China Healthcare Limited ANNUAL REPORT your healthcare partner in life

Transcription

1 China Healthcare Limited ANNUAL REPORT your healthcare partner in life

2 CONTENTS Page Corporate Profile 01 Chairman s Message 04 Operating and Financial Review 06 Corporate Information 09 Board of Directors 10 Key Management 11 Report on Corporate Governance 12 Risk Management Policies and Processes 18 Financial Report 20 Statistics of Shareholdings 57 Notice of Annual General Meeting 59 Proxy Form

3 ECON Healthcare Group, now known as China Healthcare Group, was founded in 1987 by Mr Ong Chu Poh, the Group Chairman and CEO, with one nursing home and over time expanded into a cluster of nursing homes and purpose-built medicare centres with wide range of healthcare services and comprehensive in-house rehabilitation facilities, acute hospital and clinic. With some 20 years of experience in the healthcare industry, ECON Healthcare is recognized by the community for its holistic approach, high quality and customer-focused services. We believe human care and attention are the critical elements in nursing and rehabilitation services. Our key strength lies in our ability to provide a wide range of personalized healthcare services for the convenience of our residents. CORPORATE PROFILE ECON Healthcare was the first in the nursing home industry to obtain the ISO 9002 Certificate in ECON Healthcare eventually upgraded its quality standard to ISO 9001:2000 Certificate in 2002, and achieved the Singapore Quality Class status and was awarded the Singapore Promising Brand Award in We were invited by SPRING Singapore to take the lead in establishing quality standards and operational procedures for the Singapore nursing home industry as part of the National Skill Recognition System. At ECON Medicare Centres and Nursing Homes, we provide a comprehensive range of healthcare services to meet the different needs of our residents, which comprise of long term and respite residential care, day care, physiotherapy, occupational therapy and speech therapy services, Traditional Chinese Medicine services, wound management, geriatric and stroke rehabilitation treatments. Besides residential nursing care services, we also provide hospital management services, bachelor of nursing degrees and diploma courses, nursing care training, ambulance services and home care services. Annual Report 01

4 ECON HEALTHCARE LIMITED At ECON, we believe in taking care of our residents like horticulturists would take care of their bonsai plants. Every resident is important to us because the well-being and satisfaction of our residents and their families are the reasons for our existence. Annual Report 02

5 CHINA HEALTHCARE LIMITED OUR PHILOSOPY E - Excellence in our services C- Commitment to do our best O- On the dot always N- Nimble mind at work OUR VISION To be a premium and leading brand in healthcare services in the Asia Pacific region, recognised by our customers for our holistic approach, personal touch and technological advancement. OUR MISSION We are dedicated to provide high quality and customer-focused healthcare services. We will achieve this by focused on: Customer Needs Being sensitive to our customers need Research & Development Improving our services through constant research and skills development Quality System Continuing to be highly systematic and organised in our service delivery and quality control Networking Building up our local and international network with our partners in healthcare People development Caring and grooming our people to set and achieve higher goals Annual Report 03

6 ECON HEALTHCARE LIMITED DEAR SHAREHOLDERS Let me first begin by recording my appreciation to all our shareholders for the support given to the Company all this while. Since listed on Singapore Exchange in 2002, we have strived to focus our efforts in growing the core business, strengthening our finances, investing in manpower and expanding regionally. CHAIRMAN S MESSAGE Our Medicare Centres bed capacity has increased by 220 beds with the commencement of operations of the 2 new medicare centres. FY has been a challenging year for China Healthcare Group. During the financial year, we underwent and completed the renovation at our Chai Chee medicare centre as well as the upgrading work at Choa Chu Kang medicare centre. Our Medicare Centres capacity has increased by 220 beds with the commencement of operations of these 2 new medicare centres. The increase, however, was offset by the closure of 2 rented nursing homes by 120 beds. Most of the nursing homes residents were transferred to our new medicare centre. The consolidation of 2 smaller outlets to one facility enhances cost effectiveness and management efficiency. It is in line with our strategies to establish more medicare centres and to upgrade the existing nursing home facilities where feasible. We have also successfully procured the lease of a premise in the Northern part of Singapore to be used as a nursing home with 160 beds capacity. This new nursing home was under renovation during the financial year and has just started operation in June. The increase in capacity has given the Group a promising prospect in the years ahead. However, prior to enjoying a better result from the increased capacity, the Group has to contend with additional costs such as rental expense incurred during the renovation period, initial set-up cost, additional staff costs, staff training expense and finance expense for the new facilities. As of today, China Healthcare Group s total bed capacity has increased to about 1,000 as compared to the bed capacity of 553 when the Company listed in December The strong incremental grow in terms of bed capacity is in line with the Group s 5-year plan to double the number of beds to 1,000 Annual Report 02

7 CHINA HEALTHCARE LIMITED The strong incremental grow in terms of bed capacity is in line with the Group s 5-year plan that to double the number of beds to 1,000 and we have successfully attained the target one and a half year earlier. and we have successfully attained the target one and a half year earlier. We are in the process of reviewing and repositioning the business strategies of West Point Family Hospital and Econ Careskill Training Centre, which have yet to contribute positively to the Group. The Management is confident that it will be able to achieve the projection with the new strategies and business models in place. Regionally, besides the setting up of our first overseas Medicare Centre in Malaysia in June 2004, we have invested 20% stake in a Chinabased company that manufactures hospital equipments in Zhuhai. We expect these 2 investments to contribute positive results to the Group in the next financial year. The change of the Company s name from ECON Healthcare Limited to China Healthcare Limited during the financial year marks our inaugural foray into the international market, especially the China market with a 1.3 billion population. Looking ahead, the Group expects that both local and overseas operations will yield greater results through higher occupancy, enhanced cost effectiveness and positive results from the repositioning and remodeling of our hospital and training facilities. Given the above and barring any unforeseen circumstances, the Directors are optimistic that the Group will perform better in FY On behalf of the Board of Directors, I would like to thank our staff at all levels for their dedicated efforts and teamwork in meeting all the challenges in FY, and to thank all our valued shareholders, customers and business associates for their continued support. I am grateful to my fellow Directors for their counsel and commitments during the year, and would like to take this opportunity to extend a warm welcome to Ms Li Ling Xiu who joined the Board as a Non- Executive Director and Mr Chow Hock Meng who was appointed alternate Director to Ms Li Ling Xiu during the year. ONG CHU POH Group Chairman and CEO Annual Report 05

8 ECON HEALTHCARE LIMITED... the Company changed its name from Econ Healthcare Limited to China Healthcare Limited, which reflected the Group s strategy to seek further growth and development regionally, especially China. OPERATING AND FINANCIAL REVIEW Annual Report 02

9 CHINA HEALTHCARE LIMITED During the financial year under review, the Group launched its two ECON Medicare Centres in Singapore upon completion of their renovation and upgrading works. Consequent to the launch, total bed capacity at ECON Medicare Centres has increased by 220. However, the increase was offset by the closure of 2 smaller nursing homes by about 120 beds. As of today, the Group has a total bed capacity of about 1,000 in Singapore and Malaysia. For the financial year ended 31 March, the Group s revenue increased by 0.21 million to million as compared to the previous year. The increase was mainly contributed by the increase in occupancy at the medicare centres and the opening of new medicare centres in Singapore during the financial year. However, the increase was partially offset by the decrease in revenue generated by a subsidiary, West Point Family Hospital Pte Ltd ( WPFH ), and the closure of two older and smaller nursing homes. In order to meet with the Group s local and regional expansion plans, additional staff was recruited for next level of growth. Consequently, staff costs increased by 0.34 million to 6.89 million. Profit before taxation was down by 0.82 million to 0.02 million mainly due to higher losses from WPFH as fewer beds were available during the 5 months renovation period. The onetime initial start up cost incurred in the new medicare centres and the lower gain on disposal of quoted investments realized in FY has further deteriorated the results of the Group. Income tax expense was higher as compared to FY 2005 as WPFH did not recognize the deferred tax assets relating to its tax losses. The income tax expense in FY 2005 included a tax credit of 91,000 relating to amounts over provided in the prior years. Property, plant and equipment increased by million mainly due to the expansion and upgrading of its Singapore and Malaysia operations which include the purchase and upgrade of medicare centres, procurement of new and advance equipments and nursing home beds for its medicare centres. This resulted in the increase of depreciation of property, plant and equipment and finance costs 0.36 million and 0.32 million respectively. The increase in interestbearing bank loans was for the financing of the purchase/upgrade of the medicare centre facilities. On the other hand, acquisition of the purpose-built freehold medicare centre, which was previously leased by the Group for its operations, has contributed savings in operating lease expenses of 0.41 million. During the financial year under review, the Group acquired 20% stake in a China-based hospital equipment manufacturer in Zhuhai. This caused the investment in associate increased by 1.19 million. The improved cash position during the financial year was contributed by the issue of 46,993,500 ordinary shares at each to Oei Hong Leong Foundation Pte Ltd through a private placement exercise. On 18 January, the Company changed its name from Econ Healthcare Limited to China Healthcare Limited, which reflected the Group s strategy to seek further growth and development regionally, especially China. Annual Report 07

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11 CHINA HEALTHCARE LIMITED CORPORATE INFORMATION Board of Directors Ong Chu Poh (Chairman & CEO) Koh Hin Ling (Executive Director) Wong Kook Fei (Independent Director) Dr Tan Hung Yong Richard (Independent Director) Li Ling Xiu (Non-Executive Director) (Appointed on 3 Oct 2005) Chow Hock Meng (Alternate Director to Li Ling Xiu) (Appointed on 15 May ) Audit Committee Wong Kook Fei (Chairman) Dr Tan Hung Yong Richard Li Ling Xiu Remuneration Committee Dr Tan Hung Yong Richard (Chairman) Wong Kook Fei Li Ling Xiu Nominating Committee Wong Kook Fei (Chairman) Dr Tan Hung Yong Richard Ong Chu Poh Joint Company Secretaries Lee Seng Suan (CPA) Lee Seng Hua Registered Office 452 Upper East Coast Road Singapore Company Registration Number K Share Registrar & Share Transfer Office M & C Services Private Limited 138 Robinson Road #17-00 The Corporate Office Singapore Auditors KPMG Certified Public Accountants 16 Raffles Quay #22-00 Hong Leong Building Singapore Partner-in-Charge: Tan Wah Yeow (Appointed from commencement of financial period ended 31 March 2002) Principal Bankers DBS Bank Limited Oversea-Chinese Banking Corporation Limited RHB Bank Berhad Annual Report 09

12 CHINA HEALTHCARE LIMITED BOARD OF DIRECTORS Mr Ong Chu Poh Group Chairman and CEO Mr Ong is the founder of the Group. He has extensive management experience in both local and overseas MNCs. He set up the Group s first nursing home in 1987 and has since, under his strong leadership and vision for the industry, managed the expansion and growth of the business. Mr Ong is responsible for the overall management, operational efficiency and the charting and reviewing of the Group s policies, strategies and corporate directions. He holds a Bachelor of Arts degree from the then Nanyang University, Singapore and a diploma in Marketing Management from Ngee Ann Polytechnic. He is also a graduate of the Singapore Staff and Command College. Mdm Koh Hin Ling Executive Director Mdm Koh spearheads the development and management of the Traditional Chinese Medicine ( TCM ) Division of the Group. Mdm Koh holds a Bachelor of Arts degree from the then Nanyang University, Singapore and has a Diploma in Chinese Medicines from the Singapore Chinese Physicians Training College. She also holds a Master Degree in TCM from Nanjing University of TCM and has a practicing certificate for TCM. Mr Wong Kook Fei Independent Director Mr Wong is the Chairman for the Audit Committee and Nominating Committee. He has extensive working experience in the banking industry with more than 20 years experience in corporate finance and investment banking. Mr Wong is currently a Director of Structured Finance & Loan Syndication at Bayerische Hypo-und Vereinsbank AG in Singapore. He holds a Bachelor of Commerce (Honours) degree from Mc Master University, Ontario, Canada. Dr Tan Hung Yong Richard Independent Director Dr Tan is the Chairman for Remuneration Committee. He is the CEO and Medical Director of the Singapore Aeromedical Centre with ST Medical Services Pte Ltd, a wholly-owned subsidiary of SembCorp Logistics Ltd. Prior to this, Dr Tan served with the Singapore Armed Forces ( SAF ) for 19 years. He last held the position of Chief Airforce Medical Officer in SAF. Dr Tan holds Medical Degrees in Aviation Medicine and Masters of Medicine (Occupational Medicine) from the National University of Singapore and is an Academician of the International Academy of Aviation and Space medicine. Ms Li Ling Xiu Non-Executive Director Ms Li was appointed as Non-Executive Director of the Company in October She is currently the Chief Executive Officer of Chip Lian Investments (HK) Limited( Chip Lian ) and Sanion Enterprises Limited. Prior to joining Chip Lian, Ms Li was the Group Deputy General Manager of China Strategic Holdings Limited, a company listed on the Hong Kong Stock Exchange. Mr Chow Hock Meng Alternate Director to Ms Li Ling Xiu Mr Chow was appointed as Alternate Director to Ms Li Ling Xiu in May. He has been with Chip Lian Group of companies since 1983 as a Manager in charge of corporate finance and investment. He is an executive director of International Capital Investment Limited, formerly known as Jurong Engineering Ltd and is concurrently the company s General Manager.

13 CHINA HEALTHCARE LIMITED KEY MANAGEMENT Ms Chan Sau Wai CEO, Malaysia Operations and Project Director Ms Chan joined us in February 2001 as Group Accountant and has advanced her career within the Group progressively. She was promoted to Finance & Project Director in November 2003 and was further promoted to her current position in January. She is responsible for the business development and operations of Malaysia activities and she oversees the planning, developments and implementation of the Group s local and overseas projects. She also oversees the finance and corporate matters of the Group. She is an associate member of the Association of Chartered Certified Accountants ( ACCA ) and an associate member of the Malaysian Institute of Accountants. Ms Chan is also a Director of West Point Family Hospital Pte Ltd and the Company s subsidiaries in Malaysia. Dr Gan Qinghui, Edward Business Development Manager, China Division Dr Gan joined the Company as Deputy Operations Manager in January 2002 and was promoted to his current position in April He is responsible for the development and implementation of the Group s business development projects and activities in China. Dr Gan has more than 13 years of experience in the healthcare industry and he holds a degree in Medicine from Shanghai Medical University and a Postgraduate Diploma in Marketing from The Chartered Institute of Marketing in the United Kingdom. Mr Tan Wong Tong General Manager, Econ Careskill Training Centre Pte Ltd Mr Tan joined us as General Manager in charge of the Training Division of the Group in January Mr Tan has had more than 20 years of experience in the Human Resource field in the Ministry of Defence. He oversees the development and growth of Econ Careskill Training Centre Pte Ltd, which is a wholly owned subsidiary of China Healthcare Limited. Mr Tan holds a Bachelor of Arts degree from the National University of Singapore. He also holds a Post-Graduate Diploma in Human Resource Management from the Singapore Institute of Management. Mr Vincent Pok Eng Leong Human Resource Manager Mr Pok joined the Company as Human Resource Manger in March He is responsible for the full spectrum of the Group s human resources development and management functions. Mr Pok has more than 18 years of experience in human resources management and holds a Bachelor degree in Business Administration (Major in Human Resources) from RMIT, Australia. Ms Florence Lum Yeok Yin Director of Operations Ms Lum joined the Company as Director of Operations in May. Ms Lum has approximately 30 years of experience in the healthcare industry in hospital/nursing home operations and management including business development and marketing, corporate services, clinical support services and building project management. She holds a Master in Business Administration from Hull University (UK), Diploma in Marketing from the Chartered Institute of Marketing (UK), and a Diploma in Administrative Management (UK). She is also a State Registered Nurse. Annual Report 11

14 REPORT ON CORPORATE GOVERNANCE China Healthcare Limited is committed to ensure a high standard of corporate governance within the Group to safeguard the interests of its shareholders and maximize long-term shareholder value. The following sets out the Group s corporate governance practices with specific reference to the principles of the Code of Corporate Governance ( the Code ). BOARD MATTERS The Board s Conduct of Its Affairs The Board is entrusted with the responsibility for the overall corporate governance of the Group including setting its corporate strategy and direction, overseeing the management of the business and reviewing the affairs and financial position of the Group. The Board has direct responsibility for decision making in the following corporate events and actions. Approval for the release of the half year and full year results announcements; Approval of the annual report and financial statements; Convening of the shareholders meetings; Approval of corporate strategies; Material acquisitions and disposals of assets; Approval of interested person transactions; and Appointment of Directors to the Board. The Company has in place general orientation-training programmes to ensure that all new incoming directors are familiar with the Group s business and governance practices. The Company relies on the Directors to undergo further relevant training if necessary to update themselves on the relevant new laws, regulations and changing commercial risks, from time to time. The Board meets at least twice yearly. Additional meetings are also held at such other times as and when required to address any specific significant matters that may arise. The Company s Articles of Association allow Board meetings to be held by way of conference telephone and other electronic communications equipment. During the financial year under review, the number of meetings of the Board and Board Committees held and the attendance of the Directors at such meetings are as follows: Board Audit Committee Nominating Committee Remuneration Committee Name No. of meetings Attendance No. of No. of meetings Attendance meetings Attendance No. of meetings Attendance Ong Chu Poh Koh Hin Ling Wong Kook Fei Dr Tan Hung Yong Richard (i) Dr Vasoo Sushilan (ii) Tay Joo Soon (ii) (i) Dr Tan Hung Yong Richard was appointed to the Board on 22 June 2005 (ii) Dr Vasoo Sushilan and Tay Joo Soon resigned on 11 June 2005

15 FINANCIAL REPORT REPORT ON CORPORATE GOVERNANCE Board Composition & Balance The Board at the date of this report comprises: Ong Chu Poh (Chairman and Chief Executive Officer) Koh Hin Ling (Executive Director) Wong Kook Fei (Independent Director) Dr Tan Hung Yong Richard (Independent Director) Li Ling Xiu (Non-Executive Director) (appointed on 3 October 2005) Chow Hock Meng (Alternate Director to Li Ling Xiu) (appointed on 15 May ) The independence of each director is reviewed annually by the Nominating Committee. The Nominating Committee adopts the Code s definition of what constitutes an independent director in its review. The Board is of the opinion that, given the scope and nature of the operations of the Group, the present size of the Board is appropriate for effective decision making. The composition is reviewed annually by the Nominating Committee to ensure that the Board has the appropriate mix of expertise and experience. Chairman and Chief Executive Officer ( CEO ) The Chairman and CEO of the Company is Mr Ong Chu Poh. He is responsible to the Board for the corporate directions and operational efficiency, development and review of the Group s policies and strategies and ensuring a cohesive working relationship and timeliness of information flow between the Board and management. The Board is of the view that it is not necessary to separate the role of Chairman and CEO given the present Group corporate structure, scope of operations and the presence of 3 competent and professional non-executive Directors. Board Membership The Nominating Committee comprises Mr Wong Kook Fei, Chairman of the Committee, Mr Ong Chu Poh and Dr Tan Hung Yong Richard. The responsibilities of the Nominating Committee are to identify candidates and review all nominations and re-nominations for the appointments of Board members, evaluate the effectiveness and performance of the Board and individual Directors, and review the independence of the Directors annually. All Directors who are appointed by the Board are subject to re-election by shareholders at the next Annual General Meeting ( AGM ). In addition, pursuant to the Company s Articles of Association, at least one third of the Directors other than the CEO, are required to retire by rotation and submit themselves for re-election at each AGM. Board Performance The Nominating Committee recommends to the Board how the Board s performance is to be evaluated and propose objective performance criteria which address how the Board can enhance long-term shareholders value. The Board also implements a process to be carried out by the Nominating Committee for assessing the effectiveness of the Board as a whole and the contribution of each director to the effectiveness of the Board. Each member of the Nominating Committee shall abstain from voting on any resolutions in respect of the assessment of his performance or re-nomination as director. Annual Report 13

16 REPORT ON CORPORATE GOVERNANCE Access to Information The management provides the Directors with regular and relevant information about the Group s financial and operational performance. Detailed Board papers are prepared prior to each meeting of the Board. The Board papers include sufficient information from Management on major operational, financial and corporate matters requiring Board s decision. All Directors have unrestricted access to the Group s records and information and the non-executive Directors have access to all levels of key personnel. All the Directors have seperate and independent access to the senior management and both the joint Company Secretaries. It is the responsibility of the Company Secretary to attend all Board meetings and to ensure that Board procedures are followed and that applicable rules and regulations are complied with. Should the Directors, whether as a group or individual, in furtherance of their duties require independent professional advice, the Directors may, with the consent of the Chairman, appoint a professional advisor to render the appropriate advice at the Company s expense. REMUNERATION MATTERS Procedures for Developing Remuneration Policies The Remuneration Committee is chaired by Dr Tan Hung Yong Richard with Mr Wong Kook Fei and Ms Li Ling Xiu as members. The Remuneration Committee reviews and recommends to the Board a framework of remuneration for the Directors and key executives, and determines specific remuneration packages for each executive Director. The recommendations of the Remuneration Committee are submitted for endorsement by the entire Board. All aspects of remuneration, including but not limited to directors fees, salaries, allowances, bonuses, options and benefits-in-kind are covered by the Remuneration Committee. Each member of the Remuneration Committee shall abstain from voting on any resolutions in respect of his own remuneration package. Level & Mix of Remuneration The Group s remuneration policy is to provide compensation packages at market rates which reward successful performance and attract, retain and motivate the Directors and key executives. The non-executive Directors receive directors fees, in accordance with their contributions, taking into account factors such as effort and time spent and responsibilities of the Directors. The directors fees are recommended and endorsed by the Board for approval by shareholders of the Company at the AGM.

17 FINANCIAL REPORT REPORT ON CORPORATE GOVERNANCE Disclosure on Remuneration The breakdown, showing the level and mix of each individual director s remuneration in FY is as follows: Remuneration Band & Name of Director Base/Fixed Salary Director s fees Variable or performance related income/bonuses, benefits-in-kind, stock options, others S250,000 to S499,999 Ong Chu Poh 95% - 5% Below S250,000 Koh Hin Ling 90% - 10% Wong Kook Fei - 100% - Dr Tan Hung Yong Richard - 100% - Li Ling Xiu - 100% - Dr Vasoo Sushilan (resigned) - 100% - Tay Joo Soon (resigned) - 100% - Our top 5 Executives (who are not directors) of the Group fall within the remuneration band of below S150,000. Ms Chan Sau Wai - CEO of Malaysia Operations and Project Director Dr Gan Qinghui - Business Development Manager, China Division Mr Tan Wong Tong - General Manager, Econ Careskill Training Centre Pte Ltd Mr Vincent Pok Eng Leong - Human Resource Manager Ms Florence Lum - Director of Operations None of the employees of the Company was an immediate family member of a director or the CEO and whose remuneration exceeded S150,000 during the year. ACCOUNTABILITY AND AUDIT Accountability It is the aim of the Board to provide shareholders with detailed analysis, explanation and assessment of the Group s performance, financial position and prospects. Management provides the Board with up-to-date financial reports and other information on the Group s performance for effective monitoring and decision making. Audit Committee The Audit Committee consists of three members, all of whom are non-executive and the majority, including its Chairman, are independent Directors. The Audit Committee is chaired by Mr Wong Kook Fei and has as its members, Dr Tan Hung Yong Richard and Ms Li Ling Xiu, who is a non-executive director. The Nominating Committee is of the opinion that all of the Audit Committee members are non-executive, the Audit Committee is able to exercise objective judgement independently. The Audit Committee has explicit authority to investigate any matter within its terms of reference, full access to and co-operation by Management and full discretion to invite any director or executive officer to attend its meetings, and reasonable resources to enable it to discharge its functions properly. Annual Report 15

18 REPORT ON CORPORATE GOVERNANCE The Audit Committee met twice during the financial year. In performing its functions, the Audit Committee: reviews the audit plans of both the internal and external auditors; reviews the auditors report and their evaluation of the Company s and Group s system of internal controls; reviews the co-operation given by the Company s officers to the internal and external auditors; reviews the financial statements of the Group and of the Company prior to their submission to the Board for approval; reviews the effectiveness and adequacy of the internal audit function; nominates and reviews appointment of auditors; and reviews all interested person transactions, if any. The Audit Committee meets with the external auditors, without the presence of management, at least annually. The Audit Committee reviews the independence of the external auditors annually. In particular, the Audit Committee undertakes a review of all non-audit services that are provided by the external auditors and is satisfied that the provision of such services has not affected the independence of the external auditors. Internal Controls The Board is responsible for ensuring that Management maintains a sound system of internal controls to safeguard shareholder investments and Group s assets. The Board believes that, in the absence of any evidence to the contrary and from due enquiry, the system of internal controls maintained by the Group s management that has been in place throughout the financial year and up to the date of this report is adequate to meet the needs of the Group in the current business environment. The system of internal controls is designed to manage rather than to eliminate the risk of failure to achieve business objectives. As such, the controls can only provide reasonable but not absolute assurance against material misstatement or loss. The Board has adopted a set of internal controls which sets out approval limits for expenditure, investments and cheque signatory arrangements. The effectiveness of the internal control system and procedures is monitored by management and reviewed by the Board. The Board is satisfied that there are adequate internal controls in the Company. Internal Audit The Group has engaged BDO Raffles Consultants Pte Ltd ( BDO ) as its Internal Auditors. The Audit Committee has considered the independence, resources and experience of BDO to ensure that the Internal Auditor has the neccessary resources to adequately perform their functions. The Internal Auditor s primary line of reporting is directly to the Chairman of the Audit Committee. Administratively, the Internal Auditor reports to the CEO of the Company. The Internal Auditor reviews, identifies and analyses the risks incurred by the Group in its activities and examines if there are any material non-compliance and internal control weaknesses. The Audit Committee will oversee and monitor the implementation of any improvements thereto.

19 FINANCIAL REPORT REPORT ON CORPORATE GOVERNANCE COMMUNICATION WITH SHAREHOLDERS In line with the continuing disclosure obligations of the Company pursuant to the SGX-ST s Listing Manual, the Board s policy is that all shareholders should be equally informed of all major developments that impact the Group in a timely manner. Half year and full year results and other major developments of the Group are published via SGXNET and press releases. The Company maintains a corporate website at which shareholders can access information on the Group. The website provides corporate announcements, press releases and disclosures to the SGX-ST. The Company encourages its shareholders to attend the AGM to ensure a high level of accountability. The Annual Report, together with the Notice of AGM, are dispatched to the shareholders at least 14 working days prior to the meeting. The Board welcomes the views of shareholders on matters affecting the Company at the AGM and the Chairmen of the Audit, Remuneration and Nominating Committees are normally available at the meeting to answer questions relating to the work of these committees. DEALING IN SECURITIES The Company has adopted the Best Practices Guide issued by the SGX-ST in relation to dealings in the Company s securities by directors and executives of the Company. The Company has advised Directors and all key executives not to deal in the Company s shares while in possession of price sensitive information and during the period commencing 1 month prior to each announcement of financial results by the Company and ending on the date of the announcement of the results. Directors and executives are also expected to observe insider-trading laws at all times even when dealing in securities within permitted trading periods. MATERIAL CONTRACTS [RULE 1207(8) OF SGX-ST LISTING MANUAL] Except as disclosed in the financial statements, there are no material contracts of the Company or its subsidiaries involving the interests of the Chief Executive officer, each director or controlling shareholder of the Company either still subsisting at the end of the financial year or if not then subsisting, entered into since the end of the previous financial year. Interested Person Transactions The Company has adopted an internal policy in respect of any transactions with interested persons and has set out the procedures for review and approval of interested person transactions. All interested person transactions are reviewed and approved by the Audit Committee. For the financial year ended 31 March, there were no interested person transactions that required disclosure under Rule 907 of the SGX-ST Listing Manual. Annual Report 17

20 RISK MANAGEMENT POLICIES AND PROCESSES Pursuant to Rule 1207 (4) (d) of the SGX-ST Listing Manual, the operating and financial risk management policies and processes of the Group are summarized as follows : OPERATING RISK Management Growth The growth of our Group in the past few years has resulted in added responsibilities for management who is responsible for overseeing the expansion and enhancing our service quality. In order to meet the demands of our current and future projects, we will need to attract, motivate and retain a significant number of professionals who have relevant industry experiences to drive the growth. We will continue to attract more talents into our Group and to motivate and retain such professionals at a competitive cost, as well as improve the operational efficiency and financial management of our Group in order to manage and sustain our growth effectively. Enhancement of Quality Service Our marketing activities are limited as a result of the stringent Ministry of Health promotion guidelines. Consequently, we rely on personal references from our existing network or residents and their family members, relatives and friends, and doctors. References are also received from other institutions such as hospitals, voluntary welfare organizations and community clubs. The decline in quality services that we provide may cause cessation or reduction of these referrals. We will continue to train our staff to upgrade their competencies and skills. We jointly collaborate with PSB Corporation in the development and conducting of training programmes in healthcare services and nursing under the National Skill Recognition System ( NSRS ). The system requires organizations to establish work performance standards to consistently deliver quality goods and services. Competition Despite the high barriers to entry, other healthcare providers have facilities and personnel to provide healthcare services similar to that of our Group. China Healthcare Groups s continued success depends on the ability to compete effectively with its competitors. We intend to upgrade our existing nursing homes to medicare centres, where feasible, and to build more facilities to meet the increasing demand. Besides the upgrading of the infrastructure, we emphasize on quality services. We conduct in-house training for our nursing staff regularly to ensure our nursing care services provided to our customers are enhanced. Such a strategy has enabled our Group to enjoy significant growth in recent years and we believe we will continue to lead the commercial nursing home market in Singapore. Risk Associated with Future Acquisitions Besides the acquisition of land to construct new medicare centres, we intend to pursue other strategic acquisitions as part of our plan to provide our Group with complementary services, customer bases, technologies and qualified professionals. Such acquisitions present risks that could potentially have an adverse effect on the Group s operations and earnings, such as diversion of management s attention, anticipated returns not being achieved and amortization of goodwill and intangible assets. We will continue to adopt a cautious approach and to exercise due diligence when considering all material acquisitions. FINANCIAL RISKS Our financial risks are set out on Page 54 under Note 28 to the financial statements.

21 FINANCIAL CONTENTS Page Directors Report 20 Statement by Directors 24 Report of the Auditors to the Members of 25 China Healthcare Limited Balance Sheets 26 Consolidated Profit and Loss Account 27 Consolidated Statement of Changes in Equity 28 Consolidated Statement of Cash Flows 29 Notes to the Financial Statements 30

22 DIRECTORS REPORT The Directors submit this annual report to the members of the Company together with the audited consolidated financial statements of the Group and the Balance Sheet of the Company for the financial year ended 31 March. Directors The directors of the Company in office at the date of this report are as follows: Ong Chu Poh Koh Hin Ling Wong Kook Fei Dr Tan Hung Yong Richard Li Ling Xiu (Appointed on 3 October 2005) Chow Hock Meng (Alternate director to Ms Li Ling Xiu) (Appointed on 15 May ) Change of Name During the financial year, the Company changed its name from Econ Healthcare Limited to China Healthcare Limited with effect from 18 January. Directors Interests According to the register kept by the Company for the purposes of Section 164 of the Companies Act, Chapter 50 (the Act), particulars of interests of directors who held office at the end of the financial year (including those held by their spouses and infant children) in shares, debentures, warrants and share options in the Company and in related corporations (other than wholly-owned subsidiaries) are as follows: Shares registered in the name of Director Holdings at beginning of the year/date of appointment The Company China Healthcare Limited (formerly known as Econ Healthcare Limited) Number of ordinary shares Holdings at end of the year Shares in which Director is deemed to have an interest Holdings at beginning of the year/date of appointment Holdings at end of the year Ong Chu Poh 10,989,850 12,114,850 66,758,150 66,758,150 Koh Hin Ling 2,700,017 2,700,017 75,047,983 76,172,983 Wong Kook Fei 100, , Dr Tan Hung Yong Richard 300, , Tay Joo Soon (resigned on 11 June 2005) 200, Dr Vasoo Sushilan (resigned on 11 June 2005) 200, TMI Holdings (1997) Pte Ltd Ong Chu Poh 9,334,137 9,334, , ,606 Koh Hin Ling 429, ,606 9,334,137 9,334,137

23 FINANCIAL REPORT DIRECTORS REPORT By virtue of Section 7 of the Act, Mr Ong Chu Poh and Mdm Koh Hin Ling are deemed to have interests in all the subsidiaries of the Company, at the beginning and at the end of the financial year. Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares, debentures, warrants or share options of the Company, or of related corporations, either at the beginning of the financial year, or date of appointment if later, or at the end of the financial year. There were no changes in any of the above mentioned interests in the Company between the end of the financial year and 21 April. Except as disclosed under the Share Options section of this report, neither at the end of, nor at any time during the financial year, was the Company a party to any arrangement whose objects are, or one of whose objects is, to enable the directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate. Except for salaries, bonuses and fees and those benefits that are disclosed in note 20 to the financial statements, since the end of the last financial year, no director has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director, or with a firm of which he is a member or with a company in which he has a substantial financial interest. Share Options The China Healthcare Employees Share Option Scheme (the Scheme ) of the Company was approved and adopted by its members at an Extraordinary General Meeting held on 23 October The Scheme is administered by the Remuneration Committee comprising: Dr Tan Hung Yong Richard, Chairman Mr Wong Kook Fei Ms Li Ling Xiu (Independent Director) (Independent Director) (Non-Executive Director) The Scheme applies to directors of the Company and employees of the Group. Persons who are controlling shareholders or their associates are not eligible to participate in the Scheme. A controlling shareholder is a person who: (i) holds directly or indirectly 15% or more of the nominal amount of all voting shares in the Company. The Singapore Exchange Securities Trading Limited ( SGX-ST ) may determine that a person who satisfies this paragraph is not a controlling shareholder; or (ii) in fact exercises control over the Company. The size of the Scheme shall not exceed 15 per cent of the issued share capital of the Company on the day preceeding the date of grant of options. Annual Report 21

24 DIRECTORS REPORT Other information regarding the Scheme is set out below: (i) The subscription price of the options will be: (a) at the market price, based on the average of the last dealt prices per share determined by reference to the daily official list published by the SGX-ST for a period of 5 consecutive market days immediately prior to the relevant date of grant; or (b) at a price which is set at a discount to the market price. The maximum discount shall not exceed 20 per cent of the market price. (ii) Options granted with the subscription price set at the market price may be exercised in multiples of 1,000, in whole or in part, as follows: (a) up to 50 per cent of the option at any time after 12 months of the date of grant of that option; and (b) the balance 50 per cent of the option at any time after 24 months of the date of grant of that option. Provided always that an option shall be exercised before the end of 120 months (or 60 months where the participant is a non-executive director) of the date of grant of that option and subject to such other conditions as may be introduced by the Remuneration Committee from time to time. Options granted with the subscription price set at a discount to the market price may only be exercised after 2 years from the date of grant, in multiples of 1,000, in whole or in part, as follows: (a) up to 50 per cent of such options at any time after 36 months from the date of grant of that option; and (b) the balance 50 per cent at any time after 48 months of the date of grant of that option. Provided always that such option shall be exercised before the end of 120 months (or 60 months where the participant is a non-executive director) of the date of grant of that option and subject to such other conditions as may be introduced by the Remuneration Committee from time to time.

25 FINANCIAL REPORT DIRECTORS REPORT (iii) The Scheme shall continue to be in force at the discretion of the Remuneration Committee, subject to a maximum of 10 years commencing on the date upon which the Scheme is adopted by the shareholders at a general meeting. Provided always that the Scheme may continue beyond the above stipulated period with the approval of the shareholders by way of an ordinary resolution passed at a general meeting and of any relevant authorities which may then be required. During the financial year, there were: (i) no options granted by the Company or its subsidiaries to any person to take up unissued shares in the Company or its subsidiaries; and (ii) no shares issued by virtue of any exercise of option to take up unissued shares of the Company or its subsidiaries. As at the end of the financial year, there were no unissued shares of the Company or its subsidiaries under option. Audit Committee The members of the Audit Committee at the date of this report are:- Mr Wong Kook Fei, Chairman Dr Tan Hung Yong Richard Ms Li Ling Xiu (Independent Director) (Independent Director) (Non-Executive Director) The Audit Committee performs the functions specified in Section 201B of the Companies Act, the Listing Manual, the Best Practices Guide of the Singapore Exchange and the Code of Corporate Governance. The functions performed are detailed in the Report on Corporate Governance. The Audit Committee is satisfied with the independence and objectivity of the external auditors and has recommended to the Board of Directors that the auditors, KPMG, be nominated for re-appointment as auditors at the forthcoming Annual General Meeting of the Company. Auditors The auditors, KPMG, have indicated their willingness to accept re-appointment. On behalf of the Board of Directors Ong Chu Poh Director Koh Hin Ling Director 21 June Annual Report 23

26 STATEMENT BY DIRECTORS In our opinion: (a) the financial statements set out on pages 26 to 56 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 March and of the results, changes in equity and cash flows of the Group for the year ended on that date; and (b) 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. The Board of Directors has, on the date of this statement, authorised these financial statements for issue. On behalf of the Board of Directors Ong Chu Poh Director Koh Hin Ling Director 21 June

27 FINANCIAL REPORT REPORT OF THE AUDITORS T O THE MEMBERS OF CHINA HEALTHCARE LIMITED (Formerly known as Econ Healthcare Limited) We have audited the accompanying financial statements of China Healthcare Limited for the year ended 31 March as set out on pages 26 to 56. These financial statements are the responsibility of the Company s directors. 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 plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion: (a) the consolidated financial statements of the Group and the balance sheet of the Company are properly drawn up in accordance with the provisions of the Companies Act, Chapter 50 (the Act) and Singapore Financial Reporting Standards to give a true and fair view of the state of affairs of the Group and of the Company as at 31 March and of the results, changes in equity and the cash flows of the Group for the year ended on that date; (b) the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore have been properly kept in accordance with the provisions of the Act. KPMG Certified Public Accountants Singapore 21 June Annual Report 25

28 BALANCE SHEETS As At 31 March Group Company Note Non-current assets Property, plant and equipment 3 37,210,482 20,794,605 30,014,907 14,808,549 Goodwill on consolidation 4 185, , Subsidiaries ,039,824 4,935,370 Associate 6 1,188, Jointly-controlled entity Other investments 8 1,999,000 1,999,000 1,999,000 1,999,000 40,583,370 22,978,718 37,053,731 21,742,919 Current assets Inventories 9 69,112 80, Trade and other receivables 10 1,893,673 1,968,029 5,421,362 1,904,072 Other investments 8 216, , , ,418 Cash and cash equivalents 11 3,283, ,561 2,662, ,187 5,462,781 3,133,618 8,300,220 2,299,677 Total assets 46,046,151 26,112,336 45,353,951 24,042,596 Equity attributable to equity holders of the parent Share capital 12 17,633,743 6,585,360 17,633,743 6,585,360 Share premium 13-3,381,523-3,381,523 Currency translation reserve 13 1,313 (2,028) - - Merger deficit 13 (1,485,364) (1,485,364) - - Accumulated profits 4,396,674 4,479,812 2,785,777 1,022,584 20,546,366 12,959,303 20,419,520 10,989,467 Minority interests 756,682 1,426, Total equity 21,303,048 14,385,698 20,419,520 10,989,467 Non-current liabilities Interest-bearing borrowings 14 19,873,011 6,951,025 19,873,011 6,951,025 Deferred tax liabilities ,776 88,908 59,076-20,067,787 7,039,933 19,932,087 6,951,025 Current liabilities Trade and other payables 16 3,248,192 2,419,258 3,740,731 4,050,244 Interest-bearing borrowings 14 1,068,200 1,970,147 1,068,200 1,970,147 Current tax payable 358, , ,413 81,713 4,675,316 4,686,705 5,002,344 6,102,104 Total liabilities 24,743,103 11,726,638 24,934,431 13,053,129 Total equity and liabilities 46,046,151 26,112,336 45,353,951 24,042,596 The accompanying notes form an integral part of these financial statements.

29 FINANCIAL REPORT CONSOLIDATED PROFIT AND LOSS ACCOUNT Year Ended 31 March Note 2005 Revenue 17 13,627,301 13,418,662 Other income 223, ,682 Supplies and consumables (1,967,877) (1,698,398) Staff costs (6,888,903) (6,553,085) Depreciation of property, plant and equipment 3 (959,143) (601,155) Amortisation of goodwill 4 - (21,774) Operating lease expense (1,387,378) (1,794,523) Other operating expenses (2,066,140) (1,936,570) Finance costs 18 (566,807) (252,523) Share of profit in associate 3,655 - Share of profit/(loss) of jointly-controlled entity 584 (23) Profit before tax 18, ,293 Income tax expense 21 (363,391) (108,868) (Loss)/Profit for the year (344,826) 734,425 Attributable to: Equity holders of the parent 260, ,316 Minority interests (605,258) (239,891) (Loss)/Profit for the year (344,826) 734,425 Earnings per share (cents) Basic Diluted The accompanying notes form an integral part of these financial statements. Annual Report 27

30 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Year Ended 31 March Share capital Share premium Currency translation reserve Merger deficit Accumulated profits Total attributable to equity holders of the parent Minority interests Total equity At 1 April ,585,360 3,381,523 (1,005) (1,485,364) 3,779,887 12,260,401 1,666,286 13,926,687 Translation differences relating to financial statements of subsidiaries - - (1,023) - - (1,023) - (1,023) Net loss recognised directly in equity - - (1,023) - - (1,023) - (1,023) Profit/(Loss) for the year , ,316 (239,891) 734,425 Total recognised income and expense for the year - - (1,023) - 974, ,293 (239,891) 733,402 Dividends paid in relation to the year ended 31 March 2004 of 0.31 cents per share, less tax at 20% (274,391) (274,391) - (274,391) At 31 March ,585,360 3,381,523 (2,028) (1,485,364) 4,479,812 12,959,303 1,426,395 14,385,698 At 1 April 2005, as previously reported 6,585,360 3,381,523 (2,028) (1,485,364) 4,479,812 12,959,303 1,426,395 14,385,698 Effects of adopting FRS ,304 48,304-48,304 At 1 April 2005, restated 6,585,360 3,381,523 (2,028) (1,485,364) 4,528,116 13,007,607 1,426,395 14,434,002 Purchase of equity interest from minority shareholder (64,455) (64,455) Issue of shares 7,753, ,753,928-7,753,928 Expenses incurred in relation to the issue of shares (87,068) (87,068) - (87,068) Translation differences relating to financial statements of subsidiaries - - 3, ,341-3,341 Net (loss)/gain recognised directly in equity (87,068) - 3, (83,727) - (83,727) Profit/(Loss) for the year , ,432 (605,258) (344,826) Total recognised income and expense for the year (87,068) - 3, , ,705 (605,258) (428,553) Transfer from share premium reserve to share capital upon implementation of the Companies (Amendment) Act ,381,523 (3,381,523) Dividends paid in relation to year ended 31 March 2005 of 0.31 cents per share, less tax at 20% (391,874) (391,874) - (391,874) At 31 March 17,633,743-1,313 (1,485,364) 4,396,674 20,546, ,682 21,303,048 The accompanying notes form an integral part of these financial statements.

31 FINANCIAL REPORT CONSOLIDATED STATEMENT OF CASH FLOWS Year Ended 31 March Note 2005 Operating activities Profit before tax 18, ,293 Adjustments for: Impairment loss on quoted investments - 93,000 Dividend income (6,499) (5,966) Depreciation of property, plant and equipment 3 959, ,155 Amortisation of goodwill 4-21,774 Loss/(Gain) on disposal of property, plant and equipment 5,705 (2,700) Share of profit of associate (3,655) - Share of (profit)/loss of jointly-controlled entity (584) 23 Interest income (71,033) (443) Gain on disposal of quoted investments (60,650) (265,089) Interest expense 566, ,523 Gain on remeasurement of investments held for trading (87,352) - Exchange loss on investing investments 15,384 - Operating profit before working capital changes 1,335,831 1,537,570 Changes in working capital: Inventories 11,498 (4,684) Trade and other receivables 104,073 (423,310) Trade and other payables 14,824 (72,530) Cash generated from operations 1,466,226 1,037,046 Income taxes paid (208,605) (267,943) Cash flows from operating activities 1,257, ,103 Investing activities Interest received 71, Dividend received 6,499 5,966 Purchase of property, plant and equipment (16,666,426) (2,867,418) Proceeds from sale of property, plant and equipment 3,756 2,700 Purchase of quoted investments - (33,004) Proceeds from sale of quoted investments 277, ,800 Purchase of equity interest in associate (1,184,484) - Fixed deposit charged to bank (40,379) (95,408) Net cash inflow on acquisition of subsidiary 24 51,532 - Purchase of additional equity interest in subsidiary (64,455) - Cash flows used in investing activities (17,545,874) (2,334,042) Financing activities Interest paid (566,807) (288,311) Dividends paid (391,874) (274,391) Payment of finance lease liabilities (22,286) (22,286) Proceeds from bank loans 15,815,298 4,000,000 Repayment of bank loans (3,327,388) (2,233,469) Net proceeds from issuance of shares 7,666,860 - Cash flows used in financing activities 19,173,803 1,181,543 Net increase/(decrease) in cash and cash equivalents 2,885,550 (383,396) Cash and cash equivalents at beginning of the year 239, ,745 Effect of exchange rate changes on balances held in foreign currencies 3,341 - Cash and cash equivalents at end of the year 11 3,128, ,349 The accompanying notes form an integral part of these financial statements. Annual Report 29

32 NOTES TO THE FINANCIAL STATEMENTS These notes form an integral part of the financial statements. The financial statements were authorised for issue by the directors on 21 June. 1 Domicile and Activities China Healthcare Limited (the Company) is incorporated in the Republic of Singapore and has its principal place of business at 20 Jalan Afifi, #06-02/03/04, CISCO Centre II, Singapore The principal activities of the Company are those relating to investment holding, provision of management services and letting of properties. The immediate and ultimate holding companies during the financial year were Econ Medicare Centre Holdings Pte Ltd and TMI Holdings (1997) Pte Ltd respectively. Both were incorporated in Singapore. The consolidated financial statements relate to the Company and its subsidiaries (referred to as the Group) and the Group s interests in an associate and a jointly-controlled entity. 2 Summary of Significant Accounting Policies 2.1 Basis of preparation The financial statements are prepared in accordance with Singapore Financial Reporting Standards (FRS) including related Interpretations promulgated by the Council on Corporate Disclosure and Governance. During the financial year, the Group adopted the following new/revised FRSs which are relevant to its operations: FRS 1 (revised) Presentation of Financial Statements FRS 2 (revised) Inventories FRS 8 (revised) Accounting Policies, Changes in Accounting Estimates and Errors FRS 10 (revised) Events After the Balance Sheet Date FRS 16 (revised) Property, Plant and Equipment FRS 21 (revised) The Effects of Changes in Foreign Exchange Rates FRS 24 (revised) Related Party Disclosures FRS 27 (revised) Consolidated and Separate Financial Statements FRS 28 (revised) Investment in Associates FRS 31 (revised) Interests in Joint Ventures FRS 32 (revised) Financial Instruments: Disclosure and Presentation FRS 33 (revised) Earnings Per Share FRS 36 (revised) Impairment of Assets FRS 38 (revised) Intangible Assets FRS 39 Financial Instruments: Recognition and Measurement FRS 102 Share-based Payment FRS 103 Business Combinations FRS 105 Non-current Assets Held for Sale and Discontinued Operations The effects of adopting the new/revised FRSs during the financial year are set out in note 23.

33 FINANCIAL REPORT NOTES TO THE FINANCIAL STATEMENTS 2 Summary of Significant Accounting Policies (Cont d) 2.1 Basis of preparation (Cont d) The financial statements are presented in Singapore dollars, unless otherwise stated. They are prepared on the historical cost basis except as disclosed in the accounting policies below. The preparation of financial statements in conformity with FRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods. In the process of applying the Group s accounting policies, the management is of the opinion that any instances of application of judgements are not expected to have a significant effect on the amounts recognised in the financial statements, apart from those involving estimations. The main areas for which the use of different estimates and assumptions could cause material adjustment to the carrying amounts of assets are discussed below. Goodwill impairment testing Impairment loss is recognised when the carrying amount of the cash generating unit to which the goodwill is allocated, exceeds the recoverable amount. The recoverable amount is the greater of the net selling price and value-in-use. The calculation of the value-inuse requires the management to estimate the future cashflows expected from the cash generating unit and an appropriate discount rate in order to calculate the present value of the future cashflows. No impairment loss is recognised in the financial year ended 31 March (note 4). Impairment of available-for-sale investments The Group assesses whether the impairment on available-for-sale investments are other-than temporary impaired based on assumptions regarding the duration and extent to which the fair value of the investment is less than its cost, and the financial health of and near-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cashflow. Deferred tax valuation The Group recognises deferred tax assets for loss carry-forwards and deductible temporary differences after estimating the amount of future taxable profit that will be probable, against which the loss carry-forwards and deductible temporary difference can be utilised. For this, management considers the scheduled reversal of temporary differences and projected future taxable income. For subsidiaries with cumulative losses incurred, the management believes that it is not probable that the temporary differences arising from the wear and tear allowances and tax losses can be utilised. Accordingly, the deferred tax assets have not been recognised. Impairment of receivables Impairment losses are recorded to cover the risk of non-recovery of receivables when there is objective evidence of impairment. This impairment is assessed on a case-by-case basis or using a statistical approach based on portfolios of receivables with similar credit risk profiles. Annual Report 31

34 NOTES TO THE FINANCIAL STATEMENTS 2 Summary of Significant Accounting Policies (Cont d) 2.2 Consolidation Subsidiaries are companies controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of a company so as to obtain benefits from its activities. Investments in subsidiaries are stated in the Company s balance sheet at cost less impairment losses. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Associates are companies in which the Group has significant influence, but not control, over financial and operating policies. Jointly-controlled entities are entities over whose activities the Group has joint control, established by contractual agreement. Investments in associates and jointly-controlled entities are stated in the Company s balance sheet at cost, less impairment losses. In the Group s financial statements, they are accounted for using the equity method of accounting. The Group s investment in these entities includes goodwill on acquisition. Business combinations are accounted for under the purchase method. The cost of an acquisition is measured at the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. The excess of the Group s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition is credited to the profit and loss account in the period of the acquisition. 2.3 Goodwill on consolidation Goodwill arising on acquisition represents the excess of the cost of acquisition over the fair value of the Group s share of the identifiable net assets acquired. Goodwill is stated at cost less impairment losses. Goodwill is tested for impairment on an annual basis as described in note Foreign currencies (i) Foreign currency and transactions Foreign currency transactions are translated at foreign exchange rates ruling at transaction dates. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into Singapore dollars at rates of exchange ruling at that date. Foreign exchange differences arising from translation are recognised in the profit and loss account. Non-monetary assets and liabilities measured at cost in foreign currencies are translated to Singapore dollars using exchange rates at the date of the transaction. Non-monetary assets and liabilities measured at fair value in foreign currencies are translated to Singapore dollars at foreign exchange rates ruling at the dates the fair value was determined. (ii) Foreign operations The assets and liabilities of foreign operations including goodwill and fair value adjustments arising on the acquisition of foreign operations are translated to Singapore dollars for consolidation at the rates of exchange ruling at the balance sheet date. Revenue and expenses of foreign operations are translated at the average exchange rates for the year. Exchange differences arising on translation are recognised directly in equity. On disposal, the accumulated translation differences are recognised in the consolidated profit and loss account as part of the gain or loss on sale.

35 FINANCIAL REPORT NOTES TO THE FINANCIAL STATEMENTS 2 Summary of Significant Accounting Policies (Cont d) 2.5 Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses except for freehold land and building which are stated at their revalued amounts. The revalued amount is the fair value determined on the basis of existing use at the date of revaluation less any subsequent accumulated depreciation. Revaluations are performed by independent professional valuers with sufficient regularity to ensure that the carrying amount of these assets does not differ materially from that which would be determined using fair values at the balance sheet date. Any increase in revaluation is credited to the revaluation reserve unless it offsets a previous decrease in value recognised in the profit and loss account. A decrease in value is recognised in the profit and loss account where it exceeds the increase previously recognised in the revaluation reserve. Upon disposal, any related revaluation surplus is transferred from the revaluation reserve to accumulated profits and is not taken into account in arriving at the gain or loss on disposal. Property, plant and equipment acquired through finance leases is capitalised at the lower of its fair value and the present value of the minimum lease payments at the inception of the lease, less accumulated depreciation and impairment losses. 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 directly against the profit and loss account. Capitalised leased assets are depreciated over the shorter of the economic useful life of the asset and the lease term. No depreciation is provided on freehold land and properties under construction. Depreciation is provided on a straight-line basis so as to write off items of property, plant and equipment over their estimated useful lives as follows: Freehold buildings Leasehold building Nursing home and hospital equipment Ambulances and medical equipment Furniture and fittings Office and other equipment Renovations Motor vehicles Computers and accessories 50 years remaining lease period 10 years 5 years 10 years 5 years shorter of 20% and remaining lease period 5 years 3 years The useful lives and residual values, if not insignificant, are reassessed annually. 2.6 Financial assets Investments in entities over which the Group does not have control, joint-control or significant influence are classified as available-for-sale investments and are stated at fair value, with any resultant gain or loss being recognised directly in equity. The exceptions are impairment losses and foreign exchange gains and losses on monetary items, which are recognised in the profit and loss account. When these investments are derecognised, the cumulative gain or loss previously recognised directly in equity is recognised in the profit and loss account. The fair value of financial instruments classified as held-for-trading and available-for-sale is determined using the market bid prices of quoted investments at the balance sheet date. Where these financial instruments do not have quoted market prices in an active market and other methods of determining fair value do not result in a reasonable estimate, they are stated at cost less impairment losses. Financial assets classified as held-for-trading or available-for-sale investments are recognised by the Group on the date it commits to purchase the investments, and derecognised on the date a sale is committed. Annual Report 33

36 NOTES TO THE FINANCIAL STATEMENTS 2 Summary of Significant Accounting Policies (Cont d) 2.7 Affiliate An affiliate is defined as one, other than a related corporation, which has common direct or indirect shareholders or common directors with the Company. Amounts due from affiliate are stated at cost less allowance for doubtful receivables. 2.8 Inventories Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the first-in, first-out formula and comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. 2.9 Trade and other receivables Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less allowance for impairment Cash and cash equivalents Cash and cash equivalents comprise cash balances and bank deposits. For the purpose of the statement of cash flows, cash and cash equivalents are presented net of bank overdrafts which are repayable on demand and which form an integral part of the Group s cash management Impairment The carrying amounts of the Company s assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the assets recoverable amounts are estimated. An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. The impairment loss is charged to the profit and loss account. Calculation of recoverable amount The recoverable amount of the assets is the greater of their net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs. Reversal of impairment An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been recognised. Reversals of impairment are recognised in the profit and loss account Liabilities and interest-bearing liabilities Trade and other payables are recognised initially at fair value, and subsequently at amortised cost, using the effective interest method. Interest-bearing liabilities are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing liabilities are stated at amortised cost with any difference between cost and redemption value being recognised in the profit and loss account over the period of the borrowings on an effective interest basis.

37 FINANCIAL REPORT NOTES TO THE FINANCIAL STATEMENTS 2 Summary of Significant Accounting Policies (Cont d) 2.13 Employee benefits Defined contribution plans Obligations for contributions to defined contribution plans are recognised as an expense in the profit and loss account as incurred. Short-term compensated absences Short-term accumulating compensated absences are recognised when the employees render services that increase their entitlement to future compensated absences. Share-based payments The share option programme allows the Group s employees to acquire shares of the Company. The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. At each balance sheet date, the Company revises its estimates of the number of options that are expected to become exercisable. It recognises the impact of the revision of original estimates in employee expense and in a corresponding adjustment to equity over the remaining vesting period. The proceeds received net of any directly attributable transactions costs are credited to share capital when the options are exercised. No options have been granted during the year Provisions A provision is recognised in the balance sheet when the Group has a present obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and the amount can be reliably estimated. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability Income tax Income tax on the results for the year comprises current and deferred tax. Income tax is recognised in the profit and loss account except for the tax effects of items recognised directly in equity, which are recognised in the statement of changes in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Temporary differences are not recognised for goodwill not deductible for tax purposes and for the initial recognition of assets or liabilities that affect neither accounting nor taxable profit. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax is provided on temporary differences arising on investments in subsidiaries, associates and jointly-controlled entities, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not be reversed in the foreseeable future. Annual Report 35

38 NOTES TO THE FINANCIAL STATEMENTS 2 Summary of Significant Accounting Policies (Cont d) 2.16 Share capital Dividends on ordinary shares are recognised as a liability in the period in which they are declared Revenue recognition Home fees, other ancillary services and management fees Revenue is recognised upon services rendered. Rental income Rental income from property leases is recognised on an accrual basis. Dividends Dividend income is recognised when the right to receive payment is established Operating leases Where the Group has the use of assets under operating leases, payments made under the leases are recognised in the profit and loss account on a straight-line basis over the term of the lease Finance costs Interest expense and similar charges are expensed in the profit and loss account in the period in which they are incurred, except to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to prepare for its intended use or sale. The interest component of finance lease payments is recognised in the profit and loss account using the effective interest rate method Key management personnel Key management personnel of the Group are those persons having the authority and responsibility for planning, directing and controlling the activities of the Company. The Board of Directors and senior management team are considered as key management personnel of the Company.

39 FINANCIAL REPORT 3 Property, Plant and Equipment Valuation Cost Freehold land Freehold building Leasehold building Freehold building Properties under construction Nursing home and hospital equipment Ambulances and medical equipment Furniture and fittings Office and other equipment Renovations Motor vehicles Computers and accessories Total Group At 1 April ,820, ,000 4,800,000 2,528, , , , , , , , ,992 20,032,939 Additions ,374, ,698 46,297 46, ,892 19,492-84,263 2,903,206 Reclassifications ,682 (300,682) Disposals (187,929) (187,929) At 31 March ,820, ,000 4,800,000 2,528,022 2,621,730 1,312, , , , , , ,255 22,748,216 At 1 April ,820, ,000 4,800,000 2,528,022 2,621,730 1,312, , , , , , ,255 22,748,216 Additions 9,318,010 5,096, ,258, ,178 3, ,789 10, ,480-43,988 16,666,426 Assets acquired in business combination ,739-9,273 20, ,983-2, ,225 Reclassifications - 2,186, (3,604,238) ,417, Disposals (11,071) - (15,405) - (25,104) - (206) (51,786) At 31 March 18,138,010 7,963,384 4,800,000 2,528, ,535 1,635, , , ,983 2,887, , ,245 40,095,081 Accumulated depreciation At 1 April , ,834 25, , , ,921 50, ,871 28,638 84,496 1,540,385 Depreciation charge for the year - 13,600 96,344 50, ,499 38,046 81,630 23,703 45,957 46,035 34, ,155 Reclassifications ,609 (40,609) Disposals (187,929) (187,929) At 31 March , ,178 75, , , ,551 74, ,828 74, ,277 1,953,611 At 1 April , ,178 75, , , ,551 74, ,828 74, ,277 1,953,611 Depreciation charge for the year - 155, , ,470 38,247 85,175 69, ,711 57,917 58, ,143 Translation differences on consolidation , , ,170 Disposals (6,082) - (11,036) - (25,104) - (103) (42,325) At 31 March - 189, ,802 75, , , , , , , ,870 2,884,599 Annual Report 37

40 3 Property, Plant and Equipment (Cont d) Valuation Cost Freehold land Freehold building Leasehold building Freehold building Properties under construction Nursing home and hospital equipment Ambulances and medical equipment Furniture and fittings Office and other equipment Renovations Motor vehicles Computers and accessories Total Group Carrying amount At 1 April ,820, ,600 4,625,166 2,502, , , , ,792 63, , ,448 54,496 18,492,554 At 31 March ,820, ,000 4,528,822 2,452,182 2,621, , , , , , , ,978 20,794,605 At 1 April ,820, ,000 4,528,822 2,452,182 2,621, , , , , , , ,978 20,794,605 At 31 March 18,138,010 7,774,166 4,365,198 2,452, , ,544 88, , ,372 2,570,495 88,496 91,375 37,210,482

41 FINANCIAL REPORT 3 Property, Plant and Equipment (Cont d) Company At cost Freehold land and buildings Properties under construction Furniture and fittings Office and other equipment Renovations Motor vehicles Computers and accessories Total At 1 April ,028, ,207 9,935 25,330 86, ,230 51,569 12,636,631 Additions - 2,374,523-3,418 3,337-67,549 2,448,827 At 31 March ,028,022 2,621,730 9,935 28,748 89, , ,118 15,085,458 At 1 April ,028,022 2,621,730 9,935 28,748 89, , ,118 15,085,458 Additions 14,414,600 1,068, ,369 15,512,689 Transfers 2,186,794 (3,604,238) - - 1,417, At 31 March 28,629,416 85,712 9,935 29,248 1,507, , ,487 30,598,147 Accumulated depreciation At 1 April ,680-1,126 3,932 47,487 24,444 8, ,127 Depreciation charge for the year 64, ,695 13,791 37,646 26, ,782 At 31 March ,840-2,120 6,627 61,278 62,090 34, ,909 At 1 April ,840-2,120 6,627 61,278 62,090 34, ,909 Depreciation charge for the year 155, ,986 54,518 37,646 46, ,331 At 31 March 265,058-3,114 17, ,796 99,736 81, ,240 Carrying amount At 1 April ,982, ,207 8,809 21,398 38, ,786 43,111 12,505,504 At 31 March ,918,182 2,621,730 7,815 22,121 28, ,140 84,164 14,808,549 At 1 April ,918,182 2,621,730 7,815 22,121 28, ,140 84,164 14,808,549 At 31 March 28,364,358 85,712 6,821 11,635 1,391,323 88,494 66,564 30,014,907 Annual Report 39

42 3 Property, Plant and Equipment (Cont d) The carrying amount of property, plant and equipment of the Group includes amounts totalling 88,494 (2005: 126,140) held under finance leases. The revalued freehold land and building of the Group are stated at valuation which were arrived at by a firm of professional valuers, DTZ Debenham Tie Leung (SEA) Pte Ltd based on the open market value of the respective properties as at 31 March The carrying amount of the revalued freehold land and building of the Group would have been approximately 6,724,000 (2005: 6,811,000) had the freehold land and building been carried at cost less accumulated depreciation. All freehold land and buildings of the Group and of the Company are mortgaged as security for banking facilities (refer to note 14). 4 Goodwill on Consolidation Cost At 1 April 2004 and 31 March ,774 At 1 April 2005, as previously reported 217,774 Effects of adopting FRS 103 (32,661) At 1 April 2005, restated 185,113 Additions 636 At 31 March 185,749 Accumulated amortisation At 1 April ,887 Amortisation 21,774 At 31 March ,661 At 1 April 2005, as previously reported 32,661 Effects of adopting FRS 103 (32,661) At 1 April 2005, restated and 31 March - Carrying amount At 1 April ,887 At 31 March ,113 At 31 March 185,749 Impairment tests for goodwill Goodwill is allocated to the cash-generating unit identified as the hospital extension ward management business within the Group s other ancillary services segment. The recoverable amount of the cash-generating unit is based on its fair value less costs to sell. The fair value is primarily determined by an independent valuation of the building with a remaining lease term of 33.5 years and based on prevailing property market conditions in March. No impairment loss was recognised as the recoverable amount of the cash-generating unit exceeded the carrying amount. 5 Subsidiaries Company 2005 Unquoted equity shares, at cost 3,969,824 3,865,370 Loan to subsidiary 1,070,000 1,070,000 5,039,824 4,935,370

43 FINANCIAL REPORT 5 Subsidiaries (Cont d) Details of the subsidiaries are as follows: Name of subsidiary Country of incorporation Effective interest held by the Group % 2005 % Held by the Company Econ Nursing Home Services (1987) Pte Ltd Singapore Sunnyville Nursing Home (1996) Pte Ltd Singapore Econ Ambulance Services Pte Ltd Singapore Econ Medicare Centre Pte Ltd Singapore Econ Careskill Training Centre Pte Ltd Singapore Econ Healthcare (China) Pte. Ltd. Singapore Econ TCM Services Pte. Ltd. (formerly known as Econ Traditional Chinese Medical Centre Pte. Ltd.) Singapore Econ Healthcare (M) Pte. Ltd. Singapore West Point Family Hospital Pte Ltd Singapore Econ Healthcare (S) Pte. Ltd. (formerly known as EHL (S) Pte. Ltd.) Singapore Held by Econ Careskill Training Centre Pte Ltd EHL Language Centre Pte. Ltd. Singapore Held by Econ Healthcare (M) Pte. Ltd. Econ Healthcare (M) Sdn. Bhd (formerly known as Gentle Rich Sdn. Bhd.) Econ Medicare Centre Sdn. Bhd. (formerly known as Global Effect Sdn. Bhd) Malaysia Malaysia All of the above subsidiaries are audited by KPMG Singapore, except for Econ Healthcare (M) Sdn. Bhd. and Econ Medicare Centre Sdn. Bhd. which are audited by BDO Binder, Kuala Lumpur. For purposes of consolidation under FRS 27 Consolidated and Separate Financial Statements, West Point Family Hospital Pte Ltd is considered to be a subsidiary of the Company because the Company controls the appointment of more than half of the Board of Directors. The loan to subsidiary, West Point Family Hospital Pte Ltd is interest-free, unsecured and will be capitalised on a date falling on or after 5 years from 23 June 2003 or such later date as the Company may specify. Pursuant to the capitalisation of the loan, the Company shall be allotted the aggregate number of ordinary shares in the subsidiary equivalent to the amount of the loan divided by the par value of the ordinary shares of the subsidiary at time of capitalisation. The subsidiary shall upon capitalisation, issue to the Company with such percentage of its share capital such that the Company shall hold in aggregate 60 per cent of the issued share capital of the subsidiary at the time of capitalisation. Annual Report 41

44 6 Associate Group Investment in associate 1,188, Investment in associate at 31 March includes goodwill of approximately 509,000 (2005: Nil). Details of the associate are as follows: Name of associate Place of incorporation and business Effective interest held by the Group % Held by Econ Healthcare (China) Pte. Ltd. 1 Boxuan Medical Equipment Pte. Ltd. Singapore Audited by KPMG Singapore 2005 % The financial information of the associate is as follows: Profit and loss account Revenue 2,362,344 Expenses (2,344,069) Profit after taxation 18,275 Balance sheet Total assets 6,644,038 Total liabilities 3,947,888 7 Jointly-Controlled Entity Group Unquoted equity shares, at cost - 23 Share of post-acquisition loss - (23) Details of the jointly-controlled entity are as follows: Name of jointly-controlled entity Held by Econ Healthcare (M) Pte. Ltd. Econ Medicare Centre Sdn. Bhd. (formerly known as Global Effect Sdn. Bhd.) Principal activities Provision of healthcare services Place of incorporation and business Effective interest held by the Group 2005 % % Malaysia - 50

45 FINANCIAL REPORT 7 Jointly-Controlled Entity(Cont d) The Group s share of the jointly-controlled entity s results is as follows: 2005 Results 392, ,149 Revenue Expenses (336,072) (173,612) Profit / (Loss) before taxation 56,361 (43,463) Income tax expense (14,004) - Profit / (Loss) after taxation 42,357 (43,463) Assets and liabilities Non-current assets - 363,688 Curent assets - 51,227 Current liabilities - (460,126) Net liabilities - (45,211) In 2005, the Group discontinued applying the equity method of accounting for its investment in jointly-controlled entity when its share of losses accounted for by the equity method exceeded the carrying amount of the investment. The unrecognised share of losses amounted to 45,980 as at 31 March The Group increased its interest in Econ Medicare Centre Sdn. Bhd. from 50% to 100% in January. The investment is thereafter accounted for as interests in subsidiaries. 8 Other Investments Group and Company Note 2005 Non-current investments Unquoted equity securities available-for-sale (a) 1,999,000 1,999,000 Current investments Quoted equity securities held-for-trading (b) 216, ,418 (a) The fair value of investments in unquoted equity securities is not available as there is no quoted market prices in an active market and other methods of determining fair value do not result in a reasonable estimate. The unquoted equity securities are carried at cost less impairment losses. (b) With the adoption of FRS 39 on 1 April 2005, quoted equity securities held-for-trading are stated at fair value. At 31 March 2005, these investments were stated at cost of 378,418 less impairment loss of 93,000. The differences between the fair values and the carrying amounts of these investments at 1 April 2005 are taken to the opening balance of the accumulated profits at that date. 9 Inventories Inventories consist of drugs, pharmaceutical products and hospital accessories. Annual Report 43

46 10 Trade and Other Receivables Group 2005 Company 2005 Trade receivables 1,343,861 1,152,936 1,890 - Home fees billed in advance (41,328) (45,109) - - Allowance for doubtful receivables (212,774) (220,140) - - Net receivables 1,089, ,687 1,890 - Deposits 402, , , ,205 Prepayments 56,069 22,688 5,722 3,900 Staff advances 9,167 7, Other receivables 286, , , ,950 Amounts due from: Subsidiaries (non-trade) - - 5,061,415 1,555,337 Jointly-controlled entity (non-trade) - 536, Minority shareholder of a subsidiary (non-trade) - 5, Affiliate (non-trade) 49,680 49,680 49,680 49,680 1,893,673 1,968,029 5,421,362 1,904,072 The non-trade amounts due from subsidiaries, jointly-controlled entity, minority shareholder of a subsidiary and affiliate are unsecured, interest-free and repayable on demand. 11 Cash and Cash Equivalents Note Group 2005 Company 2005 Cash at bank and in hand 1,109, , ,558 14,900 Fixed deposits 2,173, ,627 2,096,550 95,287 3,283, ,561 2,662, ,187 Deposit pledged (155,006) (114,627) (96,505) (95,287) Secured bank overdrafts 14 - (445,585) - (445,585) 3,128, ,349 2,565,603 (430,685) The weighted average effective interest rate per annum relating to fixed deposits at the balance sheet date is 2.38% (2005: 1.25%). Interest rates reprice yearly. 12 Share Capital Company 2005 No. of shares No. of Shares Paid-up capital: At 1 April 109,756,000 6,585, ,756,000 6,585,360 Issue of shares 46,993,500 7,753, Expense incurred in relation to the issue of shares - (87,068) - - Transfer from share premium upon implementation of the Companies (Amendment) Act ,381, ,749,500 17,633, ,756,000 6,585,360

47 FINANCIAL REPORT 12 Share Capital(Cont d) The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company s residual assets. On the date of commencement of the Companies (Amendment) Act 2005 on 30 January : (a) (b) (c) the concept of authorised share capital was abolished; share of the Company ceased to have par value; and share premium is transferred to share capital. 13 Reserves The application of the share premium account was governed by Section 69 of the Companies Act, Chapter 50. The currency translation reserve of the Group comprises foreign exchange differences arising from the translation of the financial statements of subsidiaries whose measurement currencies are different from that of the Company. The merger deficit arises from the difference between the nominal value of shares issued by the Company and the nominal value of shares of the subsidiaries acquired under the historical cost method of consolidation. 14 Interest-Bearing Borrowings Group and Company Note 2005 Current liabilities Secured bank overdrafts ,585 Secured bank loans 1,045,914 1,002,276 Unsecured revolving credit - 500,000 Finance lease liabilities 22,286 22,286 1,068,200 1,970,147 Non-current liabilities Secured bank loans 19,840,709 6,896,437 Finance lease liabilities 32,302 54,588 19,873,011 6,951,025 Total borrowings 20,941,211 8,921,172 Maturity of borrowings (excluding finance lease liabilities) Group and Company 2005 Within 1 year 1,045,914 1,947,861 After 1 year but within 5 years 4,873,693 3,362,594 After 5 years 14,967,016 3,533,843 Total borrowings 20,886,623 8,844,298 The bank loans and bank overdrafts are secured by corporate guarantees from its subsidiaries, Econ Nursing Home Services (1987) Pte Ltd and Econ Medicare Centre Pte Ltd, and on the freehold land and buildings with carrying amount of 28,364,358 at 31 March (2005: 11,918,182). Annual Report 45

48 14 Interest-Bearing Borrowings (Cont d) Finance lease liabilities At 31 March, the Group and Company had obligations under finance leases that are payable as follows: Principal Interest Payments Group and Company Repayable within 1 year 22,286 2,782 25,068 Repayable after 1 year but within 5 years 32,302 4,102 36,404 54,588 6,884 61, Repayable within 1 year 22,286 2,782 25,068 Repayable after 1 year but within 5 years 54,588 6,884 61,472 76,874 9,666 86,540 Effective interest rates and repricing analysis Effective interest rate % Floating interest Fixed interest rate maturing within 1 to 5 1 year years Total Group and Company S floating rate loan ,886, ,886,623 Finance lease liabilities ,286 32,302 54,588 20,886,623 22,286 32,302 20,941, S floating rate loan ,921, ,921,096 S fixed rate loan , , ,617 Unsecured revolving credit , ,000 Secured bank overdrafts , ,585 Finance lease liabilities ,286 54,588 76,874 7,866, , ,205 8,921, Deferred Tax Liabilities Movements in deferred tax liabilities and assets during the year are as follows: At 1/4/2005 Effects of adopting FRS 39 Charged to profit and loss account (note 21) At 31/3/ Group Deferred tax liabilities Property, plant and equipment 106,416-88, ,849 Investments held for trading - 12,706 4,729 17, ,416 12,706 93, ,284 Deferred tax assets Trade and other receivables (8,570) - - (8,570) Liability for short-term accumulating compensated absences (8,938) - - (8,938) (17,508) - - (17,508)

49 FINANCIAL REPORT 15 Deferred Tax Liabilities (Cont d) Deferred tax liabilities and assets are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same taxation authority. The net amounts, determined after appropriate offsetting are as follows: Group 2005 Deferred tax liabilities 194,776 88,908 The following temporary differences have not been recognised: Group 2005 Unutilised wear and tear allowances 1,466,000 1,098,000 Tax losses 12,588,000 12,024,855 14,054,000 13,122,855 Deferred tax assets have not been recognised in respect of these items as it is not probable that future taxable profit will be available against which the temporary differences can be utilised. The unutilised wear and tear allowances and tax losses are subject to agreement by the tax authorities. At 1/4/2005 Effects of adopting FRS 39 Charged to profit and loss account (note 21) At 31/3/ Company Deferred tax liabilities Property, plant and equipment ,641 41,641 Investments held for trading - 12,706 4,729 17,435-12,706 46,370 59, Trade and Other Payables Group Company Trade payables and accrued operating expenses 996, , , ,911 Refundable deposits 736, , Home fees collected in advance 24,269 11, Course fees collected in advance 44, Liability for short-term accumulated compensated absences 42,159 36, Amounts due to: Subsidiaries (non-trade) - - 3,345,985 3,935,589 Minority shareholder of a subsidiary (loan) 1,000,000 1,000, Minority shareholder of a subsidiary (non-trade) 45, Other payables 359,584 97, ,471 11,744 3,248,192 2,419,258 3,740,731 4,050,244 The loan due to minority shareholder of a subsidiary is unsecured and repayable on demand. The effective interest rate at the end of the financial year is 3.95% (2005: 3.85%) per annum. Interest rates are pegged to the prevailing market rates. The non-trade amounts due to subsidiaries and minority shareholder of a subsidiary are unsecured, interest-free and repayable on demand. Annual Report 47

50 17 Revenue Group 2005 Home fees 7,910,192 7,396,646 Other ancillary services 5,676,642 6,001,504 Rental income 38,967 12,000 Management fees 1,500 8,512 13,627,301 13,418, Finance Costs Group 2005 Interest paid and payable to: Bank 534, ,892 Finance lease creditors 2,782 2,782 Minority shareholder of a subsidiary 39,521 36,637 Total finance costs 577, ,311 Less: Finance costs capitalised in properties under construction (10,358) (35,788) 566, , Profit Before Tax The following items have been included in arriving at profit before tax: Group 2005 Dividend income from investments (6,499) (5,966) Interest income (71,033) (443) Exchange loss 28,784 - Impairment loss on quoted investments - 93,000 Non-audit fees paid to auditors of the Company - 1,500 Contributions to defined contribution plans included in staff costs 325, ,344 Allowance for doubtful receivables (reversed)/made (7,366) 165,950 Pre-operating expenses - 3,413 Bad debts written off 71,762 - Loss/(Gain) on disposal of property, plant and equipment 5,705 (2,700) Gain on disposal of quoted investments (60,650) (265,089) Gain on remeasurement of investments held for trading (87,352) - 20 Remuneration to Key Management Personnel Remuneration paid or payable to key management personnel is recognised in the following line items in the profit and loss account: Group 2005 Staff costs 359, ,006 Other operating expenses 44,000 36, , ,006

51 FINANCIAL REPORT 21 Income Taxes Note Group 2005 Current tax expense Current year 396, ,793 Under/(Over) provided in prior years 26,240 (106,999) Group relief (152,013) (78,834) 270,229 71,960 Deferred tax expense Movements in temporary differences 46,718 20,460 Under provided in prior years 46,444 16, ,162 36,908 Income tax expense 363, ,868 Reconciliation of effective tax rate Group Note 2005 Profit before tax 18, ,293 Income tax using Singapore tax rate of 20% 3, ,659 Expenses not deductible for tax purposes 134,933 52,217 Tax exempt revenues (34,168) (121,228) Deferred tax assets not recognised 186,229 99,771 Amount of loss for which tax credit has not been recognised 152,013 78,834 Benefit on tax losses transferred in (152,013) (78,834) Under/(Over) provided in prior years 72,684 (90,551) 363, , Basic Earnings Per Share Note Group 2005 Basic and diluted earnings per share is based on: Net profit for the year 260, ,316 No. of shares No. of shares Weighted average number of shares outstanding during the year 141,259, ,756, Changes in Accounting Policies The accounting policies set out in note 2 have been applied in preparing the financial statements for the year ended 31 March. The changes in accounting policies arising from the adoption of FRS 39 Financial Instruments: Recognition and Measurement, FRS 103 Business Combinations, FRS 36 (revised) Impairment of Assets and FRS 38 (revised) Intangible Assets are summarised below: FRS 39 Financial Instruments: Recognition and Measurement The adoption of FRS 39 resulted in the Group measuring its held-for-trading investments at fair value. Financial assets and liabilities are stated at amortised cost instead of cost. This change has been accounted for by the Group by increasing the opening balance at 1 April 2005 of the accumulated profits by 48,304. Comparatives have not been restated. FRS 103 Business Combinations, FRS 36 (revised) Impairment of Assets, FRS 38 (revised) Intangible assets The adoption of FRS 103, FRS 36 (revised) and FRS 38 (revised) has resulted in a change in accounting policy for goodwill. Annual Report 49

52 23 Changes in Accounting Policies (Cont d) Until 31 March 2005, goodwill was amortised on a straight-line basis over a period of 10 years. In accordance with FRS 103, the Company ceased amortisation of goodwill from 1 April 2005 and the accumulated amortisation of 32,661 has been eliminated with a corresponding decease in goodwill. Goodwill is thereafter tested for impairment annually, or when circumstances change, indicating that goodwill might be impaired. Had there not been a change in accounting policy, the profit attributable to equity holders of the parent for the year ended 31 March would decrease by 21, Acquisition of Subsidiaries (i) In August 2005, the Group acquired all the remaining shares in Econ TCM Services Pte. Ltd. (formerly known as Econ Traditional Chinese Medical Centre Pte. Ltd.), an existing subsidiary, for 64,455 in cash representing the fair value of the net assets acquired. (ii) In December 2005, the Group acquired additional equity interest in Econ Medicare Centre Sdn. Bhd. (formerly known as Global Effect Sdn. Bhd.). Previously, Econ Medicare Centre Sdn. Bhd. was accounted for as an associate. Following the acquisition, Econ Medicare Centre Sdn. Bhd. became a wholly-owned subsidiary of the Group. The cash flows and net assets acquired are provided below: Property, plant and equipment 732,225 Trade and other receivables 29,717 Cash and cash equivalents 52,061 Trade and other payables (814,110) Net identifiable assets and liabilities (107) Goodwill on consolidation 636 Cash consideration paid, satisfied in cash 529 Cash acquired (52,061) Net cash inflow (51,532) Since acquisition, the subsidiaries contributed a net profit of 27,190 to the consolidated results for the year. If the acquisitions had occurred on 1 April 2005, Group revenue would have been 14,019,734 and net loss would have been 288,464. There were no acquisitions in the year ended 31 March Commitments Group 2005 Company 2005 Capital expenditure contracted but not provided for - 1,158,980-1,158,980 At 31 March 2005, the balance sheet date, the directors proposed a final dividend of 342,988 less tax of 20%. The dividend has not been provided for at that date. No dividends have been proposed at 31 March.

53 FINANCIAL REPORT 26 Significant Related Party Transactions For the purposes of these financial statements, parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. Significant related party transactions, at terms agreed between the parties, are as follows: Group 2005 (i) Rental expenses paid to: Immediate holding company 388,200 1,193,000 Related corporation 198, , ,200 1,391,000 (ii) Sale of healthcare equipment to jointly-controlled entity - (122,850) On 23 October 2002, the Group and the Company entered into a three-year option (the Option ), for a nominal consideration of 8.00, to acquire the property at 452 Upper East Coast Road, Singapore from the immediate holding company, at the prevailing market value at the time of exercise of the Option based on an independent valuation. The Option became effective upon the listing of the Company s shares on the SGX-Sesdaq and was due to expire at 4.00 pm on 22 October On 4 August 2005, the Company exercised the Option for a cash consideration of 14,000,000 based on valuation arrived at by Messrs Knight Frank Cheong Chye & Ballieu, a firm of professional valuers. 27 Segment Reporting Segment information is presented in respect of the Group s business segments. The primary format, business segments, is based on the Group s management and internal reporting structure. Geographical segment information is not presented as the Group operates mainly in Singapore. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise corporate assets and expenses, interest expenses and related assets and liabilities. The Group comprises the following main business segments: Operation of medicare centres and nursing homes : Operation of four medicare centres and two nursing homes. Other ancillary services : Provision of homecare services, hospital extension ward management services, ambulance services and sale and rental of healthcare equipment and accessories. Annual Report 51

54 27 Segment Reporting (Cont d) Operation of medicare centres and nursing homes Other ancillary services Eliminations Total Business segments Revenue and expenses Revenue from external customers 9,631,134 8,825,508 3,996,167 4,593, ,627,301 13,418,662 Inter-segment revenue - 45, , ,981 (350,183) (301,298) - - Total revenue 9,631,134 8,870,825 4,346,350 4,849,135 (350,183) (301,298) 13,627,301 13,418,662 Segment results 3,051,184 2,878,780 (441,909) 199, ,609,275 3,078,703 Impairment loss on quoted investments - (93,000) Amortisation of goodwill - (21,774) Gain on remeasurement of investments held for trading 87,352 - Gain on disposal of quoted investment 60, ,089 Dividend income 6,499 5,966 Interest income 70,655 - Unallocated corporate expenses (2,253,298) (2,139,145) Finance costs (566,807) (252,523) Share of profit in associate 3,655 - Share of profit/(loss) of jointly-controlled entity 584 (23) Profit before tax 18, ,293 Income tax expense (363,391) (108,868) (Loss)/Profit for the year (344,826) 734,425

55 FINANCIAL REPORT 27 Segment Reporting (Cont d) Operation of medicare centres and nursing homes Other ancillary services Eliminations Total Assets and liabilities Segment assets 32,783,255 16,787,770 6,858,911 6,501,769 (508,993) (360,858) 39,133,173 22,928,681 Unallocated assets 6,912,978 3,183,655 Total assets 46,046,151 26,112,336 Segment liabilities 1,225,681 1,005,154 2,136,758 1,660,307 (508,993) (360,858) 2,853,446 2,304,603 Unallocated liabilities 394, ,655 Borrowings 20,941,211 8,921,172 Current and deferred tax liabilities 553, ,208 Total liabilities 24,743,103 11,726,638 Capital expenditure Capital expenditure 16,073,980 2,577, , , ,636,557 2,828,902 Unallocated capital expenditure 29,869 74,304 16,666,426 2,903,206 Significant non-cash items Depreciation 366, , , , , ,533 Unallocated depreciation 151,113 81, , ,155 Annual Report 53

56 28 Financial Instruments Risk management is integral to the whole business of the Group. The Group has a system of controls in place to create an acceptable balance between the cost of risks occurring and the cost of managing the risks. The management continually monitors the Group s risk management process to ensure that an appropriate balance between risk and control is achieved. Credit risk Credit risk is the potential financial loss resulting from the failure of a customer or a counterparty to settle its financial and contractual obligations to the Group, as and when they fall due. Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. At the balance sheet date, there was no significant concentration of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheets. Liquidity risk The Group monitors its liquidity risk and maintains a level of cash and cash equivalents deemed adequate by management to finance the Group s operations and to mitigate the effects of fluctuations in cash flows. Interest rate risk The Group s exposure to interest rate risk relates primarily to its interest-bearing liabilities and loan from minority shareholder. The Group balances this risk by maintaining a mixture of fixed and floating rate borrowings. The Group does not hedge its exposure to changes in interest rates on interest-bearing borrowings and loan from minority shareholder. Foreign currency risk The Group incurs foreign currency risk on transactions that are denominated in a currency other than Singapore dollars. The currency giving rise to this risk is primarily Malaysia Ringgit. The Group does not hedge its exposure to foreign currency risk. Estimating fair value (i) Quoted investments held-for-trading The fair value of the investments have been determined based on quoted market prices as at the balance sheet date (ii) Unquoted equity investments As the fair value cannot be measured reliably because the range of possible fair value estimates is wide and the probabilities of the various estimates within the range cannot be reasonably assessed, the investment is stated at cost less impairment losses. The Group is also unable to disclose the range of estimates within which a fair value is highly likely to lie.

57 FINANCIAL REPORT 28 Financial Instruments (Cont d) (iii) Interest-bearing loans Fair value is calculated based on discounted expected future principal and interest cash flows. (iv) Finance lease liabilities The fair value of finance lease liabilities is estimated as the present value of future cash flows, discounted at market interest rates for homogeneous lease agreements. The estimated fair values reflect change in interest rates. (v) Other financial assets and liabilities The notional amounts of financial assets and liabilities with a maturity of less than one year (including trade and other receivables, cash and cash equivalents, and trade and other payables) are assumed to approximate their fair values. All other financial assets and liabilities are discounted to determine their fair values. 29 Change of Name During the financial year, the Company changed its name from Econ Healthcare Limited to China Healthcare Limited with effect from 18 January. 30 FRS not yet Adopted The Company has not applied the following standards and interpretations that have been issued as of the balance sheet date but are not yet effective: FRS 102 Share-Based Payment FRS 40 Investment Property Amendments to FRS 19 Employee Benefits Actuarial Gains and Losses, Group Plans and Disclosures INT FRS 104 Determining Whether an Arrangement Contains a Lease INT FRS 105 Rights to Interests Arising from Decommissioning, Restoration and Environmental Rehabilitation Funds Amendments to FRS 39 Financial Instruments: Recognition and Measurement Cash Flow Hedge Accounting of Forecast Intragroup Transactions FRS 106 Exploration and Evaluation of Mineral Resources INT FRS 106 Liabilities Arising from Participating in a Specific Market Waste Electrical and Electronic Equipment Amendments to FRS 39 Financial Instruments: Recognition and Measurement The Fair Value Option Amendments to FRS 39 Financial Instruments: Recognition and Measurement Financial Guarantee Contracts and Credit Insurance Annual Report 55

58 30 FRS Not Yet Adopted (Cont d) FRS 107 Financial Instruments: Disclosures Amendments to FRS 1 Presentation of Financial Statements Capital Disclosures Amendments to FRS 21 The Effects of Changes in Foreign Exchange Rates Net Investment in a Foreign Operation INT FRS 107 Applying the Restatement Approach under FRS 29 Financial Reporting in Hyperinflationary Economies The initial application of these standards and interpretations are not expected to have any material impact on the Group s financial statements. The Group has not considered the impact of accounting standards issued after the balance sheet date. 31 Comparative Information Comparatives in the financial statements have been changed from the previous year due to the changes in accounting policies as described in note 23.

59 FINANCIAL REPORT STATISTICS OF SHAREHOLDINGS As At 15 June Number of shares issued : 156,749,500 Class of shares : Ordinary Shares Voting rights : One vote per share Analysis of Shareholdings Size of Shareholdings No. of Shareholders % No. of Shares % ,000 10, ,567, ,001 1,000, ,244, ,000,001 and above ,938, Total 1, ,749, Twenty Largest Shareholders No. Name No. of Shares % 1 Econ Medicare Centre Holdings Pte Ltd 64,364, Oei Hong Leong Foundation Pte Ltd 46,993, Ong Chu Poh 12,114, Fraser Securities Pte Ltd 3,000, HSBC (Singapore) Nominees Pte Ltd 3,000, Koh Hin Ling 2,700, Tan Wong Tong 2,628, Chan Sau Wai 1,138, Ng Siok Keow 887, Wong Say Yin 600, Kua Sei Peng or Kee Puay Kiang 400, DBS Nominees Pte Ltd 393, United Overseas Bank Nominees Pte Ltd 343, Kam Thiam Seng 309, Thomson Medical Centre Ltd 304, Richard Tan Hung Yong 300, UOB Kay Hian Pte Ltd 292, Tan Sing Eng 276, Lim Mui Hong 275, OCBC Securities Private Ltd 204, Total 140,521, Annual Report 57

60 STATISTICS OF SHAREHOLDINGS As At 15 June SUBSTANTIAL SHAREHOLDERS Name Direct Interest Deemed Interest Total % Econ Medicare Centre Holdings Pte Ltd 64,364,133-64,364, % TMI Holdings (1997) Pte Ltd (1) - 64,364,133 64,364, % Ong Chu Poh (2) 12,114,850 67,064,150 79,179, % Koh Hin Ling (3) 2,700,017 76,478,983 79,179, % Oei Hong Leong Foundation Pte Ltd 46,993,500-46,993, % Chip Lian Private Limited (4) - 46,993,500 46,993, % Oei Hong Leong (5) - 46,993,500 46,993, % (1) Deemed interested by virtue of its 100% shareholding in Econ Medicare Centre Holdings Pte Ltd. (2) Mr Ong Chu Poh is deemed to be interested in 64,364,133 shares held by Econ Medicare Centre Holdings Pte Ltd by virtue of Section 7 of the Companies Act, Cap. 50 and 2,700,017 shares held by his spouse, Mdm Koh Hin Ling. (3) Mdm Koh Hin Ling is deemed to be interested in 64,364,133 shares held by Econ Medicare Centre Holdings Pte Ltd by virtue of Section 7 of the Companies Act, Cap. 50 and 12,114,850 shares held by his spouse, Mr Ong Chu Poh. (4) Deemed interested by virtue of its 100% shareholding in Oei Hong Leong Foundation Pte. Ltd. (5) Mr Oei Hong Leong who owns more than 50% of the issued shares in the capital of Chip Lian Private Limited, which in turn, holds 100% of the issued shares in Oei Hong Leong Foundation Pte. Ltd., is deemed to have an interest in the shares held by Oei Hong Leong Foundation Pte. Ltd. by virtue of Section 7 of the Companies Act, Cap. 50. Shareholdings held by the public Based on information available to the Company as at 15 June, approximately 19.25% of the issued ordinary shares of the Company is held by the public and therefore, the Company is in compliance with Rule 723 of the SGX-ST Listing Manual.

61 FINANCIAL REPORT NOTICE OF ANNUAL GENERAL MEETING CHINA HEALTHCARE LIMITED (formerly known as Econ Healthcare Limited) (Incorporated in the Republic of Singapore) Company Reg. No K NOTICE IS HEREBY GIVEN that the Fourth Annual General Meeting of the Company will be held at The Conference Room of SATA, 351 Chai Chee Street, Level 2, Singapore on Friday, 28 July at a.m. to transact the following business:- AS ORDINARY BUSINESS 1. To receive and adopt the Directors Report and Audited Financial Statements for the financial year ended 31 March. Resolution 1 2. To re-elect the following Directors who will retire pursuant to the Articles of Association of the Company and who, being eligible, will offer themselves for re-election: Mdm Koh Hin Ling (Retiring under Article 89) Resolution 2 Ms Li Ling Xiu (Retiring under Article 88) Resolution 3 Ms Li Ling Xiu will, upon re-election as Director, remain as a member of the Audit Committee and Remuneration Committee and will be considered non-independent for the purposes of Rule 704(8) of the Listing Manual of the Singapore Exchange Securities Trading Limited. 3. To approve Directors fees of S38,000 for the financial year ended 31 March (2005: S40,000). Resolution 4 4. To re-appoint Messrs KPMG as Auditors of the Company and to authorise the Directors to fix their remuneration. Resolution 5 5. To transact any other ordinary business that may be transacted at an Annual General Meeting. AS SPECIAL BUSINESS 6. To consider and, if thought fit, to pass with or without modifications, the following resolutions as Ordinary Resolutions:- 6.1 That pursuant to Section 161 of the Companies Act, Cap. 50 of Singapore ( Companies Act ) and the listing rules of the Singapore Exchange Securities Trading Limited ( SGX-ST ), authority be and is hereby given to the Directors of the Company to issue shares and/or convertible securities in the capital of the Company (whether by way of rights, bonus or otherwise) at any time to such persons and upon such terms and conditions and for such purposes as the Directors may in their absolute discretion deem fit, provided that: (i) the aggregate number of shares and/or convertible securities to be issued pursuant to this Resolution does not exceed fifty per cent, (50%) of the issued shares in the capital of the Company, of which the aggregate number of shares and/or convertible securities to be issued other than on a pro-rata basis to existing shareholders of the Company does not exceed twenty per cent, (20%) of the issued shares in the capital of the Company, and for the purpose of determining the aggregate number of shares that may be issued under this Resolution, the percentage of issued shares shall be based on the number of issued shares in the capital of the Company at the time this Resolution is passed, after adjusting for new shares arising from the conversion or exercise of convertible securities or share options which are outstanding or subsisting at the time this Resolution is passed and any subsequent consolidation or subdivision of the shares of the Company; and (ii) the authority conferred by this Resolution shall, unless revoked or varied by the Company in general meeting, continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier. Resolution 6 Annual Report 59

62 NOTICE OF ANNUAL GENERAL MEETING 6.2 That authority be and is hereby given to the Directors to offer and grant options in accordance with the provisions of the China Healthcare Employees Share Option Scheme (the Scheme ) and pursuant to Section 161 of the Companies Act, Cap. 50, to allot and issue such number of shares as may be required to be issued pursuant to the exercise of the options granted under the Scheme provided always that the aggregate number of shares to be issued pursuant to the Scheme shall not exceed fifteen per cent, (15%) of the issued shares in capital of the Company from time to time. Resolution 7 By Order of the Board Lee Seng Suan Company Secretary Singapore 12 July NOTES 1. A Member entitled to attend and vote at the Annual General Meeting is entitled to appoint not more than two proxies to attend and vote in his/her stead. Such proxy need not be a Member of the Company and where there are two proxies, the number of shares to be represented by each proxy must be stated. 2. The instrument or form appointing a proxy, duly executed, must be deposited at the Company s registered office at 452, Upper East Coast Road, Singapore not less than 48 hours before the time for holding the above Annual General Meeting. EXPLANATORY NOTES ON SPECIAL BUSINESS TO BE TRANSACTED 1. The proposed Ordinary Resolution 6, if passed, will empower the Directors from the date of the above Meeting until the date of the next Annual General Meeting, to allot and issue shares and/or convertible securities in the Company, including a rights or bonus issue. The maximum number of shares which the Directors may issue pursuant to this Resolution shall not exceed the quantum set out in the Resolution. 2. The proposed Ordinary Resolution 7, if passed, will empower the Directors of the Company to offer and grant options under the China Healthcare Employees Share Option Scheme (the Scheme ) and to allot and issue shares pursuant to the exercise of such options under the Scheme up to an amount not exceeding fifteen (15%) of the issued shares in capital of the Company from time to time.

63 CHINA HEALTHCARE LIMITED (formerly known as Econ Healthcare Limited) (Incorporated in the Republic of Singapore) Company Reg. No K PROXY FORM IMPORTANT: 1. For Investors who have used their CPF moneys to buy shares of China Healthcare Limited, the Annual Report is forwarded to them at the request of their CPF Approved Nominees and is sent solely FOR INFORMATION ONLY. 2. This Proxy Form is not valid for use by CPF Investors and shall be ineffective for all intents and purposes if used or purported to be used by them. 3. CPF Investors who wish to vote should contact their CPF Approved Nominees. I/We, of (Name) (Address) being a member/members of China Healthcare Limited (the Company ), hereby appoint (a) Name Address NRIC/Passport No. Proportion of Shareholdings (%) and/or (Delete as appropriate) (b) as my/our proxy/proxies to attend and to vote for me/us and on my/our behalf and, if necessary, to demand a poll, at the 4th Annual General Meeting of the Company to be held at The Conference Room of SATA, 351 Chai Chee Street, Level 2, Singapore on Friday, 28 July at a.m. and at any adjournment thereof. (Please indicate with an X in the spaces provided whether you wish your vote(s) to be cast for or against the Resolutions to be proposed at the Meeting as indicated hereunder. In the absence of specific directions, the proxy/proxies will vote or abstain as he/they may think fit, as he/they will on any other matter arising at the Meeting.) No. Resolutions relating to: For Against 1 Directors Report and Financial Statements for the year ended 31 March 2 Re-election of Mdm Koh Hin Ling as Director 3 Re-election of Ms Li Ling Xiu as Director 4 Approval of Directors fees 5 Re-appointment of KPMG as Auditors 6 Authority to allot and issue new shares and/or convertible securities 7 Authority to offer and grant options and issue shares pursuant to the exercise of options Dated this day of Total number of shares in: a) CDP Register b) Register of Members No. of Shares Signature of Shareholder(s) or Common Seal of Corporate Shareholder Important: Please read notes overleaf

64 Notes: 1. A member of the Company entitled to attend and vote at the above meeting is entitled to appoint not more than two proxies to attend and vote in his/her stead. A proxy need not be a member of the Company and where there are two or more proxies, the number of shares to be represented by each proxy must be stated. 2. This Proxy Form must be signed by the appointor or his/her duly authorised attorney or, if the appointor is a body corporate, signed by a duly authorised officer or his attorney and affixed with its common seal thereto. 3. This instrument appointing a proxy [together with the power of attorney (if any) under which it is signed or a certified copy thereof], must be deposited at the registered office of the Company at 452 Upper East CoastRoad Singapore not less than 48 hours before the time fixed for holding the Annual General Meeting. 4. Please insert the total number of shares held by you. If you have shares entered against your name in the Depository Register (as defined in Section 130A of the Companies Act, Chapter 50 of Singapore), you should insert that number of shares. If you have shares registered in your name in the Register of Members, you should insert that number of shares. If you have shares entered against your name in the Depository Register and shares registered in your name in the Register of Members, you should insert the aggregate number of shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the shares held by you. 5. The Company shall be entitled to reject this instrument of proxy if it is incomplete, not properly completed or illegible or where the true intention of the appointor is not ascertainable from the instructions of the appointor specified in this instrument of proxy. In addition, in the case of members whose shares are deposited with The Central Depository (Pte) Limited ( CDP ), the Company may reject any instrument of proxy lodged if such member is not shown to have shares entered against his name in the Depository Register 48 hours before the time fixed for holding the Annual General Meeting as certified by CDP to the Company. fold along this line (1) Please affix postage stamp The Company Secretary China Healthcare Limited 452 Upper East Coast Road Singapore fold along this line (2)

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