ARMSTRONG INDUSTRIAL CORPORATION LIMITED

Transcription

1 CIRCULAR DATED 26 SEPTEMBER 2013 FOR INFORMATION ONLY THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. PLEASE READ IT CAREFULLY. If you are in any doubt in relation to this Circular or as to the course of action you should take, you should consult your stockbroker, bank manager, solicitor, accountant, tax adviser or other professional adviser immediately. If you have sold or transferred all your issued and fully paid ordinary shares in the capital of Armstrong Industrial Corporation Limited, you should immediately forward this Circular together with the Notice of Extraordinary General Meeting and the accompanying proxy form to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for onward transmission to the purchaser or transferee. The Singapore Exchange Securities Trading Limited assumes no responsibility for the correctness of any of the statements made or reports contained or opinions expressed in this Circular. This Circular, the Exit Offer Letter and the Acceptance Form(s) (all as defi ned herein) shall not be construed as, may not be used for the purposes of, and do not constitute, a notice or proposal or advertisement or an offer or invitation or solicitation in any jurisdiction or in any circumstance in which such a notice or proposal or advertisement or an offer or invitation or solicitation is unlawful or not authorised, or to any person to whom it is unlawful to make such a notice or proposal or advertisement or an offer or invitation or solicitation. ARMSTRONG INDUSTRIAL CORPORATION LIMITED (Company Registration No.: K) (Incorporated in the Republic of Singapore) CIRCULAR TO SHAREHOLDERS IN RELATION TO THE PROPOSED VOLUNTARY DELISTING OF ARMSTRONG INDUSTRIAL CORPORATION LIMITED FROM THE OFFICIAL LIST OF THE SINGAPORE EXCHANGE SECURITIES TRADING LIMITED ( SGX-ST ) PURSUANT TO RULES 1307 AND 1309 OF THE SGX-ST LISTING MANUAL Independent Financial Adviser to the Independent Directors of Armstrong Industrial Corporation Limited DELOITTE & TOUCHE CORPORATE FINANCE PTE LTD (Company Registration No.: N) (Incorporated in the Republic of Singapore) IMPORTANT DATES, TIMES AND VENUE Last date and time for lodgement of proxy form : Saturday, 19 October 2013, by 10 a.m. Date and time of Extraordinary General Meeting : Monday, 21 October 2013, at 10 a.m. Venue of Extraordinary General Meeting : InterContinental Singapore, Ballroom 1, Level 2, 80 Middle Road, Singapore

2 CONTENTS Page DEFINITIONS... 3 FORWARD-LOOKING STATEMENTS... 9 INDICATIVE TIMETABLE LETTER TO SHAREHOLDERS Introduction The Delisting Proposal Irrevocable Undertakings The Exit Offer The Options Proposal Market Quotations Confi rmation of Financial Resources Information on the Offeror Information on the Company and the Group Information in Respect of the Directors Rationale for the Delisting and the Offeror s Intentions Overseas Shareholders Implications of Compulsory Acquisition and Delisting Disclosures of Holdings and Dealings in Shares Exemption Relating to Directors Recommendation Advice of Deloitte to the Independent Directors Independent Directors Recommendations Extraordinary General Meeting Action to be Taken by Shareholders Maintenance of Free Float Directors Responsibility Statement Consents Documents Available for Inspection Additional Information APPENDIX I LETTER FROM DELOITTE TO THE INDEPENDENT DIRECTORS... I-1 to 24 APPENDIX II ADDITIONAL INFORMATION ON THE COMPANY.... II-1 to 9 APPENDIX III ADDITIONAL INFORMATION ON THE OFFEROR AND THE PARTIES ACTING IN CONCERT WITH IT... III-1 to 5 1

3 CONTENTS APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY IV-1 to 71 APPENDIX V APPENDIX VI APPENDIX VII UNAUDITED 1ST QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 31 MARCH V-1 to 12 UNAUDITED 2ND QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 30 JUNE VI-1 to 16 RELEVANT PROVISIONS IN THE COMPANY S ARTICLES OF ASSOCIATION IN RESPECT OF CAPITAL, DIVIDENDS AND VOTING... VII-1 to 22 APPENDIX VIII EY S REPORT IN RESPECT OF THE REVIEW OF THE CONDENSED INTERIM FINANCIAL INFORMATION FOR THE PERIOD FROM 1 JANUARY 2013 TO 30 JUNE VIII-1 APPENDIX IX LETTER FROM DELOITTE IN RESPECT OF THE REVIEW OF THE CONDENSED INTERIM FINANCIAL INFORMATION FOR THE 6 MONTH PERIOD ENDED 30 JUNE IX-1 NOTICE OF EXTRAORDINARY GENERAL MEETING... N-1 PROXY FORM 2

4 DEFINITIONS Except where the context otherwise requires, the following defi nitions apply throughout this Circular: Acceptance Form(s) : FAA and/or FAT, as the case may be Articles : The Articles of Association of the Company Board : The board of Directors of the Company CDP : The Central Depository (Pte) Limited CIMB : CIMB Bank Berhad, Singapore Branch, the fi nancial adviser to the Offeror in respect of the Delisting and the Exit Offer Circular : This circular to the Shareholders dated 26 September 2013 issued by the Company Closing Date : 5.30 p.m. on Friday, 8 November 2013 or such later date(s) as may be announced from time to time by or on behalf of the Offeror, being the last day for the lodgment of acceptances of the Exit Offer Code : The Singapore Code on Take-overs and Mergers Company : Armstrong Industrial Corporation Limited (Company Registration No K) Company Securities : Shares or securities which carry voting rights in the Company, or instruments convertible into rights to subscribe for Shares, or warrants, options for Shares, or derivatives in respect of Shares or such securities Companies Act : Companies Act (Chapter 50 of Singapore) Concert Parties : Parties acting or deemed to be acting in concert with the Offeror in connection with the Exit Offer, namely, Gilbert Investment Corporation Pte. Ltd., Polyfoam Asia Pte. Ltd., INOAC Corporation and the Ong Family Controlling Shareholder : A person who holds directly or indirectly 15% or more of the total number of issued Shares excluding treasury shares in the Company (unless the SGX-ST determines otherwise) or a person who in fact exercises control over the Company, as defi ned under the Listing Manual CPF : Central Provident Fund CPF Agent Banks : The banks approved by the CPF to be its agent banks, being DBS Bank Ltd., Oversea-Chinese Banking Corporation Limited and United Overseas Bank Limited CPFIS : Central Provident Fund Investment Scheme CPFIS Investors : Investors who purchased the Shares using their CPF savings under the CPFIS Delisting : The voluntary delisting of the Company from the Offi cial List of the SGX-ST under Rules 1307 and 1309 of the Listing Manual Delisting Proposal : The proposal for the Delisting of the Company as set out at Section 1.2 of the Letter to the Shareholders in this Circular 3

5 DEFINITIONS Delisting Resolution : The resolution to be proposed at the EGM to approve the Delisting Delisting Resolution Approval Conditions : Has the meaning ascribed to it at Section 4.4 of the Letter to the Shareholders in this Circular Deloitte : Deloitte & Touche Corporate Finance Pte Ltd, the independent fi nancial adviser to the Independent Directors Directors : Directors of the Company as at the Latest Practicable Date EGM : The extraordinary general meeting of the Company to be held on Monday, 21 October 2013, notice of which is set out on page N-1 of this Circular, and any adjournment thereof EY : Ernst & Young LLP, the independent auditors of the Company Encumbrances : All liens, equities, mortgages, pledges, charges, encumbrances, rights of pre-emption and any other third party rights or interests of any nature whatsoever Exit Offer : The delisting exit offer made by CIMB, for and on behalf of the Offeror, to acquire the Offer Shares on the terms and conditions set out in the Exit Offer Letter, and the relevant Acceptance Form(s) Exit Offer Letter : The letter dated 26 September 2013 setting out the terms and conditions of the Exit Offer (including the relevant Acceptance Form(s)), which will be despatched by the Offeror to the Shareholders on the same date as this Circular Exit Offer Price : S$0.40 in cash for each Offer Share tendered in acceptance of the Exit Offer FAA : Form of Acceptance and Authorisation for Offer Shares to be issued to the Shareholders whose Shares are deposited with CDP FAT : Form of Acceptance and Transfer for Offer Shares to be issued to the Shareholders whose Shares are not deposited with CDP FY : Financial year ended or ending 31 December, as the case may be GCPL : Gilbert Investment Corporation Pte. Ltd. (Company Registration No N) Group : Collectively, the Company and its subsidiaries Holding Announcement : Holding announcement dated 20 June 2013 by the Company on its receipt of a Non-Binding Indicative Proposal as set out at Section 1.1 of the Letter to the Shareholders in this Circular Holding Announcement Date : 20 June 2013, being the date of the Holding Announcement 4

6 DEFINITIONS IFA Letters : The letters from Deloitte setting out its advice to the Independent Directors as set out in Appendix I to this Circular and in respect of the review of the condensed interim fi nancial information for the 6 month period ended 30 June 2013 as set out in Appendix IX to this Circular Independent Directors : The Directors who are considered to be independent for the purposes of making recommendations to the Shareholders in respect of the Delisting and the Exit Offer, namely Mr. Koh Gim Hoe Steven, Mr. Chan Pee Teck Peter, Mr. Tan Peng Chin and Mr. Ang Meng Huat Anthony Irrevocable Undertakings : Has the meaning ascribed to it at Section 3 of the Letter to the Shareholders in this Circular Joint Announcement : Joint announcement dated 5 July 2013 by the Offeror and the Company on the Delisting Proposal Joint Announcement Date : 5 July 2013, being the date of the Joint Announcement Latest Practicable Date : 12 September 2013, being the latest practicable date prior to the printing of this Circular Listing Manual : The SGX-ST Listing Manual Market Day : A day on which the SGX-ST is open for trading in securities Minimum Acceptance Condition : Valid acceptances in respect of such number of Offer Shares which when taken together with the Shares owned controlled or agreed to be acquired by the Offeror and the parties acting in concert with it will result in the Offeror and the parties acting in concert with it holding such number of Shares carrying not less than 72% of the total voting rights attributable to the issued share capital of the Company as at the close of the Exit Offer, as set out at Section 4.4, Condition 2 of the Letter to the Shareholders in this Circular Memorandum : The Memorandum of Association of the Company NAV : Net asset value Notice of EGM : The notice of an extraordinary general meeting of the Company to be held at InterContinental Singapore, Ballroom 1, Level 2, 80 Middle Road, Singapore on Monday, 21 October 2013 at 10 a.m. as set out on page N-1 of this Circular NTA : Net tangible assets Offer Shares : Has the meaning ascribed to it at Section 4.2 of the Letter to the Shareholders in this Circular Offeror : AGP Asia Holding Pte. Ltd. (Company Registration No N) Ong Family : Mr. Ong Peng Koon Gilbert, Ms. Chow Goon Chau Patricia, Mr. Ong Eugene and Ms. Ong Mingli Phyllis 5

7 DEFINITIONS Ong Family Undertakings : The irrevocable undertaking obtained by the Offeror from all four (4) members of the Ong Family, who collectively hold an aggregate of 229,775,629 Shares representing approximately 46.54% of the total number of issued Shares (excluding 24,158,000 Shares held by the Company as treasury shares), pursuant to which they have each undertaken and/or agreed, inter alia, the following: (i) to vote all their Shares in favour of the Delisting Resolution and accept the Exit Offer in respect of all their Shares; (ii) to assign to GCPL their rights to receive (and the benefi t of receiving) the proceeds (the Proceeds) that would be payable by the Offeror as consideration pursuant to their acceptances of the Exit Offer, and that such Proceeds would be regarded as an interest-free shareholder s loan extended to the Offeror by GCPL such that no cash shall be payable by the Offeror to any member of the Ong Family pursuant to their respective acceptances of the Exit Offer; and (iii) to waive their rights under Rule 30 of the Code to receive any cash settlement or payment for their respective acceptances of the Exit Offer Option : A validly issued and subsisting option to subscribe for new Shares under the Share Option Schemes Option Holders : The holders of Options under the Share Option Schemes Option Price : The amount in cash to be paid to the Option Holders in consideration of such Option Holders agreeing (i) not to exercise any of their Options into new Shares and (ii) not to exercise any of their rights as Option Holders Options Proposal : The proposal in respect of the Options to Option Holders on the terms described in Section 5.2 of the Letter to the Shareholders in this Circular Overseas Shareholders : Shareholders whose addresses are outside Singapore, as shown on the Register of Members of the Company, or as the case maybe, in the records of CDP Proceeds : The proceeds that would be payable by the Offeror as consideration pursuant to the Ong Family s acceptances of the Exit Offer Relevant Directors : Mr. Ong Peng Koon Gilbert and Ms. Chow Goon Chau Patricia as set out at Section 2.2(c) of the Letter to the Shareholders in this Circular Restricted Jurisdiction : Has the meaning ascribed to it in Section 12.3 of the Letter to Shareholders in this Circular Securities Account : Securities account maintained by a Depositor with CDP, but does not include a securities sub-account SGX-ST : Singapore Exchange Securities Trading Limited Shareholders : Registered holders of the Shares, except that where the registered holder is CDP, the term Shareholders shall, where the context admits, mean the Depositors who have Shares entered against their names in the Depository Register 6

8 DEFINITIONS Shareholders Agreement : Has the meaning ascribed to it in Section 8 of the Letter to Shareholders in this Circular Shareholders Approval : Has the meaning ascribed to it in Section 2.1 of the Letter to the Shareholders in this Circular Share Option Schemes : The Armstrong Industrial Corporation Share Option Scheme 2000 and the Armstrong Industrial Corporation Share Option Scheme 2008, collectively Shares : Issued ordinary shares in the capital of the Company Share Registrar : Boardroom Corporate & Advisory Services Pte Ltd (Company Registration No W) SIC : Securities Industry Council of Singapore SK Options Undertaking : The irrevocable undertaking obtained by the Offeror from Mr. Koh Gim Hoe Steven, the Deputy Chief Executive Offi cer of the Company not to exercise any of his 3,450,284 Options into new Shares for the duration of the Exit Offer S$ : Singapore dollars, being the lawful currency of the Republic of Singapore VWAP : Volume weighted average price % or per cent. : Per centum or percentage Unless otherwise defi ned, the term acting in concert shall have the same meaning ascribed to it in the Code. The terms Depositor, Depository Agent and Depository Register shall have the meanings ascribed to them respectively in Section 130A of the Companies Act. The terms subsidiary and related corporation shall have the same meanings ascribed to them respectively in Section 5 and Section 6 of the Companies Act. The term substantial shareholder shall have the meaning ascribed to it in Section 81 of the Companies Act. Words importing the singular shall, where applicable, include the plural and vice versa and words importing one gender shall include the other gender. References to persons shall, where applicable, include corporations. Capitalised terms used in the extracts of the Exit Offer Letter and not defi ned herein shall bear the same meanings as attributed to them in the Exit Offer Letter. The headings in this Circular are inserted for convenience only and shall be ignored in construing this Circular. Any reference in this Circular to any enactment is a reference to that enactment as for the time being amended or re-enacted. Any word defi ned in the Companies Act, the Listing Manual or the Code or any modifi cation thereof and used in this Circular shall, where applicable, have the meaning assigned to it under the Companies Act, the Listing Manual or the Code or any modifi cation thereof, as the case may be, unless the context otherwise requires. 7

9 DEFINITIONS Any reference to a time of day and date in this Circular is made by reference to Singapore time and date, unless otherwise stated. Any discrepancies in this Circular between the listed amounts and the total thereof are due to rounding. Accordingly, fi gures may have been adjusted to ensure that totals refl ect an arithmetic aggregation of the fi gures that precede them. In this Circular, the issued and paid-up share capital of the Company as at the Latest Practicable Date is S$43,745, comprising 493,669,353 Shares (excluding 24,158,000 Shares held by the Company as treasury shares). 8

10 FORWARD-LOOKING STATEMENTS All statements other than statements of historical facts included in this Circular are or may be forwardlooking statements. Forward-looking statements include but are not limited to those using words such as seek, expect, anticipate, estimate, believe, intend, project, plan, strategy, forecast and similar expressions or future or conditional verbs such as will, would, should, could, may and might. These statements refl ect the current expectations, beliefs, hopes, intentions or strategies of the party making the statements regarding the future and assumptions in light of currently available information. Such forward-looking statements are not guarantees of future performance or events and involve known and unknown risks and uncertainties. Accordingly, actual results may differ materially from those described in such forward-looking statements. Shareholders and investors should not place undue reliance on such forward-looking statements, and neither the Company, the Offeror nor the IFA undertakes any obligation to update publicly or revise any forward-looking statements. 9

11 INDICATIVE TIMETABLE Last date and time for lodgement of proxy : Saturday, 19 October 2013, by 10 a.m. forms for the EGM (1) Date and time of the EGM : Monday, 21 October 2013, at 10 a.m. Date of commencement of the Exit Offer : Thursday, 26 September 2013 Expected Closing Date and time of the Exit Offer : Friday, 8 November 2013, at 5.30 p.m., or such other date(s) as may be announced from time to time by or on behalf of the Offeror Expected date for the Delisting of Shares : Approximately two (2) to three (3) weeks after the Closing Date, or such other date as may be announced from time to time by or on behalf of the Company Expected date for the payment of the Exit Offer Price, in respect of valid acceptances of the Exit Offer : Within 10 days of the receipt of valid acceptance of the Exit Offer provided that: (a) the Delisting Resolution has been passed; and (b) the Minimum Acceptance Condition has been satisfi ed. Notes: (1) Proxy forms should be duly completed and deposited at the registered offi ce of the Company at 531 Bukit Batok Street 23, Singapore not less than 48 hours before the time appointed for holding of the EGM. Completion and return of a proxy form will not preclude a Shareholder from attending and voting in person at the EGM in place of his proxy. Shareholders should note that, save for the last date and time for lodgement of proxy forms for the EGM, the date and time of the EGM and the date of commencement of the Exit Offer, the above timetable is indicative only and may be subject to change. For the events listed above which are described as expected, please refer to future announcement(s) by the Company for the exact dates and times of these events. PLEASE NOTE THAT THE EXIT OFFER IS CONDITIONAL UPON (I) THE DELISTING RESOLUTION APPROVAL CONDITIONS BEING SATISFIED AND (II) THE MINIMUM ACCEPTANCE CONDITION IN RESPECT OF THE EXIT OFFER BEING SATISFIED. THE OPTIONS PROPOSAL IS CONDITIONAL UPON THE EXIT OFFER BECOMING OR BEING DECLARED UNCONDITIONAL AS TO ACCEPTANCES IN ALL RESPECTS. PLEASE ALSO NOTE THAT APPROVING THE DELISTING RESOLUTION AT THE EGM DOES NOT AUTOMATICALLY MEAN THAT YOU HAVE ACCEPTED THE EXIT OFFER AND/OR THE OPTIONS PROPOSAL. PLEASE REFER TO APPENDIX I OF THE EXIT OFFER LETTER AND/ OR PARAGRAPH 4 OF THE OPTIONS PROPOSAL IF YOU WISH TO ACCEPT THE EXIT OFFER AND/OR OPTIONS PROPOSAL RESPECTIVELY. 10

12 LETTER TO SHAREHOLDERS ARMSTRONG INDUSTRIAL CORPORATION LIMITED (Company Registration No.: K) (Incorporated in the Republic of Singapore) Board of Directors: Registered Office Mr. Ong Peng Koon Gilbert (Chairman and Chief Executive Offi cer) 531 Bukit Batok Mr. Koh Gim Hoe Steven (Deputy Chief Executive Offi cer) Street 23 Ms. Chow Goon Chau Patricia (Executive Director) Singapore Mr. Chan Pee Teck Peter (Non-Executive and Independent Director) Mr. Tan Peng Chin (Non-Executive and Independent Director) Mr. Ang Meng Huat Anthony (Non-Executive and Independent Director) 26 September 2013 To: The Shareholders of Armstrong Industrial Corporation Limited Dear Sir / Madam PROPOSED VOLUNTARY DELISTING OF ARMSTRONG INDUSTRIAL CORPORATION LIMITED 1. INTRODUCTION 1.1. On 20 June 2013 (the Holding Announcement Date ), the Company announced that the Board had received a Non-Binding Indicative Proposal from a consortium involving the major shareholder of the Company that may result in the Delisting of the Company On 5 July 2013 (the Joint Announcement Date ), the Company and AGP Asia Holding Pte. Ltd. (the Offeror ) jointly announced that the Offeror had presented to the Directors, a formal proposal (the Delisting Proposal ) to seek the voluntary delisting of the Company (the Delisting ) from the Offi cial List of the Singapore Exchange Securities Trading Limited pursuant to Rules 1307 and 1309 of the Listing Manual. A copy of the Joint Announcement is available on the website of the SGX-ST at Under the terms of the Delisting Proposal, CIMB will make, for and on behalf of the Offeror, the Exit Offer to acquire all the Offer Shares at the offer price of S$0.40 in cash for each Offer Share Having reviewed the Delisting Proposal, the Directors resolved to (a) apply to the SGX-ST for the Delisting; and (b) subject to the approval of the SGX-ST, convene the EGM to seek the approval of the Shareholders for the Delisting pursuant to Rules 1307 and 1309 of the Listing Manual The purpose of this Circular is to provide Shareholders with relevant information regarding the Delisting Proposal and the Exit Offer and to seek Shareholders Approval at the EGM to be held on Monday, 21 October

13 LETTER TO SHAREHOLDERS 2. THE DELISTING PROPOSAL Under the terms of the Delisting Proposal, CIMB will make, for and on behalf of the Offeror, the Exit Offer to acquire the Offer Shares Rules 1307 and 1309 of the Listing Manual Under Rule 1307 of the Listing Manual, the SGX-ST may agree to an application by the Company to delist from the Offi cial List of the SGX-ST if: (a) (b) (c) the Company convenes the EGM to obtain Shareholders approval of the Delisting Resolution; the Delisting Resolution has been approved by a majority of at least 75% of the total number of issued Shares (excluding treasury shares) held by Shareholders present and voting, on a poll, either in person or by proxy at the EGM (the Directors who own Shares and the Controlling Shareholders of the Company need not abstain from voting on the Delisting Resolution); and the Delisting Resolution has not been voted against by 10% or more of the total number of issued Shares (excluding treasury shares) held by Shareholders present and voting, on a poll, either in person or by proxy at the EGM, (collectively, the Shareholders Approval ). In addition, under Rule 1309 of the Listing Manual, if the Company is seeking to delist from the SGX-ST: (i) (ii) a reasonable exit alternative, which should normally be in cash, should be offered to Shareholders and holders of any other classes of listed securities to be delisted; and the Company should normally appoint an independent fi nancial advisor to advise on the Exit Offer. An application was made by the Company to the SGX-ST on 7 August 2013 to delist the Company from the Offi cial List of the SGX-ST. The SGX-ST has, in its letter dated 10 September 2013, advised that it has no objection to the proposed Delisting, subject to the Shareholders Approval. However, the SGX-ST s decision is not to be taken as an indication of the merits of the Company, the Offeror, the Exit Offer or the proposed Delisting Application to the Securities Industry Council As stated in the Exit Offer Letter, an application was made by the Offeror to the SIC to seek clarifi cation regarding the extent to which the provisions of the Code applied to the Exit Offer. The SIC ruled on 17 June 2013, inter alia, that: (a) (b) it consents to the Minimum Acceptance Condition; the Exit Offer is exempted from compliance with Rule 22 of the Code on the offer timetable subject to the Exit Offer remaining open for at least: (i) (ii) 21 days after the despatch of the Exit Offer Letter, if the Exit Offer Letter, together with the relevant acceptance form(s), are despatched after Shareholders Approval for the Delisting has been obtained; or 14 days after the date of the announcement of Shareholders Approval of the Delisting if the Exit Offer Letter, together with the relevant acceptance form(s), are despatched on the same date as the circular to be issued by the Company in connection with the Delisting; and 12

14 LETTER TO SHAREHOLDERS (c) Mr. Ong Peng Koon Gilbert and Ms. Chow Goon Chau Patricia (the Relevant Directors ) are exempted from the requirement to make a recommendation to the Shareholders on the Exit Offer as the Relevant Directors, being directors and parties acting in concert with the Offeror, face irreconcilable confl icts of interest in doing so. Nevertheless, the Relevant Directors must still assume responsibility for the accuracy of the facts stated and opinions expressed in documents or advertisements issued by, or on behalf of, the Company to the Shareholders in connection with the Exit Offer. 3. IRREVOCABLE UNDERTAKINGS As stated in the Exit Offer Letter, the Offeror has obtained irrevocable undertakings from: (a) (b) the Ong Family, who collectively hold an aggregate of 229,775,629 Shares representing approximately 46.54% of the total number of issued Shares (excluding 24,158,000 Shares held by the Company as treasury shares), pursuant to which they have each undertaken and/or agreed, inter alia, the following: (i) to vote all their Shares in favour of the Delisting Resolution and accept the Exit Offer in respect of all their Shares; (ii) to assign to GCPL their rights to receive (and the benefi t of receiving) the Proceeds that would be payable by the Offeror as consideration pursuant to their acceptances of the Exit Offer, and that such Proceeds would be regarded as an interest-free shareholder s loan extended to the Offeror by GCPL such that no cash shall be payable by the Offeror to any member of the Ong Family pursuant to their respective acceptances of the Exit Offer; and (iii) to waive their rights under Rule 30 of the Code to receive any cash settlement or payment for their respective acceptances of the Exit Offer; from Mr. Koh Gim Hoe Steven, the Deputy Chief Executive Offi cer of the Company not to exercise any of his 3,450,284 Options into new Shares for the duration of the Exit Offer. The Ong Family Undertakings and the SK Options Undertaking (collectively, the Irrevocable Undertakings ) shall terminate, lapse and cease to have any effect on the earlier of: (a) the conclusion of the EGM convened to obtain Shareholders approval for the Delisting if the Delisting Resolution is not approved at such EGM; and (b) the date on which the Exit Offer (including any revised or improved Exit Offer made by or on behalf of the Offeror) is withdrawn, lapses or closes. Save as aforesaid, neither the Offeror nor any of the parties acting in concert with it has received any irrevocable undertaking from any party to (a) vote for or against the Delisting Resolution; and (b) accept or reject the Exit Offer. 4. THE EXIT OFFER As stated in the Exit Offer Letter, CIMB, for and on behalf of the Offeror, has offered to acquire all the Offer Shares in accordance with the Code. The Exit Offer for the Offer Shares is made on the terms and subject to the conditions set out in this Circular, the Exit Offer Letter and the Acceptance Forms, on the following basis: 4.1. Exit Offer Price The consideration for the Exit Offer payable for all the Shares other than those held as treasury shares and those held, directly or indirectly, by the Offeror as at the date of the Exit Offer (the Offer Shares ) is as follows: For each Offer Share: S$0.40 (the Exit Offer Price ). The Exit Offer Price will be payable in cash for the Offer Shares which are validly tendered in acceptance of the Exit Offer save for the 229,775,629 Offer Shares held by the Ong Family. 13

15 LETTER TO SHAREHOLDERS THE OFFEROR DOES NOT INTEND TO REVISE THE EXIT OFFER PRICE UNDER ANY CIRCUMSTANCES. The Exit Offer shall be applicable to any number of Offer Shares that are tendered in acceptance of the Exit Offer Offer Shares As stated in the Exit Offer Letter, the Exit Offer is extended, on the same terms and conditions, to: (a) (b) all Shares other than those held by the Company as treasury shares and those held, directly or indirectly, by the Offeror; and all new Shares unconditionally issued or to be issued pursuant to the valid exercise, prior to the close of the Exit Offer, of any Option to subscribe for new Shares granted under the Share Option Schemes, (collectively, the Offer Shares ) No Encumbrances As stated in the Exit Offer Letter, the Offer Shares will be acquired fully paid and free from all liens, equities, mortgages, charges, encumbrances, rights of pre-emption and other third party rights and interests of any nature whatsoever, and together with all rights, benefi ts and entitlements attached thereto as at the Joint Announcement Date and thereafter attaching thereto (including the right to receive and retain all dividends, rights and other distributions, if any, which may be announced, declared, paid or made thereon by the Company, on or after the Joint Announcement Date). If any dividend, other distribution or return of capital is declared, made or paid by the Company on or after the Joint Announcement Date, the Offeror reserves the right to reduce the Exit Offer Price by the amount of such dividend, distribution or return of capital Exit Offer Conditions As stated in the Exit Offer Letter, the Delisting and the Exit Offer will be conditional on: Condition 1: The Delisting Resolution Approval Conditions being satisfied The Delisting and the Exit Offer will be conditional on: (a) (b) the resolution to approve the Delisting (the Delisting Resolution ) being approved by a majority of at least 75% of the total number of issued Shares (excluding treasury shares) held by Shareholders present and voting, on a poll, either in person or by proxy at the EGM to be convened for Shareholders to vote on the Delisting Resolution (the Directors and controlling Shareholders need not abstain from voting on the Delisting Resolution); and the Delisting Resolution not being voted against by 10% or more of the total number of issued Shares (excluding treasury shares) held by Shareholders present and voting, on a poll, either in person or by proxy at the EGM, (collectively, the Delisting Resolution Approval Conditions ). Under Rule 1307(2) of the Listing Manual, all Shareholders, including the Directors and controlling Shareholders, are not required to abstain from voting on the Delisting Resolution. Accordingly, Mr. Ong Peng Koon Gilbert, a Director and a controlling Shareholder, and his wife, Ms. Chow Goon Chau Patricia, a Director, are entitled to and have, pursuant to the Ong Family Undertakings, undertaken to vote their respective entire shareholding interests in the Company (which constitute, in aggregate, 227,267,915 Shares, representing approximately 46.04% of the total number of Shares (excluding 24,158,000 Shares held by the Company as treasury shares)) in favour of the Delisting Resolution at the EGM. Details of the Ong Family Undertakings are set out in Section 3 of the Letter to Shareholders in this Circular. 14

16 LETTER TO SHAREHOLDERS Condition 2: The Minimum Acceptance Condition in respect of the Exit Offer being satisfied The Exit Offer will also be conditional upon the Offeror having received, by the close of the Exit Offer, valid acceptances in respect of such number of Offer Shares which, when taken together with the Shares owned, controlled or agreed to be acquired by the Offeror and parties acting in concert with it (either before or during the Exit Offer and pursuant to the Exit Offer or otherwise), will result in the Offeror and parties acting in concert with it holding such number of Shares carrying not less than 72% of the total voting rights attributable to the issued share capital of the Company as at the close of the Exit Offer (including any voting rights attributable to the Shares issued or to be issued pursuant to the valid exercise of Options on or prior to the close of the Exit Offer) (the Minimum Acceptance Condition ). Accordingly, the Exit Offer will not become or be capable of being declared unconditional as to acceptances until the close of the Exit Offer, unless at any time prior to the close of the Exit Offer, the Offeror has received valid acceptances in respect of such number of Offer Shares which will result in the Offeror and parties acting in concert with it holding such number of Shares carrying not less than 72% of voting rights attributable to the maximum potential issued share capital of the Company. For this purpose, the maximum potential issued share capital of the Company means the total number of Shares which would be in issue had all the Options been validly exercised as at the date of such declaration. The Ong Family have, pursuant to their respective Ong Family Undertakings, undertaken to accept the Exit Offer in respect of all their Shares comprising in aggregate 229,775,629 Shares representing approximately 46.54% of the total number of Shares. The respective shareholdings of each member of the Ong Family is set out in Appendix III to this Circular. As at the Latest Practicable Date, the Offeror does not hold any Shares in the Company. However, the Concert Parties collectively hold, directly or indirectly, 229,775,629 Shares representing approximately 46.54% of the total issued Shares. The rationale for setting the Minimum Acceptance Condition at 72% is to enable the Ong Family to retain indirectly an effective shareholding interest in the Company of no less than 46.54%, being refl ective of the aggregate shareholding interest that they hold in the Company as at the Latest Practicable Date. The Minimum Acceptance Condition, if satisfi ed, will ensure that the Ong Family retains an effective shareholding interest in the Company of no less than 46.54% at the successful close of the Exit Offer, through their investment holding company - GCPL, which in turn holds 65% of the shares of the Offeror. Please note that the Delisting and the Exit Offer will be conditional upon the Delisting Resolution Approval Conditions being satisfied and the Minimum Acceptance Condition in respect of the Exit Offer being satisfied. If any of the above conditions is not fulfilled, the Delisting will not proceed and the Exit Offer will lapse, and the Company will remain listed on the SGX-ST. Please also note that approving the Delisting Resolution at the EGM does NOT automatically mean that you have accepted the Exit Offer. Please refer to Section 19 of this Letter to the Shareholders entitled, Action to be taken by Shareholders for further details on the actions to take if you wish to accept the Exit Offer. 15

17 LETTER TO SHAREHOLDERS 4.5. Acceptances Shareholders may choose to accept the Exit Offer in respect of all or part of their holdings of Offer Shares Duration As stated in the Exit Offer Letter, the Exit Offer will be open for acceptance by Shareholders from the date of despatch of the Circular and Exit Offer Letter, and will remain open for at least 14 days after the date of the announcement of the fulfi llment of the Delisting Resolution Approval Conditions. Shareholders may choose to accept the Exit Offer before the EGM. However such acceptances would be conditional on the Delisting Resolution being approved at the EGM and the Minimum Acceptance Condition being fulfi lled. If the Delisting Resolution Approval Conditions or the Minimum Acceptance Condition is not fulfi lled, the conditions to the Delisting and the Exit Offer will not have been fulfi lled and the Exit Offer will lapse, and the Shareholders and the Offeror will cease to be bound by any prior acceptances of the Exit Offer by any Shareholder. Although no extension of the Exit Offer is currently contemplated, if the Exit Offer is extended, an announcement will be made of such extension, and the Exit Offer will remain open for acceptance for such period as may be announced. If the Exit Offer is extended, holders who have validly accepted the Exit Offer in respect of part of their Shares will be entitled to tender additional Shares in acceptance of the Exit Offer Warranty As stated in the Exit Offer Letter, acceptance of the Exit Offer will be deemed to constitute an unconditional and irrevocable warranty by that Shareholder that each Share in respect of which the Exit Offer is accepted is sold by him as, or on behalf of, the benefi cial owner(s) thereof, fully paid and free from all Encumbrances, and together with all rights, benefi ts and entitlements attached thereto as at the Joint Announcement Date and thereafter attaching thereto (including the right to receive and retain all dividends, rights and other distributions, if any, which may be announced, declared, paid or made thereon by the Company on or after the Joint Announcement Date). 5. THE OPTIONS PROPOSAL 5.1. Share Option Schemes As at the Latest Practicable Date, there are 7,975,275 outstanding Options granted under the Share Option Schemes. Under the rules of the Share Option Schemes, the Options are personal to the Option Holders and are, inter alia, not transferable (but may be exercised by an Option Holder s duly appointed personal representative in the event of the death of such Option Holder as provided in the rules of the Share Option Schemes). In view of this restriction, CIMB, for and on behalf of the Offeror, will not make an offer to acquire the Options (although for the avoidance of doubt, the Exit Offer will be extended, on the same terms and conditions, to all new Shares unconditionally issued or to be issued pursuant to the valid exercise of Options prior to the close of the Exit Offer). Instead, CIMB will, for and on behalf of the Offeror, make the Options Proposal in respect of the Options to Option Holders on the terms described in Section 5.2 below entitled Terms of the Options Proposal. 16

18 LETTER TO SHAREHOLDERS 5.2. Terms of the Options Proposal CIMB, for and on behalf of the Offeror, proposes that subject to: (a) (b) the conditions in Section 4.4 above being met and the Exit Offer becoming or being declared to be unconditional in all respects; and the relevant Options continuing to be exercisable into new Shares, it will pay the Option Holders the Option Price in consideration of such Option Holders agreeing: (i) (ii) not to exercise any of such Options into new Shares; and not to exercise any of their rights as Option Holders, in each case from the date of their acceptance of the Options Proposal to the respective dates of expiry of such Options. Further, Option Holders who have accepted the Options Proposal will also be required to surrender their relevant Options for cancellation if the Exit Offer becomes or is declared to be unconditional in all respects. If the Exit Offer lapses or is withdrawn or if the relevant Options cease to be exercisable into new Shares, the Options Proposal will lapse accordingly. The Option Price is computed on a see-through basis. In other words, the Option Price in relation to any Option is the amount of the excess of the Exit Offer Price over the exercise price of that Option. For the avoidance of doubt, no cash amount will be paid for any Option where the exercise price is equal to or in excess of the Exit Offer Price. A separate letter setting out more details of the Options Proposal has been sent to the Option Holders on the same day as the date of despatch of the Exit Offer Letter Exit Offer and Options Proposal Mutually Exclusive For the avoidance of doubt, whilst the Options Proposal is conditional upon the Exit Offer becoming or being declared to be unconditional in all respects, (i.e. (a) the Delisting Resolution Approval Conditions being satisfi ed; and (b) the Minimum Acceptance Condition in respect of the Exit Offer being satisfi ed), the Exit Offer is not conditional upon acceptances received in relation to the Options Proposal. The Exit Offer and the Options Proposal are separate and mutually exclusive. The Options Proposal does not form part of the Exit Offer and vice versa. Without prejudice to the foregoing, if the Option Holders wish to exercise their Options in order to accept the Exit Offer in respect of the new Shares to be issued pursuant to such exercise, they may not accept the Options Proposal in respect of their Options. Conversely, if the Option Holders wish to accept the Options Proposal in respect of their Options, they may not exercise those Options in order to accept the Exit Offer in respect of the new Shares to be issued pursuant to such exercise. 17

19 LETTER TO SHAREHOLDERS 6. MARKET QUOTATIONS The market quotations have been extracted from paragraph 6 of the Exit Offer Letter and reproduced below. Further details on the Exit Offer are set out in the Exit Offer Letter containing, inter alia, the terms of the Exit Offer and the relevant Acceptance Form(s). 6. MARKET QUOTATIONS 6.1 Closing Prices of the Shares The following table sets out the last closing prices of the Shares on the SGX-ST on (a) a monthly basis from January 2013 (being the six (6) calendar months prior to the Joint Announcement Date), (b) 2 July 2013, being the last Market Day prior to the Joint Announcement Date, and (c) the Latest Practicable Date: Month Closing price (S$) January February March April May June July 2013, being the last Market Day prior to the Joint Announcement Date September 2013, being the Latest Practicable Date Source: Bloomberg L.P. 6.2 Highest and Lowest Prices of the Shares The highest and lowest closing prices of the Shares on the SGX-ST during the period commencing six (6) calendar months prior to the Joint Announcement Date and ending on the Latest Practicable Date are as follows: Price (S$) Date(s) Highest closing price September 2013 Lowest closing price January January March 2013 Source: Bloomberg L.P. 7. CONFIRMATION OF FINANCIAL RESOURCES CIMB, being the Offeror s fi nancial adviser for the Delisting and in connection with the Exit Offer, has confi rmed that, taking into account the Ong Family Undertakings and the SK Options Undertaking, sufficient financial resources are available to the Offeror to satisfy in full all acceptances of the Exit Offer on the basis of the Exit Offer Price. 18

20 LETTER TO SHAREHOLDERS 8. INFORMATION ON THE OFFEROR The information on the Offeror has been extracted in substance from paragraph 4 of the Exit Offer Letter and reproduced below. 4. INFORMATION ON THE OFFEROR AND THE PARTIES ACTING IN CONCERT WITH IT 4.1 The Offeror The Offeror is a special purpose vehicle incorporated in Singapore for the purposes of the Delisting and the Exit Offer. Its principal activity is that of investment holding. As at the Latest Practicable Date, the Offeror has an issued and paid-up capital of S$100 comprising 100 ordinary shares, 65% of which is held by GCPL and the remaining 35% is held by Polyfoam Asia Pte. Ltd. ( Polyfoam ). The board of directors of the Offeror comprises: (a) (b) (c) (d) (e) (f) Mr. Ong Peng Koon Gilbert; Ms. Chow Goon Chau Patricia; Mr. Ong Eugene; Ms. Ong Mingli Phyllis; Mr. Kenjiro Miwa; and Mr. Noriyoshi Suzuki. As at the Latest Practicable Date, the Offeror does not own or have control over any Shares. 4.2 GCPL and the Ong Family GCPL is an investment holding company of the Ong Family which is incorporated in Singapore. Its directors and shareholders are (a) Mr. Ong, (b) Mr. Ong s spouse Mrs. Ong, and (c) Mr. Ong s two (2) children Mr. Ong Eugene (who is a Treasury Manager of the Company) and Ms. Ong Mingli Phyllis (who is a Business Director of the Company). The respective shareholdings of the Ong Family in GCPL are as follows: Mr. Ong : 55.0% Mrs. Ong : 25.0% Mr. Ong Eugene : 10.0% Ms. Ong Mingli Phyllis : 10.0% As at the Latest Practicable Date, the Ong Family collectively holds an aggregate of 229,775,629 Shares representing approximately 46.54% of the total number of Shares. GCPL does not own or have control over any Shares as at the Latest Practicable Date. 4.3 Polyfoam and the INOAC Group Polyfoam is incorporated in Singapore and is a wholly-owned subsidiary of INOAC Corporation ( INOAC ). The INOAC group of companies (the INOAC Group ), which is headquartered in Japan, is a conglomerate engaged in, inter alia, the development and supply of materials based on urethane, rubber, plastic and synthetic materials. As at the Latest Practicable Date, INOAC and Polyfoam do not own or have control over any Shares. 19

21 LETTER TO SHAREHOLDERS 4.4 Shareholders Agreement Polyfoam, GCPL and the Offeror have entered into a shareholders agreement (the Shareholders Agreement ) in relation to, inter alia, the establishment and business of the Offeror, the investment of Polyfoam in the Offeror, the regulation of the relationship between GCPL and Polyfoam as shareholders of the Offeror and the making of the Exit Offer. The Shareholders Agreement includes provisions such as those relating to board matters and board and shareholder reserved matters (including but not limited to giving Polyfoam veto/consent rights on certain board and shareholder matters in relation to the Offeror and its subsidiaries (which will include the Company if it is successfully privatised at the close of the Exit Offer)). 4.5 Shareholder Loan Agreements GCPL and Polyfoam have each entered into a shareholder loan agreement with the Offeror (the GCPL Loan Agreement and the Polyfoam Loan Agreement respectively) for the purposes of funding, inter alia, a portion of the consideration payable by the Offeror for valid acceptances received pursuant to the Exit Offer. Under the terms of the GCPL Loan Agreement, GCPL shall, subject to the fulfi lment of certain conditions, be deemed to have advanced to the Offeror an interest-free shareholder s loan of S$91,910, (the GCPL Loan ), such amount being the consideration payable by the Offeror for the 229,775,629 Shares which shall have been tendered by the Ong Family in acceptance of the Exit Offer pursuant to the Ong Family Undertakings. Under the terms of the Polyfoam Loan Agreement, Polyfoam shall, subject to the fulfi lment of certain conditions (including the GCPL Loan having been advanced or deemed to be advanced to the Offeror pursuant to the GCPL Loan Agreement) advance to the Offeror an interest-free shareholder s loan of S$49,490, for the purpose of funding a portion of the consideration payable by the Offeror for valid acceptances (other than those of the Ong Family) received pursuant to the Exit Offer. 4.6 Further disclosures on the Offeror and the parties acting in concert with the Offeror can be found in Appendix II to this Exit Offer Letter entitled Additional Information on the Offeror and the Parties Acting in Concert with It. 9. INFORMATION ON THE COMPANY AND THE GROUP 9.1. General Information The Company was incorporated on 15 October 1980 and is listed on the Mainboard of the SGX-ST. The principal activities of the Company and its subsidiaries consist of the manufacture and sale of precision die-cut foam and rubber moulded components for a wide range of technology and other applications Outlook for the Group The following commentary has been extracted from the Company s unaudited second quarter fi nancial statements and dividend announcement for the period ended 30 June The following extract must be read in the context of the unaudited second quarter fi nancial statements and dividend announcement for the period ended 30 June 2013 set out in Appendix VI to this Circular. The global hard disk drive market is expected to remain subdued in the second half of 2013 with the increasing consumer preference for tablets. China s Automotive market is expected to register slow growth due to the tightening of local regulations over car ownership Additional Information on the Company Additional Information on the Company is set out in Appendix II to this Circular. 20

22 LETTER TO SHAREHOLDERS 10. INFORMATION IN RESPECT OF THE DIRECTORS Independence of Directors All the Directors, except for the Relevant Directors are independent for the purposes of the Exit Offer and the Options Proposal and are required to make recommendations to Shareholders and Options Holders in respect of the Exit Offer and the Options Proposal. The SIC had ruled on 17 June 2013 that the Relevant Directors are exempted from the requirement to make a recommendation to the Shareholders on the Exit Offer as the Relevant Directors, being directors and parties acting in concert with the Offeror, face irreconcilable confl icts of interest in doing so. Nevertheless, the Relevant Directors must still assume responsibility for the accuracy of the facts stated and opinions expressed in documents or advertisements issued by, or on behalf of, the Company to the Shareholders in connection with the Exit Offer. All the Directors (including, for the avoidance of doubt, the Relevant Directors) are responsible for the accuracy of facts stated and completeness of the information contained in announcements and documents issued by or on behalf of the Company to Shareholders in connection with the Exit Offer. 11. RATIONALE FOR THE DELISTING AND THE OFFEROR S INTENTIONS The information on the Offeror s rationale for the Delisting and the Offeror s intentions relating to the Company and the Group has been extracted from paragraph 5 of the Exit Offer Letter and reproduced below. 5. RATIONALE FOR THE DELISTING AND THE OFFEROR S INTENTIONS 5.1 Business Synergies and Greater Management Flexibility The Offeror is making the Delisting Proposal and Exit Offer with a view to delisting the Company from the SGX-ST and exercising any right of compulsory acquisition under Section 215(1) of the Companies Act. The Offeror believes that there is considerable scope for the INOAC Group and the Company (together with its subsidiaries, the Group ) to work closely to achieve business synergies by sharing manufacturing facilities, collaborating in research and development, and consolidating their sales and marketing efforts in selected markets. Privatising the Company will give the Offeror and the management of the Company more fl exibility to explore such opportunities, optimise the use of its resources and facilitate the implementation of any strategic initiatives and/or operational changes. The Offeror also believes that the Group stands to benefi t in the long term from the experience, standing and expertise of the INOAC Group in developing its existing businesses. 5.2 Clean Cash Exit Opportunity at an Upfront Premium It is noted that the Shares have not transacted at or above the Exit Offer Price within the past two (2) years. The Offeror believes that, through the Delisting Proposal and Exit Offer, the accepting Shareholders will have an opportunity to realise their investments in the Company for a cash consideration at a premium over the historical transacted prices of the Shares on the SGX-ST, without incurring any brokerage and other trading costs. 21

23 LETTER TO SHAREHOLDERS The following table benchmarks the Exit Offer Price against the historical transacted prices of the Shares on the SGX-ST: Description Share Price (S$) (1) Premium of Exit Offer Price over Share Price (2) (%) (i) Last transacted price per Share on 2 July 2013 (being the last full day of trading in the Shares on the SGX- ST prior to the Joint Announcement Date (the Last Market Day )) (ii) Last transacted price per Share on 19 June 2013 (being the last full day of trading prior to the release of a holding announcement by the Company on 20 June 2013) (iii) (iv) (v) (vi) VWAP (3) for the one-month period prior to and including the Last Market Day VWAP for the three-month period prior to and including the Last Market Day VWAP for the six-month period prior to and including the Last Market Day VWAP for the 12-month period prior to and including the Last Market Day Source: Bloomberg L.P. Notes: (1) The historical market prices and the corresponding premium are computed based on data extracted from Bloomberg L.P. (such data excluding off-market transactions). (2) Computed based on the share prices which were rounded to the nearest four (4) decimal places. (3) Volume weighted average transacted price ( VWAP ). (4) Market Day refers to a day on which the SGX-ST is open for the trading of securities. 5.3 Low Trading Liquidity The trading liquidity of the Shares on the SGX-ST in the past year has been generally thin. The average daily trading volume of the Shares for the one-month, three-month, sixmonth, and 12-month periods prior to and including the Last Market Day are as follows: Period prior to and including the Last Market Day Average Daily Trading Volume (1) Approximate percentage of total number of Shares (%) Last one (1) month 4,026, Last three (3) months 2,466, Last six (6) months 1,834, Last 12 months 1,171, Source: Bloomberg L.P. 22

24 LETTER TO SHAREHOLDERS Note: (1) The average daily trading volume is computed based on the total trading volume of the Shares (excluding off-market transactions) for all Market Days for the relevant periods immediately prior to and including the Last Market Day, divided by the total number of Market Days during the respective periods. In view of the low trading liquidity during the periods prior to and including the Last Market Day, the Offeror believes that the Exit Offer represents an opportunity for Shareholders to realise their investments in Shares at a price (without incurring any brokerage and other trading costs) which may not otherwise be readily available. 5.4 No Need for Access to Capital Markets Since 1 January 2008, the Company has not carried out any exercise to raise cash funding on the SGX-ST. The Company is unlikely to require access to Singapore capital markets to fi nance its operations in the foreseeable future. Accordingly, it is not necessary for the Company to maintain a listing on the SGX-ST. 5.5 Offeror s Intentions Following the close of the Exit Offer, the Offeror will undertake a comprehensive review of the businesses, organisation, operations and fi xed assets of the Company, its subsidiaries, joint ventures and associated companies. This review will help the Offeror determine the optimal business strategy for the Group. Save as disclosed above, the Offeror has no current intention of (a) making material changes to the existing business of the Group, (b) re-deploying the fi xed assets of the Group, or (c) discontinuing the employment of the employees of the Group, other than in the ordinary course of business. In addition, the Offeror has no current intention of seeking a listing of the Company on another stock exchange. Nonetheless, the Offeror retains the flexibility at any time to consider options or opportunities which may present themselves, and which it regards to be in the interests of the Offeror and/or the Group. 5.6 Compulsory Acquisition In the event the Offeror acquires not less than 90% of the issued Shares (other than those already held by the Offeror, its related corporations and their respective nominees as at the date of the Exit Offer) pursuant to the Exit Offer, the Offeror will be entitled to exercise the right of compulsory acquisition under Section 215(1) of the Companies Act to acquire all the remaining issued Shares at the Exit Offer Price. The Offeror intends to exercise its right of compulsory acquisition in the event that the Offeror acquires at least 90% of the issued Shares (not held by the Offeror, its related corporations or their respective nominees as at the date of the Exit Offer). If so, and upon completion of the compulsory acquisition, the Company will then become a wholly-owned subsidiary of the Offeror. 23

25 LETTER TO SHAREHOLDERS In addition, Shareholders who do not accept the Exit Offer would have a corresponding right, under and subject to Section 215(3) of the Companies Act, to require the Offeror to acquire their Shares at the Exit Offer Price by serving notice requiring the Offeror to do so, in the event that the Shares acquired by the Offeror pursuant to the Exit Offer, together with any other Shares held by the Offeror, its related corporations and their respective nominees comprise 90% or more of the total issued Shares. Shareholders who have not accepted the Exit Offer and who wish to exercise their rights under Section 215(3) of the Companies Act are advised to seek their own independent legal advice. Shareholders should read carefully Section 13 of the Letter to Shareholders entitled Implications of Compulsory Acquisition and Delisting set out in the Delisting Circular. 12. OVERSEAS SHAREHOLDERS This Circular does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy any security, nor is it a solicitation of any vote or approval in any jurisdiction, nor shall there b e any sale, issuance or transfer of the securities referred to in this Circular in any jurisdiction in contravention of applicable law. The Exit Offer will be made solely by the Exit Offer Letter, and the relevant Acceptance Forms, which will contain the full terms and conditions of the Exit Offer, including details of how the Exit Offer may be accepted The availability of the Exit Offer to the Shareholders whose addresses are outside Singapore, as shown on the Register of Members of the Company or, as the case may be, in the records of CDP may be affected by the laws of the relevant overseas jurisdictions. Accordingly, any Overseas Shareholder should inform himself about and observe any applicable legal requirements in his own jurisdiction, and exercise caution in relation to the Exit Offer, as the Exit Offer Letter, the Acceptance Forms and this Circular have not been reviewed by any regulatory authority in any overseas jurisdiction. Where there are potential restrictions on sending the Exit Offer Letter, the Acceptance Forms and this Circular to any overseas jurisdiction, the Offeror, CIMB, CDP and the Company each reserves the right not to send these documents to such overseas jurisdictions. For the avoidance of doubt, the Exit Offer is open to all the Shareholders holding Offer Shares, including those to whom the Exit Offer Letter, the Acceptance Forms and this Circular have not been, or may not be, sent Copies of the Exit Offer Letter, the relevant Acceptance Forms, this Circular and any other formal documentation relating to the Exit Offer are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in or into or from any jurisdiction where the making of or the acceptance of the Exit Offer would violate the applicable law of that jurisdiction ( Restricted Jurisdiction ) and will not be capable of acceptance by any such use, instrumentality or facility within any Restricted Jurisdiction and persons receiving such documents (including custodians, nominees and trustees) must not mail or otherwise forward, distribute or send them in or into or from any Restricted Jurisdiction. The Exit Offer (unless otherwise determined by the Offeror or CIMB and permitted by applicable law and regulation) will not be made, directly or indirectly, in or into, or by the use of mails of, or by any means or instrumentality (including, without limitation, telephonically or electronically) of interstate or foreign commerce of, or any facility of a national, state or other securities exchange of, any Restricted Jurisdiction and the Exit Offer will not be capable of acceptance by any such use, means, instrumentality or facility. 24

26 LETTER TO SHAREHOLDERS Overseas Shareholders may, nonetheless, obtain copies of the Exit Offer Letter, the relevant Acceptance Forms, this Circular and any related documents, during normal business hours, from the date of the Exit Offer Letter and up to the Closing Date, from the Offeror through its receiving agent, Boardroom Corporate & Advisory Services Pte. Ltd., at 50 Raffl es Place, #32-01 Singapore Land Tower, Singapore Alternatively, an Overseas Shareholder may write in to the Offeror through Boardroom Corporate & Advisory Services Pte. Ltd. at the address listed above to request for the Exit Offer Letter, the relevant Acceptance Forms, this Circular and any related documents to be sent to an address in Singapore by ordinary post at the Overseas Shareholder s own risk (the last day for despatch in respect of such request shall be a date falling three (3) Market Days prior to the Closing Date) It is the responsibility of any Overseas Shareholder who wishes to (a) request for the Exit Offer Letter, the relevant Acceptance Forms, this Circular and/or any related documents; and/or (b) accept the Exit Offer, to satisfy himself as to the full observance of the laws of the relevant jurisdiction in that connection, including the obtaining of any governmental or other consent which may be required, and compliance with all necessary formalities or legal requirements and the payment of any taxes, imposts, duties or other requisite payments due in such jurisdiction. Such Overseas Shareholder shall be liable for any such taxes, imposts, duties or other requisite payments payable and the Offeror, CIMB, CDP, the Company and/or any person acting on its behalf shall be fully indemnifi ed and held harmless by such Overseas Shareholder for any such taxes, imposts, duties or other requisite payments as the Offeror, CIMB, CDP, the Company and/or any person acting on its behalf may be required to pay. In (i) requesting for the Exit Offer Letter, the relevant Acceptance Forms, this Circular and/or any related documents; and/ or (ii) accepting the Exit Offer, the Overseas Shareholder represents and warrants to the Offeror, CDP, CIMB and the Company that he is in full observance of the laws of the relevant jurisdiction in that connection, and that he is in full compliance with all necessary formalities or legal requirements. ANY OVERSEAS SHAREHOLDER WHO IS IN ANY DOUBT ABOUT HIS POSITION SHOULD CONSULT HIS PROFESSIONAL ADVISER IN THE RELEVANT JURISDICTION The Offeror and CIMB each reserves the right to (a) reject any acceptance of the Exit Offer where it believes, or has reason to believe, that such acceptance may violate the applicable laws of any jurisdiction; and (b) notify any matter, including the despatch of the Exit Offer Letter, any formal documentation relating to the Exit Offer, and the fact that the Exit Offer has been made, to any or all the Shareholders (including the Overseas Shareholders) by announcement to the SGX-ST and if necessary, paid advertisement in a newspaper published and circulated in Singapore, in which case such notice shall be deemed to have been suffi ciently given notwithstanding any failure by any Shareholder to receive or see such announcement or advertisement In view of the potential restrictions on sending this Circular or any related documents to any overseas jurisdiction, the Company reserves the right not to send this Circular or any related documents to any overseas jurisdiction. Subject to compliance with applicable laws, any affected Overseas Shareholder may, nonetheless, attend in person and obtain copies of this Circular during normal business hours and up to 5.30 p.m. on the Closing Date, from the Share Registrar at 50 Raffl es Place, Singapore Land Tower #32-01, Singapore Alternatively, an Overseas Shareholder may, subject to compliance with applicable laws, write to the Share Registrar at the above-stated address to request that a copy of this Circular be sent to an address in Singapore by ordinary post at his own risk, at any time up to 3 Market Days prior to the Closing Date. 25

27 LETTER TO SHAREHOLDERS 13. IMPLICATIONS OF COMPULSORY ACQUISITION AND DELISTING As stated in the Exit Offer Letter, in the event the Offeror acquires not less than 90% of the issued Shares (other than those already held by the Offeror, its related corporations and their respective nominees as at the date of the Exit Offer) pursuant to the Exit Offer, the Offeror will be entitled to exercise the right of compulsory acquisition under Section 215(1) of the Companies Act to acquire all the remaining issued Shares at the Exit Offer Price. The Offeror intends to exercise its right of compulsory acquisition in the event that the Offeror acquires at least 90% of the issued Shares (not held by the Offeror, its related corporations or their respective nominees as at the date of the Exit Offer). If so, and upon completion of the compulsory acquisition, the Company will then become a wholly-owned subsidiary of the Offeror. In addition, Shareholders who do not accept the Exit Offer would have a corresponding right, under and subject to Section 215(3) of the Companies Act, to require the Offeror to acquire their Shares at the Exit Offer Price by serving notice requiring the Offeror to do so, in the event that the Shares acquired by the Offeror pursuant to the Exit Offer, together with any other Shares held by the Offeror, its related corporations and their respective nominees comprise 90% or more of the total issued Shares. Shareholders who have not accepted the Exit Offer and who wish to exercise their rights under Section 215(3) of the Companies Act are advised to seek their own independent legal advice Shareholders should note that shares of unlisted companies are generally valued at a discount to the shares of comparable listed companies due to the lack of liquidity. Following the Delisting, it is likely to be diffi cult for Shareholders who do not accept the Exit Offer to sell their Shares in the absence of a public market for the Shares, as there is no arrangement for such Shareholders to exit their investment in the Shares. If the Company is delisted, even if such Shareholders were able to sell their Shares, it is uncertain that they would receive a comparable or better price to the Exit Offer Price. As an unlisted company, the Company will no longer be obliged to comply with the listing requirements of the SGX-ST, in particular the continuing corporate disclosure requirements under Chapter 7 of the Listing Manual and Appendices 7.1 to to the Listing Manual. Nonetheless, as a company incorporated in Singapore, the Company will still need to comply with the Companies Act and its Memorandum and Articles and the interests of Shareholders who do not accept the Exit Offer will be protected to the extent provided for by the Companies Act, which includes, inter alia, the entitlement to be sent a copy of the profi t and loss accounts and balance sheet at least 14 days before each annual general meeting, at which the accounts will be presented. If the Company is delisted from the Offi cial List of the SGX-ST, each Shareholder who holds Shares that are deposited with CDP and who does not accept the Exit Offer will be entitled to one share certifi cate representing his delisted Shares. The share certifi cate will be sent, by ordinary post and at the Shareholder s own risk, to the Shareholder s address as it appears in the records of CDP after the Company has been delisted from the Offi cial List of the SGX-ST. The Share Registrar will arrange to forward the share certifi cates to such Shareholders (who are not CPFIS Investors), by ordinary post and at the Shareholders own risk, to their respective addresses as such addresses appear in the records of CDP for their physical safekeeping. The share certifi cates belonging to CPFIS Investors will be forwarded to their respective CPF Agent Banks for their safe-keeping, details of which are set out in Appendix I to the Exit Offer Letter. If a Shareholder wishes to split his share certifi cate into other denominations, he will be required to pay for each additional share certifi cate so required, a fee of S$2 (exclusive of goods and services tax). Shareholders who are in doubt of their position should seek independent professional advice. 26

28 LETTER TO SHAREHOLDERS 14. DISCLOSURES OF HOLDINGS AND DEALINGS IN SHARES Holdings in Shares by Directors The details of the number of Shares held by Directors, as recorded in the Register of Directors Shareholdings of the Company as at the Latest Practicable Date, are as follows: Direct Interest Indirect Interest Total Interest Name of Director No. of Shares % (1) No. of Shares % (1) No. of Shares % (1) Mr. Ong Peng Koon Gilbert (2) 198,745, ,522, ,267, Ms. Chow Goon Chau Patricia (3) 28,522, ,745, ,267, Mr. Koh Gim Hoe Steven 5,364, ,364, Mr. Ang Meng Huat Anthony (4) 6,635 (5) 1,342, ,348, Notes: (1) The percentage is computed based on total number of issued Shares of 493,669,353 (excluding 24,158,000 Shares held by the Company as treasury shares). (2) Mr. Ong Peng Koon Gilbert is deemed to be interested in the 28,522,000 Shares held by his spouse, Ms. Chow Goon Chau Patricia. (3) Ms. Chow Goon Chau Patricia is deemed to be interested in the 198,745,915 Shares held by her spouse, Mr. Ong Peng Koon Gilbert. (4) Mr. Ang Meng Huat Anthony is deemed to be interested in the 1,342,000 Shares held by HL Bank Nominees (Singapore) Pte. Ltd. (5) Mr. Ang Meng Huat Anthony s direct shareholding is less than 0.01% of the issued Share capital of the Company Options held by Directors The details of the number of Options held by Directors as at the Latest Practicable Date, are as follows: Name of Director No. of Options held under Armstrong Industrial Corporation Share Option Scheme 2000 No. of Options held under Armstrong Industrial Corporation Share Option Scheme 2008 Mr. Koh Gim Hoe Steven 3,450, Dealings in Company Securities by Director None of the Directors have dealt for value in the Company s Shares or exercised their Options during the period commencing three (3) months prior to the Holding Announcement Date and ending on the Latest Practicable Date Intentions of Directors in respect of their Shares and Options (a) Mr. Ong Peng Koon Gilbert holds 198,745,915 Shares (representing approximately 40.26% of the issued share capital of the Company) as at the Latest Practicable Date. Mr. Ong Peng Koon Gilbert has confi rmed that he will vote in favour of the Delisting Resolution at the EGM and will accept the Exit Offer in respect of all the Shares held by him, in accordance with the terms of the irrevocable undertaking that he has provided to the Offeror; (b) Mr. Koh Gim Hoe Steven holds 5,364,000 Shares (representing approximately 1.09% of the issued share capital of the Company) as at the Latest Practicable Date. Mr. Koh Gim Hoe Steven has confi rmed that he will vote in favour of the Delisting Resolution at the EGM and will accept the Exit Offer in respect of all the Shares held by him; 27

29 LETTER TO SHAREHOLDERS (c) (d) (e) (f) Ms. Chow Goon Chau Patricia holds 28,522,000 Shares (representing approximately 5.78% of the issued share capital of the Company) as at the Latest Practicable Date. Ms. Chow Goon Chau Patricia has confi rmed that she will vote in favour of the Delisting Resolution at the EGM and will accept the Exit Offer in respect of all the Shares held by her, in accordance with the terms of the irrevocable undertaking that she has provided to the Offeror; Mr. Ang Meng Huat Anthony holds 6,635 Shares directly (representing approximately 0.001% of the issued share capital of the Company) and has a deemed interest in 1,342,000 Shares held by HL Bank Nominees (Singapore) Pte. Ltd. (representing approximately 0.27% of the issued share capital of the Company) as at the Latest Practicable Date. Mr. Ang Meng Huat Anthony has confi rmed that he will, and will procure HL Bank Nominees (Singapore) Pte. Ltd. to, vote in favour of the Delisting Resolution at the EGM and will accept, and will procure that HL Bank Nominees (Singapore) Pte. Ltd. accepts, the Exit Offer in respect of all the Shares held by him, and HL Bank Nominees (Singapore) Pte. Ltd., respectively; Mr. Chan Pee Teck Peter does not hold any Shares or Options; and Mr. Tan Peng Chin does not hold any Shares or Options. The directors who own Shares intend to vote in favour of the Delisting Resolution and to accept the Exit Offer in respect of all the Shares and Options held by them, hold an aggregate of 233,980,550 Shares (representing approximately 47.40% of the issued share capital of the Company) and 3,450,284 Options. In addition, as stated in the Exit Offer Letter, the Offeror has also obtained an SK Options Undertaking from Mr. Koh Gim Hoe Steven, the Deputy Chief Executive Offi cer of the Company not to exercise any of his 3,450,284 Options, into new Shares for the duration of the Exit Offer. Accordingly, as at the Latest Practicable Date, the Shareholders (including Directors) who have either (a) provided irrevocable undertakings to vote in favour of the Delisting Resolution and to accept the Exit Offer and Options Proposal in respect of all the Shares and Options held by them, and/or (b) have indicated their intention to vote in favour of the Delisting Resolution and to accept the Exit Offer in respect of all the Shares and Options held by them, hold an aggregate of 233,980,550 Shares (representing approximately 47.40% of the issued share capital of the Company) and 3,450,284 Options Holdings in Shares by Substantial Shareholders The details of the number of Shares held by substantial Shareholders, as recorded in the Register of Substantial Shareholders of the Company as at the Latest Practicable Date, are as follows: Name of Substantial Direct Interest Indirect Interest Total Interest Shareholders No. of Shares % (1) No. of Shares % (1) No. of Shares % (1) Mr. Ong Peng Koon Gilbert (2) 198,745, ,522, ,267, Ms. Chow Goon Chau Patricia (3) 28,522, ,745, ,267, Notes: (1) The percentage is computed based on total number of issued Shares of 493,669,353 (excluding 24,158,000 Shares held by the Company as treasury shares). (2) Mr. Ong Peng Koon Gilbert is deemed to be interested in the 28,522,000 Shares held by his spouse, Ms. Chow Goon Chau Patricia. (3) Ms. Chow Goon Chau Patricia is deemed to be interested in the 198,745,915 Shares held by her spouse, Mr. Ong Peng Koon Gilbert. 28

30 LETTER TO SHAREHOLDERS 15. EXEMPTION RELATING TO DIRECTORS RECOMMENDATION An application was made to the SIC to seek the SIC s ruling whether each of Mr. Ong Peng Koon Gilbert and Ms. Chow Goon Chau Patricia should be exempted from the requirement to make a recommendation on the Exit Offer to the Shareholders for the following reasons: (a) (b) Mr. Ong Peng Koon Gilbert Mr. Ong Peng Koon Gilbert is the Chairman and Chief Executive Offi cer of the Company. He is also a party acting in concert with the Offeror. Ms. Chow Goon Chau Patricia Ms. Chow Goon Chau Patricia is an Executive Director of the Company. She is also a party acting in concert with the Offeror. The SIC ruled on 17 June 2013 that each of Mr. Ong Peng Koon Gilbert and Ms. Chow Goon Chau Patricia are exempted from the requirement to make a recommendation to the Shareholders on the Exit Offer, being directors and parties acting in concert with the Offeror, face irreconcilable confl icts of interest in doing so. Nevertheless, they must still assume responsibility for the accuracy of the facts stated and opinions expressed in documents or advertisements issued by, or on behalf of, the Company to the Shareholders in connection with the Exit Offer. 16. ADVICE OF DELOITTE TO THE INDEPENDENT DIRECTORS Deloitte has been appointed as the independent fi nancial adviser to the Independent Directors in relation to the Exit Offer. The IFA Letter is set out in Appendix I to this Circular entitled Letter from Deloitte to the Independent Directors. Shareholders are advised to read and consider carefully, in its entirety, the advice of Deloitte contained therein An extract of Deloitte s advice to the Independent Directors in relation to the Exit Offer is reproduced below, and all terms and expressions used in the extract below shall bear the same meanings as attributed to them in the letter from Deloitte to the Independent Directors unless otherwise stated: 7. CONCLUSION In arriving at our advice in respect of the fi nancial terms of the Exit Offer, we have taken into account the factors which we consider to have a signifi cant bearing on our assessment which include the following: a. Our analysis of the liquidity of the Shares indicates that the historical market price of the Shares provides a meaningful reference point for comparison with the Exit Offer. b. The Shares have traded at or marginally below the Exit Offer Price in the period post the Holding Announcement Date to the Latest Practicable Date. c. We note that the market price of the Shares has traded up signifi cantly about 1 month prior to 5 July 2013 and that the market price of the Shares outperformed the benchmark indices (being FSSTI and FSTIN). It is possible that the Exit Offer is in part responsible for this rise and outperformance. d. The Exit Offer Price represents a 14.0% premium to the 1 month VWAP, a 17.0% premium to the 3 month VWAP and a 21.1% premium to the 6 month VWAP of the Shares prior to the Holding Announcement Date. This compares unfavourably to the average and median premium of 33.6% and 28.1% for the 1 month VWAP, 29.0% and 23.9% for the 3 month VWAP and 26.3% and 22.6% for the 6 month VWAP respectively for voluntary delisting offers in the two year period preceding the Joint Announcement Date up to the Latest Practicable Date. 29

31 LETTER TO SHAREHOLDERS e. The Exit Offer Price represents a 14.0% premium to the 1 month VWAP, a 17.0% premium to the 3 month VWAP and a 21.1% premium to the 6 month VWAP of the Shares prior to the Holding Announcement Date. This compares unfavourably to the average and median premium of 35.9% and 34.3% for the 1 month VWAP, 39.0% and 37.0% for the 3 month VWAP and 41.5% and 38.4% for the 6 month VWAP respectively for cash offers for privatisations in the two year period preceding the Joint Announcement Date up to the Latest Practicable Date. f. The Exit Offer Price s premium of 14.0% (for the 1 month VWAP), 17.0% (for the 3 month VWAP) and 21.1% (for the 6 month VWAP) is in range of the premiums offered for voluntary delisting offers and privatisation cash offers, however, they are lower than the average and median takeover premiums as compared to the 25 privatisation cash offers and 9 voluntary delisting exit offers. g. The Company s EBITDA margin is lower than that of the average and median EBITDA margin of Comparable Companies. The Company s net margin and return on equity are higher than the median but lower than the average of the Comparable Companies. h. The LTM EV/EBITDA of 14.0x, LTM P/E of 40.1x and the P/NTA of 2.0x as at 30 Jun 2013 implied by the Exit Offer Price are higher than the maximum of those of the Comparable Companies and signifi cantly above the average and median EV/EBITDA, P/E and P/NTA of the Comparable Companies. We note that the Comparable Companies are not under offer and that the fi nancial ratios of the Company are in general more favourable than those of the Comparable Companies. i. The LTM EV/EBITDA implied by the Exit Offer Price of 14.0x is signifi cantly higher than both the median and average of the Comparable Transactions of 3.2x and 2.7x, respectively, and the LTM P/E implied by the Exit Offer Price of 40.1x is signifi cantly higher than both the median and average of those of the Comparable Transactions of 12.3x and 12.3x respectively. j. The Offeror has stated that it does not intend to revise the Exit Offer Price. k. The Offer is conditional upon the conditions mentioned in paragraph 3.5 above. l. The Offeror is making the Delisting Proposal and Exit Offer with a view to delisting the Company from the SGX-ST and exercising any right of compulsory acquisition under Section 215(1) of the Companies Act. m. With the entrance of a new controlling shareholder, Shareholders should be aware that dividend policies and payments going forward may vary from historical norms. n. The Company has not received any competing offer(s) from the Joint Announcement Date up to the Latest Practicable Date. Having considered the factors listed in paragraph 6 and subject to the assumptions and qualifi cations set out elsewhere in this letter and taking into account the conditions prevailing as at the Latest Practicable Date, we are of the opinion that the Exit Offer is fair and reasonable and not prejudicial to the interests of the Shareholders. Accordingly, we advise the Independent Directors that they should recommend that the Shareholders ACCEPT the Exit Offer. In rendering our opinion, we have not had regard to any general or specifi c investment objectives, fi nancial situations, risk profi les, tax positions or particular needs or constraints of any individual Shareholder or any specifi c group of Shareholders and we neither assume any responsibility for, nor hold ourselves out as advisers to any person other than the Independent Directors. 30

32 LETTER TO SHAREHOLDERS Our opinion is only based on a fi nancial analysis and does not incorporate any assessment of commercial, legal, tax, regulatory or other matters. Such factors (including the aforesaid illustrations) are beyond the ambit of our review and do not fall within our terms of reference in connection with the Exit Offer. We wish to emphasize that we have been appointed to render our opinion as of the Latest Practicable Date. Our terms of reference do not require us to express, and we do not express, an opinion on the future growth prospects of the Company. Shareholders should note that the trading of the Shares is subject to, inter alia, the performance and prospects of the Group, prevailing economic conditions, economic outlook and stock market conditions and sentiments. Accordingly, our advice on the Exit Offer does not and cannot take into account future trading activities or patterns or price levels that may be established for the Shares after the Latest Practicable Date since these are governed by factors beyond the ambit of our review and also, such advice, if given, would not fall within our terms of reference in connection with the Exit Offer. Our opinion is addressed to the Independent Directors for their benefi t in connection with and for the purposes of their consideration in respect of the Offer. Any recommendations made by the Independent Directors in respect of the Exit Offer shall remain their responsibility. Whilst a copy of this letter may be reproduced in the Circular, no other person may reproduce, disseminate or quote this letter (or any part thereof) for any purpose (other than the intended purpose in relation to the Delisting Proposal and the Exit Offer) at any time and in any manner without our prior written consent in each specifi c case. Our opinion is governed by the laws of Singapore, and is strictly limited to the matters stated in this letter and do not apply by implication to any other matter. 17. INDEPENDENT DIRECTORS RECOMMENDATIONS Shareholders are advised by the Independent Directors to read and consider carefully the following recommendations of the Independent Directors and the advice of Deloitte contained in the IFA Letter as reproduced in Appendix I to this Circular, in its entirety. The Independent Directors also draw the attention of the Shareholders to Section 13 of this Letter to the Shareholders entitled Implications of Compulsory Acquisition and Delisting. In reaching the recommendations set out below, the Independent Directors have considered carefully, amongst other things, the terms of the Delisting Proposal including the Exit Offer and the advice given by Deloitte. Having taken the above matters into consideration, the Independent Directors concur with the advice of Deloitte in respect of the Exit Offer. Accordingly, the Independent Directors recommend that Shareholders VOTE IN FAVOUR of the Delisting Resolution at the EGM, and ACCEPT the Exit Offer in respect of Shares owned by them. Shareholders should note that they should not rely on the advice of Deloitte as the sole basis for deciding whether or not to accept the Exit Offer. In rendering the above advice and giving the above recommendations, the Independent Directors have not taken into consideration nor had regard to the general or specifi c investment objectives, fi nancial situation, risk profi le, tax position and/or particular or unique needs and constraints of any individual Shareholder. As each Shareholder would have different investment objectives and profi les, the Independent Directors recommend that any individual Shareholder who may require specifi c advice in relation to his investment objectives, portfolio and/or Shares should consult his stockbroker, bank manager, solicitor, accountant, tax adviser or other professional adviser immediately. 31

33 LETTER TO SHAREHOLDERS 18. EXTRAORDINARY GENERAL MEETING The EGM, as convened by the notice attached to this Circular, will be held at InterContinental Singapore, Ballroom 1, Level 2, 80 Middle Road, Singapore on Monday, 21 October 2013 at 10 a.m. The purpose of the EGM is for Shareholders to consider and, if thought fi t, pass, on a poll, with or without amendments, the Delisting Resolution set out in the notice of EGM on page N-1 of this Circular. 19. ACTION TO BE TAKEN BY SHAREHOLDERS Voting at the EGM Shareholders will fi nd enclosed with this Circular the notice of EGM and a proxy form. If a Shareholder is unable to attend the EGM and wishes to appoint a proxy to attend and vote on his behalf, he should complete, sign and return the attached proxy form in accordance with the instructions printed thereon as soon as possible and, in any event, so as to reach the registered offi ce of the Company at 531 Bukit Batok Street 23, Singapore , not later than 48 hours before the time of the EGM on Saturday, 19 October 2013 at 10 a.m. Completion and return of a proxy form by a Shareholder will not prevent him from attending and voting in person at the EGM if he so wishes, in place of his proxy Acceptance of the Exit Offer and/or Options Proposal The Exit Offer Letter and the relevant Acceptance Form(s) have been despatched to Shareholders by ordinary post together with this Circular. To accept the Exit Offer, and/or Options Proposal, you should complete, sign and return the relevant Acceptance Form(s) in accordance with the provisions and instructions stated in the Exit Offer Letter and the relevant Acceptance Form(s). Additional information on the procedures for acceptance and settlement of the Exit Offer and/or the Options Proposal is set out in Appendix I to the Exit Offer Letter and paragraph 4 of the Options Proposal, respectively. Shareholders should note that if the Delisting Resolution is not approved at the EGM, the condition to the Exit Offer will not be fulfi lled. In such an event, those Offer Shares in respect of which acceptances have been received shall be returned to the relevant Shareholders in accordance with the procedures set out in the Acceptance Form(s). If you do not wish to accept the Exit Offer, and/or Options Proposal, you do not need to take any action. In the event of the delisting of the Company, you will continue to hold Shares in the Company which will then be an unlisted company. If you hold Shares that are deposited with CDP, share certifi cates in respect of your Shares that are deposited with CDP will be sent, by ordinary mail and at your own risk, to your mailing address as it appears in the records of CDP, after the Company has been delisted from the Offi cial List of the SGX-ST. Section 13 of this Letter to the Shareholders sets out further details in the event that a Shareholder chooses not to accept the Exit Offer Information pertaining to CPFIS Investor Information on the Exit Offer pertaining to CPFIS Investors is set out in paragraph 11 to the Exit Offer Letter. 20. MAINTENANCE OF FREE FLOAT In the event that the Delisting Resolution Approval Conditions or the Minimum Acceptance Condition is not fulfi lled, and the free fl oat of the Shares falls below 10% of the issued Shares, the Company shall take appropriate measures to restore the free fl oat to at least 10% of the issued Shares to ensure that it complies with Rule 723 of the Listing Manual. 32

34 LETTER TO SHAREHOLDERS 21. DIRECTORS RESPONSIBILITY STATEMENT The Directors (including any Director who may have delegated detailed supervision of this Circular) collectively and individually accept full responsibility for the accuracy of the information given in this Circular (other than those relating to the Offeror, the Concert Parties, the Exit Offer, the recommendations of the Independent Directors and Appendices I, III, VIII, IX) and confi rm after making all reasonable enquiries, that to the best of their knowledge and belief, this Circular constitutes full and true disclosure of all material facts about the Delisting Proposal, the Company and its subsidiaries, and the Directors are not aware of any material facts the omission of which would make any statement in this Circular misleading. In respect of the IFA Letters, the responsibility of the Directors has been to ensure that the facts stated therein with respect to the Group are, to the best of their knowledge and belief, fair and accurate in all material respects. The recommendations of the Independent Directors to Shareholders set out in Section 17 of this Letter to the Shareholders entitled Independent Directors Recommendations are the responsibilities of the Independent Directors. Where information in this Circular has been extracted from published or otherwise publicly available sources or obtained from a named source, the sole responsibility of the Directors has been to ensure that such information has been accurately and correctly extracted from those sources and/ or reproduced in this Circular in its proper form and context. 22. CONSENTS The independent fi nancial adviser, Deloitte, has given and has not withdrawn its written consent to the issue of this Circular with the inclusion of its name in this Circular, the IFA Letters set out in Appendix I and IX to this Circular, and all references thereto in the form and context in which they appear in this Circular The Company s independent auditors, EY has given and has not withdrawn its written consent to the issue of this Circular with the inclusion herein of the audited fi nancial statements of the Group for FY2012 set out in Appendix IV to this Circular, EY s report in respect of the review of the condensed interim fi nancial information for the period from 1 January 2013 to 30 June 2013 set out in Appendix VIII to this Circular and the references to their name in the form and context in which they appear in this Circular. 23. DOCUMENTS AVAILABLE FOR INSPECTION Copies of the following documents will be available for inspection at the registered offi ce of the Company at 531 Bukit Batok Street 23, Singapore , during normal business hours for the period during which the Exit Offer remains open for acceptance: (a) (b) (c) (d) (e) (f) the Memorandum and Articles; audited fi nancial statements of the Group for FY2012; the unaudited second quarter fi nancial statements and dividend announcement of the Group for the period ended 30 June 2013; the letter from the Offeror to the Company dated 5 July 2013 in respect of the Delisting Proposal; the IFA Letters; EY s report in respect of the review of the condensed interim fi nancial information for the period from 1 January 2013 to 30 June 2013; 33

35 LETTER TO SHAREHOLDERS (g) (h) the letters of consent referred to in Section 22 of this Letter to the Shareholders; the Ong Family Undertakings dated 5 July 2013; and (i) the SK Options Undertaking dated 5 July ADDITIONAL INFORMATION Your attention is drawn to the Appendices which form part of this Circular. Yours faithfully For and on behalf of the Board of Directors Koh Gim Hoe Steven Deputy Chief Executive Officer Armstrong Industrial Corporation Limited 34

36 APPENDIX I LETTER FROM DELOITTE TO THE INDEPENDENT DIRECTORS 26 September 2013 The Independent Directors Armstrong Industrial Corporation Limited 531, Bukit Batok St 23, Singapore Dear Sirs, PROPOSED VOLUNTARY DELISTING OF ARMSTRONG INDUSTRIAL CORPORATION LIMITED PURSUANT TO RULES 1307 AND 1309 OF THE SGX-ST LISTING MANUAL Unless otherwise defi ned or the context otherwise requires, all terms defi ned in the Circular to the Shareholders dated 26 September 2013 ( Circular ) shall have the same meaning herein. 1. INTRODUCTION On 20 June 2013, (the Holding Announcement Date ), Armstrong Industrial Corporation Limited (the Company ) announced that the Board of Directors of the Company had received a Non-Binding Indicative Proposal from a consortium involving the major shareholder of the Company that may result in the Delisting of the Company. On 5 July 2013, (the Joint Announcement Date ) the Company and AGP Asia Holding Pte. Ltd. (the Offeror ) jointly announced that the Offeror had presented to the Directors, a formal proposal (the Delisting Proposal ) to seek the voluntary delisting of the Company (the Delisting ) from the Offi cial List of SGX-ST pursuant to Rules 1307 and 1309 of the Listing Manual. Under the Delisting Proposal, CIMB will make, for and on behalf of the Offeror, the Exit Offer to acquire all the Offer Shares of the Company at the Exit Offer Price of S$0.40 in cash for each Offer Share. We, Deloitte & Touche Corporate Finance Pte Ltd ( DTCF ), have been appointed by the Company to advise the Independent Directors in respect of their recommendation on the actions to be taken by the Shareholders in respect of the Exit Offer. This letter sets out our assessment of the fi nancial terms of the Exit Offer and our advice to the Independent Directors. It will form part of the Circular dated 26 September 2013 issued by the Company to provide the Shareholders with details of the Delisting Proposal, Exit Offer and the recommendations of the Independent Directors on the actions to be taken by the Shareholders in respect of the Exit Offer. 2. TERMS OF REFERENCE We have been appointed to advise the Independent Directors in respect of their recommendation on the actions to be taken by the Shareholders in respect of the Exit Offer. We have confi ned our assessment to the fi nancial terms of the Exit Offer. We are not required to evaluate, comment or form a view on the commercial risks or merits of the Exit Offer or on the future prospects and earnings potential of the Company and its subsidiaries and associated company (the Group ) and we have made no such evaluation. Such evaluation, if any, remains the responsibility of the directors of the Company (the Directors ) and the management of the Company (the Management ). We have drawn upon their views to the extent we have deemed necessary or appropriate in arriving at our advice as set out in this letter. We do not express any view as to the prices at which the Shares may trade in the absence of the Exit Offer. I-1

37 APPENDIX I LETTER FROM DELOITTE TO THE INDEPENDENT DIRECTORS We do not make any representation or warranty in relation to the merits of the Exit Offer nor have we been requested, and we do not express an opinion on, the relative merits of the Exit Offer as compared to any other alternative transaction. We have not been instructed or authorized to solicit, and we have not solicited, any indications of interest from any third party with respect to the Shares or the Exit Offer. We have not made an independent evaluation or appraisal of the assets and liabilities including without limitation the real properties of the Group and we have not been furnished with any such independent evaluation or appraisal. We have held discussions with the Independent Directors and Management and have examined publicly available information collated by us as well as information, written and verbal, provided to us by the Independent Directors, the Management and the professional advisers of the Company (which has included its solicitors). We have relied upon and assumed the accuracy of the relevant information, both written and verbal, provided to us by the aforesaid parties and have not independently verifi ed such information, whether written or verbal, and accordingly cannot and do not warrant, and do not accept any responsibility for the accuracy, completeness and adequacy of such information. We have not independently verifi ed and have assumed that all statements of fact, belief, opinion and intention made by the Directors in the Circular have been reasonably made after due and careful enquiry. Accordingly, no representation or warranty (whether expressed or implied) is made and no responsibility is accepted by us concerning the accuracy, completeness or adequacy of such information. We have nonetheless made reasonable enquiries and exercised our judgement on the reasonable use of such information and have found no reason to doubt the accuracy or reliability of such information. Where information relating to the Exit Offer, and the parties acting or deemed to be acting in concert with the Offeror in connection with the Exit Offer, has been extracted from published or otherwise publicly available sources, our sole responsibility has been to ensure that such information has been accurately and correctly extracted from the relevant sources. Our opinion is based upon market, economic, industry, monetary, regulatory and other conditions in effect on, and the information made available to us as at, the Latest Practicable Date. In rendering our advice, we have not had regard to the general or specifi c investment objectives, fi nancial situation, risk profi les, tax position or particular needs and constraints of any Shareholder. As different Shareholders have different investment profi les and objectives, we advise the Independent Directors to recommend that any Shareholder who may require specifi c advice in relation to his or her investment portfolio should consult his or her stockbroker, bank manager, solicitor, accountant, tax adviser or other professional adviser. The Company has been separately advised by its own professional advisers in the preparation of the Circular other than this letter. We have had no role or involvement and have not and will not provide any advice (fi nancial or otherwise) in the preparation, review and verifi cation of the Circular other than this letter. Accordingly, we take no responsibility for and express no views, whether expressed or implied, on the contents of the Circular other than this letter. Whilst a copy of this letter may be reproduced in the Circular, neither the Company nor the Independent Directors may reproduce, disseminate or quote this letter (or any part thereof) for any other purposes at any time and in any manner without our prior written consent in each specifi c case. Our advice in relation to the fi nancial terms of the Exit Offer should be considered in the context of the entirety of this letter and the Circular. 3. THE TERMS OF THE OFFER Shareholders should refer to the Delisting Proposal setting out, inter alia, the background of the Offeror, the terms and conditions of the Offer and the intentions of the Offeror with respect to the Company, Shareholders are advised to read these documents and the terms and conditions contained therein very carefully. I-2

38 APPENDIX I LETTER FROM DELOITTE TO THE INDEPENDENT DIRECTORS The following summary of the salient terms of the Exit Offer have been obtained from the Delisting Proposal and paragraph 4 of the Circular The Exit Offer As stated in the Circular, CIMB, for and on behalf of the Offeror, has offered to acquire all the Offer Shares in accordance with the Code. The Exit Offer for the Offer Shares is made on the terms and subject to the conditions set out in this Circular, the Exit Offer Letter and the Acceptance Forms, on the following basis: For each Offer Share: S$0.40 in cash (the Exit Offer Price ). The Offeror does not intend to revise the Exit Offer Price under any circumstances Offer Shares As stated in the Circular, the Exit Offer is extended to: (a) (b) all Shares other than those held by the Company as treasury shares and those held, directly or indirectly, by the Offeror; and all new Shares unconditionally issued or to be issued pursuant to the valid exercise, prior to the close of the Exit Offer, of any Option to subscribe for new Shares granted under the Share Option Schemes. (collectively, the Offer Shares ) 3.3. No Encumbrances As stated in the Circular, the Offer Shares will be acquired fully paid and free from all liens, equities, mortgages, charges, encumbrances, rights of pre-emption and any other third party rights and interests of any nature whatsoever, and together with all rights, benefi ts and entitlements attached thereto as at the Joint Announcement Date and thereafter attaching thereto (including the right to receive and retain all dividends, rights and other distributions, if any, which may be announced, declared, paid or made thereon by the Company, on or after the Joint Announcement Date). If any dividend, other distribution or return of capital is declared, made or paid by the Company on or after the Joint Announcement Date, the Offeror reserves the right to reduce the Exit Offer Price by the amount of such dividend, distribution or return of capital Closing Date The Exit Offer is expected to close by 5.30 p.m. on Friday, 08 November 2013 or such later date(s) as may be announced from time to time by or on behalf of the Offeror, being the last day for the lodgment of acceptances of the Exit Offer Exit Offer Conditions As stated in the Circular, the Delisting and the Exit Offer will be conditional on: (a) (i) the Delisting Resolution being approved by a majority of at least 75% of the total number of issued Shares (excluding treasury shares) held by the Shareholders present and voting, on a poll, either in person or by proxy at the EGM to be convened for the Shareholders to vote on the Delisting Resolution; and (ii) the Delisting Resolution not being voted against by 10% or more of the total number of issued Shares (excluding treasury shares) held by the Shareholders present and voting, on a poll, either in person or by proxy at the EGM, (collectively, the Delisting Resolution Approval Condition ); and I-3

39 APPENDIX I LETTER FROM DELOITTE TO THE INDEPENDENT DIRECTORS (b) the Offeror having received, by the close of the Exit Offer, valid acceptances in respect of such number of Offer Shares which, when taken together with the Shares owned, controlled or agreed to be acquired by the Offeror and parties acting in concert with it (either before or during the Exit Offer and pursuant to the Exit Offer or otherwise), will result in the Offeror and parties acting in concert with it holding such number of Shares carrying not less than 72% of the total voting rights attributable to the issued share capital of the Company as at the close of the Exit Offer (including any voting rights attributable to the Shares issued or to be issued pursuant to the valid exercise of Options on or prior to the close of the Exit Offer) (the Minimum Acceptance Condition ). Accordingly, the Exit Offer will not become or be capable of being declared unconditional as to acceptances until the close of the Exit Offer, unless at any time prior to the close of the Exit Offer, the Offeror has received valid acceptances in respect of such number of Offer Shares which will result in the Offeror and parties acting in concert with it holding such number of Shares carrying not less than 72% of voting rights attributable to the maximum potential issued share capital of the Company. For this purpose, the maximum potential issued share capital of the Company means the total number of Shares which would be in issue had all the Options been validly exercised as at the date of such declaration. Under Rule 1307(2) of the Listing Manual, all Shareholders, including the Directors and controlling Shareholders, are not required to abstain from voting on the Delisting Resolution. Accordingly, Mr. Ong Peng Koon Gilbert, a Director and a controlling Shareholder, and his wife, Ms. Chow Goon Chau Patricia, a Director, are entitled to, and have undertaken pursuant to the Ong Family Undertakings, to vote their respective entire shareholding interests in the Company in favour of the Delisting Resolution at the EGM and to accept the Exit Offer in respect of all their Shares. The respective shareholdings of Mr. Ong Peng Koon Gilbert and Ms. Chow Goon Chau Patricia in the Company are set out in paragraph 14 of the Circular. Further details of these irrevocable undertakings have been set out in paragraph 3 of the Circular. As at the Latest Practicable Date, the Offeror does not hold any Shares in the Company. However, the Concert Parties collectively hold, directly or indirectly, 229,775,629 Shares representing approximately % of the total issued Shares. Shareholders should note that the Delisting and the Exit Offer will be conditional upon the Delisting Resolution Approval Conditions being satisfied and the Minimum Acceptance Condition in respect of the Exit Offer being satisfied. If any of the above conditions is not fulfilled, the Delisting will not proceed and the Exit Offer will lapse, and the Company will remain listed on the SGX-ST. Shareholders should also note that approving the Delisting Resolution at the EGM does NOT automatically mean that they have accepted the Exit Offer. Shareholders should refer to paragraph 19 of the Circular to the Shareholders entitled, Actions to be taken by Shareholders for further details on the actions to take if shareholders wish to accept the Exit Offer Acceptances Shareholders may choose to accept the Exit Offer in respect of all or part of their holdings of Offer Shares Duration As stated in the Circular, the Exit Offer will be open for acceptance by Shareholders from the date of despatch of the Circular, and will remain open for at least 14 days after the date of the announcement of the fulfi llment of the Delisting Resolution Approval Conditions. Shareholders may choose to accept the Exit Offer before the EGM. However such acceptances would be conditional on the Delisting Resolution being approved at the EGM and the Minimum Acceptance Condition being fulfi lled. If the Delisting Resolution Approval Conditions or the Minimum Acceptance Condition is not fulfi lled, the conditions to the Delisting and the Exit Offer will not have been fulfi lled and the Exit Offer will lapse, and the Shareholders and the Offeror will cease to be bound by any prior acceptances of the Exit Offer by any Shareholder. I-4

40 APPENDIX I LETTER FROM DELOITTE TO THE INDEPENDENT DIRECTORS Although no extension of the Exit Offer is currently contemplated, if the Exit Offer is extended, an announcement will be made of such extension, and the Exit Offer will remain open for acceptance for such period as may be announced. If the Exit Offer is extended, holders who have validly accepted the Exit Offer in respect of part of their Shares will be entitled to tender additional Shares in acceptance of the Exit Offer. 4. INFORMATION ON THE COMPANY AND THE OFFEROR 4.1. Information on the Company Information on the Company is set out in paragraph 2 of the Delisting Proposal and paragraph 9 of the Circular Information on the Offeror and the parties acting in concert with it Information on the Offeror is set out in paragraph 3 of the Delisting Proposal and paragraph 8 of the Circular. We highlight the following sentences Polyfoam is incorporated in Singapore and is a wholly-owned subsidiary of INOAC Corporation ( INOAC ). The INOAC group of companies (the INOAC Group ), which is headquartered in Japan, is a conglomerate engaged in, inter alia, the development and supply of materials based on urethane, rubber, plastic and synthetic materials. 5. RATIONALE FOR DELISTING We refer to paragraph 7 of the Delisting Proposal and paragraph 11 of the Circular. We highlight that this paragraph further states the following The Offeror believes that there is considerable scope for the INOAC Group and the Company (together with its subsidiaries, (the Group ) to work closely to achieve business synergies by sharing manufacturing facilities, collaborating in research and development, and consolidating their sales and marketing efforts in selected markets. Privatising the Company will give the Offeror and the management of the Company more fl exibility to explore such opportunities, optimise the use of its resources and facilitate the implementation of any strategic initiatives and/or operational changes. The Offeror also believes that the Group stands to benefi t in the long term from the experience, standing and expertise of the INOAC Group in developing its existing businesses. 6. FINANCIAL ASSESSMENT OF THE OFFER In assessing the fi nancial terms of the Offer, we have taken into account the following factors: a. Liquidity of the Shares; b. Market quotations for the Shares; c. Comparison of prices for the Shares with selected, relevant indices; d. Volume weighted average prices for the Shares; e. Premia for takeovers of SGX-listed companies; f. Comparison of ratings with Comparable Companies; g. Comparison of ratings with Comparable Transactions; and h. Other considerations. I-5

41 APPENDIX I LETTER FROM DELOITTE TO THE INDEPENDENT DIRECTORS 6.1. Liquidity of the Shares Share prices transacted in the equity capital market can be affected by their liquidity which for this purpose is expressed as average daily volume traded as a percentage of free fl oat. In order to evaluate whether the historical market prices of the Shares provide a meaningful reference point for comparison of the Exit Offer, we have considered the historical liquidity of the Shares over selected reference periods. We have also compared the liquidity of the Shares with the liquidity of the ten largest companies by market capitalisation within the FTSE Straits Times Index. Reference Periods Joint Announcement Date to the Latest Practicable Date (5 July 12 September 2013) Average Daily Trading Volume ( 000 Shares) Approximate Percentage of Free Float (%) Latest Practicable Date % Joint Announcement Date to the Latest Practicable Date 1, % Prior to Joint Announcement Date Last trading day prior to the Joint Announcement date (2 July 2013) Between the Holding Announcement Date and the Joint Announcement Date 16, % 4, % Prior to Holding Announcement Date Last 1 month VWAP prior to Holding Announcement Date 3, % Last 3 month VWAP prior to Holding Announcement Date 1, % Last 6 month VWAP prior to Holding Announcement Date 1, % Last 1 year VWAP prior to Holding Announcement Date 1, % Last 2 year VWAP prior to Holding Announcement Date 1, % Table 1 Liquidity of the Shares Source: Bloomberg We note that the liquidity of the Shares in the reference periods prior to the Holding Announcement Date was between 0.48% to 1.43%. The liquidity of the Shares between the Holding Announcement Date and the Joint Announcement Date was 1.98% and on the last trading day prior to the Joint Announcement Date was 7.15%. We have also benchmarked the liquidity of the Shares to the liquidity of the Top 10 SGX Companies (by market capitalization) for the one year period preceding the Holding Announcement Date. Please note that the composition of Top 10 SGX Companies is different between these two reference periods. We note that the liquidity of the Top 10 SGX Companies in the one year period prior to the Holding Announcement Date ranged from 0.10% to 0.53% with an average and median of 0.25% and 0.20% respectively. The liquidity of the Shares during this one year reference period was 0.48% and as such is (i) on the higher end of the range of the liquidity of the Top 10 SGX Companies, and (ii) signifi cantly above the median and average liquidity of the Top 10 SGX Companies. I-6

42 APPENDIX I LETTER FROM DELOITTE TO THE INDEPENDENT DIRECTORS Overall, this analysis indicates that the historical market price of the Shares provides a meaningful reference point for comparison with the Exit Offer. However, Shareholders should note that the level of liquidity of the Shares may make it diffi cult for Shareholders with substantial holdings to realise their Shares through the market. The liquidity of the Shares especially the period after the Holding Announcement Date and Joint Announcement Date should not in any way be relied upon as an indication of the future liquidity of the Shares. There is no assurance that the liquidity of the Shares will remain at these levels after the Exit Offer closes Market Quotations for the Shares We have compared the Exit Offer Price against the historical and current prices of the Shares. We set out below a chart showing the Exit Offer relative to the daily closing prices and trading volumes of the Shares for the period from 20 June 2010 (being the three year period up to the last trading day prior to the Holding Announcement Date) to the Latest Practicable Date. Chart 1 - Price-Volume chart of the Company from 20 June 2010 (being the three year period up to the Holding Announcement Date) to the Latest Practicable Date Source: Bloomberg A summary of the signifi cant corporate developments and announcements of fi nancial performance made by the Company for the three year period prior to 20 June 2013 (being the Holding Announcement Date) to the Latest Practicable Date is as follows: Notes Date Event 1) 11 June 2010 The Board of Armstrong Industrial Corp. Ltd. has been notifi ed that the Company s major shareholder had been approached by a third party expressing interest to consider a possible offer for the shares or the business of the Company. 2) 12 August 2010 Announcement of net profi t of S$7.1 million for 6 months ended 30 June 2010, representing an increase of 126% as compared to the 6 months ended 30 June Declaration of interim one-tier tax-exempt dividend of S$0.02 per ordinary share for the fi nancial year ending 31 December ) 25 February 2011 Announcement of net profi t of S$24.9 million for FY2010, representing an increase of 77.1% as compared to FY ) 05 April 2011 Book closure date for a fi nal one-tier tax-exempt dividend of S$0.02 per ordinary share for the year ended 31 December I-7

43 APPENDIX I LETTER FROM DELOITTE TO THE INDEPENDENT DIRECTORS Notes Date Event 5) 13 May 2011 Announcement of net profi t of S$4.01 million for the quarter ended 31 March 2011, representing a decrease of 43.5% as compared to the quarter ended 31 March ) 30 June 2011 As of period ended on 30 June 2011, the Company repurchased 2,861,000 shares, representing 0.57% for S$0.9 million. 7) 12 August 2011 Announcement of net profi t of S$2.09 million for the quarter ended 30 June 2011, representing a decrease of 70.4% as compared to the quarter ended 30 June ) 27 October 2011 The Company does not expect the performance of the second half to improve signifi cantly as compared to the fi rst half. This was due to two of Armstrong s buildings located in Rojana Industrial Park II in Thailand being heavily affected by fl oods and a few of the Company s large customers were also heavily affected due to the fl oods in Ayutthaya. 9) 11 November 2011 The Company announced a net profi t of S$6.2 million for the nine months ended 30 September 2011, representing a decrease of 66.7% as compared to the nine months ended 30 September ) 20 January 2012 The Company announced that it expects to record a net loss for the fourth quarter. The severe fl ood in Thailand had affected operations at two of the Group s factory buildings which are located in Rojana Industrial Park 2, Ayutthaya, Thailand resulting in provisions for impairment losses in respect of the Thailand assets that were damaged by the fl ood. The supply chains of key customers were disrupted which affected the Company s performance. 11) 27 February 2012 Announcement as part of an earnings call of estimated net profi t of S$8.1 million for FY2011, representing a decrease of 67.3% as compared to FY ) 31 March 2012 The Company completed repurchase of 8,959,000 shares, representing 1.78% of issued shares for S$2.36 million during the period ended 31 March ) 12 April 2012 The Company announced that there were material changes to the unaudited fi nancial statements for FY2011 that were announced on 27 February The change resulted in the profi t reducing to S$7.1 million as compared to S$8.1 million announced previously. This revised net profi t for the year represented a decrease of 71.4% as compared to FY ) 13 April 2012 The Company announced that the Annual General Meeting would be held on 30 April ) 15 May 2012 The Company announced a net profi t of S$5.1 million for the quarter ended 31 March 2012 representing an increase of 26.7% as compared to the quarter ended 31 March ) 13 August 2012 The Company announced a net profi t of S$7.2 million for the half-year ended 30 June 2012 representing an increase of 18.2% as compared to the six months ended 30 June The Company also announced that barring any unforeseen circumstances including some uncertainty in the Data Storage market for the second half of the year, the Group continues to expect to post comparable revenue but higher net profi t in 2012 compared to ) 30 September 2012 The Company completed repurchase of 461,000 shares, representing 0.09% of issued shares for S$0.12 million, during the period ended 30 September I-8

44 APPENDIX I LETTER FROM DELOITTE TO THE INDEPENDENT DIRECTORS Notes Date Event 18) 14 November 2012 The Company announced a net profi t of S$10.1 million for the nine months ended 30 September 2012, representing an increase of 61.5% as compared to the nine months ended 30 September The Company expects similar revenue but higher net profi t in fi scal year 2012 versus fi scal year ) 25 February 2013 The Company announced a net profi t of S$11.5 million for FY2012 representing an increase of 61.0% as compared to FY2011. The Company recommended fi rst & fi nal tax exempt (one-tier) cash dividend of 0.6 cents per ordinary share for fi scal year ) 26 February 2013 The Company provided the full year 2012 results briefi ng presentation. It was noted that the increase of 61.0% year on year in net profi t was due to lower provision for impairment loss and S$2.6 million of insurance proceeds arising from the Thailand fl ood, as well as lower net fair value adjustment for derivative contracts. 21) 13 May 2013 The Company announced a net profi t of S$1.2 million for the quarter ended 31 March 2013 representing a decrease of 76.8% as compared to quarter ended 31 March ) 20 June 2013 The Company received a Non-Binding Indicative Proposal from a consortium involving the major shareholder of the Company that may result in the Delisting of the Company. 23) 05 July 2013 The Company announced that it received an Exit Offer for proposed voluntary delisting of the Company. 24) 14 August 2013 The Company announced a net profi t of S$1.4 million for the half-year ended 30 June 2013 representing a decrease of 80.1% as compared to the six months ended 30 June We highlight the following in respect of the development in market prices of the Shares: a. The Exit Offer Price of S$0.40 is higher than the traded price of the Shares in the two year period preceding the Holding Announcement Date (where the Shares traded in the range of S$0.215 to S$0.370 per Share). b. The Exit Offer Price of S$0.40 is within the range of traded price of the Shares in the three year period preceding the Holding Announcement Date (where the Shares traded in the range of S$0.215 to S$0.485 per Share) but is lower than the high of S$0.485 per Share. c. The Shares have traded at or marginally below the Exit Offer Price in the period post the Holding Announcement Date to the Latest Practicable Date Comparison of prices for the Shares with selected, relevant indices We have benchmarked movements of the market prices of the Shares against selected relevant indices being: a. FTSE Straits Times Index ( FSSTI Index ); b. FTSE Straits Times Industrials Index ( FSTIN Index ); and The reference price for the prices of the Shares is the closing price on 20 June The period of comparison is the 2 year period prior to the Holding Announcement Date up to the Latest Practicable Date. I-9

45 APPENDIX I LETTER FROM DELOITTE TO THE INDEPENDENT DIRECTORS Chart 2 Comparison of the Price Performance of the Shares Relative to the FSSTI and FSTIN Index Source: Bloomberg We highlight that the following key observations in respect of this comparison: a. The market price of the Shares has traded below the FSSTI and FSTIN indices except in February 2012; and b. The market price of the Shares outperformed the FSSTI and FSTIN indices between the period from June 2012 to the Joint Announcement Date and to the Latest Practicable Date. It is possible that the Sale Process is in part responsible for this rise and outperformance Volume Weighted Average Prices for the Shares We have compared the Exit Offer Price with the VWAP of the Shares for the selected reference periods in the table below: Reference Periods VWAP (S$) Premium/ (Discount) of Offer (%) Highest Transacted Price (S$) Lowest Transacted Price (S$) Joint Announcement Date to the Latest Practicable Date (5 July 12 September 2013) Latest Practicable Date (1) % Joint Announcement Date to the Latest Practicable Date % Prior to Joint Announcement Date Last trading day prior to the Joint Announcement date (2) (2 July 2013) Between the Holding Announcement Date and the Joint Announcement Date % % I-10

46 APPENDIX I LETTER FROM DELOITTE TO THE INDEPENDENT DIRECTORS Reference Periods VWAP (S$) Premium/ (Discount) of Offer (%) Highest Transacted Price (S$) Lowest Transacted Price (S$) Prior to Holding Announcement Date Last 1 month VWAP prior to Holding Announcement Date % Last 3 month VWAP prior to Holding Announcement Date % Last 6 month VWAP prior to Holding Announcement Date % Last 1 year VWAP prior to Holding Announcement Date % Last 2 year VWAP prior to Holding Announcement Date % Table 2 - Comparison of the VWAP of the Shares and the Exit Offer Notes: 1. Closing Share price as at Latest Practicable Date 2. Closing Share price as at 2 July 2012 Source: Bloomberg We highlight the following: a. The Exit Offer Price is S$0.400 represents a premium of S$0.005 (or 1.3%) above the closing Share price on Latest Practicable Date. b. The Exit Offer Price represents a premium of S$0.012 (or 3.2%) above the VWAP of the Share from the Joint Announcement Date to the Latest Practicable Date. Within this period, the Share price has traded at or marginally below the Exit Offer Price and with a highest price of S$ c. The Exit Offer Price represents a premium of S$0.022 (or 5.9%) above the Share price on the last trading day prior to the Joint Announcement Date. d. The Exit Offer Price represents a premium of S$0.049 (or 14.0%) to the 1 month VWAP of the Shares prior to the Holding Announcement Date; a premium of S$0.058 (or 17.0%) over the 3 month VWAP of the Shares prior to the Holding Announcement Date and a premium of S$0.070 (or 21.1%) over the 6 month VWAP of the Shares prior to the Holding Announcement Date. e. The Exit Offer Price represents a premium of S$0.089 (or 28.5%) to the 1 year VWAP prior to the Holding Announcement Date. The market price of the Shares has traded below the Exit Offer Price during the two year period prior to the Holding Announcement Date and the market price of the Shares has traded at or marginally below the Exit Offer Price from the Holding Announcement Date to the Latest Practicable Date. I-11

47 APPENDIX I LETTER FROM DELOITTE TO THE INDEPENDENT DIRECTORS 6.5. Premia for Takeovers of SGX-Listed Companies We have benchmarked the premium implied by the Exit Offer Price over the VWAP of the Shares against the premia or discounts paid in respect of selected takeovers of companies listed on the SGX-ST. We have compiled data of such transactions from the two year period preceding the Holding Announcement Date up to the Latest Practicable Date ( Reference Period ) and have presented a summary of such data in the table below. Premium/ (Discount) for 1 month Premium/ (Discount) for 3 month Premium/ (Discount) for 6 month Exit Offer Price 14.0% 17.0% 21.1% All Privatisations Number Average 35.4% 36.4% 37.4% Median 31.7% 35.3% 29.7% Minimum -12.9% -35.9% -40.2% Maximum 100.0% 118.8% 136.1% Privatisations Number Voluntary Delisting Average 33.6% 29.0% 26.3% Median 28.1% 23.9% 22.6% Minimum 1.9% -35.9% -40.2% Maximum 61.3% 72.3% 76.1% Privatisations Number Cash Offers Average 35.9% 39.0% 41.5% Median 34.3% 37.0% 38.4% Minimum -12.9% -17.3% -19.7% Maximum 100.0% 118.8% 136.1% Table 3 - Selected Data in Respect of Takeovers on the SGX-ST Source: Company announcements, offer documents and circulars to shareholders We note the following: a. The Exit Offer Price represents a premium of 14.0% to the VWAP of the Shares in the 1 month period before the Holding Announcement Date. The average and median of the 9 observed voluntary delisting exit offers are at premiums of 33.6% and 28.1% respectively when compared with the targets 1 month VWAP. The average and median of the 25 privatisation cash offers are at premiums of 35.9% and 34.3% respectively when compared with the targets 1 month VWAP; and b. The Exit Offer Price represents a premium of 17.0% over the VWAP of the Shares in the 3 month period before the Holding Announcement Date. The average and median of the 9 observed voluntary delisting exit offers are at premiums of 29.0% and 23.9% respectively when compared with the targets 3 month VWAP. The average and median of the 25 privatisation cash offers are at premiums of 39.0% and 37.0% respectively when compared with the targets 3 month VWAP. I-12

48 APPENDIX I LETTER FROM DELOITTE TO THE INDEPENDENT DIRECTORS c. The Exit Offer Price represents a premium of 21.1% over the VWAP of the Shares in the 6 month period before the Holding Announcement Date. The average and median of the 9 observed voluntary delisting exit offers are at premiums of 26.3% and 22.6% respectively when compared with the targets 6 month VWAP. The average and median of the 25 privatisation cash offers are at premiums of 41.5% and 38.4% respectively when compared with the targets 6 month VWAP. The Exit Offer Price s premium of 14.0% (for the 1 month VWAP), 17.0% (for the 3 month VWAP) and 21.1% (for the 6 month VWAP) is in range of the premiums offered for voluntary delisting offers and privatisation cash offers, however, they are lower than the average and median takeover premiums as compared to the 25 privatisation cash offers and 9 voluntary delisting exit offers Comparison of ratings with Comparable Companies The principal activities of the Company and its subsidiaries (the Group ) consist of the manufacture and sale of precision die-cut foam and rubber moulded components for a wide range of technology and other applications. The Company operates in fi ve key divisions including: data storage, offi ce automation, consumer electronics/telecommunications, automotive, and industrial engineering. The Group s key manufacturing facilities are located in Southeast Asia comprising Singapore, Thailand, Indonesia, Malaysia, Vietnam, and China. We highlight that we have not identifi ed any listed company which is truly comparable to the Company in terms of the composition of its business activities, geographical spread, size of operations, asset base, track record, fi nancial performance, operating and fi nancial leverage, market capitalisation, risk profi le, liquidity, future prospects and other relevant criteria. As a result, any comparisons drawn can serve only as an illustrative guide. Thus for this purpose, we have considered companies whose principal activities are broadly similar to the Group s precision engineering business involving die-cut foam and rubber moulded components (the Comparable Companies ). We have benchmarked the Exit Offer Price by generating selected valuation statistics for the Company implied by the Exit Offer Price and compared those statistics with those for the Comparable Companies. The list of Comparable Companies has been prepared after consultation with the Directors and the Management of the Company. In our analysis, we have collated and presented the following ratios: LTM P/E A variant of the Price-to-Earnings ratio ( P/E ) where the earnings of a Company is computed based upon the last-twelve-month ( LTM ) period ending on the most recent quarter for which fi nancial results have been published. The P/E is the ratio of market capitalisation relative to its profi t after tax attributable to shareholders of the Company ( NPAT ). The P/E is affected by, inter alia, the capital structure of a Company, its tax position as well as its accounting policies relating to depreciation and intangible assets. LTM EV/EBITDA A variation of the EV/EBITDA ratio where the EBITDA of a Company is computed based upon the LTM period ending on the most recent quarter for which fi nancial results have been published. EV or Enterprise Value is the sum of a Company s market capitalisation, preferred equity, minority interests, short and long term debts less its cash and cash equivalents. EBITDA stands for historical consolidated earnings before interest, tax, depreciation and amortisation expenses. I-13

49 APPENDIX I LETTER FROM DELOITTE TO THE INDEPENDENT DIRECTORS The EV/EBITDA ratio illustrates the ratio of the market value of a Company s business relative to its historical consolidated pre-tax operating cashfl ow performance, without regard to its capital structure. Price-to-Net Tangible Assets ( P/NTA ) NTA refers to consolidated net tangible assets, which is the total assets of a company less intangible assets (such as goodwill, patents and trademarks) and total liabilities. P/NTA refers to the ratio of a company s share price divided by NTA per share. We note that the Group s key activities include manufacturing and selling of precision die-cut foam and rubber moulded components for a wide range of technology and other applications. The value of the Company is derived predominantly from its ability to generate positive cash fl ows and streams of net earnings using a large asset base including factories which house manufacturing facilities. Accordingly, we have selected cash fl ows and earnings-based valuation ratios (such as EV/EBITDA and P/E) and asset based evaluation ratio (Price/NTA) as the benchmarks for evaluation. The selected valuation statistics of the Comparable Companies are based upon their closing prices on the Latest Practicable Date while those of the Company are as implied by the Exit Offer Price. Such comparisons are affected by differences in their accounting policies. Our analysis has not attempted to adjust for such differences. The following is the list of Comparable Companies, together with a brief description of their principal activities: Company Name Principal Activities Market Capitalization (1) (S$ millions) Revenue LTM (2) (S$ millions) Broadway Industrial Group Limited ( Broadway ) Chosen Holdings Limited ( Chosen ) Sunningdale Tech Ltd ( Sunningdale ) Manufacturer of foam plastics and packaging products, expanded polystyrene related products, precision machined components and sub-assembly of actuator arms. Operates in three segments - foam plastics, hard disk drive and non-hard disk drive. It serves the automotive, hard disk drive, semiconductor and protective packaging industry. A regional manufacturer engaged in product design and development, mould design and fabrication, plastic injection moulding and secondary processes and final product assembly. It focuses on the data storage, medical devices, communication and industrial products industry. It also offers value-added secondary processes, such as spray-painting, tempo printing, silkscreening, EMI shielding, automated pin insertion, decorative fi nishing and ultrasonic welding as part of its integrated turnkey manufacturing services. Manufacturer and seller of dies, tools, jigs, fi xtures, high precision steel moulds and plastic products. Operates in four segments automotive, healthcare, consumer electronics/telecommunications and mould fabrication. Its mould fabrication business designs and manufactures moulds used in the manufacturing of plastic injection parts I-14

50 APPENDIX I LETTER FROM DELOITTE TO THE INDEPENDENT DIRECTORS Company Name Principal Activities Market Capitalization (1) (S$ millions) Revenue LTM (2) (S$ millions) Innovalues Ltd ( Innovalues ) Amtek Engineering Ltd ( Amtek ) Cheung Woh Technologies Ltd ( Cheung Woh ) Hi-P International Ltd ( Hi-P ) Jubilee Industries Holdings Ltd ( Jubilee ) Engaged in the manufacturing of precision machined parts and components, assembly of printer rollers, rubber compounding and rubber moulding. It also provides surface treatment services, such as electroless nickel plating, zinc phosphating and hard anodizing. Products are mainly used in office automation equipment, hard disk drives, automotive and oil and gas industries. Operates in two main segments. Its precision engineering segment performs stamping, machining and progressive precision cold forging of metal components, finishing and bonding, assembly of metal enclosures/chassis and manufacturing of tools and dies. Its rubber and plastic segment is in the business of manufacturing precision plastic and rubber components and mould. A regional integrated manufacturer engaged in providing high-precision engineering products to the hard disk drives, communications, solar energy, electrical and electronics, semiconductor and automotive industries. It produces hard disk drive components including voice coil motor plates, disk clamps and air combs. Its precision metal stamping components includes sheet metal machined parts, stamped parts, prototypes, stamping tool design and fabrication. Automotive components include seat track adjusters, car seat recliners and hydraulic steering components. Additionally, it also manufactures re-rolling steel such as precision cold-rolled steel. Designs and fabricates mould, precision plastic injection moulding, assembly, provision of ancillary value-added services (mainly surface finishing services) and precision metal stamping. It is a vertically integrated contract manufacturer serving the wireless telecommunications, consumer electronics and computing and automotive industries. The main business segments are precision plastic injection moulding, mould design and fabrication and subproduct assembly and full-product assembly services. It has regional manufacturing plants located across South-East Asia, China and Poland. Provider of precision plastic injection mould design and fabrication, precision plastic injection moulding and value added services. It serves consumer electronics, household appliances, automotive and computer peripherals industries. A variety of precision plastic injection moulding services include single-shot, doubleshot, vertical, insert and gas-assisted moulding , I-15

51 APPENDIX I LETTER FROM DELOITTE TO THE INDEPENDENT DIRECTORS Company Name Principal Activities Market Capitalization (1) (S$ millions) Revenue LTM (2) (S$ millions) Fischer Tech Ltd ( Fischer Tech ) Manufacturer of precision plastic injection moulds, high-precision injection moulding, laser marking and decorative finishing for engineering components of automotive, computer peripherals and consumer product industries. The two main business segments are plastic injection and mould design and fabrication. The high-precision plastic injection segment manufactures plastic components, used in the automotive, smart phones, computer peripherals and consumer product industries. The mould design and fabrication segment manufacture moulds, which are used in the manufacture of plastic injection components. Its customers include Palm, HTC, Hewlett Packard, Canon, Pollak and Panasonic Table 4 - Description of Comparable Companies Source: Bloomberg, OneSource, the annual report and Company fi lings of the respective companies Notes: (1) Market Capitalisation of the Comparable Companies is as at Latest Practicable Date. (2) LTM revenue is computed based upon the last-twelve-month period ending on the most recent quarter (or half-year if Comparable Companies do not publish quarterly fi lings) for which fi nancial results have been published. To give a degree of comfort as to the comparability of the Company with the Comparable Companies, we have presented selected fi nancial ratios using the latest fi nancial statements of the Comparable Companies: Company Name LTM ending EBITDA margin (1) (%) Net Margin (2) (%) Return on Equity (%) (3) Net Gearing (%) (4) Asset Turnover (times) (5) 3Yr CAGR Revenue (%) (6) The Company 30/06/ % 2.2% 4.8% -0.7% 1.2x 7.6% Broadway 30/06/ % 1.0% 2.6% 66.6% 1.0x 3.2% Chosen 30/06/ % 0.8% 1.3% -16.5% 1.0x -0.8% Sunningdale 30/06/ % 1.7% 3.3% 3.6% 1.1x 6.5% Innovalues 30/06/ % 16.4% 27.2% 12.9% 1.1x -1.5% Amtek 30/06/ % 3.1% 11.7% 25.8% 1.3x -4.8% Cheung Woh 31/05/ % -3.4%* -2.1%* -10.9% 0.5x -21.2% Hi-P 30/06/ % 3.7% 7.2% -14.0% 1.1x 15.9% Jubilee 30/06/ % -11.5%* -13.8%* -22.8% 0.7x -12.8% Fischer Tech 31/03/ % 5.3% 8.6% -12.5% 1.0x 3.0% Average 10.7% 4.6% 8.9% 3.6% 1.0x -1.4% Median 9.7% 1.7% 3.3% -10.9% 1.0x -0.8% Maximum 27.1% 16.4% 27.2% 66.6% 1.3x 15.9% Minimum 0.5% -11.5% -13.8% -22.8% 0.5x -21.2% Table 5 - Financial Ratios of Comparable Companies Source: Bloomberg, the annual report and Company fi lings of the respective companies Notes: (1) EBITDA margin is computed based on the ratio of LTM EBITDA over the LTM revenue. LTM EBITDA has been adjusted for non-operating, non-recurring and extraordinary items. I-16

52 APPENDIX I LETTER FROM DELOITTE TO THE INDEPENDENT DIRECTORS (2) Net margin is computed based on the ratio of LTM NPAT over the LTM revenue. LTM NPAT has been adjusted for nonoperating, non- recurring and extraordinary items; corporate tax rates have been applied to these adjustments. (3) Return on equity is computed based on the ratio of normalised NPAT over shareholders funds, excluding minority interest. (4) Net gearing is computed based on the ratio of total borrowings less cash and cash equivalents over shareholders equity, excluding minority interest. (5) Asset turnover is computed based on the ratio of revenue over total assets. (6) 3Yr-CAGR revenue is the compound annual growth rate in revenue over a 3 year period. * - As the companies are not profi table on a LTM basis, leading to negative margins, these have been excluded in the computation of the average net margin and average return on equity. We note the following: a. The Company s EBITDA margin is lower than both the average and median of Comparable Companies. The Company s net margin and return on equity are higher than the median but lower than the average of the Comparable Companies. b. The Company is in a net cash position while the average net gearing of Comparable Companies is 3.6% and median net cash position of Comparable Companies is 10.9%, respectively. c. The Company s asset turnover is in line with the average of the Comparable Companies. d. The Company s revenue CAGR over the last three years is within the range of that of the Comparable Companies and is higher than the median and average CAGR of the Comparable Companies. With this in mind, we have compared the multiples implied by the Exit Offer Price with those of the Comparable Companies. Company Name Market Capitalisation (S$ millions) LTM EV/EBITDA (Normalised) (1) LTM P/E (Normalised) (2) LTM P/NTA The Exit Offer Price (3) x 40.1x 2.0x Broadway x 18.5x 0.7x Chosen x 38.7x 0.5x Sunningdale x 12.7x 0.4x Innovalues x 2.4x 0.7x Amtek x 10.7x 1.3x Cheung Woh x NM 0.5x Hi-P x 14.0x 1.0x Jubilee x^ NM 1.7x Fischer x 5.3x 0.5x Average 3.4x 14.6x 0.8x Median 3.8x 12.7x 0.7x Maximum 4.8x 38.7x 1.7x Minimum 1.6x 2.4x 0.4x Table 6 Valuation multiples of Comparable Companies Source: Bloomberg, the annual report and Company fi lings of the respective companies I-17

53 APPENDIX I LETTER FROM DELOITTE TO THE INDEPENDENT DIRECTORS Notes: (1) Computed as the ratio of EV to normalised LTM EBITDA, where EV is calculated as equity value + net debt + minority interest. LTM EBITDA has been adjusted for non-operating, non-recurring and extraordinary items. (2) Computed as the ratio of market capitalisation to normalised LTM NPAT. LTM NPAT has been adjusted for non-operating, nonrecurring and extraordinary items; corporate tax rates have been applied to these adjustments. (3) Implied by the Exit Offer Price. NM - Not Meaningful. As the companies are loss making on a LTM basis, the multiples have been excluded from the computation of the average, median, maximum and minimum multiples ^ - As multiple is exceptional due to a major drop in net profi t after tax (from S$1.8m to -S$0.8m for 6 months ended 30/06/2012 and 30/06/2013 respectively), multiple has been excluded from the computation of the average, median, maximum and minimum multiple. We highlight the following key observations arising from the data presented above: a. The LTM EV/EBITDA implied by the Exit Offer Price of 14.0x is signifi cantly above the average and the median LTM EV/EBITDA of the Comparable Companies of 3.4x and 3.8x respectively; and b. The LTM P/E implied by the Exit Offer Price of 40.1x is signifi cantly above the average and median LTM P/E of the Comparable Companies of 14.6x and 12.7x, respectively. c. The LTM P /NTA implied by the Exit Offer Price of 2.0x is signifi cantly above the average and median P/NTA of the Comparable Companies of 0.8x and 0.7x, respectively. d. In addition, the implied LTM EV/EBITDA, LTM P/E and LTM P/NTA are higher than the maximum observed in the Comparable Companies. We would like to highlight the following with regard to the NTA of the Company. The NTA of the Company that has been used to calculate the ratios is based on the unaudited fi nancials for the quarter ended 30 Jun The NTA comprises of certain properties currently stated at a valuation of S$24.6 million which is approximately 12.5% of the total Exit Offer Value. Based on the Singapore Code of Takeovers and Mergers Rule 26.1, if the net book value of properties held by the business is more than 30% of the total Exit Offer Value, an independent valuation of the properties will be required. An independent valuation has not been carried out for the purpose of this Exit Offer. We understand that these properties may not refl ect current market value. We have been informed by the management that some of these properties are recently purchased and some have been revalued recently. However, based on information provided by the management, if the revalued properties were to be considered in the calculation of the NTA, the resultant P/NTA would be 1.9x which would still be higher than most of the Comparable Companies. The key observations above illustrate that the Exit Offer Price is fair and reasonable as the LTM EV/ EBITDA, LTM P/E and the P/NTA implied by the Exit Offer Price are signifi cantly higher than the median and average multiples implied by the Comparable Companies. Please note that this comparison is for illustration purposes only and our opinion in paragraph 7 is based on the factors listed in paragraph 6 and subject to the assumptions and qualifi cations set out elsewhere in this letter and taking into account the conditions prevailing as at the Latest Practicable Date. It is relevant to note that the Comparable Companies are not subject to take-over offers as at the Latest Practicable Date. I-18

54 APPENDIX I LETTER FROM DELOITTE TO THE INDEPENDENT DIRECTORS 6.7. Comparison of ratings with Comparable Transactions We have made comparison between the valuation ratios implied by the Exit Offer Price and the valuation ratios indicated by selected completed transactions between 5 October 2011 and the Latest Practicable Date, involving targets that operate in the precision engineering and component manufacturing segment that are broadly comparable to the Company ( Comparable Transactions ). We note the following in respect of such comparison: a. The list of Comparable Transactions cannot be exhaustive. b. The Comparable Transactions identifi ed as being comparable are few in number. c. The Comparable Transactions occurred over a period of time, when conditions may have been different from those presently. Announcement Date Target Name Description 16 May 2012 Juken Technology Limited ( Juken ) 15 Mar 2012 Meiban Group Limited ( Meiban ) 5 Oct 2011 Beyonics Technology Limited ( Beyonics ) Manufacturer of precision moulded plastic components. Operates in three divisions - plastic injection moulding, mould design and fabrication and instrumental. The plastic injection moulding segment is in the manufacturing process for producing parts from plastic materials. It serves industries such as automation, optical, automotive, audio and video, data storage, industrial and households and medical. A service provider which operates in segments such as - design, colour styling, mould making, injection moulding and contract manufacturing. It also offers design and consultancy services such as industrial design, product packaging and graphics, mechanical design, prototyping, visual communications and corporate branding and market research. It serves the industries such as automotive, medical and business equipment. A manufacturing services provider, offering electronics manufacturing and precision engineering services. It serves original equipment manufacturers in computer storage devices, medical devices and electronics communication products and is also a manufacturer of precision machining parts for the hard disk drive, electronics and automotive industry. Table 7 - Comparable Transactions Target Company Descriptions Source: OneSource, Circular, Offer Document and Company Filings I-19

55 APPENDIX I LETTER FROM DELOITTE TO THE INDEPENDENT DIRECTORS Our Comparable Transactions analysis is based on data compiled from publicly available sources and serves as a guide to the premium paid in connection with the acquisitions or divestments of companies in the component manufacturing sector. Each transaction must be judged on its own commercial and fi nancial merits. The premium that an acquirer pays in any particular transaction depends on various factors such as the potential synergy that the acquirer can gain from the acquisition, the presence of competing bids, prevailing market conditions, attractiveness of the target s business and assets, size of consideration and existing and desired level of control in the target Company. Conclusions drawn from the comparisons made may not refl ect any perceived market valuation of the Company. Hence, the comparison of the Exit Offer Price with the Comparable Transactions is for illustration purposes only. Announcement Date Acquirer Target % Shares Acquired Implied Equity Value (S$ million) LTM EV/ EBITDA (1) (Normalised) LTM P/E (1) (Normalised) P/NTA 5 July 2013 (Joint Announcement Date) Offeror The Company N/A N/A 14.0x (2) 40.1x (2) 2.0x 16 May 2012 Frencken Group Limited 15 March 2012 Zhong Yong Holdings Ltd 5 October 2011 Channelview Investment Ltd Juken x 12.6x 1.0x Meiban x 11.9x 0.8x Beyonics x NM (3) 0.6x Average 2.7x 12.3x 0.8x Median 3.2x 12.3x 0.8x Maximum 3.2x 12.6x 1.0x Minimum 1.6x 11.9x 0.6x Table 8 - Valuation Analysis for Comparable Transactions Source: Bloomberg, Mergermarket, S&P Capital IQ, Company fi lings, offer documents and circulars to shareholders in relation to the respective transactions and DTCF s computation, as the case may be. Notes: (1) Based on normalised LTM EBITDA and NPAT for last twelve-month period prior to each transaction s announcement date. EBITDA has been adjusted for non-operating, non-recurring and extraordinary items. NPAT has been adjusted for nonoperating, non-recurring and extraordinary items; corporate tax rates have been applied to these adjustments. (2) Based on cash position, debt, net earnings and EBITDA for the 12 month period ended 30 June 2013, as provided by the Company. (3) Not Meaningful. Beyonics recorded a net loss attributable to owners of Beyonics of S$17.46 million for the year ended 31 July 2011, it is not possible to present a meaningful comparison on a LTM P/E multiple basis. We highlight the following key observations arising from the data presented above: a. The LTM EV/EBITDA implied by the Exit Offer Price of 14.0x is signifi cantly higher than both the median and average of the Comparable Transactions of 3.2x and 2.7x, respectively; and b. The LTM P/E implied by the Exit Offer Price of 40.1x is signifi cantly higher than both the median and average of those of the Comparable Transactions of 12.3x and 12.3x, respectively. In addition, the implied LTM EV/EBITDA, LTM P/E and LTM P/NTA are higher than the maximum observed in the Comparable Companies. I-20

56 APPENDIX I LETTER FROM DELOITTE TO THE INDEPENDENT DIRECTORS The key observations above illustrate that the Exit Offer Price is fair and reasonable, as the LTM EV/EBITDA and LTM P/E implied by the Exit Offer Price are signifi cantly higher than the median and average of Comparable Transactions. Please note that this comparison is for illustration purposes only and our opinion in paragraph 7 is based on the factors listed in paragraph 6 and subject to the assumptions and qualifi cations set out elsewhere in this letter and taking into account the conditions prevailing as at the Latest Practicable Date Other considerations No Intention to Revise the Exit Offer Price and Extension of duration The Offeror has stated that it does not intend to revise the Exit Offer Price. Although no extension of the Exit Offer is currently contemplated, if the Exit Offer is extended, an announcement will be made of such extension, and the Exit Offer will remain open for acceptance for such period as may be announced. If the Exit Offer is extended, holders who have validly accepted the Exit Offer in respect of part of their Shares will be entitled to tender additional Shares in acceptance of the Exit Offer Compulsory Acquisition and Listing Status As stated in the paragraph 13 of Circular, in the event the Offeror acquires not less than 90% of the issued Shares (other than those already held by the Offeror, its related corporations and their respective nominees as at the date of the Exit Offer) pursuant to the Exit Offer, the Offeror will be entitled to exercise the right of compulsory acquisition under Section 215(1) of the Companies Act to acquire all the remaining issued Shares at the Exit Offer Price. The Offeror intends to exercise its right of compulsory acquisition in the event that the Offeror acquires at least 90% of the issued Shares (not held by the Offeror, its related corporations or their respective nominees as at the date of the Exit Offer). If so, and upon completion of the compulsory acquisition, the Company will then become a wholly-owned subsidiary of the Offeror. In addition, Shareholders who do not accept the Exit Offer would have a corresponding right, under and subject to Section 215(3) of the Companies Act, to require the Offeror to acquire their Shares at the Exit Offer Price by serving notice requiring the Offeror to do so, in the event that the Shares acquired by the Offeror pursuant to the Exit Offer, together with any other Shares held by the Offeror, its related corporations and their respective nominees comprise 90% or more of the total issued Shares. Shareholders who have not accepted the Exit Offer and who wish to exercise their rights under Section 215(3) of the Companies Act are advised to seek their own independent legal advice The intentions of the Offeror and its concert parties for the Company Paragraph 3 of the Delisting Proposal describes the Offeror, inter alia, as follows The Offeror is a special purpose vehicle incorporated in Singapore for the purposes of the Delisting and the Exit Offer. Its principal activity is that of investment holding. As at the Joint Announcement Date, the Offeror has an issued and paid-up capital of S$100 comprising 100 ordinary shares, 65% of which is held by Gilbert Investment Corporation Pte. Ltd. ( GCPL ) and the remaining 35% is held by Polyfoam Asia Pte. Ltd. ( Polyfoam ) Polyfoam is incorporated in Singapore and is a wholly-owned subsidiary of INOAC Corporation ( INOAC ). The INOAC group of companies (the INOAC Group ), which is headquartered in Japan, is a conglomerate engaged in, inter alia, the development and supply of materials based on urethane, rubber, plastic and synthetic materials.... In addition, the Offeror has stated in the Circular, inter alia, the following intentions the Offeror is making the Delisting Proposal and Exit Offer with a view to delisting the Company from the SGX-ST and exercising any right of compulsory acquisition under Section 215(1) of the Companies Act. I-21

57 APPENDIX I LETTER FROM DELOITTE TO THE INDEPENDENT DIRECTORS The Offeror believes that there is considerable scope for the INOAC Group and the Group to work closely to achieve business synergies by sharing manufacturing facilities, collaborating in research and development, and consolidating their sales and marketing efforts in selected markets. Privatising the Company will give the Offeror and the management of the Company more fl exibility to explore such opportunities, optimise the use of its resources and facilitate the implementation of any strategic initiatives and/or operational changes. The Offeror also believes that the Group stands to benefi t in the long term from the experience, standing and expertise of the INOAC Group in developing its existing businesses Dividend policies going forward The Offeror has not stated dividend polices for the Company going forward. As such, Shareholders should be aware that going forward dividend policies and payments may vary from historical norms Absence of Competing Offers We understand from the Company that from the Joint Announcement date up to the Latest Practicable Date, no competing offer has been forthcoming. As the Offeror now has a controlling interest in the Company, it is unlikely that a competing offer will be forthcoming. 7. CONCLUSION In arriving at our advice in respect of the fi nancial terms of the Exit Offer, we have taken into account the factors which we consider to have a signifi cant bearing on our assessment which include the following: a. Our analysis of the liquidity of the Shares indicates that the historical market price of the Shares provides a meaningful reference point for comparison with the Exit Offer. b. The Shares have traded at or marginally below the Exit Offer Price in the period post the Holding Announcement Date to the Latest Practicable Date. c. We note that the market price of the Shares has traded up signifi cantly about 1 month prior to 5 July 2013 and that the market price of the Shares outperformed the benchmark indices (being FSSTI and FSTIN). It is possible that the Exit Offer is in part responsible for this rise and outperformance. d. The Exit Offer Price represents a 14.0% premium to the 1 month VWAP, a 17.0% premium to the 3 month VWAP and a 21.1% premium to the 6 month VWAP of the Shares prior to the Holding Announcement Date. This compares unfavourably to the average and median premium of 33.6% and 28.1% for the 1 month VWAP, 29.0% and 23.9% for the 3 month VWAP and 26.3% and 22.6% for the 6 month VWAP respectively for voluntary delisting offers in the two year period preceding the Joint Announcement Date up to the Latest Practicable Date. e. The Exit Offer Price represents a 14.0% premium to the 1 month VWAP, a 17.0% premium to the 3 month VWAP and a 21.1% premium to the 6 month VWAP of the Shares prior to the Holding Announcement Date. This compares unfavourably to the average and median premium of 35.9% and 34.3% for the 1 month VWAP, 39.0% and 37.0% for the 3 month VWAP and 41.5% and 38.4% for the 6 month VWAP respectively for cash offers for privatisations in the two year period preceding the Joint Announcement Date up to the Latest Practicable Date. f. The Exit Offer Price s premium of 14.0% (for the 1 month VWAP), 17.0% (for the 3 month VWAP) and 21.1% (for the 6 month VWAP) is in range of the premiums offered for voluntary delisting offers and privatisation cash offers, however, they are lower than the average and median takeover premiums as compared to the 25 privatisation cash offers and 9 voluntary delisting exit offers. I-22

58 APPENDIX I LETTER FROM DELOITTE TO THE INDEPENDENT DIRECTORS g. The Company s EBITDA margin is lower than that of the average and median EBITDA margin of Comparable Companies. The Company s net margin and return on equity are higher than the median but lower than the average of the Comparable Companies. h. The LTM EV/EBITDA of 14.0x, LTM P/E of 40.1x and the P/NTA of 2.0x as at 30 Jun 2013 implied by the Exit Offer Price are higher than the maximum of those of the Comparable Companies and signifi cantly above the average and median EV/EBITDA, P/E and P/NTA of the Comparable Companies. We note that the Comparable Companies are not under offer and that the fi nancial ratios of the Company are in general more favourable than those of the Comparable Companies. i. The LTM EV/EBITDA implied by the Exit Offer Price of 14.0x is signifi cantly higher than both the median and average of the Comparable Transactions of 3.2x and 2.7x, respectively, and the LTM P/E implied by the Exit Offer Price of 40.1x is signifi cantly higher than both the median and average of those of the Comparable Transactions of 12.3x and 12.3x respectively. j. The Offeror has stated that it does not intend to revise the Exit Offer Price. k. The Offer is conditional upon the conditions mentioned in paragraph 3.5 above. l. The Offeror is making the Delisting Proposal and Exit Offer with a view to delisting the Company from the SGX-ST and exercising any right of compulsory acquisition under Section 215(1) of the Companies Act. m. With the entrance of a new controlling shareholder, Shareholders should be aware that dividend policies and payments going forward may vary from historical norms. n. The Company has not received any competing offer(s) from the Joint Announcement Date up to the Latest Practicable Date. Having considered the factors listed in paragraph 6 and subject to the assumptions and qualifi cations set out elsewhere in this letter and taking into account the conditions prevailing as at the Latest Practicable Date, we are of the opinion that the Exit Offer is fair and reasonable and not prejudicial to the interests of the Shareholders. Accordingly, we advise the Independent Directors that they should recommend that the Shareholders ACCEPT the Exit Offer. In rendering our opinion, we have not had regard to any general or specifi c investment objectives, fi nancial situations, risk profi les, tax positions or particular needs or constraints of any individual Shareholder or any specifi c group of Shareholders and we neither assume any responsibility for, nor hold ourselves out as advisers to any person other than the Independent Directors. Our opinion is only based on a fi nancial analysis and does not incorporate any assessment of commercial, legal, tax, regulatory or other matters. Such factors (including the aforesaid illustrations) are beyond the ambit of our review and do not fall within our terms of reference in connection with the Exit Offer. We wish to emphasize that we have been appointed to render our opinion as of the Latest Practicable Date. Our terms of reference do not require us to express, and we do not express, an opinion on the future growth prospects of the Company. Shareholders should note that the trading of the Shares is subject to, inter alia, the performance and prospects of the Group, prevailing economic conditions, economic outlook and stock market conditions and sentiments. Accordingly, our advice on the Exit Offer does not and cannot take into account future trading activities or patterns or price levels that may be established for the Shares after the Latest Practicable Date since these are governed by factors beyond the ambit of our review and also, such advice, if given, would not fall within our terms of reference in connection with the Exit Offer. I-23

59 APPENDIX I LETTER FROM DELOITTE TO THE INDEPENDENT DIRECTORS Our opinion is addressed to the Independent Directors for their benefi t in connection with and for the purposes of their consideration in respect of the Exit Offer. Any recommendations made by the Independent Directors in respect of the Exit Offer shall remain their responsibility. Whilst a copy of this letter may be reproduced in the Circular, no other person may reproduce, disseminate or quote this letter (or any part thereof) for any purpose (other than the intended purpose in relation to the Delisting Proposal and the Exit Offer) at any time and in any manner without our prior written consent in each specifi c case. Our opinion is governed by the laws of Singapore, and is strictly limited to the matters stated in this letter and do not apply by implication to any other matter. Yours faithfully DELOITTE & TOUCHE CORPORATE FINANCE PTE LTD Ng Jiak See Executive Director I-24

60 APPENDIX II ADDITIONAL INFORMATION ON THE COMPANY 1. DIRECTORS The names, addresses and descriptions of the Directors as at the Latest Practicable Date are as follows: Name Address Designation Mr. Ong Peng Koon Gilbert 45 Faber Crescent, Faber Hills, Singapore Chairman and Chief Executive Officer Mr. Koh Gim Hoe Steven 9 Thomson Lane, #08-07, Sky@Eleven, Singapore Executive Director and Deputy Chief Executive Officer Ms. Chow Goon Chau Patricia Mr. Chan Pee Teck Peter Mr. Tan Peng Chin Mr. Ang Meng Huat Anthony 45 Faber Crescent, Faber Hills, Singapore King s Walk, King s Garden, Singapore Jalan Harum, Oei Tiong Ham Park, Singapore B Braddell Hill, #18-08, Braddell View, Singapore Executive Director Non-Executive and Independent Director Non-Executive and Independent Director Non-Executive and Independent Director 2. REGISTERED OFFICE The registered office of the Company is at 531 Bukit Batok Street 23, Singapore PRINCIPAL ACTIVITIES The Company was incorporated on 15 October 1980 and is listed on the Mainboard of the SGX-ST. The principal activities of the Company and its subsidiaries consist of the manufacture and sale of precision die-cut foam and rubber moulded components for a wide range of technology and other applications. 4. SHARE CAPITAL OF THE COMPANY 4.1. Issued Share Capital As at the Latest Practicable Date, the Company has an issued share capital of S$43,745, comprising 493,669,353 Shares (excluding 24,158,000 Shares held by the Company as treasury shares) Capital, Dividends and Voting Rights The rights of Shareholders in respect of capital, dividends and voting are contained in the Articles, which are available for inspection at the Company s registered office at 531 Bukit Batok Street 23, Singapore The relevant provisions have been extracted from the Articles (save for editorial changes) and reproduced in Appendix VII to this Circular. II-1

61 APPENDIX II ADDITIONAL INFORMATION ON THE COMPANY 4.3. New Issues The Company did not issue any new Shares or transfer any treasury shares between 31 December 2012, being the date of the Group s last published audited financial statements, and the Latest Practicable Date Pre-emption There is no restriction in the Articles on the right to transfer any Offer Shares, which has the effect of requiring the holders of such Offer Shares, before transferring them, to offer them for purchase to members of the Company or to any person. 5. FINANCIAL INFORMATION 5.1. Consolidated Statement of Comprehensive Income A summary of the audited consolidated statements of comprehensive income of the Group for FY2010, FY2011 and FY2012 and the unaudited consolidated statements of comprehensive income of the Group for the three months ended 31 March 2013 and the six months ended 30 June 2013 is set forth below. This summary is extracted from, and should be read together with, the audited consolidated financial statements of the Group for FY2010, FY2011 and FY2012, as well as the unaudited first quarter financial statements and dividend announcement of the Group for the period ended 31 March 2013 and the unaudited second quarter financial statements and dividend announcement of the Group for the period ended 30 June 2013, and the respective accompanying notes, copies of which, are available for inspection at the Company s registered office at 531 Bukit Batok Street 23, Singapore FY2010 S$ 000 FY2011 S$ 000 FY2012 S$ 000 Period ended 31 March 2013 S$ 000 Period ended 30 June 2013 S$ 000 Turnover 225, , ,238 51, ,341 Cost of sales (163,435) (168,266) (173,704) (40,601) (84,993) Gross profit 62,014 45,985 42,534 10,941 23,348 Other operating income 1,021 7,623 6, Distribution and selling expenses (7,098) (6,902) (7,721) (2,056) (4,299) Administrative expenses (21,297) (22,339) (25,237) (5,894) (12,624) Other operating expenses (1,035) (10,711) (826) (1,105) (2,434) Profit from operations 33,605 13,656 14,890 2,092 4,358 Financial expenses (454) (676) (641) (153) (321) Financial income Profit before taxation 33,250 13,086 14,565 1,995 4,204 Taxation (6,755) (4,569) (2,038) (754) (2,202) Profit after taxation 26,495 8,517 12,527 1,241 2,002 II-2

62 APPENDIX II ADDITIONAL INFORMATION ON THE COMPANY FY2010 S$ 000 FY2011 S$ 000 FY2012 S$ 000 Period ended 31 March 2013 S$ 000 Period ended 30 June 2013 S$ 000 Other comprehensive income: Items that may be reclassified subsequently to profit or loss Exchange differences on translating foreign operations (debit)/credit to translation reserve (700) 2,125 (6,885) 2,416 3,737 Other comprehensive income for the year/ period net of tax (700) 2,125 (6,885) 2,416 3,737 Total comprehensive income for the year/ period 25,795 10,642 5,642 3,657 5,739 Profit after taxation attributable to: Owners of the Company 24,903 7,132 11,483 1,074 1,433 Non-controlling interests 1,592 1,385 1, ,495 8,517 12,527 1,241 2,002 Total comprehensive income attributable to: Owners of the Company 24,329 8,951 5,585 3,260 4,706 Non-controlling interests 1,466 1, ,033 25,795 10,642 5,642 3,657 5,739 Earnings per share attributable to owners of the Company (cents) - Basic Diluted Balance Sheet A summary of the audited consolidated balance sheet of the Group as at 31 December 2012 and the unaudited consolidated balance sheet of the Group as at 30 June 2013 is set out below. This summary is extracted from, and should be read together with, the audited financial statements of the Group for FY2012, and the unaudited second quarter financial statements and dividend announcement of the Group for the period ended 30 June 2013, copies of which, are available for inspection at the Company s registered office at 531 Bukit Batok Street 23, Singapore II-3

63 APPENDIX II ADDITIONAL INFORMATION ON THE COMPANY As at 31 December 2012 S$ 000 As at 30 June 2013 S$ 000 Non-current assts Fixed assets 48,247 55,978 Associated company - - Other investments Intangible assets 1,002 3,333 Deferred tax assets ,066 60,243 Current assets Stocks 27,918 27,969 Trade debtors 53,426 64,679 Other debtors 2,488 2,735 Prepayments 2,639 3,359 Due from an associated company (trade) Due from an associated company (non-trade) 575 1,397 Derivative financial instruments Fixed deposits 5,147 6,266 Cash and bank balances 26,477 21, , ,584 Current liabilities Trade creditors 21,031 28,749 Other creditors 3,119 4,187 Accruals 9,147 9,416 Due to corporate shareholder Loans from non-controlling interests of subsidiaries 1,779 1,846 Provision for taxation 568 1,057 Term loans, current portion 1,220 1,473 Short-term bank loans 13,607 15,215 Lease obligations, current portion Derivative financial instruments 2,660 3,781 53,299 65,842 Net current assets 65,970 62,742 Non-current liabilities Term loans, non-current portion 4,999 8,510 Lease obligations, non-current portion Pension liability Other creditors, non-current portion Deferred taxation 1,904 2,066 7,417 11,590 Net assets 108, ,395 Equity attributable to owners of the Company Share capital 50,211 50,211 Shares held in treasury (6,466) (6,466) Capital reserve 5,237 5,458 II-4

64 APPENDIX II ADDITIONAL INFORMATION ON THE COMPANY As at 31 December 2012 S$ 000 As at 30 June 2013 S$ 000 Premium paid on acquisition of non-controlling interests (96) (96) Share based payment reserve Translation reserve (8,157) (4,884) Revenue reserve 58,510 56, , ,949 Non-controlling interests 8,413 9,446 Total equity 108, , Significant Accounting Policies and Changes A summary of the significant accounting policies of the Group is set out in Note 2 of the audited consolidated financial statements of the Group for FY2012, as set out in the annual report of the Company for FY2012, copies of which, are available for inspection at the Company s registered office at 531 Bukit Batok Street 23, Singapore Changes in Accounting Policies The accounting policies adopted are consistent with those of FY2012 except in FY2013, the Group has adopted all the new and revised standards that are effective for annual periods beginning on or after 1 January The adoption of these standards and interpretations did not have any effect on the financial performance or position of the Group and the Company except as discussed below: Amendments to Financial Reporting Standard ("FRS") 1 Presentation of Items of Other Comprehensive Income The Amendments to FRS 1 Presentation of Items of Other Comprehensive Income is effective for financial periods beginning on or after 1 July The Amendments to FRS 1 changes the grouping of items presented in other comprehensive income. Items that could be reclassified subsequently to profit or loss when specific conditions are met would be presented separately from items that will not be reclassified subsequently to profit or loss. As the Amendments only affect the presentations of items that are already recognised in other comprehensive income, there is no impact on the financial position or performance of the Group upon adoption of these Amendments. Revised FRS 19 Employee Benefits Revised FRS 19 Employee Benefits is effective for financial periods beginning on or after 1 January For defined benefit plans, the Revised FRS 19 requires all actuarial gains and losses to be recognised in other comprehensive income and unvested past service costs previously recognised over the average vesting period to be recognised immediately in profit or loss when incurred. Prior to adoption of the Revised FRS 19, the Group recognised actuarial gains and losses as income or expense when the net cumulative unrecognised gains and losses for each individual plan at the end of the previous period exceeded 10% of the higher of the defined benefit obligation and the fair value of the plan assets and recognised unvested past service costs as an expense on a straight-line basis over the average vesting period until the benefits become vested. Upon adoption of the Revised FRS 19, the Group changed its accounting policy to recognise all actuarial gains and losses in other comprehensive income and all past service costs in profit or loss in the period they occur. II-5

65 APPENDIX II ADDITIONAL INFORMATION ON THE COMPANY The Revised FRS 19 replaced the interest cost and expected return on plan assets with the concept of net interest on defined benefit liability or asset which is calculated by multiplying the net balance sheet defined benefit liability or asset by the discount rate used to measure the employee benefit obligation, each as at the beginning of the annual period. The Revised FRS 19 also amended the definition of short-term employee benefits and requires employee benefits to be classified as short-term based on the expected timing of settlement rather than the employee s entitlement to the benefits. In addition, the Revised FRS 19 modifies the timing of recognition for termination benefits. The modification requires the termination benefits to be recognised at the earlier of when the offer cannot be withdrawn or when the related restructuring costs are recognised. Changes to definition of short-term employee benefits and timing of recognition for termination benefits did not have any impact to the Group s financial position and financial performance. The changes in accounting policies have been applied retrospectively. The changes in accounting policies did not have any impact to the Group s financial position and financial performance for the half year ended 30 June FRS 113 Fair Value Measurement FRS 113 Fair Value Measurement is effective for financial periods beginning on or after 1 January FRS 113 provides a single source of guidance for all fair value measurements. FRS 113 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under FRS when fair value is required or permitted by FRS. FRS 113 expanded the required disclosures related to fair value measurements to help users understand the valuation techniques and inputs used to develop fair value measurements and the effect of fair value measurements on profit or loss. The application of FRS 113 did not have any impact to the financial position of the Group Material Changes (a) (b) Save as disclosed in publicly available information on the Group (including but not limited to the unaudited second quarter financial statements and dividend announcement of the Group for the period ended 30 June 2013 as set out in Appendix VI to this Circular), as at the Latest Practicable Date, there have been no known material changes in the financial position of the Group since 31 December 2012, being the date of the Group s last published audited financial statements. Save as disclosed in this Circular and save for information regarding the Group which is publicly available, there have been no material changes in any information previously published by or on behalf of the Company during the period commencing from the Joint Announcement Date and ending on the Latest Practicable Date. 6. DISCLOSURE OF INTERESTS 6.1. Shareholdings and Dealings (a) Interest of the Company in securities of the Offeror The Company does not have any direct or indirect interests in the shares of the Offeror or securities which carry voting rights in the Offeror, or instruments convertible into such shares or securities, or rights to subscribe for such shares or securities, or warrants, options or derivatives in respect of such shares or securities as at the Latest Practicable Date. II-6

66 APPENDIX II ADDITIONAL INFORMATION ON THE COMPANY (b) Dealings in securities of the Offeror by the Company The Company did not deal for value in the shares of the Offeror or securities which carry voting rights in the Offeror, or instruments convertible into such shares or securities, or rights to subscribe for such shares or securities, or warrants, options or derivatives in respect of such shares or securities during the period commencing three (3) months prior to the Joint Announcement Date and ending on the Latest Practicable Date. (c) Interests of the Directors in securities of the Offeror Save for Mr. Ong Peng Koon Gilbert and Ms. Chow Goon Chau Patricia, none of the Directors has any direct or indirect interest in the shares of the Offeror or securities which carry voting rights in the Offeror, or instruments convertible into such shares or securities, or rights to subscribe for such shares or securities, or warrants, options or derivatives in respect of such shares or securities as at the Latest Practicable Date. (d) Dealings in securities of the Offeror by the Directors Save for the subscription by GCPL (of which Mr. Ong Peng Koon Gilbert and Ms. Chow Goon Chau Patricia are shareholders) of sixty-five (65) ordinary shares in the share capital of the Offeror at an issue price of S$1.00 per share on 4 May 2013, none of the Directors has dealt for value in shares of the Offeror or securities which carry voting rights in the Offeror, or instruments convertible into such shares or securities, or rights to subscribe for such shares or securities, or warrants, options or derivatives in respect of such shares or securities during the period commencing three (3) months prior to the Joint Announcement Date and ending on the Latest Practicable Date. (e) Interests of the Directors in Company Securities Save as disclosed in Section 14 of the Letter to the Shareholders in this Circular, none of the Directors has any interest, whether direct or indirect, in the Company Securities as of the Latest Practicable Date. (f) Dealings in Company Securities by the Directors Save as disclosed in Section 14 of the Letter to the Shareholders in this Circular, none of the Directors has dealt for value in the Company Securities during the period commencing three (3) months prior to the Holding Announcement Date and ending on the Latest Practicable Date. (g) Company Securities owned or controlled by the independent financial adviser As at the Latest Practicable Date, neither Deloitte nor funds whose investments are managed by it on a discretionary basis, owns or controls any Company Securities. (h) Dealings in Company Securities by the independent financial adviser Neither Deloitte nor funds whose investments are managed by it on a discretionary basis, has dealt for value in any Company Securities during the period commencing three (3) months prior to the Joint Announcement Date and ending on the Latest Practicable Date Service Contracts with Directors There are (a) no service contracts between any of the Directors or proposed directors with the Company or its subsidiaries which have more than twelve (12) months to run and which are not terminable by the employing company within the next twelve (12) months without paying II-7

67 APPENDIX II ADDITIONAL INFORMATION ON THE COMPANY any compensation; and (b) no such service contracts between any of the Directors or proposed directors with the Company or its subsidiaries entered into or amended during the period commencing six (6) months prior to the Joint Announcement Date and ending on the Latest Practicable Date Arrangements Affecting Directors (a) (b) (c) It is not proposed that any payment or other benefit be made or given to any Director or to any director of any other corporation deemed to be related to the Company by virtue of Section 6 of the Companies Act, as compensation for loss of office or as consideration for or in connection with his retirement from office or otherwise in connection with the Exit Offer. Certain Directors have entered into arrangements with the Offeror, details of which are set out in Section 3 of the Letter to the Shareholders in this Circular. Save as disclosed in this Circular, there is no agreement or arrangement made between any Director and any other person in connection with or conditional upon the outcome of the Exit Offer. GCPL and the Offeror have entered into (i) the Shareholders Agreement and (ii) the GCPL Loan Agreement, details of which are set out in Section 8 of the Letter to the Shareholders in this Circular. Save as disclosed in this Circular, as at the Latest Practicable Date, there are no material contracts entered into by the Offeror in which any Director has a material personal interest, whether direct or indirect. 7. MATERIAL CONTRACTS WITH INTERESTED PERSONS Other than those entered into in the ordinary course of business, neither the Company nor any of its subsidiaries has entered into any material contracts with interested persons (as defined in the Note on Rule of the Code) within the three (3) years preceding the Joint Announcement Date. 8. MATERIAL LITIGATION As at the Latest Practicable Date, neither the Company nor any of its subsidiaries is engaged in any material litigation as plaintiff or defendant which might materially and adversely affect its financial position and the Directors are not aware of any proceedings (pending or threatened) against the Company or any of its subsidiaries or of any facts likely to give rise to any proceedings which might materially and adversely affect the financial position of the Company and its subsidiaries taken as a whole. 9. SHARE PRICES The following table sets out the highest, lowest and last closing prices of the Shares on the SGX-ST on a monthly basis from January 2013 to August 2013, as extracted from the SGX- ST. The closing price of the Shares on the SGX-ST on (a) the last trading day prior to the Joint Announcement Date was S$0.375 per Share; and (b) the Latest Practicable Date was S$0.395 per Share. II-8

68 APPENDIX II ADDITIONAL INFORMATION ON THE COMPANY Month Highest closing price of the month (S$) Lowest closing price of the month (S$) Closing price as at the last Market Day of the month (S$) January February March April May June July August Highest closing price Lowest closing price Closing price as on the last between 1-12 September between 1-12 September trading day prior to the Joint Month 2013 (S$) 2013 (S$) Announcement Date (S$) 1 12 September Highest and Lowest Prices The highest and lowest closing prices of the Shares on the SGX-ST during the period commencing six (6) calendar months prior to the Joint Announcement Date and ending on the Latest Practicable Date are as follows: Highest Closing Price : Lowest Closing Price : II-9

69 APPENDIX III ADDITIONAL INFORMATION ON THE OFFEROR AND THE PARTIES ACTING IN CONCERT WITH IT The following section on additional information on the Offeror and the Parties acting in concert with it is reproduced from Appendix II to the Exit Offer Letter, and all terms and expressions used in the extract below shall bear the same meanings as attributed to them in the Exit Offer Letter unless otherwise stated. 1. DIRECTORS OF THE OFFEROR The names, addresses and descriptions of the Offeror Directors as at the Latest Practicable Date are as follows: Name Address Designation Mr. Ong Peng Koon Gilbert Ms. Chow Goon Chau Patricia Mr. Ong Eugene Ms. Ong Mingli Phyllis 45 Faber Crescent, Faber Hills, Singapore Faber Crescent, Faber Hills, Singapore Faber Crescent, Faber Hills, Singapore Faber Crescent, Faber Hills, Singapore Director Director Director Director Mr. Kenjiro Miwa Nanzan-cho Showa-ku Nagoya Aichi, Japan Director Mr. Noriyoshi Suzuki 35 Jurong East Avenue 1, #20-02 Parc Oasis Block D, Singapore Director 2. REGISTERED OFFICE OF THE OFFEROR The registered office of the Offeror is at 146 Robinson Road, #09-01, Singapore PRINCIPAL ACTIVITIES OF THE OFFEROR The principal activity of the Offeror is that of an investment holding company. 4. SHARE CAPITAL As at the Latest Practicable Date, the Offeror has an issued share capital of S$100 comprising 100 fully paid-up ordinary shares. GCPL and Polyfoam each hold 65 and 35 fully paid-up ordinary shares in the Offeror respectively. III-1

70 APPENDIX III ADDITIONAL INFORMATION ON THE OFFEROR AND THE PARTIES ACTING IN CONCERT WITH IT 5. SUMMARY OF FINANCIAL INFORMATION As the Offeror was only incorporated on 4 May 2013, no audited financial statements of the Offeror have been prepared since the date of its incorporation. 6. MATERIAL CHANGES IN FINANCIAL POSITION As at the Latest Practicable Date, save as a result of the making and financing of the Exit Offer, there has been no known material change in the financial position of the Offeror since 4 May 2013, being the date of its incorporation. 7. SIGNIFICANT ACCOUNTING POLICIES As no audited financial statements of the Offeror have been prepared since the date of its incorporation, there are no significant accounting policies to be noted. 8. DISCLOSURE OF SHAREHOLDINGS AND DEALINGS 8.1 Shareholdings in the Company Save as set out in the table below, neither the Offeror, the Offeror Directors nor any of the parties acting or deemed to be acting in concert with the Offeror owns, controls or has agreed to acquire any Relevant Securities as at the Latest Practicable Date. Name Offeror Directors Shareholding Interest Number of Shares % (1) Mr. Ong Peng Koon Gilbert 198,745, Ms. Chow Goon Chau Patricia 28,522, Mr. Ong Eugene 1,748, Ms. Ong Mingli Phyllis 759, Mr. Kenjiro Miwa - - Mr. Noriyoshi Suzuki - - The Offeror - - Other Parties Acting or deemed to be Acting in Concert GCPL - - Polyfoam - - Ms. Ong Hwee Joo Sheena (2) 904, Ms. Ong Hwee Ong Hwee Tin (2) 500, Total Shareholding Interest 231,180, Notes: (1) The percentage shareholding interest is based on the issued share capital of 493,669,353 Shares (excluding 24,158,000 Shares held by the Company as treasury shares) as at the Latest Practicable Date. (2) Ms. Ong Hwee Joo Sheena and Ms. Ong Hwee Ong Hwee Tin are sisters of Mr. Ong and as such are parties deemed to be acting in concert with the Offeror. III-2

71 APPENDIX III ADDITIONAL INFORMATION ON THE OFFEROR AND THE PARTIES ACTING IN CONCERT WITH IT 8.2 Dealings in Shares Save as disclosed below, neither the Offeror, the Offeror Directors nor any of the parties acting or deemed to be acting in concert with the Offeror have dealt for value in any Relevant Securities during the period commencing three (3) months prior to the Joint Announcement Date and ending on the Latest Practicable Date. Name Date of Number of Shares Transacted Price Transaction acquired (disposed) per Share (S$) CIMB Securities (Singapore) Pte Ltd 6 May , CIMB Securities (Singapore) Pte Ltd 6 May , CIMB Securities (Singapore) Pte Ltd 7 May 2013 (20,000) CIMB Securities (Singapore) Pte Ltd 7 May 2013 (5,000) CIMB Securities (Singapore) Pte Ltd 8 May 2013 (16,000) No Other Undertakings Save as set out in paragraph 2.6 of this Exit Offer Letter entitled "Irrevocable Undertakings", as at the Latest Practicable Date, neither the Offeror nor any party acting in concert with it has received any irrevocable undertaking from any party to vote for or against the Delisting Resolution and to accept or reject the Exit Offer. 8.4 Indemnity Agreements Save as set out in paragraph 2.6 of this Exit Offer Letter entitled "Irrevocable Undertakings" and as otherwise disclosed in this Exit Offer Letter, as at the Latest Practicable Date, neither the Offeror nor any party acting in concert with it has any arrangement of the kind referred to under Note 7 to Rule 12 of the Code, including any indemnity or option arrangements, and any agreement or understanding, formal or informal, of whatever nature, relating to the Shares which may be an inducement to deal or refrain from dealing in the Shares. 8.5 Security Interests and Borrowed Securities Save as disclosed below, as at the Latest Practicable Date, neither the Offeror nor any party acting in concert with it has: (a) (b) (c) granted a security interest over any Relevant Securities to another person, whether through a charge, pledge or otherwise; borrowed from another party on any Relevant Securities (excluding borrowed Relevant Securities which have been on-lent or sold); or lent any Relevant Securities to another person. The Offeror has entered into: (i) (ii) (iii) a share charge with CIMB (as security agent) dated 5 July 2013 (the "Share Charge") pursuant to which the Offeror had agreed to grant a charge over all the Shares owned by the Offeror or held by any nominee on its behalf from time to time; a debenture with CIMB (as security agent) dated 5 July 2013 (the "Debenture") creating fixed and floating charges over all of the Offeror's assets; and a deed of subordination with CIMB (as security agent), Polyfoam and GCPL (as subordinated lenders) dated 5 July 2013 (the "Deed of Subordination"), where the III-3

72 APPENDIX III ADDITIONAL INFORMATION ON THE OFFEROR AND THE PARTIES ACTING IN CONCERT WITH IT Offeror, Polyfoam and GCPL have agreed to subordinate the debt owing by the Offeror to Polyfoam and GCPL to the indebtedness under the CIMB Facility Agreement (as defined below). The Share Charge, Debenture and Deed of Subordination (collectively, the "Security Agreements") are each entered into pursuant to a facility agreement entered into between the Offeror as borrower and CIMB (as arranger, original lender, agent, security agent and account bank) dated 5 July 2013 (the "CIMB Facility Agreement") for the purpose of funding the Exit Offer. 9. GENERAL 9.1 Agreement having any Connection with or Dependence upon the Exit Offer Save for (a) the Ong Family Undertakings provided by the Ong Family, details of which are set out in paragraph 2.6 of this Exit Offer Letter entitled "Irrevocable Undertakings", and (b) the Options Undertaking, details of which are set out in paragraph 2.6 of this Exit Offer Letter entitled "Irrevocable Undertakings", and otherwise disclosed in this Exit Offer Letter, there is no agreement, arrangement or understanding as at the Latest Practicable Date between (i) the Offeror or any parties acting in concert with the Offeror and (ii) any of the current or recent Directors or any of the current or recent Shareholders having any connection with or dependence upon the Exit Offer. 9.2 Payment or Benefit to the Directors As at the Latest Practicable Date, there is no agreement, arrangement or understanding for payment or other benefit to be made or given to any Director or any director of a corporation deemed to be related to the Company by virtue of Section 6 of the Companies Act as compensation for loss of office or as consideration for or in connection with his retirement from office or otherwise in connection with the Exit Offer. 9.3 Transfer of Shares Save as disclosed in paragraph 8.5 of this Appendix II in which the Share Charge has been granted to CIMB by the Offeror, as at the Latest Practicable Date, there is no agreement, arrangement or understanding whereby any Shares acquired pursuant to the Exit Offer, as the case may be, will be transferred to any other person. 9.4 Arrangements Save for (a) the Ong Family Undertakings, details of which are set out in paragraph 2.6 of this Exit Offer Letter entitled "Irrevocable Undertakings", (b) the Shareholders Agreement, details of which are set out in paragraph 4.4 of this Exit Offer Letter entitled "Shareholders' Agreement", (c) the Polyfoam Loan Agreement and the GCPL Loan Agreement, details of which are set out in paragraph 4.5 of this Exit Offer Letter entitled "Shareholder Loan Agreements", (d) the Options Undertaking, details of which are set out in paragraph 2.6 of this Exit Offer Letter entitled "Irrevocable Undertakings", and (e) the CIMB Facility Agreement (and such other agreements entered into by the Offeror in connection therewith, including the Security Agreements), details of which are set out in paragraph 8.5 of Appendix II to this Exit Offer Letter, as at the Latest Practicable Date, there is no agreement, arrangement or understanding between the Offeror and any directors of the Company or any other person in connection with or conditional upon the outcome of the Exit Offer or is otherwise connected with the Exit Offer. III-4

73 APPENDIX III ADDITIONAL INFORMATION ON THE OFFEROR AND THE PARTIES ACTING IN CONCERT WITH IT 9.5 Transfer Restrictions The Memorandum and Articles of Association of the Company do not contain any restrictions on the right to transfer Offer Shares, which has the effect of requiring the holders of the Offer Shares, before transferring them, to first offer them for purchase to Shareholders or to any other person. 9.6 Material Change in Information Save as disclosed in this Exit Offer Letter and save for the information relating to the Offeror and the Exit Offer that is publicly available, there has been no material change in any information previously published by or on behalf of the Offeror during the period commencing from the Joint Announcement Date and ending on the Latest Practicable Date. III-5

74 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 The audited financial statements for FY2012, prepared in accordance with the requirements of the Companies Act, are reproduced below. The financial statements for FY2012 were audited by Ernst and Young LLP. Armstrong Industrial Corporation Limited and its Subsidiaries Annual Financial Statements 31 December 2012 IV-1

75 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 REPORT OF THE DIRECTORS (Amounts are expressed in Singapore dollars) The directors are pleased to present their report to the members together with the audited consolidated financial statements of Armstrong Industrial Corporation Limited (the Company ) and its subsidiaries (collectively, the Group ) and the balance sheet and statement of changes in equity of the Company for the financial year ended 31 December Directors The directors of the Company in office at the date of this report are: Mr Ong Peng Koon Gilbert Mr Koh Gim Hoe Steven Ms Chow Goon Chau Patricia Mr Chan Pee Teck Peter Mr Tan Peng Chin Mr Anthony Ang Meng Huat (Chairman and Chief Executive Officer) In accordance with Article 104 of the Company s Articles of Association, Mr Koh Gim Hoe Steven and Ms Chow Goon Chau Patricia retire and, being eligible, offer themselves for re-election. Arrangements to Enable Directors to Acquire Shares and Debentures Except for the Armstrong Industrial Corporation Share Option Scheme 2000 and 2008, 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 object 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 Interests in Shares and Debentures The following directors, who held office at the end of the financial year, had, according to the register of directors shareholdings required to be kept under Section 164 of the Singapore Companies Act, Cap 50, an interest in shares and share options of the Company and related corporations, as stated below: Direct interest Deemed interest As at As at As at As at As at As at Armstrong Industrial Corporation Limited Ordinary Shares Mr Ong Peng Koon Gilbert 198,745, ,745, ,745,915 28,522,000 28,522,000 28,522,000 Ms Chow Goon Chau Patricia 28,522,000 28,522,000 28,522, ,745, ,745, ,745,915 Mr Koh Gim Hoe Steven 5,364,0000 5,364,000 5,364,000 Mr Anthony Ang Meng Huat 6,635 6,635 6,635 1,342,000 1,342,000 1,342,000 Share Options to subscribe for Ordinary Shares Mr Koh Gim Hoe Steven 3,450,284 3,450,284 3,450,284 By virtue of Section 7 of the Singapore Companies Act, Cap 50, Mr Ong Peng Koon Gilbert and Ms Chow Goon Chau Patricia are deemed to be interested in the shares held by the Company in all its subsidiaries. Except as disclosed in this report, no other director who held office at the end of the financial year had interests in the shares, share options, warrants or debentures of the Company or related corporations either at the beginning or end of the financial year and on 21 January IV-2

76 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 REPORT OF THE DIRECTORS (Amounts are expressed in Singapore dollars) Directors Contractual Benefits Since the end of the previous financial year, no director of the Company has received or become entitled to receive a benefit (other than a benefit or any fixed salary of a full-time employee of the Company included in the aggregate amount of emoluments shown in the financial statements, or any emoluments received from related corporation or fees paid to a firm of which a director is a member or share options granted pursuant to the Armstrong Industrial Corporation Share Option Scheme), by reason of a contract made by the Company or a related corporation 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, except as disclosed in Note 42 to the financial statements. Share Options (a) Armstrong Industrial Corporation Share Option Scheme and Armstrong Industrial Corporation Performance Share Plan At the Extraordinary General Meeting held on 16 January 2009, shareholders of the Company approved the termination of Armstrong Industrial Corporation Share Option Scheme 2000 and adopted the Armstrong Industrial Corporation Share Option Scheme 2008 ( Share Option Scheme ) and Armstrong Industrial Corporation Performance Share Plan 2008 ( Share Plan ). The termination of the Share Option Scheme 2000 does not prejudice the rights of the option holders holding options which have been granted and accepted prior to the Scheme s termination. Pursuant to the rules of the Share Option Scheme and Share Plan, employees of the Group (including non-executive directors, controlling shareholders and their associates) who meet the relevant criteria as set out in the said rules are eligible to participate in the Share Option Scheme and Share Plan. The Share Option Scheme and Share Plan are administered by the Remuneration Committee which comprises: Mr Tan Peng Chin Chairman Independent Director Mr Chan Pee Teck Peter Member Independent Director Mr Anthony Ang Meng Huat Member Independent Director During the financial year, the Company did not grant any share options or award any shares to the employees, executive and non-executive directors. (b) Unissued Shares Under Option As at the end of the financial year, unissued shares of the Company under option were as follows: Options granted Date granted Exercise period Exercise price (per share) $ Aggregate options outstanding Exercisable options 2000 Options to Options to , , Options to ,226,000 10,226,000 10,363,794 10,363,794 IV-3

77 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 REPORT OF THE DIRECTORS (Amounts are expressed in Singapore dollars) Share Options (cont d) (b) Unissued Shares Under Option (cont d) The details of options granted and exercised are as follows: Option participants Options granted during the year Aggregate options granted [1] Aggregate options exercised [2] Aggregate options outstanding [3] Director of the Company Koh Gim Hoe Steven * 11,664,284 8,214,000 3,450,284 Employees Other employees 25,623,693 13,197,164 6,913,510 37,287,977 21,411,164 10,363,794 * Directors and employees granted 5.00% or more of the total options available under the Share Option Scheme. [1] Aggregate options granted since commencement of the Share Option Scheme to end of financial year. [2] Aggregate options exercised since commencement of the Share Option Scheme to end of financial year. [3] Aggregate options outstanding as at end of financial year. Except as disclosed above, no other executive or employee of the Company has received 5.00% or more of the total options available and no options have been granted to controlling shareholders of the Company or their associates during the financial year. Except as disclosed above, there were no unissued shares of the Company or its subsidiaries under option as at the end of the financial year. The options granted by the Company do not entitle the holders of the options, by virtue of such holdings, to any right to participate in any share issue of any other company. Audit Committee The Audit Committee performed the functions specified in the Singapore Companies Act, Cap 50. The functions performed are detailed in the Report on Corporate Governance. Auditor Ernst & Young LLP have expressed their willingness to accept re-appointment as auditor. On behalf of the Board, Ong Peng Koon Gilbert Director Koh Gim Hoe Steven Director 20 March 2013 IV-4

78 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 STATEMENT BY DIRECTORS We, Ong Peng Koon Gilbert and Koh Gim Hoe Steven, being two of the directors of Armstrong Industrial Corporation Limited, do hereby state that, in the opinion of the directors, (i) the accompanying balance sheets, consolidated statement of comprehensive income, statements of changes in equity and consolidated statement of cash flows together with notes thereto are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2012, and the results of the business, changes in equity and cash flows of the Group and the changes in equity of the Company for the year ended on that date, and (ii) 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, Ong Peng Koon Gilbert Director Koh Gim Hoe Steven Director 20 March 2013 IV-5

79 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 INDEPENDENT AUDITOR S REPORT for the financial year ended 31 December 2012 Independent Auditor s Report to the members of Armstrong Industrial Corporation Limited Report on the financial statements We have audited the accompanying financial statements of Armstrong Industrial Corporation Limited (the Company ) and its subsidiaries (collectively, the Group ), which comprise the balance sheets of the Group and the Company as at 31 December 2012, the statements of changes in equity of the Group and the Company and the consolidated statements of comprehensive income and consolidated statement of cash flows of the Group for the year then ended, and a summary of significant accounting policies and other explanatory information. Management s responsibility for the financial statements Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Singapore Companies Act, Chapter 50 (the Act ) and Singapore Financial Reporting Standards, and for 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. 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 about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the 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 of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the 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. Opinion In our opinion, the consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2012 and the results, changes in equity and cash flows of the Group and the changes in equity of the Company for the year ended on that date. Report on other legal and regulatory requirements In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act. Ernst & Young LLP Public Accountants and Certified Public Accountants Singapore 20 March 2013 IV-6

80 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 BALANCE SHEETS as at 31 December 2012 (Amounts are expressed in Singapore dollars) Note Group Company $ 000 $ 000 $ 000 $ 000 Non-current assets Fixed assets 4 48,247 39,795 1,651 1,835 Subsidiaries 5 29,195 28,221 Associated company 6 Other investments Intangible assets 8 1,002 1, Deferred tax assets Loans to subsidiaries 9 3,311 50,066 41,221 31,257 33,782 Current assets Stocks 10 27,918 36,706 2,041 4,198 Trade debtors 11 53,426 51,120 11,510 9,667 Other debtors 12 2,488 6, Prepayments 13 2,639 1, Due from subsidiaries (trade) 14 12,583 10,508 Due from subsidiaries (non-trade) 14 15,002 15,340 Due from an associated company (trade) Due from an associated company (non-trade) Derivative financial instruments Fixed deposits 17 5,147 1, Cash and bank balances 17 26,477 31,480 4,612 3, , ,977 47,101 44,757 Current liabilities Trade creditors 18 21,031 24,373 1,038 1,455 Other creditors 19 3,119 3,297 1,116 1,205 Accruals 20 9,147 7,430 5,257 3,811 Due to subsidiaries (trade) 21 7,201 6,212 Due to subsidiaries (non-trade) Due to corporate shareholder Loans from non-controlling interests of subsidiaries 22 1,779 1,878 Provision for taxation Term loans, current portion 23 1, Short-term bank loans 23 13,607 18,872 9,954 12,619 Lease obligations, current portion Derivative financial instruments 16 2,660 4,350 2,444 4,350 53,299 62,086 27,283 30,032 Net current assets 65,970 67,891 19,818 14,725 IV-7

81 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 BALANCE SHEETS as at 31 December 2012 (Amounts are expressed in Singapore dollars) Non-current liabilities Note Group Company $ 000 $ 000 $ 000 $ 000 Term loans, non-current portion 23 4,999 1,459 Lease obligations, non-current portion Pension liability Deferred taxation 25 1,904 1, ,417 3, Net assets 108, ,759 50,569 47,855 Equity attributable to owners of the Company Share capital 26 50,211 50,211 50,211 50,211 Shares held in treasury 27 (6,466) (6,341) (6,466) (6,341) Capital reserve 28 5,237 4,837 Premium paid on acquisition of non-controlling interests 29 (96) (96) Share-based payment reserve Translation reserve 31 (8,157) (2,259) Revenue reserve 58,510 50,392 5,857 3, ,206 97,711 50,569 47,855 Non-controlling interests 8,413 8,048 Total equity 108, ,759 50,569 47,855 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. IV-8

82 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 December 2012 (Amounts are expressed in Singapore dollars) Note Group $ 000 $ 000 Turnover , ,251 Cost of sales (173,704) (168,266) Gross profit 42,534 45,985 Other operating income 33 6,140 7,623 Distribution and selling expenses (7,721) (6,902) Administrative expenses (25,237) (22,339) Other operating expenses 34 (826) (10,711) Profit from operations 36 14,890 13,656 Financial expenses 37 (641) (676) Financial income Profit before taxation 14,565 13,086 Taxation 39 (2,038) (4,569) Profit after taxation 12,527 8,517 Other comprehensive income: Exchange differences on translating foreign operations (debit)/credit to translation reserve (6,885) 2,125 Other comprehensive income for the year, net of tax (6,885) 2,125 Total comprehensive income for the year 5,642 10,642 Profit after taxation attributable to: Owners of the Company 11,483 7,132 Non-controlling interests 1,044 1,385 12,527 8,517 Total comprehensive income attributable to: Owners of the Company 5,585 8,951 Non-controlling interests 57 1,691 5,642 10,642 Earnings per share attributable to owners of the Company (cents) Basic Diluted The accompanying accounting policies and explanatory notes form an integral part of the financial statements. IV-9

83 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 STATEMENTS OF CHANGES IN EQUITY for the year ended 31 December 2012 (Amounts are expressed in Singapore dollars) (a) Group Equity, total Equity attributable to owners of the Company, total Share capital Attributable to owners of the Company Shares held in treasury Capital reserve Premium paid on acquisition of noncontrolling interests Share-based payment Translation Revenue reserve reserve reserve Noncontrolling interests $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 As at 1 January ,759 97,711 50,211 (6,341) 4,837 (96) 967 (2,259) 50,392 8,048 Profit net of tax 12,527 11,483 11,483 1,044 Other comprehensive income (6,885) (5,898) (5,898) (987) Total comprehensive income for the year 5,642 5,585 (5,898) 11, Contributions by and distributions to owners Purchase of treasury shares (125) (125) (125) Dividend paid (Note 41) (2,965) (2,965) (2,965) Total transactions with owners in their capacity as owners (3,090) (3,090) (125) (2,965) Others Transfer to statutory reserve 400 (400) Contribution by noncontrolling interest Dividend paid to non-controlling interest of a subsidiary (61) (61) Total others (400) 308 As at 31 December , ,206 50,211 (6,466) 5,237 (96) 967 (8,157) 58,510 8,413 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. IV-10

84 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 STATEMENTS OF CHANGES IN EQUITY for the year ended 31 December 2012 (Amounts are expressed in Singapore dollars) (a) Group (cont d) Equity, total Equity attributable to owners of the Company, total Share capital Attributable to owners of the Company Shares held in treasury Capital reserve Premium paid on acquisition of noncontrolling interests Share-based payment Translation Revenue reserve reserve reserve Noncontrolling interests $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 As at 1 January , ,794 49,628 (3,986) 685 1,071 (4,078) 57,474 7,616 Profit net of tax 8,517 7,132 7,132 1,385 Other comprehensive income 2,125 1,819 1, Total comprehensive income for the year 10,642 8,951 1,819 7,132 1,691 Contributions by and distributions to owners Issue of shares Purchase of treasury shares (2,355) (2,355) (2,355) Exercise of share options 104 (104) Dividend paid (Note 41) (10,062) (10,062) (10,062) Total contributions by and distributions to owners (11,938) (11,938) 583 (2,355) (104) (10,062) Changes in ownership interests in subsidiaries without a change in control Acquisition of non-controlling interests, representing total changes in ownership interests in subsidiaries (1,296) (96) (96) (1,200) Total transactions with owners in their capacity as owners (13,234) (12,034) 583 (2,355) (96) (104) (10,062) (1,200) Others Transfer to statutory reserve 4,152 (4,152) Dividend paid to non-controlling interest of a subsidiary (59) (59) Total others (59) 4,152 (4,152) (59) As at 31 December ,759 97,711 50,211 (6,341) 4,837 (96) 967 (2,259) 50,392 8,048 IV-11

85 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 STATEMENTS OF CHANGES IN EQUITY for the year ended 31 December 2012 (Amounts are expressed in Singapore dollars) (b) Company Equity, total Share capital Shares held in treasury Share-based payment reserve Revenue reserve $ 000 $ 000 $ 000 $ 000 $ 000 As at 1 January ,855 50,211 (6,341) 967 3,018 Profit net of tax 5,804 5,804 Other comprehensive income Total comprehensive income for the year 5,804 5,804 Contributions by and distributions to owners Purchase of treasury shares (125) (125) Dividend paid (Note 41) (2,965) (2,965) Total transactions with owners in their capacity as owners (3,090) (125) (2,965) As at 31 December ,569 50,211 (6,466) 967 5,857 As at 1 January ,125 49,628 (3,986) 1,071 3,412 Profit net of tax 9,668 9,668 Other comprehensive income Total comprehensive income for the year 9,668 9,668 Contributions by and distributions to owners Issue of shares Purchase of treasury shares (2,355) (2,355) Exercise of share options 104 (104) Dividend paid (Note 41) (10,062) (10,062) Total transactions with owners in their capacity as owners (11,938) 583 (2,355) (104) (10,062) As at 31 December ,855 50,211 (6,341) 967 3,018 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. IV-12

86 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 31 December 2012 (Amounts are expressed in Singapore dollars) Note Group $ 000 $ 000 Cash flows from operating activities Profit before taxation 14,565 13,086 Adjustments: Depreciation of fixed assets 5,437 5,285 (Reversal of)/provision for impairment of fixed assets 34 (187) 3,780 Write-down of stocks ,386 Gain on disposal of fixed assets, net (96) (48) Allowance for stock obsolescence, net 1, Allowance/(write-back of allowance) for doubtful trade debts, net 3 (138) Allowance for doubtful non-trade debts 396 Interest expense Interest income (316) (106) Dividend income (20) (30) Fair value changes to held for trading quoted equity shares and amounts under fund management (12) 26 Amortisation of intangible assets 5 34 Gain on disposal of quoted equity shares (84) Fair value adjustments for derivative contracts, net (1,868) 4,298 Unrealised exchange loss (3,108) 1,744 Operating cash flows before working capital changes 16,496 31,401 Stocks 7,790 (2,846) Trade debtors (2,302) 4,425 Other debtors and prepayments 2,432 (4,093) Due from an associated company (192) 77 Trade creditors (3,341) (944) Other creditors and accruals 1, Due to corporate shareholder (125) (39) Pension liability 386 Cash generated from operations 22,685 28,426 Interest received Interest paid (641) (676) Income tax paid (2,823) (6,000) Net cash generated from operating activities 19,537 21,856 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. IV-13

87 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 31 December 2012 (Amounts are expressed in Singapore dollars) Note Group $ 000 $ 000 Cash flows from investing activities Dividend received from quoted investments Proceeds from sale of fixed assets Purchase of fixed assets B (17,127) (8,131) Proceeds from sale of quoted equity shares 225 Net cash used in investing activities (16,293) (7,772) Cash flows from financing activities Purchase of treasury shares (125) (2,355) Fixed deposits pledged A 4 1,796 Proceeds from short-term bank loans 33,764 25,137 Repayment of short-term bank loans (38,118) (18,370) Proceeds from bank term loans 4, Repayment of bank term loans (661) (1,053) Repayment of lease obligations (206) (216) Dividend paid (2,965) (10,062) Dividend paid to non-controlling interests of subsidiaries (61) (59) Proceeds from issue of new shares pursuant to exercise of share options 479 Acquisition of non-controlling interests of a subsidiary (1,296) Share capital contribution by non-controlling interest of a subsidiary 369 Net cash used in financing activities (3,093) (5,103) Net increase in cash and cash equivalents 151 8,981 Effect of exchange rate changes on cash and cash equivalents (1,917) (38) Cash and cash equivalents at beginning of year 33,225 24,282 Cash and cash equivalents at end of year A 31,459 33,225 A. Cash and cash equivalents Cash and cash equivalents included in the consolidated statement of cash flows comprise the following: $ 000 $ 000 Fixed deposits 5,147 1,914 Cash and bank balances 26,477 31,480 31,624 33,394 Less: Fixed deposits pledged (Note 17) (165) (169) Cash and cash equivalents at end of year 31,459 33,225 B. Fixed assets During the financial year, the Group acquired fixed assets with an approximate aggregate cost of $17,288,000 (2011: $8,227,000) of which $161,000 (2011: $96,000) was acquired by means of finance leases and $17,127,000 (2011: $8,131,000) by cash. The accompanying accounting policies and explanatory notes form an integral part of the financial statements. IV-14

88 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Corporate information Armstrong Industrial Corporation Limited (the Company ), a company incorporated and domiciled in Singapore, is a public limited company listed on the Singapore Exchange Securities Trading Limited. The registered office and principal place of business of Armstrong Industrial Corporation Limited is located at 531 Bukit Batok Street 23, Singapore The principal activities of the Company are those of investment holding and the manufacture and sale of precision die-cut foam and rubber moulded components for a wide range of technology and other applications. The principal activities of the subsidiaries are disclosed in Note 5 to the financial statements. There have been no significant changes in the nature of these activities during the financial year. 2. Summary of significant accounting policies 2.1 Basis of preparation The consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company have been prepared in accordance with Singapore Financial Reporting Standards ( FRS ). The financial statements have been prepared on a historical cost basis except as disclosed in the accounting policies below. The financial statements are presented in Singapore Dollars (SGD or $), and all values in the tables are rounded to the nearest thousand ($ 000) as indicated. 2.2 Changes in accounting policies The accounting policies adopted are consistent with those of the previous financial year except in the current financial year, the Group has adopted all the new and revised standards that are effective for annual periods beginning on or after 1 January The adoption of these standards and interpretations did not have any effect on the financial performance or position of the Group and the Company. 2.3 Standards issued but not yet effective The Group has not adopted the following standards and interpretations that have been issued and are relevant to the Group, but not yet effective: Effective for annual periods Description beginning on or after Amendments to FRS 1 Presentation of Items of Other Comprehensive Income 1 July 2012 Revised FRS 19 Employee Benefits 1 January 2013 FRS 113 Fair Value Measurements 1 January 2013 Amendments to FRS 107 Disclosures Offsetting Financial Assets and Financial Liabilities 1 January 2013 Improvements to FRSs Amendment to FRS 1 Presentation of Financial Statements 1 January Amendment to FRS 16 Property, Plant and Equipment 1 January Amendment to FRS 32 Financial Instruments: Presentation 1 January 2013 Revised FRS 27 Separate Financial Statements 1 January 2014 Revised FRS 28 Investments in Associates and Joint Ventures 1 January 2014 FRS 110 Consolidated Financial Statements 1 January 2014 FRS 112 Disclosure of Interests in Other Entities 1 January 2014 Amendments to FRS 32 Offsetting Financial Assets and Financial Liabilities 1 January 2014 Amendments to FRS 110, FRS 112 and FRS 27 Investment Entities 1 January 2014 Except for the Amendments to FRS 1 and FRS 112, the directors expect that the adoption of the other standards above will have no material impact on the financial statements in the period of initial application. The nature of the impending changes in accounting policy on adoption of the Amendments to FRS 1 and FRS 112 are described below. IV-15

89 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Summary of significant accounting policies (cont d) 2.3 Standards issued but not yet effective (cont d) Amendments to FRS 1 Presentation of Items of Other Comprehensive Income The Amendments to FRS 1 Presentation of Items of Other Comprehensive Income ( OCI ) is effective for financial periods beginning on or after 1 July The Amendments to FRS 1 changes the grouping of items presented in OCI. Items that could be reclassified to profit or loss at a future point in time would be presented separately from items which will never be reclassified. As the Amendments only affect the presentations of items that are already recognised in OCI, the Group does not expect any impact on its financial position or performance upon adoption of this standard. FRS 112 Disclosure of Interests in Other Entities FRS 112 is effective for financial periods beginning on or after 1 January FRS 112 is a new and comprehensive standard on disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. FRS 112 requires an entity to disclose information that helps users of its financial statements to evaluate the nature and risks associated with its interests in other entities and the effects of those interests on its financial statements. The Group is currently determining the impact of the disclosure requirements. As this is a disclosure standard, it will have no impact to the financial position and financial performance of the Group when implemented in Foreign currency The Group s consolidated financial statements are presented in Singapore Dollars, which is also the Company s functional currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. (i) Transactions and balances Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the end of the reporting period. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Exchange differences arising on the settlement of monetary items or on translating monetary items at the end of the reporting period are recognised in profit or loss except for exchange differences arising on monetary items that form part of the Group s net investment in foreign operations, which are recognised initially in other comprehensive income and accumulated under foreign currency translation reserve in equity. The foreign currency translation reserve is reclassified from equity to profit or loss of the Group on disposal of the foreign operation. (ii) Consolidated financial statements For consolidation purpose, the results and financial position of foreign operations are translated into SGD using the following procedures: Assets and liabilities for each balance sheet presented are translated at the closing exchange rate ruling at the end of the reporting period; and Statements of comprehensive income are translated at average exchange rates for the year, which approximates the exchange rates at the dates of the transactions. All resulting exchange differences are recognised in other comprehensive income. On disposal of a foreign operation, the component of other comprehensive income relating to that foreign operation is recognised in profit or loss. IV-16

90 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Summary of significant accounting policies (cont d) 2.4 Foreign currency (cont d) (ii) Consolidated financial statements (cont d) In the case of a partial disposal without loss of control of a subsidiary that includes a foreign operation, the proportionate share of the cumulative amount of the exchange differences is re-attributed to non-controlling interest and is not recognised in profit or loss. For partial disposals of associates that are foreign operations, the proportionate share of the accumulated exchange differences is reclassified to profit or loss. 2.5 Basis of consolidation and business combinations (i) Basis of consolidation Basis of consolidation from 1 January 2010 The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the end of the reporting period. The financial statements of the subsidiaries used in the preparation of consolidated financial statements are prepared for the same reporting date as the parent company. Consistent accounting policies are applied to like transactions and events in similar circumstances. All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions and dividends are eliminated in full. Subsidiaries are 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. Losses within a subsidiary are attributed to the non-controlling interest even if that results in a deficit balance. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it: De-recognises the assets (including goodwill) and liabilities of the subsidiary at their carrying amounts at the date when control is lost; De-recognises the carrying amount of any non-controlling interest; De-recognises the cumulative translation differences recorded in equity; Recognises the fair value of the consideration received; Recognises the fair value of any investment retained; Recognises any surplus or deficit in profit or loss; Re-classifies the Group s share of components previously recognised in other comprehensive income to profit or loss or retained earnings, as appropriate. Basis of consolidation prior to 1 January 2010 Certain of the above-mentioned requirements were applied on a prospective basis. The following differences, however, are carried forward in certain instances from the previous basis of consolidation: Acquisition of non-controlling interests, prior to 1 January 2010, were accounted for using the parent entity extension method, whereby, the difference between the consideration and the book value of the share of the net assets acquired were recognised in goodwill. Losses incurred by the Group were attributed to the non-controlling interest until the balance was reduced to nil. Any further losses were attributed to the Group, unless the non-controlling interest had a binding obligation to cover these. Losses prior to 1 January 2010 were not reallocated between non-controlling interest and the owners of the Company. Upon loss of control, the Group accounted for the investment retained at its proportionate share of net asset value at the date control was lost. The carrying value of such investments as at 1 January 2010 have not been restated. IV-17

91 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Summary of significant accounting policies (cont d) 2.5 Basis of consolidation and business combinations (cont d) (ii) Business combinations Business combinations from 1 January 2010 Business combinations are accounted for by applying the acquisition method. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisitionrelated costs are recognised as expenses in the periods in which the costs are incurred and the services are received. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability, will be recognised in accordance with FRS 39 either in profit or loss or as a change to other comprehensive income. If the contingent consideration is classified as equity, it is not remeasured until it is finally settled within equity. In business combinations achieved in stages, previously held equity interests in the acquiree are remeasured to fair value at the acquisition date and any corresponding gain or loss is recognised in profit or loss. The Group elects for each individual business combination, whether non-controlling interest in the acquiree (if any) is recognised on the acquisition date at fair value, or at the non-controlling interest s proportionate share of the acquiree s identifiable net assets. Any excess of the sum of the fair value of the consideration transferred in the business combination, the amount of non-controlling interest in the acquiree (if any), and the fair value of the Group s previously held equity interest in the acquiree (if any), over the net fair value of the acquiree s identifiable assets and liabilities is recorded as goodwill. The accounting policy for goodwill is set out in Note 2.10(i). In instances where the latter amount exceeds the former, the excess is recognised as gain on bargain purchase in profit or loss on the acquisition date. Business combinations prior to 1 January 2010 In comparison to the above mentioned requirements, the following differences applied: Business combinations are accounted for by applying the purchase method. Transaction costs directly attributable to the acquisition formed part of the acquisition costs. The non-controlling interest (formerly known as minority interest) was measured at the proportionate share of the acquiree s identifiable net assets. Business combinations achieved in stages were accounted for as separate steps. Adjustments to those fair values relating to previously held interests are treated as a revaluation and recognised in equity. Any additional acquired share of interest did not affect previously recognised goodwill. When the Group acquired a business, embedded derivatives separated from the host contract by the acquiree were not reassessed on acquisition unless the business combination results in a change in the terms of the contract that significantly modified the cash flows that otherwise would have been required under the contract. Contingent consideration was recognised if, and only if, the Group had a present obligation, the economic outflow was more likely than not and a reliable estimate was determinable. Subsequent adjustments to the contingent consideration were recognised as part of goodwill. IV-18

92 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Summary of significant accounting policies (cont d) 2.6 Transactions with non-controlling interests Non-controlling interest represents the equity in subsidiaries not attributable, directly or indirectly, to owners of the Company, and are presented separately in the consolidated statement of comprehensive income and within equity in the consolidated balance sheet, separately from equity attributable to owners of the Company. Changes in the Company s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the noncontrolling interest is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company. 2.7 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. In the Company s separate financial statements, investments in subsidiaries are accounted for at cost less any impairment losses. 2.8 Associated company An associated company is an entity, not being a subsidiary or a joint venture, in which the Group has significant influence. An associated company is equity accounted for from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associated company. The Group s investment in associated company is accounted for using the equity method. Under the equity method, the investment in associated company is carried in the balance sheet at cost plus post-acquisition changes in the Group s share of net assets of the associated company. Goodwill relating to associated company is included in the carrying amount of the investment and is neither amortised nor tested individually for impairment. Any excess of the Group s share of the net fair value of the associated company s identifiable assets, liabilities and contingent liabilities over the cost of the investment is included as income in the determination of the Group s share of results of the associated company in the period in which the investment is acquired. The profit or loss reflects the share of the results of operations of the associated companies. Where there has been a change recognised in other comprehensive income by the associated companies, the Group recognises its share of such changes in other comprehensive income. Unrealised gains and losses resulting from transactions between the Group and the associated company are eliminated to the extent of the interest in the associated companies. The Group s share of the profit or loss of its associated company is the profit attributable to the equity holders of the associated company and, therefore is the profit or loss after tax and non-controlling interests in the subsidiaries of associated company. When the Group s share of losses in an associated company equals or exceeds its interest in the associated company, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associated company. After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group s investment in its associated company. The Group determines at the end of each reporting period whether there is any objective evidence that the investment in the associated company is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associated company and its carrying value and recognises the amount in profit or loss. The financial statements of the associated companies are prepared as of the same reporting date as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group. Upon loss of significant influence over the associated company, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associated company upon loss of significant influence and the fair value of the aggregate of the retained investment and proceeds from disposal is recognised in profit or loss. IV-19

93 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Summary of significant accounting policies (cont d) 2.9 Fixed assets Fixed assets are initially recorded at cost. Such cost includes the cost of replacing part of the fixed asset and borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying fixed asset. The accounting policy for borrowing costs is set out in Note The cost of an item is recognised as a fixed asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Subsequent to recognition, fixed assets are measured at cost or valuation less accumulated depreciation and accumulated impairment losses. Expenditure for additions, improvements and renewals are recognised as individual assets with specific useful lives and depreciation. Expenditure for maintenance and repairs are charged to profit or loss as incurred. The revalued leasehold land and building is stated at the valuation when it was first revalued prior to 1 January Where fixed assets are revalued, any surplus on revaluation is recognised in other comprehensive income and accumulated in equity under asset revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss, in which case the increase is recognised in profit or loss. A revaluation deficit is recognised in profit or loss, except to the extent that it offsets an existing surplus on the same asset carried in the asset revaluation reserve. Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. The revaluation surplus included in the asset revaluation reserve in respect of an asset is transferred directly to retained earnings on retirement or disposal of the asset. Depreciation is calculated using the straight-line method to write off the cost or valuation of fixed assets over their estimated useful lives. The estimated useful lives of fixed assets are as follows: Leasehold land and buildings 20 to 50 years Freehold buildings 20 years Plant and machinery 5 to 10 years Furniture, fittings and office equipment 5 to 12 years Motor vehicles 5 to 10 years Computers 3 years Tools and equipment 3 to 10 years Renovation 5 years Construction-in-progress represents machinery under installation and renovation in progress and is stated at cost. Constructionin-progress is not depreciated until such time as the relevant assets are available for use. Freehold land has an unlimited useful life and therefore is not depreciated. The carrying values of fixed assets are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. The residual values, useful life and depreciation method are reviewed at each financial year-end, and adjusted prospectively, if appropriate. A fixed asset is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in profit or loss in the year the asset is derecognised Intangible assets (i) Goodwill Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group s cash-generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. IV-20

94 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Summary of significant accounting policies (cont d) 2.10 Intangible assets (cont d) (i) Goodwill (cont d) A cash-generating unit to which goodwill has been allocated is tested for impairment annually and whenever there is an indication that the unit may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each cash-generating unit to which the goodwill relates. Where the recoverable amount of the cashgenerating unit is less than the carrying amount, an impairment loss is recognised in profit or loss. Impairment losses recognised for goodwill are not reversed in subsequent periods. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained. Goodwill and fair value adjustments arising on the acquisition of foreign operation on or after 1 January 2005 are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated in accordance with the accounting policy set out in Note 2.4. Goodwill and fair value adjustments which arose on acquisitions of foreign operation before 1 January 2005 are deemed to be assets and liabilities of the Company and are recorded in SGD at the rates prevailing at the date of acquisition. (ii) Other intangible assets Intangible assets acquired separately are measured initially at cost. The cost of intangible assets acquired in a business combination is their fair values as at the date of acquisition. Following initial acquisition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is reflected in profit or loss in the year in which the expenditure is incurred. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite useful lives are amortised on a straight-line basis over the estimated useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite useful lives is recognised in profit or loss in the expense category consistent with the function of the intangible asset. Club memberships and license fees are capitalised as intangible assets and are amortised on a straight-line basis over 18 to 44 years and 5 to 10 years respectively. Intangible assets with indefinite useful lives or not yet available for use are tested for impairment annually or more frequently if the events or circumstances indicate that the carrying value may be impaired either individually or at the cash-generating unit level. Such intangible assets are not amortised. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether the useful life assessment continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised. IV-21

95 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Summary of significant accounting policies (cont d) 2.11 Impairment of non-financial assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset s recoverable amount. An asset s recoverable amount is the higher of an asset s or cash-generating unit s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. 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. The Group bases its impairment calculation on detailed budgets and forecast calculations which are prepared separately for each of the Group s cash-generating units to which the individual assets are allocated. These budgets and forecast calculations are generally covering a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year. Impairment losses are recognised in profit or loss in those expenses categories consistent with the function of the impaired asset, except for assets that were previously revalued where the revaluation was taken to other comprehensive income. In this case, the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation. For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in profit or loss unless the asset is measured at revalued amount, in which case the reversal is treated as a revaluation increase Financial assets Initial recognition and measurement Financial assets are recognised when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. The Group determines the classification of its financial assets at initial recognition. When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. Subsequent measurement The subsequent measurement of financial assets depends on their classification as follows: (i) Financial assets at fair value through profit or loss Financial assets classified as held for trading are included in the category financial assets at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by FRS 39. Derivative financial instruments (including separated embedded derivatives) are also classified as held for trading unless they are designated as effective hedging instruments. The Group has not designated any financial assets upon initial recognition at fair value through profit or loss. Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value of the financial assets are recognised in profit or loss. Net gains or net losses on financial assets at fair value through profit or loss include exchange differences, interest and dividend income. IV-22

96 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Summary of significant accounting policies (cont d) 2.12 Financial assets (cont d) (ii) Loans and receivables Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less impairment. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process. De-recognition A financial asset is de-recognised where the contractual right to receive cash flows from the asset has expired. On de-recognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that has been recognised in other comprehensive income is recognised in profit or loss. Regular way purchase or sale of a financial asset All regular way purchases and sales of financial assets are recognised or de-recognised on the trade date (i.e. the date that the Group commits to purchase or sell the asset). Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned Impairment of financial assets The Group assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. For financial assets carried at amortised cost, the Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be recognised are not included in a collective assessment of impairment. If there is objective evidence that an impairment loss on financial assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the financial asset s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. The impairment loss is recognised in profit or loss. When the asset becomes uncollectible, the carrying amount of impaired financial assets is reduced directly or if an amount was charged to the allowance account, the amounts charged to the allowance account are written off against the carrying value of the financial asset. To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss Cash and cash equivalents Cash and cash equivalents comprise cash at bank and on hand, fixed deposits, and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. IV-23

97 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Summary of significant accounting policies (cont d) 2.15 Stocks Stocks are stated at the lower of cost and net realisable value. Costs incurred in bringing the stocks to their present location and condition are accounted for as follows: based on normal operating capacity and on a weighted average basis. Where necessary, allowance is provided for damaged, obsolete and slow moving items to adjust the carrying value of stocks to the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale Financial liabilities Initial recognition and measurement Financial liabilities are recognised when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. The Group determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognised initially at fair value plus in the case of financial liabilities not at fair value through profit or loss, directly attributable transaction costs. Subsequent measurement The measurement of financial liabilities depends on their classification as follows: (i) Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss includes financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Subsequent to initial recognition, financial liabilities at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value of the financial liabilities are recognised in profit or loss. The Group has not designated any financial liabilities upon initial recognition at fair value through profit or loss. (ii) Other financial liabilities After initial recognition, other financial liabilities are subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process. De-recognition A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss. IV-24

98 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Summary of significant accounting policies (cont d) 2.17 Financial guarantee A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Financial guarantees are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequent to initial recognition, financial guarantees are recognised as income in profit or loss over the period of the guarantee. If it is probable that the liability will be higher than the amount initially recognised less amortisation, the liability is recorded at the higher amount with the difference charged to profit or loss 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. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) where, as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and the amount of the obligation can be reliably estimated. Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost 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. In particular, the Singapore companies in the Group make contributions to the Central Provident Fund scheme in Singapore, a defined contribution pension scheme. These contributions are recognised as an expense in the period in which the related service is performed. (ii) Defined benefit plan The cost of providing benefits under the defined benefit plans is determined separately for each plan using the projected unit credit method. Actuarial gains and losses are recognised as income or expense when the net cumulative unrecognised actuarial gains and losses for each individual plan at the end of the previous reporting period exceed 10% of the higher of the defined benefit obligation and the fair value of plan assets at that date. These gains or losses are recognised over the expected average remaining working lives of the employees participating in the plans. The unvested past service costs are recognised as an expense on a straight-line basis over the average period until the benefits become vested. If the benefits are already vested, immediately following the introduction of, or changes to, a pension plan, past service costs are recognised immediately. The defined benefit asset or liability is the aggregate of the present value of the defined benefit obligation (derived using a discount rate based on government bonds) at the end of the reporting period plus any actuarial gains (less any actuarial losses) not recognised, reduced by past service costs not yet recognised and the fair value of plan assets out of which the obligations are to be settled directly. If such aggregate is negative, the asset is measured at the lower of such aggregate or the aggregate of cumulative unrecognised net actuarial losses and past service costs and the present value of any economic benefits available in the form of refunds from the plan or reductions in the future contributions to the plan. IV-25

99 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Summary of significant accounting policies (cont d) 2.20 Employee benefits (cont d) (iii) Employee leave entitlement Employee entitlements to annual leave are recognised as a liability when they accrue to employees. The estimated liability for leave is recognised for services rendered by employees up to the end of the reporting period. (iv) Employee share option plans 2.21 Leases Employees of the Group receive remuneration in the form of share options as consideration for services rendered. The cost of these equity-settled transactions with employees granted after 22 November 2002 is measured by reference to the fair value of the options at the date on which the options are granted, which takes into account market conditions and non-vesting conditions. This cost is recognised in profit or loss, with a corresponding increase in the share-based payment reserve, over the vesting period. The cumulative expense recognised at the end of each reporting period until the vesting date reflects the extent to which the vesting period has expired and the Group s best estimate of the number of options that will ultimately vest. The charge or credit to profit or loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in personnel expenses. No expense is recognised for options that do not ultimately vest, except for options where vesting is conditional upon a market or non-vesting condition, which are treated as vested irrespective of whether or not the market condition or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied. In the case where the option does not vest as the result of a failure to meet a non-vesting condition that is within the control of the Group or the employee, it is accounted for as a cancellation. In such case, the amount of the compensation cost that otherwise would be recognised over the remainder of the vesting period is recognised immediately in profit or loss upon cancellation. The share-based payment reserve is transferred to revenue reserve upon expiry of the share option. The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date: whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement. For arrangements entered into prior to 1 January 2005, the date of inception is deemed to be 1 January 2005 in accordance with the transitional requirements of INT FRS 104. Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss. Contingent rents, if any, are charged as expenses in the periods in which they are incurred. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term. Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is made. Revenue is measured at the fair value of consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The Group assesses its revenue arrangements to determine if it is acting as principal or agent. The Group has concluded that it is acting as a principal in all of its revenue arrangements. The following specific recognition criteria must also be met before revenue is recognised. IV-26

100 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Summary of significant accounting policies (cont d) 2.22 Revenue recognition (cont d) (i) Sale of goods Revenue from sale of goods is recognised upon the transfer of significant risks and rewards of ownership of the goods to the customer, usually on delivery of goods. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods. (ii) Management fees Management fees are recognised upon the rendering of management and consultation services to subsidiaries. (iii) Dividend income Dividend income is recognised when the Group s right to receive payment is established. (iv) Interest income 2.23 Taxes Interest income is recognised using the effective interest method. Group turnover excludes intercompany transactions. (i) Current tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the end of the reporting period, in the countries where the Group operates and generates taxable income. Current taxes are recognised in profit or loss except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. (ii) Deferred tax Deferred tax is provided using the liability method on temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences, except: that is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable profit or loss; and where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilised except: of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable profit or loss; and IV-27

101 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Summary of significant accounting policies (cont d) 2.23 Taxes (cont d) (ii) Deferred tax (cont d) companies, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each reporting period and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the end of the reporting period. Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current income tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, would be recognised subsequently if new information about facts arise and circumstances change. The adjustment would either be treated as a reduction to goodwill (as long as it does not exceed goodwill) if incurred during the measurement period or in profit or loss. (iii) Sales tax Revenues, expenses and assets are recognised net of the amount of sales tax except: which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and 2.24 Segment reporting The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet. For management purposes, the Group is organised into operating segments based on their products and services which are independently managed by the respective segment managers responsible for the performance of the respective segments under their charge. The segment managers report directly to the management of the Company who regularly reviews the segment results in order to allocate resources to the segments and to assess the segment performance. Additional disclosures on each of these segments are shown in Note 45, including the factors used to identify the reportable segments and the measurement basis of segment information Share capital and share issuance expenses Proceeds from issuance of ordinary shares are recognised as share capital in equity. Incremental costs directly attributable to the issuance of ordinary shares are deducted against share capital. IV-28

102 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Summary of significant accounting policies (cont d) 2.26 Treasury shares The Group s own equity instruments, which are reacquired (treasury shares) are recognised at cost and deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Group s own equity instruments. Any difference between the carrying amount of treasury shares and the consideration received, if reissued, is recognised directly in equity. Voting rights related to treasury shares are nullified for the Group and no dividends are allocated to them respectively Government grants Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. Government grants are recognised in profit or loss on a systematic basis over the periods in which the Company recognises as expenses the related costs for which the grants are intended to compensate. Grants related to income are presented under Other operating income Contingencies A contingent liability is: (i) (ii) A possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group; or A present obligation that arises from past events but is not recognised because: obligation; or A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. Contingent liabilities and assets are not recognised on the balance sheet of the Group, except for contingent liabilities assumed in a business combination that are present obligations and which the fair values can be reliably determined Related parties A related party is defined as follows: (a) (b) A person or a close member of that person s family is related to the Group and the Company if that person: (i) Has control or joint control over the Company; (ii) Has significant influence over the Company; or (iii) Is a member of the key management personnel of the Group or the Company or of a parent of the Company. An entity is related to the Group and the Company if any of the following conditions applies: (i) The entity and the Company are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others). (ii) One entity is an associated company or joint venture of the other entity (or an associated company or joint venture of a member of a group of which the other entity is a member). (iii) Both entities are joint ventures of the same third party. (iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity. (v) The entity is a post-employment benefit plan for the benefit of employees of either the Company or an entity related to the Company. If the Company is itself such a plan, the sponsoring employers are also related to the Company; (vi) The entity is controlled or jointly controlled by a person identified in (a); (vii) A person identified in (a) (i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity). IV-29

103 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Significant accounting estimates and judgements 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 assessed 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. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in the future periods. (i) Key sources of estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the end of each reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. The Group based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur. Depreciation of fixed assets Fixed assets are depreciated on a straight-line basis over their estimated useful lives. Management estimates the useful lives of these fixed assets to be 3 to 50 years. These are common life expectancies applied in the industry and in respect of leasehold land and buildings, represent the leasehold period. The carrying amount of the Group s fixed assets at 31 December 2012 was approximately $48,247,000 (2011: $39,795,000). Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised. A 3% (2011: 3%) difference in the expected useful lives of these assets from management s estimates would result in approximately 1% (2011: 2%) variance in profit for the year. Impairment of non-financial assets The Group assess whether there are any indicators of impairment for all non-financial assets at each reporting date. Goodwill is tested for impairment annually and at other times when such indicators exist. Other non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable. When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows. Further details of the key assumptions applied in the impairment assessment of goodwill are given in Note 8 to the financial statements. Income taxes The Group has exposure to income taxes in numerous jurisdictions. Significant judgement is involved in determining the group-wide provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The carrying amount of the Group s provision for taxation, deferred tax liabilities and deferred tax assets at 31 December 2012 was $568,000 (2011: $956,000), $1,904,000 (2011: $1,756,000) and $543,000 (2011: Nil) respectively. (ii) Critical judgements made in applying accounting policies In the process of applying the Group s accounting policies, management has made the following judgements, apart from those involving estimations, which has the most significant effect on the amounts recognised in the financial statements: Impairment of financial assets The Group follows the guidance of FRS 39 in determining when a financial asset is other-than-temporarily impaired. This determination requires significant judgement. The Group evaluates, among other factors, the duration and extent to which the fair value of a financial asset is less than its cost; and the financial health of and near-term business outlook for the financial asset, including factors such as industry and sector performance, changes in technology and operational and financing cash flow. Further details as disclosed in Notes 7 and 11. IV-30

104 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Fixed assets (a) Group Cost or Valuation At Valuation At Cost Freehold Freehold Leasehold Leasehold Freehold Freehold Plant and Furniture, Fittings and Office Motor Tools and Constructionin-progress Land Building Land Buildings Land Building Machinery Equipment Vehicles Computers Equipment Renovation Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 As at 1 January ,151 10, ,004 36,704 5,316 3,780 2,099 5,730 6, ,448 Additions , , ,878 8,227 Disposals (1,021) (37) (512) (64) (139) (1,773) Reclassifications (1) (187) (189) (228) , (1,000) Reclassification to intangible assets (Note 8) (138) (138) Translation adjustments (5) (129) (16) (124) 692 (9) 95 (76) ,340 As at 31 December 2011 and 1 January ,247 11, ,282 39,206 5,350 4,032 2,561 8,059 7,052 1,905 88,104 Additions ,259 2, , ,256 1,927 1,840 17,288 Disposals (649) (146) (337) (38) (227) (250) (1,647) Write off against allowance for impairment (53) (3,924) (502) (34) (27) (575) (1,808) (6,923) Reclassifications 1, (5) (63) 48 (163) (2,157) Translation adjustments (3) (77) (317) (1,014) (20) (87) (2,407) (139) (117) (193) (438) (399) (141) (5,352) As at 31 December ,333 13,055 3,089 3,200 38,775 5,360 4,274 2,607 8,075 6,359 1,447 91,470 IV-31

105 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Fixed assets (cont d) (a) Group (cont d) Accumulated depreciation and impairment At Valuation At Cost Freehold Freehold Leasehold Leasehold Freehold Freehold Plant and Furniture, Fittings and Office Motor Tools and Constructionin-progress Land Building Land Buildings Land Building Machinery Equipment Vehicles Computers Equipment Renovation Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 As at 1 January ,129 1,599 20,594 4,015 2,062 1,759 4,118 3,267 40,293 Charge for the Year , ,285 Impairment loss 34 2, ,087 3,780 Disposals (948) (35) (425) (61) (23) (1,492) Reclassifications (25) (25) Translation adjustments (110) (66) 349 (39) As at 31 December 2011 and 1 January ,720 1,657 24,478 4,485 2,073 1,879 5,128 5,067 48,309 Charge for the year , ,437 Write-off against allowance for impairment (53) (3,924) (502) (34) (27) (575) (1,808) (6,923) Write-back of allowance for impairment (162) (25) (187) Disposals (541) (79) (298) (29) (180) (27) (1,154) Reclassifications (301) (77) (2) Translation adjustments (69) (41) (265) (44) (1,093) (113) (75) (78) (230) (251) (2,259) As at 31 December ,927 1,746 20,946 3,996 2,115 2,058 5,059 3,509 43,223 Net book value As at 31 December ,713 8, ,625 14, , ,931 1,985 1,905 39,795 As at 31 December ,780 10,128 3,089 1,454 17,829 1,364 2, ,016 2,850 1,447 48,247 IV-32

106 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Fixed assets (cont d) (b) Company Plant and Machinery Furniture, Fittings and Office Equipment Tools Motor Vehicles Computers and Equipment Renovation Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Cost As at 1 January ,405 1,353 1, ,418 Additions Disposals (255) (15) (16) (2) (288) As at 31 December 2011 and 1 January ,703 1,372 1,142 1, ,065 Additions Disposals (74) (2) (55) (14) (90) (235) As at 31 December ,774 1,396 1,107 1, ,114 Accumulated depreciation As at 1 January ,965 1, ,190 Charge for the year Disposals (254) (14) (16) (2) (286) As at 31 December 2011 and 1 January ,810 1, ,230 Charge for the year Disposals (73) (2) (15) (1) (90) (181) As at 31 December ,879 1, ,463 Net book value As at 31 December ,835 As at 31 December ,651 IV-33

107 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Fixed assets (cont d) Revaluation of freehold land and building The freehold land and building stated at valuation was revalued by the directors as of June 1994 based on appraisals received from an independent firm of professional valuers. The surplus arising from the revaluation has been taken to capital reserve. Had the leasehold land and building been stated at cost less accumulated depreciation, the net book value as at 31 December 2012 would have been $338,579 (2011: $443,749). Capitalisation of borrowing costs The Group s construction-in-progress includes borrowing costs arising from bank loans borrowed specifically for the purpose of construction of a factory building. During the financial year, the borrowing costs capitalized as cost of construction-inprogress amounted to $30,000 (2011: Nil). The rate used to determine the amount of borrowing costs eligible for capitalisation was 4.52% (2011: Nil), which is the effective interest rate of the specific borrowing. Assets pledged as security As at 31 December 2012, freehold land and buildings of certain subsidiaries with net book value of approximately $11,365,000 (2011: $2,703,000) have been pledged as security for term loans granted to the subsidiaries (Note 23). Assets held under finance leases As at 31 December 2012, the Group and the Company had motor vehicles under finance leases with net book values of approximately $738,000 (2011: $794,000) and $194,000 (2011: $407,000) respectively. Impairment of assets During the financial year ended 31 December 2011, the Group recognised impairment losses amounting to $3,780,000 in respect of the fixed assets affected by the Thailand flood. During the financial year ended 31 December 2012, the Group reviewed this impairment provision and recognised reversal of impairment losses amounting to approximately $187,000 upon re-assessment of these useability of these fixed assets. 5. Subsidiaries (a) Investments in subsidiaries comprise: Company $ 000 $ 000 Unquoted equity shares, at cost 30,545 29,071 Less: Allowance for impairment (1,350) (850) 29,195 28,221 IV-34

108 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Subsidiaries (cont d) (b) The Group had the following subsidiaries as at 31 December 2012: Name of company Principal activities Country of incorporation and place of business Percentage of equity held by the Group Cost of investment by the Company % % $ 000 $ 000 Held by the Company Armstrong Rubber Manufacturing Pte Ltd (2) Manufacture and sale of rubber parts and components of electronic and other instruments Singapore Armstrong-Odenwald (Asia) Pte Ltd (2) Armstrong Weston Holdings Pte Ltd (2) * Armstrong Electronics Sdn Bhd (formerly known as Atronics Precision Sdn Bhd) (3) Armstrong Technology Sdn Bhd (formerly known as Foamline Industries Sdn Bhd) (3) Architectural, engineering and related technical consultancy services Singapore ,645 5,171 Investment holding Singapore (1) (1) Fabrication of foam products Malaysia (1) (1) Fabrication of foam products Malaysia Hardyflex Industries Sdn Bhd (3) Armstrong Mechanical Components Company Limited ( AMC ) (3) # Armstrong Rubber & Chemical Products Company Limited (3) Armstrong Rubber Technology (Thailand) Company Limited (3) Manufacture and sale of rubber products, hardware, industrial parts and components Manufacture and sale of die-cut foam components Manufacture and sale of die-cut foam components Manufacture and sale of rubber parts and components of electronic and other instruments Malaysia ,103 3,103 Thailand ,844 1,844 Thailand ,299 8,299 Thailand ,307 1,307 Armstrong Technology (Dalian) Co Ltd (4) Manufacture and sale of die-cut foam components People s Republic of China Armstrong Technology (Suzhou) Co Ltd (3) Manufacture and sale of die-cut, rubber moulding, tools and die fabrication People s Republic of China ,193 2,193 Armstrong Technology (Wuxi) Co Ltd (3) Manufacture and sale of die-cut foam components People s Republic of China ,242 4,242 PT Armstrong Industri Indonesia (5) Manufacture and sale of die-cut foam components Indonesia IV-35

109 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Subsidiaries (cont d) Name of company Principal activities Country of incorporation and place of business Percentage of equity held by the Group Cost of investment by the Company % % $ 000 $ 000 Held by Armstrong Rubber Manufacturing Pte Ltd Yasuda Tsusho Ltd (7) ^ Trading of materials and machineries Malaysia Held by Armstrong-Odenwald (Asia) Pte Ltd Armstrong Odenwald Changchun (AOC) Technology Co Ltd (3) Armstrong Odenwald Technology (Tianjin) Co Ltd (6) Armstrong Odenwald Technology (Wuhan) Co Ltd (3) Armstrong Odenwald Technology (Changshu) Co Ltd (7) Manufacture and sale of foam products, rubber products for general applications in sealing, dampening and sound absorption functions and related product s tooling fabrication, processing, and sales People s Republic of China People s Republic of China People s Republic of China People s Republic of China Held by Armstrong Weston Holdings Pte Ltd Armstrong Weston Vietnam Co Ltd (3) Production of noise and vibration reduction components, silkscreen nameplates, labels and stickers Vietnam ,545 29,071 (1) Cost of investment is less than $1,000 (2) Audited by Ernst and Young LLP, Singapore (3) Audited by member firms of Ernst and Young Global in the respective countries (4) Audited by Dalian Zhongde Certified Public Accountants Co Ltd (5) Audited by Kantor Akuntan Publik Dra Ririen, Registered Public Accountants (6) Audited by Zhong Xing Cai Guang Hua CPA Office (Tian Jin) Co Ltd (7) Not required to be audited by the laws of the country of incorporation * The Company owns 50% equity interest in Armstrong Weston Holdings Pte Ltd (Armstrong Weston) with the remaining 50% equity interest owned by one of the commissioners of PT Armstrong Industri Indonesia, another subsidiary of the Company. Armstrong Weston has been accounted for as a subsidiary as the Company has control over the board of directors of Armstrong Weston. # The company ceased operations and became dormant during the financial year. ^ The company was struck off the register by Labuan Financial Services Authority in The company ceased operations since April During the financial year, the Company recognised impairment loss amounting to $500,000 in respect of its investment in AMC subsequent to transfer of AMC s operations and consolidation of its business into another subsidiary in Thailand, in line with the strategic direction of the Group for more effective management. The impairment loss was determined with reference to the estimated realisable value of AMC s assets and expected settlement value of AMC s liabilities. IV-36

110 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Associated company (a) Investment in associated company comprises: Group Company $ 000 $ 000 $ 000 $ 000 Unquoted equity shares, at cost Translation adjustment (4) (4) Share of post-acquisition profits, net of dividends received (36) (36) (b) Details of the associated company are as follows: Name of company Principal activities Country of incorporation and place of business Effective percentage of equity held by the Group Cost of investment by the Group % % $ 000 $ 000 Held by PT Armstrong Industri Indonesia PT Zephyr Indonesia * Silkscreen printing Indonesia * Not required to be audited under the laws of the country of incorporation. The Group has not recognised losses relating to PT Zephyr Indonesia where its share of losses exceeds the Group s interest in this associated company. The Group s cumulative share of unrecognised losses at the end of the reporting period was approximately $133,000 (2011: $84,000), of which $49,000 (2011: $14,000) was the share of the current year s losses. The Group has no obligation in respect of these losses. The summarised financial information of the associated company, not adjusted for the proportion of ownership interest held by the Group, is as follows: $ 000 $ 000 Assets and liabilities: Current assets 607 1,635 Non-current assets Total assets 1,130 2,400 Current liabilities 1,786 2,684 Non-current liabilities Total liabilities 2,074 3,023 Results Turnover 2,023 2,543 Loss for the year (466) (136) IV-37

111 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Other investments Group Company $ 000 $ 000 $ 000 $ 000 Held for trading investments Investment in quoted equity shares Amounts under fund management Derivative financial instruments Total financial assets at fair value through profit or loss Derivative financial instruments 2,660 4,350 2,444 4,350 Total financial liabilities at fair value through profit or loss 2,660 4,350 2,444 4, Intangible assets Intangible assets comprise club memberships, goodwill and license fees paid for the transfer of the licensed technology and know-how in connection with the development, design, manufacture, engineering, application and sale of the licensed products. The club memberships and licenses have useful lives ranging from 18 to 44 years and 5 to 10 years respectively. Amortisation of intangible assets is recognised in Administrative Expenses line item in the statement of comprehensive income. Group Company $ 000 $ 000 $ 000 $ 000 Club memberships At beginning and end of year, at cost Reclassification from fixed assets (Note 4) 138 Translation adjustments (31) (14) Less: Accumulated amortisation (39) (34) Less: Allowance for impairment in value (39) (39) (39) (39) Goodwill At beginning of year and end of year License fees At beginning and end of year, at cost Less: Accumulated amortisation (384) (384) (211) (211) At end of year 1,002 1, IV-38

112 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Intangible assets (cont d) Movement in accumulated amortisation for club memberships during the year is as follows: Group Company $ 000 $ 000 $ 000 $ 000 At beginning of year 34 Amortisation for the year 5 34 At end of year Movement in accumulated amortisation for license fees during the year is as follows: Group Company $ 000 $ 000 $ 000 $ 000 At beginning of year Amortisation for the year At end of year The carrying amounts of goodwill of $315,000, $530,000 and $17,000 (2011: $315,000, $530,000 and $17,000) are allocated to Hardyflex Industries Sdn Bhd ( HIM ), Armstrong Rubber & Chemical Products Company Limited ( ARC ) and Armstrong Technology (Suzhou) Co Ltd ( ATSU ) respectively, which are the cash generating units ( CGU ). The recoverable amounts of the CGUs have been determined based on value in use calculations using cash flow projections from financial budgets approved by management covering a five-year period. The pre-tax discount rate applied to the cash flow projections and the forecasted growth rates used to extrapolated cash flows beyond the five-year period are as follows: HIM ARC ATSU Growth rates 0% 0% 0% 0% 0% 0% Pre-tax discount rates 5% 5% 5% 4% 6% 6% The calculations of value in use for the CGUs are most sensitive to the following assumptions: Budgeted gross margins Gross margins are based on average values achieved in one to four years preceding the start of the budget period. Growth rates The forecasted growth rates are estimated with reference to growth achieved in the three to five years preceding the start of the budget period. Pre-tax discount rates Discount rates reflect the current market assessment of the risks specific to each CGU, regarding the time value of money and individual risk of underlying assets which have not been incorporated in the cash flow estimates. The discount rate calculation is based on the specific circumstances of the Group and its operating segments and derived from its weighted average cost of capital ( WACC ). The WACC takes into account both debt and equity. Market share assumptions These assumptions are important because, as well as using industry data for growth rates (as noted above), management assesses how the CGU s position, relative to its competitors, might change over the budget period. Management expects the Group s share of the relevant market to be stable over the budget period. IV-39

113 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Loans to subsidiaries Loans to subsidiaries are unsecured, interest-free, have no fixed term of repayment and are repayable in cash only when the cash flows of the subsidiaries permit. These amounts are not expected to be repaid within the next twelve months. During the financial year ended 31 December 2012, full allowance for impairment amounting to $3,297,000 (2011: Nil) was made in respect of loans to subsidiaries. The impairment allowance was made mainly pursuant to transfer of AMC s operations as disclosed in Note 5. Included in loans to subsidiaries (before allowance for impairment) is $244,000 (2011: $258,000) denominated in United States Dollars. 10. Stocks Group Company $ 000 $ 000 $ 000 $ 000 Finished goods 7,027 7, ,112 Work-in-progress 2,159 5, Raw materials 17,835 21,435 1,044 2,141 Goods-in-transit 897 2,625 Total stocks at lower of cost and net realisable value 27,918 36,706 2,041 4,198 Inventories recognised as an expense in cost of sales 173, ,266 55,962 61,228 Inclusive of the following charge: - Inventories written-down Movements in allowance for stock obsolescence during the year are as follows: Group Company $ 000 $ 000 $ 000 $ 000 At beginning of year 1,941 1, Allowance for the year 1, Write-back of allowance (98) (104) (15) (42) Write-off against allowance (21) (469) (19) (46) Translation adjustment (144) 56 At end of year 2,882 1, Allowance for stock obsolescence of the Group and the Company, amounting to approximately $98,000 (2011: $104,000) and $15,000 (2011: $42,000) respectively were written back as these previously identified obsolete stocks were sold during the financial year. During the financial year, the Group wrote-down stocks amounting to approximately $34,000 (2011: $2,386,000) in respect of items that were affected by the Thailand flood. IV-40

114 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Trade debtors Group Company $ 000 $ 000 $ 000 $ 000 Trade debtors 53,761 51,458 11,654 9,811 Less: Allowance for doubtful trade debts (335) (338) (144) (144) 53,426 51,120 11,510 9,667 Other debtors 2,488 6, Due from subsidiaries (trade) (Note 14) 12,583 10,508 Due from subsidiaries (non-trade) (Note 14) 15,002 15,340 Due from an associated company (trade) (Note 15) Due from an associated company (non-trade) (Note 15) Fixed deposits (Note 17) 5,147 1, Cash and bank balances (Note 17) 26,477 31,480 4,612 3,878 88,453 91,640 44,591 40,480 Loans to subsidiaries (non-current) (Note 9) 3,311 Total loans and receivables 88,453 91,640 44,591 43,791 Movements in allowance for doubtful trade debts during the year are as follows: Group Company $ 000 $ 000 $ 000 $ 000 At beginning of year Allowance for the year 3 42 Write-back of allowance (180) Write-off against allowance 1 (127) Translation adjustment (7) (6) At end of year Trade receivables that are individually determined to be impaired at the end of the reporting period relate to debtors that are in significant financial difficulties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancements. Information regarding trade and other debtors that are past due but not impaired is disclosed in Note 46. Trade debtors are non-interest bearing and generally on 30 to 120 days term. They are recognised at their original invoice amounts which represent their fair values on initial recognition. Included in trade debtors of the Group and the Company are significant amounts that are denominated in the following foreign currency: Group Company $ 000 $ 000 $ 000 $ 000 United States Dollar 19,303 14,913 11,004 8,963 IV-41

115 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Other debtors Group Company $ 000 $ 000 $ 000 $ 000 Insurance receivable 3,161 Other debtors 1,945 2, Staff advances Deposits ,488 6, During the financial year ended 31 December 2012, allowance for impairment amounting to $396,000 (2011: Nil) was made in respect of other debtors of the Group as the amount was deemed to be of doubtful recovery. 13. Prepayments Group Company $ 000 $ 000 $ 000 $ 000 Prepayments Advance payments 2, ,639 1, Due from subsidiaries These balances are unsecured, interest-free, repayable on demand and to be settled in cash. Balances due from subsidiaries (trade) (before allowance for impairment) that are denominated in foreign currencies are as follows: Company $ 000 $ 000 United States Dollar 2,060 1,718 Japanese Yen 1,188 1,371 Balances due from subsidiaries (non trade) (before allowance for impairment) that are denominated in foreign currencies are as follows: Company $ 000 $ 000 Thai Baht 1,705 1,490 United States Dollar During the financial year ended 31 December 2012, allowance for impairment amounting to $737,000 (2011: Nil) was made in respect of balances due from certain subsidiaries as the amounts were deemed to be of doubtful recovery. IV-42

116 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Due from an associated company These balances are unsecured, interest-free, repayable on demand and to be settled in cash. Balances due from an associated company (trade) are denominated in Indonesian Rupiah. 16. Derivative financial instruments Derivative financial instruments included in the balance sheets as at 31 December are as follows: Notional amount Assets Liabilities Notional amount Assets Liabilities $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Group Forward currency contracts 87, (2,660) 167, (4,350) Company Forward currency contracts 85, (2,444) 166, (4,350) At 31 December 2012, the settlement dates on open forward contracts ranged between 1 to 12 months, details of which are set out below: Group Company $ 000 $ 000 $ 000 $ 000 Contracts to deliver Singapore Dollar and receive: United States Dollar 2,262 26,322 2,262 26,322 Japanese Yen 22,571 22,571 Euro 1,066 1,066 Australian Dollar ,833 27,452 24,833 27,452 Contracts to deliver United States Dollar and receive: Singapore Dollar 48, ,053 48, ,053 Japanese Yen 11,131 10,479 11,131 10,479 60, ,532 60, ,532 Contracts to deliver Australian Dollar and receive: Singapore Dollar 2,235 2,235 Contracts to deliver Japanese Yen and receive: United States Dollar 856 9, ,504 Contracts to deliver Thai Baht and receive: Japanese Yen 2,249 1,162 United States Dollar 7 2,249 1,169 IV-43

117 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Fixed deposits, cash and bank balances Fixed deposits are made for varying short-term periods depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. Fixed deposits of subsidiaries amounting to $165,000 (2011: $169,000) were pledged as security to financial institutions for credit and performance guarantee facilities granted to the Group. Included in the fixed deposits and cash and bank balances of the Group and the Company are significant amounts that are denominated in the following foreign currencies: Group Company $ 000 $ 000 $ 000 $ 000 United States Dollar 4,364 5, Singapore Dollar 471 1,014 NA NA Japanese Yen Euro 236 1, ,476 Australian Dollar NA: Not applicable 18. Trade creditors Due to corporate shareholder Amounts due to trade creditors are non-interest bearing. Trade creditors are normally settled on 30 to 90 day terms. Included in trade creditors of the Group and the Company are significant amounts that are denominated in the following foreign currencies: Group Company $ 000 $ 000 $ 000 $ 000 United States Dollar 8,801 5, Japanese Yen 5,150 6, Amount due to corporate shareholder is non-interest bearing and settled on 60 day terms in cash. 19. Other creditors Group Company $ 000 $ 000 $ 000 $ 000 Sundry creditors 3,101 3,294 1,114 1,203 Deposits received ,119 3,297 1,116 1,205 IV-44

118 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Accruals Group Company $ 000 $ 000 $ 000 $ 000 Accrued purchases 1,305 2, ,442 Accrued operating expenses 7,842 5,390 4,974 2,369 9,147 7,430 5,257 3, Due to subsidiaries These balances are unsecured, interest-free, repayable on demand and to be settled in cash. Balances due to subsidiaries (trade) that are denominated in foreign currencies are as follows: Company $ 000 $ 000 Thai Baht 2 8 United States Dollar Japanese Yen 7 16 Balances due to subsidiaries (non-trade) that are denominated in foreign currencies are as follows: Company $ 000 $ 000 Chinese Renminbi 20 Japanese Yen Loans from non-controlling interests of subsidiaries These loans from non-controlling interests of subsidiaries are unsecured, interest-free and to be settled in cash. The amounts are denominated in United States Dollars and are repayable on demand. IV-45

119 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Term loans/short-term bank loans (a) Term loans Group Company $ 000 $ 000 $ 000 $ 000 Loan repayments: - due within 1 year 1, due between 1 to 5 years 4,999 1,459 6,219 2,058 Trade creditors (Note 18) 21,031 24,373 1,038 1,455 Other creditors (Note 19) 3,119 3,297 1,116 1,205 Accruals (Note 20) 9,147 7,430 5,257 3,811 Due to subsidiaries (trade) (Note 21) 7,201 6,212 Due to subsidiaries (non-trade) (Note 21) Due to corporate shareholder Loans from non-controlling interests of subsidiaries (Note 22) 1,779 1,878 Short-term bank loans (Note 23(b)) 13,607 18,872 9,954 12,619 Lease obligations (Note 24) Total financial liabilities carried at amortised cost 55,198 58,377 24,716 25,590 As at 31 December 2012, details of the term loans are as follows: Term loans (1) and (2) Bank loans amounting to $405,000 (2011: $551,000) and $194,000 (2011: $238,000) are secured by a mortgage on a subsidiary s freehold land and building with a net book value of approximately $2,389,000 (2011: $2,703,000), bear interest at THBFIX 1 month of 2.37% plus 2.25% (2011: 2.78% plus 2.25%) per annum and are repayable in 60 monthly installments commencing November 2009 and May 2011 respectively. Term loans (3) and (4) Bank loans amounting to $2,254,000 (2011: Nil) and $378,000 (2011: Nil) are secured by a mortgage on a subsidiary s freehold land and building with a net book value of approximately $3,644,000 (2011: Nil), bear interest at THBFIX 1 month of 2.37% plus 2.15% (2011: Nil) per annum and are repayable in 108 monthly installments commencing July 2013 and 5 monthly installments commencing December 2013 respectively. Term loan (5) Bank loan amounting to $792,000 (2011: Nil) is secured by a mortgage on a subsidiary s freehold land and building with a net book value of approximately $1,564,000 (2011: Nil), bears interest at BLR of 6.6% minus 2% (2011: Nil) per annum and is repayable in 120 monthly installments commencing January Term loans (6), (7), (8) and (9) Bank loans amounting to $223,000 (2011: $305,000), $170,000 (2011: $208,000), $220,000 (2011: Nil) and $554,000 (2011: Nil) are secured by a pledge on a subsidiary s machines with a net book value of approximately $2,319,000 (2011: $731,000), bear interest at THBFIX 1 month of 2.37% plus 2.25% (2011: THBFIX 1 month of 2.78% plus 2.25%) per annum and are repayable in 48 monthly installments commencing October 2010, 56 monthly installments commencing November 2011 and 60 monthly installments commencing April 2012 and July 2012 respectively. IV-46

120 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Term loans/short-term bank loans (cont d) (a) Term loans (cont d) Term loans (10) and (11) Bank loans amounting to $233,000 (2011: Nil) and $368,000 (2011: Nil) are secured by a pledge on a subsidiary s machines with a net book value of approximately $2,319,000 (2011: $731,000), bear interest at THBFIX 1 month of 2.37% plus 2.15% (2011: Nil) per annum and are repayable in 60 monthly installments commencing December 2012, and 60 monthly installments commencing March 2013 respectively. Term loans (12) Bank loan totaling to $428,000 (2011: $756,000) are repayable within 1 to 3 years. As at 31 December 2012, the loans bear interest at THBFIX 3 months of 3.10% plus 1.75% (2011: 3.60% plus 1.75%) and THBFIX 3 months of 3.10% plus 3.25% (2011: 3.60% plus 3.25%). The Company has given corporate gurantees to the bank in respect of these loan facilities. (b) Short-term bank loans A short term loan of $1,372,000 (2011: $1,511,000) is secured by a mortgage on a subsidiary s freehold land and building with a net book value of approximately $3,768,000 (2011: $4,358,000). The Company has given corporate guarantees in respect of short-term bank loans of the Group amounting to $3,654,000 (2011: $6,253,000). Short-term bank loans amounting to $556,000 (2011: $2,107,000) are repriced every 3 months while short-term bank loans amounting to $13,051,000 (2011: $16,765,000) have no fixed repricing period. The loans are repayable within the next 12 months and bear interest at 1.46% to 8.53% (2011: 1.85% to 8.53%) per annum. Included in term loans and short-term bank loans of the Group and the Company are significant amounts that are denominated in the following foreign currency: Group Company $ 000 $ 000 $ 000 $ 000 United States Dollar 4,115 15,630 1,834 11,619 IV-47

121 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Lease obligations Present Group Total Minimum Lease Payments Interest Value of Minimum Lease Payments $ 000 $ 000 $ More than 1 year and not later than 5 years 144 (16) 128 Later than 5 years 144 (16) 128 Not later than 1 year 146 (13) (29) More than 1 year and not later than 5 years 156 (18) 138 Later than 5 years 156 (18) 138 Not later than 1 year 191 (20) (38) 309 Present Company Total Minimum Lease Payments Interest Value of Minimum Lease Payments $ 000 $ 000 $ More than 1 year and not later than 5 years 44 (7) 37 Later than 5 years 44 (7) 37 Not later than 1 year 33 (5) (12) More than 1 year and not later than 5 years 80 (12) 68 Later than 5 years 80 (12) 68 Not later than 1 year 111 (14) (26) 165 Lease terms range from 3 to 7 years with options to purchase at the end of the lease term. Lease terms do not contain restrictions concerning dividend or additional debt. The effective interest rates of the lease obligations range from 4.48% to 7.96% (2011: 4.48% to 7.96%) per annum. IV-48

122 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Deferred taxation Group Company $ 000 $ 000 $ 000 $ 000 Deferred tax liabilities Differences in depreciation for tax purposes Undistributed earnings of subsidiaries 1,516 1, Provisions (71) (200) Others (38) Net deferred tax liabilities 1,904 1, Group Company $ 000 $ 000 $ 000 $ 000 Deferred tax assets Provisions Unutilised capital allowances Differences in depreciation for tax purposes (193) (197) Net deferred tax assets The Group has unutilised tax losses and unabsorbed capital allowances of approximately $5,470,000 (2011: $5,749,000) available for offset against future taxable income, subject to the agreement of the relevant income tax authorities and compliance with certain provisions of the tax legislation of the respective countries in which the subsidiaries operate. The potential deferred tax asset arising from these unutilised tax losses and unabsorbed capital allowance has been recognised in the financial statements to the extent deemed recoverable. As at 31 December 2012, the Group recognised deferred tax liability of approximately $1,516,000 (2011: $1,222,000) for taxes that would be payable on the unremitted earnings of certain of the Group s subsidiaries. 26. Share capital Group and Company No. of shares 000 $ 000 No. of shares 000 $ 000 Issued and fully paid At beginning of year 517,827 50, ,552 49,628 Issued for cash under employee share option plan 1, Transfer from share-based payment reserve (Note 30) 104 At end of year 517,827 50, ,827 50,211 IV-49

123 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Share capital (cont d) During the financial year ended 31 December 2011, the Company increased its issued and paid-up capital via an allotment of 1,274,714 new ordinary shares for cash pursuant to the exercise of employee share options (Note 44). During the financial year, the Company bought back 461,000 (2011: 8,959,000) ordinary shares by way of market acquisition for a total consideration of approximately $125,000 (2011: $2,355,000). The highest and lowest prices paid for the purchases were $0.27 and $0.26 (2011: $0.32 and $0.23) per share respectively. The repurchase transactions were made out of shareholders funds. The ordinary shares bought back were retained as shares held in treasury (Note 27). The holders of ordinary shares (excluding shares held in treasury) are entitled to receive dividends as and when declared by the Company. All ordinary shares excluding shares held in treasury carry one vote per share. The ordinary shares have no par value. 27. Shares held in treasury Group and Company No. of shares 000 $ 000 No. of shares 000 $ 000 At beginning of year 23,697 6,341 14,738 3,986 Acquired during the financial year ,959 2,355 At end of year 24,158 6,466 23,697 6,341 Treasury shares relate to ordinary shares of the Company that is held by the Company. 28. Capital reserve Group $ 000 $ 000 Asset revaluation reserve ^ Legal reserve * 4,790 4,390 5,237 4,837 ^ Asset revaluation reserve represents increases in the fair value of leasehold land and building prior to 1 January 1997, net of tax, and decreases prior to 1 January 1997 to the extent that such decreases relates to an increase on the same asset previously recognised in equity. * Under Section 1202 of the Thailand Civil and Commercial Code, Armstrong Rubber & Chemical Products Company Limited, a subsidiary incorporated in Thailand, has to allocate not less than 5 percent of retained earnings to its legal reserve each time it declares a dividend payment, until the reserve reaches not less than 10 percent of registered capital. The legal reserve is not available for offset with other reserves in deficit nor for dividend payment. In accordance with the Foreign Enterprise Law applicable to the subsidiaries in PRC, the subsidiaries are required to make appropriation to a Statutory Reserve Fund ( SRF ). At least 10% of the statutory profits after tax as determined in accordance with the applicable PRC accounting standards and regulations must be allocated to the SRF until the cumulative total of the SRF reaches 50% of the subsidiary s registered capital. Subject to approval from the relevant PRC authorities, the SRF may be used to offset any accumulated losses or increase the registered capital of the subsidiary. The SRF is not available for dividend distribution to shareholders. IV-50

124 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Premium paid on acquisition of non-controlling interests This reserve represents the difference between the amount by which non-controlling interest is adjusted and the fair value of consideration paid or received when there are changes in the Company owners ownership interest in a subsidiary that do not result in a loss of control. 30. Share-based payment reserve Share-based payment reserve represents equity-settled share options granted to employees (Note 44). The reserve is made up of the cumulative value of services received from employees recorded over the vesting period commencing from the offer date of equity-settled share options, and is reduced by the expiry of the share options. Group and Company $ 000 $ 000 At beginning of year 967 1,071 Exercise of share options (Note 26) (104) At end of year Translation reserve The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from that of the Group s presentation currency. Group $ 000 $ 000 At beginning of year (2,259) (4,078) Net effect of exchange differences arising from translation of financial statements of foreign operations (5,898) 1,819 At end of year (8,157) (2,259) 32. Turnover Turnover represents the invoiced value of goods sold, net of discounts and returns. IV-51

125 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Other operating income Group $ 000 $ 000 Dividend income from quoted investments Write-back of impairment of fixed assets 187 Gain on disposal of fixed assets, net Foreign exchange gain, net 560 2,335 Insurance claims (Note 34) 2,572 4,720 Gain on disposal of quoted equity shares 84 Fair value adjustments for derivative contracts, net 1,868 Fair value changes to held for trading quoted equity shares and amounts under fund management 12 Government grants Other income ,140 7,623 Government grants relate mainly to financial assistance received from the International Enterprise Singapore Board for approved branding activities. 34. Other operating expenses Group $ 000 $ 000 Fair value adjustments for derivative contracts, net 4,298 Fair value changes to held for trading quoted equity shares and amounts under fund management 26 Provision for impairment of fixed assets* 3,780 Write-down of stocks* 34 2,386 Allowance for doubtful non-trade debts 396 Bank charges Other expenses ,711 * During the financial year ended 31 December 2011, the Group s Thailand operations were partially affected by the severe flood in Thailand. Consequently, the Group recognised impairment losses in respect of fixed assets and wrote-down stocks that were damaged by the flood of approximately $3,780,000 and $2,386,000 respectively. Reversal of impairment loss on fixed assets and write-down of stocks amounting to $187,000 and $34,000 respectively were recognised in the financial year ended 31 December As the fixed assets and stocks were covered by insurance, the Group recognised insurance claims of approximately $4,720,000 and $2,572,000 during the financial years ended 31 December 2011 and 2012 respectively in accordance with the requirements of FRS 37 Provisions, Contingent Liabilities and Contingent Assets. IV-52

126 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Personnel expenses Group $ 000 $ 000 Wages, salaries and bonuses 37,283 34,432 Contributions to defined contribution plans 4,076 3,368 Contributions to defined benefit plan 439 Other personnel expenses 5,206 6,853 47,004 44, Profit from operations This is determined after charging the following: Group $ 000 $ 000 Audit fees: - auditors of the Company other auditors Non-audit fees: - auditors of the Company other auditors Amortisation of intangible assets (Note 8) 5 34 Depreciation of fixed assets (Note 4) 5,437 5,285 Operating lease expenses 3,368 2,775 Personnel expenses (Note 35) 47,004 44,653 Directors fees * * Includes directors fees of $8,000 (2011: $8,000) paid by certain subsidiaries of the Group. 37. Financial expenses Group $ 000 $ 000 Interest expense - finance leases bank term loans others IV-53

127 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Financial income Group $ 000 $ 000 Interest income - fixed deposits bank balances Taxation Group $ 000 $ 000 Current taxation - current year 2,697 3,676 - over provision in respect of prior years (402) (489) Deferred taxation - current year 280 1,301 - (over)/under provision in respect of prior years (865) 54 Tax deducted at source ,038 4,569 Reconciliation between tax expense and the product of accounting profit multiplied by the applicable tax rate is as follows: Group $ 000 $ 000 Accounting profit before taxation 14,565 13,086 Tax at domestic tax rates applicable to profits in the countries concerned * 2,500 3,930 Adjustments: Expenses not deductible for tax purposes Income not subject to tax (536) (615) Over provision in respect of prior years (1,267) (435) Utilisation of prior year losses (47) (4) Tax exemption and incentives (200) (363) Witholding tax 338 1,248 Deferred tax assets not recognised 282 Others 41 (10) 2,038 4,569 * This is computed by aggregating separate computations for each company in their respective countries. IV-54

128 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Taxation (cont d) A loss-transfer system of group relief (group relief system) for companies was introduced in Singapore with effect from year of assessment Under the group relief system, a company belonging to a group may transfer its current year unabsorbed capital allowances, current year unutilised trade losses and current year unabsorbed donations (loss items) to another company belonging to the same group, to be deducted against the assessable income of the latter company, subject to conditions under Section 37(c) of the Singapore Income Tax Act. The Company transferred tax losses of approximately $2,453,000 to the Company s subsidiaries under the group relief system for the financial year ended 31 December 2011, subject to compliance with the relevant rules and procedures and agreement of the Inland Revenue Authority of Singapore. The corporate income tax rate applicable to Indonesia subsidiary of the Group was reduced from 28% to 25% for the year of assessment 2012 onwards. The corporate income tax rate applicable to Thailand subsidiaries of the Group was reduced from 30% to 23% for the year of assessment 2013 and to 20% for the year of assessment 2014 (and year of assessment 2015 if certain criteria are met). The deferred tax computation as at 31 December 2011 and 2012 has reflected these changes as appropriate. The Group also enjoys the following incentives: (a) Thailand Following the Thailand flood during the financial year ended 31 December 2011, corporate income tax exemption for 8 years was granted to Board of Investment ( BOI ) promoted companies that have been affected by flooding and who wish to invest in temporary manufacturing facilities or in new projects to restore businesses in Thailand. Subject to certain specific criteria, the tax exemption may be with or without cap, and corporate income tax reduction by 50% may be available for another 3 to 5 years. In addition to the above, the specific incentives granted are as follows: Armstrong Rubber & Chemical Products Company Limited The subsidiary was granted promotional privileges by the BOI of Thailand for the manufacture of plastic insulator pursuant to investment promotion certificate No (2)/2551 and the promotion certificate No. 1512(2)/2555. Among the significant privileges are exemptions from corporate income tax on profits from the promoted activities for a period of seven to eight years, commencing from the date the operating income was first earned. Armstrong Mechanical Components Company Limited The subsidiary was granted promotional privileges by the BOI of Thailand for the manufacture of plastic insulators pursuant to investment promotion certificate No. 1806(2)/2547. Among the significant privileges are exemptions from corporate income tax on profits from the promoted activities for a period of seven years, commencing from the date the operating income was first earned (2004). Armstrong Rubber Technology (Thailand) Company Limited The subsidiary was granted promotional privileges by the BOI of Thailand for the manufacture of rubber products pursuant to investment promotion certificate No. 2192(2)/2550. Among the significant privileges are exemptions from corporate income tax on profits from the promoted activities for a period of seven years, commencing from the date the operating income was first earned (2008). (b) People s Republic of China ( PRC ) Armstrong Technology (Dalian) Co Ltd /Armstrong Odenwald Changchun (AOC) Technology Co Ltd /Armstrong Technology (Suzhou) Co Ltd In accordance with the Income Tax Law of the PRC for enterprises with Foreign Investment and Foreign Enterprises, the subsidiaries in the PRC are entitled to full exemption from Enterprise Income Tax ( EIT ) for the first two years and a 50% reduction in EIT for the next three years, commencing from the first profitable year after offsetting all tax losses carried forward from the previous five years. IV-55

129 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Taxation (cont d) (b) People s Republic of China ( PRC ) (cont d) Armstrong Technology (Dalian) Co Ltd /Armstrong Odenwald Changchun (AOC) Technology Co Ltd /Armstrong Technology (Suzhou) Co Ltd (cont d) Armstrong Technology (Dalian) Co Ltd has commenced 50% EIT exemption from the financial years ended 31 December Armstrong Technology (Suzhou) Co Ltd has commenced 50% EIT exemption during the financial year ended 31 December Armstrong Odenwald Changchun (AOC) Technology Co Ltd was awarded the status of Hi-Tech Enterprise by the PRC government. This status allows the subsidiary to enjoy a reduction in tax rate from 25% to 15%. This incentive is valid for the period from 1 January 2011 to 31 December (c) Vietnam Armstrong Weston Vietnam Co Ltd The statutory corporate income tax rate applicable to the subsidiary is 10% of taxable profits in the first 15 years of commercial operation and 25% thereafter. The subsidiary is also entitled to an exemption from corporate income tax for 4 years commencing from the first year it makes a taxable profit and a 50% reduction for the following 7 years. (d) Malaysia Yasuda Tsusho Ltd The subsidiary was incorporated in the Federal Territory of Labuan, Malaysia under the Offshore Companies Act, In accordance with the Labuan Offshore Business Activity Tax Act, 1990, taxation charge and payable is based on a flat RM20,000 upon election made on Section 7(1) of the said Act. Armstrong Technology Sdn Bhd During the financial year, Armstrong Technology Sdn Bhd was awarded pioneer status incentive under the Promotion of Investment Act, 1986 for manufacturing of moulded rubber parts and components for noise, anti-vibration and thermal insulation; and seals/damping/filters for automotive and electronic industries. This status allows the subsidiary to enjoy corporate tax exemption of 70% of statutory income arising from the pioneer activities for a period of 5 years. The incentive period had not commenced as at 31 December Earnings per share Basic earnings per share is calculated by dividing the net profit for the year attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share is calculated by dividing the net profit attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the year (adjusted for the effects of dilutive options). The following reflects the profit and share data used in the basic and diluted earnings per share computations for the years ended 31 December: Group $ 000 $ 000 Net profit attributable to ordinary shareholders for basic and diluted earnings per share 11,483 7,132 IV-56

130 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Earnings per share (cont d) The weighted average number of ordinary shares is calculated as follows: Number of shares Issued ordinary shares at beginning of year 494, ,815 Weighted average number of ordinary shares issued during the year 901 Weighted average number of ordinary shares bought back during the year (262) (2,379) Weighted average number of issued ordinary shares at year end 493, ,337 Effect of dilutive share options * Adjusted weighted average number of ordinary shares applicable to diluted earnings per share 493, ,485 * Excludes 10,226,000 (2011: 10,911,000) options with an exercise price of $0.38 per share which are anti-dilutive in Dividends Group and Company $ 000 $ 000 Declared and paid during the financial year: Final exempt (one-tier) dividend for 2011: 0.6 cents (2010: 2.0 cents) per share 2,965 10,062 Proposed but not recognised as a liability as at 31 December: Dividends on ordinary shares, subject to shareholders approval at the AGM Final exempt (one-tier) dividend for 2012: 0.6 cents (2011: 0.6 cents) per share 2,962 2, Related party information (a) Sales and purchases of goods and services The Group had significant transactions with related parties on terms agreed between the parties as follows: Group $ 000 $ 000 Costs and expenses Purchases from corporate shareholder of a subsidiary Fees paid to a firm of which a director is a member IV-57

131 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Related party information (cont d) (b) Compensation of key executives Group $ 000 $ 000 Short-term employee benefits 2,990 2,870 Contributions to defined contribution plans ,071 2,932 Comprise amounts paid to: Directors of the Company 1,912 1,851 Other key executives 1,159 1,081 3,071 2, Commitments and contingent liabilities (a) Operating lease commitments As lessee The Group had entered into lease agreements for land, factory cum office building and staff housing, resulting in future rental commitments which can, subject to certain terms in the agreements, be revised annually based on prevailing market rates. A factory cum office building was sold and leased back by the Company for 10 years from June The Company has the option to renew the lease for an additional 5 years at a rate to be agreed with the lessor. Lease terms do not contain restrictions on the Group s activities concerning dividend or additional debt. Certain lease terms entered into by subsidiaries include restrictions on further leasing. As at 31 December 2012, the Group and the Company had aggregate minimum lease commitments as follows: Group Company $ 000 $ 000 $ 000 $ 000 Within 1 year 3,325 3,117 2,272 2,220 Between 1 and 5 years 5,581 7,010 3,481 5,725 After 5 years 2,979 1,693 11,885 11,820 5,753 7,945 IV-58

132 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Commitments and contingent liabilities (cont d) (b) Capital expenditure commitments As at 31 December 2012, the Group and the Company had capital expenditure contracted but not provided for in the financial statements as follows: Group Company $ 000 $ 000 $ 000 $ 000 Fixed assets purchase commitments 9, (c) Contingent liabilities (i) (ii) As at 31 December 2012, the Company had given undertakings to Armstrong Rubber Manufacturing Pte Ltd and Armstrong Weston Holdings Pte Ltd to provide financial support to these subsidiary companies, where necessary, to enable these companies to operate as going concerns and to meet their obligations for at least 12 months from the date of this report; and As at 31 December 2012, the Company had given corporate guarantees of up to Baht 255 million (2011: Baht 255 million) and US$5.4 million (2011: US$5.9 million), equivalent to $16,689,000 (2011: $17,977,000) for banking facilities granted to its subsidiary companies. 44. Employee benefits (a) Pension liability The Group provides defined post-employment benefits to its employees in Indonesia in accordance with local law. These benefits are unfunded. The following tables summarise the components of net benefit expense recognised in profit or loss and the amounts recognised in the balance sheet for the plan. Group 2012 $ 000 Net benefit expense Current service cost, representing net benefit expense (439) Benefit liability Defined benefit obligation (386) Changes in present value of defined benefit obligations are as follows: Group 2012 $ 000 Current service cost 439 Exchange differences (53) At 31 December 386 The Group expects to contribute $0.2 million to the defined benefit pension plan in IV-59

133 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Employee benefits (cont d) (a) Pension liability (cont d) The principal assumptions used in determining pension obligations for the defined benefit plan are shown below: Group 2012 Discount rate 6% Future salary increases 10% Mortality rate TMI 11 Disability rate 10% of mortality Retirement age 52 years (b) Share options The Company has an employee share incentive plan for the granting of non-transferable options to employees. Options are granted for terms of 1 to 10 years to purchase the Company s ordinary shares at not less than the market value of the shares at the date of offer. The options vest in various tranches over 3 years and are exercisable beginning on the first anniversary of the date of offer. There are no cash settlement alternatives. There has been no modification or cancellation of options granted during both 2012 and Information with respect to the number of options granted under the Company s employee option plans is as follows: Options Over Number of Shares Weighted Average Exercise Price Options Over Number of Shares Weighted Average Exercise Price $ $ Outstanding at beginning of year 11,125, ,506, Granted Lapsed (762,142) 0.35 (106,000) 0.38 Exercised (1,274,714) 0.38 Outstanding at end of year 10,363, ,125, Exercisable at end of year 10,363, ,125, Outstanding Average Option Price Exercisable Average Option Price Option Price Options Average Life Options $ $ $ $ , , $ ,226, ,226, Total 10,363, ,363, On 16 January 2009, the shareholders of the Company voted to terminate the Armstrong Industrial Corporation Share Option Scheme No further option will be granted under this scheme. The termination of this scheme does not prejudice the rights of the option holders share options which have been granted and accepted under this scheme prior to its termination. IV-60

134 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Group segmental reporting The Group is organised on a worldwide basis into five main operating divisions, namely: (i) (ii) (iii) (iv) (v) Data storage Office automation Consumer electronics / Telecommunications Automotive Industrial engineering Other operations include trading of adhesive and foam products. The operating businesses are organised and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Transfer prices between business segments are set on an arm s length basis in a manner similar to transactions with third parties. Segment expenses and results include transfers between business segments. These transfers are eliminated on consolidation Data Storage Office Automation Consumer Electronics/ Telecommunications Automotive Industrial Engineering Others Eliminations Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Turnover External sales 43,093 21,599 64,755 84,707 2, ,238 Inter-segment sales 54,352 (54,352) Total sales 43,093 21,599 64,755 84,707 2,084 54,352 (54,352) 216,238 Interest income Interest expenses (191) (40) (128) (245) (37) (641) Fair value adjustments for derivative contracts, net 1, (78) ,868 Depreciation and amortisation (637) (542) (1,989) (2,148) (126) (5,442) Write-down of stocks (Note 34) (3) (5) (26) (34) Other non-cash income Other non-cash expenses (172) (125) (1,008) (286) (12) (1,603) Segment profit/(loss) 561 1,000 1,983 10,180 1,031 (84) (106) 14,565 Assets Additions to fixed assets 742 1,211 6,785 7,500 1,050 17,288 Segment assets 22,250 16,376 50,140 76,611 3, ,335 Segment liabilities 18,159 7,172 13,535 20,704 1,146 60,716 IV-61

135 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Group segmental reporting (cont d) 2011 Data Storage Office Automation Consumer Electronics/ Telecommunications Automotive Industrial Engineering Others Eliminations Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Turnover External sales 47,871 22,368 66,369 75,371 2, ,251 Inter-segment sales 61,000 (61,000) Total sales 47,871 22,368 66,369 75,371 2,272 61,000 (61,000) 214,251 Interest income Interest expenses (197) (35) (164) (277) (3) (676) Fair value adjustments for derivative contracts, net (3,538) (367) (226) (122) (45) (4,298) Depreciation and amortisation (516) (538) (2,052) (1,754) (459) (5,319) Impairment of fixed assets (Note 34) (696) (174) (1,094) (1,790) (26) (3,780) Write-down of stocks (Note 34) (99) (170) (1,255) (844) (18) (2,386) Other non-cash income Other non-cash expenses (73) (111) (258) (126) (12) (580) Segment profit/(loss) (1,902) 1,795 3,508 9, ,901 (2,045) 13,086 Assets Additions to fixed assets 1, ,357 3, ,227 Segment assets 25,508 18,486 54,686 68,427 4, ,198 Segment liabilities 21,777 6,902 14,934 19,962 1,864 65,439 Other non-cash expenses consist of allowance for stock obsolescence and allowance for doubtful trade and non-trade debts. Geographical information The secondary segment reporting format is geographical segments that are based on location of assets. The locations of the Group s customers are not significantly different from the locations of the Group assets. Turnover Non-current Assets $ 000 $ 000 $ 000 $ 000 Singapore 54,565 58,558 4,038 4,692 Malaysia 14,555 13,869 5,650 4,049 Thailand 56,868 51,474 13,615 5,870 PRC 65,661 68,671 24,450 23,876 Indonesia 20,487 18, Vietnam 4,102 3,414 1,547 1, , ,251 49,792 40,819 Non-current assets information presented above consist of fixed assets, intangible assets and deferred tax assets. Information about a major customer Revenue from one major customer amounts to $13,594,000 (2011: $17,140,000), arising from sales by the data storage segment. IV-62

136 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Financial risk management objectives and policies The Group and the Company are exposed to financial risks arising from its operations and the use of financial instruments. The key financial risks include credit risk, liquidity risk, interest rate risk, foreign currency risk and market price risk. The Board of Directors reviews and agrees policies and procedures for the management of these risks, which are executed by the Deputy CEO and his team. The Audit Committee provides independent oversight to the effectiveness of the risk management process. It is and has been throughout the current and previous financial year, the Group s policy that no derivatives shall be undertaken except for the use as hedging instruments where appropriate and cost efficient. The Group and the Company do not apply hedge accounting. The following sections provide details regarding the Group s and Company s exposure to the above-mentioned financial risks and the objectives, policies and processes for the management of these risks. There has been no change to the Group s exposure to these financial risks or the manner in which it manages and measures the risks. Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of the Group s and the Company s financial instruments will fluctuate because of changes in market interest rates. The Group s and the Company s exposure to interest rate risk arises primarily from their loans and borrowings and deposits. The Group s policy is to negotiate the most favourable interest rates available with the view of matching the tenure and cash flow characteristics of its financing needs. The following tables set out the carrying amount, by maturity, of the Group s and the Company s financial instruments that are exposed to interest rate risk: 2012 Within 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years More than 5 years Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Group Cash and bank balances 26,477 26,477 Short-term bank loans (13,607) (13,607) Term loans (1,220) (1,402) (787) (688) (525) (1,597) (6,219) Company Cash and bank balances 4,612 4,612 Short-term bank loan (9,954) (9,954) 2011 Within 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years More than 5 years Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Group Cash and bank balances 31,480 31,480 Short-term bank loans (18,872) (18,872) Term loans (599) (717) (479) (117) (98) (48) (2,058) Company Cash and bank balances 3,878 3,878 Short-term bank loan (12,619) (12,619) IV-63

137 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Financial risk management objectives and policies (cont d) Interest rate risk (cont d) Sensitivity analysis for interest rate risk The table below demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group s profit before tax (through the impact on interest expense on floating rate loans): Increase/ decrease in basis point Effect on profit before tax Increase/ decrease in basis point Effect on profit before tax $ 000 $ 000 Singapore Dollar +50 (41) +50 (5) Singapore Dollar United States Dollar +50 (21) +50 (75) United States Dollar Thai Baht (14) Thai Baht Chinese Renminbi +50 (7) +50 Chinese Renminbi Liquidity risk Liquidity risk is the risk that the Group or the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Group s and the Company s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Group s and the Company s objective is to maintain a gearing of not more than 5% in its capital management and flexibility through the use of stand-by credit facilities. The table below summarises the maturity profile of the Group s and the Company s financial assets and liabilities at the end of the reporting period based on contractual undiscounted payments. IV-64

138 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Financial risk management objectives and policies (cont d) Liquidity risk (cont d) $ 000 $ 000 Within 1 year 1 to 5 years More than 5 years Total Within 1 year 1 to 5 years More than 5 years Total Group Financial assets Trade debtors and other receivables 55,914 55,914 57,523 57,523 Derivatives Cash and cash equivalents 31,459 31,459 33,225 33,225 Due from an associated company Total undiscounted financial assets 88,547 88,547 91,551 91,551 Financial liabilities Trade and other payables 33,332 33,332 35,260 35,260 Derivatives 2,660 2,660 4,350 4,350 Loans and borrowings 15,213 3,704 1,670 20,587 21,936 1, ,637 Total undiscounted financial liabilities 51,205 3,704 1,670 56,579 61,546 1, ,247 Total net undiscounted financial assets/(liabilities) 37,342 (3,704) (1,670) 31,968 30,005 (1,652) (49) 28,304 Company Financial assets Trade debtors and other receivables 11,697 11,697 9,904 9,904 Derivatives Cash and cash equivalents 5,309 5,309 4,728 4,728 Due from subsidiaries 27,585 27,585 25,848 25,848 Total undiscounted financial assets 44,850 44,850 40,559 40,559 Financial liabilities Trade and other payables 7,411 7,411 6,471 6,471 Due to subsidiaries 7,286 7,286 6,335 6,335 Derivatives 2,444 2,444 4,350 4,350 Loans and borrowings 9, ,039 12, ,854 Total undiscounted financial liabilities 27, ,180 29, ,010 Total net undiscounted financial assets/(liabilities) 17,714 (44) 17,670 10,629 (80) 10,549 The maximum amount of financial guarantees given by the Company that could be called within one year and within one to five years amount to $3,961,000 (2011: $6,569,000) and $120,000 (2011: $440,000) respectively. IV-65

139 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Financial risk management objectives and policies (cont d) 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 and the Company s exposure to credit risk arises primarily from trade and other receivables. For other financial assets (including investment securities, cash and cash equivalents and derivatives), the Group and the Company minimise 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, receivable balances are monitored on an ongoing basis with the result that the Group s exposure to bad debts is not significant. For transactions that do not occur in the country of the relevant operating unit, the Group does not offer credit terms without the approval of the respective Head of Credit Control. The age analysis of trade and other debtors past due but not impaired is as follows: Group Company $ 000 $ 000 $ 000 $ 000 Trade receivables past due: Less than 30 days 7,548 7, to 60 days 2,800 2, to 90 days 711 1, More than 90 days 1,471 1, ,530 12,850 1, Trade receivables that are neither past due nor impaired are creditworthy debtors with good payment record with the Group. Cash and cash equivalents and derivatives that are neither past due nor impaired are placed with or entered into with reputable financial institutions with high credit ratings and no history of default. As at 31 December 2012, the Company had given corporate guarantees of up to Baht 255 million (2011: Baht 255 million) and US$5.4 million (2011: US$5.9 million), equivalent to $16,689,000 (2011: $17,977,000) for banking facilities granted to its subsidiary companies. IV-66

140 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Financial risk management objectives and policies (cont d) Credit risk (cont d) Credit risk concentration profile The Group determines concentrations of credit risk by monitoring the country and industry sector profile of its trade receivables on an on-going basis. The credit risk concentration profile of the Group s trade receivables at the end of the reporting period is as follows: Group $ 000 % $ 000 % By Country: Singapore 1, ,557 3 Malaysia 5, , Indonesia 2, ,199 6 Thailand 14, , PRC 27, , Vietnam Others 1, , , , By Industry Sector: Data storage 10, , Office automation 4, , Consumer electronics / Telecommunications 10, , Automotive 27, , Industrial engineering Others , , At the end of the reporting period, approximately 46% (2011: 46%) of the Group s trade receivables were due from the top 5 major customers of each entity within the Group. Foreign currency risk The Group has transactional currency exposures arising from sales or purchases that are denominated in a currency other than the respective functional currencies of the Group entities, which are in SGD, Thai Baht (THB), Malaysian Ringgit (RM), Rupiah (RP), United States Dollars (USD) and Renminbi (RMB). The Group manages its foreign currency denominated trade receivables and trade payables on a net receivable or payable basis. As at 31 December 2012, approximately 32% (2011: 35%) of total net receivables is denominated in USD. IV-67

141 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Financial risk management objectives and policies (cont d) Foreign currency risk (cont d) Sensitivity analysis for foreign currency risk The following table demonstrates the sensitivity to a reasonably possible change in the USD and Japanese Yen (JPY) exchange rates (against SGD), with all other variables held constant, of the Group s profit before tax. Group Profit before tax Profit before tax $ 000 $ 000 USD - strengthened 3% (2011: 3%) (550) (3,229) - weakened 3% (2011: 3%) 332 3,049 JPY - strengthened 3% (2011: 3%) 548 (470) - weakened 3% (2011: 3%) (548) 343 Market price risk Market price risk is the risk that the fair value or future cash flows of the Group s financial instruments will fluctuate because of changes in market prices (other than interest or exchange rates). The Group is exposed to equity price risk arising from its investment in quoted equity instruments. These instruments are quoted on the SGX-ST in Singapore and are classified as held for trading financial assets. The Group does not have exposure to commodity price risk. The Group s objective is to manage investment returns and equity price risk using a diversified portfolio of shares. Sensitivity analysis for equity price risk At the end of the reporting period, if the STI had been 1% (2011: 1%) higher/lower with all other variables held constant, the Group s profit net of tax would have been approximately $4,000 (2011: $4,000) higher/lower, arising as a result of higher/lower fair value gains on held for trading investments in equity instruments. IV-68

142 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Fair value of financial instruments (a) Fair value of financial instruments that are carried at fair value Group 2012 Quoted prices in active markets for identical instruments Significant other observable inputs Total (Level 1) (Level 2) $ 000 $ 000 $ 000 Financial assets: Held for trading investments Equity instruments (quoted) Amounts under fund management Derivatives Forward currency contracts At 31 December Financial liabilities: Derivatives Forward currency contracts 2,660 2,660 At 31 December ,660 2,660 Group 2011 Quoted prices in active markets for identical instruments Significant other observable inputs Total (Level 1) (Level 2) $ 000 $ 000 $ 000 Financial assets: Held for trading investments Equity instruments (quoted) Amounts under fund management Derivatives Forward currency contracts At 31 December Financial liabilities: Derivatives Forward currency contracts 4,350 4,350 At 31 December ,350 4,350 IV-69

143 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Fair value of financial instruments (cont d) (a) Fair value of financial instruments that are carried at fair value (cont d) Fair value hierarchy The Group classifies fair value measurement using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels: Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities, and Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). There have been no transfers between Level 1 and Level 2 during the years ended 31 December 2012 and 31 December Determination of fair value Quoted equity instruments and amounts under fund management (Note 7): Fair value is determined directly by reference to their published market bid price at the end of the reporting period. Derivatives (Note 16): Forward currency contracts are valued using a valuation technique with market observable inputs. The most frequently applied valuation techniques include forward pricing models, using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates and interest rate curves. (b) Fair value of financial instruments by classes that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value Trade and other debtors and creditors, balances due from/ to subsidiaries and associated company, fixed deposits, cash and bank balances, accruals, balance due to corporate shareholder, loans from non-controlling interests of subsidiaries, loans and borrowings at floating rate and lease obligations The carrying amounts of these financial assets and liabilities are reasonable approximation of fair values, either due to their short-term nature or that they are floating rate instruments that are re-priced to market interest rates on or near the end of the reporting period. (c) Fair value of financial instruments by classes that are not carried at fair value and whose carrying amounts are not reasonable approximation of fair value The fair value of loans to subsidiaries is not determinable as timing of the future cash flows arising from these amounts cannot be estimated reliably. The aggregate of these financial assets (before allowance for impairment) for the Company amounted to $3,404,000 (2011: $3,418,000). IV-70

144 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR FY2012 NOTES TO THE FINANCIAL STATEMENTS 31 December Capital management Capital includes debt and equity items as disclosed in the table below. The primary objective of the Group s capital management is to ensure that it maintains a strong credit standing and healthy capital structure in order to support its business and maximise shareholder value. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payout, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the years ended 31 December 2012 and 31 December The banking facilities undertaken by the Group require the Group to comply with certain minimum net worth, working capital, return on equity and gearing covenants. The Group monitors capital using a gearing ratio, which is net debt divided by total capital. The Group s policy is to keep the gearing ratio to between 0% and 5%. The Group includes within net debt, loans and borrowings less cash and cash equivalents. Capital includes equity attributable to the equity holders of the Company and reserves. Group $ 000 $ 000 Loans and borrowings 21,886 23,117 Less: Cash and cash equivalents (31,459) (33,225) Net cash (9,573) (10,108) Equity attributable to the equity holders of the Company 100,206 97,711 Gearing Ratio NM NM NM: Not meaningful 49. Authorisation of financial statements The financial statements of Armstrong Industrial Corporation Limited and its subsidiaries for the year ended 31 December 2012 were authorised for issue in accordance with a resolution of the directors on 20 March IV-71

145 APPENDIX V UNAUDITED 1ST QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 31 MARCH 2013 The unaudited 1 st Quarter Financial Statements and Dividend Announcement for the Group for the period ended 31 March 2013 set out below have been extracted from the announcement by the Company on 13 May 2013 and was not specifically prepared for inclusion in this Circular. The figures have not been audited. V-1

146 APPENDIX V UNAUDITED 1ST QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 31 MARCH 2013 ARMSTRONG INDUSTRIAL CORPORATION LIMITED (Co Reg No : K) First Quarter Financial Statements for the Period Ended 31 March (a) An income statement and statement of comprehensive income, or a statement of comprehensive income, for the group, together with a comparative statement for the corresponding period of the immediately preceding financial year 3 months ended Variance S$'000 S$'000 % Turnover 51,542 52, % Cost of sales (40,601) (43,840) -7.4% Gross profit 10,941 8, % Other operating income (Note 1) 206 5, % Distribution and selling expenses (2,056) (1,654) 24.3% Administrative expenses (5,894) (5,608) 5.1% Other operating expenses (Note 2) (1,105) (448) 146.7% Profit from operations 2,092 6, % Financial expenses, net (Note 3) (97) (143) -32.2% Profit before taxation (Note 4) 1,995 6, % Taxation (754) (837) -9.9% Profit after taxation 1,241 5, % Other comprehensive income: Items that may be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations credit/(debit) to translation reserve 2,416 (1,962) NM Other comprehensive income for the period, net of tax 2,416 (1,962) NM Total comprehensive income 3,657 3, % Profit attributable to:- Owners of the parent 1,074 5, % Non-controlling interests % 1,241 5, % Total comprehensive income attributable to:- Owners of the parent 3,260 3, % Non-controlling interests 397 (38) NM 3,657 3, % NM : Not Meaningful V-2

147 APPENDIX V UNAUDITED 1ST QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 31 MARCH 2013 Note 1 Other operating income comprise: 3 months ended S$'000 S$'000 Gain on disposal of fixed assets,net 14 - Fair value adjustment for derivative contracts, net - 2,733 Fair value changes to held for trading quoted equity shares and amounts under fund management Foreign exchange gain, net Insurance claims - 2,269 Others ,571 Note 2 3 months ended S$'000 S$'000 Other operating expenses comprise: Loss on disposal of fixed assets, net - (6) Fair value adjustment for derivative contracts, net (915) - Impairment of fixed assets - (146) Impairment of stocks - (35) Others (190) (261) (1,105) (448) Note 3 3 months ended S$'000 S$'000 Financial expenses,net comprise: Interest expense (153) (173) Interest income Total (97) (143) Note 4 Profit before taxation is determined after (charging)/crediting the following: 3 months ended S$'000 S$'000 Depreciation of fixed assets (1,479) (1,324) Amortisation of intangible assets (20) (2) Allowance for stock obsolescence, net (170) (337) Provision for impairment of fixed assets and stocks - (181) Insurance claims - 2,269 V-3

148 APPENDIX V UNAUDITED 1ST QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 31 MARCH (b)(i) A statement of financial position (for the issuer and group), together with a comparative statement as at the end of the immediately preceding financial year. Group Group Company Company S$'000 S$'000 S$'000 S$'000 Share capital and reserves Share capital - ordinary shares 50,211 50,211 50,211 50,211 Shares held in treasury (6,466) (6,466) (6,466) (6,466) Capital reserve 5,304 5, Share-based payment reserve Premium paid on acquisition of NCI (96) (96) - - Translation reserve (5,971) (8,157) - - Revenue reserve 59,517 58,510 3,203 5, , ,206 47,915 50,569 Non-controlling interests 8,810 8, , ,619 47,915 50,569 Non-current assets Fixed assets 50,676 48,247 2,138 1,651 Subsidiaries ,195 29,195 Other investments Intangible assets 3,290 1, Deferred tax asset Loan to subsidiaries ,888 50,066 32,065 31,257 Current assets Stocks 26,334 27,918 2,212 2,041 Trade debtors 55,331 53,426 12,589 11,510 Other debtors, deposit and prepayment 5,711 5, Due from subsidiaries (trade) ,952 12,583 Due from subsidiaries (non-trade) ,724 15,002 Due from an associated company (trade) Due from an associated company (non-trade) 1, Derivative financial instruments Fixed deposits 7,214 5, Cash and bank balances 25,542 26,477 3,274 4, , ,269 42,560 47,101 Current liabilities Trade creditors 22,224 21,031 2,342 1,038 Other creditors and accruals 12,463 12,266 5,363 6,373 Due to subsidiaries (trade) - - 5,795 7,201 Due to subsidiaries (non-trade) Due to corporate shareholder Loan from shareholders of subsidiaries 1,810 1, Provision for taxation Term loans, current portion 1,565 1, Short-term bank loans 12,451 13,607 8,742 9,954 Lease obligations, current portion Derivative financial instruments 3,538 2,660 3,503 2,444 55,172 53,299 26,208 27,283 Net current assets 66,706 65,970 16,352 19,818 Non-current liabilities Term loans, non-current portion 6,855 4, Lease obligations, non-current portion Pension liability Other creditors, non-current portion Deferred taxation 1,983 1, ,318 7, , ,619 47,915 50,569 V-4

149 APPENDIX V UNAUDITED 1ST QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 31 MARCH (b)(ii) Aggregate amount of the group s borrowings and debt securities Amount repayable in one year or less, or on demand As at As at Secured (S$ 000) Unsecured (S$ 000) Secured (S$ 000) Unsecured (S$ 000) 2,781 11,348 2,414 12,546 Amount repayable after one year As at As at Secured (S$ 000) Unsecured (S$ 000) Secured (S$ 000) Unsecured (S$ 000) 6, , Details of any collateral (A) Term Loans Secured by Mortgage on Subsidiaries Land & Buildings Short term loan A short term loan of S$1,401,000 (2012: S$1,372,000) is secured by a mortgage on a subsidiary s land use right and leasehold building with net book value of amounting to approximately S$3,802,000 (2012: S$3,768,000), bears interest at 6.9% (2012: 6.9% to 5.83%) per annum and is repayable within the next 12 months. Term loans (1) & (2) Bank loans of S$385,000 (2012: S$405,000) and S$193,000 (2012: S$194,000) are secured by a mortgage on a subsidiary s freehold land and building with a net book value of approximately S$2,480,000 (2012: S$2,389,000), bear interest at THBFIX 1 month of 2.50% plus 2.25% (2011: 2.37% plus 2.25%) per annum and are repayable in 60 monthly instalments commencing November 2009 and May 2011 respectively. Term loans (3) & (4) Bank loans of S$2,398,000 (2012: S$2,254,000) and S$2,560,000 (2012: S$378,000) are secured by a mortgage on a subsidiary s freehold land and building with a net book value of approximately S$4,880,000 (2012: S$3,644,000), bear interest at THBFIX 1 month of 2.50% plus 2.15% (2012: 2.37% plus 2.15) per annum and are repayable in 108 monthly instalments commencing July 2013 and in 5 monthly instalments commencing December 2013 respectively. Term loan (5) Bank loan of S$781,000 (2012: S$792,000) is secured by a mortgage on a subsidiary s freehold land and building with a net book value of approximately S$1,638,000 (2012: S$1,564,000), bears interest at BLR of 6.6% minus 2% (2012: 6.6% minus 2%) per annum and is repayable in 120 monthly instalments commencing January (B) Term Loans Secured by Pledge on a Subsidiary s Machines Term loans (6), (7), (8), (9), (10) and (11) Bank loans of S$211,000 (2012: S$223,000), S$169,000 (2012: S$170,000), S$220,000 (2012: S$220,000), S$558,000 (2012: S$554,000) and S$236,000 (2012: S$233,000) bear interest at THBFIX 1 month of 2.50% plus 2.25% (2012: 2.37% plus 2.25%) per annum and are repayable in 48 monthly instalments commencing October 2010, 56 monthly instalments commencing November 2011 and 60 monthly instalments commencing April 2012, July 2012 and December 2012 respectively. Bank loan of S$377,000 (2012: S$368,000) bears interest at THBFIX 1 month of 2.50% plus 2.15% (2012: 2.37% plus 2.15%) per annum and is repayable in 60 monthly instalments commencing March 2013 respectively. These bank loans are secured by pledge on a subsidiary s machines with net book values amounting to approximately S$2,077,000 (2012: S$2,319,000). Finance lease The finance lease obligations of S$231,000 (2012:S$261,000) are secured over the fixed assets purchased with net book values amounting to approximately S$520,000 (2012: S$738,000). V-5

150 APPENDIX V UNAUDITED 1ST QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 31 MARCH (c) A statement of cash flows (for the group), together with a comparative statement for the corresponding period of the immediately preceding financial year 3 months ended Cash flows from operating activities Profit before taxation 1,995 6,180 Adjustments:- Depreciation of fixed assets 1,479 1,324 Impairment of fixed assets Impairment of stocks - 35 (Gain)/Loss on disposal of fixed assets, net (14) 6 Allowance for stock obsolescence, net Interest expense Interest income (56) (30) Dividend income -* -* Fair value changes to held for trading quoted equity shares and amounts under fund management (70) (49) Amortisation of intangible assets 20 2 Fair value adjustment for derivative contracts, net 915 (2,733) Translation adjustments 727 (617) Operating profit before working capital changes 5,319 4,774 Stocks 1,375 4,783 Trade debtors (1,912) (5,001) Other debtors, deposits and prepayments (584) 2,554 Fixed deposits pledged (14) (7) Due from an associated company (608) (258) Due to corporate shareholder 26 (122) Trade creditors 1,193 (781) Other creditors and accruals 291 (1,377) Pension liability (120) - Cash generated from operations 4,966 4,565 Interest received Interest paid (153) (173) Income tax paid (331) (901) Net cash generated from operating activities 4,538 3,521 Cash flows from investing activities Dividend received from quoted investments -* -* Proceeds from sale of fixed assets Purchase of fixed assets (Note B) (4,597) (2,758) Purchase of intangible assets (253) - Net cash used in investing activities (4,763) (2,410) Cash flows from financing activities Proceeds from short-term bank loans 619 5,984 Repayment of short-term bank loans (1,850) (8,778) Repayment of term loans (299) - Proceeds from new term loans 2, Repayment of lease obligations (42) (49) Net cash generated from/(used in) financing activities 529 (2,596) Net increase/(decrease) in cash and cash equivalents 304 (1,485) Effect of exchange rate changes on cash and cash equivalents 814 (546) Cash and cash equivalents at beginning of period 31,459 33,225 Cash and cash equivalents at end of period (Note A) 32,577 31,194 * Amount less than S$1,000 V-6

151 APPENDIX V UNAUDITED 1ST QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 31 MARCH 2013 (A) Cash and cash equivalents Cash and cash equivalents included in the consolidated statement of cash flows comprise the following: S$'000 S$'000 Fixed deposits 7,214 1,909 Cash and bank balances 25,542 29,461 32,756 31,370 Less: Fixed deposits pledged (179) (176) Cash and cash equivalents at end of period 32,577 31,194 (B) Fixed assets During the financial period under review, the Group acquired fixed assets with an aggregate cost of S$4,597,000 (2012: S$2,758,000) in cash. 1(d)(i) A statement (for the issuer and group) showing either (i) all changes in equity or (ii) changes in equity other than those arising from capitalisation issues and distributions to shareholders, together with a comparative statement for the corresponding period of the immediately preceding financial year Attributable to Owners of the Company Group 3 months ended Equity attributable to owners of the Company, total Sharebased payment Premium paid on acquisition of noncontrolling Share Shares held in Revenue Capital Noncontrolling Translation Equity, capital treasury reserve reserve reserve interests reserve interests total S$'000 S$'000 S$'000 S$'000 S$'000 S$'000 S$'000 S$'000 S$'000 S$'000 As at ,206 50,211 (6,466) 58,510 5, (96) (8,157) 8, ,619 Profit net of tax 1, , ,241 Other comprehensive income 2, , ,416 Total comprehensive income for the period 3, , , ,657 Contributions by and distributions to ow ners Transfer to statutory reserve - - (67) Total contributions by and distributions to ow ners (67) As at ,466 50,211 (6,466) 59,517 5, (96) (5,971) 8, ,276 3 months ended As at ,711 50,211 (6,341) 50,392 4, (96) (2,259) 8, ,759 Profit net of tax 5, , ,343 Other comprehensive income (1,667) (1,667) (295) (1,962) Total comprehensive income for the period 3, , (1,667) (38) 3,381 Contributions by and distributions to ow ners Transfer to statutory reserve - - (167) Total contributions by and distributions to ow ners (167) As at ,130 50,211 (6,341) 55,311 5, (96) (3,926) 8, ,140 V-7

152 APPENDIX V UNAUDITED 1ST QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 31 MARCH 2013 Company 3 months ended Share capital Shares held in treasury Share-based payment reserve Re venue reserve Equity, Total As at ,211 (6,466) 967 5,857 50,569 Profit net of tax (2,654) (2,654) Other comprehensive income Total comprehensive income for the period (2,654) (2,654) As at ,211 (6,466) 967 3,203 47,915 3 months ended As at ,211 (6,341) 967 3,018 47,855 Profit net of tax ,375 2,375 Other comprehensive income Total comprehensive income for the period ,375 2,375 As at ,211 (6,341) 967 5,393 50,230 (d)(ii) Details of any changes in the company's share capital arising from rights issue, bonus issue, share buy-backs, exercise of share options or warrants, conversion of other issues of equity securities, issue of shares for cash or as consideration for acquisition or for any other purpose since the end of the previous period reported on. State also the number of shares that may be issued on conversion of all the outstanding convertibles, as well as the number of shares held as treasury shares, if any, against the total number of issued shares excluding treasury shares of the issuer, as at the end of the current financial period reported on and as at the end of the corresponding period of the immediately preceding financial year. There were no share options exercised during the quarter ended 31 March The number of outstanding share options as at 31 March 2013 and 31 March 2012 were 10,198,794 and 10,363,794 respectively. Treasury shares as at 31 March 2013 and 31 March 2012 were 24,158,000 and 23,697,000 shares respectively. During the financial period, the Company did not buy back any shares. (d)(iii) To show the total number of issued shares excluding treasury shares as at the end of the current financial period and as at the end of the immediately preceding year Total number of issued shares excluding treasury shares as at 31 March 2013 and 31 December 2012 is 493,669,353 shares. (d)(iv) A statement showing all sales, transfers, disposal, cancellation and/or use of treasury shares as at the end of the current financial period reported on There were no sales, transfers, disposal, cancellation and/or or use of treasury shares during the current financial period. V-8

153 APPENDIX V UNAUDITED 1ST QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 31 MARCH Whether the figures have been audited or reviewed, and in accordance with which auditing standard or practice The figures have not been audited or reviewed. 3. Where the figures have been audited or reviewed, the auditors report (including any qualifications or emphasis of matter) Not applicable. 4. Whether the same accounting policies and methods of computation as in the issuer s most recently audited annual financial statements have been applied There were no changes in accounting policies and methods of computation adopted in the financial statements for the current reporting period as compared to the most recent audited annual financial statements as at 31 December With effect from 1 January 2013, the Group adopted the Amendments to Financial Reporting Standard ( FRS ) 1 Presentation of Items of Other Comprehensive Income ( OCI ). The Amendments to FRS 1 changes the grouping of items presented in OCI. Items that could be reclassified to profit or loss at a future point in time would be presented separately from items which will never be reclassified. 5. If there are any changes in the accounting policies and methods of computation, including any required by an accounting standard, what has changed, as well as the reasons for, and the effect of, the change As the Amendments to FRS 1 only affect the presentation of items that are already recognised in OCI, there is no impact on the Group s financial position or performance pursuant to the adoption of this standard. 6. Earnings per ordinary share of the group for the current financial period reported on and the corresponding period of the immediately preceding financial year, after deducting any provision for preference dividends Group 3 months ended Based on weighted average number of ordinary shares in issue (in cents) On a fully diluted basis (in cents) Weighted average number of shares used in computing earnings per share Weighted average number of shares used in computing diluted earnings per share 493,669, ,130, ,759, ,220,439 V-9

154 APPENDIX V UNAUDITED 1ST QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 31 MARCH Net asset value (for the issuer and group) per ordinary share based on total number of issued shares excluding treasury shares of the issuer at the end of the (a) current financial period reported on and (b) immediately preceding financial year Net asset backing per ordinary share based on existing issued share capital as at the end of the period reported on (in cents) Group Company Number of shares used in computing net asset value per share 493,669, ,669, ,669, ,669, A review of the performance of the group, to the extent necessary for a reasonable understanding of the group s business. The review must discuss any significant factors that affected the turnover, costs, and earnings of the group for the current financial period reported on, including (where applicable) seasonal or cyclical factors. It must also discuss any material factors that affected the cash flow, working capital, assets or liabilities of the group during the current financial period reported on Income Statement Turnover 1Q2013 vs 1Q2012 The Group s turnover decreased marginally by 1.5% from S$52.3 million in 1Q2012 to S$51.5 million in 1Q2013. The Automotive segment was the key revenue driver, registering growth of 10.8% on the back of low turnover in 1Q2012 as Thailand operations were still recovering from effects of the Thailand flood which occurred in 4Q2011. The Consumer Electronics segment remained relatively flat with growth of 1.8%. The Office Automation segment, which represents 7.3% of the Group s turnover, registered a contraction of 40.6% from S$6.3 million in 1Q2012 to S$3.8 million in 1Q2013 mainly due to weaker demand in Indonesia. The Data Storage segment contracted by 8.2% in line with the weak market conditions during the quarter. China and Thailand operations registered growth of 11.4% and 9.9% respectively. Turnover from Indonesia, Malaysia, Vietnam and Singapore operations reduced by 27.9%, 16.5%, 12.4% and 11.1% respectively. China remained the largest contributor to the Group s revenue at 33.4%, followed by Thailand and Singapore at 27.2% and 24.1% respectively. Profit 1Q2013 vs 1Q2012 The Group s gross profit increased by 29.3% from S$8.5 million in 1Q2012 to S$10.9 million mainly due to recovery from effects of the Thailand flood. Other operating income reduced from S$5.6 million in 1Q2012 to S$0.2 million mainly due to the absence of mark-to-market gain on the Group s forward foreign exchange contracts of S$2.7 million which was recognised in 1Q2012 and insurance claim of S$2.3 million, offset by net foreign exchange gain which was higher by S$0.3 million in 1Q2013. Distribution and selling expenses increased from S$1.7 million in 1Q2012 to S$2.1 million mainly due to higher freight charges in 1Q2013 as the Group pursues new geographical markets within PRC. V-10

155 APPENDIX V UNAUDITED 1ST QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 31 MARCH 2013 Administrative expenses increased by 5.1% from S$5.6 million in 1Q2012 to S$5.9 million mainly due to start-up expenses incurred by the Group s new subsidiary located in Changshu, PRC. Other operating expenses increased from S$0.4 million in 1Q2012 to S$1.1 million mainly due to markto-market loss on the Group s hedging contracts of S$0.9 million in 1Q2013. As a result of the above, net profit after taxation decreased from S$5.3 million in 1Q2012 to S$1.2 million in 1Q2013. Balance Sheet Fixed assets increased by S$4.4 million from S$46.3 million as at 31 December 2012 to S$50.7 million as at 31 March 2013 mainly due to construction of buildings in Thailand amounting to approximately S$1.0 million as well as acquisition of new machinery by the Group amounting to approximately S$2.9 million, net of depreciation during the quarter. Stocks decreased by S$1.6 million from S$27.9 million as at 31 December 2012 to S$26.3 million as at 31 March 2013 and trade debtors increased by S$1.9 million from S$53.4 million as at 31 December 2012 to S$55.3 million as at 31 March 2013 in line with the higher level of sales towards the end of 1Q2013 compared to end of 4Q2012. Trade creditors also increased from S$21.0 million as at 31 December 2012 to S$22.2 million as at 31 March 2013 in tandem with the foregoing. Total bank loans increased by S$1.0 million from S$19.8 million to S$20.9 million as at 31 March 2013 mainly due to net drawdown of term loans to finance acquisition of fixed assets. Consolidated Cash Flow Statement The Group continued to generate healthy net cash inflow from operations of S$4.5 million in 1Q2013. With net capital expenditure of S$4.8 million, partially offset by net inflow of cash of financing activities of S$0.5 million, the cash and cash equivalents stood at S$32.6 million as at 31 March 2013, compared to S$31.5 million as at 31 December Where a forecast, or a prospect statement, has been previously disclosed to shareholders, any variance between it and the actual results Not applicable. 10. A commentary at the date of the announcement of the significant trends and competitive conditions of the industry in which the group operates and any known factors or events that may affect the group in the next reporting period and the next 12 months As personal computer shipments are projected to drop and the global hard disk drive market is expected to decline in 2013, the Group expects to face continued challenges for its Data Storage business in the near term. China and Thailand s Automotive segments are expected to grow, albeit at a slower pace. V-11

156 APPENDIX V UNAUDITED 1ST QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 31 MARCH Dividend (a) Current Financial Period Reported On Any dividend declared for the current financial period reported on? No (b) Corresponding Period of the Immediately Preceding Financial Year Any dividend declared for the corresponding period of the immediately preceding financial year? None (c) Date payable Not applicable. (d) Books closure date Not applicable. 12. If no dividend has been declared (recommended), a statement to that effect No dividend has been declared or recommended. 13. If the Group has obtained a general mandate from shareholders for IPTs, the aggregate value of such transactions as required under Rule 920(1)(a)(ii). If no IPT mandate has been obtained, a statement to that effect. No IPT mandate has been obtained from shareholders. 14. Statement Pursuant to SGX Listing Rule 705(5) of the Listing Manual The Board of Directors of the Company hereby confirm that, to the best of their knowledge, nothing has come to the attention of the board of directors of the Company which may render the financial results for the first quarter ended 31 March 2013 to be false or misleading in any material aspect. BY ORDER OF THE BOARD Chuang Sheue Ling Company Secretary 13 May 2013 V-12

157 APPENDIX VI UNAUDITED 2ND QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 30 JUNE 2013 The unaudited 2 nd quarter financial statements and dividend announcement for the period ended 30 June 2013 set out below have been extracted from the announcement by the Company on 14 August 2013, and was not specifically prepared for inclusion in this Circular. The figures have not been audited. VI-1

158 APPENDIX VI UNAUDITED 2ND QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 30 JUNE 2013 ARMSTRONG INDUSTRIAL CORPORATION LIMITED (Co Reg No : K) Second Quarter Financial Statements for the Period Ended 30 June (a) An income statement and statement of comprehensive income, or a statement of comprehensive income, for the group, together with a comparative statement for the corresponding period of the immediately preceding financial year 3 months ended 6 months ended Variance Variance S$'000 S$'000 % S$'000 S$'000 % Turnover 56,799 55, % 108, , % Cost of sales (44,392) (44,146) 0.6% (84,993) (87,986) -3.4% Gross profit 12,407 10, % 23,348 19, % Other operating income (Note 1) 165 1, % 367 6, % Distribution and selling expenses (2,243) (2,134) 5.1% (4,299) (3,788) 13.5% Administrative expenses (6,730) (6,333) 6.3% (12,624) (11,941) 5.7% Other operating expenses (Note 2) (1,333) (528) 152.5% (2,434) (355) 585.6% Profit from operations 2,266 3, % 4,358 9, % Financial expenses, net (Note 3) (57) (132) -56.8% (154) (275) -44.0% Profit before taxation (Note 4) 2,209 2, % 4,204 9, % Taxation (1,448) (435) 232.9% (2,202) (1,272) 73.1% Profit after taxation 761 2, % 2,002 7, % Other comprehensive income: Items that may be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations credit/(debit) to 1,321 (3,158) NM 3,737 (5,120) NM Other comprehensive income for the period, net of tax 1,321 (3,158) NM 3,737 (5,120) NM Total comprehensive income 2,082 (599) NM 5,739 2, % Profit attributable to:- Owners of the parent 359 2, % 1,433 7, % Non-controlling interests % % 761 2, % 2,002 7, % Total comprehensive income attributable to:- Owners of the parent 1,446 (655) NM 4,706 2, % Non-controlling interests NM 1, NM 2,082 (599) NM 5,739 2, % NM : Not Meaningful VI-2

159 APPENDIX VI UNAUDITED 2ND QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 30 JUNE 2013 Note 1 Other operating income comprise: 3 months ended 6 months ended S$'000 S$'000 S$'000 S$'000 Gain on disposal of fixed assets,net Fair value adjustment for derivative contracts, net ,547 Fair value changes to held for trading quoted equity shares and amounts under fund management Insurance claims ,269 Others , ,188 Note 2 3 months ended 6 months ended S$'000 S$'000 S$'000 S$'000 Other operating expenses comprise: Loss on disposal of quoted equity shares - (9) - (9) Fair value adjustment for derivative contracts, net (285) - (1,200) - Fair value changes to held for trading quoted equity shares and amounts under fund management (3) (48) - - Foreign exchange loss, net (832) (471) (831) (137) Impairment of fixed assets (146) Write-down of stocks (35) Others (213) (0) (403) (28) (1,333) (528) (2,434) (355) Note 3 3 months ended 6 months ended S$'000 S$'000 S$'000 S$'000 Financial expenses,net comprise: Interest expense (168) (161) (321) (334) Interest income Total (57) (132) (154) (275) Note 4 Profit before taxation is determined after (charging)/crediting the following: 3 months ended 6 months ended S$'000 S$'000 S$'000 S$'000 Depreciation of fixed assets (1,540) (1,338) (3,019) (2,662) Amortisation of intangible assets (18) (2) (38) (4) Allowance for stock obsolescence, net (237) (239) (407) (576) Insurance claims ,269 Provision Impairment of fixed assets (146) Write-down of stocks (35) VI-3

160 APPENDIX VI UNAUDITED 2ND QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 30 JUNE (b)(i) A statement of financial position (for the issuer and group), together with a comparative statement as at the end of the immediately preceding financial year. Group Group Company Company S$'000 S$'000 S$'000 S$'000 Share capital and reserves Share capital - ordinary shares 50,211 50,211 50,211 50,211 Shares held in treasury (6,466) (6,466) (6,466) (6,466) Capital reserve 5,458 5, Share-based payment reserve Premium paid on acquisition of NCI (96) (96) - - Translation reserve (4,884) (8,157) - - Revenue reserve 56,759 58,510 1,811 5, , ,206 46,523 50,569 Non-controlling interests 9,446 8, , ,619 46,523 50,569 Non-current assets Fixed assets 55,978 48,247 2,939 1,651 Subsidiaries ,885 29,195 Other investments Intangible assets 3,333 1, Deferred tax asset Loan to subsidiaries ,243 50,066 31,554 31,257 Current assets Stocks 27,969 27,918 2,081 2,041 Trade debtors 64,679 53,426 13,063 11,510 Other debtors, deposit and prepayment 6,094 5, Due from subsidiaries (trade) ,010 12,583 Due from subsidiaries (non-trade) ,225 15,002 Due from an associated company (trade) Due from an associated company (non-trade) 1, Derivative financial instruments Fixed deposits 6,266 5, Cash and bank balances 21,508 26,477 3,978 4, , ,269 45,503 47,101 Current liabilities Trade creditors 28,749 21,031 1,772 1,038 Other creditors and accruals 13,603 12,266 6,224 6,373 Due to subsidiaries (trade) - - 6,273 7,201 Due to subsidiaries (non-trade) Due to corporate shareholder Loan from shareholders of subsidiaries 1,846 1, Provision for taxation 1, Term loans, current portion 1,473 1, Short-term bank loans 15,215 13,607 11,419 9,954 Lease obligations, current portion Derivative financial instruments 3,781 2,660 3,780 2,444 65,842 53,299 29,776 27,283 Net current assets 62,742 65,970 15,727 19,818 Non-current liabilities Term loans, non-current portion 8,510 4, Lease obligations, non-current portion Pension liability Other creditors, non-current portion Deferred taxation 2,066 1, ,590 7, , ,619 46,523 50,569 VI-4

161 APPENDIX VI UNAUDITED 2ND QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 30 JUNE (b)(ii) Aggregate amount of the group s borrowings and debt securities Amount repayable in one year or less, or on demand As at As at Secured (S$ 000) Unsecured (S$ 000) Secured (S$ 000) Unsecured (S$ 000) 2,819 13,943 2,416 12,544 Amount repayable after one year As at As at Secured (S$ 000) Unsecured (S$ 000) Secured (S$ 000) Unsecured (S$ 000) 8,950-5, Details of any collateral (A) Term Loans Secured by Mortgage on Subsidiaries Land & Buildings Short term loan A short term loan of S$1,480,000 (2012: S$1,372,000 ) is secured by a mortgage on a subsidiary s land use right and leasehold building with a net book value of approximately S$4,081,000 (2012: S$3,768,000), bears interest of 6.9% (2012: 6.90% to 8.53%) per annum with no fixed repricing period and is repayable within the next 12 months. Term loans (1) & (2) Bank loans of S$335,000 (2012: S$405,000) and S$176,000 (2012: S$194,000) are secured by a mortgage on a subsidiary s freehold land and building with a net book value of approximately S$2,402,000 (2012: S$2,389,000), bear interest at THBFIX 1 month of 2.28% plus 2.25% (2011: 2.37% plus 2.25%) per annum and are repayable in 60 monthly instalments commencing November 2009 and May 2011 respectively. Term loans (3) & (4) Bank loans of S$2,367,000,000 (2012: S$2,254,000) and S$4,503,000 (2012: S$378,000) are secured by a mortgage on a subsidiary s freehold land and building with a net book value of approximately S$6,521,000 (2012: S$3,644,000), bear interest at THBFIX 1 month of 2.28% plus 2.15% (2012: 2.37% plus 2.15) per annum and are repayable in 108 monthly instalments commencing July 2013 and in 5 monthly instalments commencing December 2013 respectively. Term loan (5) Bank loan of S$761,000 (2012: S$792,000) is secured by a mortgage on a subsidiary s freehold land and building with a net book value of approximately S$1,622,000 (2012: S$1,564,000), bear interest at BLR of 6.6% minus 2% (2012: 6.6% minus 2%) per annum and is repayable in 120 monthly instalments commencing January (B) Term Loans Secured by Pledge on a Subsidiary s Machines Term loans (6), (7), (8), (9), (10) and (11) Bank loans of S$182,000 (2012: S$223,000), S$155,000 (2012: S$170,000), S$205,000 (2012:S$220,000), S$519,000 (2012: S$554,000) and S$220,000 (2012: S$233,000) are secured by a pledge on a subsidiary s machines with a net book value of approximately S$2,302,000 (2012: S$2,319,000), bear interest at THBFIX 1 month of 2.28% plus 2.25% (2012: 2.37% plus 2.25%) per annum and are repayable in 48 monthly instalments commencing October 2010, 56 monthly instalments commencing November 2011 and 60 monthly instalments commencing April 2012, July 2012 and December 2012 respectively. Bank loan of S$352,000 (2012: S$368,000) bears interest at THBFIX 1 month of 2.28% plus 2.15% (2012: 2.37% plus 2.15%) per annum and is repayable in 60 monthly instalments commencing March 2013 respectively.these bank loans are secured by pledge on a subsidiary s machines with net book values amounting to approximately S$2,032,000 (2012: S$2,319,000). Finance lease The finance lease obligations of $514,000 (2012:$261,000) are secured over the fixed assets purchased with net book values amounting to approximately $1,250,000 (2012: $738,000). VI-5

162 APPENDIX VI UNAUDITED 2ND QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 30 JUNE (c) A statement of cash flows (for the group), together with a comparative statement for the corresponding period of the immediately preceding financial year 3 months ended 6 months ended Cash flows from operating activities Profit before taxation 2,209 2,994 4,204 9,174 Adjustments:- Depreciation of fixed assets 1,540 1,338 3,019 2,662 Provision for impairment of fixed assets Write-down of stocks Gain on disposal of fixed assets, net (97) (9) (111) (3) Allowance for stock obsolescence, net Interest expense Interest income (111) (29) (167) (59) Dividend income (16) (9) (16) (9) Fair value changes to held for trading quoted equity shares and amounts under fund management 3 48 (67) (1) Amortisation of intangible assets Loss on disposal of quoted equity shares Fair value adjustment for derivative contracts, net 285 (814) 1,200 (3,547) Unrealised foreign exchange differences 886 (1,451) 1,613 (2,068) Operating profit before working capital changes 5,122 2,479 10,441 7,253 Stocks (1,883) 1,582 (508) 6,365 Trade debtors (9,348) (1,992) (11,260) (6,993) Other debtors, deposits and prepayments (383) (41) (967) 2,513 Due from an associated company (364) (51) (972) (309) Due to corporate shareholder (17) 44 9 (78) Trade creditors 6,524 1,743 7, Other creditors and accruals 1,227 1,484 1, Pension liability Cash generated from operations 1,003 5,248 5,983 9,820 Interest received Interest paid (168) (161) (321) (334) Income tax paid (1,267) (789) (1,598) (1,690) Net cash (used in)/generated from operating activities (321) 4,327 4,231 7,855 Cash flows from investing activities Dividend received from quoted investments Proceeds from sale of fixed assets Proceeds from sale of quoted equity shares Purchase of fixed assets (Note B) (6,416) (7,188) (11,013) (9,946) Purchase of intangible assets - - (253) - Net cash used in investing activities (5,846) (7,027) (10,609) (9,437) Cash flows from financing activities Dividend paid to shareholders (2,963) (2,965) (2,963) (2,965) Fixed deposits pledged 1 8 (13) 1 Purchase of treasury shares - (125) - (125) Proceeds from short-term bank loans 11,811 5,019 12,430 11,003 Repayment of short-term bank loans (9,373) (3,056) (11,223) (11,834) Repayment of term loans (316) (170) (615) (170) Proceeds from new term loans 2,008 2,862 4,109 3,109 Repayment of lease obligations (83) (49) (125) (98) Net cash generated from/(used in) financing activities 1,085 1,524 1,600 (1,079) Net decrease in cash and cash equivalents (5,082) (1,176) (4,778) (2,661) Effect of exchange rate changes on cash and cash equivalents 101 (546) 915 (1,092) Cash and cash equivalents at beginning of period 32,577 31,194 31,459 33,225 Cash and cash equivalents at end of period (Note A) 27,596 29,472 27,596 29,472 VI-6

163 APPENDIX VI UNAUDITED 2ND QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 30 JUNE 2013 (A) Cash and cash equivalents Cash and cash equivalents included in the consolidated statement of cash flows comprise the following: S$'000 S$'000 Fixed deposits 6,266 3,993 Cash and bank balances 21,508 25,647 27,774 29,640 Less: Fixed deposits pledged (178) (168) Cash and cash equivalents at end of period 27,596 29,472 (B) Fixed assets During the financial period under review, the Group acquired fixed assets with an approximate aggregate cost of S$11,382,000 (2012: S$9,946,000) of which S$369,000 (2012: Nil) was acquired by means of finance leases and S$11,013,000 (2012: S$9,946,000) in cash. During the quarter period under review, the Group acquired fixed assets with an approximate aggregate cost of S$6,785,000 (2012: S$7,188,000) of which S$369,000 (2012: Nil) was acquired by means of finance leases and S$6,416,000 (2012: S$7,188,000) in cash. VI-7

164 APPENDIX VI UNAUDITED 2ND QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 30 JUNE (d)(i) A statement (for the issuer and group) showing either (i) all changes in equity or (ii) changes in equity other than those arising from capitalisation issues and distributions to shareholders, together with a comparative statement for the corresponding period of the immediately preceding financial year Attributable to Owners of the Company Group 3 months ended Equity attributable to owners of the Company, total Sharebased payment As at ,466 50,211 (6,466) 59,517 5, (96) (5,971) 8, ,276 Profit net of tax Other comprehensive income 1, , ,321 Total comprehensive income for the period 1, , ,082 Contributions by and distributions to ow ners Transfer to statutory reserve (154) Dividend paid (2,963) - - (2,963) (2,963) Total contributions by and distributions to ow ners (2,963) - - (3,117) (2,963) As at ,949 50,211 (6,466) 56,759 5, (96) (4,884) 9, ,395 3 months ended As at ,130 50,211 (6,341) 55,311 5, (96) (3,926) 8, ,140 Profit net of tax 2, , ,559 Other comprehensive income (2,788) (2,788) (370) (3,158) Total comprehensive income for the period (655) - - 2, (2,788) 56 (599) Contributions by and distributions to ow ners Purchase of treasury shares (125) - (125) (125) Dividend paid (2,965) - - (2,965) (2,965) Transfer to statutory reserve (205) Total contributions by and distributions to ow ners (3,090) - (125) (3,170) (3,090) As at ,385 50,211 (6,466) 54,274 5, (96) (6,714) 8, ,451 Attributable to Owners of the Company Group 6 months ended Equity attributable to owners of the Company, total Premium paid on acquisition of noncontrolling Share Shares held in Re ve nue Capital Noncontrolling Translation capital treasury reserve reserve reserve interests reserve interests Equity, total S$'000 S$'000 S$'000 S$'000 S$'000 S$'000 S$'000 S$'000 S$'000 S$'000 Sharebased payment Premium paid on acquisition of noncontrolling Share Shares held in Re ve nue Capital Noncontrolling Translation capital treasury reserve reserve reserve interests reserve interests Equity, total S$'000 S$'000 S$'000 S$'000 S$'000 S$'000 S$'000 S$'000 S$'000 S$'000 As at ,206 50,211 (6,466) 58,510 5, (96) (8,157) 8, ,619 Profit net of tax 1, , ,002 Other comprehensive income 3, , ,737 Total comprehensive income for the period 4, , ,273 1,033 5,739 Contributions by and distributions to ow ners Transfer to statutory reserve (221) Dividend paid (2,963) - - (2,963) (2,963) Total contributions by and distributions to ow ners (2,963) - - (3,184) (2,963) As at ,949 50,211 (6,466) 56,759 5, (96) (4,884) 9, ,395 6 months ended As at ,711 50,211 (6,341) 50,392 4, (96) (2,259) 8, ,759 Profit net of tax 7, , ,902 Other comprehensive income (4,455) (4,455) (665) (5,120) Total comprehensive income for the period 2, , (4,455) 18 2,782 Contributions by and distributions to ow ners Purchase of treasury shares (125) - (125) (125) Dividend paid (2,965) - - (2,965) (2,965) Transfer to statutory reserve - - (372) Total transactions w ith ow ners in their capacity as owners (3,090) - (125) (3,337) (3,090) As at ,385 50,211 (6,466) 54,274 5, (96) (6,714) 8, ,451 VI-8

165 APPENDIX VI UNAUDITED 2ND QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 30 JUNE 2013 Company 3 months ended Share capital Shares held in treasury Share-based payment reserve Re venue reserve Equity, Total As at ,211 (6,466) 967 3,203 47,915 Profit net of tax ,571 1,571 Other comprehensive income Total comprehensive income for the period ,571 1,571 Contributions by and distributions to ow ners Dividends paid (2,963) (2,963) Total transactions w ith ow ners in their capacity as ow ners (2,963) (2,963) As at ,211 (6,466) 967 1,811 46,523 3 months ended As at ,211 (6,341) 967 5,393 50,230 Profit net of tax Other comprehensive income Total comprehensive income for the period Contributions by and distributions to ow ners Purchase of treasury shares - (125) - - (125) Dividends paid (2,965) (2,965) Total transactions w ith ow ners in their - (125) - (2,965) (3,090) capacity as ow ners As at ,211 (6,466) 967 3,204 47,916 6 months ended As at ,211 (6,466) 967 5,857 50,569 Profit net of tax (1,083) (1,083) Other comprehensive income Total comprehensive income for the period (1,083) (1,083) Contributions by and distributions to ow ners Dividends paid (2,963) (2,963) Total transactions w ith ow ners in their capacity as ow ners (2,963) (2,963) As at ,211 (6,466) 967 1,811 46,523 6 months ended As at ,211 (6,341) 967 3,018 47,855 Profit net of tax ,151 3,151 Other comprehensive income Total comprehensive income for the period ,151 3,151 Contributions by and distributions to ow ners Issue of shares Purchase of treasury shares - (125) - - (125) Exercise of share options Dividends paid (2,965) (2,965) Total transactions w ith ow ners in their capacity as ow ners - (125) - (2,965) (3,090) As at ,211 (6,466) 967 3,204 47,916 VI-9

166 APPENDIX VI UNAUDITED 2ND QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 30 JUNE 2013 (d)(ii) Details of any changes in the company's share capital arising from rights issue, bonus issue, share buy-backs, exercise of share options or warrants, conversion of other issues of equity securities, issue of shares for cash or as consideration for acquisition or for any other purpose since the end of the previous period reported on. State also the number of shares that may be issued on conversion of all the outstanding convertibles, as well as the number of shares held as treasury shares, if any, against the total number of issued shares excluding treasury shares of the issuer, as at the end of the current financial period reported on and as at the end of the corresponding period of the immediately preceding financial year. There were no share options exercised during the quarter ended 30 June The number of outstanding share options as at 30 June 2013 and 30 June 2012 were 8,074,794 and 10,370,794 respectively. There were 24,158,000 treasury shares as at 30 June 2013 and 30 June During the financial period, the Company did not buy back any shares. (d)(iii) To show the total number of issued shares excluding treasury shares as at the end of the current financial period and as at the end of the immediately preceding year Total number of issued shares excluding treasury shares as at 30 June 2013 and 31 December 2012 is 493,669,353 shares. (d)(iv) A statement showing all sales, transfers, disposal, cancellation and/or use of treasury shares as at the end of the current financial period reported on There were no sales, transfers, disposal, cancellation and/or or use of treasury shares during the current financial period. 2. Whether the figures have been audited or reviewed, and in accordance with which auditing standard or practice The consolidated financial information of the Group for the 6 months ended 30 June 2013 as set out in sections 1(a), 1(b)(i) and 1(c) to 1(d)(i) of this announcement has been extracted from the condensed interim financial information that has been prepared in accordance with Singapore Financial Reporting Standard ( FRS ) 34 Interim Financial Reporting, which has been reviewed by the independent auditor in accordance with Singapore Standard on Review Engagements 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity. The results for the 3 months ended 30 June 2013, 3 months ended 30 June 2012 and 6 months ended 30 June 2012 have not been audited or reviewed. 3. Where the figures have been audited or reviewed, the auditors report (including any qualifications or emphasis of matter) Please refer to the independent auditor s review report dated 14 August 2013 appended to this announcement (Appendix A). 4. Whether the same accounting policies and methods of computation as in the issuer s most recently audited annual financial statements have been applied There were no changes in accounting policies and methods of computation adopted in the financial statements for the current reporting period as compared to the most recent audited annual financial statements as at 31 December 2012, except for the changes in accounting policy pursuant to adoption of Revised FRS 19 Employee Benefits. With effect from 1 January 2013, the Group also adopted the Amendments to FRS 1 Presentation of Items of Other Comprehensive Income ( OCI ) and FRS 113 Fair Value Measurement. VI-10

167 APPENDIX VI UNAUDITED 2ND QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 30 JUNE If there are any changes in the accounting policies and methods of computation, including any required by an accounting standard, what has changed, as well as the reasons for, and the effect of, the change Amendments to FRS 1 Presentation of Items of Other Comprehensive Income The Amendments to FRS 1 Presentation of Items of Other Comprehensive Income ( OCI ) is effective for financial years beginning on or after 1 July The Amendments to FRS 1 changes the grouping of items presented in OCI. Items that could be reclassified subsequently to profit or loss when specific conditions are met would be presented separately from items that will not be reclassified subsequently to profit or loss. As the Amendments only affect the presentations of items that are already recognised in OCI, there is no impact on the financial position or performance of the Group upon adoption of these Amendments. Revised FRS 19 Employee Benefits Revised FRS 19 Employee Benefits is effective for financial years beginning on or after 1 January For defined benefit plans, the Revised FRS 19 requires all actuarial gains and losses to be recognised in OCI and unvested past service costs previously recognised over the average vesting period to be recognised immediately in profit or loss when incurred. Prior to adoption of the Revised FRS 19, the Group recognised actuarial gains and losses as income or expense when the net cumulative unrecognised gains and losses for each individual plan at the end of the previous period exceeded 10% of the higher of the defined benefit obligation and the fair value of the plan assets and recognised unvested past service costs as an expense on a straight-line basis over the average vesting period until the benefits become vested. Upon adoption of the Revised FRS 19, the Group changed its accounting policy to recognise all actuarial gains and losses in OCI and all past service costs in profit or loss in the period they occur. The Revised FRS 19 replaced the interest cost and expected return on plan assets with the concept of net interest on defined benefit liability or asset which is calculated by multiplying the net balance sheet defined benefit liability or asset by the discount rate used to measure the employee benefit obligation, each as at the beginning of the annual period. The Revised FRS 19 also amended the definition of short-term employee benefits and requires employee benefits to be classified as short-term based on the expected timing of settlement rather than the employee s entitlement to the benefits. In addition, the Revised FRS 19 modifies the timing of recognition for termination benefits. The modification requires the termination benefits to be recognised at the earlier of when the offer cannot be withdrawn or when the related restructuring costs are recognised. Changes to definition of short-term employee benefits and timing of recognition for termination benefits did not have any impact to the Group s financial position and financial performance. The changes in accounting policies have been applied retrospectively. The changes in accounting policies did not have any impact to the Group s financial position and financial performance for the financial periods presented. FRS 113 Fair Value Measurement FRS 113 Fair Value Measurement is effective for financial years beginning on or after 1 January FRS 113 provides a single source of guidance for all fair value measurements. FRS 113 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under FRS when fair value is required or permitted by FRS. FRS 113 expanded the required disclosures related to fair value measurements to help users understand the valuation techniques and inputs used to develop fair value measurements and the effect of fair value measurements on profit or loss. The application of FRS 113 did not have any impact to the financial position of the Group. VI-11

168 APPENDIX VI UNAUDITED 2ND QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 30 JUNE Earnings per ordinary share of the group for the current financial period reported on and the corresponding period of the immediately preceding financial year, after deducting any provision for preference dividends Group 3 months ended 6 months ended Based on weighted average number of ordinary shares in issue (in cents) On a fully diluted basis (in cents) Weighted average number of shares used in computing earnings per share Weighted average number of shares used in computing diluted earnings per share 493,669, ,008, ,669, ,069, ,767, ,097, ,767, ,158, Net asset value (for the issuer and group) per ordinary share based on total number of issued shares excluding treasury shares of the issuer at the end of the (a) current financial period reported on and (b) immediately preceding financial year Net asset backing per ordinary share based on existing issued share capital as at the end of the period reported on (in cents) Group Company Number of shares used in computing net asset value per share 493,669, ,669, ,669, ,669, A review of the performance of the group, to the extent necessary for a reasonable understanding of the group s business. The review must discuss any significant factors that affected the turnover, costs, and earnings of the group for the current financial period reported on, including (where applicable) seasonal or cyclical factors. It must also discuss any material factors that affected the cash flow, working capital, assets or liabilities of the group during the current financial period reported on Income Statement Turnover 2Q2013 vs 2Q2012 The Group s turnover increased marginally by 3.2% from S$55.0 million in 2Q2012 to S$56.8 million in 2Q2013. The Automotive segment was the key revenue driver, registering growth of 20.7% as sales by Japanese customers in China improves and new projects were secured with an European car manufacturer. The Data Storage segment contracted by 13.8% in line with weak market conditions during the quarter. The Consumer Electronics segment contracted by 7.7% while the Office Automation segment contracted by 28.7% mainly due to weaker demand in Indonesia. China operations registered growth of 33.9%. Turnover from Singapore, Indonesia and Thailand operations contracted by 12.7%, 11.8% and 4.8% respectively while turnover from Malaysia and Vietnam remained flat. China remained the largest contributor to the Group s revenue at 35.4%, followed by Thailand and Singapore at 25.0% and 23.1% respectively. VI-12

169 APPENDIX VI UNAUDITED 2ND QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 30 JUNE H2013 vs 1H2012 For the half year ended 30 June 2013, the Group s turnover increased marginally by 0.9% to S$108.3 million from S$107.3 million in the corresponding period last year. The Automotive segment registered growth of 15.8% while revenue from the Data Storage, Consumer Electronics and Office Automation segments contracted by 11.1%, 2.2% and 35.0% due to reasons mentioned above. Profit 2Q2013 vs 2Q2012 The Group s gross profit increased by 14.0% from S$10.9 million in 2Q2012 to S$12.4 million mainly due to the combined effects of lower cost of materials as a result of weaker Japanese yen, increase in turnover and favourable changes in product mix. Other operating income reduced from S$1.2 million in 2Q2012 to S$0.2 million mainly due to the absence of mark-to-market gain on the Group s forward foreign exchange contracts of S$0.8 million which was recognised in 2Q2012. Distribution and selling expenses increased from S$2.1 million in 2Q2012 to S$2.2 million in line with the increase in sales and as a result of higher freight charges as the Group pursues new geographical markets within PRC. Administrative expenses increased from S$6.3 million in 2Q2012 to S$6.7 million mainly due to start-up expenses incurred by the Group s new subsidiary located in Changshu, PRC. Other operating expenses increased from S$0.5 million in 2Q2012 to S$1.3 million mainly due to mark-tomarket loss on the Group s hedging contracts of S$0.3 million in 2Q2013 and net foreign exchange loss of S$0.8 million. Tax expense increased from S$0.4 million in 2Q2012 to S$1.4 million in 2Q2013 due to withholding tax provisions on dividend income from foreign subsidiaries amounting to approximately S$0.4 million recognised in 2Q2013, and adjustment for overprovision for tax of approximately S$0.4 million in 2Q2012. As a result of the above, net profit after taxation decreased from S$2.6 million in 2Q2012 to S$0.8 million in 2Q H2013 vs 1H2012 The Group s gross profit increased from S$19.3 million in 1H2012 to S$23.3 million in 1H2013 due to the combined effects of: (i) lower cost of materials as a result of weaker Japanese yen; (ii) increase in turnover; (iii) favourable changes in product mix; and (iv) recovery from effects of the Thailand flood which occurred in 4Q2011. Other operating income decreased by S$5.8 million from S$6.2 million to S$0.4 million due to reduction in net fair value gain on derivative contracts by S$3.5 million and reduced insurance claims by S$2.3 million. Selling and distribution expenses increased from S$3.8 million to S$4.3 million while administrative expenses increased from S$11.9 million to S$12.6 million mainly due to the same reasons as provided in the previous paragraph. Other operating expenses increased from S$0.4 million to S$2.4 million mainly due to mark-to-market loss on the Group s hedging contracts of S$1.2 million and net foreign exchange loss of S$0.8 million in 1H2013. Balance Sheet Fixed assets increased by S$7.7 million from S$48.2 million as at 31 December 2012 to S$56.0 million as at 30 June 2013 mainly due to acquisition of new machinery, tools and equipment as well as payment for building under construction by the Group amounting to approximately S$9.8 million, net of depreciation during the half year. Trade debtors increased by S$11.3 million from S$53.4 million as at 31 December 2012 to S$64.7 million as at 30 June 2013 mainly due to increase sales to customers in China s Automotive segment with longer credit terms. VI-13

170 APPENDIX VI UNAUDITED 2ND QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 30 JUNE 2013 Trade creditors also increased from S$21.0 million as at 31 December 2012 to S$28.7 million as at 30 June 2013 due to timing differences in payment to suppliers and in line with increase in operations. Total bank loans increased by S$5.4 million from S$19.8 million to S$25.2 million as at 30 June 2013 mainly due to net drawdown of term loans to finance acquisition of fixed assets. Consolidated Cash Flow Statement The Group continued to generate healthy net cash inflow from operations of S$4.2 million in 1H2013. With net capital expenditure of S$10.6 million and dividend payment of S$3.0 million, partially offset by net inflow of cash of financing activities of S$4.6 million, the cash and cash equivalents stood at S$27.6 million as at 30 June 2013, compared to S$31.5 million as at 31 December Where a forecast, or a prospect statement, has been previously disclosed to shareholders, any variance between it and the actual results Not applicable. 10. A commentary at the date of the announcement of the significant trends and competitive conditions of the industry in which the group operates and any known factors or events that may affect the group in the next reporting period and the next 12 months The global hard disk drive market is expected to remain subdued in the second half of 2013 with the increasing consumer preference for tablets. China s Automotive market is expected to register slow growth due to the tightening of local regulations over car owership. On 5 July 2013, the Company together with AGP Asia Holding Pte. Ltd. (the Offeror ) jointly announced that the Offeror had presented to the directors of the Company (the Board ), a formal proposal (the Delisting Proposal ) to seek the voluntary delisting of the Company (the Delisting ) from the Official List of the Singapore Exchange Securities Trading Limited ( SGX-ST ) pursuant to Rules 1307 and 1309 of the Listing Manual of the SGX-ST. Under the Delisting Proposal, the Offeror will make an exit offer to acquire all the Company s shares (other than those held by the Company as treasury shares and those held directly or indirectly by the Offeror) and all new shares unconditionally issued pursuant to the Company s Share Option Schemes 2000 and 2008 (the Offer Shares ) at the offer price of S$0.40 in cash for each Offer Share. The Board had reviewed the Delisting Proposal and had decided to (i) apply to the SGX-ST for the Delisting; and (ii) subject to the approval of the SGX-ST, convene an extraordinary general meeting to seek the approval of the Company s shareholders for the Delisting. The Company has submitted a draft of the circular relating to the Delisting to SGX-ST, but has not received an approval from SGX-ST in respect of the Delisting; and there is no assurance that any such approval from SGX- ST will be forthcoming. The Company will update its shareholders on the Delisting in due course. 11. Dividend (a) Current Financial Period Reported On Any dividend declared for the current financial period reported on? No (b) Corresponding Period of the Immediately Preceding Financial Year Any dividend declared for the corresponding period of the immediately preceding financial year? None VI-14

171 APPENDIX VI UNAUDITED 2ND QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 30 JUNE 2013 (c) Date payable Not applicable. (d) Books closure date Not applicable. 12. If no dividend has been declared (recommended), a statement to that effect No dividend has been declared or recommended. 13. If the Group has obtained a general mandate from shareholders for IPTs, the aggregate value of such transactions as required under Rule 920(1)(a)(ii). If no IPT mandate has been obtained, a statement to that effect. No IPT mandate has been obtained from shareholders. 14. Statement Pursuant to SGX Listing Rule 705(5) of the Listing Manual The Board of Directors of the Company hereby confirm that, to the best of their knowledge, nothing has come to the attention of the board of directors of the Company which may render the financial results for the second quarter ended 30 June 2013 to be false or misleading in any material aspect. 15. Responsibility Statement The Directors (including any who may have delegated detailed supervision of this Announcement) have taken all reasonable care to ensure that the facts stated and all opinions expressed in this Announcement are fair and accurate and that, where appropriate, no material facts have been omitted from this Announcement, and they jointly and severally accept responsibility accordingly. Where any information has been extracted or reproduced from published or otherwise publicly available sources, the sole responsibility of the Directors has been to ensure, through reasonable enquiries, that such information is accurately and correctly extracted from such sources or, as the case may be, reflected or reproduced in this Announcement. BY ORDER OF THE BOARD Chuang Sheue Ling Company Secretary 14 August 2013 Important Notes to this Announcement: For the avoidance of doubt, the Company is not making and does not intend to make any profit forecast in this announcement. All statements other than statements of historical facts included in this announcement are or may be forward-looking statements. Forward-looking statements involve assumptions, risks and uncertainties. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements as a result of changes of these assumptions, risks, and uncertainties. Examples of these factors include, but are not limited to, general industry and economic conditions, interest rate movements, cost of capital and availability of capital, competition from other companies and venues for sale/manufacture/distribution of goods and services, shift in customer demands, customers and partners, changes in operating expenses, including employee wages, benefits and training, and governmental and public policy changes. You are cautioned not to place undue reliance on these forward-looking statements, which are based on current views of the Company on future events. The Company undertakes no obligation to update publicly or revise any forward-looking statements. VI-15

172 APPENDIX VI UNAUDITED 2ND QUARTER FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 30 JUNE 2013 Appendix A The extract of the review report dated 14 August 2013, on the condensed interim financial information of the Company and its subsidiaries for the financial period ended 30 June 2013 which has been prepared in accordance with FRS 34 Interim Financial Reporting, is as follows: Ernst & Young LLP One Raffles Quay North Tower, Level 18 Singapore Mailing Address: Robinson Road PO Box 384 Singapore Tel: Fax: ey.com Independent Auditor s Report on Review of Condensed Interim Financial Information For the financial period from 1 January 2013 to 30 June 2013 Introduction We have reviewed the accompanying condensed balance sheets of Armstrong Industrial Corporation Limited (the Company ) and its subsidiaries (collectively the Group ) as at 30 June 2013 and the related condensed consolidated statement of comprehensive income, condensed consolidated statement of cash flows and condensed statements of changes in equity of the Group and the Company for the six-month period then ended, and other explanatory notes. Management is responsible for the preparation and presentation of this condensed interim financial information in accordance with Singapore Financial Reporting Standard FRS 34 Interim Financial Reporting ( FRS 34 ). Our responsibility is to express a conclusion on this condensed interim financial information based on our review. Scope of Review We conducted our review in accordance with Singapore Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Singapore Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed interim financial information is not prepared, in all material respects, in accordance with FRS 34. Other matter We have not carried out an audit or review in accordance with Singapore Standards on Auditing or Singapore Standards on Review Engagements on the financial information for the six-month period ended 30 June 2012 included as comparatives in the condensed interim financial information and accordingly, we do not express any assurance on the comparative financial information. Ernst & Young LLP Public Accountants and Chartered Accountants Singapore 14 August 2013 VI-16

173 APPENDIX VII RELEVANT PROVISIONS IN THE COMPANY S ARTICLES OF ASSOCIATION IN RESPECT OF CAPITAL, DIVIDENDS AND VOTING The rights of Shareholders in respect of capital, voting and dividends are contained in the Articles, the relevant provisions of which are set out below: A. Rights in respect of Capital SHARES 6. Treasury shares (1) Shares purchased or otherwise reacquired by the Company may be held as treasury shares by the Company in accordance with these Articles and the Act, and the Company shall be entered into the Register of Members as the member holding the treasury shares. (2) The Company shall not exercise any rights in respect of treasury shares other than as provided by the Act and subject to the listing rules of the Exchange. Subject thereto, the Company may hold or deal with its treasury shares in the mariner authorized by, or prescribed pursuant to, the Act and the listing rules of the Exchange. 7. Company s shares as security 8. Issue of New Shares Save to the extent permitted by the Act, none of the funds or assets of the Company or of any subsidiary thereof shall be directly or indirectly employed in the purchase or subscription of or in loans upon the security of the Company's shares (or its holding company, if any) and the Company shall not, except as authorized by the Act give any financial assistance for the purpose of or in connection with any purchase of shares in the Company (or its holding company, if any). (1) Subject to the Act, these Articles and the listing rules of the Exchange, no shares may be issued by the Directors without the prior approval of the Company in General Meeting but subject thereto and to Article 52, and to any special rights attached to any shares for the time being issued, the Directors may issue, allot or grant options over or otherwise deal with or dispose of the same to such persons on such terms and conditions and at such time and subject or not to the payment of any part of the amount thereof in cash as the Directors may think fit, and any shares may be issued with such preferential, deferred, qualified or special rights, privileges, or conditions as the Directors may think fit, and preference shares may be issued which are or at the option of the Company are liable to be redeemed, the terms and manner of redemption being determined by the Directors, provided always that:- (i) (ii) (iii) (iv) the total number of issued preference shares shall not exceed the total number of the issued ordinary shares at any time; the rights attaching to shares of a class other than ordinary shares shall be expressed in the resolution creating the same; where the capital of the Company consists of shares of different classes, the voting rights shall be prescribed in such manner that a unit of capital in each class shall carry the same voting power when such right is exercisable; any issue of shares for cash to Members holding shares of any class shall be offered to such Members in proportion as nearly as may be to the number of shares of such class then held by them and the second sentence of Article 52(1) with such adaptations as are necessary shall apply. VII-1

174 APPENDIX VII RELEVANT PROVISIONS IN THE COMPANY S ARTICLES OF ASSOCIATION IN RESPECT OF CAPITAL, DIVIDENDS AND VOTING 9. Issue of New Shares (1) Preference shareholders shall have the same rights as ordinary shareholders as regards receiving of notices, reports and balance sheets and attending General Meetings of the Company. Preference shareholders shall also have the right to vote at any meeting convened for the purpose of reducing the capital or winding up or sanctioning a sale of the undertaking or where the proposal to be submitted to the meeting directly affects their rights and privileges or when the dividend on the preference shares is more than six months in arrears. (2) The Company has power to issue further preference capital ranking equally with, or in priority to, preference shares from time to time already issued or about to be issued. 10. Variation of rights Rights of Preference Shareholders 11. Creation or issue of further shares with special rights 12. Power to pay commission and brokerage 13. Power to charge interest on capital (1) If at any time the share capital is divided into different classes, the repayment of preference capital other than redeemable preference and the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may, subject to the provisions of the Act, whether or not the Company is being wound up, only be made, varied or abrogated with the sanction of a Special Resolution passed at a separate General Meeting of the holders of shares of the class and to every such Special Resolution the provisions of Section 184 of the Act shall, with such adaptations as are necessary, apply. To every such separate General Meeting the provisions of these Articles relating to General Meetings shall mutatis mutandis apply; but so that the necessary quorum shall be two persons at least holding or representing by proxy or by attorney onethird of the issued shares of the class and that any holder of shares of the class present in person or by proxy or by attorney may demand a poll. Provided always that where the necessary majority for such a Special Resolution is not obtained at the Meeting, consent in writing if obtained from the holders of three-fourths of the issued shares of the class concerned within two months of the Meeting shall be as valid and effectual as a Special Resolution carried at the Meeting. (2) The repayment of preference capital other than redeemable preference or any other alteration of preference shareholder rights, may only be made pursuant to a special resolution of the preference shareholders concerned. PROVIDED ALWAYS that where the necessary majority for such a special resolution is not obtained at the Meeting, consent in writing if obtained from the holders of three-fourths preference shares concerned within two months of the Meeting, shall be as valid effectual as a special resolution carried at the meeting. The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not unless otherwise expressly provided by the terms of issue of the shares of that class or by these Articles as are in force at the time of issue, be deemed to be varied by the creation or issue of further shares ranking equally therewith. Subject to the Act, the Company may exercise the powers of paying commission or brokerage on any issue of shares at such rate or amount and in such manner as the Directors may deem fit. Such commission or brokerage may be satisfied by the payment of cash or the allotment of fully or partly paid shares, or partly in one way and party in the other. If any shares of the Company are issued for the purpose of raising money to defray the expenses of the construction of any works or buildings or the provision of any plant which cannot be made profitable for a lengthened period, the Company may, subject to the conditions and restrictions mentioned in the Act, pay interest on so much of the share capital as is for the time being paid VII-2

175 APPENDIX VII RELEVANT PROVISIONS IN THE COMPANY S ARTICLES OF ASSOCIATION IN RESPECT OF CAPITAL, DIVIDENDS AND VOTING up and may charge the same to capital as part of the cost of the construction or provision. 14. No trust recognised Except as required by law, no person shall be recognised by the Company as holding any share upon any trust and the Company shall not be bound by or compelled in any way to recognise (even when having notice thereof) any equitable, contingent, future or partial interest in any share or any interest in any fractional part of a share or (except only as by these Articles or by law otherwise provided) any other rights in respect of any share, except an absolute right to the entirety thereof in the person (other than the Depository or its nominee as the case may be) entered in the Register of Members as the registered holder thereof or (where the person entered in the Register of Members as the registered holder of a share is the Depository or its nominee as the case may be) the person whose name is entered in the Depository Register in respect of that share. Nothing contained herein in this Article relating to the Depository or the Depository Agents or the Depositors or in any depository agreement made by the Company with any common depository for shares or in any notification of substantial shareholding to the Company or in response to a notice pursuant to Section 92 of the Act or any note made by the Company of any particulars in such notification or response shall derogate or limit or restrict or qualify these provisions; and any proxy or instructions on any matter whatsoever given by the Depository or the Depository Agents or Depositors to the Company or the Directors shall not constitute any notification of trust and the acceptance of such proxies and the acceptance of or compliance with such instructions by the Company or the Directors shall not constitute the taking of any notice of trust. 15. Joint holders (1) The Company shall not be bound to register more than three persons as the joint holders of any share except in the case of executors, trustees or administrators of the estate of a deceased Member. (2) If two or more persons are registered as joint holders of any share any one of such person may give effectual receipts for any dividend payable in respect of such share and the joint holders of a share shall, subject to the provisions of the Act, be severally as well as jointly liable for the payment of all instalments and calls and interest due in respect of such shares. (3) Only the person whose name stands first in the Register of Members as one of the joint holders of any share shall be entitled to delivery of the certificate relating to such share or to receive notices from the Company and any notice given to such person shall be deemed notice to all the joint holders. 16. Fractional part of a share 17. Payment of instalments No person shall be recognised by the Company as having title to a fractional part of a share otherwise than as the sole or a joint holder of the entirety of such share. If by the conditions of allotment of any shares the whole or any part of the amount of the issue price thereof shall be payable by instalments every such instalment shall, when due, be paid to the Company by the person who for the time being shall be the registered holder of the share or his personal representatives, but this provision shall not affect the liability of any allottee who may have agreed to pay the same. 18. Shares Certificates The certificate of title to shares or debentures in the capital of the Company shall be issued under the Seal in such form as the Directors shall from time to time prescribe and may bear the autographic or facsimile signatures of at least two Directors, or by one Director and the Secretary or some other person appointed by the Directors in place of the Secretary for the purpose, and shall specify the number and class of shares to which it VII-3

176 APPENDIX VII RELEVANT PROVISIONS IN THE COMPANY S ARTICLES OF ASSOCIATION IN RESPECT OF CAPITAL, DIVIDENDS AND VOTING relates, the amounts paid thereon, the amount (if any) unpaid on the shares and the extent to which the shares are paid up. The facsimile signatures may be reproduced by mechanical or other means provided the method or system of reproducing signatures has first been approved by the Auditors of the Company. 19. Entitlement to certificate Retention of certificate 20. New certificates may be issued (1) Shares must be allotted and certificates despatched within 10 Market Days of the final closing date for an issue of shares unless the Exchange shall agree to an extension of time in respect of that particular issue. The Depository must despatch statements to successful investor applicants confirming the number of shares held under their Securities Accounts. Persons entered in the Register of Members as registered holders of shares shall be entitled to certificates within 10 Market Days after lodgement of any transfer, or such other period as may be approved by the Exchange. Every registered shareholder shall be entitled to receive share certificates in reasonable denominations for his holding and where a charge is made for certificates, such charge shall not exceed S$2 (or such other sum as may be approved by the Exchange from time to time). Where a registered shareholder transfers part only of the shares comprised in a certificate or where a registered shareholder requires the Company to cancel any certificate or certificates and issue new certificates for the purpose of subdividing his holding in a different manner the old certificate or certificates shall be cancelled and a new certificate or certificates for the balance of such shares issued in lieu thereof and the registered shareholder shall pay a fee not exceeding S$2 (or such other sum as may be approved by the Exchange from time to time) for each such new certificate as the Directors may determine. Where the Member is a Depositor the delivery by the Company to the Depository of provisional allotments or share certificates in respect of the aggregate entitlements of Depositors to new shares offered by way of rights issue or other preferential offering or bonus issue shall to the extent of the delivery discharge the Company from any further liability to each Depositor in respect of his individual entitlement. (2) The retention by the Directors of any unclaimed share certificate (or stock certificates as the case may be) shall not constitute the Company a trustee in respect thereof. Any share certificate (or stock certificate as the case may be) unclaimed after a period of six years from the date of issue of such share certificate (or stock certificate as the case may be) may be forfeited and if so shall be dealt with in accordance with Article 40, 44, 48 and 49, mutatis mutandis. (1) Subject to the provisions of the Act, if any share certificate shall be defaced, worn out, destroyed, lost or stolen, it may be renewed on such evidence being produced and a letter of indemnity (if required) being given by the shareholder, transferee, person entitled, purchaser, member firm or member company of the Exchange or on behalf of its or their client or clients as the Directors shall require, and (in case of defacement or wearing out) on delivery up of the old certificate and in any case on payment of such sum not exceeding S$2 (or such sum as may be approved by the Exchange from time to time) as the Directors may from time to time require. In the case of destruction, loss or theft, a shareholder or person entitled to whom such renewed certificate is given shall also bear the loss and pay to the Company all expenses incidental to the investigations by the Company of the evidence of such destruction or loss. Any duplicate certificate issued on or after 30 January 2006 in respect of a share certificate issued before that date shall state in place of the historical nominal value of the shares, the amount paid on the shares and the amount (if any) unpaid on the shares. VII-4

177 APPENDIX VII RELEVANT PROVISIONS IN THE COMPANY S ARTICLES OF ASSOCIATION IN RESPECT OF CAPITAL, DIVIDENDS AND VOTING New Certificate in place of one not surrendered (2) When any shares under the powers in these Articles herein contained are sold by the Directors and the certificate thereof has not been delivered up to the Company by the former holder of the said shares, the Directors may issue a new certificate for such shares distinguishing it in such manner as they may think fit from the certificate not so delivered up. TRANSFER OF SHARES 21. Form of transfer of shares Subject to these Articles, any Member may transfer all or any of his shares but every instrument of transfer of the legal title in shares must be in writing and in the form for the time being approved by the Directors and the Exchange. Shares of different classes shall not be comprised in the same instrument of transfer. The Company shall accept for registration transfers in the form approved by the Exchange. 22. Execution The instrument of transfer of a share shall be signed by or on behalf of the transferor and the transferee and be witnessed, provided that an instrument of transfer in respect of which the transferee is the Depository or its nominee (as the case may be) shall not be ineffective by reason of it not being signed or witnessed for by or on behalf of the Depository or its nominee (as the case may be). The transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the Register of Members. 23. Person under disability 24. Directors power to decline to register Term of registration of transfers No share shall in any circumstances be transferred to any infant, bankrupt or person of unsound mind. (1) Subject to these Articles, the Act or as required by the Exchange, there shall be no restriction on the transfer of fully paid up shares except where required by law but the Directors may in their discretion decline to register any transfer of shares upon which the Company has a lien and in the case of shares not fully paid up may refuse to register a transfer to a transferee of whom they do not approve. If the Directors shall decline to register any such transfer of shares, they shall give to both the transferor and the transferee written notice of their refusal to register as required by the Act. (2) The Directors may decline to register any instrument of transfer unless:- (i) such fee not exceeding S$2 (or such other sum as may be approved by the Exchange from time to time) as the Directors may from time to time require, is paid to the Company in respect thereof; (ii) (iii) the instrument of transfer, duly stamped in accordance with any law for the time being in force relating to stamp duty, is deposited at the Office or at such other place (if any) as the Directors appoint accompanied by the certificates of the shares to which it relates, and such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer and, if the instrument of transfer is executed by some other person on his behalf, the authority of the person so to do; and the instrument of transfer is in respect of only one class of shares. 25. Retention of transfers (1) All instruments of transfer which are registered may be retained by the Company, but any instrument of transfer which the Directors may decline to register shall (except in the case of fraud) be returned to VII-5

178 APPENDIX VII RELEVANT PROVISIONS IN THE COMPANY S ARTICLES OF ASSOCIATION IN RESPECT OF CAPITAL, DIVIDENDS AND VOTING the person depositing the same. (2) Subject to any legal requirements to the contrary, the Company shall be entitled to destroy all instruments of transfer which have been registered at any time after the expiration of six years from the date of registration thereof and all dividend mandates and notifications of change of address at any time after the expiration of six years from the date of recording thereof and all share certificates which have been cancelled at any time after the expiration of six years from the date of the cancellation thereof and it shall be conclusively presumed in the favour of the Company that every entry in the Register of Members purporting to have been made on the basis of an instrument of transfer or other documents so destroyed was duly and properly made and every instrument of transfer so destroyed was a valid and effective instrument duly and properly registered and every share certificate so destroyed was a valid and effective certificate duly and properly cancelled and every other document hereinbefore mentioned so destroyed was a valid and effective document in accordance with the recorded particulars thereof in the books or records of the Company. PROVIDED that:- (i) (ii) (iii) the provisions aforesaid shall apply only to the destruction of a document in good faith and without notice of any claim (regardless of the parties thereto) to which the document might be relevant; nothing herein contained shall be construed as imposing upon the Company any liability in respect of the destruction of any such document earlier than as aforesaid or in any circumstances which would not attach to the Company in the absence of this Article; and references herein to the destruction of any document include references to the disposal thereof in any manner. 26. Closing of Register 27. Renunciation of allotment The Register of Members and the Depository Register may be closed at such times and for such period as the Directors may from time to time determine, provided always that the Registers shall not be closed for more than thirty days in the aggregate in any year. Provided Always that the Company shall give prior notice of such closure as may be required to the Exchange, stating the period and purpose or purposes for which the closure is made. (1) Nothing in these Articles shall preclude the Directors from recognising a renunciation of the allotment of any share by the allottee in favor of some other person. Indemnity against wrongful transfer (2) Neither the Company nor its Directors nor any of its Officers shall incur any liability for registering or acting upon a transfer of shares apparently made by sufficient parties, although the same may, by reason of any fraud or other cause not known to the Company or its Directors or other Officers, be legally inoperative or insufficient to pass the property in the shares proposed or professed to be transferred, and although the transfer may, as between the transferor and transferee, be liable to be set aside, and notwithstanding that the Company may have notice that such instrument of transfer was signed or executed and delivered by the transferor in blank as to the name of the transferee or the particulars of the shares transferred, or otherwise in defective manner. And in every such case, the person registered as transferee, his executors, VII-6

179 APPENDIX VII RELEVANT PROVISIONS IN THE COMPANY S ARTICLES OF ASSOCIATION IN RESPECT OF CAPITAL, DIVIDENDS AND VOTING trustees, administrators and assigns, alone shall be entitled to be recognised as the holder of such shares and the previous holder shall, so far as the Company is concerned, be deemed to have transferred his whole title thereto. TRANSMISSION OF SHARES 28. Transmission on death (1) In case of the death of a registered shareholder, the survivor or survivors, where the deceased was a joint holder, and the legal representatives of the deceased, where he was a sole or only surviving holder, shall be the only persons recognised by the Company as having any title to his interest in the shares, but nothing herein shall release the estate of a deceased registered shareholder (whether sole or joint) from any liability in respect of any share held by him. (2) In the case of the death of a Depositor, the survivor or survivors, where the deceased was a joint holder, and the legal personal representatives of the deceased, where he was a sole holder and where such legal representatives are entered in the Depository Register in respect of any shares of the deceased, shall be the only persons recognised by the Company as having any title to his interests in the share; but nothing herein contained shall release the estate of a deceased Depositor (whether sole or joint) from any liability in respect of any share held by him. 29. Persons becoming entitled on death or bankruptcy of Member may be registered Rights of unregistered executors and trustees 30. Rights of unregistered executors and trustees (1) Any person becoming entitled to a share in consequence of the death or bankruptcy of any Member or by virtue of a vesting order by a court of competent jurisdiction and recognised by the Company as having any title to that share may, upon producing such evidence of title as the Directors shall require, be registered himself as holder of the share upon giving to the Company notice in writing or transfer such share to some other person. If the person so becoming entitled shall elect to be registered himself, he shall send to the Company a notice in writing signed by him stating that he so elects. If he shall elect to have another person registered he shall testify his election by executing to that person a transfer of the share. All the limitations, restrictions and provisions of these Articles relating to the right to transfer and the registration of transfers shall be applicable to any such notice or transfer as aforesaid as if the death or bankruptcy of the Member had not occurred and the notice or transfer were a transfer executed by such Member. The Directors shall have, in respect of a transfer so executed, the same power of refusing registration as if the event upon which the transmission took place had not occurred, and the transfer were a transfer executed by the person from whom the title by transmission is derived. (2) The Directors may at any time give notice requiring any such person to elect whether to be registered himself as a Member in the Register of Members or, (as the case may be), entered in the Depository Register in respect of the share or to transfer the share and if the notice is not complied with within 60 days the Directors may thereafter withhold payment of all dividends or other moneys payable in respect of the share until the requirements of the notice have been complied with. A person entitled to a share by transmission shall be entitled to receive, and may give a discharge for, any dividends or other moneys payable in respect of the share, but he shall not be entitled in respect of it to receive notices of, or to attend or vote at meetings of the Company, or, save as aforesaid, to exercise any of the rights or privileges of a Member, unless and until he shall become registered as a shareholder or have his name entered in the Depository VII-7

180 APPENDIX VII RELEVANT PROVISIONS IN THE COMPANY S ARTICLES OF ASSOCIATION IN RESPECT OF CAPITAL, DIVIDENDS AND VOTING Register as a Depositor in respect of the share. 31. Fee for registration of probate, etc. There shall be paid to the Company in respect of the registration of any probate, letters of administration, certificate of marriage or death, power of attorney or other document relating to or affecting the title to any share, such fee not exceeding S$2 (or such other sum as may be approved by the Exchange from time to time) as the Directors may from time to time require or prescribe. CALL ON SHARES 32. Call on shares The Directors may from time to time make such calls as they think fit upon the Members in respect of any money unpaid on their shares and not by the terms of the issue thereof made payable at fixed times, and each Member shall (subject to receiving at least fourteen days' notice specifying the time or times and place of payment) pay to the Company at the time or times and place so specified the amount called on his shares. A call may be revoked or postponed as the Directors may determine. 33. Time when made 34. Interest on calls 35. Sum due to allotment 36. Power to differentiate 37. Payment in advance of calls A call shall be deemed to have been made at the time when the resolution of the Directors authorising the call was passed and may be made payable by instalments. If a sum called in respect of a share is not paid before or on the day appointed for payment thereof, the person from whom the sum is due shall pay interest on the sum due from the day appointed for payment thereof to the time of actual payment at such rate not exceeding ten per cent per annum as the Directors determine, but the Directors shall be at liberty to waive payment of such interest wholly or in part. Any sum which by the terms of issue and allotment of a share becomes payable upon allotment or at any fixed date shall for all purposes of these Articles be deemed to be a call duly made and payable on the date on which, by the terms of issue, the same becomes payable, and in case of non-payment all the relevant provisions of the Articles as to payment of interest and expenses, forfeiture or otherwise shall apply as if such sum had become payable by virtue of a call duly made and notified. The Directors may on the issue of shares differentiate between the holders as to the amount of calls to be paid and the times of payments. The Directors may, if they think fit, receive from any Member willing to advance the same all or any part of the money uncalled and unpaid upon the shares held by him and such payments in advance of calls shall extinguish (so far as the same extend) the liability upon the shares in respect of which it is made, and upon the money so received or so much thereof as from time to time exceeds the amount of the calls then made upon the shares concerned, the Company may pay interest at such rate not exceeding without the sanction of the Company in General Meeting ten per cent per annum as the Member paying such sum and the Directors agree upon. Capital paid on shares in advance of calls shall not whilst carrying interest confer a right to participate in profits and until appropriated towards satisfaction of any call shall be treated as a loan to the Company and not as part of its capital and shall be repayable at any the Directors so decide. FORFEITURE AND LIEN 38. Notice requireing payment of calls If any Member fails to pay in full any call or instalment of a call on or before the day appointed for payment thereof, the Directors may at any time thereafter serve a notice on such Member requiring payment of so much of the call or instalment as is unpaid together with any interest and expense which may VII-8

181 APPENDIX VII RELEVANT PROVISIONS IN THE COMPANY S ARTICLES OF ASSOCIATION IN RESPECT OF CAPITAL, DIVIDENDS AND VOTING have accrued by reason of such non-payment. 39. Notice to state time and place 40. Forfeiture on noncompliance with notice 41. Notice of forfeiture to be given and entered 42. Directors may allow forfeited share to be redeemed 43. Sales of shares forfeited 44. Rights and liabilities of Members whose shares have been forfeited or surrendered The notice shall name a further day (not being less than seven days from the date of service of the notice) on or before which and the place where the payment required by the notice is to be made, and shall state that in the event of non-payment in accordance therewith the shares on which the call was made will be liable to be forfeited. If the requirements of any such notice as aforesaid are not complied with any share in respect of which such notice has been given may at any time thereafter, before payment of all calls and interest and expenses due in respect thereof, be forfeited by a resolution of the Directors to that effect. Such forfeiture shall include all dividends declared in respect of the forfeited share and not actually paid before the forfeiture. The forfeiture or surrender of a share shall involve the extinction at the time of forfeiture or surrender of all interest in and all claims and demands against the Company in respect of the share, and all other rights and liabilities incidental to the share as between the Member whose share is forfeited or surrendered and the Company, except only such of those rights and liabilities as are by these Articles expressly saved, or as are by the Act given or imposed in the case of past Members. The Directors may accept a surrender of any share liable to be forfeited hereunder. When any share has been forfeited in accordance with these Articles, notice of the forfeiture shall forthwith be given to the holder of the share or to the person entitled to the share by transmission, as the case may be, and an entry of such notice having been given, and of the forfeiture with the date thereof, shall forthwith be made in the Register of Members or in the Depository Register (as the case may be) opposite to the share; but the provisions of this Article are directory only, and no forfeiture shall be in any manner invalidated by any omission or neglect to give such notice or to make such entry as aforesaid. Notwithstanding any such forfeiture as aforesaid, the Directors may, at any time before the forfeited share has been otherwise disposed of, annul the forfeiture, upon the terms of payment of all calls and interest due thereon and all expenses incurred in respect of the share and upon such further teams (if any) as they shall see fit. A share so forfeited or surrendered shall become the property of the Company and may be sold, re-allotted or otherwise disposed of either to the person who was before such forfeiture or surrender the holder thereof or entitled thereto or to any other person, upon such terms and in such manner as the Directors shall think fit, and at any time before a sale, re-allotment or disposition the forfeiture or surrender may be cancelled on such terms as the Directors think fit. To give effect to any such sale, the Directors may, if necessary, authorise some person to transfer a forfeited or surrendered share to any such person as aforesaid. A Member whose shares have been forfeited or surrendered shall cease to be a Member in respect of the shares, but shall notwithstanding the forfeiture or surrender remain liable to pay to the Company all moneys which at the date of forfeiture or surrender were payable by him to the Company in respect of the shares with interest thereon at ten per cent per annum (or such lower rate as the Directors may approve) from the date of forfeiture or surrender until payment, but such liability shall cease if and when the Company receives payment in full of all such money in respect of the shares and the Directors may waive payment of such interest either wholly or in part. 45. Company s lien The Company shall have a first and paramount lien and charge on every share (not being a fully paid share) in the name of each Member (whether solely or jointly with others) and on the dividends declared or payable in respect thereof for all unpaid calls and instalments due on any such share and interest and VII-9

182 APPENDIX VII RELEVANT PROVISIONS IN THE COMPANY S ARTICLES OF ASSOCIATION IN RESPECT OF CAPITAL, DIVIDENDS AND VOTING expenses thereon but such lien shall only be upon the specific shares in respect of which such calls or instalments are due and unpaid and to such amounts as the Company may be called upon by law to pay in respect of the shares of the Member or deceased Member. 46. Member not entitled to privileges until all calls paid 47. Sale of shares subject to lien 48. Application of proceeds of such sale 49. Title to shares forfeited or surrendered or sold to satisfy a lien No Member shall be entitled to receive any dividend or to exercise any privileges as a Member until he shall have paid all calls for the time being due and payable on every share held by him, whether along or jointly with any other person, together with interest and expenses (if any). The Directors may sell in such manner as the Directors think fit any share on which the Company has a lien but no sale shall be made unless some sum in respect of which the lien exists is presently payable nor until the expiration of seven days after notice in writing stating and demanding payment of the sum payable and giving notice of intention to sell in default, shall have been given to the Member for the time being in relation to the share or the person entitled thereto by reason of his death or bankruptcy. To give effect to any such sale, the Directors may authorise some person to transfer the shares sold to the purchaser thereof. The net proceeds of sale, whether of a share forfeited by the Company or of a share over which the Company has a lien, after payment of the costs of such sale shall be applied in or towards payment or satisfaction of the unpaid call and accrued interest and expenses and the residue (if any) paid to the Member entitled to the share at the time of sale or his executors, trustees, administrators or assigns or as he may direct. A statutory declaration in writing by a Director of the Company that a share has been duly forfeited or surrendered or sold to satisfy a lien of the Company on a date stated in the declaration shall be conclusive evidence of the facts stated therein as against all persons claiming to be entitled to the share, and such declaration and the receipt of the Company for the consideration (if any) given for the share on the sale, re-allotment or disposal thereof, together with the certificate under Seal for the share delivered to a purchaser or allottee thereof, shall (subject to the execution of a transfer if the same be required) constitute a good title to the share and the person to whom the share is sold, re-allotted or disposed of shall be entered in the Register of Members as the holder of the share or (as the case may be) in the Depository Register in respect of the share and shall not be bound to see to the application of the purchase money (if any) nor shall his title to the share be affected by any irregularity or invalidity in the forfeiture, surrender, sale, reallotment or disposal of the share. ALTERATION OF CAPITAL 50. Power to increase capital 51. Rights and privileges of new shares 52. Issue of new shares to The Company in General Meeting may from time to time by Ordinary Resolution, whether all the shares for the time being issued shall have been fully called up or not, increase its capital by the creation of new shares as may be deem expedient. Subject to any special rights for the time being attached to any existing class of shares, the new shares shall be issued upon such terms and conditions and with such rights and privileges annexed thereto as the General Meeting resolving upon the creation thereof shall direct and if no direction be given as the Directors shall determine; subject to the provisions of these Articles and in particular (but without prejudice to the generality of the foregoing) such shares may be issued with a preferential or qualified right to dividends and in the distribution of assets of the Company or otherwise. (1) Subject to any direction to the contrary that may be given by the Company in General Meeting or except as permitted under the listing VII-10

183 APPENDIX VII RELEVANT PROVISIONS IN THE COMPANY S ARTICLES OF ASSOCIATION IN RESPECT OF CAPITAL, DIVIDENDS AND VOTING Members rules of the Exchange, all new shares shall before issue be offered to the Members in proportion, as nearly as the circumstances admit, to the number of the existing shares to which they are entitled or hold. The offer shall be made by notice specifying the number of shares offered, and limiting a time within which the offer, if not accepted, will be deemed to be declined, and, after the expiration of that time, or on the receipt of an intimation from the person to whom the offer is made that he declines to accept the shares offered, the Directors may dispose of those shares in such manner as they think most beneficial to the Company. The Directors may likewise so dispose of any new shares which (by reason of the ratio which the new shares bear to shares held by persons entitled to an offer of new shares) cannot, in the opinion of the Directors, be conveniently offered under this Article. (2) Notwithstanding Article 52(1) above, the Company may by Ordinary Resolution in General Meeting give to the Directors a general authority, either unconditionally or subject to such conditions as may be specified in the Ordinary Resolution, to: (i) (ii) (iii) issue shares in the capital of the Company (whether by way of rights, bonus or otherwise); and or make or grant offers, agreements, or options (collectively, "Instruments") that might or would require shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) warrants, debentures or other instruments convertible into shares; and (notwithstanding that the authority conferred by the Ordinary Resolution may have ceased to be in force) issue shares in pursuance of any Instrument made or granted by the Directors while the Ordinary Resolution was in force, provided that:- (a) (b) the aggregate number of shares to be issued pursuant to the Ordinary Resolution (including shares to be issued in pursuance of Instruments made or granted pursuant to the Ordinary Resolution) shall be subject to such limits and manner of calculation as may be prescribed by the Exchange; and unless previously revoked or varied by the Company in General Meeting, such authority to issue shares does not continue beyond the conclusion of the Annual General Meeting of the Company next following the passing of the Ordinary Resolution or the date by which such Annual General Meeting is required to be held, or the expiration of such other period as may be prescribed by the Act (whichever is the earliest). (3) Notwithstanding Article 52(1) above but subject to the Act, the Directors shall not be required to offer any new shares to Members to whom by reason of foreign securities laws such offers may not be made without registration of the shares or a prospectus or other document, but to sell the entitlements to the new shares on behalf of such Members in such manner as they think most beneficial to the Company. 53. New shares otherwise subject to Except so far as otherwise provided by the conditions of issue or by these Articles, any capital raised by the creation of new shares shall be considered part of the original capital of the Company and shall be subject to the VII-11

184 APPENDIX VII RELEVANT PROVISIONS IN THE COMPANY S ARTICLES OF ASSOCIATION IN RESPECT OF CAPITAL, DIVIDENDS AND VOTING provisions of Articles 54. Power to consolidate cancel and subdivide shares provisions of these Articles with reference to allotments, payment of calls, lien, transfer, transmission, forfeiture and otherwise. The Company may by Ordinary Resolution:- (i) (ii) consolidate and divide all or any of its shares; cancel any shares which, at the date of the passing of the Resolution, have been forfeited and diminish its share capital in accordance with the Act; (iii) (iv) subdivide its shares or any of them (subject, nevertheless, to the provisions of the Act), provided always that in such subdivision the proportion between the amount paid and the amount (if any) unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived; and subject to the provisions of these Articles and the Act, convert any class of shares into any other class of shares. 55. Company may purchase its own shares 56 Power to reduce capital Subject to and in accordance with the provisions of the Act or the listing rules of any stock exchange upon which the shares of the Company are listed, the Company may purchase or otherwise acquire shares in the issued share capital of the Company on such terms and in such manner as the Company may from time to time think fit. If required by the Act or the listing rules of any stock exchange upon which the shares of the Company are listed, any share which is so purchased or acquired by the Company unless held as a treasury share in accordance with the Act or the listing rules of any stock exchange upon which the shares of the Company are listed shall be cancelled immediately on purchase or acquisition. On the cancellation of a share as aforesaid, the rights and privileges attached to that share shall expire, and the number of issued shares shall be diminished by the number of issued shares so cancelled. In any other instance, the Company may hold or deal with any such share in any manner as may be permitted by, and in accordance with, the Act or the listing rules of any stock exchange upon which the shares of the Company are listed. The Company may by Special Resolution reduce its share capital in any manner and subject to any incident authorised and consent required by law. STOCK 57. Power to convert into stock 58. Transfer of stock 59. Rights of stock holders The Company may by Ordinary Resolution convert any or all its paid up shares into stock and may from time to time by resolution reconvert any stock into paid up shares. The holders of stock may transfer the same or any part thereof in the same manner and subject to these Articles as and subject to which the shares from which the stock arose might previously to conversion have been transferred or as near thereto as circumstances admit but no stock shall be transferable except in such units as the Directors may from time to time determine. The holders of stock shall, according to the amount of stock held by them, have the same rights, privileges and advantages as regards dividend, return of capital, voting and other matters as if they held the shares from which the stock arose, but no such privilege or advantage (except as regards dividend and return of capital and the assets on winding up) shall be conferred by any such aliquot part of the stock which would not if existing in shares have conferred that privilege or advantage, and no such conversion shall affect or prejudice any preference or other special privileges attached to the shares so converted. VII-12

185 APPENDIX VII RELEVANT PROVISIONS IN THE COMPANY S ARTICLES OF ASSOCIATION IN RESPECT OF CAPITAL, DIVIDENDS AND VOTING 60. Interpretation All provisions of these Articles applicable to paid up shares shall apply to stock and the words ''share" and "shareholder" or similar expression herein shall include "stock" or "stockholder". BONUS ISSUE AND CAPITALISATION OF PROFITS AND RESERVES 141. Power to capitalize profits (1) The Directors may, subject to the Act and the listing rules of the Exchange and with the sanction of the Company by way of Ordinary Resolution, including any resolution passed pursuant to Article 8: (i) (ii) issue bonus shares for which no consideration is payable to the Company to the persons registered as holders of shares in the Register of Members or (as the case may be) the Depository Register at the close of business on the date of the Ordinary Resolution (or such other date as may be specified therein or determined as therein provided) or (in the case of an Ordinary Resolution passed pursuant to Article 7) such other date as may be determined by the Directors, in proportion to their then holdings of shares; capitalize any sum for the time being standing to the credit of any of the Company's reserve accounts or other undistributable reserve or any sum standing to the credit of the profit and loss account by appropriating such sum to the persons registered as holders of shares in the Register of Members or (as the case may be) the Depository Registry at the close of business on: (a) (b) the date of the Ordinary Resolution (or such other date as may be specified therein or determined as therein provided) or; (in the case of an Ordinary Resolution passed pursuant to Article 8) such other date as may be determined by the Directors, in proportion to their then holdings of shares and applying such sum on their behalf in paying up in full new shares (or, subject to any special rights previously conferred on any shares or class or shares for the time being issued, new shares of any other class not being redeemable shares) for allotment and distribution credited as fully paid up to and amongst them as bonus shares in the proportion aforesaid. (iii) issue shares for which no consideration is payable and to capitalize any undivided profits or other moneys of the Company not required for the payment or provision of any dividend on any shares entitled to cumulative or noncumulative preferential dividends (including profits or other moneys carried and standing to any reserve or reserves) and to apply such profits or other moneys in paying up in full new shares, in each case on terms that such shares shall, upon issue, be held by or for the benefit of participants of any share incentive or option scheme or plan implemented by the Company, such scheme or plan having been approved by the Company in General Meeting in accordance with the provisions of the Act. (2) The Directors may do all acts and things considered necessary or expedient to give effect to any such bonus issue or capitalization under Article 141(1), with full power to the Directors to make such provisions VII-13

186 APPENDIX VII RELEVANT PROVISIONS IN THE COMPANY S ARTICLES OF ASSOCIATION IN RESPECT OF CAPITAL, DIVIDENDS AND VOTING as they think fit for any fractional entitlements which would arise on the basis aforesaid (including provisions whereby factional entitlements are disregarded or the benefit thereof accrues to the Company rather than to the Members concerned). The Directors may authorize any person to enter, on behalf of all the Members interested, into an agreement with the Company providing for any such bonus issue or capitalization and matters incidental thereto and any agreement made under such authority shall be effective and binding on all concerned Directors to do all acts and things to give effect Whenever such a resolution as aforesaid shall have been passed the Directors shall make all appropriations and applications of the sum resolved to be capitalised thereby, all allotments and issues of fully paid shares or debentures (if any), and generally shall do all acts and things required to give effect thereto and also to authorise any person to enter on behalf of all the Members entitled thereto into an agreement with the Company providing for the allotment to them respectively, credited as fully paid up, of any further shares or debentures to which they may be entitled upon such capitalisation or (as the case may require) for the payment up by the Company on their behalf, by the application thereto of their respective proportions of the sum resolved to be capitalised, of the amounts or any part of the amounts remaining unpaid on their existing shares and any agreement made under such authority shall be effective and binding on all such Members. B. Rights in respect of Voting GENERAL MEETINGS 61. Annual General Meeting (1) Subject to the provisions of the Act, the Company shall in each year hold a General Meeting in addition to any other meetings in that year to be called the Annual General Meeting, and not more than fifteen months shall elapse between the date of one Annual General Meeting of the Company and that of the next. The Annual General Meeting shall be held at such time and place as the Directors shall appoint. Extraordinary General Meetings 62. Calling of Extraordinary General Meetings (2) All General Meetings other than Annual General Meetings shall be called Extraordinary General Meetings. The Directors may, whenever they think fit, convene an Extraordinary General Meeting and Extraordinary General Meetings shall also be convened on such requisition or, in default, may be convened by such requisitionists as provided by Section 176 of the Act. If at any time there are not within Singapore sufficient Directors capable of acting to form a quorum at a meeting of Directors, any Director may convene an Extraordinary General Meeting in the same manner as nearly as possible as that in which meetings may be convened by the Directors. NOTICE OF GENERAL MEETINGS 63. Notice of meetings (1) Subject to the provisions of the Act (including those regarding the calling of General Meetings at short notice) and the listing rules of the Exchange, any General Meeting at which it is proposed to pass a Special Resolution or a resolution of which special notice has been given to the Company, shall be called by at least twenty-one days' notice (or such other period as may be prescribed by the Act or the listing rules of the Exchange from time to time) and any other General Meeting shall be called by, at least fourteen days' notice in writing (or such other period as may be prescribed by the Act or the listing rules of the Exchange from time to time). The period of notice shall in each case be exclusive both of the day on which the notice is served or VII-14

187 APPENDIX VII RELEVANT PROVISIONS IN THE COMPANY S ARTICLES OF ASSOCIATION IN RESPECT OF CAPITAL, DIVIDENDS AND VOTING deemed to be served and of the day for which the notice is given. Every notice calling a General Meeting shall specify the place and the day and the hour of the meeting and shall be given in the manner hereinafter mentioned to such persons (including the Auditors) as are under the provisions herein contained and the Act entitled to receive notices of General Meetings from the Company. Any notice of a meeting called to consider special business shall be accompanied by a statement regarding the effect of any proposed resolution in respect of such special business. At least fourteen days' notice of every such meeting shall be given by advertisement in the daily press and in writing to the Exchange and to such other stock exchanges on which the Company is listed. 64. Contents of notice Notice of Annual General Meeting (1) Every notice calling a General Meeting shall specify the place and the day and hour of the Meeting and there shall appear with reasonable prominence in every such notice a statement that a Member entitled to attend and vote is entitled to appoint a proxy to attend and to vote instead of him and that a proxy need not be a Member of the Company. (2) In the case of an Annual General Meeting, the notice shall also specify the Meeting as such. Nature of special business to be specified 65. Special business (3) In the case of any General Meeting at which business other than routine business is to be transacted (special business), the notice shall specify the general nature of the special business, and if any resolution is to be proposed as a Special Resolution or as requiring special notice, the notice shall contain a statement to that effect. All business shall be deemed special that is transacted at any Extraordinary General Meeting, and all that is transacted at an Annual General Meeting shall also be deemed special, with the exception of sanctioning a dividend, the consideration of the accounts and balance sheet and the reports of the Directors and Auditors, and any other documents required to be annexed to the balance sheet, electing Directors in place of those retiring by rotation or otherwise and the fixing of the Directors remuneration and the appointment and fixing of the remuneration of the Auditors or determining the manner in which such remuneration is to be fixed. Any notice of meeting called to consider special business shall be accompanied by a statement regarding the effect of any proposal resolution in respect of such special business. PROCEEDINGS AT GENERAL MEETINGS 66. Quorum No business shall be transacted at any General Meeting unless a quorum is present at the time the meeting proceeds to business. Save as herein otherwise provided, two Members present in person shall form a quorum. For the purpose of this Article, Member includes a person attending by proxy or by attorney or as representing a corporation which is a Member but shall, as required by the Act, exclude the Company where it is a Member by reason of its holding treasury shares. Provided that (i) a proxy representing more than one Member shall only count as one Member for the purpose of determining the quorum; and (ii) where a Member is represented by more than one proxy such proxies shall count as only one Member for the purpose of determining the quorum. 67. Adjournment if quorum not present If within half an hour from the time appointed for the Meeting a. quorum is not present, the Meeting if convened on the requisition of Members shall be dissolved. In any other case it shall stand adjourned to the same day in. next week at the same time and place, or to such other day and at such other time VII-15

188 APPENDIX VII RELEVANT PROVISIONS IN THE COMPANY S ARTICLES OF ASSOCIATION IN RESPECT OF CAPITAL, DIVIDENDS AND VOTING and place as the Directors may determine, and if at such adjourned Meeting a quorum is not present within half an hour from the time appointed for holding the Meeting, the Meeting shall be dissolved. 68. Resolutions in writing Subject to the Act, a resolution in writing signed by every Member of the Company entitled to vote or being a corporation by its duly authorised representative shall have the same effect and validity as an Ordinary Resolution of the Company passed at a General Meeting duly convened, held and constituted, and may consist of several documents in the like form, each signed by one or more of such Members. 69. Chairman The Chairman of the Directors or, in his absence, the Deputy Chairman (if any) shall preside as Chairman at every General Meeting. If there is no such Chairman or Deputy Chairman or if at any Meeting he is not present within fifteen minutes after the time appointed for holding the Meeting or is unwilling to act, the Members present shall choose some Director to be Chairman of the Meeting or, if no Director is present or if all the Directors present decline to take the Chair, some Member present to be Chairman. 70. Adjournment The Chairman may, with the consent of any Meeting at which a quorum is present (and shall if so directed by the Meeting), adjourn the Meeting from time to time and from place to place, but no business shall be transacted at any adjourned Meeting except business which might lawfully have been transacted at the Meeting from which the adjournment took place. When a meeting is adjourned for fourteen days or more, notice of the adjourned Meeting shall be given as in the case of the original Meeting. Save as aforesaid, it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned Meeting. 71. Method of voting At any General Meeting a resolution put to the vote of the Meeting shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands) demanded:- (i) (ii) (iii) (iv) by the Chairman of the Meeting; or by at least two Members present in person or by proxy (where a Member has appointed more than one proxy, any one of such proxies may represent that member) or attorney or in the case of a corporation by a representative and entitled to vote thereat; or by any Member or Members present in person or by proxy (where a Member has appointed more than one proxy, any one of such proxies may represent that Member) or attorney or in the case of a corporation by a representative or any number or combination of such Members, holding or representing not less than one-tenth of the total voting rights of all the Members having the right to vote at the Meeting excluding treasury shares; or by a Member or Members present in person or by proxy (where a Member has appointed more than one proxy, any one of such proxies may represent that Member) or attorney or in the case of a corporation by a representative or any number or combination of such Members, holding or representing shares in the Company conferring a right to vote at the Meeting being shares on which an aggregate sum has been paid up equal to not less than one tenth of the total sum paid up on all the shares conferring that right (excluding treasury shares). Provided always that no poll shall be demanded on the election of a Chairman or on a question of adjournment. Unless a poll is so demanded (and the demand is not withdrawn) a declaration by the Chairman that a resolution has been carried or carried unanimously or by a particular majority or lost and an entry to that effect in the minute book shall be conclusive evidence of the fact VII-16

189 APPENDIX VII RELEVANT PROVISIONS IN THE COMPANY S ARTICLES OF ASSOCIATION IN RESPECT OF CAPITAL, DIVIDENDS AND VOTING without proof of the number or proportion of the votes recorded in favour of or against the resolution. A demand for a poll may be withdrawn. 72. Taking a poll If a poll is duly demanded (and the demand is not withdrawn) it shall be taken in such manner (including the use of ballot or voting papers or tickets) as the Chairman may direct and the result of a poll shall be deemed to be the resolution of the Meeting at which the poll was demanded. The Chairman may, and if so requested shall, appoint scrutineers and may adjourn the Meeting to some place and time fixed by him for the purpose of declaring the result of the poll. 73. Votes counted in error 74. Chairman s casting vote 75. Time for taking a poll 76. Continuance of business after demand for a poll 77. Voting rights of Members If any votes are counted which ought not to have been counted or might have been rejected, the error shall not vitiate the result of the voting unless it is pointed out at the same Meeting or at any adjournment thereof, and not in that case unless it shall in the opinion of the Chairman be of sufficient magnitude. In the case of equality of votes, whether on a show of hands or on a poll, the Chairman of the Meeting at which the show of hands takes place or at which the poll is demanded shall be entitled to a second or casting vote in addition to the votes to which he may be entitled as a Member or as proxy of a Member. A poll demanded on any question shall be taken either immediately or at such subsequent time (not being more than thirty days from the date of the Meeting) and place as the Chairman may direct. No notice need be given of a poll not taken immediately. The demand for a poll shall not prevent the continuance of a Meeting for the transaction of any business, other than the question on which the poll has been demanded. VOTES OF MEMBERS Subject and without prejudice to any special privileges or restrictions as to voting for the time being attached to any special class of shares for the time being forming part of the capital of the Company each Member entitled to vote may vote in person or by proxy or attorney, and (in the case of a corporation) by a representative. On a show of hands every Member who is present in person or by proxy or attorney, or in the case of a corporation by a representative, shall have one vote provided that if a Member is represented by two proxies, only one of the two proxies as determined by their appointor shall vote on a show of hands and in the absence of such determination, only one of the two proxies as determined by the Chairman (or by a person authorised by him) shall vote on a show of hands and on a poll, every Member who is present in person or by proxy, attorney or representative shall have one vote for each share which he holds or represents Provided Always That notwithstanding anything contained in these Articles, a Depositor shall not be entitled to attend any General Meeting and to speak and vote thereat unless his name is certified by the Depository to the Company as appearing on the Depository Register not earlier than 48 hours before that General Meeting (the "cut-off time") as a Depositor on whose behalf the Depository holds shares in the Company. For the purpose of determining the number of votes which a Depositor or his proxy may cast on a poll, the Depositor or his proxy shall be deemed to hold or represent that number of shares entered in the Depositor's Securities Account at the cut-off time as certified by the Depository to the Company, or where a Depositor has apportioned the balance standing to his Securities Account as at the cut-off time between two proxies, to apportion the said number of shares between the two proxies in the same proportion as specified by the Depositor in appointing the proxies; and accordingly no instrument appointing a proxy of a Depositor shall be rendered invalid merely by reason of any discrepancy between the number of shares standing to the credit of that Depositor s Securities Account as at the cut-off time and the true balance standing to the Securities Account of a Depositor as at the time of the VII-17

190 APPENDIX VII RELEVANT PROVISIONS IN THE COMPANY S ARTICLES OF ASSOCIATION IN RESPECT OF CAPITAL, DIVIDENDS AND VOTING relevant General Meeting, if the instrument is dealt with in such manner as aforesaid. 78. Voting rights of joint holders 79. Voting rights of members of unsound mind Where there are joint holders of any share any one of such persons may vote and be reckoned in a quorum at any Meeting either personally or by proxy or by attorney or in the case of a corporation by a representative as if he were solely entitled thereto but if more than one of such joint holders is so present at any meeting then the person present whose name stands first in the Register of Members or the Depository Register (as the case may be) in respect of such share shall alone be entitled to vote in respect thereof. Several executors or administrators of a deceased Member in whose name any share stands shall for the purpose of this Article be deemed joint holders thereof. If a Member be a lunatic, idiot or non-compos mentis, he may vote whether on a show of hands or on a poll by his committee, curator bonis or such other person as properly has the management of his estate and any such committee, curator bonis or other person may vote by proxy or attorney, provided that such evidence as the Directors may require of the authority of the person claiming to vote shall have been deposited at the Office not less than forty-eight hours before the time appointed for holding the Meeting. 80. Right to vote Subject to the provisions of these Articles, every Member either personally or by attorney or in the case of a corporation by a representative and every proxy shall be entitled to be present and vote at any General Meeting and be reckoned in the quorum thereat in respect of shares fully paid and in respect of partly paid shares where calls are not due and unpaid. 81. Objections No objection shall be raised to the qualification of any voter except at the Meeting or adjourned Meeting at which the vote objected to is given or tendered and every vote not disallowed at such Meeting shall be valid for all purposes. Any such objection made in due time shall be referred to the Chairman of the Meeting whose decision shall be final and conclusive. 82. Votes on a poll On a poll votes may be given either personally or by proxy or by attorney or in the case of a corporation by its representative and a person entitled to more than one vote need not use all his votes or cast all the votes he uses in the same way. 83. Appointment of proxies (1) A Member may appoint not more than two proxies to attend and vote at the same General Meeting. (2) If a Member is a Depositor, the Company shall be entitled:- (i) (ii) to reject any instrument of proxy lodged if the Depositor is not shown to have any shares entered in its Securities Account as at the cut-off time as certified by the Depository to the Company; and to accept as validly cast by the proxy or proxies appointed by the Depositor on a poll that number of votes which corresponds to or is less than the aggregate number of shares entered in its Securities Account of that Depositor as at the cut-off time as certified by the Depository to the Company, whether that number is greater or smaller than the number specified in any instrument of proxy executed by or on behalf of that Depositor. (3) Where a Member appoints more than one proxy, he shall specify the proportion of his shareholding to be represented by each proxy. If no such proportion or number is specified the first named proxy may be treated as representing 100% of the shareholding and any second VII-18

191 APPENDIX VII RELEVANT PROVISIONS IN THE COMPANY S ARTICLES OF ASSOCIATION IN RESPECT OF CAPITAL, DIVIDENDS AND VOTING named proxy as an alternate to the first named. (4) Voting right(s) attached to any shares in respect of which a Member has not appointed a proxy may only be exercised at the relevant General Meeting by the member personally or by his attorney, or in the case of a corporation by its representative. (5) Where a Member appoints a proxy in respect of more shares than the shares standing to his name in the Register of Members, or in the case of a Depositor, standing to the credit of that Depositor's Securities Account, such proxy may not exercise any of the votes or rights of the shares not registered to the name of that Member in the Register of Members or standing to the credit of that Depositor's Securities Account as at the cut-off time, as the case may be. 84. Proxy need not be a Member 85. Instrument appointing a proxy A proxy or attorney need not be a Member, and shall be entitled to vote on a show of hands on any question at any General Meeting. Any instrument appointing a proxy shall be in writing in the common form approved by the Directors under the hand of the appointor or his attorney duly authorised in writing or, if the appointor is a corporation, under seal or under the hand of its attorney duly authorised and the Company shall accept as valid in all respects the form of proxy approved by the Directors for use at the date relevant to the General Meeting in question. 86. To be left at Company s office 87. Intervening death or insanity of principal not to revoke proxy 88. Corporations acting by representatives The instrument appointing a proxy, together with the power of attorney or other authority, if any, under which the instrument of proxy is signed or a duly certified copy of that power of attorney or other authority (failing previous registration with the Company) shall be attached to the instrument of proxy and must be left at the Office or such other place (if any) as is specified for the purpose in the notice convening the Meeting not less than forty-eight hours before the time appointed for the holding of the Meeting or adjourned Meeting (or in the case of a poll before the time appointed for the taking of the poll) at which it is to be used failing which the instrument may be treated as invalid. An instrument appointing a proxy shall, unless the contrary is stated thereon, be valid as well for any adjournment of the Meeting as for the Meeting to which it relates Provided that an instrument of proxy relating to more than one meeting (including any adjournment thereof) having once been so delivered for the purposes of any meeting shall not be required again to be delivered for the purposes of any subsequent meeting to which it relates. An instrument of proxy shall be deemed to include the power to demand or concur in demanding a poll on behalf of the appointor. Unless otherwise instructed, a proxy shall vote as he thinks fit. The signature on an instrument appointing a proxy need not be witnessed. A vote given in accordance with the terms of an instrument of proxy (which for the purposes of these Articles shall also include a power of attorney) shall be valid notwithstanding the previous death or insanity of the principal or revocation of the proxy, or of the authority under which the proxy was executed or the transfer of the share in respect of which a proxy is given, provided that no intimation in writing of such death, insanity, revocation or transfer shall have been received by the Company at the Office (or such other place as may be specified for the deposit of instruments appointing proxies) before the commencement of the Meeting or adjourned Meeting (or in the case of a poll before the time appointed for the taking of the poll) at which the proxy is used. Any corporation which is a Member may by resolution of its directors or other governing body authorise such person as it thinks fit to act as its representative at any Meeting of the Company or of any class of Members and the persons so authorised shall be entitled to exercise the same powers on behalf of the corporation as the corporation could exercise if it were an individual Member of VII-19

192 APPENDIX VII RELEVANT PROVISIONS IN THE COMPANY S ARTICLES OF ASSOCIATION IN RESPECT OF CAPITAL, DIVIDENDS AND VOTING the Company. The Company shall be entitled to treat a certificate under the seal of the corporation as conclusive evidence of the appointment or revocation of appointment of a representative under this Article. NOTICES 162. Notice of General Meeting Notice of every General Meeting shall be given in manner hereinbefore authorised to:- (i) every Member; (ii) (iii) (iv) every person entitled to a share in consequence of the death or bankruptcy or otherwise of a Member who but for the same would be entitled to receive notice of the Meeting; the Auditor for the time being of the Company; and the Exchange. C. Rights in respect of Dividends DIVIDENDS AND RESERVES 129. Payment of dividends 130. Apportionment of dividends 131. Payment of preference and interim dividends 132. Dividends not to bear interest 133. Deduction from dividend 134. Retention of dividends on shares subject to lien The Directors may, with the sanction of the Company, by Ordinary Resolution declare dividends but (without prejudice to the powers of the Company to pay interest on share capital as hereinbefore provided) no dividend shall be payable except out of the profits of the Company. Subject to the rights of holders of shares with special rights as to dividend (if any), all dividends shall be declared and paid according to the number of shares held by a Member in respect whereof the dividend is paid, but (for the purposes of this Article only) no amount paid on the share in advance of calls shall be treated as paid on the share. All dividends shall be apportioned and paid pro rata according to the amount paid on the shares during any portion or portions of the period in respect of which the dividend is paid, but if any share is issued on terms providing that it shall rank for dividend as from a particular date such shares shall rank for dividend accordingly. Notwithstanding Article 130, if, and so far as in the opinion of the Directors, the profits of the Company justify such payments, the Directors may pay fixed preferential dividends on any express class of shares carrying a fixed preferential dividend expressed to be payable on a fixed date on the half-yearly or other dates (if any) prescribed for the payment thereof by the terms of issue of the shares, and subject thereto may also from time to time pay to the holders of any other class of shares interim dividends thereon of such amounts and on such dates as they may think fit. No dividend or other moneys payable on or in respect of a share shall bear interest against the Company. The Directors may deduct from any dividend or other moneys payable to any Member on or in respect of a share all sums of money (if any) presently payable by him to the Company on account of calls or in connection therewith, or any other account which the Company is required by law to withhold or deduct. The Directors may retain any dividend or other moneys payable on or in respect of a share on which the Company has a lien and may apply the same in or towards satisfaction of the debts, liabilities or engagements in respect of which the lien exists Retention of The Directors may retain the dividends payable on shares in respect of which VII-20

193 APPENDIX VII RELEVANT PROVISIONS IN THE COMPANY S ARTICLES OF ASSOCIATION IN RESPECT OF CAPITAL, DIVIDENDS AND VOTING dividends on shares pending transmission 136. Unclaimed dividends 137. Payment of dividend in specie 138. Dividends payable by cheque 139. Effects of transfers any person is under these Articles, as to the transmission of shares, entitled to become a Member, or which any person under these Articles is entitled to transfer, until such person shall become a Member in respect of such shares or shall duly transfer the same. The payment by the Directors of any unclaimed dividends or other moneys payable on or in respect of a share into a separate account shall not constitute the Company a trustee in respect thereof. All dividends unclaimed after being declared may be invested or otherwise made use of by the Directors for the benefit of the Company and any dividend unclaimed after a period of six years from the date of declaration of such dividend may be forfeited and if so shall revert to the Company but the Directors may at any time thereafter at their absolute discretion annul any such forfeiture and pay the dividend so forfeited to the person entitled thereto prior to the forfeiture. For the avoidance of doubt no Member shall be entitled to any interest, share of revenue or other benefit arising from any unclaimed dividends, howsoever and whatsoever. The Company may, upon the recommendation of the Directors, by Ordinary Resolution direct payment of a dividend in whole or in part by the distribution of specific assets and in particular of paid up shares or debentures of any other company or in any one or more of such ways, and the Directors shall give effect to such Resolution, and where any difficulty arises in regard to such distribution, the Directors may settle the same as they think expedient and in particular may issue fractional certificates and fix the value for distribution of such specific assets or any part thereof and may determine that cash payments shall be made to any Members upon the footing of the value so fixed in order to adjust the rights of all parties and may vest any such specific assets in trustees as may seem expedient to the Directors. Any dividend or other moneys payable in cash on or in respect of a share may be paid by cheque or warrant sent through the post to the registered address of the Member or person entitled thereto or, if several persons are registered as joint holders of the share or are entitled thereto in consequence of the death or bankruptcy of the holder, to any one of such persons or to such person and such address as such persons may by writing direct Provided that where the Member is a Depositor, the payment by the Company to the Depository of any dividend payable to a Depositor shall to the extent of the payment discharge the Company from any further liability in respect of the payment. Every such cheque and warrant shall be made payable to the order of the person to whom it is sent or to such person as the holder or joint holders or person or persons entitled to the share in consequence of the death or bankruptcy of the holder may direct and payment of the cheque if purporting to be endorsed or the receipt of any such person shall be a good discharge to the Company. Every such cheque and warrant shall be sent at the risk of the person entitled to the money represented thereby. A transfer of shares shall not pass the right to any dividend declared on such shares before the registration of the transfer. D. Rights in respect of Reserves RESERVES 140. Power to carry profit to reserve The Directors may from time to time set aside out of the profits of the Company and carry to reserve such sums as they think proper which, at the discretion of the Directors, shall be applicable for meeting contingencies or for the gradual liquidation of any debt or liability of the Company or for repairing or maintaining the works, plant and machinery of the Company or for special dividends or bonuses or for equalizing dividends or for any other purpose to which the profits of the Company may properly be applied and pending such application may either be employed in the business of the Company or be invested. The Directors may divide the reserve into such special funds as they think fit and VII-21

194 APPENDIX VII RELEVANT PROVISIONS IN THE COMPANY S ARTICLES OF ASSOCIATION IN RESPECT OF CAPITAL, DIVIDENDS AND VOTING E. Rights in respect of Winding Up may consolidate into one fund, any special funds or any parts of any special funds into which the reserve may have been divided. The Directors may also, without placing the same to reserve, carry forward any profits which they may think it not prudent to divide. WINDING UP 163. Distribution of assets in specie 164. Liquidator s commission If the Company is wound up (whether the liquidation is voluntary, under supervision or by the Court) the Liquidator may, with the authority of a Special Resolution, divide among the Members in specie or kind the whole or any part of the assets of the Company and whether or not the assets shall consist of property of one kind or shall consist of properties of different kinds and may for such purpose set such value as he deems fair upon any one or more class or classes of property to be divided as aforesaid and may determine how such division shall be carried out as between the Members or different classes of Members. The Liquidator may, with the like authority, vest the whole or any part of the assets in trustees upon such trusts for the benefit of Members as the Liquidator with the like authority thinks fit, and the liquidation of the Company may be closed and the Company dissolved, but no Member shall be compelled to accept any shares or other securities in respect of which there is a liability. On a voluntary winding up of the Company, no commission or fee shall be paid to a Liquidator without the prior approval of the Members in General Meeting. The amount of such commission or fee shall be notified to all Members not less than seven days prior to the Meeting at which it is to be considered VII-22

195 APPENDIX VIII EY S REPORT IN RESPECT OF THE REVIEW OF THE CONDENSED INTERIM FINANCIAL INFORMATION FOR THE PERIOD FROM 1 JANUARY 2013 TO 30 JUNE 2013 VIII-1