DRIVEN FOR. GROWTH A n n u a l R e p o r t

DRIVEN FOR GROWTH A n n u a l R e p o r t 2 0 0 7

CONTENTS 02 Financial Highlights 08 Chairman s Message 12 CEO s Review of Operations 16 Board of Directors 18 Key Management 20 Corporate Information 21 Corporate Governance 28 Directors Report 31 Statement by Directors 32 Independent Auditor s Report 33 Consolidated Income Statement 34 Balance Sheets 35 Consolidated Statement of Changes in Equity 36 Consolidated Cash Flow Statement 38 Notes to the Financial Statements 75 Shareholders Information 77 Notice of Fourteenth Annual General Meeting Proxy Form

vision To be the preferred global total solution provider of steel products and services mission H arness U nderstand P ursue our Resources for Sustainable Growth and Profit and provide value-added services to meet customer s needs Organisation and People Excellence values S ervice T eamwork L ifelong E nterprising We will seize challenging business opportunities that would put us ahead of our competitors. We will be proactive and innovative market leaders by taking the initiative to be different and not being afraid to break the status quo. We will be visionary in our outlook and persevering in our united efforts. E xcellence We will strive to be excellent and professional in our product knowledge and duties. We will take personal responsibility and accountability for our partners and customers to ensure quality products and reliable service to them. We believe in developing our people to their maximum potential so that they are enabled and equipped to provide total solutions. Learning We seek to provide quality service that goes the extra mile to all internal and external customers, suppliers and colleagues. We will do this by establishing a relationship based on mutual raespect, trust and integrity. This will lead to service that is prompt, efficient, friendly, trustworthy and solutions-based. We will strive to achieve our shared vision by living our shared values and aligning ourselves towards our common goals. We will show respect for all individuals through mutual trust, open communication and motivation. We will be enthusiastic and supportive of each other as we strive to attain inter-dependence and cooperation. We will grow with the right heart, mind and skill-sets to achieve personal and organisational success. We will equip through mentoring, coaching, training and development to create a culture of continuous learning and enthusiastic sharing of experiences. We believe in relevant and applied knowledge as the foundations to building leadership quality.

02 H U P S t e e l L i m i t e d Financial Highlights Revenue ($ m) 2007 2006 2005 2004 106.9 2003 54.1 186.2 197.8 284.2 Net Profit Attributable to Shareholders ($ m) 2007 2006 2005 2004 13.8 2003 1.4 15.7 21.6 31.2 Earnings Per Share (cents) 2007 2006 2005 3.48 6.89 7.17 2004 4.58 2003 0.47 Gross Dividend Per Share (cents) 2007 2006 2005 2004 1.50 2003 0.50 *Subject to shareholders approval 3.00 5.125 6.049*

A n n u a l R e p o t 2 0 0 7 03 Financial Highlights FY2007 $ 000 FY2006 $ 000 FY2005 $ 000 FY2004 $ 000 FY2003 $ 000 Turnover by Geographical Locations Singapore Malaysia Other South East Asia Countries Other Countries 206,938 27,260 27,404 22,570 132,194 24,851 9,408 19,749 124,019 28,713 30,207 14,880 62,556 23,400 14,111 6,917 24,341 20,791 6,469 2,506 284,172 186,202 197,819 106,984 54,107 Results of Operation Turnover Net profit attributable to shareholders Earnings per share (cents) Net asset value per share (cents) Gross dividend per share (cents) 284,172 31,175 6.89 32.08 6.049* 186,202 15,729 3.48 34.77 5.125 197,819 21,608 7.17 38.30 3.00 106,984 13,806 4.58 32.38 1.50 54,107 1,400 0.47 29.50 0.50 * Subject to approval by shareholders FY2007 $ 000 FY2006 $ 000 FY2005 $ 000 FY2004 $ 000 FY2003 $ 000 Financial Position Property, plant and equipment Other non-current assets 34,392 12,698 32,949 16,098 33,826 14,293 34,876 14,271 38,493 10,381 Non-current assets 47,090 49,047 48,119 49,147 48,874 Current assets Current liabilities 179,113 80,037 109,466 31,710 142,274 72,678 78,646 21,507 45,121 4,477 Net current assets 99,076 77,756 69,596 57,139 40,644 Non-current liabilities 1,038 988 2,218 8,729 851 Net assets 145,128 125,815 115,497 97,557 88,667 Share Capital Reserves Retained earnings 68,157 543 76,428 59,317 842 65,656 30,154 28,146 57,163 30,127 28,162 39,173 30,053 31,983 26,542 145,128 125,815 115,463 97,462 88,578 Minority interest - - 34 95 89 145,128 125,815 115,497 97,557 88,667

REVENUE + 53 % to $284.2 million Revenue surges 53% due to robust demand from the Marine, Oil & Gas, and the recovery of Construction sectors. GROSS PROFIT + 61 % to $60.1 million Gross profit growth is in line with the higher revenue recorded. NET PROFIT + 98 % to $31.2 million

Driven for Performance Our record revenue was boosted by continued sturdy demand from the oil and gas, marine and the recovering construction sectors. The Group saw healthy volume growth across all its major product categories from structural to pipes and fittings. The strong performance also produced a record net profit after tax for the financial year.

SHARE CAPITAL + 14 % to $68.1 million Completion of Rights Issue of 1 share for every 4 existing shares held by shareholders at a subscription price of $0.10 per share and a total of 90,482,698 shares were allotted. Cash Flow + 62.5 % to $18.2 million Storage capacity + 5,000 sqm to total of 35,000 sqm Extension of storage capacity is much needed due to increasing inventories holding which included higher valued products.

Driven for Greater Heights The sterling performance for FY2007 underscores the effectiveness of the Group s efforts to re-position its business thrusts and maximise its leverage on domestic economic trends to drive both top-line and bottom-line growth, making FY2007 a record year for our shareholders.

08 H U P S t e e l L i m i t e d Chairman s Message The Group expects robust demand for its products in-line with the optimistic outlook of the local economy for the coming financial year. Dear Shareholders The year in review It gives me great pleasure to report that the financial year ended 30 June 2007 ( FY2007 ) represented an outstanding year for the Group. The Group s revenue increased 53% to $284.2M in FY2007 from $186.2M in FY2006: Its net profit doubled to $31.2M in FY2007 from $15.7M in FY2006. Our record revenue was boosted by continued sturdy demand from the oil and gas, marine and the recovering construction sectors. The Group saw healthy volume growth across all its major product categories from structural steel to pipes and fittings. The strong performance also produced a record net profit after tax for the Group in the financial year. With the anticipated strong demand for its products, the Group had embarked on and completed the construction of a warehouse extension at its flagship premise at 116, Neythal Road. The extension added another 5,000 square metres of covered warehouse space bringing the total available warehouse space at this site to 35,000 square metres. It would provide much needed storage area for the Group s increasing inventory holding which included high valued products. The Group s properties enjoyed nearly full occupancy during the financial year as well as an increase in rental rates. Rental income however, formed only a small percentage of the Group s revenue. During the financial year, the Group declared a bonus dividend and completed a rights issue of 1 rights share for every 4 existing shares held with an option for shareholders to elect to use the bonus dividends declared to pay for the rights shares. The rights issue was oversubscribed and the rights shares were listed on the Stock Exchange of Singapore on 7 December 2006. Subsequent to the end of FY2007, the Group undertook a share placement exercise involving the issue of 49,500,000 new ordinary shares to several institutional funds. Apart from enhancing the shareholder profile of the Group, we envisage that this placement will help to stir more institutional interests in HUPSteel. The new shares have been allotted and quoted on the Stock Exchange of Singapore since 24 August 2007. The share placement generated a cash inflow of approximately $27 million which is earmarked for working capital purposes in preparation to meet further growth in the volume of business in the current financial year 2008 and beyond. Outlook The Group expects robust demand for its products in-line with the optimistic outlook of the local economy for the coming financial year. Brisk activities are reported at shipyards, as well as projects relating to oil and gas and the construction sectors.

A n n u a l R e p o t 2 0 0 7 09 Chairman s Message Requirements from the marine, oil and gas sectors would continue to provide a stable base for the Group s revenue while the Group seizes the opportunity to grow its business from the construction sector. Projects like the Integrated Resorts, MRT line and the Marina Business and Financial Centre would lead to an increase in demand for the Group s structural steel products, augmenting the demand from the construction of residential properties. With global oil prices and consumption remaining high, it is expected that there will be no slowdown in oil exploration and related activities. As a consequence, more marine vessels will be needed to support these activities. This, in turn, augurs well for the Group s pipe and fitting business which supplies to the oil and gas and marine sectors. The Group s structural steel business will also benefit from these sustained activities. Supply of steel products is expected to remain tight and lead time for certain products have been longer than usual although prices are not expected to fluctuate widely. This has led the Group to increase its inventory holding at the end of the financial year to meet customers needs. The Group s properties are expected to generate healthy rental income and maintain good occupancy rates. The market value of these properties is expected to improve amidst the property boom. The management will constantly evaluate business options relating to these properties that will enhance good shareholder returns. The Group will continue to seek out and review new business opportunities, both locally and overseas, to penetrate and expand in other markets especially in the Asia Pacific region, and to source for and introduce new products to meet customers needs. Dividend The Directors are pleased to recommend a final dividend of 0.5 cent (FY2006: 0.5 cent) per share less tax at 18%. Given the Group s strong operating performance, the Directors further propose a special dividend of 1.0 cents (FY2006: 1.5 cents) per share less tax at 18% to express our appreciation for the support from our shareholders. In addition, the Board of Directors is also recommending a bonus dividend of 3.049 cents less tax at 18% (2.5 cents net) and proposes a renounceable non-underwritten rights issue of shares in the ratio of 1 rights share for every 4 existing shares held by shareholders with a subscription price of $0.10 per rights share. Shareholders will be given an option to elect to use the bonus dividend declared to fully subscribe for their rights shares without further cash outlay. One of the aims of this exercise is to utilize most of the accumulated Section 44A tax credit before it expires so that shareholders may benefit from the tax refund if their personal income tax rate is lower than the corporate tax rate. The Board of Directors is looking forward to the support of the shareholders to approve the rights issue at the forthcoming Annual General Meeting to be held on 26 October 2007. Acknowledgement I would like to thank my fellow Directors for their support and wise counsel and the Management and staff for their loyalty, dedication and contributions to the Group. I would also like to welcome Mr Philip Chan Kam Loon and Mr Lim Chee San who joined us as Independent Directors on 1 November 2006. Between them, they bring along years of experience in accounting, finance, legal and corporate governance to the Board. I would also like to express the Group s appreciation to our customers, suppliers and business associates for their continuing support. Finally, I would like to thank all of you, our shareholders, for your commitment, support and loyalty to the Group. Tang See Chim Non-executive Chairman

10 H U P S t e e l L i m i t e d 主席报告 来临财政年, 本地经济的展望乐观, 集团也预 计产品的需求会强盛 亲爱的股东 回顾 我很高兴宣布集团于 2007 年 6 月 30 日结束的财政年 (2007 财政年 ) 表现优越 集团的营业额从 2006 财政年的 1 亿 8620 万元增加了 53%, 到 2 亿 8420 万元 ; 其净盈利也增加一倍, 从 2006 财政年的 1570 万元增加到 3120 万元 来自石油化工和天然气 海事和正在复苏的建筑领域的持续强劲需求提高我们空前最佳的收益 集团所有主要产品类别, 从结构钢铁到钢管的销量都取得了强健的增长 强劲的表现也促成了集团在这个财政年取得了有史以来最多的净盈利 ( 扣税后 ) 有鉴于市场将对其产品有强劲的需求, 集团已完成在旗舰地点 116 号 Nethyal Road 进行的货仓扩建工程 该工程将货仓的有盖面积增加了 5000 平方公尺, 将总面积增加到 3 万 5000 平方公尺 它将为集团日益增加的库存, 包括高价值产品, 提供所需的储存空间 集团的产业在财政年的租用率近乎百分之一百, 租金也提高了 然而, 从租金取得的收入, 只占集团收益的一小部分 在该财政年, 集团派发红利股息, 并以现有 4 股配 1 股的比率, 让股东可选择以红利股息认购附加股 附加股获得超额认购, 而附加股于 2006 年 12 月在新加坡股票交易所上市 2007 财政年结束后, 集团推出一个售股计划, 派发 4950 万个新股给数个基金机构 这些新股自 2007 年 8 月 24 日开始已经在新加坡股票交易所分派和交易 售股计划流入约 2700 万元现金, 并将被当成运作资金, 以应对 2008 财政年及以后生意量的增长 展望 来临财政年, 本地经济的展望乐观, 集团也预计产品的需求会强盛 海事 石油化工与天然气的需求将继续为集团的营业额提供稳健的基础, 而集团也会把握机会发展建筑业的业务 目前正在开发的工程如综合度假胜地 地铁环线和滨海湾金融中心将提高对集团钢材的需求, 并扩大建设住屋带来的需求 随着全球油价和消费居高不下, 预料石油开采与相关的活动将不会放缓 因此, 也需要更多船只来支持这些活动 这也意味着集团供应给石油化工 天然气与海事钢管业务也会增加 集团结构钢铁生意也会从这些持续活动中受惠 钢铁产品的供应预料将持续紧缩, 而一些产品的交货期比一般长, 虽然价钱预料将不会有太大的波动 这促使集团在财政年结束前增加库存以迎合顾客的需求

A n n u a l R e p o t 2 0 0 7 11 主席报告 集团的房地产预料将带来稳健的租金收益并保持高租用率 这些产业的的市场价值预料将在房地产热潮中提高 管理层将不断评估这些产业的商机以确保股东能得到高回报 集团将继续寻找和检讨国内外新的商机, 渗入和扩充到其他市场, 尤其是亚太区域的, 并推出新产品来迎合顾客的需求 股息 董事会建议, 派发每股 0.5 分 (2006 财政年 :0.5 分 ) 扣除所得税 18% 的终期股息 鉴于集团的强劲营业表现, 董事会进一步建议派发每股 1.0 分 (2006 财政年 :1.5 分 ) 扣除所得税 18%, 以感谢股东的支持 此外, 董事会也建议派发 3.049 分扣除所得税 18% 的红利股息, 并提出以每股 10 分, 以现有 4 股配 1 股的比率, 发行弃权非包销附加股 (renounceable non-underwritten rights issue) 股东可选择以红利股息认购附加股 派发红利股息是为了让股东在期限内利用公司累积的第 44A 项税务减免额 这样一来, 若股东的个人所得税率比公司税率低的话, 就能从退回税款中受惠 董事会希望在 2007 年 10 月 26 日举行的常年会议中, 获得股东对附加股的支持 致谢 我要感谢董事 管理层和职员对集团的支持与奉献 我也欢迎在 2006 年 11 月 1 日加入我们担任独立董事的陈锦轮先生和林志山先生 他们为董事会带来了在会计 金融 法律和公司监管方面的多年经验 最后集团也感激顾客 供应商和商业伙伴对我们的持续支持 邓思沾非执行主席

12 H U P S t e e l L i m i t e d CEO s Review of Operations Sales volume for FY2007 grew almost two-fold over that for the financial year ended 30 June 2006 ( FY2006 ). General During the financial year ended 30 June 2007 ( FY2007 ), HUPSteel (or the Group ) reaped benefits across all product categories as Singapore s economic growth continued to gain momentum. In line with these broader macroeconomic trends, HUPSteel continued to experience strong demand for its steel products from our traditionally firm Oil and Gas and Marine sectors. Our customers from these sectors have reported healthy order books and many have been working at their near capacity levels directly benefiting us. In addition, the Group also saw increased demand coming from the recovery in Singapore s Construction sector. Concurrently, in FY2007, HUPSteel sold more to our customers in the Oil, Gas and Marine sectors. Pipes, fittings and structural steel It is against this backdrop of vibrant Oil, Gas and Marine sectors that the Group s sales for pipes, fittings and structural steel for FY2007 reached a record high of $284.2M since its listing on the Stock Exchange of Singapore. Steel plates which are one of the main building materials for marine vessels and rigs were in great demand

A n n u a l R e p o t 2 0 0 7 13 CEO s Review of Operations The ever increasing consumption of oil worldwide kept oil prices at high levels leading to a constant search for new oil reserves and alternative fuel sources. This has translated into increased exploration activities and related down-stream projects which, in turn, generated demand for more pipe and fitting products. To support the thriving exploration and related activities, new rigs and supporting marine vessels were needed. These spurred demand for shipbuilding and rigbuilding in the Marine sector following in tandem with the Oil and Gas sector. Steel plates which are one of the main building materials for marine vessels and rigs were in great demand as shipyards carried out building activities at an accelerated pace to fulfill the overwhelming orders received. At the beginning of the calendar year 2007, there were signs of recovery in the Singapore s Construction sector, with large infrastructure projects like the Integrated Resorts, MRT lines and Business & Financial Centre at Marina, all expected to start work soon. The sector was further boosted by the large number of en-bloc projects concluded in the first half of the calendar year which augurs well for the future of the Construction industry. Sales volume for FY2007 grew almost two-fold over that for the financial year ended 30 June 2006 ( FY2006 ). Almost 65% of our sales were made locally as Singapore, being one of the world s preferred oil refining as well as shipbuilding centers showed a huge appetite for steel products. The remaining sales were made to other countries in the Asia-Pacific region. Our steel supplies come from steel mills in both Europe and Asia thus reducing our exposure to country-specific conditions that can affect supply prices. After interacting with many of these suppliers over the past many years, we have close relationships with these mills and our in-depth knowledge of the products manufactured by the various mills ensures that our customers are always supplied with products that meet their needs. During FY2007, supply for pipes, fittings and structural steel products remained tight due to the strong global economy. Our strong ties with the mills have enabled HUPSteel to secure enough supplies to meet the demand of our customers. It was in view of the tightening supply situation that the Group built up its inventory holdings to $79.9M which is approximately 80% more than the previous year s level (FY2006: $44.4M). This was intentional as we anticipated continued strong demand from our large base of customers spread across the Asia-Pacific region. Gross profit margin for the Group for FY2007 improved slightly to 21.1% from 20.1% achieved for FY2006. This could be attributed to better prices fetched for structural steel products as compared to the previous year. This margin is a function of the sales mix of pipes, fittings and structural steel products that make up the total sales of the Group. Sandblasting, General Hardwares & Properties Riding on the buoyant shipbuilding sector, the Group s sandblasting service offered through one of its subsidiaries; Sinip Steel Industries Pte Ltd also continued to enjoy booming activity throughout FY2007. The sandblasting work is primarily bundled as a value-added service to our shipbuilding customers. Revenue from the general hardware business remained stable and profitable throughout FY2007.

14 H U P S t e e l L i m i t e d CEO s Review of Operations With the property sector showing signs of recovery in the early part of 2007, rental rates have similarly improved in line with market sentiment. The Group s properties had achieved comparatively higher occupancy and better rental rates for FY2007 than the previous year. The management will be reviewing its properties portfolio and consider any viable options to redeploy these assets in the new financial year. This business segment of the Group constitutes less than 5% of its annual turnover. Profit and Loss The Group reported a record revenue of $284.2M for FY2007, an increase of 53% over the revenue of $186.2M for FY2006. Other operating income for FY2007 rose 102% to $3.1M from $1.5M. The increase was partially attributed to a special dividend of $0.9M received as a result of an early redemption of a bond held by the Group. The Group also sold some of its quoted equities that generated a gain on disposal amounting to $0.8M during FY2007. Operating expenses for FY2007 included staff costs of $11.6M (FY2006: $9.0M), depreciation of $1.4M (FY2006: $1.3M), other operating expenses of $10.8M (FY2006: $7.9M) and finance cost of $1.9M (FY2006: $1.0M). All these expenses were comparatively higher, primarily due to the higher sales turnover experienced during FY2007. The Group also employed more staff during the year and its total workforce stood at 175 at the end of FY2007. Finance cost rose significantly due to interest costs arising from more trust receipts utilised for the purchase of inventories to generate higher sales and to increase inventories holding. With the higher revenue reported and a reduction in corporate tax rate to 18%, the Group turned in yet another record year of net profit after tax of $31.2M which was 98% higher than the net profit after tax of $15.7 for FY2006. Balance Sheet In line with higher sales and continued strong demand expected from its customers, the Group s trade receivables (including other receivables) and inventories rose to $80.5M (FY2006: $53.4M) and $79.9M (FY2006: $44.4M) respectively. Correspondingly, trade and other payables and borrowings also increased to $30.6M (FY2006: 10.2M) and $43.2M (FY2006: $17.7M) respectively. Despite of the higher working capital requirement, the Group was able to maintain a healthy current ratio of 2.2 (FY2006: 3.45) and managed a positive cash flow for FY2007. During the year, the Group begun the construction of a warehouse extension at its flagship premise located at 116, Neythal Road. The extension was completed in March 2007 and added another 5,000 square metres of covered warehouse space to store our inventories including the high value products. The record net profit after tax for FY2007 had enabled us to report higher return on equity of 21.5% compared with 12.5% achieved for FY2006. At the same time, return on assets also rose to 13.8% (FY2006: 9.9%) with the higher net profit after tax of $31.2M achieved for FY2007. Corporate Throughout FY2007, the Group continuously reviewed opportunities referred by business associates for possible merger and acquisition. They were evaluated, among other criteria, on the business risk involved, size of investment needed and whether it would complement the Group s activities thereby creating synergy for its business. The Group undertook and completed a 1 for 4 rights issue of shares exercise during FY2007. This rights issue of shares exercise which was bundled with an option for shareholders to elect to use their bonus dividends to subscribe for their entitled rights shares was fully taken. With this exercise, the Group was able to return part of the S44A tax credit to shareholders. At the end of the exercise, a total of 90,482,698 new shares were allotted and listed on the Official List of the Singapore Exchange Securities Trading Limited on 7 December 2006. As a result, our share capital increased to $68.1M from $59.3M by capitalising $9.0M from retained earnings.

A n n u a l R e p o t 2 0 0 7 15 CEO s Review of Operations The Group also took unprecedented steps to announce and paid its first ever interim dividend of 1 cent per share and 2 nd interim dividend of 0.5 cent per share to celebrate its record results. We had also declared a final dividend of 0.5 cent and a special dividend of 1 cent per share during the announcement of the Group s full year results. We were happy to be selected as one of the fastest growing 50 companies in Singapore. This award recognised companies that had achieved the highest compounded annual growth rate in turnover of at least 10% every year for the last three years and must be profitable for all of those years. On 11 July 2007, the Group undertook a share placement of 49,500,000 new shares to 3 interested institutional funds, namely Lehman Brothers Commercial Corporation Asia Limited, Lion Capital Management Limited and UOB Asset Management Limited at a price of $0.555 per share for a total consideration of $27.4M. These proceeds would be used mainly for working capital, any new business opportunities and retire borrowings. More importantly, the placement also served to enhance the shareholders profile of the Group and improve market liquidity of its shares. These shares were subsequently allotted and listed on the Official List of the Singapore Exchange Securities Trading Limited on 24 August 2007. With this placement, the number of shares in issued increased from 452,396,488 to 501,896,488. On 10 September 2007, the Group announced a bonus dividend of 3.049 cents less tax at 18% (2.5 cents net) and proposed a renounceable non-underwritten rights issue of shares in the ratio of 1 right share for every 4 existing shares held by the shareholders with a subscription price of $0.10 per rights share. Shareholders will be given an option to elect to use the bonus dividend declared to fully subscribe for their rights without further cash outlay. This exercise is the same as the one completed in 2006 and it aims to utilize most of the Section 44A tax credit balance before it expires by 31 December 2007 so that shareholders may benefit from the tax refund if their personal income tax rate is lower than the corporate tax rate. Lim Kim Thor Chief Executive Officer

16 H U P S t e e l L i m i t e d Board of Directors From Left to Right: Lim Yee Kim, Lim Chee San, Lim Boh Chuan, Lim Beo Peng, Lim Eng Chong, Tang See Chim, Ong Kian Min, Lim Kim Thor, Lim Puay Koon, and Chan Kam Loon. TANG SEE CHIM Mr Tang See Chim, 75, has been an Independent Director of the Company since 1994, was appointed as the Non Executive Chairman of the Board of Directors on 21 Feburary 2005. He is also the Chairman of the Audit and Nominating Committees and a member of the Remuneration Committee. Mr Tang has been in law practice for the last 40 years and since the beginning of 1993, has been a consultant to the law firm of David Lim & Partners. He was a Member of Parliament from 1966 to 1988 and was the Parliamentary Secretary to the Minister for Finance from 1968 to 1970 and the Minister of State for Finance from 1970 to 1972. Mr Tang was Deputy Speaker of Parliament from 1972 to 1981. Mr Tang is also an Independent Director of City Development Ltd, G K Goh Holdings Ltd, New Toyo International Holdings Ltd and Dutech Holdings Limited. Mr Tang graduated with a Bachelor of Science (Honours) degree in Economics from the London School of Economics, University of London. Mr Tang qualified as a Barrister-at-Law at the Middle Temple, London. LIM KIM THOR Mr Lim Kim Thor, 54, has been a Director of the Company since 1978 and was appointed as the Chief Executive Officer of the Company in 2004. He is the Chairman of the Executive Committee. Mr Lim has over 30 years of experience in the industrial hardware and steel pipe business. He enjoys close and strategic relationships with leading global steel product manufacturers and suppliers as well as major customers in the marine engineering and oil and gas industries. Mr Lim is responsible for the execution of the Group s business strategy and business expansion. LIM BOH CHUAN Mr Lim Boh Chuan, 49, has been a Director of the Company since 1983. Mr B C Lim was appointed as the Deputy Managing Director in 1994 and as a member of the Executive Committee since 1994. Mr B C Lim has over 20 years of experience in industrial hardware business. Mr Lim assists Chief Executive Officer in general management and is responsible for the Group s property business and is in charge of the Business Development Division of the Group. Mr Lim graduated with a Bachelor degree in Estate Management from the National University of Singapore. He is a member of the Singapore Institute of Directors since 1999. Mr Lim is the Patron of the Hwa Chong Junior College s Alumni Association. He is also the Vice Chairman of the Hwa Chong Institution Board of Governors. In 2003, Mr Lim had the honour of receiving the Service To Education Award from the Ministry of Education.

A n n u a l R e p o t 2 0 0 7 17 Board of Directors LIM YEE KIM Mr Lim Yee Kim, 59, has been a Director of the Company since 1973 and a member of the Executive Committee. He has accumulated close to 40 years of experience in the industrial hardware business. In December 2002, Mr Lim was appointed as the General Manager (Sales and Procurement) of the Company, with principal responsibility for the sales of the Group s industrial hardware business and the sourcing and procurement of pipe fittings to meet customers various needs. Mr Lim is also an active member of the Singapore Metal & Machinery Association. LIM BEO PENG Mr Lim Beo Peng, 46, has been a Director of the Company since 1993 and is a member of the Executive Committee. He assumed Executive functions in 2005 by being in charge of the newly created Corporate Service Division which provides the back room service and support to the Group. Mr Lim graduated with a Bachelor degree in Business Administration from the National University of Singapore. Mr Lim has over 18 years of experience in the industrial hardware business. Beside his business interest, Mr Lim is also represented in the 38th Honorary Committee (2006-2007) of the Singapore Metal & Machinery Association. LIM ENG CHONG Mr Lim Eng Chong, 50, has been a Director of the Company since 1992 and is currently a member of the Nominating Committee and the Remuneration Committee. Mr Lim holds a Master in Business Administration (MBA) degree from McGill University. Mr Lim has more than 20 years of multinational experience in international business and strategic market development. He is currently a director and the President of Canadec Pte Ltd. LIM PUAY KOON Dr Lim Puay Koon, 47, has been a Director of the Company since 1993 and is currently a member of the Audit Committee. Dr Lim holds a PhD in computer and systems engineering, and a Master in Business Administration (MBA) degree from Rensselaer Polytechnic Institute (USA). Dr Lim has more than 20 years of experience in the IT industry and has held various management and systems engineering positions in Hewlett-Packard, Dell Asia Pacific, the National Computer Board (now part of Infocomm Development Authority or IDA) and the New York State Office (USA). He is currently the Director and General Manager, HP Managed Services, South-East Asia. ONG KIAN MIN Mr Ong Kian Min, 47, has been an Independent Director of the Company since 2003 and is the Chairman of the Remuneration Committee and a member of the Audit and Nominating Committees. Mr Ong is currently an Advocate and Solicitor and a consultant with Drew & Napier LLC, a Singapore law firm. He was called to the Bar of England and Wales in 1988 and to the Singapore Bar the following year. Mr Ong has also been a Member of Parliament since January 1997. Mr Ong was awarded the President s Scholarship and Police Force Scholarship in 1979. He holds a Bachelor of Laws (Honours) external degree from the University of London and a Bachelor of Science (Honours) degree from the Imperial College of Science and Technology in England. LIM CHEE SAN Mr Lim Chee San, 47, was appointed as an Independent Director of the Company since 1st November 2006. He is also a member of the Audit Committee. He has been an accountant, a banker and a lawyer at different times during the last 23 years. He has his own law firm, TanLim Partnership, now. Before he started his current law practice, he was the Head of Banking Operations in a large regional bank. He also has many years of experience as an auditor in large international accounting firms. He is a barrister-at-law, a chartered certified accountant, and a chartered information technology practitioner. He was among the top candidates in his accountancy and law examinations. CHAN KAM LOON, PHILIP Mr Chan Kam Loon, Philip, 47, was appointed as an Independent Director of the Company since 1st November 2006. Mr Chan was formerly the Head of Listings Function, Markets Group at the Singapore Exchange. He has a degree in accountancy from the London School of Economics and is a qualified Chartered Accountant with the Institute of Chartered Accountant in England and Wales. He articled with KPMG in London and practiced with Price Waterhouse in Singapore. Mr Chan has worked in the corporate finance business for some years and was a director of investments at a private equity fund. Mr Chan has served on the Singapore s Accounting Standards Committee, Singapore Zhejiang Business Council and also Singapore Shandong Business Council. He also serves as an independent director of several other SGX listed companies.

18 H U P S t e e l L i m i t e d Key Management STEEL BUSINESS & BUSINESS DEVELOPMENT JOE LIM KIM SAN Mr Joe Lim Kim San, was appointed an Executive Director of Thong Seng Metal Pte Ltd ( Thong Seng ), a wholly owned subsidiary of the Company, since 1993. His main responsibility is to assist the Group s Chief Executive Officer in the sales and business operations of Thong Seng. Mr Lim holds a Master of Business Administration (MBA) degree. TEO BOON DAT Mr Teo Boon Dat, is the Sales Manager of the Company. Mr Teo is mainly responsible for domestic sales supplying to various industries such as engineering, trading, shipbuilding and ship repair. Mr Teo also has sales account responsibility for certain customers in Malaysia and Hong Kong. Mr Teo has close to 20 years of sales experience in the industrial hardware business and he has been instrumental in procuring certain large order term contracts from one of the largest local ship building and ship repair companies. Mr Teo joined the Company as a Sales Executive in 1983 and was promoted to Sales Manager since 1994. Mr Teo holds a G.C.E. A Level Certificate. CHAI CHO LIM Mr Chai Cho Lim, is the Sales Manager of the Company. Mr Chai is mainly responsible for export sales to markets spanning the South and South East Asia, Middle East and Oceania regions. Mr Chai has more than 14 years of sales experience in the industrial hardware business serving key accounts and customers in the oil and gas industry. Mr Chai joined the Company as a Senior Sales Executive in 1995 and was promoted to Sales Manager in 2001. Mr Chai holds a Bachelor of Business Administration degree (major in Marketing) from the National University of Singapore. PHILIP TEO LEONG SENG Mr Philip Teo, is the Marketing Manager of the Company since 2004. He is responsible for the marketing, sales and procurement of stainless steel products. His previous experiences included a 2 years stint in Japan and also managing an Anglo-Swedish company responsible for the SEA region. Mr. Philip Teo holds a B.Eng. (Hons) Degree from the University of Glasgow. THOMAS ONG HAN BOON Mr Thomas Ong Han Boon, is the Marketing Manager of Hoe Seng Huat Pte Ltd, a wholly owned subsidiary of the Company. Mr. Ong is involved in sales, marketing and procurement activities of the Company. He is also responsible for new market development and overseeing the sales and marketing team. He has been in the industrial hardware and steel business for over 36 years. Mr. Ong holds a GCE A Level Certificate.

A n n u a l R e p o t 2 0 0 7 19 Key Management CORPORATE SERVICES LIM KOK WAH As the Head of Logistics, Mr Lim Kok Wah, is responsible for the logistics and warehousing function of the Group. He also assists the General Manager (Sales & Procurement) in procurement of pipe fittings to meet the customers various needs. He first joined the Company as the Corporate Development Manager in December 2001 and was promoted to the Head of Logistics in January 2006. Mr Lim has several years of experience in public accounting with one of the Big Four public accounting firms and internal audit experience. Mr Lim is a Certified Public Accountant (CPA) and a Certified Internal Auditor (CIA). Mr Lim holds a Bachelor of Accountancy degree (Honours) from Nanyang Technological University. YAP CHUEN KONG Mr Yap Chuen Kong, joined the Company as the Group Financial Controller and was appointed as the Chief Financial Officer with effect from 1 May 2007. He is in charge of financial reporting, taxation, treasury, internal control systems and corporate advisory matters for the Group and the Company. He started his career with one of the Big Four public accounting firms and has since accumulated years of accounting and management experience from working in other public listed companies and private enterprises. Mr Yap graduated from Nanyang Technological University with a degree in Bachelor of Accountancy (Honours). PECK KIM GEE Mr Peck Kim Gee, joined the Company as a Project Development Manager in 1995. His main responsibilities are assisting the Deputy Managing Director in project management, ISO, property related matters and the Group s property business. He is also the appointed Fire Safety Manager for the Group s warehouse. Prior to joining the Company, Mr Peck has several years of experience in public accounting. Mr Peck holds a Bachelor of Business Administration degree in Finance and a Master of Business Administration degree. LUCY LAZAROUS-SIM Ms Lucy Lazarous-Sim is the Human Resource Manager for the Company & its group of Companies since June 2005. Prior to joining the Group, she has more than 18 years of experience in the field of Admin & Human Resource, in various industries. Ms Lazarous oversees the full spectrum of HR activities for the Group which includes policies formulation, recruitment, compensation & benefits management, performance management, training & development, industrial relations, succession planning, career management, employee communication and work life balance. Ms Lazarous holds a Diploma in Administrative Management. NG MEI CHOO Ms Ng Mei Choo, joined the Company as Finance and Admin Manager of Pressure Products Sdn Bhd ( Pressure Products ), a wholly owned subsidiary of the Company incorporated in Malaysia, since 2001. Her main responsibilities are to assist the Managing Director in overseeing the Company s daily operation relating to financial reporting, taxation, secretarial, human resource and the day-to-day sales and marketing related matters. Ms Ng started her career with a Public Listed Company in Malaysia and has since accumulated years of corporate experiences. Ms Ng holds a Bachelor of Economics (Honours) degree and a Master in Accountancy from University of Malaya, Malaysia.

20 H U P S t e e l L i m i t e d Corporate Information Board of Directors Mr Tang See Chim - Non-executive Chairman, Independent Director Mr Lim Kim Thor - Chief Executive Officer Mr Lim Boh Chuan - Deputy Managing Director Mr Lim Yee Kim - Executive Director Mr Lim Beo Peng - Executive Director Mr Lim Eng Chong - Non-executive Director Dr Lim Puay Koon - Non-executive Director Mr Ong Kian Min - Independent, Non-executive Director Mr Chan Kam Loon, Philip (appointed on 1 Nov 06) - Independent, Non-executive Director Mr Lim Chee San (appointed on 1 Nov 06) - Independent, Non-executive Director Executive Committee Mr Lim Kim Thor Chairman Mr Lim Boh Chuan Mr Lim Yee Kim Mr Lim Beo Peng Audit Committee Mr Tang See Chim Chairman Mr Ong Kian Min Dr Lim Puay Koon Mr Lim Chee San (appointed on 1 Nov 06) Mr Chan Kam Loon, Philip (appointed on 14 Feb 07) Nominating Committee Company Secretaries Mr Tan Cher Liang Ms Julie Koh Ngin Joo Registered Address 3 Church Street #08-01 Samsung Hub Singapore 049483 Business Office Address 116 Neythal Road Singapore 628603 Tel : (65) 6419 2121 Fax : (65) 6419 2113 Website: www.hupsteel.com Share Registrar Tricor Barbinder Share Registration Services 8 Cross Street #11-00 PWC Building Singapore 048424 Tel : (65) 6236 3333 Auditors PricewaterhouseCoopers 8 Cross Street #17-00 PWC Building Singapore 048424 Tel : (65) 6236 3388 Audit Partner-in-charge Ms Quek Bin Hwee Date of appointment : 13/1/2003 Mr Tang See Chim Chairman Mr Ong Kian Min Mr Lim Eng Chong Remuneration Committee Mr Ong Kian Min Chairman Mr Tang See Chim Mr Lim Eng Chong Mr Chan Kam Loon, Philip (appointed on 1 Nov 06)

Annual Repot 2007 21 Corporate Governance The Board of Directors of the Group is committed to maintaining the a high standard of corporate governance by complying with the Code of Corporate Governance ( the Code ) reviewed by the Singapore Council on Corporate Disclosure and Governance, whose recommendations to revise the Code have been accepted by the Government in July 2005 ( the revised Code ). This Report describes the Company s corporate governance framework in place with reference to the revised Code and the Best Practice Guide. BOARD MATTERS Principle 1 : The Board s Conduct of its Affairs The Board s primary role is to protect and enhance long-term shareholders value and its primary functions are to establish the corporate and strategic policies of the Group, ensures effective management leadership, proper conduct of the Group s businesses and to monitor the Group s performance. Matters which are specifically reserved for the Board include material acquisition and disposal proposals, major corporate or financial restructuring, strategic business initiatives i.e board policies, strategies and financial objectives of the Company, major fund raising exercises, approving nominations of directors and appointment of key executives, approval for the release of quarterly and full year results, approval of annual audited accounts for the Group and the Directors Report thereto, proposals of dividends and authorization of material interested person transactions and other significant corporate actions. Additionally, the Board delegates and entrusts certain of its functions and powers to Board Committees such as Executive Committee ( EC ), Audit Committee ( AC ), Remuneration Committee ( RC ), and Nominating Committee ( NC ). The EC comprises of Mr Lim Kim Thor (Chairman), Mr Lim Boh Chuan, Mr Lim Yee Kim and Mr Lim Beo Peng. The EC is established principally to assist the Board in making decisions expeditiously and is mainly responsible for planning and strategy, Group policy review, attending to urgent and important business or business of an unusual and extraordinary nature, and any other functions delegated by the Board. The Board comprises of members with strong business credentials, industry knowledge and from various professions such as banking, IT, financial and the legal profession. The Management regularly furnishes the Board with updates concerning the changes in laws, regulations or accounting standards where they may be applicable and relevant in enabling the Board to carry out its duties and responsibilities properly. To facilitate the effective and efficient discharge of duties and responsibilities, the directors are provided with extensive information on the Group s business activities, strategic directions and policies with regular and timely updates whenever there are any new developments. Newly appointed directors are given briefings by the Management on the Group s business activities, strategic directions, policies and the regulatory environment in which it operates, as well as their statutory and other duties and responsibilities as directors.

22 HUPSteel Limited Corporate Governance The Board is scheduled to meet at least four times a year and where necessary, hold additional meetings to address significant issues that may arise. The attendance of the directors at Board and Board committees meetings is as follow. Board Meeting Executive Committee ( EC ) Audit Committee ( AC ) Remuneration Committee ( RC ) Nominating Committee ( NC ) Held Attend Held Attend Held Attend Held Attend Held Attend Tang See Chim 4 4 4 4 3 3 1 1 Lim Kim Thor (1) 4 4 8 8 3 1 Lim Boh Chuan 4 4 8 8 Lim Yee Kim 4 4 8 7 Lim Eng Chong 4 4 3 3 1 1 Lim Puay Koon 4 4 4 4 Lim Beo Peng 4 4 8 8 Ong Kian Min 4 4 4 4 3 3 1 1 Chan Kam Loon, Philip (2) 4 3 4 1 3 1 Lim Chee San (3) 4 2 4 2 (1) Mr Lim Kim Thor retired from RC from 1 November 2006. (2) Mr Chan Kam Loon, Philip was appointed as an Independent Director and member of RC from 1 November 2006. He was appointed as a member of AC from 14 February 2007. (3) Mr Lim Chee San was appointed as an Independent Director and member of AC from 1 November 2006. Principle 2 : Board s Composition and Balance The Board of Directors comprises 10 directors, 4 of whom are independent non-executive and 2 of whom are non independent and non-executive. The NC reviews the independence of each director annually. At each annual general meeting, one-third of the directors are subject to retirement by rotation. However, the Chief Executive Officer shall not while he continues to hold that office be subject to retirement by rotation. Directors who have attained the age of 70 and above are subject to annual retirement and re-appointment in accordance with Section 153(6) of the Companies Act, Cap. 50. Key information about the directors is detailed in the Board of Directors section. The NC is of the view that there is a good balance between the executive and non-executive directors and a strong independent element on the Board to enable an objective judgment of the corporate affairs of the Group by board members. The Board is also of the opinion that its current size and current mix of expertise and experience of its members, as a group, provide core competencies in areas such as accounting and finance, business and management experience, industry knowledge necessary in the discharge of its duties and responsibilities. The Board, through the NC, examines on an on-going basis the size and the composition of the Board to evaluate whether the Board is effective in carrying out its duties. Principle 3 : Role of Chairman and Chief Executive Officer Mr Tang See Chim is the Non Executive Chairman of the Board of Directors while Mr Lim Kim Thor is the Chief Executive Officer of the Group. The Chairman is responsible for board proceedings in the best interests of the Group. The Chairman ensures that the Board members work together with the Management and that the Board engages Management in constructive discussions on various matters, including strategic issues and business planning processes. The Chief Executive Officer ( CEO ) bears executive responsibility for the Group s business. The CEO oversees the daily running of the Group s operations and is responsible to execute strategies and policies adopted by the Board.

Annual Repot 2007 23 Corporate Governance Principle 4 : Board membership The NC is made up of members all of whom are non-executive and the majority of whom are independent. The NC, which meets at least once every financial year, comprises three members namely: Tang See Chim (Chairman- Independent and non-executive) Ong Kian Min (Independent and non-executive) Lim Eng Chong (Non Independent and non-executive) The NC has adopted its terms of reference that describes the responsibilities of its members. The NC is responsible for the identification and selection of new directors. The NC make recommendations to the Board on all Board appointments, review all nominations and re-nominations having regard to directors contributions and past performance (eg. Attendance, preparedness, participation and candour), to assess the effectiveness of the Board as a whole. The NC also determines annually whether or not a director is independent. In considering the appointment of any new director, the NC ensures that the new director possesses the necessary skills, knowledge and experience that could facilitate the Board in the making of sound and well-considered decisions. The directors submit themselves for re-nomination and re-election at regular intervals. Under the Articles of Association of the Company, at each Annual General Meeting one-third of the directors for the time being (or, if their number is not a multiple of three, the number nearest to but not greater than one-third) shall retire from office by rotation, provided that no director holding office as Chief Executive Officer shall be subject to retirement by rotation or to be taken into account in determining the number of directors to retire. The NC has recommended for re-election of Mr Chan Kam Loon Philip, Mr Lim Chee San and Mr Ong Kian Min as directors of the company pursuant to Article 87 and 88 at the forthcoming AGM. The NC has also recommended the re-appointment of Mr Tang See Chim as director of the company according to section 153(6) of the Companies Act, Cap 50 at the forthcoming AGM. The Board has accepted the NC s recommendation and the three retiring directors have offered themselves for re-election. The structure, size and composition of the Board are reviewed periodically by the NC to ensure relevance. Principle 5 : Board Performance The NC assesses the effectiveness of the Board as a whole and the contribution by each director to the effectiveness of the Board on an annual basis. In its assessment of the Board effectiveness, the NC takes into consideration the frequency of the Board meetings, the rate at which issues raised are adequately dealt with and the reports from the various committees. In the like manner, the NC is able to assess the contribution of each individual director to the effectiveness of the Board. The NC has conducted a Board s performance evaluation as a whole in FY2007, participated by all directors. The assessment parameters are broadly based on the attendance records at the meetings of the Board and the relevant board committees, intensity of participation at meetings, sense of independence, quality of contributions and workload requirements. Principle 6 : Access to Information The Board has separate and independent access to the Management. Requests for information from the Board are dealt with promptly. The Board is informed of all material events and transactions as and when they occur. The company secretary attends all board meetings and is responsible for ensuring that board procedures are followed.

24 HUPSteel Limited Corporate Governance REMUNERATION MATTERS Principle 7 : Procedures for Developing Remuneration Policies Principle 8 : Level and Mix of Remuneration Principle 9 : Disclosure on Remuneration The RC, which meets at least once every financial year, comprises of 4 directors, of which 3 are independent and 1 non executive. The composition of the RC is as follows:- Ong Kian Min (Chairman- Independent and non-executive director) Tang See Chim (Independent and non-executive director) Lim Eng Chong (Non-independent and non-executive) Chan Kam Loon, Philip (Independent and non-executive director) appointed on 1 November 2006 Lim Kim Thor (Chief Executive Officer) retired on 1 November 2006 The RC carried out their duties in accordance with the written Terms of Reference. The primary objective of the RC are to make recommendations to the Board on the Group s framework of remuneration for directors and key executives and to determine specific remuneration packages for all the executive directors The RC is also responsible for administering the Company s Employee Stock Options Scheme. The RC is chaired by an independent non-executive director and the committee has access to expert advice inside and outside the Company for knowledge on executive compensation. The RC s recommendations are made in consultation with the Chairman of the Board and are submitted for endorsement by the entire Board. The RC takes into account the pay and employment conditions within the industry and in comparable companies, as well as the Company s relative performance and the performance of the individual directors when setting remuneration packages so as to attract, retain and motivate the directors needed to run the Company successfully. All aspects of the remuneration, including but not limited to directors fees, salaries, allowances, bonuses, profit sharing incentives, and benefits in kind are covered in the review by the RC. A proportion of the executive directors remuneration is linked to performance. Remuneration Report Name of director Base Salary (%) Variable Payments (%) Other Benefits (%) Fees (%) Total (%) Share Options Granted $750,001 and above Lim Kim Thor 15.6 80.0 3.1 1.3 100 Lim Boh Chuan 22.9 69.5 5.5 2.1 100 $500,001 and $750,000 Lim Yee Kim 29.1 59.2 8.8 2.9 100 $250,001 and $500,000 Lim Beo Peng 37.2 39.0 18.1 5.7 100 100,000 Below $250,000 Lim Eng Chong 100 100 Lim Puay Koon 100 100 Tang See Chim 100 100 Ong Kian Min 100 100 Chan Kam Loon, Philip 100 100 Lim Chee San 100 100

Annual Repot 2007 25 Corporate Governance The Group adopts a remuneration policy for staff comprising a fixed component and a variable component. The fixed component is in the form of a base salary. The variable component is in the form of a variable bonus that is linked to the performance of the Group and of the individual staff. Staff appraisals are conducted once a year. The Employees Share Option Scheme is another element of the variable component to align the interests of staff with that of the shareholders. The scheme had since expired on 16 November 2006. Details of options granted can be found in the Directors Report. The Board is of the view that disclosure of the remuneration of key management staff who are not directors will be detrimental to the Group s interest because of the very competitive nature of the industry the Group operates in. There is no employee in the Group, being an immediate family member of a director, whose remuneration exceeded S$150,000 during the year. ACCOUNTABILITY AND AUDIT Principle 10 : Accountability The Board account to the shareholders through providing timely information relating to the financial and operations of the Group as well as any issues faced by the Group regularly and as and when required through announcement releases to the SGX-ST. Principle 11 : Audit Committee Principle 12 : Internal Controls The AC comprises 5 directors of whom 4 are independent and 1 non executive and all members have accounting or financial management expertise. The composition of AC is as follows:- Tang See Chim (Chairman- Independent and non-executive director) Lim Puay Koon (Non-independent and non-executive director) Ong Kian Min (Independent and non-executive director) Lim Chee San (Independent and non-executive director) appointed on 1 November 2006 Chan Kam Loon, Philip (Independent and non-executive director) appointed on 14 February 2007 Details of the functions and responsibilities of the AC are found in the Directors Report. The AC has full access to and co-operation from Management and it meets external and internal auditors without the presence of Company s Management. With the assistance of the external and internal auditors, the AC conducts annual review of all material internal controls. The AC is satisfied that the Company s material internal controls are adequate. The AC has confirmed that there are no non-audit services provided by the external auditors which affect the independence of the auditors. Principle 13 : Internal Audit The Group has outsourced the internal audit functions to Messrs Ernst & Young. The internal auditors undertake the following functions and responsibilities in line with the Standards for the Professional Practice of Internal Auditing: review the effectiveness of the Company s material internal controls; provide assurance that key business and operational risks are identified and managed; ensure internal controls are in place and functioning as intended; and ensure operations are conducted in an effective and efficient manner.

26 HUPSteel Limited Corporate Governance The Internal Auditor reports directly to the Chairman of the Audit Committee and make recommendations on their findings. The Group s external auditors, Messrs PriceWaterhouseCoopers, also contribute an independent perspective on the internal control systems arising from their audit and annually report their findings to the AC. COMMUNICATION WITH SHAREHOLDERS Principle 14 : Regular, effective and fair communication with shareholders The Board strives to ensure that all material information is disclosed to the shareholders in an adequate and timely basis. The Board informs and communicates with shareholders through annual reports, announcement releases through SGX-ST, advertisement of notice of meetings and at General Meetings. Principle 15 : Greater shareholder participation Chairmen of the EC, AC, NC and RC, or members of the respective committees standing in for them, as well as external auditors will be present and available to address questions at General Meetings SECURITIES TRANSACTIONS The Company has clear policies and guidelines for dealings in the securities of the Company by Directors and employees which are in conformity with the SGX-ST Best Practices Guide. INTERESTED PERSON TRANSACTIONS The Company monitors all its interested person transactions closely and all interested person transactions are subject to review by the Audit Committee. The aggregate value of interested person transactions entered into during the year were as follows:- Name of interested person Aggregate value of all interested person transactions during the financial year under review (excluding transactions less than $100,000 and transactions conducted under shareholders mandate pursuant to Rule 920) Aggregate value of all interested person transactions conducted under shareholders mandate pursuant to Rule 920 (excluding transactions less than $100,000) Dr Lim Kim Hock Service $556,904 RISK MANAGEMENT The Group regularly reviews and improves its business and operational activities to identify areas of significant business risk as well as take appropriate measures to control and mitigate these risks. The Group reviews all significant control policies and procedures and highlights all significant matters to the AC and the Board. The financial risk management objectives and policies are outlined below. Fluctuation in industrial hardware product prices As a stockist, the Group has to stock a wide range of steel pipes and other accessories to cater to the needs of its customers. The Group currently sources its pipes and fittings from global steel hardware manufacturers. Prices of these steel products are subject to international price fluctuations of steel. Any significant fluctuation in the price of steel will affect the Group s cost of purchase and bottom line.

Annual Repot 2007 27 Corporate Governance The Group, with more than 60 years of knowledge and expertise gained in this line of business, is able to make appropriate adjustments to its supplier choice, timing of purchase and shipment, contracting arrangement with its customers, and hedging policies to address price fluctuation risk. Risks of political instability or economic downturn in the countries to which the Group exports In FY2007, exports accounted for 25% of the Group s revenue as compared to 28% in FY2006. The major countries to which the Group currently exports to are mainly Asian countries such as Malaysia, Thailand, and Indonesia. As such, any political instability or economic downturn in these countries will adversely affect the sales and hence profitability of the Group. The Group recognized the importance of market diversification and its ongoing strategy is to entrench its current market position in ASEAN markets and to further expand beyond its existing geographical coverage. Exposure to credit risks The Group is exposed to credit risk of its customers. From time to time, in the ordinary course of business, certain customers may default on their payment. Such events may arise due to the inherent risk from its customers business, risk pertaining to the political, economic, social and legal environment of its customers jurisdiction and foreign exchange risk. However, the Group regularly reviews its exposure by way of monthly management reports, market feedbacks, performing checks on customers financial status and executes necessary payment recovery measures to minimize its credit risks. The Group performs credit check and approval before granting credit to customers and all credit accounts are subject to regular review. The Group imposes a credit limit and a credit term on each customer. Significant credit exceptions are brought to the attention of the Executive Directors. In addition, the Group is not dependant on any single customer or any single country. The Group has more than 1000 customers based in more than 15 countries. Hence, the Group is not exposed to significant credit risk posed by any single customer. Foreign exchange exposure The purchases of the Group are mainly denominated in US$ and its sales are mainly denominated in S$. The Group is exposed to fluctuations in foreign exchange rates particularly as its sales and purchases are denominated in different currencies. For FY2007, approximately 89.2% of its total purchases were made in US$, whilst approximately 82.3% of its total sales were denominated in S$16.6% in US$ and 1.1% in Malaysia Ringgit ( MR ), which was pegged to US$ until recently. Hence, the Group may be exposed to any significant fluctuation of the US$. The Group monitors the US$ exchange rates closely and will enter into forward contracts on a case-by-case basis to reduce its exposure. The Group also holds some US$ deposits from customer collections as a form of natural hedge.

28 HUPSteel Limited Directors Report The directors present their report to the members together with the audited financial statements of the Group for the financial year ended 30 June 2007 and the balance sheet of the Company as at 30 June 2007. Directors The directors of the Company in office at the date of this report are as follows: Mr Tang See Chim Mr Lim Kim Thor Mr Lim Boh Chuan Mr Lim Yee Kim Mr Lim Beo Peng Mr Lim Eng Chong Dr Lim Puay Koon Mr Ong Kian Min Mr Chan Kam Loon, Philip (appointed on 1 November 2006) Mr Lim Chee San (appointed on 1 November 2006) Arrangements to enable directors to acquire shares or debentures Neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose object was to enable the directors of the Company to acquire benefits by means of an acquisition of shares in, or debentures of, the Company or any other body corporate other than as disclosed under Share Options on page 29. Directors interests in shares or debentures (a) According to the register of directors shareholdings, none of the directors holding office at the end of the financial year had any interest in the share capital of the Company or its related corporations, except as follows : Holdings registered in the name of director Holdings in which a director is deemed to have an interest At 30.06.2007 At 01.07.2006 At 30.06.2007 At 01.07.2006 THE COMPANY (Ordinary shares) Lim Kim Thor 24,589,200 19,671,360 119,556,000 95,673,600 Lim Boh Chuan 28,960,200 23,168,160 119,412,000 95,529,600 Lim Yee Kim 25,903,800 20,723,040 119,412,000 95,529,600 Lim Eng Chong 15,147,000 12,117,600 119,412,000 95,529,600 Lim Puay Koon 28,962,000 23,169,600 119,412,000 95,529,600 Lim Beo Peng 6,828,000 5,462,400 (b) (c) By virtue of section 7 of the Singapore Companies Act, all directors, except Mr Tang See Chim, Mr Ong Kian Min, Mr Chan Kam Loon, Philip and Mr Lim Chee San, are deemed to have interests in all the ordinary shares of the wholly-owned subsidiaries held by the Group at the beginning and end of the financial year. The directors interests in the shares of the Company and of related corporations as at 21 July 2007 were the same as at 30 June 2007.

Annual Repot 2007 29 Directors Report Directors contractual benefits Since the end of the previous financial year, no directors 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, except as disclosed in the financial statements and in this report, and except that certain directors have employment relationships with the Company, and have received remuneration in those capacities. Share options The Employees Share Option Scheme ( the Option Scheme ) was approved by the members of the Company at an Extraordinary General Meeting held on 24 April 1996. Particulars of options granted previously under the Option Scheme were set out in the Directors Report for the respective financial years. During the financial year, no options have been granted. No options have been granted to controlling shareholders as [defined in the Listing Manual of the Singapore Exchange Securities Trading Limited ( SGX-ST )] of the Company and their associates (as defined in the Listing Manual of the SGX-ST). No employee has received 5% or more of the total number of options available under the Option Scheme. No options were granted at a discount during the financial year. At the end of the financial year, outstanding options to take up unissued shares of the Company under the Option Scheme were as follow : Date of grant Balance at beginning of financial year Exercised during financial year Expired/ cancelled Balance at end of financial year Exercise price Expiry date 17 November 2001 72,000 (54,000) (18,000) $0.1300 16 November 2006 The terms of the Option Scheme are as follows : (a) (b) (c) (d) The share options granted may be exercised at any time after the first anniversary but before the expiry of the fifth anniversary of the date of grant. The shares under the Option Scheme may be exercised in full or in respect of 1,000 shares or a multiple thereof. The grantee may exercise the option by submitting to the Company a notice in the prescribed form accompanied by a remittance for the full amount of the aggregate exercise price in respect of the shares which have been exercised under the option. The persons to whom the options have been granted under the Option Scheme do not have the right to participate, by virtue of the options, in any share issue of any other Company in the Group. During the financial year, no options were granted to take up unissued shares of the subsidiaries and no shares of the subsidiaries were issued by virtue of the exercise of an option to take up unissued shares. At the end of the financial year, there were no unissued shares of the subsidiaries under option.

30 HUPSteel Limited Directors Report Audit Committee The members of the Audit Committee at the date of this report are : Mr Tang See Chim Independent (Chairman) Dr Lim Puay Koon Non - Executive Mr Ong Kian Min Independent Mr Chan Kam Loon, Philip Independent (appointed on 1 November 2006) Mr Lim Chee San Independent (appointed on 14 February 2007) The Audit Committee carried out its functions in accordance with Section 201B(5) of the Singapore Companies Act. In performing those functions, the Committee : (i) (ii) (iii) (iv) (v) reviews with the external auditors, their audit plan, audit report and any matters which the external auditors wish to discuss, without the presence of management; reviews with the internal auditors, their audit plan, evaluation of the internal accounting controls, audit report and any matters which the internal auditors wish to discuss, without the presence of management; reviews the balance sheet of the Company and the consolidated financial statements of the Group in the quarterly announcements and annual report; makes recommendations to the Board on the appointment of external and internal auditors and on their remunerations; and reviews the Interested Person Transactions as defined in Chapter 9 of the Listing Manual of the Singapore Exchange Securities Trading Limited ( SGX-ST ) as is required by SGX-ST and ensures that the transactions were on normal commercial terms and not prejudicial to the interests of the members of the Company. The Audit Committee has recommended to the Board that the auditors PricewaterhouseCoopers, be nominated for re-appointment at the forthcoming Annual General Meeting. Auditors The auditors, PricewaterhouseCoopers, have expressed their willingness to accept re-appointment. On behalf of the directors Lim Kim Thor Director Lim Boh Chuan Director 3 October 2007

Annual Repot 2007 31 Statement By Directors In the opinion of the directors, (a) (b) the balance sheet of the Company and the consolidated financial statements of the Group as set out on pages 33 to 74 are drawn up so as to give a true and fair view of the state of affairs of the Company and of the Group at 30 June 2007, and of the results of the business, changes in equity and cash flows of the Group for the financial year ended 30 June 2007; and at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due. On behalf of the directors Lim Kim Thor Director Lim Boh Chuan Director 3 October 2007

32 HUPSteel Limited Independent Auditor s Report To the Members of HupSteel Limited We have audited the accompanying financial statements of HupSteel Limited set out on pages 33 to 74, which comprise the balance sheet of the Company and the Group as at 30 June 2007, and the consolidated income statement, the consolidated statement of changes in equity and the consolidated cash flow statement of the Group for the financial year then ended, and a summary of significant accounting policies and other explanatory notes. Directors Responsibility for the Financial Statements The Company s directors are responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of the Singapore Companies Act (Cap. 50) ( the Act ) and Singapore Financial Reporting Standards. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Singapore Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors considers internal controls relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal controls. An audit also include evaluating the appropriateness of accounting policies used and reasonableness of accounting estimates made by directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a reasonable basis for our audit opinion. Opinion In our opinion, (a) (b) the balance sheet of the Company and the consolidated financial statements of the Group are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Company and of the Group as at 30 June 2007, and the results, changes in equity and cash flows of the Group for the financial year ended on that date; and the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditor, have been properly kept in accordance with the provisions of the Act. PricewaterhouseCoopers Certified Public Accountants 3 October 2007

Annual Repot 2007 33 Consolidated Income Statement GROUP 2007 2006 NOTES $ 000 $ 000 Revenue 4 284,172 186,202 Other gains 4 3,123 1,546 Expenses - Purchases of inventories (259,574) (125,708) - Changes in inventories 35,519 (23,041) - Employee benefits 5 (11,615) (8,996) - Depreciation of property, plant and equipment 18 (1,379) (1,290) - Other 6 (10,807) (7,927) - Finance 7 (1,972) (957) (249,828) (167,919) Profit before income tax 37,467 19,829 Income tax expense 8 (6,292) (4,100) Net profit 31,175 15,729 Attributable to : Equity holders of the Company 31,175 15,729 Earnings per share attributable to equity holders of the Company 9 Basic earnings per ordinary share 6.89 cents 3.48 cents Diluted earnings per ordinary share 6.89 cents 3.48 cents The accompanying notes form an integral part of these financial statements.

34 HUPSteel Limited Balance Sheets As at 30 June 2007 GROUP COMPANY 2007 2006 2007 2006 NOTES $ 000 $ 000 $ 000 $ 000 Current assets Cash and cash equivalents 10 18,217 11,200 4,968 4,135 Trade and other receivables 11 80,541 53,399 26,134 22,668 Tax recoverable 8 161 230 Inventories 12 79,944 44,425 43,405 32,767 Other current assets 13 250 212 73 77 179,113 109,466 74,580 59,647 Non-current assets Other receivables 14 6 Available-for-sale financial assets 15 7,930 11,363 7,930 9,930 Investment in club membership 62 61 Investment in subsidiaries 16 9,457 9,457 Loan to a subsidiary 17 35,230 34,258 Property, plant and equipment 18 34,392 32,949 8,052 8,391 Goodwill 19 4,630 4,630 Deferred income tax assets 24 76 38 25 47,090 49,047 60,694 62,036 Total assets 226,203 158,513 135,274 121,683 Current liabilities Trade and other payables 20 30,604 10,238 13,099 5,498 Current income tax liabilities 8 6,269 3,803 3,139 2,844 Borrowings 21 43,164 17,669 3,964 2,963 80,037 31,710 20,202 11,305 Non-current liabilities Borrowings 21 14 33 Provision for directors retirement gratuity 23 879 818 879 818 Deferred income tax liabilities 24 145 137 27 1,038 988 879 845 Total liabilities 81,075 32,698 21,081 12,150 Net assets 145,128 125,815 114,193 109,533 Equity Share capital 25 68,157 59,317 68,157 59,317 Capital reserves 26 (477) (477) 1,430 1,430 Currency translation reserves 27 (506) (598) Fair value reserves 28 1,526 1,917 1,526 1,526 Retained earnings 76,428 65,656 43,080 47,260 Total equity 145,128 125,815 114,193 109,533 The accompanying notes form an integral part of these financial statements.

Annual Repot 2007 35 Consolidated Statement of Changes in Equity Attributable to equity holders of the Company Notes Share capital Share premium Capital reserves Currency translation reserves Fair value reserves Retained earnings Minority interest Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Balance at 1 July 2006 59,317 (477) (598) 1,917 65,656 125,815 Fair value gains on availablefor-sale financial assets 28 742 742 Transfer on disposal of available-for-sale financial assets 28 (1,133) (1,133) Currency translation differences 27 92 92 Net gains/(losses) recognised directly in equity 92 (391) (299) Net profit 31,175 31,175 Total recognised (losses)/ gains 92 (391) 31,175 30,876 Employee share option scheme 25 5 5 Rights issue 25 9,048 (9,048) Share issue expenses 25 (213) (213) Dividend paid/payable 29 (11,355) (11,355) Balance at 30 June 2007 68,157 (477) (506) 1,526 76,428 145,128 Balance at 1 July 2005 30,154 29,163 (477) (540) 1,247 57,163 34 116,744 Fair value gains on availablefor-sale financial assets 28 670 670 Currency translation differences 27 (84) (84) Net (losses)/gains recognised directly in equity (84) 670 586 Net profit 15,729 15,729 Total recognised (losses)/ gains (84) 670 15,729 16,315 Bonus issue 25 6,031 (6,031) Effect of Companies (Amendment) Act 2005 25 23,132 (23,132) Dividend paid 29 (7,236) (7,236) Liquidation of a subsidiary 26 (34) (8) Balance at 30 June 2006 59,317 (477) (598) 1,917 65,656 125,815 The accompanying notes form an integral part of these financial statements.

36 HUPSteel Limited Consolidated Cash Flow Statement 2007 2006 $ 000 $ 000 Cash flows from operating activities Net profit 31,175 15,729 Adjustments for : Tax 6,292 4,100 Property, plant and equipment - depreciation 1,379 1,290 - loss/(gain) on disposal 25 (2) Gain on disposal of available-for-sale financial assets (797) Loss on liquidation of a subsidiary 26 Interest income (210) (243) Interest expense 1,653 1,352 Dividend income (1,288) (458) Foreign currency translation 40 (66) Operating cash flow before working capital changes 38,269 21,728 Change in operating assets and liabilities Inventories (35,519) 23,041 Trade and other receivables (27,143) 1,661 Trade and other payables 18,901 1,477 Other current assets (39) 129 Cash (used in)/generated from operations (5,531) 48,036 Income tax paid (3,778) (5,444) Interest received 217 243 Net cash (used in)/from operating activities (9,092) 42,835 The accompanying notes form an integral part of these financial statements.

Annual Repot 2007 37 Consolidated Cash Flow Statement 2007 2006 Note $ 000 $ 000 Cash flows from investing activities Property, plant and equipment - purchases (3,534) (470) - proceeds from sale 738 5 Available-for-sale financial assets - purchases (42) - proceeds from sale 3,839 Proceeds from liquidation of a subsidiary 43 Dividends received from other quoted investments 1,288 458 Net cash from/(used in) investing activities 2,331 (6) Cash flows from financing activities Net expense from issue of shares (208) Proceeds from/(repayment of) trust receipts 26,828 (37,440) Dividend paid to shareholders (9,500) (7,236) Repayment of term loan (1,333) (5,000) Payments under finance lease obligations (18) (14) Interest paid (1,991) (1,352) Net cash from/(used in) financing activities 13,778 (51,042) Net increase/(decrease) in cash and cash equivalents 7,017 (8,213) Cash and cash equivalents at beginning of the financial year 10 11,200 19,413 Cash and cash equivalents at end of the financial year 10 18,217 11,200 The accompanying notes form an integral part of these financial statements.

38 HUPSteel Limited Notes to the Financial Statements These notes form an integral part of and should be read in conjunction with the accompanying financial statements. 1. General The Company is incorporated and domiciled in Singapore. The address of its principal place of business is 116 Neythal Road Singapore 628603. The Company is listed on the Singapore Exchange. The principal activities of the Company consist of trading in industrial hardware and investment holding. The principal activities of its subsidiaries are set out in Note 16 to the financial statements. 2. Significant accounting policies 2.1 Basis of preparation The financial statements have been prepared in accordance with Singapore Financial Reporting Standards ( FRS ). The financial statements have been prepared under the historical cost convention, except as disclosed in the accounting policies below. The preparation of financial statements in conformity with FRS requires management to exercise its judgement in the process of applying the Group s accounting policies. It also requires the use of certain critical accounting estimates and assumptions. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3. Interpretations and amendments to published standards effective in 2007 On 1 July 2006, the Group adopted the new or revised FRS and Interpretations to FRS (INT FRS) that are mandatory for application from that date. Changes to the Group s accounting policies have been made as required, in accordance with the relevant transitional provisions in the respective FRS and INT FRS. The following are the FRS and INT FRS that are relevant to the Group: FRS 19 (Amendment) FRS 21 (Amendment) FRS 32 (Amendment) FRS 39 (Amendment) INT FRS 104 Employee Benefits The Effects of Changes in Foreign Exchange Rates Financial Instruments: Disclosures and Presentation Financial Instruments: Recognition and Measurement Determining whether an Arrangement contains a Lease The adoption of the above FRS and INT FRS did not result in substantial changes to the Group s accounting policies. 2.2 Revenue recognition Revenue for the Group comprises the fair value of the consideration received or receivable for the sale of goods and rendering of services in the ordinary course of the Group s activities. Revenue is presented, net of goods and services tax, rebates and discounts, and after eliminating sales within the Group. Revenue is recognised as follows: (a) Sale of goods Revenue from sale of goods is recognised when a Group entity has delivered the products to the customer, the customer has accepted the products and collectibility of the related receivables is reasonably assured.

Annual Repot 2007 39 Notes to the Financial Statements 2. Significant accounting policies (continued) 2.2 Revenue recognition (continued) (b) Rendering of services Revenue from services is recognised over the period in which the services are rendered, by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be performed. (c) Interest income Interest income is recognised on a time-proportion basis using the effective interest method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cashflow discounted at original effective interest rate of the instrument, and thereafter amortising the discount as interest income. (d) Dividend income Dividend income is recognised when the right to receive payment is established. (e) Rental income 2.3 Group accounting Subsidiaries Rental income from operating leases is recognised on a straight-line basis over the lease term. Subsidiaries are entities over which the Group has power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values on the date of acquisition, irrespective of the extent of any minority interest. Subsidiaries are consolidated from the date on which control is transferred to the Group to the date on which that control ceases. In preparing the consolidated financial statements, intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Where necessary, adjustments are made to the financial statements of subsidiaries to ensure consistency of accounting policies with those of the Group. Please refer to Note 2.6 for the accounting policy on investments in subsidiaries in the separate financial statements of the Company.

40 HUPSteel Limited Notes to the Financial Statements 2. Significant accounting policies (continued) 2.4 Property, plant and equipment (a) Measurement (i) Land and buildings Land and buildings are initially recorded at cost. Freehold land and buildings were revalued in August 1992 by independent professional valuers on the basis of open market with existing use. The Group has no fixed policy on the frequency of valuation of its property, plant and equipment and the valuation was carried out for the purpose of updating the book value of the freehold land and buildings for the initial public offering of shares of the Company. Freehold land is subsequently stated at revalued amount less accumulated impairment losses. Buildings on freehold land are subsequently stated at the revalued amount less accumulated depreciation and accumulated impairment losses. When an asset is revalued, any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset. The net amount is then restated to the revalued amount of the asset. Increases in carrying amount arising from revaluation are credited to the asset revaluation reserve, unless they offset previous decreases in the carrying amount of the same asset, in which case, they are credited to the income statement. Decreases in carrying amounts that offset previous increases of the same asset are charged against the asset revaluation reserve. All other decreases in carrying amounts are charged to the income statement. (ii) Other property, plant and equipment All other property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. (iii) Component of costs The cost of property, plant and equipment includes expenditure that is directly attributable to the acquisition of the items. Dismantlement, removal or restoration costs are included as part of the cost of property, plant and equipment if the obligation for dismantlement, removal or restoration is incurred as a consequence of acquiring or using the asset. (b) Depreciation Freehold land is not depreciated. Depreciation on other property, plant and equipment is calculated using the straight line method to allocate their depreciable amounts over their estimated useful lives. The estimated useful lives are as follows: Buildings and leasehold land Motor vehicles Furniture, fittings and equipment Plant and machinery Useful lives 25 to 50 years 4 to 10 years 3 to 20 years 3 to 20 years The residual values and useful lives of property, plant and equipment are reviewed, and adjusted as appropriate, at each balance sheet date. The effects of any revision of the residual values and useful lives are included in the income statement for the financial year in which the changes arise.

Annual Repot 2007 41 Notes to the Financial Statements 2. Significant accounting policies (continued) 2.4 Property, plant and equipment (continued) (c) Subsequent expenditure Subsequent expenditure relating to property, plant and equipment that has already been recognised is added to the carrying amount of the asset only when it is probable that future economic benefits associated with the item will flow to the Group and the cost can be reliably measured. Other subsequent expenditure is recognised as an expense during the financial year in which it is incurred. (d) Disposal 2.5 Goodwill On disposal of an item of property, plant and equipment, the difference between the net disposal proceeds and its carrying amount is taken to the income statement. Any amount in revaluation reserve relating to that asset is transferred to retained earnings directly. Goodwill represents the excess of the cost of an acquisition of subsidiaries and business units over the fair value at the date of acquisition of the Group s share of their identifiable net assets. (a) Acquisitions pre - 1 July 2001 Goodwill on acquisitions of subsidiaries was adjusted against capital reserves in the year of acquisition; such goodwill has not been retrospectively capitalised and amortised. On disposal of the subsidiary, such goodwill previously adjusted against capital reserves are not recognised in the income statement. (b) Acquisitions post 1 July 2001 Goodwill on acquisitions of subsidiaries or business units is included as goodwill within non-current assets on the balance sheet. Goodwill for acquisition post 1 July 2004 is determined after deducting the Group s share of their identifiable net assets and contingent liabilities. Goodwill recognised within non-current assets is tested at least annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on disposal of subsidiaries or business units includes the carrying amount of goodwill relating to the subsidiary or business unit sold. 2.6 Investments in subsidiaries Investments in subsidiaries are stated at cost less accumulated impairment losses in the Company s balance sheet. On disposal of investments in subsidiaries, the difference between net disposal proceeds and the carrying amount of the investment is taken to the income statement. 2.7 Impairment of non-financial assets (a) Goodwill Goodwill is tested annually for impairment, as well as when there is any indication that the goodwill may be impaired. For the purpose of impairment testing of goodwill, goodwill is allocated to each of the Group s cashgenerating-units (CGU) expected to benefit from synergies of the business combination. An impairment loss is recognised in the income statement when the carrying amount of a CGU, including the goodwill, exceeds the recoverable amount of a CGU. Recoverable amount of the CGU is the higher of the CGU s fair value less cost to sell and value in use.

42 HUPSteel Limited Notes to the Financial Statements 2. Significant accounting policies (continued) 2.7 Impairment of non-financial assets (continued) (a) Goodwill (continued) The total impairment loss of a CGU is allocated first to reduce the carrying amount of goodwill allocated to the CGU and then to the other assets of the CGU pro-rata on the basis of the carrying amount of each asset in the CGU. Impairment loss on goodwill is recognised in the income statement and is not reversed in a subsequent period. (b) Property, plant and equipment Investments in subsidiaries 2.8 Financial assets Property, plant and equipment and investments in subsidiaries are reviewed for impairment whenever there is any indication that these assets may be impaired. If any such indication exists, the recoverable amount (i.e. the higher of the fair value less cost to sell and value in use) of the asset is estimated to determine the amount of impairment loss. For the purpose of impairment testing of these assets, recoverable amount is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. If this is the case, recoverable amount is determined for the CGU to which the asset belongs. If the recoverable amount of the asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. The impairment loss is recognised in the income statement unless the asset is carried at revalued amount, in which case, such impairment loss is treated as a revaluation decrease. An impairment loss for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to determine the asset s recoverable amount since the last impairment loss was recognised. The carrying amount of an asset other than goodwill is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an asset other than goodwill is recognised in the income statement, unless the asset is carried at revalued amount, in which case, such reversal is treated as a revaluation increase. However, to the extent that an impairment loss on the same revalued asset was previously recognised in the income statement, a reversal of that impairment is also recognised in the income statement. (a) Classification The Group classifies its investments in financial assets in the following categories: at fair value through profit or loss, loans and receivables, held-to-maturity and available-for-sale financial assets. However, the Group has financial assets only in the categories of loans and receivables, and available-for-sale. The classification depends on the purpose for which the assets were acquired. Management determines the classification of its financial assets at initial recognition and re-evaluates this designation at every reporting date. (i) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the receivable. They are included in current assets, except those maturing more than 12 months after the balance sheet date. These are classified as non-current assets. Loans and receivables are classified within trade and other receivables and cash and cash equivalents on the balance sheet.

Annual Repot 2007 43 Notes to the Financial Statements 2. Significant accounting policies (continued) 2.8 Financial assets (continued) (a) Classification (continued) (ii) Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the assets within 12 months after the balance sheet date. (b) Recognition and derecognition Purchases and sales of available-for-sale investments are recognised on trade-date the date on which the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. On sale of a financial asset, the difference between the net sale proceeds and its carrying amount is taken to the income statement. Any amount in the fair value reserve relating to that asset is also taken to the income statement. (c) Initial measurement Financial assets are initially recognised at fair value plus transaction costs. (d) Subsequent measurement Available-for-sale financial assets are subsequently carried at fair value. Loans and receivables are carried at amortised cost using the effective interest method. Unrealised gains and losses arising from changes in the fair value of investments classified as available-for-sale are recognised in the fair value reserve within equity. When investments classified as available-for-sale are sold or impaired, the accumulated fair value adjustments in the fair value reserve within equity are included in the income statement. (e) Impairment The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. (i) Loans and receivables An allowance for impairment of loans and receivables, including trade and other receivables, is recognised when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the receivable is impaired. The amount of the allowance is the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The amount of the allowance for impairment is recognised in the income statement within Other expenses.

44 HUPSteel Limited Notes to the Financial Statements 2. Significant accounting policies (continued) 2.8 Financial assets (continued) (e) Impairment (continued) (ii) Available-for-sale financial assets In the case of an equity security classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered an indicator that the security is impaired. When there is objective evidence that an available-for-sale financial asset is impaired, the cumulative loss that has been recognised directly in the fair value reserve is removed from the fair value reserve within equity and recognised in the income statement. The cumulative loss is measured as the difference between the acquisition cost (net of any principal repayments and amortisation) and the current fair value, less any impairment loss on that financial asset previously recognised in income statement. 2.9 Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method. Borrowings which are due to be settled within twelve months after the balance sheet date are included in current borrowings in the balance sheet even though the original term was for a period longer than twelve months and an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the balance sheet date and before the financial statements are authorised for issue. Other borrowings due to be settled more than twelve months after the balance sheet date are included in non-current borrowings in the balance sheet. 2.10 Trade and other payables Trade and other payables are initially measured at fair value, and subsequently measured at amortised cost, using the effective interest method. 2.11 Fair value estimation The carrying amounts of current financial assets and liabilities, which are carried at amortised cost, are assumed to approximate their fair values. The fair value of financial instruments traded in active markets (such as exchange- traded and over-thecounter securities) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Group is the current bid price.

Annual Repot 2007 45 Notes to the Financial Statements 2. Significant accounting policies (continued) 2.12 Leases (a) When a group company is the lessee: The Group leases certain property, plant and equipment from third parties. Finance leases Leases of property, plant and equipment where the Group assumes substantially the risks and rewards of ownership are classified as finance leases. The leased assets and the corresponding lease liabilities (net of finance charges) under finance leases are recognised on the balance sheet as property, plant and equipment and borrowings respectively at the inception of the leases at the lower of the fair values of the leased assets and the present values of the minimum lease payments. Each lease payment is apportioned between the finance charge and the reduction of the outstanding lease liability. The finance charge is recognised in the income statement and allocated to each period during the lease term so as to achieve a constant periodic rate of interest on the remaining balance of the finance lease liability. Contingent rents are recognised as an expense in the income statement in the financial year in which they are incurred. Operating leases Leases of property, plant and equipment in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are taken to the income statement on a straight-line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place. (b) When a group company is the lessor: 2.13 Inventories The Company leases out certain property, plant and equipment to third parties. Operating leases Assets leased out under operating leases are included in property, plant and equipment. Rental income (net of any incentives given to lessees) is recognised on a straight-line basis over the lease term. Inventories are carried at the lower of cost and net realisable value. Cost is determined on a weighted average basis. Net realisable value is the estimated selling price in the ordinary course of business, less selling expenses.

46 HUPSteel Limited Notes to the Financial Statements 2. Significant accounting policies (continued) 2.14 Income taxes Current income tax liabilities (and assets) for current and prior periods are recognised at the amounts expected to be paid to (or recovered from) the tax authorities, using the tax rates (and tax laws) that have been enacted or substantially enacted by the balance sheet date. Deferred income tax assets/liabilities are recognised for all deductible taxable temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except when the deferred income tax assets/liabilities arise from the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction, affects neither accounting nor taxable profit or loss. Deferred income tax liability is recognised on temporary differences arising on investments in subsidiaries, except where the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income 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 income tax assets and liabilities are measured at: (i) (ii) the tax rates that are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled, based on tax rates (and tax laws) that have been enacted or substantially enacted by the balance sheet date; and the tax consequence that would follow from the manner in which the Company expects, at the balance sheet date, to recover or settle the carrying amounts of its assets and liabilities. Current and deferred income taxes are recognised as income or expenses in the income statement for the period, except to the extent that the tax arises from a business combination or a transaction which is recognised directly in equity. Deferred tax on temporary differences arising from the revaluation gains and losses on land and buildings and fair value gains and losses on available-for-sale financial assets are charged or credited directly to equity in the same period the temporary differences arise. Deferred tax arising from a business combination is adjusted against goodwill on acquisition. 2.15 Provisions Provisions for asset dismantlement, removal or restoration, warranty, restructuring costs and legal claims are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. 2.16 Employee benefits (a) Defined contribution plans Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into separate entities such as the Central Provident Fund on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The Group s contributions are recognised as employee compensation expense when they are due. (b) Employee leave entitlement Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the balance sheet date.

Annual Repot 2007 47 Notes to the Financial Statements 2. Significant accounting policies (continued) 2.17 Currency translation (a) Functional and presentation currency Items included in the financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates ( functional currency ). The financial statements are presented in Singapore Dollar, which is the Company s functional and presentation currency. (b) Transactions and balances Transactions in a currency other than the functional currency ( foreign currency ) are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Currency translation gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. (c) Translation of Group entities financial statements The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: (i) (ii) (iii) Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of the balance sheet; Income and expenses for each income statement are translated at average exchange rate (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated using the exchange rates at the dates of the transactions); and All resulting exchange differences are taken to the foreign currency translation reserve within equity. 2.18 Segment reporting A business segment is a distinguishable component of the Group engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is a distinguishable component of the Group engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different from those of segments operating in other economic environments. 2.19 Cash and cash equivalents Cash and cash equivalents include cash on hand and deposits with financial institutions. 2.20 Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares are deducted against the share capital account.

48 HUPSteel Limited Notes to the Financial Statements 2. Significant accounting policies (continued) 2.21 Dividends Interim dividends are recorded in the financial year in which they are declared payable. Final dividends are recorded in the financial year in which the dividends are approved by the shareholders. 2.22 Borrowing costs Borrowing costs are recognised on a time-proportion basis in the income statement using the effective interest method. 3. Critical accounting estimates, assumptions and judgements Estimates, assumptions and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next year are discussed below. (a) Estimated impairment of goodwill The Group tests whether goodwill has suffered any impairment. The recoverable amounts of cashgenerating units have been determined based on value-in-use calculations. These calculations require the use of estimates [see Note 19]. Management does not foresee any significant changes in the key assumptions used for the valuein-use calculations that will cause the carrying amount of the CGU to be significantly in excess of its recoverable amount. (b) Estimated allowance of inventory obsolescence The Group assesses annually whether any allowance is required to reflect the carrying value of inventory. Net realisable values have been determined based on the estimated selling price in the ordinary course of business, less applicable variable selling expenses. This estimation requires the use of judgement and estimates. (c) Estimated allowances for impairment of receivables The Group makes allowance for impairment of receivables based on an assessment of the recoverability of trade receivables and other receivables. Allowance of impairment of receivables are applied to trade receivables and other receivables where events or changes in circumstances indicate that the balances may not be collectible. The identification of doubtful receivables requires the use of judgement and estimates. Where the expectation is different from the original estimate, such difference will impact carrying value of receivables and the allowance for impairment of receivables in the period in which such estimate has been changed.

Annual Repot 2007 49 Notes to the Financial Statements 4. Revenue and other gains GROUP 2007 2006 $ 000 $ 000 Sale of goods 282,710 185,101 Services rendered 742 484 Rental income 720 617 Total revenue 284,172 186,202 Other gains: Gross dividend income from quoted investments 1,288 458 Gain on sale of property, plant and equipment 2 Gain on sale of available-for-sale financial assets 797 Sale of scrap metal 185 292 Interest income from : - fixed deposits 108 1 - quoted corporate bonds 66 189 - others 36 53 Sundry income 643 551 Other gains 3,123 1,546 287,295 187,748 5. Employee benefits GROUP 2007 2006 $ 000 $ 000 Wages and salaries 10,395 8,089 Directors fees 380 260 Employer s contribution to defined contribution plans including Central Provident Fund 705 577 Retirement gratuity 135 61 11,615 8,996

50 HUPSteel Limited Notes to the Financial Statements 6. Other expenses GROUP 2007 2006 $ 000 $ 000 Rental on operating leases 669 666 Freight charges 5,051 3,372 Allowance for impairment of receivables 37 572 Write-back of allowance for impairment of receivables (4) (331) Inventory write-down 192 56 Reversal of inventory write-down (77) (1,565) Legal and professional charges 899 848 Property taxes 431 418 Others 3,609 3,891 10,807 7,927 7. Finance expense GROUP 2007 2006 $ 000 $ 000 Interest expense on : - term loan 20 260 - finance lease liabilities 2 2 - trust receipts 1,631 1,090 1,653 1,352 Foreign exchange loss/(gain) - net 319 (395) 1,972 957 8. Income taxes Income tax expense GROUP 2007 2006 $ 000 $ 000 Tax expense attributable to profit is made up of : Current income tax - Singapore 6,274 3,798 - Foreign 105 15 6,379 3,813 Deferred income tax (21) 377 6,358 4,190 (Over)/Under provision in preceding financial years - current income tax (58) 128 - deferred income tax (8) (218) 6,292 4,100

Annual Repot 2007 51 Notes to the Financial Statements 8. Income taxes (continued) (a) Income tax expense (continued) The tax expense on profit differs from the amount that would arise using the Singapore standard rate of income tax due to the following : GROUP 2007 2006 $ 000 $ 000 Profit before income tax 37,467 19,829 Tax at statutory tax rate of 18% (2006 : 20%) 6,744 3,966 Expenses not deductible for tax purposes 162 340 Income not subject to tax (368) (46) Income subject to concessionary tax rate (5) Effect of change in tax rate (11) Effect of different tax rate in other country (15) 4 Singapore statutory stepped income exemption (149) (74) Tax charge 6,358 4,190 (b) GROUP COMPANY 2007 2006 2007 2006 $ 000 $ 000 $ 000 $ 000 Tax recoverable (161) (230) Current income tax liabilities 6,269 3,803 3,139 2,844 6,108 3,573 3,139 2,844 9. Earnings per share (a) Basic earnings per share Basic earnings per share is calculated by dividing the net profit attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the financial year. The weighted average number of ordinary shares outstanding for 2006 has been adjusted for the issue of rights shares in 2007 on the basis of 1 rights share for every 4 shares held. GROUP 2007 2006 Net profit attributable to members of HupSteel Limited ($ 000) 31,175 15,729 Weighted average number of ordinary shares in issue ( 000) 452,396 452,342 Basic earnings per ordinary share (cents) 6.89 3.48

52 HUPSteel Limited Notes to the Financial Statements 9. Earnings per share (continued) (b) Diluted earnings per share For the purpose of calculating diluted earnings per share, profit attributable to members of the Company and the weighted average number of ordinary shares outstanding are adjusted for the effects of all dilutive potential ordinary shares. The Company has share options which are dilutive potential ordinary shares. A calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company s shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options. The differences are added to the denominator as an issuance of ordinary shares for no consideration. No adjustment is made to earnings (numerator). Fully diluted earnings per share is the same as the basic earnings per share as there is no material dilutive effect from the exercise of outstanding share options at the end of the financial year. 10. Cash and cash equivalents GROUP COMPANY 2007 2006 2007 2006 $ 000 $ 000 $ 000 $ 000 Cash and bank balances 16,058 9,851 4,968 4,135 Short-term bank deposits 2,159 1,349 18,217 11,200 4,968 4,135 The carrying amounts of cash and cash equivalents approximate their fair value. Cash and cash equivalents are denominated in the following currencies : GROUP COMPANY 2007 2006 2007 2006 $ 000 $ 000 $ 000 $ 000 Singapore Dollar 14,824 9,037 4,164 3,714 United States Dollar 1,115 814 804 421 Malaysian Ringgit 2,278 1,349 18,217 11,200 4,968 4,135 Short-term bank deposits at the balance sheet date have an average maturity of 8 months (2006 : 8 months) from the end of the financial year with the following weighted average effective interest rates : GROUP 2007 2006 Singapore Dollar 1.80% 1.80% Malaysian Ringgit 1.65% 2.90%

Annual Repot 2007 53 Notes to the Financial Statements 11. Trade and other receivables GROUP COMPANY 2007 2006 2007 2006 $ 000 $ 000 $ 000 $ 000 Trade receivables - third parties 80,277 53,763 22,203 19,572 Trade receivables - subsidiaries 2,772 1,798 Goods and services tax recoverable 756 218 237 219 Less : Allowance for impairment of receivables - third parties (652) (637) (11) 80,381 53,344 25,201 21,589 Non-trade receivables from subsidiaries 899 1,055 Staff loans 18 22 2 13 Interest receivable 4 11 5 11 Sundry receivables 138 22 27 80,541 53,399 26,134 22,668 The carrying amount of trade and other receivables approximate their fair values. Non-trade receivables from subsidiaries are unsecured, interest-free and repayable on demand. Impairment loss on trade receivables amounting to $37,000 (2006: $572,000) was recognised as an expense and included in Other expenses. Trade and other receivables are denominated in the following currencies : GROUP COMPANY 2007 2006 2007 2006 $ 000 $ 000 $ 000 $ 000 Singapore Dollar 62,868 45,322 21,094 18,640 United States Dollar 15,910 6,782 5,040 4,028 Malaysian Ringgit 1,760 1,295 Others 3 80,541 53,399 26,134 22,668 The weighted average effective interest rates for staff loans is disclosed in Note 14. 12. Inventories GROUP COMPANY 2007 2006 2007 2006 $ 000 $ 000 $ 000 $ 000 Finished goods 79,944 44,425 43,405 32,767 During the year, the Group reversed $77,000 (2006 : $1,565,000), being part of an inventory write-down made in 2006, as the inventories were sold above the carrying amounts in 2007. The reversal was included in Other expense in the income statement.

54 HUPSteel Limited Notes to the Financial Statements 13. Other current assets GROUP COMPANY 2007 2006 2007 2006 $ 000 $ 000 $ 000 $ 000 Deposits 43 37 4 3 Prepayments 207 175 69 74 250 212 73 77 The carrying amounts of deposits approximate their fair values and are denominated in Singapore Dollar. 14. Other receivables non current GROUP COMPANY 2007 2006 2007 2006 $ 000 $ 000 $ 000 $ 000 Staff loans due after 12 months 6 The interest rate for the staff loans are variable and pegged to the average of the prevailing 6 months fixed deposit rates of the local banks. The carrying amounts of the staff loans approximated their fair values and were denominated in Singapore Dollars. The weighted average effective interest rate as at balance sheet date is nil % (2006 : 0.45%). 15. Available-for-sale financial assets GROUP COMPANY 2007 2006 2007 2006 $ 000 $ 000 $ 000 $ 000 Balance at beginning of financial year 11,363 10,651 9,930 9,408 Additions 42 40 Disposals (4,175) (2,743) Fair value gains transferred to equity (Note 28) 742 670 743 482 Balance at end of financial year 7,930 11,363 7,930 9,930 Available-for-sale financial assets include the following: GROUP COMPANY 2007 2006 2007 2006 $ 000 $ 000 $ 000 $ 000 Listed securities-singapore - Equity securities 6,880 7,593 6,880 6,160 - S$ Corporate bonds 1,050 3,770 1,050 3,770 7,930 11,363 7,930 9,930

Annual Repot 2007 55 Notes to the Financial Statements 15. Available-for-sale financial assets (continued) The effective interest rates for the interest-bearing financial assets were as follows: GROUP AND COMPANY 2007 2006 % % S$ Corporate bonds due in May 2012 4.080 6.293 16. Investment in subsidiaries COMPANY 2007 2006 $ 000 $ 000 Equity investments at cost 9,457 9,457 The particulars of the subsidiaries are as follows : Name Place of incorporation and business Principal activities Cost of Effective interest unquoted equity investment 2007 2006 2007 2006 % % $ 000 $ 000 Held by the Company Eastern Win Metals & Machinery Pte Ltd@ Singapore Hardware and general merchandise and racking services 100 100 364 364 Metal House Investment Pte Ltd@ Singapore Hardware trading property and investment holding 100 100 6,000 6,000 Hup Seng Huat Land Pte Ltd@ Singapore Investment holding and logistics services 100 100 1,050 1,050 Thong Seng Metal Pte Ltd@ Singapore Hardware trading 100 100 300 300 Pressure Products Sdn. Bhd.* Malaysia Hardware trading 100 100 1,743 1,743 9,457 9,457 Held by subsidiary Hoe Seng Huat Pte Ltd@ Singapore Hardware trading 100 100 20,000 20,000 Sinip Steel Industries (S) Pte Ltd@ Singapore Sand-blasting 100 100 1,500 1,500 @ Audited by PricewaterhouseCoopers, Singapore * Audited by PricewaterhouseCoopers, Kuala Lumpur, Malaysia

56 HUPSteel Limited Notes to the Financial Statements 17. Loan to a subsidiary COMPANY 2007 2006 $ 000 $ 000 Loan due after 12 months 35,230 34,258 The loan to a subsidiary is unsecured and interest-free. It has no fixed terms of repayment and is not expected to be repaid in the next 12 months from the balance sheet date. The fair value of the loan is $33,552,000 (2006:$32,627,000). The fair value is computed based on the present value of the cashflows on the loan assuming the minimum maturity of 12 months, using a discount rate based upon the borrowing rate which the directors expect would be available to the Group at balance sheet date. The loan is denominated in Singapore dollar. 18. Property, plant and equipment Freehold land and buildings $ 000 Leasehold land and buildings $ 000 Motor vehicles $ 000 Furniture, fittings and equipment $ 000 Plant and machinery $ 000 Total $ 000 Group Cost or valuation At 1 July 2006 Cost 6,520 16,988 1,250 2,313 2,061 29,132 Valuation 13,900 13,900 20,420 16,988 1,250 2,313 2,061 43,032 Exchange rate adjustments 51 5 9 1 66 Additions 1,465 849 634 586 3,534 Disposals (768) (236) (472) (1,476) At 30 June 2007 20,420 18,504 1,336 2,720 2,176 45,156 Representing : Cost 6,520 18,504 1,336 2,720 2,176 31,256 Valuation 13,900 13,900 20,420 18,504 1,336 2,720 2,176 45,156 Accumulated depreciation and accumulated impairment losses At 1 July 2006 5,792 1,686 642 1,215 748 10,083 Exchange rate adjustments 2 5 6 2 15 Depreciation charge 122 606 126 298 227 1,379 Disposals (323) (228) (162) (713) At 30 June 2007 5,914 2,294 450 1,291 815 10,764 Net book value At 30 June 2007 14,506 16,210 886 1,429 1,361 34,392

Annual Repot 2007 57 Notes to the Financial Statements 18. Property, plant and equipment (continued) Freehold land and buildings $ 000 Leasehold land and buildings $ 000 Motor vehicles $ 000 Furniture, fittings and equipment $ 000 Plant and machinery $ 000 Total $ 000 Group At 1 July 2005 Cost 6,520 16,965 1,282 2,229 1,824 28,820 Valuation 13,900 13,900 20,420 16,965 1,282 2,229 1,824 42,720 Exchange rate adjustments (51) (6) (8) (2) (67) Additions 74 52 104 240 470 Disposals (78) (12) (1) (91) At 30 June 2006 20,420 16,988 1,250 2,313 2,061 43,032 Representing : Cost 6,520 16,988 1,250 2,313 2,061 29,132 Valuation 13,900 13,900 20,420 16,988 1,250 2,313 2,061 43,032 Accumulated depreciation and accumulated impairment losses At 1 July 2005 5,672 1,104 628 949 541 8,894 Exchange rate adjustments (2) (6) (2) (3) (13) Depreciation charge 120 584 95 280 211 1,290 Disposals (75) (12) (1) (88) At 30 June 2006 5,792 1,686 642 1,215 748 10,083 Net book value At 30 June 2006 14,628 15,302 608 1,098 1,313 32,949

58 HUPSteel Limited Notes to the Financial Statements 18. Property, plant and equipment (continued) Freehold land and buildings Motor vehicles Furniture, fittings and equipment Plant and machinery Total $ 000 $ 000 $ 000 $ 000 $ 000 Company Cost or valuation At 1 July 2006 Cost 804 1,517 425 2,746 Valuation 8,920 8,920 8,920 804 1,517 425 11,666 129 433 562 Additions Disposals (717) (224) (364) (1,305) At 30 June 2007 8,920 216 1,726 61 10,923 Representing : Cost 216 1,726 61 2,003 Valuation 8,920 8,920 8,920 216 1,726 61 10,923 Accumulated depreciation and accumulated impairment losses At 1 July 2006 1,927 358 792 198 3,275 Depreciation charge 34 20 206 2 262 Disposals (304) (216) (146) (666) At 30 June 2007 1,961 74 782 54 2,871 Net book value At 30 June 2007 6,959 142 944 7 8,052

Annual Repot 2007 59 Notes to the Financial Statements 18. Property, plant and equipment (continued) Freehold land and buildings Motor vehicles Furniture, fittings and equipment Plant and machinery Total $ 000 $ 000 $ 000 $ 000 $ 000 Company Cost or valuation At 1 July 2005 Cost 804 1,486 373 2,663 Valuation 8,920 8,920 8,920 804 1,486 373 11,583 Additions 34 52 86 Disposals (3) (3) At 30 June 2006 8,920 804 1,517 425 11,666 Representing : Cost 804 1,517 425 2,746 Valuation 8,920 8,920 8,920 804 1,517 425 11,666 Accumulated depreciation and accumulated impairment losses At 1 July 2005 1,894 288 612 164 2,958 Depreciation charge 33 70 183 34 320 Disposals (3) (3) At 30 June 2006 1,927 358 792 198 3,275 Net book value At 30 June 2006 6,993 446 725 227 8,391

60 HUPSteel Limited Notes to the Financial Statements 18. Property, plant and equipment (continued) (a) The properties of the Group are as follows : Description Location Floor area Square metres Site area Square metres Tenure Years Warehouse with 3-storey office block annexe 6 Kim Chuan Drive Singapore 1,847 3,076 Freehold Warehouse with 5-storey office block annexe 116 Neythal Road Singapore 33,816 29,519 Leasehold 30 years from 2001 2- storey shophouse 359 Jalan Besar Singapore 2- storey shophouse 365/365A Jalan Besar, Singapore 255 142 Freehold 327 158 Freehold Office units Warehouse with office block annexe 7-storey industrial building Single-storey terraced factory Factory 27 Foch Road #05 04/05/06/07 Hoa Nam Building Singapore 22 Benoi Road Singapore 38 Genting Lane Singapore Lot MC 0259 Subang Industrial Park, Malaysia Lot 1 Kawasan MIEL Phase 10 Section 23 Shah Alam, Malaysia 128 Freehold 2,116 10,144 Leasehold 10 years from 2004 4,040 2,103 Freehold 149 149 Leasehold 99 years from 1992 2,594 5,300 Leasehold 99 years from 1995 (b) Freehold land and freehold buildings of the Group and the Company were revalued by the directors in August 1992 based on a valuation carried out by independent professional valuers on the basis of open market value with existing use. The revaluation surplus had been transferred to asset revaluation reserve account. The Group has no fixed policy on the frequency of valuation of its property, plant and equipment and the valuation was carried out for the purpose of updating the book value of the freehold properties for the initial public offering of shares of the Company.

Annual Repot 2007 61 Notes to the Financial Statements 18. Property, plant and equipment (continued) (c) Had the revalued freehold land and freehold buildings of the Group and the Company been carried at cost less accumulated depreciation, the net book values of the freehold properties would have been as follows : GROUP COMPANY 2007 2006 2007 2006 $ 000 $ 000 $ 000 $ 000 Carrying amounts Freehold land 6,863 6,863 2,363 2,363 Freehold buildings 2,865 2,971 472 490 9,728 9,834 2,835 2,853 (d) Additions in the consolidated financial statements include $ Nil (2006: $41,000) of plant and machinery acquired under finance leases (where the Group is the lessee). The carrying amount of plant and machinery under finance leases amounted to $60,000 (2006 : $111,000). 19. Goodwill GROUP 2007 2006 $ 000 $ 000 Goodwill arising on acquisition of business 4,630 4,630 Goodwill is allocated to the Group s cash generating unit ( CGU ) identified as the hardware operations of its subsidiary, Hoe Seng Huat Pte Ltd. The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. The growth rate does not exceed the long-term average growth rate for the hardware business in which the CGU operates. Key assumptions used for value-in-use calculations: Gross margin 1 11% Growth rate 2 2% Discount rate 3 9% 1 Budgeted gross margin 2 Weighted average growth rate used to extrapolate cash flows beyond the budget period 3 Pre-tax discount rate applied to the cash flow projections These assumptions have been used for the analysis of the CGU. Management determined budgeted gross margin based on past performance and its expectations of the market development. The weighted average growth rates used are consistent with the forecasts included in industry reports. The discount rates used are pre-tax and reflect specific risks relating to the business.

62 HUPSteel Limited Notes to the Financial Statements 20. Trade and other payables GROUP COMPANY 2007 2006 2007 2006 $ 000 $ 000 $ 000 $ 000 Trade payables non-related parties 21,964 5,676 5,624 1,809 subsidiaries 777 301 Other payables 574 610 165 273 Deposits received from customers 61 60 52 55 Dividends payable 1,855 1,855 Accrued operating expenses 1,650 3,892 4,626 3,060 30,604 10,238 13,099 5,498 The carrying amounts of trade and other payables approximate their fair values. Trade and other payables are denominated in the following currencies : GROUP COMPANY 2007 2006 2007 2006 $ 000 $ 000 $ 000 $ 000 Singapore Dollar 15,088 7,754 8,129 4,055 United States Dollar 12,831 914 2,799 578 Euro 2,170 832 2,171 832 Malaysian Ringgit 446 738 33 Australia Dollar 69 30,604 10,238 13,099 5,498 21. Borrowings GROUP COMPANY 2007 2006 2007 2006 $ 000 $ 000 $ 000 $ 000 Current Term loan 1,333 Trust receipts 43,144 16,317 3,964 2,963 Finance lease liabilities (Note 22) 20 19 43,164 17,669 3,964 2,963 Non current Finance lease liabilities (Note 22) 14 33 Total borrowings 43,178 17,702 3,964 2,963 (a) Security granted Finance lease liabilities of the Group are secured by the rights to the leased plant and machinery (Note 18(d)), which will revert to the lessor in the event of default by the Group. Trust receipts of subsidiaries amounting to $38,570,000 (2006 : $13,041,000) are guaranteed by the Company. In 2006, term loan of subsidiaries amounting to $1,333,000 were guaranteed by the Company.

Annual Repot 2007 63 Notes to the Financial Statements 21. Borrowings (continued) (b) Maturity of borrowings The current borrowings (excludes finance lease liabilities) have an average maturity of 3 months (2006 : 3 months) from the end of the financial year. (c) Currency risk The carrying amounts of total borrowings are denominated in the following currencies : GROUP COMPANY 2007 2006 2007 2006 $ 000 $ 000 $ 000 $ 000 Singapore Dollar 41,121 16,400 2,517 2,312 United States Dollar 1,638 1,274 1,409 651 Euro 187 28 38 Australia Dollar 232 43,178 17,702 3,964 2,963 (d) Interest rate risks The weighted average effective interest rates of total borrowings at the balance sheet date are as follows : GROUP COMPANY 2007 2006 2007 2006 $ 000 $ 000 $ 000 $ 000 Term loan 5.10% Trust receipts 3.96% 4.00% 4.21% 5.53% Finance lease liabilities (Note 24) 3.20% 3.20% (e) Carrying amount and fair values The carrying amounts of current borrowings approximate their fair values. The carrying amounts and fair values of non current borrowings are as follows : The Group Carrying amounts Fair values 2007 2006 2007 2006 $ 000 $ 000 $ 000 $ 000 Finance lease liabilities (Note 22) 14 33 14 33 The fair values are determined from the discounted cash flows analysis, using a discount rate based upon the borrowing rate which the directors expect would be available to the Group at the balance sheet date.

64 HUPSteel Limited Notes to the Financial Statements 22. Finance lease liabilities GROUP 2007 2006 $ 000 $ 000 Minimum lease payments due : not later than one year 21 21 later than one year but not later than five years 16 36 37 57 Less : Future finance charges (3) (5) Present value of finance lease liabilities 34 52 The present value of finance lease liabilities may be analysed as follows : Not later than one year (Note 21) 20 19 Later than one year but not later than five years (Note 21) 14 33 34 52 23. Provision for directors retirement gratuity GROUP AND COMPANY 2007 2006 $ 000 $ 000 At beginning of the financial year 818 757 Provision made during the financial year 61 61 At end of the financial year 879 818 Retirement gratuity is available to certain directors of the Group. The retirement gratuity is calculated by reference to the length of service and remuneration of the directors. 24. Deferred income taxes Deferred income tax assets and liabilities are offset when there is a legally enforceable right to set off current income tax assets against current income tax liabilities and when the deferred income taxes relate to the same fiscal authority. The amounts, determined after appropriate offsetting, are shown in the balance sheets as follows : GROUP COMPANY 2007 2006 2007 2006 $ 000 $ 000 $ 000 $ 000 Deferred income tax assets to be recovered within one year 31 52 to be recovered after one year (107) (38) (77) (76) (38) (25) Deferred income tax liabilities to be settled within one year (37) 52 to be settled after one year 182 137 (25) 145 137 27 69 99 27

Annual Repot 2007 65 Notes to the Financial Statements 24. Deferred income taxes (continued) The movements in the deferred income tax account are as follows : GROUP COMPANY 2007 2006 2007 2006 $ 000 $ 000 $ 000 $ 000 At beginning of the financial year 99 (60) 27 (139) Effect of change in tax rate (11) (3) Tax (credit)/charge to : income statement (19) 159 (49) 166 At end of the financial year 69 99 (25) 27 The movements in the deferred income tax assets and liabilities (prior to offsetting of balances within the same tax jurisdiction) during the year are as follows : The Group Deferred income tax liabilities/(assets) Accelerated tax depreciation Provisions Others Total $ 000 $ 000 $ 000 $ 000 2007 At beginning of the financial year 378 (295) 16 99 Effect of change in tax rate (38) 30 (3) (11) Tax (credited)/charged to income statement 73 (79) (13) (19) At end of the financial year 413 (344) 69 Accelerated tax depreciation Provisions Others Total $ 000 $ 000 $ 000 $ 000 2006 At beginning of the financial year 369 (342) (87) (60) Tax credited to income statement 9 47 103 159 At end of the financial year 378 (295) 16 99 The Company Deferred income tax liabilities/(assets) Accelerated tax depreciation Provisions Others Total $ 000 $ 000 $ 000 $ 000 2007 At beginning of the financial year 227 (219) 19 27 Effect of change in tax rate (23) 22 (2) (3) Tax (credited)/charged to income statement (50) 18 (17) (49) At end of the financial year 154 (179) (25)

66 HUPSteel Limited Notes to the Financial Statements 24. Deferred income taxes (continued) The Company (continued) Deferred income tax liabilities/(assets) (continued) Accelerated tax depreciation Provisions Others Total $ 000 $ 000 $ 000 $ 000 2006 At beginning of the financial year 242 (309) (72) (139) Tax charged/(credited) to income statement (15) 90 91 166 At end of the financial year 227 (219) 19 27 25. Share capital and share premium No. of shares Amount Authorised share capital Issued and paid up shares Authorised share capital Issued share capital Share premium Total share capital and share premium 000 000 $ 000 $ 000 $ 000 $ 000 2007 Balance at beginning of financial year 361,859 59,317 59,317 Exercise of share options 54 5 5 Rights issue (see note (a)) 90,483 9,048 9,048 Share issue expenses (213) (213) Balance at end of financial year 452,396 68,157 68,157 2006 Balance at beginning of financial year 500,000 301,549 50,000 30,154 29,163 59,317 Bonus issue (see note (c)) 60,310 6,031 (6,031) Effect of Companies (Amendment) Act 2005 (see note (d)) (500,000) (50,000) 23,132 (23,132) Balance at end of financial year 361,859 59,317 59,317 All issued shares are fully paid. (a) On 9 August 2006, the Company announced a renounceable non underwritten rights issue of up to 90,482,698 new ordinary shares of the Company at an issue price of S$0.10 for each rights share, on the basis of 1 rights share for every 4 shares held by entitled shareholders. The newly issued shares rank pari passu in all respects with the previously issued shares.

Annual Repot 2007 67 Notes to the Financial Statements 25. Share capital and share premium (continued) (b) Share options At the end of the financial year, outstanding options to take up unissued shares of the Company granted to a director and eligible employees of the Company and its subsidiaries under the Option Scheme were as follows : Exercised during the Balance financial Expired/ Balance Exercise Date of grant at 1.7.06 year cancelled at 30.6.07 price Expiry date 17 Nov 2001 72,000 (54,000) (18,000) $0.1300 16 Nov 2006 The newly issued shares rank pari passu in all respects with the previously issued shares. (c) (d) On 8 November 2005, the Company announced a bonus issue of shares of 1 for 5 existing shares which was subsequently approved by the SGX on the 3 January 2006. The bonus issue of 60,309,790 shares was credited as fully paid by transferring the amount of $6,030,979 from the share premium account to the share capital account. Hence the number of fully paid up shares increased from 301,549,000 to 361,858,790. These new shares were allotted and credited to the shareholders account and were listed on the SGX on 25 January 2006. Under the Companies (Amendment) Act 2005 that came into effect on 30 January 2006, the concepts of par value and authorised share capital are abolished and the amount in the share premium account as of 30 January 2006 became part of the Company s share capital. 26. Capital reserves GROUP COMPANY 2007 2006 2007 2006 $ 000 $ 000 $ 000 $ 000 Composition : Asset revaluation reserve 1,525 1,525 1,430 1,430 Goodwill arising from consolidation (2,002) (2,002) (477) (477) 1,430 1,430 27. Currency translation reserves GROUP 2007 2006 $ 000 $ 000 Balance at beginning of financial year (598) (540) Release on liquidation of a subsidiary 26 Net currency translation differences of financial statements of foreign subsidiaries 92 (84) Balance at end of financial year (506) (598)

68 HUPSteel Limited Notes to the Financial Statements 28. Fair value reserves GROUP COMPANY 2007 2006 2007 2006 $ 000 $ 000 $ 000 $ 000 Balance at beginning of financial year 1,917 1,247 1,526 1,044 Fair value gains on available-for-sale financial assets (Note 15) 742 670 743 482 Transfer on disposal of available-for-sale financial assets (1,133) (743) Balance at end of financial year 1,526 1,917 1,526 1,526 29. Dividends GROUP AND COMPANY 2007 2006 $ 000 $ 000 Final dividend paid of 0.5 cent (2006 : 0.5 cent) per share less income tax at 20% (2006 : 20%) 1,447 1,206 Special dividend paid of 1.5 cent (2006 : 2.5 cent) per share less income tax at 20% (2006 : 20%) 4,343 6,030 Interim dividend of 1.0 cent (2006 : Nil) per share less income tax at 18% 3,710 Second interim dividend of 0.5 cent (2006 : Nil) per share less income tax at 18% 1,855 11,355 7,236 At the Annual General Meeting on 26 October 2007, a final dividend of 0.5 cent per share, a special dividend of 1.0 cents per share and a bonus dividend of 3.049 cents per share amounting to a total of $18,722,000 net of tax at 18% will be recommended. 30. Contingent liability The Company has given a guarantee to a financial institution in respect of credit facilities granted to its subsidiary amounting to $38,570,000 (2006 : $13,041,000). The directors are of the view that no losses are expected to arise from the guarantee.

Annual Repot 2007 69 Notes to the Financial Statements 31. Commitments (a) Operating lease commitments where a group company is a lessee At the balance sheet date, the Group has rental commitments under operating leases for leasehold properties. The future aggregate minimum lease payments under non cancellable operating leases contracted for at the reporting date but not recognised as liabilities, are as follows : GROUP COMPANY 2007 2006 2007 2006 $ 000 $ 000 $ 000 $ 000 Not later than one year 636 660 1,475 1,483 Later than one year but not later than five years 2,074 2,325 124 Later than five years 7,462 7,388 10,172 10,373 1,475 1,607 b) Operating lease commitments where a group company is a lessor The future minimum lease payments receivable under non cancellable operating leases contracted for at the reporting date but not recognised as receivables, are as follows : GROUP COMPANY 2007 2006 2007 2006 $ 000 $ 000 $ 000 $ 000 Not later than one year 412 398 241 391 Later than one year but not later than five years 50 218 3 88 462 616 244 479 32. Financial risk management The main financial risks arising from the Group s activities are credit risk, currency risk, interest rate risk and liquidity risk. The Board of Directors reviews and agrees policies for managing each of these risks and they are summarised below : Credit risk Credit risk refers to the risk that counterparties will default on their contractual obligations resulting in financial loss to the Group. The Group has no significant concentrations of credit risk. The Group has policies in place to ensure that sales of the products and services are made to customers with an appropriate credit history. The Group reviews on a regular basis the exposure to credit risk and makes provisions for potential losses on credit extended when necessary. The carrying amount of each financial asset as indicated in the balance sheets represents the Group s maximum exposure to credit risk. Currency risk Currency risk arises from the change in foreign exchange rates that may have an adverse effect on the Group in the current reporting period and in the future years. The Group is exposed to foreign currency risk on sales and purchases that are denominated in currency other than Singapore Dollar, since the value denominated in other currencies will fluctuate due to changes in exchange rates. The Group is primarily exposed to foreign currency exposures in United States Dollar, Euro Dollar and Malaysian Ringgit. The Group does not have any formal policy with respect to the foreign currency exposure but monitored it on an ongoing basis.

70 HUPSteel Limited Notes to the Financial Statements 32. Financial risk management (continued) Interest rate risk The Group s exposure to market risk for changes in interest rates relates primarily to the Group s fixed deposits with the banks and bank borrowings. The Group monitors movements in interest rates closely. Liquidity risk The Group adopts a prudent liquidity risk management by maintaining sufficient cash and marketable securities, having adequate amount of committed credit facilities and the ability to close out market positions. 33. Related party transactions The following transactions took place between the Group and related parties during the financial year : (a) Sale and purchases of goods and services GROUP COMPANY 2007 2006 2007 2006 $ 000 $ 000 $ 000 $ 000 With subsidiaries : Sale of finished goods 16,352 13,142 Purchases of finished goods (1,022) (96) Logistics expenses (1,469) Management fee income 721 769 Rental expense (1,475) (1,484) Rental income 162 With companies in which certain directors of the Company have substantial financial interests : Management fees paid 73 73 With substantial shareholder : Consultancy fees paid 557 492 557 492 (b) Key management personnel compensation Key management personnel compensation is as follows: GROUP COMPANY 2007 2006 2007 2006 $ 000 $ 000 $ 000 $ 000 Salaries and other short term employee benefits 3,992 3,908 3,456 3,279 Post employment benefits contribution to CPF 127 146 99 110 Retirement gratuity 105 61 61 61 4,224 4,115 3,616 3,450 Including in above, total compensation to directors of the Group and Company amounted to $2,989,000 and $2,779,000 respectively (2006: $2,801,000 and $2,573,000).

Annual Repot 2007 71 Notes to the Financial Statements 34. Group segment information The geographical segments are as follows: Singapore the Company is headquartered and has operations in Singapore. The operations in this area are hardware trading and property investment. Malaysia the operations in this area are principally hardware trading. The business segments are as follows : Hardware trading sale of industrial hardware products. Property investment rental of properties. The segment information has been compiled using a consistent basis. The division of the group s revenue, results and assets and liabilities into geographical and business segments has been ascertained by reference to direct identification to each particular segment. Inter segment transactions are determined on an arm s length basis. Primary reporting format geographical segments. Financial year ended 30 June 2007 Singapore Malaysia Total $ 000 $ 000 $ 000 Revenue Total revenue 282,665 3,152 285,817 Inter segment sales (1,645) (1,645) External sales 281,020 3,152 284,172 Segment result 38,979 460 39,439 Finance expense (1,972) Income tax expense (6,292) Net profit 31,175 Segment assets 219,059 6,907 225,966 Tax assets 237 Total assets 226,203 Segment liabilities 31,036 447 31,483 Tax liabilities 6,414 Borrowings 43,178 Total liabilities 81,075 Other segment items Capital expenditure 3,531 3 3,534 Depreciation of property, plant and equipment 1,327 52 1,379

72 HUPSteel Limited Notes to the Financial Statements 34. Group segment information (continued) Primary reporting format geographical segments Financial year ended 30 June 2006 Singapore Malaysia Total $ 000 $ 000 $ 000 Revenue Total revenue 181,631 5,064 186,695 Inter segment sales (493) (493) External sales 181,138 5,064 186,202 Segment result 20,744 68 20,812 Finance expense (957) Loss on disposal of subsidiary (26) Income tax expense (4,100) Net profit 15,729 Segment assets 153,032 5,213 158,245 Tax assets 268 Total assets 158,513 Segment liabilities 10,351 705 28,758 Tax liabilities 3,940 Borrowings 17,702 Total liabilities 32,698 Other segment items Capital expenditure 468 2 470 Depreciation of property, plant and equipment 1,238 52 1,290 Revenue from sales to external customers based on location of customers for each customer based geographical segment is as follows : 2007 2006 $ 000 $ 000 Singapore 211,147 127,406 Malaysia 26,202 21,589 Other South East Asian countries 29,392 27,695 Other countries 17,431 9,512 284,172 186,202

Annual Repot 2007 73 Notes to the Financial Statements 34. Group segment information (continued) Secondary reporting format business segments Hardware Property investment Total $ 000 $ 000 $ 000 Financial year ended 30 June 2007 REVENUE External sales 283,452 720 284,172 OTHER INFORMATION Total assets 193,685 32,518 226,203 Capital expenditure 2,069 1,465 3,534 Financial year ended 30 June 2006 REVENUE External sales 185,585 617 186,202 OTHER INFORMATION Total assets 126,289 32,224 158,513 Capital expenditure 268 202 470 35. New accounting standards and FRS interpretations Certain new standards, amendments and interpretations to existing standards have been published and they are mandatory for the Group s accounting periods beginning on or after 1 July 2007 or later periods which the Group has not early adopted. The Group s assessment of the impact of adopting those standards, amendments and interpretations that are relevant to the Group is set out below: (a) FRS 40 Investment Property The Group has adopted FRS 40 on 1 July 2007, which is the effective date of the Standard. In 2006, the Group leased out certain of its properties to non-related parties. The properties were accounted for as an item of property, plant and equipment in these financial statements. Under FRS 40, these properties have been reclassified to investment properties on transition to FRS 40 on 1 July 2007. On transition to FRS 40 on 1 July 2007, the estimated effects on the balance sheet as at 30 June 2007 and income statement for the year ended 30 June 2007 are as follows: Increase/(decrease) $ 000 Balance sheet at 30 June 2007 Investment properties 14,713 Property, plant and equipment (14,713)

74 HUPSteel Limited Notes to the Financial Statements 35. New accounting standards and FRS interpretations (continued) (b) FRS 107 Financial Instruments: Disclosures, and a complementary Amendment to FRS 1 Presentation of Financial Statements Capital Disclosures The Group has adopted FRS 107 on 1 July 2007, which is the effective date of the Standard. FRS 107 introduces new disclosures to improve the information about financial instruments. It requires the disclosure of qualitative and quantitative information about exposure to risks arising from financial instruments, including minimum disclosures about credit risk, liquidity risk and market risk (including sensitivity analysis to market risk). It replaces the disclosure requirements in FRS 32 Financial Instruments: Disclosure and Presentation. The amendment to FRS 1 introduces disclosures about the level of an entity s capital and how it manages capital. The Group has assessed the impact of FRS 107 and the amendment to FRS 1 and concluded that the main additional disclosures will be the sensitivity analysis to market risk and the capital disclosures required by the amendment of FRS 1. 36. Event occurring after balance sheet date (a) (b) On 11 July 2007, the Company announced a placement of 49,500,000 new shares at an issue price of $0.555 per share to new investors. These new shares were approved by SGX-ST for quotation on 14 August 2007 and were listed on 24 August 2007. On 10 September 2007, the Company announced a renounceable non-underwritten rights issue of up to 125,474,122 new ordinary shares of the Company at an issue price of $0.10 for each rights share, on the basis of 1 rights share for every 4 shares held by entitled shareholders. 37. Approval of financial statements These financial statements were authorised for issue in accordance with a resolution of the Board of Directors of HUPSTEEL LIMITED on 3 October 2007.

Annual Repot 2007 75 Shareholders Information As at 12 September 2007 DISTRIBUTION OF SHAREHOLDERS BY SIZE OF SHAREHOLDINGS AS AT 12 SEPTEMBER 2007 Issued and fully paid-up capital : $95,843,650.80 Class of shares : Ordinary share fully paid with equal voting rights Voting rights : One vote per share SIZE OF SHAREHOLDINGS NO. OF SHAREHOLDERS % NO. OF SHARES % 1 999 539 6.86 134,107 0.03 1,000 10,000 5,339 67.93 24,817,144 4.94 10,001 1,000,000 1,946 24.76 91,363,936 18.20 1,000,001 and above 36 0.46 385,581,301 76.83 Total 7,860 100.00 501,896,488 100.00 TWENTY LARGEST SHAREHOLDERS AS AT 12 SEPTEMBER 2007 NAME OF SHAREHOLDER NO. OF SHARES % 1 HENNFA INVESTMENTS PTE LTD 74,412,000 14.83 2 UNITED OVERSEAS BANK NOMINEES PTE LTD 42,172,010 8.40 3 LIM PUAY KOON 28,962,000 5.77 4 LIM BOH CHUAN 28,960,200 5.77 5 LIM YEE KIM 25,903,800 5.16 6 LIM KIM THOR 24,589,200 4.90 7 LIM KIM HOCK 22,703,400 4.52 8 LIM ENG CHONG 15,147,000 3.02 9 ESTATE OF LIM BOON WAN, DECEASED 14,673,600 2.92 10 HSBC (SINGAPORE) NOMINEES PTE LTD 14,457,500 2.88 11 LIM BEO PENG 10,722,840 2.14 12 KIM SENG HOLDINGS PTE LTD 10,000,000 1.99 13 LIM KOK SENG 6,659,340 1.33 14 LIM HAN LEONG 6,473,340 1.29 15 TAN LEAN CHOO 5,842,260 1.16 16 OCBC SECURITIES PRIVATE LTD 4,568,880 0.91 17 KOH BOON HWEE 4,000,000 0.80 18 CITIBANK NOMINEES SINGAPORE PTE LTD 3,876,300 0.77 19 DBS NOMINEES PTE LTD 3,853,500 0.77 20 KIM ENG SECURITIES PTE. LTD. 3,558,930 0.71 TOTAL: 351,536,100 70.04

76 HUPSteel Limited Shareholders Information As at 12 September 2007 SUBSTANTIAL SHAREHOLDERS (As recorded in the Register of Substantial Shareholders) Direct Interest % Deemed Interest % Hennfa Investments Pte Ltd 74,412,000 14.83 Lim Kim Thor 24,589,200 4.90 74,556,000 14.85 Lim Boh Chuan 28,960,200 5.77 74,412,000 14.83 Lim Puay Koon 28,962,000 5.77 74,412,000 14.83 Lim Eng Chong 15,147,000 3.02 74,412,000 14.83 Lim Yee Kim 25,903,800 5.16 74,412,000 14.83 Lim Beo Peng 10,722,840 2.14 74,412,000 14.83 Estate of Lim Boon Wan, Deceased 14,673,600 2.92 74,412,000 14.83 Machotech Pte Ltd 74,412,000 14.83 Pey Choi 74,412,000 14.83 United Overseas Bank Limited 28,000,000 5.58 UOB Asset Management Ltd 28,000,000 5.58 Notes: 1. The late Mr Lim Boon Wan was the father of Messrs, Lim Kim Thor and Lim Eng Chong. The late Mr Lim Boon Wan is the uncle of the late Mr Lim Pit Hong and Mr Lim Yee Kim. He is also the grand uncle of Messrs Lim Boh Chuan and Lim Puay Koon. 2. Messrs Lim Boh Chuan and Lim Puay Koon are brothers. Messrs Lim Boh Chuan and Lim Puay Koon together hold 21.74% of the voting shares in Hennfa Investments Pte Ltd. By virtue of Section 7 of the Companies Act, Lim Boh Chuan and Lim Puay Koon are deemed to have an interest in the shares of the Company held by Hennfa Investments Pte Ltd. 3. Hennfa Investments Pte Ltd ( Hennfa ) is an investment holding company, which is 23.5%, owned by Machotech Pte Ltd ( Machotech ). Machotech is a business management and consultancy services company owned by Messrs Lim Yee Kim and Pey Choi equally. Pey Choi is the spouse of Lim Yee Kim. Machotech is thus deemed interested in the shares of Hennfa. The other shareholders of Hennfa are Pit Hong Holdings Pte. Ltd.,( Pit Hong ) Lim Kim Thor, Lim Kim Hock, Lim Eng Chong, Lim Boh Chuan, Lim Puay Koon. Pit Hong is an investment holding company that is held equally by Estate of Lim Pit Hong@Lim Geok Hong, Lim Beo Peng, Lim Han Leong and Lim Kok Seng. 4. Machotech Pte Ltd holds 23.5% of the voting shares in Hennfa Investments Pte Ltd. The directors of Machotech Pte Ltd are Mr Lim Yee Kim, his wife, Madam Pey Choi. Accordingly, by virtue of Section 7 of the Companies Act, Machotech Pte Ltd, Lim Yee Kim, and Pey Choi are deemed to have an interest the shares of the Company held by Hennfa Investments Pte Ltd by virtue of their shareholding in Machotech Pte Ltd. 5. The deemed interest of United Overseas Bank Limited and UOB Asset Management Ltd is held through the discretionary funds managed by UOB Asset Management. PERCENTAGE OF SHAREHOLDING IN PUBLIC S HANDS 46.00% of the Company s shares are held in the hands of public. Accordingly, the Company has complied with Rule 723 of the Listing Manual of the SGX-ST.

Annual Repot 2007 77 Notice of Fourteenth Annual General Meeting HUPSTEEL LIMITED Company Registration Number: 197301452D (Incorporated in Singapore with Limited Liability) NOTICE IS HEREBY GIVEN that the Fourteenth Annual General Meeting of HUPSteel Limited ( the Company ) will be held at 116 Neythal Road Singapore 628603 on Friday, 26 October 2007 at 2.30 pm. for the following purposes: AS ORDINARY BUSINESS 1. To receive and adopt the Directors Report and the Audited Financial Statements of the Company for the financial year ended 30 June 2007 together with the Auditors Report thereon. (Resolution 1) 2. To declare a final dividend of 0.5 cent less income tax at 18% for the financial year ended 30 June 2007. (2006: 0.5 cent) (Resolution 2) 3. To declare a special dividend of 1.0 cent less income tax at 18% for the financial year ended 30 June 2007. (2006: 1.5 cents) (Resolution 3) 4. To declare a bonus cash dividend of 3.049 cents less income tax at 18% for the financial year ended 30 June 2007. (2006: 3.125 cents) [See Explanatory Note (i)] (Resolution 4) 5. To re-elect the following Directors retiring pursuant to Article 87 of the Company s Articles of Association: Lim Chee San Chan Kam Loon, Philip (Resolution 5) (Resolution 6) Mr Lim Chee San will, upon re-election as a Director of the Company, remain as a member of the Audit Committee. He is considered independent for the purpose of Rule 704(8) of the Listing Manual of Singapore Exchange Securities Trading Limited ( SGX-ST ) Mr Chan Kam Loon will, upon re-election as a Director of the Company, remain as a member of the Audit and Remuneration Committees. He is considered independent for the purpose of Rule 704(8) of the Listing Manual of Singapore Exchange Securities Trading Limited ( SGX-ST ) 6. To re-elect the following Director retiring pursuant to Article 88 of the Company s Articles of Association: Ong Kian Min (Resolution 7) Mr Ong Kian Min will, upon re-election as a Director of the Company, remain as Chairman of the Remuneration Committee and member of the Nominating and Audit Committees. He is considered independent for the purpose of Rule 704(8) of the Listing Manual of Singapore Exchange Securities Trading Limited ( SGX-ST ) 7. To pass the following resolution pursuant to Section 153(6) of the Companies Act, Cap. 50:- That pursuant to Section 153(6) of the Companies Act, Cap. 50, Mr Tang See Chim who is over seventy years of age be re-appointed as Director of the Company to hold office until the next Annual General Meeting. (Resolution 8) Mr Tang See Chim will, upon re-election as a Director of the Company, remain as Chairman of the Nominating and Audit Committees and a member of the Remuneration Committee. He is considered independent for the purpose of Rule 704(8) of the Listing Manual of Singapore Exchange Securities Trading Limited ( SGX-ST ) 8. To re-appoint Messrs PricewaterhouseCoopers as the Company s Auditors and to authorise the Directors to fix their remuneration. (Resolution 9) 9. To transact any other ordinary business which may properly be transacted at an Annual General Meeting.

78 HUPSteel Limited Notice of Fourteenth Annual General Meeting AS SPECIAL BUSINESS To consider and if thought fit, to pass resolutions 10 and 11 as Ordinary Resolutions, with or without any modifications: 10. Payment of directors fees for the financial year ended 30 June 2007 Ordinary Resolution That the payment of Directors fees of S$317,187 for the financial year ended 30 June 2007 be approved. (2006: S$204,600). [See Explanatory Note (ii)] (Resolution 10) 11. Authority to allot and issue shares up to 50 per centum (50%) of issued share capital Ordinary Resolution That pursuant to Rule 806 of the Listing Manual of the Singapore Exchange Securities Trading Limited, the Directors be empowered to allot and issue shares and convertible securities in the capital of the Company at any time and upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fit provided that the aggregate number of shares (including shares to be issued in accordance with the terms of convertible securities issued, made or granted pursuant to this Resolution) to be allotted and issued pursuant to this Resolution shall not exceed fifty per centum (50%) of the issued share capital of the Company at the time of the passing of this Resolution, of which the aggregate number of shares and convertible securities to be issued other than on a pro rata basis to all shareholders of the Company shall not exceed twenty per centum (20%) of the issued share capital of the Company and that such authority shall, unless revoked or varied by the Company in general meeting, continue in force (i) until the conclusion of the Company s next Annual General Meeting or the date by which the next Annual General Meeting of the Company is required by law or the Bye-laws of the Company to be held, whichever is earlier or (ii) in the case of shares to be issued in accordance with the terms of convertible securities issued, made or granted pursuant to this Resolution, until the issuance of such shares in accordance with the terms of such convertible securities. [See Explanatory Note (iii)] (Resolution 11) By Order of the Board Tan Cher Liang Julie Koh Ngin Joo Secretaries Singapore, 10 October 2007 Explanatory Notes: (i) Ordinary Resolution 4: Bonus Cash Dividend The Company has released an announcement on Proposed Bonus Cash Dividend and Rights Issue to the SGX-ST on 10 September 2007 outlining the following exercises to be undertaken by the Company: - (a) a bonus cash dividend for the financial year ended 30 June 2007 ( FY2007 ) of 3.049 cents less tax of 18% (or 2.50 cents net) ( Bonus Dividend ) per ordinary share of the company ( Share ) to be declared and paid to shareholders of the Company ( Shareholders ) as at a books closure date to announced by the Company ( Books Closure Date ) in proportion to their respective shareholdings of the Company; and (b) a proposed renounceable non-underwritten rights issue of up to 125,474,122 new ordinary shares of the company ( Rights Shares ) at an issue price of S$0.10 for each rights share ( Issue Price ), on the basis of one(1) Rights Share for every four (4) Shares held by Entitled Shareholders as at the Books Closure Date, fractional entitlements to be disregarded and availability of option to elect to utilize Net Bonus Dividend to subscribe for rights shares ( Rights Issue ). Rationale: Bonus Dividend. The purpose of the Bonus Dividend is to reward Shareholders with a bonus cash dividend and allow the Company to pass on its tax credits under Section 44A of the Income Tax Act (Cap. 134) of Singapore to Shareholders. At the same time, the Bonus Dividend will provide Entitled Shareholders with an option to re-invest their Net Bonus Dividend by subscribing for the Rights Shares.

Annual Repot 2007 79 Notice of Fourteenth Annual General Meeting Rights Issue. The Rights Issue has been proposed to strengthen the capital base of the Company following the payment of the Net Bonus Dividend. Together with the Bonus Dividend, the Rights Issue will in effect transform a portion of the Company s retained earnings into permanent share capital. Approvals: (a) (b) (c) The Bonus Dividend is subject to the approval of the Shareholders at the Annual General Meeting ( AGM ). The directors of the Company propose to issue the Rights Shares out of the general share issue mandate resolution (Resolution 11 of this Notice) ( Share Issue Mandate ) under Section 161 of the Companies Act, Chapter 50, of Singapore, to be put forth for approval by Shareholders at the AGM. The Rights Issue is subject to the in-principle approval of SGX-ST for the listing of and quotation for the Rights Shares on the Official List of the SGX-ST and the lodgment of the Offer Information Statement with the Monetary Authority of Singapore ( MAS ). An application has been made by the Company to obtain the SGX-ST s approval for the listing of and quotation for the Rights Shares. The Offer Information Statement will be lodged with the MAS and dispatched to Entitled Shareholders in due course after in-principle approval of the SGX-ST is obtained. (ii) (iii) The Ordinary Resolution 10 proposed in item 10 above on Directors fees is considered as a special business in accordance with the Company s Articles of Association. The Ordinary Resolution 11 proposed in item 11 above, if passed, will empower the Directors from the date of the above Meeting until the date of the next Annual General Meeting, or the date by which the next Annual General Meeting is required by law to be held or when varied or revoked by the Company in general meeting, whichever is earlier, to allot and issue shares and convertible securities in the Company. The number of shares and convertible securities that the Directors may allot and issue under this Resolution would not exceed fifty per centum (50%) of the issued capital of the Company at the time of the passing of this resolution. For issue of shares and convertible securities other than on a pro rata basis to all shareholders, the aggregate number of shares and convertible securities to be issued shall not exceed twenty per centum (20%) of the issued capital of the Company. For the purpose of this resolution, the percentage of issued capital is based on the Company s issued capital at the time this proposed Ordinary Resolution is passed after adjusting for (a) new shares arising from the conversion of convertible securities or employee share options on issue when this proposed Ordinary Resolution is passed and (b) any subsequent consolidation or subdivision of shares. Notes: 1. A Member entitled to attend and vote at the Annual General Meeting (the Meeting ) is entitled to appoint a proxy to attend and vote in his/her/its stead. A proxy need not be a Member of the Company. 2. If the appointor is a corporation, the instrument appointing a proxy must be executed under seal or the hand of its duly authorized officer or attorney. 3. The instrument appointing a proxy must be deposited at the Registered Office of the Company at 3 Church Street #08-01 Samsung Hub Singapore 049483 not less than 48 hours before the time appointed for holding the Meeting. Note: Transport by company vans will be provided from Lakeside MRT which will leave at 2 pm sharp on 26 October 2007 and return to the same MRT station at 4 pm.

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HUPSTEEL LIMITED Company Registration Number: 197301452D (Incorporated in Singapore with Limited Liability) PROXY FORM (Please see notes overleaf before completing this Form) IMPORTANT: 1. For investors who have used their CPF monies to buy HUPSteel Limited s shares, this Report is forwarded to them at the request of the 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 attend the Meeting as an observer must submit their requests through their CPF Approved Nominees within the time frame specified. If they also wish to vote, they must submit their voting instructions to the CPF Approved Nominees within the time frame specified to enable them to vote on their behalf. I/We, of being a member/members of HUPSteel Limited (the Company ), hereby appoint: Name NRIC/Passport No. Proportion of Shareholdings No. of Shares % Address and/or (delete as appropriate) Name NRIC/Passport No. Proportion of Shareholdings No. of Shares % Address as my/our proxy/proxies to vote for me/us on my/our behalf at the Fourteenth Annual General Meeting (the Meeting ) of the Company to be held on Friday, 26 October 2007 at 2.30 p.m. and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the Resolutions proposed at the Meeting as indicated hereunder. If no specific direction as to voting is given or in the event of any other matter arising at the Meeting and at any adjournment thereof, the proxy/proxies will vote or abstain from voting at his/her discretion. (Please indicate your vote For or Against with a tick [ ] within the box provided.) No. Resolutions relating to: For Against 1 Directors Report and Audited Financial Statements for the financial year ended 30 June 2007. 2 Payment of proposed final dividend. 3 Payment of proposed special dividend. 4 Payment of proposed cash bonus dividend. 5 Re-election of Mr Lim Chee San as Director under Article 87 of the Company s Articles of Association. 6 Re-election of Mr Chan Kam Loon as Director under Article 87 of the Company s Articles of Association. 7 Re-election of Mr Ong Kian Min as Director under Article 88 of the Company s Articles of Association. 8 Re-election of Mr Tang See Chim as Director pursuant to Section 156(3) of the Companies Act, Cap. 50. 9 Re-appointment of PricewaterhouseCoopers as Auditors. 10 Approval of Directors fees amounting to S$317,187 for the financial year ended 30 June 2007. 11 Authority to allot and issue new shares. Dated this day of 2007 Total number of Shares in: No. of Shares (a) (b) CDP Register Register of Members Signature of Shareholder(s) or, Common Seal of Corporate Shareholder

Notes: 1. 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. 2. A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint one or two proxies to attend and vote in his/her stead. A proxy need not be a member of the Company. 3. Where a member appoints two proxies, the appointments shall be invalid unless he/she specifies the proportion of his/her shareholding (expressed as a percentage of the whole) to be represented by each proxy. 4. The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at 3 Church Street #08-01 Samsung Hub Singapore 049483 not less than 48 hours before the time appointed for the Meeting. 5. The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of an officer or attorney duly authorised. 6. A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks fit to act as its representative at the Meeting, in accordance with Section 179 of the Companies Act, Chapter 50 of Singapore. 7. The Company reserves the right to reject instructions from any members appointing the Chairman of the Meeting as his/ her proxy in the matter of voting of the resolutions tabled. General: The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of Shares entered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the member, being the appointor, is not shown to have Shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding the Meeting, as certified by The Central Depository (Pte) Limited to the Company.

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HUPSteel Limited Award Winner of Fastest Growing 50 June 2007

HUPSteel Limited (Company Registration Number: 197301452D) 116 Neythal Road Singapore 628603 Tel : (65) 6419 2121 Fax : (65) 6419 2113 www.hupsteel.com ISO 9001 : 2000 047 SAC ACCREDITED CERTIFICATION BODY Member of the IAF MLA for QMS