was a senior auditor at Hong Kong PricewaterhouseCoopers, where he was involved in auditing, accounting and business consultancy matters for more than 4 years. He was the fi nancial controller and company secretary of CCID Consulting Company Limited, Pacifi c-pack Holdings Limited and Fujian Zhenyun Plastics Industry Co., Ltd. between January 2003 and October 2006, where he was responsible for the financial, accounting and corporate secretarial functions of the companies. Mr Wong is a fellow of the Association of Chartered Certifi ed Accountants (FCCA), a member of the Hong Kong Institute of Certifi ed Public Accountants and the Institute of Chartered Accountants in England and Wales. He obtained a Bachelor of Business Administration degree from the Hong Kong University of Science and Technology in 1998.

15 FORELAND FABRICTECH 13 CORPORATE GOVERNANCE REPORT Foreland Fabrictech Holdings Limited (the Company ) continues to be committed to setting and maintaining good standards of corporate governance through the implementation of effective self-regulatory and monitoring mechanisms within the Company and its subsidiaries (the Group ) to preserve and enhance the interests of all shareholders. This report describes the Company s corporate governance processes and structures that were in place throughout the financial year, with specific reference made to the principles and guidelines of the Singapore of Corporate Governance 2005 (the ). Statement of Compliance The Board of Directors (the Board ) confirms that for the financial year ended 31 December 2009 ( FY2009 ), the Company has generally adhered to the principles and guidelines as set out in the, save as otherwise explained below. Board Matters Principle 1: The Board s Conduct of its Affairs The Board oversees the business affairs of the Company and assumes responsibility for the Group s overall strategic plans, key operational initiatives, major funding and investment proposals, financial performance reviews and corporate governance practices. Guideline 1.3: Delegation of authority on certain Board matters The Board is supported by the Audit Committee ( AC ), the Nominating Committee ( NC ) and the Remuneration Committee ( RC ). Guideline 1.4: Meetings of the Board and Board Committees The Board holds meetings for particular and specific matters as and when required. The Company s Bye-Laws (the Bye-Laws ) allow a Board meeting to be conducted by means of telephone conference or similar communications equipment. The attendance of each Director at every Board and Board Committee meeting held in FY2009, is set out below: ATTENDANCE AT BOARD & BOARD COMMITTEE MEETINGS BOARD AUDIT REMUNERATION NOMINATING No. of Meetings Attendance No. of Meetings Attendance No. of Meetings Attendance No. of Meetings Attendance Mr Tsoi Kin Chit 4 4 NA NA NA NA NA NA Mr Cai Fengquan 4 4 NA NA NA NA NA NA Mr Lim Siang Kai Mr Leow Poh Chin* Ms Chen Yan * Mr Leow Poh Chin, an independent Director, resigned on 30 November Mr Yeap Wai Kong was appointed as independent Director on 15 January 2010.

16 14 FORELAND FABRICTECH CORPORATE GOVERNANCE REPORT Guideline 1.5: Matters requiring Board approval The Board s approval is required for matters likely to have a material impact on the Group s operations as well as matters other than in the ordinary course of business. Guideline 1.6: Directors to receive appropriate training New Directors, upon appointment, will be briefed on the business and organisation structure of the Group to ensure that they are familiar with the Group structure, its business and operations. The Directors may participate in seminars and/or discussion groups to keep abreast of latest developments which are relevant to the Group. Guideline 1.7: Formal letter to be provided to Directors, setting out duties and obligations. A formal letter will be provided to each Director, upon his appointment, setting out the Director s duties and obligations. Board of Directors Principles 2 and 4: Board Composition and Balance Guideline 2.3: Appropriate size of Board The Board comprises 5 Directors. As at the date of this report, the Board comprises the following Directors: Executive Directors: Tsoi Kin Chit (Executive Chairman) Cai Fengquan (Deputy Chairman) Non-Executive Director: Chen Yan Independent Directors: Lim Siang Kai Yeap Wai Kong The NC, which reviews the independence of each Director on an annual basis, adopts the s definition of what constitutes an independent Director. As a group, the Directors bring with them a broad range of expertise and experience in areas such as accounting, finance, business and management experience, industry knowledge, strategic planning experience and customer-based experience and knowledge that are necessary and critical to meet the Group s objectives. The diversity of the Directors experience allows for the useful exchange of ideas and views. The profile of all Board members is set out in the section entitled Board of Directors. Guideline 2.1: Independent Directors to make up at least one-third of the Board There is an independent element on the Board, with independent Directors constituting at least onethird of the Board. The Board considers that the present Board size is appropriate, taking into account the nature and scope of the Group s operation.

17 FORELAND FABRICTECH 15 CORPORATE GOVERNANCE REPORT Guidelines 2.5 and 2.6: Roles and meetings of Non-executive Directors Where warranted, the non-executive Directors meet without the presence of Management or executive Directors to review any matters that must be raised privately. Chairman and Chief Executive Officer Principle 3: Chairman and Chief Executive Officer The Executive Chairman of the Company is Mr Tsoi Kin Chit. Mr Tsoi is the founder of the Group and plays a key role in developing the business of the Group and provides the Group with strong leadership and vision. Mr Tsoi is responsible for the workings of the Board and ensures the integrity and effectiveness of the governance process of the Board. Board Committees At the same time, Mr Tsoi also fulfills the role of a Chief Executive Officer and is responsible for the day-to-day running of the Group s operations as well as the exercise of control of the quality, quantity and timeliness of information flow between the Board and the Management. All major decisions made by the Executive Chairman are endorsed by the Board. The remuneration package of the Executive Chairman is reviewed periodically by the RC. Both the NC and the RC comprise non-executive and independent non-executive Directors. As such, the Board believes that there are adequate safeguards in place against an unbalanced concentration of power and authority in single individuals. In addition, Mr Lim Siang Kai has been appointed as the Lead Independent Director and he is available to shareholders where they have concerns which contact through the normal channels of the Executive Chairman or Chief Financial Officer has failed to resolve or for which such contact is inappropriate. Guideline 4.1: Nominating Committee to comprise at least three Directors, majority of whom independent; chairman not associated with a substantial shareholder The NC, regulated by a set of written terms of reference, comprises 3 members, a majority of whom, including the Chairman, are independent non-executive Directors. The members of the NC are as follows: Mr Yeap Wai Kong (Chairman) Mr Lim Siang Kai Ms Chen Yan The Board considers Mr Yeap and Mr Lim to be independent as they do not have any existing business or professional relationships with the Group or its officers that could interfere, or be reasonably perceived to interfere, with the exercise of the Directors independent business judgement with a view to the best interests of the Company.

18 16 FORELAND FABRICTECH CORPORATE GOVERNANCE REPORT Principle 4: Nominating Committee The principal functions of the NC stipulated in its terms of reference are summarised as follows: (a) Reviews and makes recommendations to the Board on all board appointments; (b) (c) (d) (e) (f) Reviews the Board structure, size and composition and makes recommendations to the Board with regards to any adjustments that are deemed necessary; Determines the independence of the Board; Makes recommendations to the Board for the continuation of services of any Director who has reached the age of 70 or otherwise; Assesses the effectiveness of the Board and the academic and professional qualifications of each individual Director; and Reviews and recommends Directors retiring by rotation for re-election at each Annual General Meeting ( AGM ). Guideline 4.2: Re-nomination and reelection of Directors In accordance with the Company s Bye-Laws, one-third, or if the number of the Directors is not a multiple of three, the number nearest to but not less than one-third of the Directors are required to retire from office by rotation at each AGM, provided that each Director shall retire at least once every 3 years. All newly appointed Directors will have to retire at the next AGM following their appointments. The retiring Directors are eligible to offer themselves for re-election. The NC had recommended the re-election of the following Directors who will be retiring at the forthcoming AGM: (1) Mr Yeap Wai Kong [Bye-Law 104] (2) Ms Chen Yan [Bye-Law 104] The Board has accepted the NC s recommendation and accordingly, the above-mentioned Directors will be offering themselves for re-election at the forthcoming AGM. Mr Yeap and Ms Chen being the members of the NC have abstained from reviewing, recommending and approving his own re-election. Guideline 4.3: Independence of Directors The NC has reviewed the independence of each Director for FY2009 in accordance with the s definition of independence and is satisfied that at least one-third of the Board comprises independent non-executive Directors. Guideline 4.4: Multiple board representations Guideline 4.5: Description of process for selection and appointment of new Directors Notwithstanding that some of the Directors have multiple board representations, the NC is satisfied that each Director is able to and has been adequately carrying out his duties as a Director of the Company. The search and nomination process for new Directors, if any, will be through search companies, contacts and recommendations for the right candidates. Guideline 4.6: Key Information regarding Directors The Directors who held office during the year up to the date of this report are disclosed on pages 23 to 25 (Directors Report) of this Annual Report. Their profiles are disclosed on pages 10 and 11 (Board of Directors) of this Annual Report.

19 FORELAND FABRICTECH 17 CORPORATE GOVERNANCE REPORT Principle 5: Board Performance The NC is responsible for assessing the effectiveness of the Board as a whole and for assessing the contribution of each individual Director. The NC is also responsible for deciding how the Board s performance may be evaluated and proposes objective performance criteria for the Board s approval and implementing corporate governance measures to achieve good stewardship of the Company. Principle 6: Access to information Guideline 6.1: Board members to be provided with timely information Guideline 6.2: To include background and explanatory information Guideline 6.3: Role of Company Secretary All Directors have independent access to the Group s Senior Management and the Company Secretary at all times. Board members are provided with adequate and timely information prior to Board meetings, and on an on-going basis. The Company Secretary provides secretarial support to the Board and ensures adherence to Board procedures and relevant rules and regulations which are applicable to the Company. The Company Secretary attends all Board and Board committees meetings. Guideline 6.5: Procedure for board to take independent professional advice at company s cost The Board seeks independent professional advice as and when necessary to enable it to discharge its responsibilities effectively. The Directors, whether as a group or individually, may seek and obtain legal and other independent professional advice, at the Company s expense, concerning any aspect of the Group s operations or undertakings in order to fulfill their roles and responsibilities as Directors. Principle 7: Remuneration Matters Guideline 7.1: RC to consist entirely NEDs; majority, including RC chairman, must be independent The RC, regulated by a set of written terms of reference, comprises 3 non-executive Directors, a majority of whom, including the Chairman, are independent. The members of the RC are as follows: Mr Yeap Wai Kong (Chairman) Mr Lim Siang Kai Ms Chen Yan Guideline 7.2: Duties of Remuneration Committee The RC reviews and recommends to the Board the fees for independent non-executive Directors that are subject to shareholders approval at the AGM and all service contracts and terms of employment of the executive Directors and senior executives. Each member of the RC will abstain from reviewing and approving his own remuneration. Principle 8: Level and Mix of Remuneration The Company s remuneration policy is to provide compensation packages at market rates which reward good performance and attract, retain and motivate Directors and managers. All aspects of remuneration, including but not limited to Directors fees, salaries, allowances, bonuses, awards granted under the Foreland Performance Share Scheme and benefits in kind shall be covered by the RC.

20 18 FORELAND FABRICTECH CORPORATE GOVERNANCE REPORT Guideline 8.1: Package should align executive Directors interests with shareholders interest As disclosed in the Prospectus of the Company issued on 17 April 2007, the Company has entered into a service agreement ( Service Agreement ) with the Executive Chairman, Mr Tsoi Kin Chit. The Service Agreement of Mr Tsoi Kin Chit is for an initial term of three years with effect from 26 April The term of service shall be renewed and extended automatically on the expiry of such initial term on a year-to-year basis on such terms and conditions as the parties may agree mutually. There are no onerous removal clauses in the service agreement. The remuneration includes a basic salary and incentive bonus that is designed to align their interests with those of the shareholders and link rewards to corporate and individual performance. Guideline 8.2: Remuneration to consider contribution, effort, time spent and responsibilities Non-executive Directors are remunerated under a framework of fixed fees for serving on the Board and Board committees. Fees for non-executive Directors are subject to the approval of shareholders at the AGM. Executive Directors do not receive Directors fees. Principle 9: Disclosure of Remuneration The remuneration of Directors during FY2009 were as follows: Breakdown of Remuneration in Percentage (%) Directors of the Company Salary % Bonus % Other Benefits % Fees % Total % S$250,001 to S$500,000: Mr Tsoi Kin Chit Executive 76% 24% 100 S$250,000 and below: Mr Cai Fengquan Executive 88% 10% 2% 100 Mr Lim Siang Kai Independent Mr Leow Poh Chin* Independent Mr Yeap Wai Kong** Independent Ms Chen Yan Non-Executive

21 FORELAND FABRICTECH CORPORATE GOVERNANCE REPORT Breakdown of Remuneration in Percentage (%) Key Executives Salary % Bonus % Other Benefits % Fees % Total % S$250,000 and below: Cai Lian Yong 52% 6% 42% 100 Zhang Hong Lai 62% 6% 32% 100 Wong Shing Mun 72% 7% 21% 100 * Mr Leow Poh Chin, an independent Director, resigned on 30 November ** Mr Yeap Wai Kong was appointed as independent Director on 15 January There was no employee of the Group who was an immediate family member of a Director of the Company and whose remuneration exceeded S$150,000 during FY2009. As disclosed in the Prospectus issued on 17 April 2007, the Company has a performance share scheme known as Foreland Performance Share Scheme (the Scheme ), details of which were set out in pages 134 to 140 and Annexure J of the said Prospectus. Principle 10: Accountability and Audit The Board provides shareholders with a detailed and balanced explanation and analysis of the Company s performance and prospects on a quarterly basis. The Management provides the Board with Management accounts of the Group s performance, position and prospects on a regular basis. Principle 11: Audit Committee Guideline 11.2: Audit Committee Guideline 11.8: Disclosure of Names of Members of Audit Committee and their Activities The AC, regulated by a set of written terms of reference, comprises 2 independent non-executive Directors, one of whom is the Chairman, and 1 non-executive Director. The members of the AC are as follows: Mr Lim Siang Kai (Chairman) Mr Yeap Wai Kong (appointed on 15 January 2010) Ms Chen Yan The members of the AC have sufficient expertise in financial management, as interpreted by the Board in its business judgement to discharge the AC s functions. The AC has full access to and the co-operation of the Management and has full discretion to invite any Director or executive officer to attend its meetings and has been given adequate resources to enable it to discharge its functions.

22 FORELAND FABRICTECH CORPORATE GOVERNANCE REPORT The AC performs the following functions: (a) (b) (c) (d) (e) (f) Reviews the annual and quarterly financial statements of the Company and the Group before submission to the Board for approval; Reviews with the internal and external auditors, their audit plans and audit reports; Reviews the cooperation given by the Company s officers to the external auditors; Reviews interested person transactions; Nominates and reviews the appointment or re-appointment of external auditors; and Reviews the independence of the external auditors annually; Apart from the above functions, the AC will commission and review the findings of internal investigations into matters where there is suspicion of fraud or irregularity, or failure of internal controls or infringement of any law, rule or regulation, which has or is likely to have a material impact on the operating results and/or financial position. In the event that a member of the AC is interested in any matter being considered by the AC, he will abstain from reviewing that particular transaction or voting on that particular resolution. Annually, the AC meets with the external auditors without the presence of Management. The AC also reviews the whistle-blowing policy by which the staff may, in confidence, report possible improprieties which may cause financial or non-financial loss to the Company. The objective is to ensure that arrangements are in place, for the independent investigation of such concerns and for appropriate follow-up action. Principle 12: Internal Controls The Board with the assistance of the AC, ensures that Management maintains an adequate system of internal controls to safeguard shareholders investment and the Company s assets. The Board is of the opinion that the system of internal controls and risk management processes maintained by the Group s Management throughout the year is adequate for the Group. The AC reviews the effectiveness on internal controls and the risk management processes adopted by the Group. Risk and Management Guideline 12.2: Internal Controls, including financial operational and compliance controls and risk management The Company has not put in place a Risk Management Committee. However, Management regularly reviews the Company s business and operational activities to identify areas of significant business risks as well as appropriate measures to control and mitigate these risks. Management reviews all significant control policies and procedures and highlights all significant matters to the Directors and AC. Generally, the risks are exposure to credit, market, liquidity, foreign currency and interest rate risks arising in the normal course of the Group s business. The Management continually monitors the Group s risk management process to ensure that an appropriate balance between risk and control is achieved.

23 FORELAND FABRICTECH CORPORATE GOVERNANCE REPORT Internal Audit Principle 13: Internal Audit The Group has outsourced its internal audit function to external audit professionals, ELTICI e-risk Pte Ltd. These audit professionals report directly to the AC and provide a comprehensive analysis of the business processes and the risks related to each process. The audit professionals perform internal audit reviews and examinations covering different business processes. The AC is of the view that the Company has an adequate internal audit function and it is not necessary to engage the internal audit for the financial year Communication with Shareholders Principle 14: Communication with Shareholders In line with continuous disclosure obligations, the Company is committed to communicate with its shareholders regularly and proactively. It is the Board s policy that shareholders be informed of all major developments of the Group. Principle 15: Communication with Shareholders Price-sensitive information and results are released to the public through SGXNET on a timely basis in accordance with the requirements of SGX-ST. All shareholders of the Company receive the annual report and notice of AGM within the mandatory notice period. The notice of AGM will also be advertised in the newspapers. Shareholders are encouraged to participate at the Company s general meetings. The Board (including the Chairman of the respective Board Committees), the Management, as well as the external auditors will be available at the forthcoming AGM to address any queries raised by shareholders. Internal on Dealings in Securities Rule 1207(18) of the SGX-ST Listing Manual on Dealings in Securities. The Company has complied with Rule 1207(18) of the SGX-ST Listing Manual and has adopted an internal code of compliance on dealings in securities by officers of the Company and its subsidiaries to provide guidance to its officers on dealing in the Company s shares. All Directors and officers of the Company and its subsidiaries who have access to price sensitive information are required to observe this code. Material Contracts The Directors and officers have been informed not to deal in the Company s shares on short-term consideration and not to deal in the Company s shares whilst in possession of price sensitive information and during the periods commencing two weeks prior to the announcement of the Company s financial statements for each of the first three quarters of its financial year and one month before the announcement of the Company's full year results and ending on the date of the announcement of the relevant results. Directors and officers are required to observe insider trading provisions under the Securities and Futures Act at all times even when dealing in the Company s securities within the permitted periods. Directors of the Company are required to report all dealings to the Company Secretary. Rule 1207(8) of the SGX-ST Listing Manual on Material Contracts Save for the service agreement entered with Mr Tsoi Kin Chit, no other material contracts involving the interests of any Director or controlling shareholder of the Company has been entered into by the Company or any of its subsidiaries in FY2009.

24 FORELAND FABRICTECH CORPORATE GOVERNANCE REPORT Interested Person Transactions Rule 907 of the SGX ST Listing Manual on Interested Person Transaction There were no interested person transactions entered into by the Group, as defined under the Listing Manual, during FY2009. Status Report on Use of IPO Proceeds Use of IPO Proceeds As at 29 March 2010, the net proceeds from the Company s initial public offering that had been utilised are as follows: Amount Amount allocated utilised Balance Use of IPO proceeds S$'000 S$'000 S$'000 Expansion of production capacity and research and development capabilities: Construction costs New equipment 13,025 7,756 5,269 Wastewater, treatment and recycling plant and methylbenzene recycling facility 2,957-2,957 16,591 8,365 8,226

25 FORELAND FABRICTECH

26 FORELAND FABRICTECH The directors are pleased to present their report to the members together with the audited consolidated financial statements of the Group and the statement of financial position and statement of changes in equity of the Company for the financial year ended 31 December Directors The directors in office at the date of this report are: Tsoi Kin Chit (Executive Chairman) Cai Fengquan (Executive Director) Chen Yan (Non-Executive Director) Lim Siang Kai (Lead Independent Director) Yeap Wai Kong (Independent Director, appointed on 15 January 2010) Arrangements to enable directors to acquire shares and debentures Neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose objects are, or one of whose objects is, to enable the directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate. Directors' interest in shares or debentures The directors of the Company holding office at the end of the financial year had no interests in the shares in or debentures of the Company and related companies as recorded in the Register of Directors in Shareholdings kept by the Company, except as follows : The Company Shareholding registered in name of director or nominee At Number of ordinary shares At Shareholding in which a director is deemed to have an interest At At Tsoi Kin Chit Ordinary shares of US$0.05 each 281,377, ,612,543 The director s interest as at 21 January 2010 was the same as those at the end of the financial year. Directors' contractual benefits Since the end of the previous financial year no director has received or become entitled to receive a benefit (other than disclosed in the consolidated financial statements and this report) by reason of a contract made by the Company or a related company with the director or with a firm of which the director is a member or with a company in which the director has a substantial financial interest.

27 FORELAND FABRICTECH Foreland Performance Share Scheme The Foreland Performance Share Scheme ( PSS ) was approved and adopted by the members of the Company on 7 March The purpose of the PSS is to provide an opportunity for Group employees and directors (including Independent Directors and Non-Executive Director) who have met the performance targets to be remunerated not just through cash bonuses but also by an equity stake in the Company so as to motivate them to greater dedication, loyalty and higher standards of performance, and to give recognition to those who have contributed to the success and development of the Company and the Group. The PSS is administered by the Remuneration Committee whose members are: Yeap Wai Kong Lim Siang Kai Chen Yan (Chairman) The Remuneration Committee comprises directors who may be participants of the PSS. A member of the Remuneration Committee who is a participant of the PSS is prohibited from being involved in the Committee s deliberation or decision in respect of awards to be granted to him. On 21 January 2010, 1,300,000 ordinary shares were granted to the employees of the Group under the PSS. The 1,300,000 ordinary shares were subsequently attotted and issued on 9 February Information on the PSS is as follows: (i) The following categories of individuals are currently eligible to participate in the PSS: (a) (b) (c) Group employees who have attained the age of 21 years on or before the commencement date of the PSS; Group executive directors; and Non-executive directors (including Independent Directors). Controlling shareholders and their associates are not eligible to participate in the PSS. As the Executive Chairman, Tsoi Kin Chit, is a controlling shareholder, he will not participate in the PSS. As the Executive Director, Cai Fengquan, is the son of Tsoi Kin Chit and thus his associate, Cai Fengquan will not participate in the PSS. (ii) (iii) (iv) (v) Participants are awarded with ordinary shares of the Company when the prescribed performance targets are met. The awards are granted at the absolute discretion of the Committee. The PSS shall continue to be in force at the discretion of the Committee, subject to a maximum period of 10 years from 7 March 2007 to 6 March 2017, provided always that the PSS may continue beyond the above stipulated period with the approval of the members by ordinary resolution in general meeting and of any relevant authorities which may then be required. Awards under PSS may be granted at any time in the course of the financial year, and may lapse by reason of cessation of service of the participant, or the retirement, redundancy, ill health, injury, disability, death, bankruptcy or misconduct of the participant, or the participant, being a non-executive director, ceasing to be a director, or a takeover, winding-up or reconstruction of the Company. The total number of new ordinary shares of the Company which may be issued pursuant to awards granted under the PSS shall not exceed 15% of the total number of issued shares in the capital of the Company on the day preceding the relevant date of award.

28 FORELAND FABRICTECH Foreland Performance Share Scheme (cont d) (vi) (vii) Subject to the prevailing legislation and SGX-ST guidelines, the Company will deliver ordinary shares of the Company to participants of the PSS upon vesting of their awards by way of an issue of new ordinary shares, deemed to be fully paid upon their issuance and allotment. The class and/or number of ordinary shares of the Company comprised in an award to the extent not yet vested, and/or which may be granted to participants, are subject to adjustment by reason of any variation in the ordinary share capital of Company (whether by way of a capitalisation of profits or reserves or rights issue, reduction, subdivision, consolidation, or distribution), upon the written confirmation of the auditors of the Company that such adjustment is (other than in the case of a capitalisation issue) fair and reasonable. Share options No option to take up unissued shares of the Company or its subsidiaries was granted during the financial year. There were no shares issued during the financial year by virtue of the exercise of options to take up unissued shares of the Company or its subsidiaries whether granted before or during the financial year. There were no unissued shares of the Company or its subsidiaries under option at the end of the financial year. Audit Committee The Audit Committee comprises the three independent and non-executive directors as follows: Lim Siang Kai Yeap Wai Kong Chen Yan (Chairman) The Audit Committee carried out its functions in accordance with the rules specified in the SGX-ST Listing Manual and the of Corporate Governance. The functions performed are detailed in the Corporate Governance Report. The Audit Committee has recommended to the Board of Directors that the independent auditor, Baker Tilly TFWLCL, be nominated for re-appointment as auditor of the Company at the forthcoming Annual General Meeting. Independent Auditor The independent auditor, Baker Tilly TFWLCL, has expressed its willingness to accept re-appointment. On behalf of the board of directors Tsoi Kin Chit Executive Chairman Cai Fengquan Executive Director 29 March 2010

29 FORELAND FABRICTECH STATEMENT BY DIRECTORS In the opinion of the directors: (i) (ii) the consolidated financial statements of the Group and the statement of financial position and statement of changes in equity of the Company as set out on pages 30 to 59 are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2009 and of the results of the business, changes in equity and cash flows of the Group and changes in equity of the Company for the financial year then ended; and at the date of this statement there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due. On behalf of the board of directors Tsoi Kin Chit Executive Chairman Cai Fengquan Executive Director 29 March 2010

30 FORELAND FABRICTECH FORELAND FABRICTECH HOLDINGS LIMITED (Incorporated in Bermuda) We have audited the accompanying financial statements of Foreland Fabrictech Holdings Limited (the Company ) and its subsidiaries (collectively the Group ) as set out on pages 30 to 59, which comprise the statements of financial position of the Group and the Company as at 31 December 2009, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows of the Group and statement of changes in equity of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory notes. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the Singapore Financial Reporting Standards. This responsibility includes devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets, selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

31 FORELAND FABRICTECH FORELAND FABRICTECH HOLDINGS LIMITED (Incorporated in Bermuda) Opinion In our opinion, the consolidated financial statements of the Group and the statement of financial position and statement of changes in equity of the Company are properly drawn up in accordance with the Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and the Company as at 31 December 2009, and the results of the business, changes in equity and cash flows of the Group and changes in equity of the Company for the financial year then ended on that date. Baker Tilly TFWLCL Public Accountants and Certified Public Accountants Singapore 29 March 2010

32 FORELAND FABRICTECH CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the financial year ended 31 December 2009 Note 2009 Group 2008 Revenue 3 281, ,734 Cost of sales (219,463) (288,800) Gross profit 62, ,934 Other income ,940 Selling and distribution expenses (7,021) (10,366) Administrative expenses (10,645) (16,616) Other expenses 5 (85) (1,473) Finance costs 6 (17) (294) Profit before tax 7 45, ,125 Tax expense 9 (12,728) (40,229) Total comprehensive income attributable to equity holders of the Company 32, ,896 Earnings per share (expressed in RMB cents): - Basic and diluted The accompanying notes form an integral part of these financial statements.

33 FORELAND FABRICTECH 31 STATEMENTS OF FINANCIAL POSITION At 31 December 2009 Group Company Note Non-current assets Property, plant and equipment , ,662 Investment in subsidiaries , , , , , ,267 Current assets Inventories 13 11,911 25,167 Trade receivables 14 43,228 81,960 Other receivables, deposits and prepayments 15 39,949 29,651 Amounts due from subsidiaries 16 5,486 8,590 Cash and cash equivalents , , , ,008 5,514 9,490 Total assets 490, , , ,757 Non-current liability Deferred tax liability 18 2,699 2,054 Current liabilities Trade payables 19 31,858 45,177 Other payables and accruals 20 9,337 9,209 1,433 1,937 Tax payable 3,013 11,753 44,208 66,139 1,433 1,937 Total liabilities 46,907 68,193 1,433 1,937 Net assets 443, , , ,820 Equity attributable to equity holders of the Company Share capital , , , ,132 Share premium 22 50,451 50,141 50,451 50,141 Capital reserve 23 1,463 1,463 General reserve fund 24 33,843 30,258 Merger reserve 25 (18,906) (18,906) Revenue reserve 199, ,389 (2,303) 5,547 Total equity 443, , , ,820 The accompanying notes form an integral part of these financial statements.

34 FORELAND FABRICTECH STATEMENTS OF CHANGES IN EQUITY For the financial year ended 31 December 2009 Share capital Share premium Capital reserve General reserve fund Merger reserve Revenue reserve Total Group Note Balance at 1 January ,132 50,141 1,463 18,847 (18,906) 110, ,971 Total comprehensive income for the year 106, ,896 Dividend paid 27 (30,390) (30,390) Transfer to general reserve fund 11,411 (11,411) Balance at 31 December ,132 50,141 1,463 30,258 (18,906) 175, ,477 Total comprehensive income for the year 32,638 32,638 Issue of new shares 21,22 4, ,378 Dividend paid 27 (5,285) (5,285) Transfer to general reserve fund 3,585 (3,585) Balance at 31 December ,200 50,451 1,463 33,843 (18,906) 199, ,208 The accompanying notes form an integral part of these financial statements.

35 FORELAND FABRICTECH 33 STATEMENTS OF CHANGES IN EQUITY For the financial year ended 31 December 2009 Company Share Revenue Share capital premium reserve Total Note RMB'000 RMB'000 RMB'000 RMB'000 Balance at 1 January ,132 50,141 32, ,744 Total comprehensive income for the year 3,466 3,466 Dividend paid 27 (30,390) (30,390) Balance at 31 December ,132 50,141 5, ,820 Total comprehensive loss for the year (2,565) (2,565) Issue of new shares 21,22 4, ,378 Dividend paid 27 (5,285) (5,285) Balance at 31 December ,200 50,451 (2,303) 225,348 The accompanying notes form an integral part of these financial statements.

36 34 FORELAND FABRICTECH CONSOLIDATED STATEMENT OF CASH FLOWS For the financial year ended 31 December 2009 Note Cash flows from operating activities Profit before tax 45, ,125 Adjustments for: Depreciation of property, plant and equipment 19,759 18,796 Bank interest expense 267 Bank interest income (631) (836) Property, plant and equipment written off 11 Operating cash flow before movements in working capital 64, ,363 Inventories 13,256 (17,317) Trade receivables 38,732 (696) Other receivables, deposits and prepayments (10,298) (4,255) Trade payables (13,319) (3,788) Other payables and accruals 128 1,177 Cash generated from operations 92, ,484 Interest received Income tax paid (20,823) (39,626) Net cash generated from operating activities 72, ,694 Cash flows from investing activities Purchase of property, plant and equipment, representing net cash used in investing activities (184,434) (26,490) Cash flows from financing activities Dividend paid 27 (907) (30,390) Interest paid (267) Repayments of bank borrowings (3,000) Net cash used in financing activities (907) (33,657) Net (decrease)/increase in cash and cash equivalents (112,540) 41,547 Cash and cash equivalents at beginning of financial year 213, ,683 Cash and cash equivalents at end of financial year , ,230 The accompanying notes form an integral part of these financial statements.

37 FORELAND FABRICTECH 35 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2009 These notes form an integral part of and should be read in conjunction with the accompanying financial statements. 1. Corporate information The Company (Co. Reg. No ) was incorporated in Bermuda on 9 November 2006 under the Bermuda Companies Act as an exempted company with limited liability. The registered office of the Company is at Canon s Court, 22 Victoria Street, Hamilton HM 12, Bermuda and the principal place of business of the Group is located at The Second Processing Zone, Dongshi Town, Jinjiang City, Fujian Province, the People s Republic of China (the PRC ). The principal activity of the Company is that of investment holding. The principal activities of its subsidiaries are disclosed in Note 12 to the consolidated financial statements. 2. Significant accounting policies (a) Basis of preparation The consolidated financial statements, expressed in Chinese Renminbi ( RMB ) which is the Company s functional currency, have been prepared in accordance with Singapore Financial Reporting Standards ( FRS ). The consolidated financial statements have been prepared under the historical cost convention except as disclosed in the accounting policies below. The preparation of the consolidated financial statements in conformity with FRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the financial year. Although these estimates are based on management s best knowledge of current events and actions and historical experiences and various other factors that are believed to be reasonable under the circumstances, actual results may ultimately differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The areas involving a high degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 2(u) to the financial statements. The carrying amounts of cash and cash equivalents, trade and other current receivables and payables and provisions approximate their respective fair values due to the relatively short-term maturity of these financial instruments.

38 36 FORELAND FABRICTECH NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Significant accounting policies (cont d) (b) Changes in accounting policies (i) Adoption of FRS and Interpretations of FRS ( INT FRS ) In the current financial year, the Group has adopted all the new and revised FRS and INT FRS that are relevant to its operations and effective for the current financial year. The adoption of these new/revised FRS has no material impact on the consolidated financial statements, except for the adoption of the following new or revised FRS which are relevant to the Group: FRS 1 (revised) Presentation of financial statements The revised FRS 1 requires an entity to present, in a statement of changes in equity, all owner changes in equity. All non-owner changes in equity (ie comprehensive income) are required to be presented in one statement of comprehensive income or in two statements (a separate income statement and a statement of comprehensive income). Components of comprehensive income are not permitted to be presented in the statement of changes in equity. The Group has chosen to adopt the former alternative. FRS 108 Operating Segments FRS 108 supersedes FRS 14 Segment Reporting and requires the Group to report the financial performance of its operating segments based on the information used internally by management for evaluating segment performance and deciding on allocation of resources. The Group has determined that the reportable operating segments are the same as the business segments previously identified under FRS 14. Amendment to FRS 107 Improving disclosures about financial instruments The amendment requires enhanced disclosures about fair value measurement and liquidity risk. In particular, the amendment requires disclosure of fair value measurements by level of a fair value measurement hierarchy. The adoption of the amendment results in additional disclosures but does not have an impact on the accounting policies and measurement bases adopted by the Group. (ii) FRS and INT FRS not yet effective At 31 December 2009, the following FRSs and INT FRSs were issued, revised or amended but not effective: FRS 27 FRS 103 INT FRS 117 INT FRS 118 Amendments to FRS 32 Amendments to FRS 39 Amendments to FRS 101 Amendments to FRS 102 Amendments to FRS 105 Improvements to FRSs 2009 Consolidated and Separate Financial Statements Business Combinations Distributions of Non-cash Assets to Owners Transfers of Assets from Customers Classification of Rights Issues Financial Instruments: Recognition and Measurement Eligible Hedged Items Additional Exemptions for First-time Adopters Share-based Payment - Group Cash-settled Share-based Payment Transactions Non-current Assets Held for Sale and Discontinued Operations

39 FORELAND FABRICTECH 37 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Significant accounting policies (cont d) (b) Changes in accounting policies (cont d) (ii) FRS and INT FRS not yet effective (cont d) The Group anticipates that the adoption of these FRSs and INT FRSs (where applicable) in future periods will have no material impact on the financial statements of the Company and the consolidated financial statements of the Group, except as disclosed in the following paragraphs: FRS 27 (revised) Consolidated and Separate Financial Statements FRS 27 (revised) requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in consolidated of statement of comprehensive income. The Group will apply FRS 27 (revised) prospectively to transactions with minority shareholders from 1 January FRS 103 (revised) Business Combinations FRS 103 (revised) continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to acquire a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the profit or loss. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest s proportionate share of the acquiree s net assets. All acquisition-related costs should be expensed. The Group will apply FRS 103 (revised) prospectively to all business combinations from 1 January (c) Basis of consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the reporting date. The financial statements of the subsidiaries are prepared for the same reporting date as the parent company. Consistent accounting policies are applied for like transactions and events in similar circumstances. Intragroup balances and transactions, including income, expenses and dividends, are eliminated in full. Profits and losses resulting from intragroup transactions that are recognised in assets, such as inventory and property, plant and equipment, are eliminated in full. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. Acquisitions of subsidiaries are accounted for using the purchase method of accounting except for subsidiaries acquired pursuant to the restructuring exercise of companies under common control have been consolidated using the pooling-of-interest method. Under the purchase method, the cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest.

40 38 FORELAND FABRICTECH NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Significant accounting policies (cont d) (c) Basis of consolidation (cont d) Consolidation of the subsidiaries in the Hong Kong and PRC are based on the subsidiaries financial statements prepared in accordance with FRS. Profits reflected in the financial statements prepared in accordance with FRS may differ from those reflected in the Hong Kong and PRC statutory financial statements of the subsidiary, prepared for Hong Kong and PRC reporting purposes. In accordance with the relevant laws and regulations, profits available for distribution by the Hong Kong and PRC subsidiaries are based on the amounts stated in the respective statutory financial statements. In the Company s separate financial statements, investment in subsidiaries are accounted for at cost less impairment losses. (d) Subsidiaries A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities. The Group generally has such power when it directly or indirectly, holds more than 50% of the issued share capital, or controls more than half of the voting power, or controls the composition of the board of directors. (e) Revenue recognition Revenue comprises the fair value for the sale of goods and rendering of services, net of goods and services tax, rebates and discounts, and after eliminating sales within the Group. Revenue is recognised to the extent that it is probable that the economic benefits associated with the transaction will flow to the entity, and the amount of revenue and related cost can be reliably measured. (i) Sale of goods Revenue from sale of goods is recognised when a Group entity has delivered the products to the customer and significant risks and rewards of ownership of the goods have been passed to the customer. (ii) Rendering of services Revenue from services is recognised during the financial year in which the services are rendered, by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be performed. (iii) Interest income Interest income is recognised on a time proportion basis using the effective interest method. (f) Government grants Government grants are recognised at their fair values where there is reasonable assurance that the subsidy will be received and all terms and conditions relating to the subsidy have been complied with. Where the subsidy relates to an expense item, it is recognised in the profit or loss over the periods necessary to match them on a systematic basis to the costs that it is intended to compensate. Where the subsidy relates to an asset, the fair value is recognised as deferred capital grant on the reporting date and is amortised to the profit or loss over the expected useful life of the relevant asset by equal annual instalments.

41 FORELAND FABRICTECH NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Significant accounting policies (cont d) (g) Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses. The initial cost of property, plant and equipment comprises its purchase price, including import duties and non-refundable purchase taxes and any directly attributable costs of bringing an asset to its working condition and location for its intended use less any trade discounts and rebates. Subsequent expenditure relating to property, plant and equipment that has already been recognised is added to the carrying amount of the assets when it is probable that future economic benefits, increase of the standard of performance of the asset before the expenditure was made, will flow to the Group and the cost can be reliably measured. Other subsequent expenditure is recognised in the profit or loss during the financial year when it is incurred. On disposal of a property, plant and equipment, the difference between the net disposal proceeds and its carrying amount is taken to profit or loss. Depreciation is charged so as to write off the cost of all property, plant and equipment, less any estimated residual value over their estimated useful lives, using the straight-line method as follows: No. of years Land use right 10 Leasehold property 20 Plant and machinery 5 to 15 Motor vehicles 5 Office equipment 5 Power supply equipment 5 Depreciation of asset commences only when the asset is ready for its intended use. Fully depreciated assets are retained in the consolidated financial statements until they are no longer in use. Properties in the course of construction for production, or administrative purposes, or for purposes not yet determined, are carried at cost, less any recognised impairment loss until construction or development is completed. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group s accounting policies. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use. (h) Impairment of non-financial assets At each reporting date, the Group reviews the carrying amounts of its non-financial assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

42 FORELAND FABRICTECH NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Significant accounting policies (cont d) (h) Impairment of non-financial assets (cont d) If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is recognised in other comprehensive income up to the amount of any previous revaluation. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. (i) Financial assets (i) Classification The Group classifies its financial assets as loans and receivables. The classification depends on the purpose for which the assets were acquired. Management determines the classification of its financial assets at initial recognition. Loans and receivables: Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those maturing more than 12 months after the reporting date. These are classified as non-current assets. Loans and receivables are classified within trade and other receivables, amounts due from subsidiaries and cash and cash equivalents on the statement of financial position. (ii) Recognition and derecognition Purchase and sale of financial assets are recognised on trade date the date on which the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. On disposal of a financial asset, the difference between the net sale proceeds and its carrying amount is taken to the profit or loss. Any amount in the fair value reserve relating to that asset is also taken to the profit or loss. (iii) Initial measurement Loans and receivables are initially recognised at fair value plus transaction costs. (iv) Subsequent measurement Loans and receivables are subsequently measured at amortised cost using the effective interest method.

43 FORELAND FABRICTECH 41 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Significant accounting policies (cont d) (i) Financial assets (cont d) (v) Impairment The Group assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced through the use of an allowance account. The amount of the loss is recognised in the profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the profit or loss, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. (j) Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined on weighted average basis. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads based on normal operating capacity but excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses. (k) Cash and cash equivalents Cash and cash equivalents comprise cash at bank and on hand which are subject to insignificant risk of change in value. (l) Financial liabilities and equity Financial liabilities and equity instruments issued by the Company are classified according to the substance of the contractual arrangements entered into and the definition of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below: (i) Financial liabilities Financial liabilities are recognised on the statement of financial position when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. Financial liabilities are recognised initially at fair value, plus, in the case of financial liabilities other than derivatives, directly attributable transaction costs.

44 FORELAND FABRICTECH NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Significant accounting policies (cont d) (l) Financial liabilities and equity (cont d) (i) Financial liabilities (cont d) Subsequent to initial recognition, all financial liabilities are measured at amortised cost using the effective interest method, except for derivatives, which are measured at fair value. A financial liability is derecognised when the obligation under the liability is extinguished. For financial liabilities other than derivatives, gains and losses are recognised in the consolidated statement of comprehensive income when the liabilities are derecognised or impaired, and through the amortisation process. Any gains or losses arising from changes in fair value of derivatives are recognised in the profit or loss. Net gains or losses on derivatives include exchange differences. (ii) Equity instruments Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. (m) Provision for other liabilities Provisions are recognised when the Group has a legal or constructive obligation as a result of a past events and it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made. Provisions are measured at the directors best estimate of the expenditure required to settle the obligation at the reporting date and are discounted to present value where the effect is material. (n) Borrowing costs Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale. (o) Operating leases Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are taken to the profit or loss on a straight-line basis over the lease term. When an operating lease is terminated before the expiry of the lease year, any payment required to be made to the lessor by way of penalty is recognised as an expense in the year in which termination takes place.

45 FORELAND FABRICTECH 43 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Significant accounting policies (cont d) (p) Employee benefits (i) Defined contribution plans The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. Contributions to national pension schemes are recognised as an expense in the period in which the related service is performed. Such state-managed retirement benefit schemes are dealt with as payments to defined contribution plans where the Group s obligations under the plans are equivalent to those arising in a defined contribution retirement benefit plan. (ii) Employee leave entitlement Employee entitlements to annual leave are recognised when thay accrue to employees. An accrual is made for the estimated liability for annual leave as a result of service rendered by employees up to the reporting date. (q) Foreign currencies (i) Functional and presentation currency Items included in the financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (the functional currency ). The consolidated financial statements of the Group and the Company are presented in RMB, which is the Company s functional and presentation currency. (ii) Transactions and balances Transactions in a currency other than the functional currency ( foreign currency ) are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Currency translation gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit or loss, except for currency translation differences on net investment in foreign operations and borrowings and other currency instruments qualifying as net investment hedges for foreign operations, which are included in the currency transaction reserve within equity in the consolidated financial statements. Non-monetary items measured at fair values in foreign currencies are translated using the exchange rates at the date when the fair values are determined. (iii) Translation of Group entities financial statements The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: (a) Assets and liabilities are translated at the closing rates at the date of the statement of financial position;

46 44 FORELAND FABRICTECH NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Significant accounting policies (cont d) (q) Foreign currencies (cont d) (iii) Translation of Group entities financial statements (cont d) (b) (c) Income and expenses are translated at average exchange rates (unless the average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated using the exchange rates at the dates of the transactions); and All resulting exchange differences are taken to the currency translation reserve within equity. On consolidation, exchange differences arising from the translation of the net investment in foreign operations (including monetary items that, in substance, form part of the net investment in foreign entities), and of borrowings and other currency instruments designated as hedges of such investments, are taken to the foreign currency translation reserve. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate. (r) Income tax Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the profit or loss except to the extent that it relates to items recognised directly to equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the liability method, on all temporary differences at the reporting date arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Currently enacted tax rates are used in the determination of deferred income tax. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax is provided on temporary differences arising on investment in subsidiaries, except where the timing of the reversal of temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is charged or credited to equity if the tax relates to items that are credited or charged, in the same or a different year, directly to equity. (s) Merger reserve In applying the pooling of interests method, the consolidated statement of comprehensive income and consolidated statement of cash flows include the results of operations and cash flows of the companies now comprising the Group as if the current structure of the Group had been in existence throughout the relevant years. The assets and liabilities are brought into the statement of financial position at their existing carrying amounts. Any difference between the amount recorded as share capital acquired are adjusted against equity.

47 FORELAND FABRICTECH 45 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Significant accounting policies (cont d) (t) Dividend Interim dividends are recorded during the financial year in which they are declared payable. Final dividends are recorded in the Group s financial statements in the period in which they are approved by the Company s shareholders. (u) Critical accounting judgement and key source of estimation uncertainty Estimates, assumptions concerning the future and judgements are made in the preparation of the financial statements. They affect the application of the Group s accounting policies, reported amounts of assets, liabilities, income and expenses, and disclosures made. They are amended on an on-going basis and are based on experience and relevant factors, including expectations of future events that are believed to be reasonable under the circumstances. (i) Key sources of estimation uncertainty The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below. Useful lives of property, plant and equipment Management estimates the useful lives of the Group s property, plant and equipment to be within 5 to 20 years. The estimates for the useful lives and related depreciation charges for its property, plant and equipment is based on commercial and production factors which could change significantly as a result of level of usage, technical innovation and competitor actions in response to severe market conditions. The carrying values of the Group s property, plant and equipment as at 31 December 2009 and 2008 were RMB 294,337,461 and RMB 129,661,944 respectively. Changes in those commercial and production factors could impact the economic useful lives and the residual values of these assets and therefore future depreciation charges could be revised. Allowance for receivables An allowance is provided for doubtful accounts on the estimated losses resulting from the subsequent inability of the Group s customers to make required payments. If the financial 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 specifically analyses accounts receivables and analyses historical bad debts, customer creditworthiness, current economic trends and changes in customer payment terms when making a judgement to evaluate the adequacy of the allowance for doubtful debts. The carrying amounts of the Group s trade receivables at 31 December 2009 and 2008 were RMB 43,228,398 and RMB 81,960,258 respectively.

48 46 FORELAND FABRICTECH NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Significant accounting policies (cont d) (u) Critical accounting judgement and key source of estimation uncertainty (cont d) (ii) Critical judgements in applying accounting policies In the process of applying the Group s accounting policies, which are described as above, management has made the following judgement that has the most significant effect on the amounts recognised in the financial statements (apart from those involving estimations, which are dealt with above): Withholding taxes arising from the distributions of dividends The Group s determination as to whether to accrue for withholding taxes arising from the distributions of dividends from certain subsidiaries according to the relevant tax jurisdictions is subject to judgement on the timing of the payment of the dividend. The Group considered that if the profits will not be distributed in the foreseeable future, then no withholding taxes should be provided. 3. Revenue 2009 Group 2008 Manufacturing and sale of fabrics 274, ,163 Provision of fabric processing services 7,068 20, , , Other income 2009 Group 2008 Bank interest income Government incentive/grant received 3,100 Others , Other expenses 2009 Group 2008 Donation 1,550 Property, plant and equipment written off 11 Foreign exchange loss/(gain) 85 (88) 85 1,473

49 FORELAND FABRICTECH 47 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Finance costs 2009 Group 2008 Bank interest expense 267 Bank charges Profit before tax Profit before tax is determined after charging the following: 2009 Group 2008 Depreciation on property, plant and equipment (Note 11) 19,759 18,796 Property, plant and equipment written off 11 Non-audit fees paid to auditor of the Company 76 Rental expense 1,126 1,117 Personnel expenses (Note 8) 11,955 15, Personnel expenses 2009 Group 2008 Directors of the Company - Fees Performance bonus 1,421 - Salaries Defined contribution benefits Directors of the subsidiaries - Salaries 41 - Defined contribution benefits 3 Key management personnel (non-directors) - Salaries 1,077 1,052 - Performance Share Scheme Defined contribution benefits 8 8 Other personnel - Salaries and wages 6,941 8,809 - Performance Share Scheme Defined contribution benefits 1,422 1,330 Other personnel related expenses ,955 15,095

50 48 FORELAND FABRICTECH NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Tax expense Tax expense attributable to profit is made up of: 2009 Group 2008 Current income tax PRC 12,083 38,175 Deferred tax expense 645 2,054 12,728 40,229 The Group does not have any assessable income in Bermuda. Pursuant to the relevant laws and regulations in the PRC, the subsidiary of the Group which was incorporated in the PRC is required to pay PRC enterprise income tax at an uniform rate of 25%. Pursuant to the relevant laws and regulations in the Hong Kong, the subsidiary of the Group which was incorporated in the Hong Kong is required to pay the income tax at a rate of 16.5% of its taxable income. No deferred tax has been provided as the Group and the Company did not have any material temporary differences which gave rise to a deferred tax asset or liability at 31 December 2009 and 2008 except for the provision of deferred tax for PRC s withholding tax (Note 18). The income tax expense on the results of the financial year varies from the amount of income tax determined by applying the domestic income tax rates of the respective countries to profit before tax due to the following factors: Group Profit before tax 45, ,125 Tax at the domestic rates applicable to profit in the countries where the Group operates 11,983 38,050 Expenses not deductible for tax purposes 21 Others ,083 38,175 Deferred tax expense arose from distributable earnings 645 2,054 12,728 40,229

51 FORELAND FABRICTECH NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Earnings per share The calculation of the basic and diluted earnings per share attributable to the ordinary equity holders of the Company are based on the following: Group Earnings () Net profit for the year attributable to equity holders of the Company 32, ,896 Number of shares ( 000) Weighted average number of ordinary shares 446, ,430 Diluted earnings per share for financial years ended 31 December 2009 and 2008 are not presented because there is no potential dilutive ordinary share existing during the financial year. 11. Property, plant and equipment Leasehold Land use Plant and Motor Office Power supply Constructionin-progress Group property rights machinery vehicles equipment equipment Total 2009 Cost At 1 January ,736 1, ,701 1, ,087 4, ,114 Additions , ,434 At 31 December ,736 1, ,135 1, , , ,548 Accumulated depreciation At 1 January ,244 1,180 84, ,946 90,452 Depreciation charge , ,759 At 31 December ,374 1, , , ,211 Net carrying amount , , , Cost At 1 January ,736 1, ,161 1, , ,849 Additions 21,765 4,725 26,490 Written off (225) (225) At 31 December ,736 1, ,701 1, ,087 4, ,114 Accumulated depreciation At 1 January ,114 1,136 65, ,833 71,870 Depreciation charge , ,796 Written off (214) (214) At 31 December ,244 1,180 84, ,946 90,452 Net carrying amount , , ,662

52 FORELAND FABRICTECH NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Property, plant and equipment (cont d) At the reporting date, property, plant and equipment with the following carrying amounts were pledged to a financial institution for credit facilities: Group Leasehold property 492 Land use rights Investment in subsidiaries 2009 Company 2008 Unquoted equity shares, at cost 221, ,267 The following information relates to the subsidiaries: Name of subsidiary Date and country of business/incorporation Principal activities Company s effective equity holding 2009 % 2008 % Fulian Knitting Co., Ltd * 15 October 1988, PRC Manufacturing and selling of functional and normal fabrics and provision of fabric processing services 100% 100% Fortune Luck International Enterprise Limited * 8 October 2007, Hong Kong Investment holding 100% 100% * Audited by Baker Tilly TFWLCL, Singapore for the purpose of preparation of the consolidated financial statements.

53 FORELAND FABRICTECH 51 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Inventories 2009 Group 2008 Raw materials, at cost 3,277 11,268 Work in progress, at cost 5,690 4,585 Finished goods, at cost 2,901 9,271 Consumables, at cost ,911 25,167 The cost of inventories recognised as an expense and included in cost of sales amounted to RMB 187,252,157 (2008: RMB 255,946,365). 14. Trade receivables Group Trade receivables are non-interest bearing and are generally up to 60 days terms. 15. Other receivables, deposits and prepayments 2009 Group 2008 Advance payment to contractors 3,703 Deposits for purchase of machineries 6,529 6,529 Prepayment for land use right 28,383 21,940 Other prepayments 1,334 1,182 39,949 29,651 Other receivables, deposits and prepayments that are not denominated in the functional currencies of the respective entities are as follows: 2009 Group 2008 United States dollar 6,529 6,529

54 FORELAND FABRICTECH NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Amounts due from subsidiaries 2009 Company 2008 Dividend receivable from a subsidiary 5,396 8,500 Advance due from a subsidiary non-trade ,486 8,590 The advance due from a subsidiary is unsecured, interest-free and repayable on demand. 17. Cash and cash equivalents Cash and cash equivalents comprise: Group Company Cash at banks and on hand 100, , Cash and cash equivalents that are not denominated in the functional currencies of the respective entities are as follows: Group Company Singapore dollar Deferred tax liability Deferred tax liability arose from the PRC subsidiary s distributable earnings generated from 1 January 2008 which will be subjected to tax when the PRC subsidiary declares dividend to its foreign investor. The directors expect that no more than 20% of the PRC subsidiary s earnings each year will be distributed to the Company in the foreseeable future and accordingly the deferred tax liability is provided on this amount. 19. Trade payables Group Trade payables are non-interest bearing and are normally settled within days terms.

55 FORELAND FABRICTECH 53 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Other payables and accruals Group Company Other payables Accrued operating expenses 9,263 8,905 1,433 1,937 9,337 9,209 1,433 1,937 The amount of RMB 1,431,261 (2008: RMB 515,529) included in other payables and accruals is denominated in Singapore dollar. 21. Share capital Authorised: Group and Company Number of ordinary shares US$ 000 At 1 January 2008, 1 January 2009 and 31 December ,000,000,000 50, ,200 Issued and fully paid: Group and Company Number of ordinary shares US$ 000 At 1 January ,429,520 22, ,132 Issue of new ordinary shares of US$0.05 each 11,909, ,068 At 31 December ,339,150 22, ,200 At 1 January 2008 and 31 December ,429,520 22, , Share premium Group and Company Balance at beginning of the financial year 50,141 50,141 Issue of new ordinary shares 310 Balance at end of the financial year 50,451 50,141

56 54 FORELAND FABRICTECH NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Capital reserve The capital reserve, arising from the issue of capital by the PRC subsidiary in financial year 2004, is not distributable as cash dividend. 24. General reserve fund In accordance with relevant regulations applicable to foreign investment enterprise in PRC, the PRC subsidiary is required to transfer 10% of its net profit to the general reserve fund until the reserve reaches 50% of its registered capital. The transfer to this reserve must be made before the payment of dividends to shareholders. In the event that the PRC subsidiary has accumulated losses, the transfer of this reserve can only be made after the accumulated losses are fully set off against current year net profit. The general reserve fund can only be used to set off against accumulated losses or to increase the registered capital of the PRC subsidiary, subject to approval from the PRC authorities. This general reserve fund is not available for dividend appropriation to the shareholders. 25. Merger reserve The excess of the nominal value of the shares issued by the Company to acquire the PRC subsidiary over the nominal value of the shares of the PRC subsidiary in exchange for the PRC subsidiary s shares has been taken to shareholder s equity as Merger Reserve and adjusted retrospectively in the consolidated financial statements (Note 2(s)). 26. Related party transactions In 2008, the director of the Company, Mr Tsoi Kin Chit, had paid on behalf of the Group the penalty of RMB 1.45 million arising from the termination of the proposed acquisition of the entire equity of Happy Year International Enterprise Limited. Mr Tsoi Kin Chit had undertaken not to recover this payment from the Group. 27. Dividends Group and Company Final tax exempt (one-tier) dividend paid in respect of the previous financial year to the Company s equity holders of RMB (2008: RMB 0.069) per share 5,285 30,390 In 2009, the amount of RMB 4.4 million is paid out in a way of scrip dividend and the remaining amount of RMB 0.9 million is paid by cash.

57 FORELAND FABRICTECH 55 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Commitments (a) Capital commitments Capital expenditure contracted for at the reporting date but not recognised in the financial statements are as follows: 2009 Group 2008 Commitment in respect of contracts entered into for the purchase of property, plant and equipment and construction-in-progress 68,551 14,407 (b) Operating lease commitments The Group leases various representative offices under non-cancellable operating lease agreements. The leases have varying terms, escalation clauses and renewal rights. The future minimum lease payables under non-cancellable operating leases contracted for at the reporting date but not recognised as liabilities are as follows: 2009 Group 2008 Not later than one year Later than one year but not later than five years Financial instruments (a) Categories of financial instruments Financial instruments as at the reporting date are as follows: Group Company Financial assets Loans and receivables 143, ,190 5,514 9,490 Financial liabilities Financial liabilities at amortised cost 41,195 54,386 1,433 1,937

58 56 FORELAND FABRICTECH NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Financial instruments (cont d) (b) Financial risk management The Group s overall risk management policy is to ensure adequate financial resources are available for the development of the Group s businesses whilst managing its foreign exchange risk, interest rate risk, liquidity risk and credit risk. The Group s overall risk management is determined and carried out by the board of directors. The policies for managing each of these risks are summarised as follows: (i) Foreign currency risk The Group has minimal dealings in foreign currencies and as such, has minimal exposure to foreign currency risk. The Company and its subsidiaries maintain their respective books and accounts in their functional currencies. As a result, the Group is subject to transaction and translation exposures resulting from currency exchange rate fluctuations. It is not the Group s policy to takes speculative positions in foreign currencies. The Group s currency exposure based on the information provided by key management is as follows: At 31 December 2009 SGD Financial assets Cash and cash equivalents 28 Financial liabilities Other payables and accruals (1,431) Net financial liabilities (1,403) Currency exposure (1,403) At 31 December 2008 Financial assets Cash and cash equivalents 900 Financial liabilities Other payables and accruals (516) Net financial liabilities 384 Currency exposure 384

59 FORELAND FABRICTECH 57 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Financial instruments (cont d) (b) Financial risk management (cont d) (i) Foreign currency risk (cont d) Sensitivity analysis for foreign currency risk If the Singapore dollar ( SGD ) change against the RMB by 5% (2008: 5%) with all other variables including tax rate being held constant, the effects arising from the net financial liability / asset position will be as follows: Group Profit after tax Increase/(Decrease) SGD against RMB - strengthened (70) 19 - weakened 70 (19) (ii) Interest rate risk Interest rate risk is the risk that the fair value of future cash flow of the Group s financial instruments will fluctuate because of changes in market interest rate. Apart from the bank balances, the Group has no significant interest-bearing assets and liabilities, the Group s income and operating cash flows are substantially independent of changes in market interest rates. (iii) Credit risk Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Group s exposure to credit risk arises primarily from trade and other receivables. For other financial assets, including cash and cash equivalents, the Group minimises credit risk by dealing exclusively with high credit rating counterparties. The Group s objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. The Group trades only with recognised and creditworthy third parties. It is the Group s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, debtors balances are monitored on an ongoing basis with the result that the Group s exposure to bad debts is not significant. The Group s major classes of financial assets are cash and cash equivalents and trade receivables. All trade receivables of the Group are due from third parties and receivable in the PRC. (a) Financial assets that are neither past due nor impaired Bank balances that are neither past due nor impaired are mainly deposits with banks with high credit-rating counterparties. Trade receivables that are neither past due nor impaired are substantially companies with good collection track record with the Group.

60 58 FORELAND FABRICTECH NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Financial instruments (cont d) (b) Financial risk management (cont d) (iii) Credit risk (cont d) (b) Financial assets that are past due and/or impaired There is no other class of financial assets that is past due and/or impaired except for trade receivables. The age analysis of trade receivables past due but not impaired is as follows: 2009 Group 2008 Past due less than 30 days 1, (iv) Liquidity and cash flow risk Liquidity risk is the risk that the Group will encounter difficulty in meeting financial obligations due to shortage of funds. The Group manages the liquidity risk by maintaining sufficient cash and banking facilities to enable them to meet their normal operating commitments. The Group s financial liabilities are all due within the next 12 months from the reporting date and approximate the contracted undiscounted payments. (c) Fair values of financial assets and financial liabilities The carrying amounts of the financial assets and financial liabilities recorded in the financial statements of the Group approximate their fair values due to the relatively short-term maturing of these financial instruments. 30. Capital management The Group s objectives when managing capital are to safeguard the Group s ability to continue as a going concern and to maintain an optimal capital structure so as to maximize shareholder value. In order to maintain or achieve an optimal capital structure, the Group may adjust the amount of dividend payment, return capital to shareholders, issue new shares, buy back issued shares, obtain new borrowings or sell assets to reduce borrowings. The capital structure of the Group mainly consists of equity and the Group s overall strategy remains unchanged from A subsidiary of the Group in the People s Republic of China is required to contribute to and maintain a nondistributable statutory reserve fund whose utilisation is subject to approval but the relevant authority in the People s Republic of China. This externally imposed capital requirement has been complied with by the above-mentioned subsidiary for he financial years ended 31 December 2009 and 2008.

61 FORELAND FABRICTECH NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December Segment information The Group has only one reportable segment, which is manufacturing and selling of functional and normal fabrics. All the Group s sales and assets are in the People s Republic of China. Accordingly, no segment information is presented. 32. Authorisation of financial statements The consolidated financial statements of the Group and the statement of financial position and statement of changes in equity of the Company for the financial year ended 31 December 2009 were authorised for issue in accordance with a resolution of the directors dated 29 March 2010.

62 FORELAND FABRICTECH STATISTICS OF SHAREHOLDINGS As at 15 March 2010 DISTRIBUTION OF SHAREHOLDINGS SIZE OF SHAREHOLDINGS NO. OF SHAREHOLDERS % NO. OF SHARES % , ,000-10, ,663, ,001-1,000, ,097, ,000,001 AND ABOVE ,875, TOTAL ,639, TWENTY LARGEST SHAREHOLDERS NAME NO. OF SHARES % 1 UOB KAY HIAN PTE LTD 295,477, G CAPITAL PTE LTD 13,000, CHEN SHIKUN 11,874, KIM ENG SECURITIES PTE. LTD. 9,362, HSBC (SINGAPORE) NOMINEES PTE LTD 8,300, OCBC SECURITIES PRIVATE LTD 7,453, DANIEL TAN POON KUAN 6,545, GOH SEH KIAT 6,216, DBS VICKERS SECURITIES (SINGAPORE) PTE LTD 4,903, PHILLIP SECURITIES PTE LTD 3,578, TAN KONG SIN 3,226, ZHENG YULONG 2,600, TANG KAY HENG 2,575, CHU MENG CHEE 2,430, THIAN YIM PHENG 2,088, CHENG CHIH THIE TJIE SENG 2,065, MERRILL LYNCH (SINGAPORE) PTE LTD 2,050, HO KUM LOON 2,000, HONG NGO FOK 2,000, TAN KIM SENG 2,000, TOTAL 389,748,

63 FORELAND FABRICTECH 61 STATISTICS OF SHAREHOLDINGS As at 15 March 2010 Share Capital Authorised capital : USD50,000,000 Issued and fully-paid capital : USD22,681,958 Number of Shares : 453,639,150 Class of Shares : Ordinary share of USD0.05 each Voting rights : 1 vote per ordinary share The Company does not hold any treasury shares. Substantial Shareholder The name of the substantial shareholder and the number of shares in which he has interests is as follow: Name of Substantial Shareholder No. of shares in which the substantial shareholder has direct interests No. of shares in which the substantial shareholder is deemed to have interests Tsoi Kin Chit 290,612,543* * The shares were held in the name of UOB Kay Hian Pte Ltd as nominee. Shareholdings Held in Hands of Public Based on the information available to the Company as of 15 March 2010, approximately 35.21% of the issued ordinary shares of the Company are held by the public and therefore Rule 723 of the Listing Manual of SGX-ST is complied with.

64 FORELAND FABRICTECH NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the Annual General Meeting of the Company will be held at Copthorne King s Hotel, Room Prince 2, Level 13, 403 Havelock Road, Singapore on Wednesday, 28 April 2010 at 9 a.m. to transact the following businesses: AS ORDINARY BUSINESS:- 1. To receive and adopt the audited financial statements of the Company for the financial year ended 31 December 2009 together with the reports of the Directors and the Independent Auditor, and the Statement of Directors. (Resolution 1) 2. To re-elect the following Directors retiring pursuant to the Bye-Laws of the Company: (i) Yeap Wai Kong [Bye-Law 107] (Resolution 2) (ii) Chen Yan [Bye-Law 104] (Resolution 3) Mr Yeap Wai Kong will remain as Chairman of the Remuneration Committee upon re-election as Director of the Company and will be considered independent for the purposes of Rule 704(8) of the Listing Manual. 4. To approve the payment of Directors fees of S$140,250 for the financial year ending 31 December 2010, (31 December 2009: S$150,000.00) (Resolution 4) 5. To re-appoint Messrs Baker Tilly TFWLCL as Independent Auditor of the Company and to authorise the Directors to fix their remuneration. (Resolution 5) 6. To transact any other ordinary business that may be properly transacted at an Annual General Meeting. AS SPECIAL BUSINESS:- To consider and, if thought fit, to pass the following resolutions as Ordinary Resolutions:- 6(A). AUTHORITY TO ALLOT AND ISSUE SHARES That pursuant to the Bye-Laws of the Company and the 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 to: (i) (ii) allot and/or issue further shares whether by way of rights, bonus or otherwise (including shares as may be issued pursuant to any Instrument (as defined below) made or granted by the Directors while this Resolution is in force notwithstanding that the authority conferred by this Resolution may have ceased to be in force at the time of issue of such shares), and/or; make or grant offers, agreements or options (collectively referred to as Instruments ) that might or would require shares to be issued, including but not limited to the creation and issue of warrants, debentures or other instruments convertible into shares; at any time and upon such terms and conditions and for such purposes and to such persons as the Directors may in their absolute discretion deem fit, provided that: (a) the aggregate number of shares to be issued pursuant to such authority (including shares to be issued pursuant to any Instrument but excluding shares which may be issued pursuant to any adjustments ( Adjustments ) effected under any relevant Instrument, which Adjustment shall be made in compliance 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 Bye-Laws for the time being of the Company), shall not exceed 50% of the issued share capital of the Company ( as calculated in accordance with sub-paragraph (c) below) at the time of the passing of this resolution;

65 FORELAND FABRICTECH 63 NOTICE OF ANNUAL GENERAL MEETING (b) (c) provided that the aggregate number of such shares to be issued other than on a pro rata basis in pursuance to such authority (including shares issued pursuant to any Instrument but excluding shares which may be issued pursuant to any Adjustment effected under any relevant Instrument) to the existing shareholders shall not exceed 20% of the issued share capital of the Company (as calculated in accordance with subparagraph (c) below) at the time of the passing of this resolution; (subject to such manner of calculation as may be prescribed by the SGX-ST) for the purpose of determining the aggregate number of shares that may be issued under sub-paragraphs (a) and (b) above, the total number of issued shares (excluding treasury shares) shall be based on the total number of issued shares (excluding treasury shares) of the Company at the time this Resolution is passed, after adjusting for: (i) (ii) (iii) new shares arising from the conversion or exercise of any convertible securities; new shares arising from exercising share options or vesting of share awards outstanding or subsisting at the time this Resolution is passed, provided the options or awards were granted in compliance with the provisions of the Listing Manual of the SGX-ST; and any subsequent bonus issue, consolidation or subdivision of shares; (d) (e) the 50% limit in sub-paragraph (a) above may be increased to 100% for the Company to undertake pro rata renounceable rights issues; and in exercising the authority conferred by this Resolution, 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 Bye-Laws of the Company, And, unless revoked or varied by the Company in general meeting, 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 require by law or by the Bye-Laws of the Company to be held, whichever is the earlier. (Resolution 6) [see Explanatory Note (i)] 6(B). AUTHORITY TO ALLOT AND ISSUE SHARES PRICED AT A DISCOUNT OF UP TO 20% FOR PLACEMENT EXERCISE That subject to and pursuant to the shares issue mandate in Resolution 7 being obtained, authority be and is hereby given to the Directors of the Company to the Directors 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 price shall not represent more than a 20% discount for new shares to the weighted average price per share determined in accordance with the requirements of the SGX-ST. (Resolution 7) [see Explanatory Note (ii)] 7. AUTHORITY TO GRANT AWARDS AND TO ALLOT AND ISSUE SHARES UNDER THE FORELAND PERFORMANCE SHARE SCHEME That authority be and is hereby give to the Directors to: (a) grant awards in accordance with the provisions of the Foreland Performance Share Scheme ( PSS ); and

66 64 FORELAND FABRICTECH NOTICE OF ANNUAL GENERAL MEETING (b) allot and issue from time to time such number of fully-paid shares in the Company as may be required to be allotted and issued pursuant to the vesting of awards under the PSS, Provided that the aggregate number of shares to be issued pursuant to the PSS does not exceed 15% if the issued share capital of the Company from time to time. (Resolution 8) [see Explanatory Note (iii)] 8. AUTHORITY TO ALLOT AND ISSUE SHARES UNDER THE FORELAND SCRIP DIVIDEND SCHEME That authority be and is hereby give to the Directors to allot and issue from time to time such number of shares in the Company as may be required to be allotted and issued pursuant to the Foreland Scrip Dividend Scheme. (Resolution 9) [see Explanatory Note (iv)] 10. To transact any other business which may be properly transacted at an Annual General Meeting. BY ORDER OF THE BOARD Lee How Fen Company Secretary Singapore, 6 April 2010 NOTES: (1) With the exception of The Central Depository (Pte) Ltd. ( the Depository ) who may appoint more than two proxies, a shareholder of the Company entitled to attend and vote at the above meeting who hold two or more shares is entitled to appoint no more than two proxies to attend and vote on his behalf. A proxy need not be a shareholder of the Company. (2) Where a form of proxy appoints more than one proxy (including the case where such appointment results from a nomination by the Depository), the proportion of the shareholding concerned to be represented by each proxy shall be specified in the form of proxy. (3) A corporation which is a shareholder of the Company may authorise by resolution of its directors or other governing body such persons as it thinks fit to act as its corporate representative at the meeting. (4) To be valid, the instrument appointing a proxy or proxies, or nominating a proxy or proxies on behalf of the Drpository together with the poser of attorney or other authority, if any, under which it is signed, or a notarially certified copy of such power or authority, must be deposited at the office of Singapore Share Transfer Agent, Boardroom Corporate Advisory Services Pte. Ltd. 50 Raffles Place, Singapore Land Tower #32-01, Singapore not less than 48 hours before the time appointed for holding the meeting or at any adjournment thereof. Detailed instructions can be found on the Proxy Form(s).

67 FORELAND FABRICTECH 65 NOTICE OF ANNUAL GENERAL MEETING EXPLANATORY NOTES: (i) (ii) (iii) (iv) The proposed Resolution 6 above, if passed, will empower the Directors of the Company from the date of this Meeting until the conclusion of next Annual General Meeting, or the date by which the next Annual General Meeting is required by law or by the Bye-Laws of the Company to be held, or when varied or revoke by the Company in general meeting, whichever is the earlier, to allot and issue further shares in the Company. The maximum number of shares which the Directors may issue under this resolution shall not exceed the quantum as set out in the resolution. The above 50% limit may be increased to 100% for the Company to undertake pro rata renounceable rights issue, which 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 2009 to accelerate and facilitate listed issuers funds raising efforts and will be in effect until 31 December The proposed Resolution 7 above, if passed, will empower the Directors to to issue new shares other than on a pro rata basis to shareholders of the Company at a discount exceeding 10% but not more than 20% to the weighted average price per shares determined in accordance with the requirements of 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 2009 to accelerate and facilitate listed issuers funds raising efforts and will be in effect until 31 December The proposed Resolution 8 above, if passed, will empower the Directors of the Company grant awards under the PSS and to allot and issue shares in the Company to the vesting of awards, Provided that the aggregate number of shares to be issued not exceed 15% if the issued share capital of the Company from time to time. The PSS was approved by the members of the Company on 7 March The proposed Resolution 9 above, if passed, will empower the Directors of the Company to allot and issue shares in the Company pursuant to the terms and conditions of the Foreland Scrip Dividend Scheme.

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69 FORELAND FABRICTECH annual report Corporate Information BOARD OF DIRECTORS Tsoi Kin Chit, Executive Chairman Cai Fengquan, Executive Director Lim Siang Kai, Lead Independent Director Yeap Wai Kong, Independent Director Chen Yan, Non-Executive Director AUDIT COMMITTEE Lim Siang Kai, Chairman Yeap Wai Kong Chen Yan NOMINATING COMMITTEE Yeap Wai Kong, Chairman Lim Siang Kai Chen Yan REMUNERATION COMMITTEE Yeap Wai Kong, Chairman Lim Siang Kai Chen Yan REGISTERED OFFICE Canon s Court 22 Victoria Street Hamilton HM 12 Bermuda PRINCIPAL PLACE OF BUSINESS The Second Processing Zone Dongshi Town, Jinjiang City, Fujian Province The People s Republic of China BERMUDA PRINCIPAL REGISTRAR AND TRANSFER AGENT Appleby Management (Bermuda) Ltd. Argyle House 41a Cedar Avenue Hamilton HM12 Bermuda BERMUDA RESIDENT REPRESENTATIVE Appleby Services (Bermuda) Ltd. Canon s Count 22 Victoria Street PO Box HM 1179 Hamilton, HM EX Bermuda SINGAPORE SHARE TRANSFER AGENT Boardroom Corporate Advisory Services Pte. Ltd. 50 Raffl es Place, #32-01 Singapore Land Tower Singapore COMPANY SECRETARY Lee How Fen, LLB (Hons) ASSISTANT COMPANY SECRETARIES Wong Shing Mun, FCCA Appleby Services (Bermuda) Ltd. AUDITORS Baker Tilly TFWLCL Public Accountants and Certifi ed Public Accountants 15 Beach Road #03-10 Beach Centre Singapore Partner-in-charge: Ong Kian Guan (Appointed since fi nancial year ended 31 December 2007) PRINCIPAL BANKER Industrial and Commercial Bank of China Limited Jinjiang Sub-Branch Chongde Road, Qingyang Jinjiang City, Fujian Province The People s Republic of China

70 FORELAND FABRICTECH HOLDINGS LIMITED Annual Report 2009