annual report 2010 - 早报 › osim › pages › osim_ar2010.pdf · 2013-05-13 · annual report...

air

OSIM INTERNATIONAL LTDAnnual Report 2010

In Weiqi, to win is through encirclements that conquer more territory.

OSIM’s growth is driven by leadership, innovation and execution –

which has led OSIM to gain more markets globally and record profit.

Net Cash Flows fromOperating Activities

+ 45%

94million

$

EBITDA

+ 55%

79million

$

Profit Before Tax

Returns on Shareholders Funds 63%

68million

$

2010 2009 Growth

For year ended 31 DecemberSales $509m $477m +$32m

Profit EBITDA $79m $51m +55%

Before tax $68m $38m +79%

After tax $50m $23m +117%

Net cash flows from operating activities $94m $65m +45%

Per share (cents) Diluted earnings 6.6 3.7

Net assets value 15 15

At year end Cash & cash equivalents $73m $63m

Shareholders funds $108m $97m

Net cash $58m $28m

Returns on shareholders funds Profit before tax 63% 39%

Profit after tax 46% 24%

Shareholders value Total dividends ($m) 13.3 6.6

Share price at 31 December 1.64 0.53 +209%

Record Cash Flow and Profit for FY 2010

We achieved growth in sales, cash flow and profitability.

Revenue for FY 2010 rose by $32 million to $509 million. The increase in sales was driven by launch of new products during the year.

EBITDA grew 55% to a record $79 million (EBITDA margin 15.5% vs 10.8% in 2009) due to new product innovation and better operating efficiency.

Profit before tax reached a historical high of $68 million. This is due to better margins and more effective shop and salesman productivity.

Profit after tax for the year was $50 million. This is the highest level in the company's history.

PERFORMANCE REVIEW

During the year, we had positive sales growth of $32 million with better product mix of massage chairs, massage sofas, foot massagers, head massagers, neck and shoulder massagers and nutrition supplements.

We launched uDivine chair with Andy Lau in Hong Kong, Singapore and Malaysia in Q4 which received strong customer reception.

The GNC Australia conversion to franchise outlets resulted in better profit in our Australian subsidiary but lower sales recognition (we now book franchise sales instead of retail sales).

Region FY 2010 FY 2009

$m % $m %

North Asia 298 59 259 54

South Asia 169 33 160 34

America/Africa/Europe/ Middle East/Oceania 42 8 58 12

Total 509 100 477 100

Revenue by Region – New Products Contributing

04

During the last 12 months, we increased the number of OSIM outlets by 74 and the number of GNC/RichLife outlets by 63. At the same time, we increased profitability within existing outlets.

We expect to increase the number of outlets in 2011. In China our target is to open another 50 to 80 OSIM outlets and 60 to 100 RichLife outlets per year.

Strengthened Balance Sheet - Net Cash Position

Building strong balance sheet and profitability is a key focus and priority.

During the year, net cash flow from operating activities rose by 45% to $94 million compared with $65 million in FY 2009. This was due to better operating margins and working capital management.

As at 31 December 2010, the cash and cash equivalents were $73 million compared with $63 million a year ago. In addition, we except to raise an expected $76 million in April through Taiwan TDRs.

During the year, we paid down bank loans of $25 million, invested in fixed assets of $12.6 million and Brookstone Senior Preferred Notes of $12.5 million.

Net assets were $110 million as at 31 December 2010.

Our financial ratios remain strong from improved demand for our products and better operating efficiency.

As a result of the strong performance, the Board is pleased to propose a final dividend of 1 cent per share. Inclusive of interim dividend, the total dividend is about $13.3 million or 27% of earnings.

PERFORMANCE REVIEW

Region 31 Dec 2010 31 Dec 2009

North Asia 386 301

South Asia 183 194

America/Africa/Europe/ Middle East/Oceania 39 39

Total OSIM Outlets 608 534

GNC/RichLife Outlets 251 188

Brookstone Outlets 310 314

Total 1,169 1,036

Global Network of Outlets - More Profitable

Brand GNC

Number of

Outlets 154

Geographical

Presence

South Asia

Brand BROOKSTONE

Number of

Outlets 310

Geographical

Presence

America

Brand RICHLIFE

Number of

Outlets 97

Geographical

Presence

China

Brand OSIM

Number of

Outlets 608

Geographical

Presence

North Asia, South Asia

Africa, Europe & Middle East

OURBRANDS

Pillars ofInnovation

06 FOUNDER, CHAIRMAN & CEO LETTER

Growth by Leadership, Innovation and ExecutionOSIM is Asia’s No.1 brand in well-being and healthy lifestyle

products. We take position to build and enhance our market

leadership position. International artiste Andy Lau’s uDivine

chair endorsement and OSIM BWF World Superseries global

sponsorship are excellent examples, which position OSIM in

Asia and beyond.

We take an innovative approach in product development,

branding and in management. We expect to continue to

create higher consumer demand in the coming year with the

launch of one to two major products every quarter. At the

same time, we will enhance our strategy, structure and

systems to position for sustainable growth.

We set clear goals and objectives. We put performance meas-

ures in place to evaluate results against plan. This focus on

execution has enabled us to raise our productivity per outlet

and per man.

Record PBT $68 millionReturns on shareholders funds 63%Profit before tax reached an historical high of $68 million.

This was due to better margins and more effective shop and

salesman productivity. The returns on shareholders funds

were an impressive 63%.

Profit after tax for the year was $50 million. This is the highest

level in the company’s history. We are optimistic about the

future of our industry as we build our next phase of growth.

“I am pleased to present a record set of results for the year. Profit before tax reached an historical high of $68 million. I would like to congratulate and thank my team for the wonderful achievement. I expect that this growth will continue to be driven by strong leadership, innovation and execution.”

Growing cash, growing brandsEBITDA grew 55% to a record $79 million. As at 31 Decem-

ber 2010, our cash and cash equivalents totalled $73 million.

We expect to raise an estimated $76 million in April through

the issue of Taiwan TDRs.

Globally we have a total of 1,169 outlets through OSIM,

RichLife, GNC and Brookstone. We expect to expand our

China outlets by 50 to 80 OSIM outlets and 60 to 100

RichLife outlets. Over time, we will build a portfolio of

brands in Asia and the rest of the world in well-being and

lifestyle businesses.

The outlook for the year is brightWe believe there will be many opportunities for us this year.

We are excited with the successful launch of uDivine chair

amongst other key innovations in the pipeline. The OSIM

BWF World Superseries will reach out to 500 million TV

viewers globally, particularly in China.

Overall, our focus is to continue to build sustainable growth,

profitability and positive operating cash flow. This will

strengthen our balance sheet and build long-term value for

all our stakeholders.

Finally, I would like to express my appreciation to my team,

vendors, shareholders and bankers who have worked closely

with us on this journey.

02 FOUNDER, CHAIRMAN & CEO LETTER

Growth by Leadership, Innovation and ExecutionOSIM is Asia’s No.1 brand in well-being and healthy lifestyle

products. We take position to build and enhance our market

leadership position. International artiste Andy Lau’s uDivine

chair endorsement and OSIM BWF World Superseries global

sponsorship are excellent examples, which position OSIM in

Asia and beyond.

We take an innovative approach in product development,

branding and in management. We expect to continue to

create higher consumer demand in the coming year with the

launch of one to two major products every quarter. At the

same time, we will enhance our strategy, structure and

systems to position for sustainable growth.

We set clear goals and objectives. We put performance meas-

ures in place to evaluate results against plan. This focus on

execution has enabled us to raise our productivity per outlet

and per man.

Record PBT $68 millionReturns on shareholders funds 63%Profit before tax reached an historical high of $68 million.

This was due to better margins and more effective shop and

salesman productivity. The returns on shareholders funds

were an impressive 63%.

Profit after tax for the year was $50 million. This is the highest

level in the company’s history. We are optimistic about the

future of our industry as we build our next phase of growth.

“I am pleased to present a record set of results for the year. Profit before tax reached an historical high of $68 million. I would like to congratulate and thank my team for the wonderful achievement. I expect that this growth will continue to be driven by strong leadership, innovation and execution.”

Growing cash, growing brandsEBITDA grew 55% to a record $79 million. As at 31 Decem-

ber 2010, our cash and cash equivalents totalled $73 million.

We expect to raise an estimated $76 million in April through

the issue of Taiwan TDRs.

Globally we have a total of 1,169 outlets through OSIM,

RichLife, GNC and Brookstone. We expect to expand our

China outlets by 50 to 80 OSIM outlets and 60 to 100

RichLife outlets. Over time, we will build a portfolio of

brands in Asia and the rest of the world in well-being and

lifestyle businesses.

The outlook for the year is brightWe believe there will be many opportunities for us this year.

We are excited with the successful launch of uDivine chair

amongst other key innovations in the pipeline. The OSIM

BWF World Superseries will reach out to 500 million TV

viewers globally, particularly in China.

Overall, our focus is to continue to build sustainable growth,

profitability and positive operating cash flow. This will

strengthen our balance sheet and build long-term value for

all our stakeholders.

Finally, I would like to express my appreciation to my team,

vendors, shareholders and bankers who have worked closely

with us on this journey.

Mr Ron SimFounder, Chairman and CEO

08 BOARD OF DIRECTORS

We welcome Mr. Colin Low (President & CEO of Singapore Infrastructure Development

Corporation Private Limited) on board.

Think AheadWe stay one step ahead with our determined drive to grow and create.

Mr Ron SimFounder, Chairman and

Chief Executive Officer

Mr Sim is a multi-awarded businessman,

an inspiration not just to the OSIM team

but to other entrepreneurs as well.

Inspiring and leading by example, his

business sense and entrepreneur spirit

continue to drive OSIM ahead to greater

heights.

Mr Charlie TeoExecutive Director and

Chief Operating Officer

(HQ & South Asia)

With over 20 years of leadership

experience in OSIM, Mr Teo achieves

goals with aplomb. Leaving footprints

across Southeast Asia, his leadership and

insight make him a key figure in OSIM.

He was appointed to the Board in 2000.

Mr Peter Lee Hwai KiatExecutive Director and

Chief Financial Officer and

Company Secretary

A certified public accountant, Mr Lee

takes charge of financial strategy and

control, investor relations and more.

He was appointed to the Board in 2005.

He was awarded CFO of the Year at the

Singapore Corporate Awards last year.

Mr Richard LeowExecutive Director and

Chief Operating Officer

(China)

With extensive experience in handling

sales, marketing and operations, Mr Leow

spearheads OSIM’s China business

spanning more than 40 cities. He was

appointed to the Board in 2000.

Ms Teo Sway HeongNon-Executive Director

During OSIM’s formative years, Ms Teo

played a crucial role as the Group’s Head

of Administration and Human Resources.

Appointed to the Board in March 2000,

Ms Teo has been a long-time valued

member of OSIM.

Mr Sin Boon AnnIndependent Non-Executive Director

An advisor at Drew & Napier, Mr Sin is

currently also a Member of Parliament

for Tampines GRC. He joined the Board

on 1 February 2010 to significantly

benefit OSIM with his expertise in legal

and corporate governance matters.

ership

o achieves

g footprints

eadership and

ure in OSIM.

oard in 2000.

in handling

tions, Mr Leow

business

es. He was

2000.

Ms Teo Sway HeongNon-Executive Director

During OSIM’s formative years, Ms Teo

played a crucial role as the Group’s Head

of Administration and Human Resources.

Appointed to the Board in March 2000,

Ms Teo has been a long-time valued

member of OSIM.

Mr Tan Soo NanIndependent Non-Executive Director

With over 30 years of business and

banking experience, Mr Tan is currently

the CEO of Singapore Pools. He was

appointed a Board member on 1

February 2010 to contribute to OSIM his

extensive knowledge and experience.

Mr Sin Boon AnnIndependent Non-Executive Director

An advisor at Drew & Napier, Mr Sin is

currently also a Member of Parliament

for Tampines GRC. He joined the Board

on 1 February 2010 to significantly

benefit OSIM with his expertise in legal

and corporate governance matters.

Mr Colin Low

Independent Non-Executive Director

(Joined 31 Dec 2010 replacing Mr Khor

Peng Soon who resigned on 1 Jan 2011)

Mr Low brings to the Group well over

24 years of global, international business

experience. Former President of GE

International/Asia-Pacific and current

President & CEO for SIDC, Mr Low is

adept at taking small and medium sized

companies public.

10

Drive Success with Execution We drive effective execution with clear goals, targets and measurements.

Mr Jackson TaiChairman, Brookstone Inc

Mr Tai was appointed Chairman

of Brookstone in January 2009.

Formerly the vice-chairman

and chief executive officer of

DBS Group Holdings and the

managing director in the

Investment Banking Division of

J.P. Morgan, he plays a pivotal

role in setting the pace for the

board of Brookstone Inc.

Mr Ron BoirePresident and CEO,

Brookstone Inc

Before joining Brookstone in

October 2009, Mr Boire held key

positions at Sony Electronics,

Inc and Best Buys, and was

the President of Toys “R” Us.

With his extensive business

experience, Mr Boire is leading

the new Brookstone team

towards a more effective retail

specialty store and online

operations.

Ms Cynthia PoaGroup CEO and Executive

Director, Global Active Limited

With 29 years experience in

the retail and distribution

industry of nutritional

supplements, Ms Poa’s

insightful knowledge of the

industry and passion will help

RichLife through its growth

phase in China.

MANAGEMENT TEAM

Left to right:

Mr Charlie Teo Executive Director and Chief Operating Officer (HQ and South Asia) Ms Celine Cha Chief Merchan

Chairman and Chief Executive Officer Mr Richard Leow Executive Director and Chief Operating Officer (China) Mr PChief Financial Officer and Company Secretary Mr Tan Kia Tong Chief Technology Officer

ution and measurements.

O,

ookstone in

r Boire held key

Electronics,

s, and was

Toys “R” Us.

e business

oire is leading

ne team

ffective retail

d online

Ms Cynthia PoaGroup CEO and Executive

Director, Global Active Limited

With 29 years experience in

the retail and distribution

industry of nutritional

supplements, Ms Poa’s

insightful knowledge of the

industry and passion will help

RichLife through its growth

phase in China.

MANAGEMENT TEAM

Left to right:

Mr Charlie Teo Executive Director and Chief Operating Officer (HQ and South Asia) Ms Celine Cha Chief Merchandising Officer Mr Ron Sim Founder,

Chairman and Chief Executive Officer Mr Richard Leow Executive Director and Chief Operating Officer (China) Mr Peter Lee Executive Director,

Chief Financial Officer and Company Secretary Mr Tan Kia Tong Chief Technology Officer

DIRECTORS & MANAGEMENT PROFILE

Mr Ron Sim Chye Hock, 52Founder, Chairman and Chief Executive Officer

A multi-awarded businessman, Mr Sim is not only an inspiration

to the OSIM team but to other entrepreneurs as well. Inspiring

and leading by example, his spirited business sense has earned

him the Ernst & Young ‘Entrepreneur of the Year 2003’ and the

Business Times ‘Businessman of the Year’. He was also

conferred educational recognition, such as the Doctor of

Philosophy in Marketing Management from the prestigious

Wisconsin International University and the American Univer-

sity of Hawaii in 2002, and the Honorary Fellow of the Market-

ing Institute of Singapore in 2007. Mr Sim is an Advisory Board

member of SMU Lee Kong Chian School of Business and NUS

Business School.

12

Mr Charlie Teo Chay Lee, 52 Executive Director and Chief Operating Officer

(HQ & South Asia)

With a mastery of over 20 years experience spearhead-

ing OSIM sales, marketing and operations, Mr Teo

achieves our business goals and handles his responsibili-

ties with composed execution. Crossing boundaries and

leaving footprints across Southeast Asia (Malaysia,

Thailand, Indonesia, and the Singapore headquarters),

his leadership and insight make him a key figure in

OSIM. Mr Teo joined OSIM in 1989 and was appointed

to the Board in 2000. Mr Teo is a council member of

Singapore Retailers Association.

Mr Peter Lee Hwai Kiat, 47

Executive Director and Chief Financial Officer

and Company Secretary

Mr Lee takes charge of OSIM’s financial strategy and control,

investor relations, talent management, human resources and

administration, and management information system. Prior to

joining the Group in 2000, he was a Group Financial Controller

of Golden Village. A certified public accountant, Mr Lee gradu-

ated from the National University of Singapore with a

Bachelor’s degree in Accounting, and obtained his MBA from

Manchester Business School in 2005. He was awarded CFO of

the Year at the Singapore Corporate Awards last year. Mr Lee

was appointed to the Board in 2005, and is an Advisory

member of Spring SEEDS (Startup Enterprise Development

Scheme) and Republic Polytechnic CIE (Centre for Innovation

and Enterprise).

Mr Richard Leow Lian Soon, 51Executive Director and Chief Operating Officer

(China)

With an extensive experience in handling the Greater China

operations, Mr Leow effectively tackles the challenges and

looks after OSIM’s China business spanning more than 30

cities. He has spent most of his time outside Singapore since he

joined the Group in 1987 and was appointed to the Board in

2000. Mr Leow is based in Shanghai, China. His energy and

dedication to OSIM is noteworthy.

Executive Directors


Ms Teo Sway Heong, 48

Non-Executive Director

During OSIM’s formative years, Ms Teo played a crucial role as

the Group’s Head of Administration and Human Resources.

Appointed to the Board in March 2000, Ms Teo has been a

long-time valued member of OSIM, consistently contributing to

the various endeavours of the company.

Independent Non- Executive Directors

Mr Sin Boon Ann, 52

Independent Non-Executive Director

An educator before joining Drew & Napier in 1992, Mr Sin

taught at the Faculty of Law at the National University of

Singapore from 1987. At Drew & Napier LLC, he specialises in

corporate finance, banking, joint ventures, investments and

acquisitions with a directorial role. A graduate with Bachelor of

Arts & Bachelor of Laws (Honours) from National University of

Singapore and Master of Laws from the University of London,

Mr Sin is also a Member of Parliament for the Tampines Group

Representative Constituency. Mr Sin joined the Board on 1

February 2010.

Mr Tan Soo Nan, 62

Independent Non-Executive Directors

Formerly the chief executive officer of Temasek Capital

(Private) Limited and Senior Managing Director of DBS Bank,

Mr Tan has over 30 years of valuable experience. He is the chief

executive officer of Singapore Pools (Private) Limited, a wholly

owned subsidiary of Singapore Totalisator Board where he is

concurrently the chief executive. A Bachelor of Business Admin-

istration (Honours) degree holder from the National University

of Singapore, he is also a member of the Income Tax Board of

Review, Goods and Services Tax Board of Review, and council

member of Football Association of Singapore. Mr Tan was

appointed a Board member on 1 February 2010.

Mr Colin Low, 49Independent Non-Executive Director

(Joined 31 Dec 2010 replacing Mr Khor Peng Soon who

resigned on 1 Jan 2011)

Mr Low brings to the group well over 24 years of global,

international business experience in finance, marketing, sales,

business and market development, mergers and acquisition.

Former President of GE International / Asia-Pacific and current

President & CEO for SIDC, Mr Low takes small and medium

sized companies public through Initial Public Offerings (IPOs)

and fund raising from private equity firms, investment and

sovereign funds for investment in infrastructure businesses

including industrial parks, power plants, water treatment plants,

tollways ports and real estate in the Asia Pacific region.

Non- Executive Directors

DIRECTORS & MANAGEMENT PROFILE14

Management Team

Mr Tan Kia Tong, 55 Chief Technology Officer

A Chartered Engineer, Mr Tan has steered OSIM’s R&D depart-

ment to greater heights since joining in 2002. Collaborating

with various international teams, he has spearheaded OSIM’s

technical product development in the international market,

creating some of the world’s first design technologies. A

member of the Institution of Engineering and Technology UK,

he holds a Master of Science in Electrical & Electronic Engineer-

ing from the University of Bradford/UMIST, and was awarded

the Public Administration Medal (Bronze) in 2000.

Ms Celine Cha, 43

Chief Merchandising Officer

Ms Cha is responsible for the Group’s product design,

development and merchandising & quality assurance. A

professional par excellence, Ms Cha's outstanding

achievements in the merchandising department have

been a fundamental force that keeps growing OSIM's a

strong presence in the market. Thorough and meticu-

lous, with a strong understanding of the company’s

diverse merchandising strategies and successful imple-

mentation, Ms Cha rose from the ranks to join the Group

in 1995 and was promoted to chief merchandising

officer in June 2005.

Mr Jackson Tai, 59Chairman, Brookstone Inc

Mr Tai was appointed Chairman of Brookstone in January

2009. He was a former vice-chairman and chief executive

officer of DBS Group Holdings and a former managing director

in the Investment Banking Division of J.P. Morgan. He is

currently the non-executive director of MasterCard Incorpo-

rated, CapitaLand, a member of the Bloomberg Asia Pacific

Advisory Board and of the Harvard Business School Asia Pacific

Advisory Board and serves as a trustee of Rensselaer Polytech-

nic Institute

Mr Ron Boire, 49President and CEO, Brookstone Inc

Before joining Brookstone in October 2009, Mr Boire held key

positions at Sony Electronics, Inc. and Best Buys where he was

a member of the Executive Committee among others. He later

joined Toys “R” Us, Inc. and ultimately became President. A

Masters in Business Administration degree holder from Colum-

bia Business School and London Business School, Mr. Boire also

received the S. David Feir International Humanitarian Award

from the Anti-Defamation League in 2002. He is actively

involved with the National Multiple Sclerosis Society and

currently serves as vice chairman of the Board of Directors.


Management Team

Ms Cynthia Poa Kheng Bee, 57Group CEO and Executive Director, Global Active Limited

Founder of Nature’s Farm in 1982, which she later sold, Ms Poa

is today a shareholder and chief executive officer of Global

Active Limited (GAL), the sole franchisee for GNC in Singapore,

Malaysia and Australia and the franchisor for RichLife in China.

With 29 years experience in the retail and distribution industry

of nutritional supplements, her insightful knowledge of the

industry and passion for the business, Global Active Limited

(GAL) continues to expand and build brand equity for all the

brands it represents.

16 FINANCIAL HIGHLIGHTS

Our focus is to continue to build sustainable growth, profitability and positive operating cash flow. This will build long term value for all ourstakeholders. We were among the best performing Singapore-listed stocks: in 2009, share price was up 700% and last year it was up by more than 200%.

Q1’09 Q3’09Q2’09 Q4’09 Q2’10Q1’10 Q4’10Q3’10

0

5

10

15

20

PAT (S$m) S

Effective Sales

2006 2007 2008 2009 2010

0 0

4 20

8 40

12 60

16 80

EBITDA margin (%) EBITDA (S$m)

Growing Cash

2006 2007 2008 2009 2010

0 0

3.75 17.5

7.5 35

11.5 52.5

15 70

PBT margin (%) PBT (S$m)

Record Profit

PBT margin (%)

PBT (S$m)

EBITDA margin (%)

EBITDA (S$m)

PAT (S$m)

Sales (S$m)

08 FINANCIAL HIGHLIGHTS

Our focus is to continue to build sustainable growth, profitability and positive operating cash flow. This will build long term value for all ourstakeholders. We were among the best performing Singapore-listed stocks: in 2009, share price was up 700% and last year it was up by more than 200%.

Q1’09 Q3’09Q2’09 Q4’09 Q2’10Q1’10 Q4’10Q3’10

0 0

5 37.5

10 75

15 112.5

20 150

PAT (S$m) Sales (S$m)

Effective Sales

2006 2007 2008 2009 2010

0 0

4 20

8 40

12 60

16 80

EBITDA margin (%) EBITDA (S$m)

Growing Cash

2006 2007 2008 2009 2010

0 0

3.75 17.5

7.5 35

11.5 52.5

15 70

PBT margin (%) PBT (S$m)

Record Profit

PBT margin (%)

PBT (S$m)

EBITDA margin (%)

EBITDA (S$m)

PAT (S$m)

Sales (S$m)

18

OSIM Headquarters, Singapore

GROUP STRUCTURE as at 11 February 2011

100%

30%

100%

100%

OSIM (M)Sdn Bhd

OSIM (China)Co Ltd

OSIMBrookstone

Holdings, Inc

Global ActiveLimited

OSIMInternational

Trading(Shanghai)

Co Ltd

Daito-OSIMHealthcare(Suzhou)

Co Ltd

OSIM(Taiwan)

Co Ltd

OSIM(HK) Company

Limited

87.57%

55.56%

100%

94.52%

10

OSIM Headquarters, Singapore

GROUP STRUCTURE as at 11 February 2011

100%

30%

100%

100%

Key Associated Company

Key Subsidiaries

Joint Venture

OSIMInternational

Ltd

OSIM (M)Sdn Bhd

OSIM (China)Co Ltd

OSIMBrookstone

Holdings, Inc

Global ActiveLimited

OSIMInternational

Trading(Shanghai)

Co Ltd

Daito-OSIMHealthcare(Suzhou)

Co Ltd

OSIM(Taiwan)

Co Ltd

OSIM(HK) Company

Limited

87.57%

55.56%

100%

94.52%

20 LEADING INNOVATION, NO.1 BRAND

We take the lead to inspirewell-being and create demand.OSIM is about the experience of complete well-being.

An advocate of living a holistic and healthy life, we confidently

collaborate with top celebrities who share OSIM’s belief of

inspiring well-being in our customers. Our esteemed brand

ambassadors epitomise the OSIM promise of well-being,

through feeling great and looking good.

12 LEADING INNOVATION, NO.1 BRAND

We take the lead to inspirewell-being and create demand.OSIM is about the experience of complete well-being.

An advocate of living a holistic and healthy life, we confidently

collaborate with top celebrities who share OSIM’s belief of

inspiring well-being in our customers. Our esteemed brand

ambassadors epitomise the OSIM promise of well-being,

through feeling great and looking good.

22 GLOBAL SPONSORSHIP

500 Million Viewers

OSIM is the global title sponsor of the OSIM BWF World Superseries.

Supporting OSIM's global expansion, this world class championship series is an international branding platform for OSIM with 195 matches broadcasting to 500 million viewers globally.

Date Event Country / City

18 – 23 Jan 2011 Malaysia Open Malaysia / KL

25 – 30 Jan 2011 Korea Open South Korea / Seoul (Premier)

08 – 13 Mar 2011 All England England / Birmingham (Premier)

19 – 24 Apr 2011 India Open India / New Delhi

14 – 19 Jun 2011 Singapore Open Singapore

21 – 26 Jun 2011 Indonesia Open Indonesia / Jakarta (Premier)

13 – 18 Sep 2011 China Masters China / Changzhou

20 – 25 Sep 2011 Japan Open Japan / Tokyo

18 – 23 Oct 2011 Denmark Open Denmark / Odense (Premier)

25 – 30 Oct 2011 France Open France / Paris

15 – 20 Nov 2011 Hong Kong Open Hong Kong

22 – 27 Nov 2011 China Open China / Shanghai (Premier)

14 – 18 Dec 2011 Masters Final China 2011

14 GLOBAL SPONSORSHIP

500 Million Viewers

OSIM is the global title sponsor of the OSIM BWF World Superseries.

Supporting OSIM's global expansion, this world class championship series is an international branding platform for OSIM with 195 matches broadcasting to 500 million viewers globally.

Date Event Country / City

18 – 23 Jan 2011 Malaysia Open Malaysia / KL

25 – 30 Jan 2011 Korea Open South Korea / Seoul (Premier)

08 – 13 Mar 2011 All England England / Birmingham (Premier)

19 – 24 Apr 2011 India Open India / New Delhi

14 – 19 Jun 2011 Singapore Open Singapore

21 – 26 Jun 2011 Indonesia Open Indonesia / Jakarta (Premier)

13 – 18 Sep 2011 China Masters China / Changzhou

20 – 25 Sep 2011 Japan Open Japan / Tokyo

18 – 23 Oct 2011 Denmark Open Denmark / Odense (Premier)

25 – 30 Oct 2011 France Open France / Paris

15 – 20 Nov 2011 Hong Kong Open Hong Kong

22 – 27 Nov 2011 China Open China / Shanghai (Premier)

14 – 18 Dec 2011 Masters Final China 2011

24INSPIRING WELL-BEING: MILESTONES 2010

• Launched OSIM uSoffa Petit, the World’s 1st Little Massage Sofa with international

celebrity, Lin Chi-Ling as endorser. Available in 5 lifestyle colours, the compact

uSoffa Petit is designed to provide a complete lower body massage with versatile

functionality.

JANUARY 2010

• Title sponsorship of OSIM Singapore International Triathlon 2010.

• Launched uMama Warm, a wearable 360°, multi-point, upper body massager for

the tummy, neck, shoulders and back using the original power of OSIM uPapa’s

Japanese Taiko-strength drum-massage technology.

APRIL 2010

• Launched OSIM uSoffa, the Full-Body Massage Sofa with Customisable Design with

international celebrity, Lin Chi-Ling as endorser. Enjoy the pleasures of a full-body

massage and the power to personalise the uSoffa according to your style,

personality and home décor.

JUNE 2010

• OSIM celebrates its 30th anniversary in the healthy lifestyle and well-being business.

• At the same time, OSIM celebrates its 30 years of growth with a new brand and retail

concept. The new brand platform will complement OSIM’s plans to propel its growth,

be more innovative and competitive, and better engage the consumer. This sets the

course for its next phase of growth.

SEPTEMBER 2010

• Launched OSIM uDivine, the World’s 1st Human-3D Massage chair with international

artiste, Andy Lau as endorser. Featuring the innovative OSIM Human-3D massage

system that is precise, realistic and human-contour based, the uDivine delivers the

most humanised, pleasurable and effective full-body massage.

• Global Title Sponsor of the OSIM BWF World Superseries, 2011-2013.

NOVEMBER 2010

OSIM INTERNATIONAL LTD ANNUAL REPORT 201025

CORPORATE HIGHLIGHTS

5-Year Financial Highlights 26

Corporate Governance Report 32

Corporate Information 39

OSIM Global Network 40


5-YEAR FINANCIAL HIGHLIGHTS

2OSIM INTERNATIONAL LTD ANNUAL REPORT 2010

Turnover 623 524 457 477 509Profit before tax (excluding Brookstone results) 57 15 22 38 68Net profit after tax (excluding Brookstone results) 48 12 15 23 50Net profit after tax (including Brookstone results) 34 3 (99) 23 50

Summarised Profit & Loss Accounts

Year ended 2006 2007 2008 2009 2010 $'m $'m $'m $'m $'m

Turnover ($’M)

2006 623

2007 524

2009 477

2010 509

2008 457

Profit Before Tax ($’M)(excluding Brookstone results)

2006 57

2007 15

2009 38

2010 68

2008 22

OSIM INTERNATIONAL LTD ANNUAL REPORT 2010273OSIM INTERNATIONAL LTD ANNUAL REPORT 2009

Net Cash Flows Generated fromOperating Activities ($’M)

2010 94

2006 57

2007 51

2009 65

2008 23

Cash and Cash Equivalents ($’M) at end of year

2010 73

2006 30

2007 28

2009 63

2008 26

Operating cash flows before working capital changes 79 44 42 64 79Net cash flows generated from operating activities 57 51 23 65 94Net cash flows used in investing activities (34) (8) (8) (4) (19)Net cash flows used in financing activities (45) (43) (15) (23) (62)Net (decrease)/increase in cash and cash equivalents (22) (0) 0 38 13Cash and cash equivalents at beginning of year 56 30 28 26 63Net effect of exchange rate changes (4) (2) (2) (1) (3)

Cash and cash equivalents at end of year 30 28 26 63 73

Summarised Cash Flows

Year ended 2006 2007 2008 2009 2010 $'m $'m $'m $'m $'m

5-YEAR FINANCIAL HIGHLIGHTS (CONT’D)


5-YEAR FINANCIAL HIGHLIGHTS


Turnover 623 524 457 477 509Profit before tax (excluding Brookstone results) 57 15 22 38 68Net profit after tax (excluding Brookstone results) 48 12 15 23 50Net profit after tax (including Brookstone results) 34 3 (99) 23 50

Summarised Profit & Loss Accounts

Year ended 2006 2007 2008 2009 2010 $'m $'m $'m $'m $'m

Turnover ($’M)

2006 623

2007 524

2009 477

2010 509

2008 457

Profit Before Tax ($’M)(excluding Brookstone results)

2006 57

2007 15

2009 38

2010 68

2008 22



Number of Outlets

OSIM

Number of Outlets

2006 686

2007 649

2009 534

2008 592

RichLife / GNC

2006 139

2007 133

2009 188

2010 608 2010 251

2008 153

Brookstone

2006 310

2007 322

2009 314

2010 310

2008 315

Year ended 2006 2007 2008 2009 2010

North Asia 329 322 329 301 386South Asia 323 291 227 194 183America/Africa/Europe/Middle East/Oceania 34 36 36 39 39OSIM 686 649 592 534 608

RichLife / GNC 139 133 153 188 251Brookstone 310 322 315 314 310 1,135 1,104 1,160 1,036 1,169



Shareholders’ Equity ($’M)

2006 170

2007 159

2009 97

2010 108

2008 70

Net Asset Value Per Share (Cents)

2006 31

2007 30

2009 15

2010 15

2008 13

Shareholders' equity 170 159 70 97 108Minority interests 6 7 6 7 2 176 166 76 104 110

Represented by:Fixed assets 49 39 30 20 19Associated companies and a Joint Venture 141 128 13 12 12Goodwill on consolidation 22 20 20 10 10Intangible assets 18 15 14 12 7Other non current assets 16 20 15 10 22 246 222 92 64 70

Current assets 174 143 122 167 169Current liabilities (171) (151) (112) (123) (127)Net current assets/(liabilities) 3 (8) 10 44 42

Less: Non-current liabilities Term loans (67) (44) (23) (0) –Deferred taxation (4) (3) (3) (3) (2)Others (2) (1) (0) (1) (0) (73) (48) (26) (4) (2) 176 166 76 104 110Other ratio:Net asset value per share (cents) 31 30 13 15 15

Summarised Balance Sheets

Year ended 2006 2007 2008 2009 2010 $'m $'m $'m $'m $'m Restated Restated





Number of Outlets

OSIM

Number of Outlets

2006 686

2007 649

2009 534

2008 592

RichLife / GNC

2006 139

2007 133

2009 188

2010 608 2010 251

2008 153

Brookstone

2006 310

2007 322

2009 314

2010 310

2008 315

Year ended 2006 2007 2008 2009 2010

North Asia 329 322 329 301 386South Asia 323 291 227 194 183America/Africa/Europe/Middle East/Oceania 34 36 36 39 39OSIM 686 649 592 534 608

RichLife / GNC 139 133 153 188 251Brookstone 310 322 315 314 310 1,135 1,104 1,160 1,036 1,169




Shareholders’ Equity ($’M)

2006 170

2007 159

2009 97

2010 108

2008 70

Net Asset Value Per Share (Cents)

2006 31

2007 30

2009 15

2010 15

2008 13

Shareholders' equity 170 159 70 97 108Minority interests 6 7 6 7 2 176 166 76 104 110

Represented by:Fixed assets 49 39 30 20 19Associated companies and a Joint Venture 141 128 13 12 12Goodwill on consolidation 22 20 20 10 10Intangible assets 18 15 14 12 7Other non current assets 16 20 15 10 22 246 222 92 64 70

Current assets 174 143 122 167 169Current liabilities (171) (151) (112) (123) (127)Net current assets/(liabilities) 3 (8) 10 44 42

Less: Non-current liabilities Term loans (67) (44) (23) (0) –Deferred taxation (4) (3) (3) (3) (2)Others (2) (1) (0) (1) (0) (73) (48) (26) (4) (2) 176 166 76 104 110Other ratio:Net asset value per share (cents) 31 30 13 15 15

Summarised Balance Sheets

Year ended 2006 2007 2008 2009 2010 $'m $'m $'m $'m $'m Restated Restated




Turnover by Geographical Segments

Year ended 2006 2007 2008 2009 2010 $'m $'m $'m $'m $'m

North Asia 342 252 225 259 298South Asia 204 180 163 160 169America/Africa/Europe/Middle East/Oceania 77 92 69 58 42 623 524 457 477 509

North Asia

Turnover by Geographical Segments ($’M)

South Asia

2006 342

2007 252

2009 259

2008 225

2006 204

2007 180

2009 160

2010 298 2010 169

2008 163

America/Africa/Europe/Middle East/Oceania

2006 77

2007 92

2009 58

2010 42

2008 69




RISK FACTORS

INDUSTRY SPECIFIC RISKS

1. Changes in consumer tastes

As with all other consumer products, sales of our products are dependent on consumers’ demand for our products and are susceptible to changes in consumer tastes. There is no assurance that our intensive efforts in niche marketing, brand management and product innovation will continue to enable us to satisfy the evolving consumer tastes.

2. Susceptibility to downturns in economic cycles

The nature of our healthy lifestyle products make us more susceptible to reduced demand in times of economic downturn than other kinds of business because our products may not be considered as essential health products.

3. Health epidemics, terror alerts, terror attacks and other acts of violence or war may adversely affect sales.

A large part of our outlets are located at high traffic malls and airports. Any of the above events will lead to a decrease in consumer traffic in malls and consequently may have a material adverse effect on sales.

4. Inferior quality and unsubstantiated product performance claims by imitators may lead to adverse media publicity and negative market segments.

A number of our products have always attracted imitation product traders. Their inferior quality and unsubstantiated product performance claims may lead to adverse media publicity and negative market sentiments and may have a material adverse effect on sales.

COMPANY SPECIFIC RISKS

5. Foreign exchange risks

While our sales are mainly denominated in the respective local currencies in which the sales arise, namely the S$, RM, HK$, RMB, NT$, A$ and US$, our costs of procurement of products from our contract manufacturers are incurred mainly in US$ and Yen. There is therefore an exchange transaction risk.

6. Expansion of business and franchisee network

We plan to open OSIM stores in existing and new geographical markets and sign on new franchisees. There are risks that these initiatives may not be successful.



The Directors and management of OSIM are committed to high standards of corporate governance in order to protect the interests of our employees, customers and shareholders. The Singapore Exchange Securities Trading Limited (SGX-ST)’s Listing Manual requirement (the “listing requirement”), introduced with effect from 1 July 2002, requires that an issuer which holds its Annual General Meeting (“AGM”) on or after 1 January 2003 (the “effective date”) should describe its corporate governance practices with specific reference to the Code of Corporate Governance (“Code”) in its annual report. It must disclose any deviation from any guideline of the Code together with an appropriate explanation for such deviation in the annual report.

This Report describes OSIM’s corporate governance processes and activities that were in place throughout the financial year. For proper reference, the relevant provisions of the Code under discussion are identified in bold.

BOARD OF DIRECTORS

Principle 1: Board’s Conduct of its Affairs

The principal functions of the Board are:

1) Approving the broad policies, strategies and financial objectives of the Company and monitoring the performance of management;

2) Overseeing the processes for evaluating the adequacy of internal controls, risk management, financial reporting and compliance;

3) Approving the nominations of board directors and appointment of key personnel;

4) Approving annual budgets, major funding proposals, investment and divestment proposals; and

5) Assuming responsibility for corporate governance.

Matters which are specifically reserved to the full Board for decision are those involving a conflict of interest for a substantial shareholder or a director, material

acquisitions and disposal of assets, corporate or financial restructuring and share issuances, dividends and other returns to shareholders and matters which require Board approval as specified under the Company’s interested person transaction policy.

The Board conducts regular scheduled meetings on a quarterly basis. When circumstances require, ad-hoc meetings are arranged. Board meetings are conducted in Singapore and attendance by Directors are regular. There is therefore no requirement to conduct meetings by way of a tele-conference or video-conference. The attendance of the directors at meetings of the Board and Board committees, as well as the frequency of such meetings held during the financial year ended 31 December 2010, is disclosed in the “Directors’ Attendance at Board and Committee Meetings” section of this Report.

The Company worked closely with a professional corporate secretarial firm, SAMAS Management Consultants Pte Ltd., to provide its Directors with regular updates on the latest corporate governance and listing policies. All Directors are also updated regularly concerning any changes in the Company policies.

The Company also has an on-going training budget for the existing Directors to fund the Directors’ participation at industry conferences and seminars, and to fund directors’ attendance at any course of instruction/training programme in connection with their duties as directors, if such participation or attendance is required. This budget may be utilised by each Director subject to approval by the Chairman.

The Company has adopted a policy that Directors are also welcome to request further explanations, briefings or informal discussions on any aspects of the Company’s operations or business issues from the management. The Chairman and CEO will make the necessary arrangements for the briefings, informal discussions or explanations required by the director.

Principle 2: Board Composition and Balance

The Board consists of three Independent Non-Executive Directors, one Non-Executive Director and four Executive Directors. The independence of each

CORPORATE GOVERNANCE REPORT


director is reviewed annually by the Nominating Committee (“NC”), which was constituted on 27 December 2002. The NC adopts the Code’s definition of what constitutes an Independent Director in its review. As a result of the NC’s review of the independence of the Independent Directors, the NC is of the view that the Independent Directors of OSIM are independent and further, that no individual or small group of individuals dominate the Board’s decision making process. Key information regarding the directors is given in the “Directors and Chief Officers” section of this annual report. The NC is of the view that the current Board comprises persons who, as a group, provide core competencies necessary to meet the Company’s targets.

The NC is of the view that the current size of its board of directors is appropriate, taking into account the nature and scope of the Company’s operations.

Principle 3: Role of Chairman and Chief Executive Officer (“CEO”)

The Company has the same Chairman and CEO, Mr Ron Sim Chye Hock and he is an Executive Director.

OSIM believes that the Independent Directors have demonstrated high commitment in their role as directors and have ensured that there is a good balance of power and authority. As such, there is no need for the role of the Chairman and CEO to be separated.

The Chairman and CEO is the most senior executive in the Company and bears executive responsibility for the Company’s business, as well as the responsibility for the workings of the Board. The Chairman and CEO ensures that board meetings are held when necessary and sets the board meeting agenda in consultation with the directors. The Chairman and CEO reviews most board papers before they are presented to the Board and ensures that board members are provided with complete, adequate and timely information. As a general rule, board papers are sent to directors in advance in order for directors to be adequately prepared for the meeting. Management staffs who have prepared the papers, or who can provide additional insight into the matters to be discussed, are invited to present the paper or attend at the relevant time during the board meeting. The Chairman assists to ensure that procedures are introduced to comply with the Code.

Principle 6: Access to Information

In order to ensure that the Board is able to fulfill its responsibilities, management provides the board members with regular updates of the financial position of the Company. A quarterly report of the Company’s activities is also provided to the Board. Analysts’ reports on the Company are forwarded to the directors on an on-going basis as and when received. The directors have also been provided with the phone numbers and email particulars of the Company’s senior management and company secretary to facilitate independent access.

Should directors, whether as a group or individually, need independent professional advice, the company secretary will, upon direction by the Board, appoint a professional advisor selected by the group or the individual, and approved by the Chairman and CEO, to render the advice. The cost of such professional advice will be borne by the Company.

The company secretary attends all board meetings and is responsible to ensure that board procedures are followed. It is the company secretary’s responsibility to ensure that the Company complies with the requirements of the Companies Act. Together with the other management staff of OSIM, the company secretary is responsible for compliance with all other rules and regulations which are applicable to the Company.

Please refer to the “Corporate Information” section of the annual report for the composition of the Company’s Board of Directors, and Board committees.

BOARD COMMITTEES

NOMINATING COMMITTEE (“NC”)Principle 4: Board Membership

The Chairman of the NC, Mr Sin Boon Ann, is an Independent Non-Executive Director. There are five members in the NC, three of whom are independent non-executive directors.

The NC’s principal functions are:

CORPORATE GOVERNANCE REPORT (CONT’D)


1) To identify candidates and review all nominations for the appointment or re-appointment of members of the Board of Directors; the CEO of the Company; and the members of the various Board Committees, for the purpose of proposing such nominations to the Board for its approval;

2) To determine the criteria for identifying candidates and reviewing nominations for the appointments referred to in paragraph 1. One of the criteria for the appointment of a director is the independent status of the candidate;

3) To decide how the Board’s performance may be evaluated and propose objective performance criteria for the Board’s approval; and

4) To assess the effectiveness of the Board as a whole, and the contribution by each individual director to the effectiveness of the Board.

5) To evaluate whether or not a director is able to and has been adequately carrying out his/her duties as director of the company, when he/she has multiple board representations.

6) To assess independent directors and confirm their independence.

New directors are at present appointed by way of a board resolution, after the NC approves their appointment. Such new directors must submit themselves for re-election at the next AGM of the Company. Article 92 of the Articles requires one third of the Board to retire by rotation at every AGM. With a view to renewing the composition of the Board and upholding good corporate governance practice, retiring director Mr Khor Peng Soon has opted not to be re-elected for a further term and he has resigned on 1 January 2011, The NC has interviewed and recommended the appointment of Mr Colin Low Tock Cheong (who was appointed on 31 December 2010) at the forthcoming AGM.

Principle 5: Board Performance

The NC, in considering the re-appointment of any director, evaluates the performance of the director. The Chairman & CEO will assess each director’s contribution to the Board, and discuss the results with the chairman of the NC. The assessment parameters includes attendance record at meetings of the

Board and Board committees, intensity of participation at meetings, the quality of interventions and special contributions.

The NC will evaluate the Board’s performance as a whole. The assessment process adopted both quantitative and qualitative criteria, such as return on equity, the success of the strategic and long-term objectives set by the Board, and the effectiveness of the Board in monitoring management’s performance against the goals that have been set by the Board. The NC will be working with an external professional firm on the evaluation criteria.

AUDIT COMMITTEE (“AC”)Principle 11: Audit CommitteePrinciple 12: Internal Controls

The AC comprises three members, all of whom are independent non-executive directors. The chairman of the AC, Mr Tan Soo Nan, and the other members of the AC bring together a wealth of many years of experience in business management, finance and legal services. The NC is of the view that the members of the AC have sufficient financial management expertise and experience to discharge the AC’s functions.

The AC performs the following functions:

1) Reviews the audit plans of the internal and external auditors of the Company and ensures the adequacy of the company’s system of accounting controls and the co-operation given by the Company’s management to the external and internal auditors;

2) Reviews the quarterly and annual financial statements and the auditors’ report on the annual financial statements of the Group and the Company before their submission to the board of directors;

3) Reviews effectiveness of the Group and the Company’s material internal controls, including financial, operational and compliance controls and risk management via reviews carried out by the internal auditors;

4) Meets with the external auditors, other committees, and management in separate executive sessions to discuss any matters that these groups believe should be discussed privately with the AC;



5) Reviews legal and regulatory matters that may have a material impact on the financial statements, related compliance policies and programmes and any reports received from regulators;

6) Reviews the cost effectiveness and the independence and objectivity of the external auditors;

7) Reviews the nature and extent of non-audit services provided by the external auditors;

8) Recommends to the board of directors the external auditors to be nominated, approves the compensation of the external auditors, and reviews the scope and results of the audit;

9) Reports actions and minutes of the AC to the board of directors with such recommendations as the AC considers appropriate; and

10) Reviews interested person transactions in accordance with the requirements of the Singapore Exchange Securities Trading Limited (SGX-ST)’s Listing Manual.

The AC has the express power to conduct or authorise investigations into any matters within its terms of reference. Minutes of the AC meetings are regularly submitted to the Board for its information and review.

The AC, having reviewed all non-audit services provided by the external auditors to the Group, is satisfied that the nature and extent of such services would not affect the independence of the external auditors. The AC has also conducted a review of interested person transactions.

The AC also conducts a review to ensure that there are no improper activities of the Company (if any).

The AC convened four meetings during the year with full attendance from all members. The AC has also met with internal and external auditors, without the presence of the Company’s management, at least once a year.

The Company’s external auditors, Ernst & Young LLP (“EY”), carry out, in the course of their statutory audit, a review of the effectiveness of the Company’s

material internal controls, including financial, operational and compliance controls, and risk management annually to the extent of their scope as laid out in their audit plan. Material non-compliance and internal control weaknesses noted during their audit, and the auditors’ recommendations, are reported to the AC. The Internal Audit follows up on EY’s recommendations as part of its role in the review of the Company’s internal control systems.

The AC has reviewed the Company’s risk assessment, and based on the IA audit reports and management controls in place, it is satisfied that there are adequate internal controls in the Company. The AC expects the risk assessment process to be a continuing process.

On the recommendation of the AC, the Company has implemented a whistle blowing policy which provides for the mechanisms which staff of the Company may in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters.

Principle 13: Internal Audits

The Internal Audit (“IA”) function is currently performed by an Audit & Risk Management (“A&RM”) team. The A&RM team reports directly to the chairman of the AC on audit matters, and to the Chief Financial Officer on administrative matters. The AC reviews A&RM team’s reports on a quarterly basis. The AC also reviews and approves the annual audit plans and resources to ensure that the A&RM team has the necessary resources to adequately perform its functions. The A&RM team has adopted the Standards for Professional Practice of Internal Auditing set by The Institute of Internal Auditors.

To ensure the adequacy of the internal audit function, the AC reviews the A&RM team’s activities on a half yearly basis. In 2002, the team, together with PricewaterhouseCoopers and the supervision of the AC, has completed the development of the Minimum Acceptable Controls and Control Self-Assessment programmes for the Company. The assessment exercises are done on an ongoing basis.

In 2006, the Audit & Risk Management team, together with KPMG, has developed the Enterprise Risk Management framework in the Company for better assessment and management of the company risks.



The Company has implemented Control Self-Assessment and reviewed Enterprise Risk Management programmes for the Group.

Remuneration Committee (“RC”)Principle 7: Procedures for Developing Remuneration PoliciesPrinciple 8: Level and Mix of RemunerationPrinciple 9: Disclosure on Remuneration

The RC was formed on 27 December 2002 by combining the previous Compensation Committee and OSIM Share Option Scheme Committee.

The RC consists of five directors, of whom three are independent non-executive directors. The RC is chaired by Mr Sin Boon Ann, an Independent Non-Executive director.

The RC’s principal responsibilities are to:

1) Approve the structure of the compensation programme for directors and senior management to ensure that the programme is competitive and sufficient to attract, retain and motivate senior management of the required quality to run the Company successfully;

2) Review directors’ and senior management’s compensation annually and determine appropriate adjustments; and

3) Administer the OSIM Employee Share Option Scheme (the “OSIM ESOS”). Any matter pertaining or pursuant to the OSIM ESOS and any dispute and uncertainty as to the interpretation of the OSIM ESOS, any rule, regulation or procedure thereunder or any rights under the OSIM ESOS shall be determined by the RC.

The CEO and executive directors’ remuneration packages include a variable bonus element which is performance-related.

Directors’ fees are set in accordance with a remuneration framework comprising basic fees. Executive directors do not receive directors’ fees. Non-executive directors are paid directors’ fees, subject to shareholders’ approval at the AGM.

For competitive reasons, the Company is not disclosing each individual director’s remuneration. Instead, we are disclosing the band of remuneration in note 33 to the financial statements.

Number of directors of the Company in remuneration bands: 2010 2009$500,000 and above 1 1$250,000 to $499,000 3 3Below $250,000 4 4 8 8 The Company adopts a remuneration policy for staff comprising a fixed component and a variable component. The fixed component is in form of a base salary. The variable component is in the form of a variable bonus that is linked to the Company and individual performance. Another element of the variable component is the grant of share options to staff under the OSIM ESOS. This seeks to align the interests of staff with that of the shareholders. Staff appraisals are conducted twice in a year.

One of the Top Key Executives (excluding Directors) of the Company received remuneration within S$250,000 to S$500,000.

No employee of the Company was an immediate family member of a Director or the CEO and whose remuneration exceeded S$150,000 during the financial year.

Communication with ShareholdersPrinciple 10: Accountability and AuditPrinciple 14: Communication with ShareholdersPrinciple 15: Greater Shareholder Participation

The Company has adopted quarterly results reporting since the third quarter of 2001. OSIM holds a media and analysts briefing of its quarterly, half-year and full-year results. The results are published through the SGXNET, news releases and the Company’s website and investor relations sites Zaobao.com, AsiaOne.com and Shareinvestor. All information on the Company’s new initiatives are



first disseminated via SGXNET followed by a news release, which is also available on the website.

Price sensitive information is first publicly released, either before the Company meets with any group of investors or analysts or simultaneously with such meetings. Results and annual reports are announced or issued within the mandatory period and are available on the Company’s website. The Company does not practise selective disclosure. The Company communicates with its investors on a regular basis and attends to their queries. The Company also retained a Public & Investor Relations firm. All shareholders of the Company receive the annual report and notice of AGM. The notice is also advertised in newspapers and made available on the SGXNET. At AGMs, shareholders are given the opportunity to air their views and ask directors or management questions regarding the Company.

The Articles allow a member of the Company to appoint one or two proxies to attend and vote instead of the member.

Dealings in Securities

The Company has adopted internal codes pursuant to the SGX-ST Best Practices Guide applicable to all its officers in relation to dealings in the Company’s securities. Its officers are not allowed to deal in the Company’s shares during the period commencing one month before the announcement of the Company’s quarterly results and ending on the date of the announcement of the results. In addition, all employees and directors of the Company and its subsidiaries are required to observe the insider trading laws at all times.

Interested Person Transactions

The Company has adopted an internal policy in respect of any transactions with interested persons and has set out the procedures for review and approval of the Company’s interested person transactions.

The aggregate value of interested person transactions entered into during the financial year under review is as follows:

Aggregate value of all IPT during the financial year under review

(excluding transactions < $100,000 & transactions conducted under

shareholders’ mandate pursuant to Rule 920)

Aggregate value of all IPT conducted under shareholder’s mandate pursuant to Rule 920

(excluding transactions < $100,000)

12 months ended 31 Dec 12 months ended 31 Dec2010$’000

2009$’000

2010$’000

2009$’000

Sales:OSIM (Guangzhou) Co., Ltd – – 1,123 2,746OSIM (Langfang) Co., Ltd – – 2,109 2,192FK Marketing – – 561 710 – – 3,793 5,648



Material Contracts

No material contracts to which the Company or its subsidiaries, is a party and which involve interests of the Chief Executive Officers, each director or controlling shareholders subsisted at the end of the financial year or have been entered into since the end of the previous financial year.

Ron Sim Chye Hock 8 N.A. 1 1Charlie Teo Chay Lee 8 N.A. 1 1Richard Leow Lian Soon 8 N.A. N.A. N.A.Peter Lee Hwai Kiat 8 N.A. N.A. N.A.Teo Sway Heong 8 N.A. N.A. N.A.Sin Boon Ann 8 4 1 1Tan Soo Nan 8 4 1 1Khor Peng Soon 7 3 N.A N.AColin Low 1 1 1 1

N.A. = Not applicable

Peter Lee Hwai KiatCompany Secretary

Meeting of Board Audit Committee Nominating Committee Remuneration CommitteeTotal held in FY2010 8 4 1 1

Directors’ Attendance at Board and Committee Meetings



CORPORATE INFORMATION


BOARD OF DIRECTORS

Executive ChairmanMr Ron Sim Chye Hock

Executive DirectorsMr Charlie Teo Chay LeeMr Richard Leow Lian SoonMr Peter Lee Hwai Kiat

Non-Executive DirectorMs Teo Sway Heong

Independent Non-Executive DirectorsMr Khor Peng SoonMr Sin Boon AnnMr Tan Soo Nan

CHIEF OFFICERS

ChairmanMr Ron Sim Chye Hock

Mr Charlie Teo Chay LeeMr Richard Leow Lian SoonMr Peter Lee Hwai KiatMr Tan Kia TongMs Celine Cha

AUDIT COMMITTEE

ChairmanMr Tan Soo Nan

Mr Khor Peng SoonMr Sin Boon Ann

REMUNERATION COMMITTEE

ChairmanMr Sin Boon Ann

Mr Tan Soo NanMr Khor Peng SoonMr Ron Sim Chye HockMr Charlie Teo Chay Lee

NOMINATING COMMITTEE

ChairmanMr Sin Boon Ann

Mr Tan Soo NanMr Khor Peng SoonMr Ron Sim Chye HockMr Charlie Teo Chay Lee

REGISTERED OFFICE

65 Ubi Avenue 1OSIM HeadquartersSingapore 408939

AUDITORS

Ernst & Young LLPPublic Accountants and Certified Public Accountants

1 Raffles QuayNorth Tower, Level 18Singapore 048583Partner-in-charge(Since financial year ended 31 December 2008)Mr Philip Ling Soon Hwa

COMPANY SECRETARY

Mr Peter Lee Hwai Kiat

REGISTRAR AND SHARETRANSFER OFFICE

B.A.C.S. Private Limited63 Cantonment RoadSingapore 089758

PRINCIPAL BANKERS

The Hongkong and ShanghaiBanking Corporation

The Royal Bank of Scotland PLC

United Overseas Bank Limited

RHB Bank Berhad

CORPORATE INFORMATION


OSIM GLOBAL NETWORK


SINGAPOREOSIM International Ltd65 Ubi Avenue 1OSIM HeadquartersSingapore 408939Tel: 65-6-747-6866Fax: 65-6-747-6769

Global Active Limited65 Ubi Avenue 1OSIM HeadquartersSingapore 408939Tel: 65-6-749-7206Fax: 65-6-745-2623

CHINAOSIM (CHINA) CO., LTDBeiJing Office2F Unit 1, Bldg.3, B Area, ZhaoweiIndustry Park, No.14,Jiuxianqiao Road, ChaoyangDistrict, Beijing100015, ChinaTel: 86-10-8456-5789 Fax: 86-10-8456-5810

OSIM (CHINA) CO., LTDShangHai Office5F, NO 326 Yan Qiao Road PudongNew Area Shanghai 200125 ChinaTel: 86-21-5196-2828 Fax: 86-21-5196-2880

OSIM (CHINA) CO., LTDGuangZhou Office10F,West Tower, Tianhe entertain-ment Plaza, 623 Tianhe Road ,Tianhe District, Guangzhou 510620,ChinaTel: 86-20-8753-2421Fax: 86-20-8753-0404

OSIM (CHINA) CO., LTDShenZhen OfficeA Block,6F,TianJi Building,TianAnDigital Town,Futian District, Shenzhen 518040, China Tel: 86-755-8237 8127Fax: 86-755-8237 8137

HONG KONG & MACAUOSIM (HK) Co. Ltd. Room 1812 - 22, 18/FNo. 1 Hung To Road Kwun Tong, Kowloon, HongkongTel: 852-2790-2300Fax: 852-2342-8510

MALAYSIA & BRUNEIOSIM (M) Sdn. Bhd.No 4, Jalan 13/6, Section 1346200 Petaling Jaya, Selangor, MalaysiaTel: 603-7965-9898Fax: 603-7965-9999

TAIWANOSIM (Taiwan) Co., Ltd.11F, No.176, Jian Yi RoadFar East Century Park(Building G)Chung Ho City 235, Taipei Hsien, Taiwan, R.O.C.Tel: 886-2-8227-1589Fax: 886-2-8227-1556

AUSTRALIA OSIM INTERNATIONAL(AUSTRALIA) PTY LTD201B / 3-9 Spring StreetChatswood New South WalesNSW 2067, AustraliaTel: 61-2-9411-8498 Fax: 61-2-9415-3166

BAHRAINELHAM AL HAYAT WLLStore #1200Building #2102, Road #2825Block #428, Seef MallPostal address: PO Box 214 Manama BahrainTel/Fax: 973-17-581331

CAMBODIAOSIM CAMBODIAR. M C IMPEX CO., LTD.No-37E(3rd Floor), Attwood Business Center (3th Floor) Sangkat Teuk Thlar,Khan Russey Koe, Phnom Penh, Kingdom of CambodiaTel: 855 2399 5300Fax: 855 2399 5200

INDIAOSIM INDIA- A Division of PARAMOUNT SURGIMED LTDOkhla Industrial Area.Okhla Main Road Okhla Phase II, New Delhi 110020IndiaTel: 91-11-41070000 Fax: 91-11-41616555

INDONESIAPT. OPTIMAL SEMANGAT INTI MAKMURJl. Daan Mogot KM 12.8 No 156Jakarta Barat 11730 IndonesiaTel: 62-21-5437-5999Fax: 62-21-5437-3925

IRANASAY AVARAN-E-ARIYANo. 2359Across from DAY hospitalVALI-E-ASR AveTehran, IranTel: 98-21-88786065/6Fax: 98-21-88786065

ITALYOSIM ITALIA SRLVia Nomentana 101800137 RomaTel: 39 338 4677600Fax: 39 06 41220974

OSIM GLOBAL NETWORK


OSIM GLOBAL NETWORK


SINGAPOREOSIM International Ltd65 Ubi Avenue 1OSIM HeadquartersSingapore 408939Tel: 65-6-747-6866Fax: 65-6-747-6769

Global Active Limited65 Ubi Avenue 1OSIM HeadquartersSingapore 408939Tel: 65-6-749-7206Fax: 65-6-745-2623

CHINAOSIM (CHINA) CO., LTDBeiJing Office4F, Unit 3, Bldg.1, D Area, Zhaowei Industry Park, No.14 Jiuxianqiao Road Chaoyang District, Beijing,100015,ChinaTel: 86-10-8456-5789 Fax: 86-10-8456-5810

OSIM (CHINA) CO., LTDShangHai Office5F, NO 326 Yan Qiao Road Pudong New Area Shanghai 200125 ChinaTel: 86-21-5196-2828 Fax: 86-21-5196-2880

OSIM (CHINA) CO., LTDGuangZhou Office10F,West Tower, Tianhe entertain-ment Plaza, 623 Tianhe Road ,Tianhe District, Guangzhou 510620,ChinaTel: 86-20-8753-2421Fax: 86-20-8753-0404

OSIM (CHINA) CO., LTDShenZhen OfficeA Block,6F,TianJi Building,TianAnDigital Town,Futian District, Shenzhen 518040, China Tel: 86-755-8237 8127Fax: 86-755-8237 8137

HONG KONG & MACAUOSIM (HK) Co. Ltd.Room 1812 - 22, 18/FNo. 1 Hung To Road Kwun Tong, Kowloon, Hongkong Tel: 852-2790-2300Fax: 852-2342-8510

MALAYSIA & BRUNEIOSIM (M) Sdn. Bhd.No 4, Jalan 13/6, Section 1346200 Petaling Jaya, Selangor, MalaysiaTel: 603-7965-9898Fax: 603-7965-9999

TAIWANOSIM (Taiwan) Co., Ltd.11F, No.176, Jian Yi RoadFar East Century Park(Building G) Chung Ho City 235, Taipei Hsien, Taiwan, R.O.C. Tel: 886-2-8227-1589Fax: 886-2-8227-1556

AUSTRALIA OSIM INTERNATIONAL(AUSTRALIA) PTY LTD201B / 3-9 Spring StreetChatswood New South WalesNSW 2067, AustraliaTel: 61-2-9411-8498 Fax: 61-2-9415-3166

BAHRAINELHAM AL HAYAT WLLStore #1200Building #2102, Road #2825Block #428, Seef MallPostal address: PO Box 214 Manama BahrainTel/Fax: 973-17-581331

CAMBODIAOSIM CAMBODIAR. M C IMPEX CO., LTD.No-37E(3rd Floor), Attwood Business Center (3th Floor) Sangkat Teuk Thlar,Khan Russey Koe, Phnom Penh, Kingdom of CambodiaTel: 855 2399 5300Fax: 855 2399 5200

INDIAOSIM INDIA- A Division of PARAMOUNT SURGIMED LTDOkhla Industrial Area.Okhla Main Road Okhla Phase II,New Delhi 110020IndiaTel: 91-11-41070000 Fax: 91-11-41616555

INDONESIAPT. OPTIMAL SEMANGAT INTI MAKMURJl. Daan Mogot KM 12.8 No 156Jakarta Barat 11730 IndonesiaTel: 62-21-5437-5999Fax: 62-21-5437-3925

IRANASAY AVARAN-E-ARIYANo. 2359Across from DAY hospitalVALI-E-ASR AveTehran, IranTel: 98-21-88786065/6Fax: 98-21-88786065

ITALYOSIM ITALIA SRLVia Nomentana 101800137 RomaTel: 39 338 4677600Fax: 39 06 41220974

KUWAITALI ALGHANIM & SONS (C)Shuwaikh Industrial Area, Block #1 Building #100PO Box 21540, Safat 13076 KuwaitTel: 965-2230000 #1805Fax: 965-4834655

MYANMAROSIM MYANMARFMI Centre #501380, Bogyoke Aung San RdPabedan TownshipYangon, Myanmar.Tel/Fax: 951-240289

NEW ZEALANDLC DISTRIBUTION LIMITEDShop 2, Heards Building168 Parnell Road,Parnell, AucklandNew ZealandTel/Fax: 64-93-666633

OMANOMAN INTERNATIONALELECTRONICS AND TRADING COLLCPO Box 889, Muscat Postal CODE113 Sultanate of OmanTel: 968-2456-5490Fax: 968-2456-5491

PAKISTANBEE ENTERPRISES LTD59-K, COMMERCIAL AREA,PHASE-I, DHA, LAHORE PAKISTANTEL: 92 42 3589 7441 FAX: 92 42 3572 6054

PHILIPPINESASIAN THERAPEUTICS INC845 S. Laurel St. Addition Hills Mandaluyong City1550 PhilippinesTel: 63-2-7236746Fax: 63-2-7215940

QATARALI BIN ALI MEDICALDoha, State of QatarAl Jelaiat St. #37 Behind Hamad Medical CorporationP. O. Box 75Tel: 974- 486-3457 /974-486-7871 #258 Fax: 974- 4882-585

ROMANIADIVERTA RETAIL 3000 SAAnchor Plaza Office Building ET. 6B-Dul Timisoara NR. 26Z,Sector 6, Bucuresti 6 061331 RomaniaTel: 021-317-88-82/83Fax: 021-317-88-84

SAUDI ARABIAAL-SAWANI GROUP P.O. Box 9411, Jeddah 21413 Kingdom of Saudi Arabia Tel : 9662-6912612 Fax : 9662-6911320

SOUTH KOREAOSIM KOREA INCMyung Shin Bldg., 366-16 Shindang-dong, Jung-gu, Seoul Korea 100-830KoreaTel: 82-2-724-4900Fax: 82-2-724-4901

THAILANDOSIM (THAI) CO., LTD.No 17 Soi Pattanakarn 13,Pattanakarn Road, Kwang Suanluang,Khet Suanluang Bangkok 10250Tel: 662-7174648Fax: 662-7174650

UNITED ARAB EMIRATESRSH (MIDDLE EAST) LLCJuma Al Majid Commercial Building(Top Floor)Opp. Bur Juman Centre,P.O. Box 20764,Dubai - U.A.E.Tel : 971-4-3966676Fax : 971-4-3966679

UNITED KINGDOMFK MARKETING LTD The Weston CentreWeston RoadCrewe CheshireCW1 6FLTel: 44-1270-253377Fax: 44-1270-253399

VIETNAMDTL INTERNATIONAL TRADING & SERVICE CORPORATION24/7 Street of D3, Ward 25, Binh Thanh District,Ho Chi Minh City, VietnamTel: 84 8 3512 5164Fax: 84 8 3512 5467

USABROOKSTONE INCOne Innovation WayMerrimack, NH 03054, USATel: 1800-846-3000Fax : 1-603-577 8003

CANADAXD HOLDINGS LTD160-2088 No.5 RoadRichmond, B.C.V6X 2T1Canada


OSIM GLOBAL NETWORK (CONT’D)


OSIM GLOBAL NETWORK (CONT’D)


FINANCIAL REPORTS

Directors’ Report 43

Statement by Directors 50

Independent Auditors’ Report 51

Balance Sheets 53

Consolidated Statement of Comprehensive Income 56

Statements of Changes in Equity 57

Consolidated Cash Flow Statement 62

Notes to the Financial Statements 64


DIRECTORS’ REPORTfor the year ended 31 December 2010(Amounts in Singapore Dollars)

The directors are pleased to present their report to the members together with the audited consolidated financial statements of OSIM International Ltd (the “Company”) and its subsidiaries companies (collectively, the “Group”) and the balance sheet and statement of changes in equity of the Company for the financial year ended 31 December 2010.

DirectorsThe directors of the Company in office at the date of this report are:

Ron Sim Chye HockTeo Sway HeongCharlie Teo Chay LeeRichard Leow Lian SoonPeter Lee Hwai Kiat Tan Soo Nan (appointed on 1 February 2010)Sin Boon Ann (appointed on 1 February 2010)Colin Low Tock Cheong (appointed on 31 December 2010)

Arrangements to enable directors to acquire shares and debentures Except as described below, neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose objects are, or one of whose object is, to enable directors of the Company to acquire benefits by means of the acquisition of shares or debentures of the Company or any other body corporate.

Directors’ interests in shares, warrants and debenturesThe following directors, who held office at the end of the financial year, had, according to the register of directors’ shareholdings required to be kept under section 164 of the Singapore Companies Act, Cap. 50, an interest in shares, warrants and share options of the Company and related corporations (other than wholly-owned subsidiary companies), as stated below:

Held by director as atOther shareholdings in which the director

is deemed to have an interest

At the beginning of financial year or date of appointment, if later

At the end of financial year



OSIM International LtdOrdinary shares

Ron Sim Chye Hock 238,757,978 220,757,978 161,320,157 183,920,157Teo Sway Heong 5,161,547 5,661,547 394,916,588 399,016,588Charlie Teo Chay Lee 1,954,000 2,296,540 300,000 300,000Richard Leow Lian Soon 2,550,000 2,950,000 67,500 –Peter Lee Hwai Kiat 1,720,000 2,004,000 950,000 496,000Khor Peng Soon# 52,000 52,000 – –


DIRECTORS’ REPORT (CONT’D)

Directors’ interests in shares, warrants and debentures (cont’d)

Held by director as atOther shareholdings in which the director

is deemed to have an interest





OSIM International LtdWarrants to subscribe for ordinary shares

Ron Sim Chye Hock 72,691,666 75,410,926 1,030,473 1,030,473Teo Sway Heong 1,030,473 1,030,473 72,691,666 75,410,926Charlie Teo Chay Lee 371,122 371,122 – –Richard Leow Lian Soon 304,614 304,614 – –Peter Lee Hwai Kiat 71,076 76 – –Khor Peng Soon# 29,446 29,446 – –

At 1 January 2010

At 31 December 2010

Exercise price $

Expirydate

OSIM International LtdOptions to subscribe for ordinary shares

Charlie Teo Chay Lee 247,500 – 0.178 14.01.2011 247,500 247,500 0.236 14.01.2012 198,000 198,000 0.442 26.12.2012 95,040 – 0.917 15.02.2014

Richard Leow Lian Soon 40 40 0.917 15.02.2014

Peter Lee Hwai Kiat 144,000 – 0.442 26.12.2012 69,120 120 0.917 15.02.2014

# Resigned on 1 January 2011

By virtue of section 7 of the Singapore Companies Act, Cap. 50, both Ron Sim Chye Hock and Teo Sway Heong are deemed to have interests in the shares held by the Company in its subsidiary companies.

There was no change in any of the above-mentioned interests in the Company between the end of the financial year and 21 January 2011.



Directors’ interests in shares, warrants and debentures (cont’d)Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares, share options, warrants or debentures of the Company, or of related corporations, either at the beginning of the financial year or date of appointment if later, or at the end of the financial year.

Directors’ contractual benefitsExcept as disclosed in the financial statements, since the end of the previous financial year, no director of the Company 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 the director is a member, or with a company in which the director has a substantial financial interest.

Share optionsThe OSIM Share Option Scheme (the “Option Scheme”) is administered by the Remuneration Committee comprising the following members:

Tan Soo Nan (appointed on 1 February 2010)Sin Boon Ann (Chairman) (appointed on 1 February 2010)Colin Low Tock Cheong (appointed on 31 December 2010)Ron Sim Chye HockCharlie Teo Chay LeeMichael Kan Yuet Yun (resigned on 1 February 2010)Ong Kian Min (Chairman) (resigned on 1 February 2010)Khor Peng Soon (resigned on 1 January 2011)

Only confirmed full-time employees as well as directors of the Group (other than Ron Sim Chye Hock and Teo Sway Heong) who are not controlling shareholders and their associated companies are eligible to receive options granted under the Option Scheme.

The aggregate number of ordinary shares subject to outstanding options granted under the Option Scheme will not at any time exceed 15% of the issued share capital of the Company. The exercise price of the options shall be determined by the Remuneration Committee and fixed at:

(i) a price (the “Market Price”) equal to the average of the last dealt prices of the Company’s share, as determined by reference to the Financial News or other publication published by the Singapore Exchange Securities Trading Limited (SGX-ST) for the 3 consecutive trading days immediately preceding the date of grant, rounded up to the nearest whole cent in the event of fractional prices; or

(ii) a price which is set at a discount to the Market Price, provided that:

(a) the maximum discount shall not exceed 20% of the Market Price (or such other percentage or amount as may be determined by the Remuneration Committee and permitted by the SGX-ST); and

(b) the shareholders of the Company in general meeting shall have authorised the making of offers and grants of options under the Option Scheme at a discount not exceeding the maximum discount as aforesaid.



Share options (cont’d)Where the exercise price as determined above is less than $0.05, the exercise price shall be $0.05.

The exercise period of options with exercise price at Market Price commences on the first anniversary of the date of grant while the exercise period of options with exercise price at a discount to the Market Price commences on the second anniversary of the date of grant. Options granted to executive directors and employees expire on the tenth anniversary of the date of grant while options granted to non-executive directors and employees of associated companies expire on the fifth anniversary of the date of grant.

The movement in share options during the financial year is as follows:

Group and Company2010 2009

At beginning of year 4,170,845 4,582,165Lapsed during the year (561,840) (141,320) Exercised during the year (1,699,140) (270,000)At end of year 1,909,865 4,170,845

During the financial year ended 31 December 2010, 1,699,140 (2009: 270,000) ordinary shares were issued pursuant to the Option Scheme.

Details of all the options to subscribe for ordinary shares of the Company pursuant to the Option Scheme as at 31 December are as follows:

Exercise price Number of optionsExpiry date 2010 2009 2010 2009 $ $

14.01.2011 0.178 0.178 – 450,00014.01.2012 0.236 0.236 248,065 585,56515.08.2012 0.506 0.506 – 143,00026.12.2012 0.442 0.442 453,480 708,48018.06.2013 0.488 0.488 29,600 116,00015.02.2014 0.917 0.917 1,178,720 2,167,800 1,909,865 4,170,845

Since the commencement of the Option Scheme till the end of the financial year:

• No options have been granted to the controlling shareholders of the Company and their associated companies;

• No participant has received 5% or more of the total options available under the Option Scheme;

• No options that entitle the holder to participate, by virtue of the options, in any share issue of any other corporation have been granted; and

• No options have been granted at a discount.



Share options (cont’d) Details of the options to subscribe for ordinary shares of the Company granted to directors and employees of the Group and associated companies pursuant to the Option Scheme are as follows: Aggregate options Aggregate Aggregate granted (including options options bonus issue) since exercised since lapsed since Aggregate commencement commencement commencement options of the Option of the Option of the Option outstanding Scheme to end Scheme to end Scheme to end as at end of ExerciseName of directors Exercise period of financial year of financial year of financial year financial year price ($)

Charlie Teo Chay Lee 15.01.2002 - 14.01.2011 247,500 (247,500) – – – 15.01.2003 - 14.01.2012 247,500 – – 247,500 0.236 27.12.2003 - 26.12.2012 198,000 – – 198,000 0.442 16.02.2005 - 15.02.2014 95,040 (95,040) – – –

Richard Leow Lian 15.01.2002 - 14.01.2011 247,500 (247,500) – – – Soon 15.01.2003 - 14.01.2012 247,500 (247,500) – – – 27.12.2003 - 26.12.2012 198,000 (198,000) – – – 16.02.2005 - 15.02.2014 95,040 (95,000) – 40 0.917

Peter Lee Hwai Kiat 15.01.2002 - 14.01.2011 135,000 (135,000) – – – 15.01.2003 - 14.01.2012 135,000 (135,000) – – – 27.12.2003 - 26.12.2012 144,000 (144,000) – – – 16.02.2005 - 15.02.2014 69,120 (69,000) – 120 0.917

Khor Peng Soon 16.02.2005 - 15.02.2010 21,600 – (21,600) – –

Staff/former directors 15.01.2002 - 14.01.2006 115,939 (115,939) – – – 15.01.2002 - 14.01.2011 1,649,057 (1,497,182) (151,875) – – 30.08.2002 - 29.08.2011 412,186 (348,436) (63,750) – – 15.01.2003 - 14.01.2007 132,814 (132,814) – – – 15.01.2003 - 14.01.2012 2,424,620 (2,189,680) (234,375) 565 0.236 16.08.2003 - 15.08.2012 1,048,200 (838,600) (209,600) – – 27.12.2003 - 26.12.2007 130,250 (130,250) – – – 27.12.2003 - 26.12.2012 2,720,830 (2,046,450) (418,900) 255,480 0.442 19.06.2004 - 18.06.2013 1,215,000 (926,400) (259,000) 29,600 0.488 16.02.2005 - 15.02.2010 72,000 (28,800) (43,200) – – 16.02.2005 - 15.02.2014 4,140,200 (1,418,060) (1,543,580) 1,178,560 0.917

16,141,896 (11,286,151) (2,945,880) 1,909,865



WarrantsOn 28 March 2008, the Company announced a proposed renounceable non-underwritten rights issue of warrants to shareholders of the Company to subscribe for new ordinary shares at $0.35 each in the capital of the Company. 135,459,476 warrants were allotted and issued by the Company pursuant to the Warrants Issue. These warrants were listed and quoted on the SGX-ST on 26 June 2008.

On 20 March 2009, the Company announced 2,083,351 additional warrants to be issued and allotted to the warrant holders as a consequence of the issuance of Rights Shares. These warrants were listed and quoted on SGX-ST on 23 March 2009.

For the year ended 31 December 2010, 50,700,943 (2009: nil) warrants were exercised and converted into ordinary shares. The remaining warrants will expire on 23 June 2011.

Audit committeeThe Audit Committee (the “AC”) comprises three independent non-executive directors. The members of the AC are:

Tan Soo Nan (Chairman) (appointed on 1 February 2010)Sin Boon Ann (Non-executive Director) (appointed on 1 February 2010)Colin Low Tock Cheong (Non-executive Director) (appointed on 31 December 2010)Michael Kan Yuet Yun (Chairman) (resigned on 1 February 2010)Ong Kian Min (Non-executive Director) (resigned on 1 February 2010)Khor Peng Soon (Non-executive Director) (resigned on 1 January 2011)

The AC performs the functions in accordance with section 201B(5) of the Singapore Companies Act, Cap. 50, including the following:

• Reviews the audit plans of the internal and external auditors of the Company and reviews the internal auditors’ evaluation of the adequacy of the Company’s system of internal accounting controls and the assistance given by the Company’s management to the external and internal auditors;

• Reviews the quarterly and annual financial statements and the auditors’ report on the annual financial statements of the Group and the Company before their submission to the board of directors;

• Reviews effectiveness of the Group’s and the Company’s material internal controls, including financial, operational and compliance controls and risk management via reviews carried out by the internal auditors;

• Meets with the external auditors, other committees, and management in separate executive sessions to discuss any matters that these groups believe should be discussed privately with the AC;

• Reviews legal and regulatory matters that may have a material impact on the financial statements, related compliance policies and programmes and any reports received from regulators;

• Reviews the cost effectiveness and the independence and objectivity of the external auditors; • Reviews the nature and extent of non-audit services provided by the external auditors;• Recommends to the board of directors the external auditors to be nominated, approves the compensation of the external auditors, and reviews the scope and

results of the audit; • Reports actions and minutes of the AC to the board of directors with such recommendations as the AC considers appropriate; and• Reviews interested person transactions in accordance with the requirements of the SGX-ST’s Listing Manual.



Audit committee (cont’d)The AC, having reviewed all non-audit services provided by the external auditors to the Group, is satisfied that the nature and extent of such services would not affect the independence of the external auditors. The AC has also conducted a review of interested person transactions.

The AC convened four meetings during the year with full attendance from all members. The AC has also met with internal and external auditors, without the presence of the Company’s management, at least once a year.

Further details regarding the AC are disclosed in the Report on Corporate Governance.

Auditors

Ernst & Young LLP have expressed their willingness to accept re-appointment as auditors.

On behalf of the board of directors,

Ron Sim Chye HockDirector

Peter Lee Hwai KiatDirector

Singapore11 February 2011


STATEMENT BY DIRECTORSPursuant to Section 201(15)

We, Ron Sim Chye Hock and Peter Lee Hwai Kiat, being two of the directors of OSIM International Ltd, do hereby state that, in the opinion of the directors,

(i) the accompanying balance sheets, consolidated statement of comprehensive income, statements of changes in equity and consolidated cash flow statement together with notes thereto, are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2010 and the results of the business, changes in equity and cash flows of the Group and the changes in equity of the Company for the year ended on that date; and

(ii) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

On behalf of the board of directors,

Ron Sim Chye HockDirector

Peter Lee Hwai KiatDirector

Singapore11 February 2011


INDEPENDENT AUDITORS’ REPORT to the Members of OSIM International Ltd

Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of OSIM International Ltd (the “Company”) and its subsidiaries (collectively, the “Group”) set out on pages 53 to 154, which comprise the balance sheets of the Group and the Company as at 31 December 2010, the statements of changes in equity of the Group and the Company and the consolidated statement of comprehensive income and consolidated cash flow statement of the Group for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Consolidated Financial StatementsManagement is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with the provisions of the Singapore Companies Act (the Act) and Singapore Financial Reporting Standards, and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets.

Auditors’ ResponsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.


INDEPENDENT AUDITORS’ REPORT to the Members of OSIM International Ltd (cont’d)

OpinionIn our opinion, the consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2010 and the results, changes in equity and cash flows of the Group and the changes in equity of the Company for the year ended on that date.

Report on Other Legal and Regulatory Requirements In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiary companies incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.

Ernst & Young LLPPublic Accountants and Certified Public Accountants Singapore

11 February 2011


BALANCE SHEETSas at 31 December 2010

Note Group Company2010 2009 2010 2009$’000 $’000 $’000 $’000

Equity attributable to equity holders of the Company Share capital 3a 72,410 49,252 72,410 49,252Treasury shares 3b (37,662) (2,289) (37,662) (2,289)Accumulated profits 98,018 63,395 45,233 20,637Enterprise expansion funds 4 545 545 – –Capital reserves 5 4,863 2,340 860 700Warrant reserve 6 7,699 12,191 7,699 12,191Revaluation reserve 7 2,724 5,237 – –Premium on purchase of non-controlling interests’ shares 8 (10,171) (7,862) – –Foreign currency translation reserve 9 (30,302) (26,130) – – 108,124 96,679 88,540 80,491Non-controlling interests 1,808 7,659 – –Total equity 109,932 104,338 88,540 80,491

Non-current assets

Fixed assets 10 18,635 19,555 2,374 3,953Investment properties 11 – – – –Subsidiary companies 12 – – 96,381 87,810Associated companies and a joint venture 13 12,592 11,846 1,321 913Intangible assets 14 16,648 22,952 – –Long-term investments 15 13,428 930 13,428 930Long-term receivables 16 7,480 7,596 855 1,357Deferred tax assets 36 1,624 1,366 – – 70,407 64,245 114,359 94,963

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEfor the year ended 31 December 2010

Note Group2010 2009$’000 $’000

Revenue 31 508,738 476,767Other operating income 32 15,415 12,348Changes in inventories of finished goods (10,866) (5,653)Finished goods purchased (165,462) (171,786)Employee benefits expense 30 (79,404) (78,888)Depreciation and amortisation expenses (11,276) (13,233)Other operating expenses 34 (189,666) (180,545)Financial expenses 35a (961) (1,253)Financial income 35b 197 119Share of profits of associated companies 975 692

Profit before taxation 67,690 38,568Taxation 36 (17,881) (14,006)Profit for the year 49,809 24,562

Other comprehensive income:Revaluation reserve (2,513) –Foreign currency translation (3,824) (349)Other comprehensive income for the year, net of tax (6,337) (349)Total comprehensive income for the year 43,472 24,213

Profit attributable to:

Equity holders of the Company 50,069 23,334Non-controlling interests (260) 1,228 49,809 24,562

Total comprehensive income attributable to:Equity holders of the Company 43,384 22,821Non-controlling interests 88 1,392 43,472 24,213Earnings per share (cents)

Basic 37 7.38 3.68Diluted 37 6.60 3.66



STATEMENTS OF CHANGES IN EQUITYfor the year ended 31 December 2010

Attributable to equity holders of the Company

2010 Group

Share capital (Note

3a)

Treasury shares

(Note 3b)Accumulated

profits

Enterprise expansion

funds (Note 4)

Capital reserves (Note 5)

Warrant reserve

(Note 6)

Revaluation reserve

(Note 7)

Premium on purchase of non-

controlling interests’

shares (Note 8)

Foreign currency

translation reserve

(Note 9) Total

Non- controlling interests

Total equity

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000At 1 January 2010 49,252 (2,289) 63,395 545 2,340 12,191 5,237 (7,862) (26,130) 96,679 7,659 104,338Profit for the year – – 50,069 – – – – – – 50,069 (260) 49,809Other comprehensive

incomeRevaluation reserve – – – – – – (2,513) – – (2,513) – (2,513)Foreign currency

translation – – – – – – – – (4,172) (4,172) 348 (3,824)Other comprehensive

income for the year – – – – – – (2,513) – (4,172) (6,685) 348 (6,337)Total comprehensive

income for the year – – 50,069 – – – (2,513) – (4,172) 43,384 88 43,472Contributions by

and distributions to equity holders

Transfer to capital reserves (Note 5) – – (2,363) – 2,363 – – – – – – –

Exercise of employees’ share options 921 – – – (142) – – – – 779 – 779

Lapse of employees’ share options – – 178 – (178) – – – – – – –

Exercise of warrants 22,237 – – – – (4,492) – – – 17,745 – 17,745Purchase of treasury

shares (Note 3b) – (41,608) – – – – – – – (41,608) – (41,608)Treasury shares issued

pursuant to purchase of non-controlling interests’ shares – 6,235 – – 480 – – – – 6,715 – 6,715

Dividends on ordinary shares (Note 38) – – (13,261) – – – – – – (13,261) – (13,261)

Total contributions by and distributions to equity holders 23,158 (35,373) (15,446) – 2,523 (4,492) – – – (29,630) – (29,630)


STATEMENTS OF CHANGES IN EQUITY for the year ended 31 December 2010 (cont’d)


2010 Group (cont’d)

Share capital (Note

3a)

Treasury shares


profits


funds (Note 4)


Warrant reserve

(Note 6)

Revaluation reserve

(Note 7)



shares (Note 8)

Foreign currency

translation reserve

(Note 9) Total


Total equity

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000Changes in ownership interests in subsidiary companies that do not result in a loss of control

Premium on purchase of non-controlling interest shares (Note 12c) – – – – – – – (2,309) – (2,309) – (2,309)

Acquisition of non-controlling interest(Note 12c) – – – – – – – – – – (5,939) (5,939)

Total changes in ownership interests in subsidiary companies that do not result in a loss of control – – – – – – – (2,309) – (2,309) (5,939) (8,248)

Total transactions with equity holders in their capacity as equity holders 23,158 (35,373) (15,446) – 2,523 (4,492) – (2,309) – (31,939) (5,939) (37,878)

At 31 December 2010 72,410 (37,662) 98,018 545 4,863 7,699 2,724 (10,171) (30,302) 108,124 1,808 109,932





2009 Group

Share capital (Note

3a)

Treasury shares


profits


funds (Note 4)


Warrant reserve

(Note 6)

Revaluation reserve

(Note 7)



shares (Note 8)

Foreign currency

translation reserve

(Note 9) Total


Total equity

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000At 31 December 2008 as previously reported 42,574 – 41,626 545 1,384 12,191 5,237 (7,875) (25,617) 70,065 6,424 76,489

Effect of adopting INT FRS 113 – – (609) – – – – – – (609) (126) (735)

At 1 January 2009 as restated 42,574 – 41,017 545 1,384 12,191 5,237 (7,875) (25,617) 69,456 6,298 75,754

Profit for the year – – 23,334 – – – – – – 23,334 1,228 24,562Other comprehensive income

Foreign currency translation – – – – – – – – (513) (513) 164 (349)

Total comprehensive income for the year – – 23,334 – – – – – (513) 22,821 1,392 24,213

Contributions by and distributions to equity holders

Transfer to capital reserves (Note 5) – – (1,004) – 1,004 – – – – – – –

Exercise of employees’ share options 56 – – – – – – – – 56 – 56

Lapse of employees’ share options – – 48 – (48) – – – – – – –

Issuance of rights shares (Note 3a) 6,622 – – – – – – – – 6,622 – 6,622

Purchase of treasury shares (Note 3b) – (2,289) – – – – – – – (2,289) – (2,289)

Total contributions by and distribution to equity holders 6,678 (2,289) (956) – 956 – – – – 4,389 – 4,389




2009Group (cont’d)

Share capital (Note

3a)

Treasury shares


profits


funds (Note 4)


Warrant reserve

(Note 6)

Revaluation reserve

(Note 7)



shares (Note 8)

Foreign currency

translation reserve

(Note 9) Total


Total equity

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000Changes in ownership interests in subsidiary companies that do not result in a loss of control

Premium on purchase of non-controlling interest shares – – – – – – – 13 – 13 – 13

Acquisition of non-controlling interest – – – – – – – – – – (31) (31)

Total changes in ownership interests in subsidiary companies that do not result in a loss of control – – – – – – – 13 – 13 (31) (18)

Total transactions with equity holders in their capacity as equity holders 6,678 (2,289) (956) – 956 – – 13 – 4,402 (31) 4,371

At 31 December 2009 49,252 (2,289) 63,395 545 2,340 12,191 5,237 (7,862) (26,130) 96,679 7,659 104,338




2010 Company

Share capital

(Note 3a)

Treasury shares


profits


Warrant reserve

(Note 6) Total equity$’000 $’000 $’000 $’000 $’000 $’000

At 1 January 2010 49,252 (2,289) 20,637 700 12,191 80,491Profit and total comprehensive income for the year – – 37,679 – – 37,679Contributions by and distributions to equity holdersExercise of employees’ share options 921 – – (142) – 779Lapse of employees’ share options – – 178 (178) – –Exercise of warrants 22,237 – – – (4,492) 17,745Purchase of treasury shares (Note 3b) – (41,608) – – – (41,608)Treasury shares issued pursuant to purchase of NCI’s shares – 6,235 – 480 – 6,715Dividends on ordinary shares – – (13,261) – – (13,261)Total transactions with equity holders in their capacity as equity holders 23,158 (35,373) (13,083) 160 (4,492) (29,630)At 31 December 2010 72,410 (37,662) 45,233 860 7,699 88,540

2009 Company

Share capital

(Note 3a)

Treasury shares


profits


Warrant reserve

(Note 6) Total equity$’000 $’000 $’000 $’000 $’000 $’000

At 1 January 2009 42,574 – 4,439 748 12,191 59,952Profit and total comprehensive income for the year – – 16,150 – – 16,150Contributions by and distributions to equity holdersIssuance of rights shares (Note 3a) 6,622 – – – – 6,622Exercise of employees’ share options 56 – – – – 56Lapse of employees’ share options – – 48 (48) – –Purchase of treasury shares (Note 3b) – (2,289) – – – (2,289)Total transactions with equity holders in their capacity as equity holders 6,678 (2,289) 48 (48) – 4,389At 31 December 2009 49,252 (2,289) 20,637 700 12,191 80,491



CONSOLIDATED CASH FLOW STATEMENTfor the year ended 31 December 2010

Note Group2010 2009$’000 $’000

Cash flows from operating activitiesProfit before taxation 67,690 38,568Adjustments for:

Share of profits of associated companies (975) (692)Depreciation of fixed assets 10 10,047 11,506Depreciation of investment property 11 – 23(Gain)/Loss on disposal of fixed assets (4,962) 1,271Gain on disposal of properties held-for-sale 22 (78) –Gain on disposal of subsidiary companies 12e – (535)Amortisation of intangible assets 14 1,229 1,704Impairment loss on intangible assets 14 2,934 9,604Impairment loss on fixed assets 10 – 1,422Write-off of fixed assets 2,122 –Write-off of intangible assets 192 14Financial income 35b (197) (119)Financial expenses 35a 961 1,253Provisions 1,934 801

Operating cash flows before working capital changes 80,897 64,820(Increase)/decrease in:

Stocks 10,866 5,660Trade debtors (5,433) (9,368)Other debtors, deposits and prepaid operating expenses (697) 842Due from related parties (trade) 623 (495)Due from related parties (non-trade) (9) (1)Due from associated companies (non-trade) 31 (13)Due from joint venture (trade) (1,422) (46)Due from joint venture (non-trade) – 5

(Decrease)/increase in:Trade creditors (2,172) (252)Other creditors and accruals 20,251 6,382Due to related parties (non-trade) (35) 91Due to associated companies (trade) 3,088 7,753Due to associated companies (non-trade) (88) 45Due to joint venture (trade) (124) (141)Bills payable to banks 4,897 (3,476)

Cash flows generated from operations 110,673 71,806Income tax paid, net of refund (16,170) (7,076)Net cash flows generated from operating activities 94,503 64,730



CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December 2010 (cont’d)

Note Group2010 2009$’000 $’000

Cash flows from investing activitiesPurchase of fixed assets A (11,842) (5,930)Proceeds from disposal of fixed assets 6,039 263Proceeds from disposal of properties held-for-sale 3,368 –Interest received 197 119Dividend received from an associated company – 1,722Acquisition of intangible assets 14 (552) (279)Repayment of loan from an associated company 176 127Acquisition of an associated company (408) –Purchase of unquoted debt securities 15 (12,498) –Net cash flows used in investing activities (15,520) (3,978)

Cash flows from financing activitiesAcquisition of non-controlling interests 12c, 12d (1,856) (21)Receipts from new bank loans – 2,605Repayment of bank loans (24,890) (26,822)Repayment of finance lease obligations (90) (440)Purchase of treasury shares 3b (41,608) (2,289)Proceeds from exercise of warrants 17,745 –Proceeds from issuance of rights shares – 6,622Proceeds from exercise of employees’ share options 779 56Payment of dividends 38 (13,261) –Interest paid (967) (2,110)Net cash flows used in financing activities (64,148) (22,399)

Net increase in cash and cash equivalents 14,835 38,353Net effect of exchange rates changes (4,912) (1,400)Cash and cash equivalents at beginning of year 63,234 26,281Cash and cash equivalents at end of year (Note 23) 73,157 63,234

Note A: Fixed assetsDuring the financial year, the Group acquired fixed assets with an aggregate cost of $11,999,000 (2009: $5,930,000) of which $157,000 (2009: $Nil) were acquired by means of finance leases. Cash payments of $11,842,000 (2009: $5,930,000) were made to purchase fixed assets. The Group has provided for additional restoration cost of $575,000 (2009: $355,000) for shop renovations.



NOTES TO THE FINANCIAL STATEMENTS31 December 2010

1. Corporate information OSIM International Ltd (the “Company”) is a limited liability company, which is domiciled and incorporated in Singapore and listed on the Singapore

Exchange Securities Trading Limited (“SGX-ST”).

The registered office and principal place of business of the Company is located at 65 Ubi Avenue 1, OSIM Headquarters, Singapore 408939.

The principal activities of the Company are those of marketing, distributing and franchising of healthy lifestyle products. The principal activities of its subsidiary companies are as shown in Note 12 to the financial statements.

2. Summary of significant accounting policies

2.1 Basis of preparation The consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company have been prepared

in accordance with Singapore Financial Reporting Standards (“FRS”).

The financial statements have been prepared on a historical cost basis except as disclosed in the accounting policies below.

The financial statements are presented in Singapore dollars (SGD or $) and all values in the tables are rounded to the nearest thousand ($’000) as indicated.

2.2 Changes in accounting policies The accounting policies adopted are consistent with those of the previous financial year except in the current year, the Group has adopted all the

new and revised standards and interpretations of FRS (‘INT FRS’) that are effective for annual periods beginning on or after 1 January 2010. The adoption of these standards and interpretations did not have any effect on the financial performance or position of the Group or the Company except as disclosed below:

FRS 103 Business Combinations (revised) and FRS 27 Consolidated and Separate Financial Statements (revised) The revised FRS 103 Business Combinations and FRS 27 Consolidated and Separate Financial Statements are applicable for annual periods beginning

on or after 1 July 2009. As of 1 January 2010, the Group adopted both revised standards at the same time in accordance with their transitional provisions.


NOTES TO THE FINANCIAL STATEMENTS – 31 December 2010 (cont’d)

2. Summary of significant accounting policies (cont’d)

2.2 Changes in accounting policies (cont’d)

FRS 103 Business Combinations (revised)

The revised FRS 103 introduces a number of changes to the accounting for business combinations that will impact the amount of goodwill recognised, the reported results in the period that an acquisition occurs, and future reported results. Changes in significant accounting policies resulting from the adoption of the revised FRS 103 include:

• Transactioncostswouldnolongerbecapitalisedaspartofthecostofacquisitionbutwillbeexpensedimmediately;

• Consideration contingent on future events are recognised at fair value on the acquisition date and any changes in the amount ofconsideration to be paid will no longer be adjusted against goodwill but recognised in profit or loss;

• TheGroupelectsforeachacquisitionofabusiness,tomeasurenon-controllinginterestatfairvalue,oratthenon-controllinginterest’sproportionate share of the acquiree’s identifiable net assets, and this impacts the amount of goodwill recognised; and

• Whenabusinessisacquiredinstages,thepreviouslyheldequityinterestsintheacquireeisremeasuredtofairvalueattheacquisitiondatewith any corresponding gain or loss recognised in profit or loss, and this impacts the amount of goodwill recognised.

According to its transitional provisions, the revised FRS 103 has been applied prospectively. Assets and liabilities that arose from business combinations whose acquisition dates are before 1 January 2010 are not adjusted.

FRS 27 Consolidated and Separate Financial Statements (revised)

Changes in significant accounting policies resulting from the adoption of the revised FRS 27 include:

• Achangeintheownershipinterestofasubsidiarycompanythatdoesnotresultinalossofcontrolisaccountedforasanequitytransaction.Therefore, such a change will have no impact on goodwill, nor will it give rise to a gain or loss recognised in profit or loss;

• Lossesincurredbyasubsidiarycompanyareallocatedtothenon-controllinginterestevenifthelossesexceedthenon-controllinginterestin the subsidiary company’s equity; and

• Whencontroloverasubsidiarycompanyislost,anyinterestretainedismeasuredatfairvaluewiththecorrespondinggainorlossrecognisedin profit or loss.

According to its transitional provisions, the revised FRS 27 has been applied prospectively, and does not impact the Group’s consolidated financial statements in respect of transactions with non-controlling interests, attribution of losses to non-controlling interests and disposal of subsidiary companies before 1 January 2010. The changes will affect future transactions with non-controlling interests.




2.3 Standards issued but not yet effective The Group has not adopted the following standards and interpretations that have been issued but not yet effective:

DescriptionEffective for annual periods

beginning on or after

Amendment to FRS 32 Financial Instruments: Presentation - Classification of Rights Issues 1 February 2010INT FRS 119 Extinguishing Financial Liabilities with Equity Instruments 1 July 2010Revised FRS 24 Related Party Disclosures 1 January 2011Amendments to INT FRS 114 Prepayments of a Minimum Funding Requirement 1 January 2011INT FRS 115 Agreements for the Construction of Real Estate 1 January 2011

Except for the revised FRS 24, the directors expect that the adoption of the other standards and interpretations above will have no material impact on the financial statements in the period of initial application. The nature of the impending changes in accounting policy on adoption of the revised FRS 24 is described below.

Revised FRS 24 Related Party Disclosures

The revised FRS 24 clarifies the definition of a related party to simplify the identification of such relationships and to eliminate inconsistencies in its application. The revised FRS 24 expands the definition of a related party and would treat two entities as related to each other whenever a person (or a close member of that person’s family) or a third party has control or joint control over the entity, or has significant influence over the entity. The revised standard also introduces a partial exemption of disclosure requirements for government-related entities. The Group is currently determining the impact of the changes to the definition of a related party on the disclosure of related party transaction. As this is a disclosure standard, it will have no impact on the financial position or financial performance of the Group when implemented in 2011.

2.4 Significant accounting estimates and judgements

The preparation of the Group’s consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the end of each reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future.




2.4 Significant accounting estimates and judgments (cont’d)

a) Key sources of estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the end of each reporting period, that have a

significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

i) Impairment of goodwill An impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the

higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions in an arm’s length transaction of similar assets or observable market prices less incremental costs for disposing the asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the asset’s performance of the cash generating unit being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash inflows. Further details of the key assumptions applied in the impairment assessment of goodwill and brands, are given in Note 14 to the financial statements.

ii) Taxes Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable

income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax provisions already recorded. The Group establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective countries in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the relevant tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective Group company’s domicile.

Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies.

The carrying amount of the Group’s tax payables, deferred tax liabilities, deferred tax assets and income tax recoverable as at 31 December 2010 were summarised as follows:

Provision for income tax : $10,998,000 (2009: $8,538,000) Deferred tax liabilities : $1,864,000 (2009: $2,851,000) Deferred tax assets : $1,624,000 (2009: $1,366,000) Income tax recoverable : $397,000 (2009: $394,000)





a) Key sources of estimation uncertainty (cont’d) iii) Depreciation of fixed assets Fixed assets are depreciated on a straight-line basis over their estimated useful lives. Management estimates the useful lives of

these fixed assets, except for freehold and leasehold buildings, to be within 1 to 10 years. The carrying amount of the Group’s fixed assets excluding freehold and leasehold buildings at 31 December 2010 was $14,080,000 (2009: $14,003,000) (Note 10). Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised.

iv) Provision for warranties Provision for warranties is accrued based on the estimated costs of fulfilling the total obligation, including handling and transportation

costs. The amount of the provision for warranty is estimated based on sales volumes and past experience of the level of repairs and return. The estimation basis is reviewed on an ongoing basis and revised where appropriate. The provision for warranties at 31 December 2010 was $1,985,000 (2009: $1,369,000) (Note 26).

v) Deferred revenue The Group allocates the consideration received from the sale of goods to the goods sold and the points issued under one of its

subsidiary company’s VIP card programme. The consideration allocated to the points issued is measured at their fair value. Fair value is determined by applying statistical techniques, of which factors such as changing patterns in the redemption rates were considered.

The carrying amount of deferred revenue allocated to the award credits at 31 December 2010 is $1,946,000 (2009: $1,484,000) (Note 25).

vi) Provision for restoration costs Provision for restoration costs is accrued based on the expected cost of restoring the leasehold premises, retails outlets and

warehouse to their state and condition as at the commencement of the lease and to the satisfaction of the landlord. The provision for restoration costs at 31 December 2010 was $3,697,000 (2009: $4,061,000) (Note 26).

vii) Allowance for stocks obsolescence Management makes allowance for stocks obsolescence based on historical obsolescence and slow-moving experiences. An

allowance for stocks obsolescence is made if stocks are deteriorated, damaged, obsolete or slow-moving. The allowance for stocks obsolescence at 31 December 2010 was $9,206,000 (2009: $4,240,000).





b) Critical judgements made in applying accounting policiesThe following are the judgements made by management in the process of applying the Group’s accounting policies that have the most significant effect on the amounts recognised in the financial statements:

i) Impairment of financial assets The Group follows the guidance of FRS 39 on determining when a financial asset is considered impaired. This determination requires

significant judgement. The Group evaluates, among other factors, the duration and extent to which the fair value of a financial asset is less than its cost; and the financial health of and the near-term business outlook of the issuer of the instrument, including factors such as industry performance, changes in technology and operational and financing cash flows.

ii) Impairment of non-financial assets The Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. Goodwill is

tested for impairment annually and at other times when such indicators exist. Other non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable.

iii) Determination of functional currency The Group measures foreign currency transactions in the respective functional currencies of the Company and its subsidiary

companies. In determining the functional currencies of the entities in the Group, judgment is required to determine the currency that mainly influences sales prices for goods and services and of the country whose competitive forces and regulations mainly determines the sales prices of its goods and services. The functional currencies of the entities in the Group are determined based on management’s assessment of the economic environment in which the entities operate and the entities’ process of determining sales prices.

2.5 Functional and foreign currency The Group’s consolidated financial statements are presented in Singapore Dollars, which is also the parent company’s functional currency. Each

entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.

a) Transactions and balancesTransactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiary companies and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the end of the reporting period. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.




2.5 Functional and foreign currency (cont’d)

a) Transactions and balances (cont’d)Exchange differences arising on the settlement of monetary items or on translating monetary items at the end of the reporting period are recognised in the profit or loss except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign subsidiary companies, which are recognised initially in other comprehensive income and accumulated under foreign currency translation reserve in the equity. The foreign currency translation reserve is reclassified from equity to profit or loss on disposal of the subsidiary company.

b) Foreign currency translation On consolidation, the results and financial position of foreign operations are translated into SGD using the following procedures:

• Assetsandliabilitiesforeachbalancesheetpresentedaretranslatedattheclosingraterulingatthatbalancesheetdate;and

• Incomeandexpensesforeachprofitorlossaretranslatedataverageexchangeratesfortheyear,whichapproximatestheexchangerates at the dates of the transactions.

All resulting exchange differences are recognised in other comprehensive income.

On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in the profit or loss as a component of the gain or loss on disposal.

In the case of a partial disposal without loss of control of a subsidiary company that includes a foreign operation, the proportionate share of the cumulative amount of the exchange differences are re-attributed to non-controlling interest and are not recognised in profit or loss. For partial disposals of associated companies or jointly controlled entities that are foreign operations, the proportionate share of the accumulated exchange differences is reclassified to profit or loss.

The Group has elected to recycle the accumulated exchange differences in the separate component of other comprehensive income that arises from the direct method of consolidation, which is the method the Group uses to complete its consolidation.

2.6 Subsidiary companies and basis of consolidation

a) Subsidiary companiesA subsidiary company is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities. The Group generally has such power when it, directly or indirectly, holds more than 50% of the issued share capital, or controls more than half of the voting power, or controls the composition of the board of directors.

In the Company’s separate financial statements, investments in subsidiary companies are accounted for at cost less any impairment losses.




2.6 Subsidiary companies and basis of consolidation (cont’d)

b) Basis of consolidation

Business combinations from 1 January 2010

The consolidated financial statements comprise the financial statements of the Company and its subsidiary companies as at the end of the reporting period. The financial statements of the subsidiary companies used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied to like transactions and events in similar circumstances.

All intra-group balances, transactions, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full.

Subsidiary companies are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

Business combinations are accounted for by applying the acquisition method. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisition-related costs are recognised as expenses in the periods in which the costs are incurred and the services are received.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability, will be recognised in accordance with FRS 39 either in profit or loss or as change to other comprehensive income. If the contingent consideration is classified as equity, it is not be remeasured until it is finally settled within equity.

In business combinations achieved in stages, previously held equity interests in the acquiree are remeasured to fair value at the acquisition date and any corresponding gain or loss is recognised in profit or loss.

The Group elects for each individual business combination, whether non-controlling interest in the acquiree (if any) is recognised on the acquisition date at fair value, or at the non-controlling interest’s proportionate share of the acquiree identifiable net assets.




2.6 Subsidiary companies and basis of consolidation (cont’d)

b) Basis of consolidation (cont’d)

Business combinations from 1 January 2010 Any excess of the sum of the fair value of the consideration transferred in the business combination, the amount of non-controlling interest in the acquiree (if any), and the fair value of the Group’s previously held equity interest in the acquiree (if any), over the net fair value of the acquiree’s identifiable assets and liabilities is recorded as goodwill. The accounting policy for goodwill is set out in Note 2.12(a). In instances where the latter amount exceeds the former, the excess is recognised as gain on bargain purchase in profit or loss on the acquisition date.

In comparison to the above mentioned requirements, the following differences applied:

Business combinations are accounted for by applying the purchase method. Transaction costs directly attributable to the acquisition formed part of the acquisition costs. The non-controlling interest (formerly known as minority interest) was measured at the proportionate share of the acquiree’s identifiable net assets.

Business combinations achieved in stages were accounted for as separate steps. Adjustments to those fair values relating to previously held interests are treated as a revaluation and recognised in equity.

When the Group acquired a business, embedded derivatives separated from the host contract by the acquiree are not reassessed on acquisition unless the business combination results in a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required under the contract.

Contingent consideration was recognised if, and only if, the Group had a present obligation, the economic outflow was more likely than not and a reliable estimate was determinable. Subsequent measurements to the contingent consideration affected goodwill.

c) Transactions with non-controlling interests

Non-controlling interest represents the equity in subsidiary companies not attributable, directly or indirectly, to equity holders of the Company, and are presented separately in the consolidated statement of comprehensive income and within equity in the consolidated balance sheet, separately from equity attributable to equity holders of the Company.

Changes in the Company owners’ ownership interest in a subsidiary company that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary company. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to equity holders of the parent.



2.7 Associated companies An associated company is an entity, not being a subsidiary company or a joint venture, in which the Group has significant influence. The associated

company is equity accounted for from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associated company.

The Group’s investments in associated companies are accounted for using the equity method. Under the equity method, the investment in associated company is carried in the balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the associated company. Goodwill relating to an associated company is included in the carrying amount of the investment and is neither amortised nor tested individually for impairment.

Any excess of the Group’s share of the net fair value of the associated company’s identifiable assets, liabilities and contingent liabilities over the cost of the investment is deducted from the carrying amount of the investment and is instead included as income as part of the Group’s share of the associated company’s profit or loss in the period in which the investment is acquired.

The profit or loss reflects the share of the results of operations of the associated companies. Where there has been a change recognised in other comprehensive income by the associated companies, the Group recognises its share of such changes in other comprehensive income. Unrealised gains and losses resulting from transactions between the Group and the associated companies are eliminated to the extent of the interest in the associated companies.

The Group’s share of the profit or loss of its associated companies is shown on the face of profit or loss after tax and non-controlling interests in the subsidiary companies of associated companies.

When the Group’s share of losses in an associated company equals or exceeds its interest in the associated company, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associated company.

After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group’s investment in its associated companies. The Group determines at each balance sheet date whether there is any objective evidence that the investment in the associated company is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associated company and its carrying value and recognises the amount in the profit or loss.

The financial statements of the associated companies are prepared as of the same reporting date as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.

Upon loss of significant influence over the associated company, the Group measures any retained investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the aggregate of the retained investment and proceeds from disposal is recognised in profit or loss.

In the Company’s separate financial statements, investments in associated companies are accounted for at cost less impairment loss.




2.8 Joint venture The Group’s investments in joint venture are accounted for using the equity method. Under the equity method, the investment in joint venture is

carried in the balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the joint venture. The joint venture is equity accounted for from the date the Group obtains joint control until the date the Group ceases to have joint control over the joint venture.

When the Group’s share of losses in a joint venture equals or exceeds its interest in the joint venture, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint venture.

The financial statements of the joint venture are prepared as of the same reporting date as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.

Upon loss of joint control, the Group measures any retained investment at its fair value. Any difference between the carrying amount of the former joint venture entity upon loss of joint venture control and the aggregate of the fair value of the retained investment and proceeds from disposal is recognised in profit or loss.

In the Company’s separate financial statements, interests in joint ventures are accounted for at cost less impairment losses.

2.9 Related parties A party is considered to be related to the Group if:

(a) The party, directly or indirectly through one or more intermediaries,

(i) controls, is controlled by, or is under common control with, the Group; (ii) has an interest in the Group that gives it significant influence over the Group; or

(iii) has joint control over the Group;

(b) The party is an associated company;

(c) The party is a jointly-controlled entity;

(d) The party is a member of the key management personnel of the Group or its parent;

(e) The party is a close member of the family of any individual referred to in (a) or (d);




2.9 Related parties (cont’d) (f) The party is an entity that is controlled, jointly controlled or significantly influenced by or for which significant voting power in such entity

resides with, directly or indirectly, any individual referred to in (d) or (e); or

(g) The party is a post-employment benefit plan for the benefit of the employees of the Group, or of any entity that is a related party of the Group.

2.10 Fixed assets All items of fixed assets are initially recorded at cost. Such cost includes the cost of replacing part of the fixed assets and borrowing costs that are

directly attributable to the acquisition, construction or production of a qualifying fixed assets. The cost of an item of fixed assets is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.

Subsequent to recognition, fixed assets are measured at cost less accumulated depreciation and accumulated impairment losses. When significant

parts of fixed assets are required to be replaced in intervals, the Group recognises such parts as individual assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the fixed assets as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred.

Freehold land has an unlimited useful life and therefore is not depreciated. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets as follows:

Rate of depreciation

Freehold buildings 2% - 3%Leasehold buildings 1.42% - 3%Plant and machinery 10%Computers 18% - 100%Motor vehicles 18% - 40%Shop renovations Shorter of lease terms or 331/3%Furniture and fittings 10% - 331/3%Office equipment 10% - 20%

The carrying values of fixed assets are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.




2.10 Fixed assets (cont’d) The residual value, useful life and depreciation method are reviewed at each financial year-end, and adjusted prospectively, if appropriate.

An item of fixed assets is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on derecognition of the asset is included in the profit or loss in the year the asset is derecognised.

2.11 Leases The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date: whether

fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset.

a) As lesseeFinance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss. Contingent rents, if any, are charged as expenses in the periods in which they are incurred.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.

Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.

b) As lessorLeases where the Group retains substantially all the risks and rewards of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income. The accounting policy for rental income is set out in Note 2.24(f). Contingent rents are recognised as revenue in the period in which they are earned.

2.12 Intangible assets

a) GoodwillGoodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less accumulated impairment losses.




2.12 Intangible assets (cont’d) a) Goodwill (cont’d)

For the purpose of impairment testing, goodwill acquired in a business combination is from the acquisition date allocated, to each of the Group’s cash-generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquire are assigned to those units.

The cash-generating unit to which goodwill has been allocated is tested for impairment annually and whenever there is an indication that the cash-generating unit may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each cash-generating unit (or group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised in the profit or loss. Impairment losses recognised for goodwill are not reversed in subsequent periods.

Where goodwill forms part of a cash-generating unit and part of the operation within that cash-generating unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative fair values of the operations disposed of and the portion of the cash-generating unit retained.

Goodwill and fair value adjustments arising on the acquisition of foreign operation on or after 1 January 2005 are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated in accordance with the accounting policy set out in Note 2.5.

Goodwill and fair value adjustments which arose on acquisitions of foreign operation before 1 January 2005 are deemed to be assets and liabilities of the Company and are recorded in SGD at the rates prevailing at the date of acquisition.

b) Other intangible assetsIntangible assets acquired separately are measured initially at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial acquisition, intangible assets are measured at cost less any accumulated amortisation and accumulated impairment losses.

The useful lives of intangible assets are assessed as either finite or infinite.

Intangible assets with finite useful lives are amortised over the estimated useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the profit or loss in the expense category consistent with the function of the intangible asset.




2.12 Intangible assets (cont’d)

b) Other intangible assets (cont’d)Intangible assets with indefinite useful lives or not yet available for use are tested for impairment annually, or more frequently if the events and circumstances indicate that the carrying value may be impaired either individually or at the cash-generating unit level. Such intangible assets are not amortised. The useful life of an intangible asset with an indefinite useful life is reviewed annually to determine whether the useful life assessment continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the profit or loss when the asset is derecognised.

The following classes of intangible assets are acquired by the Group through the acquisition of subsidiary companies:

i) Franchise rights and trademarks Franchise rights are paid to the franchisor, General Nutrition International, Inc. (“GNC”), in respect of every retail store opened by

the Group and entitle the Group the right to operate each retail store using the franchisor’s trademarks, trade names and operating system. Franchise rights are amortised over 20 years on a straight-line basis.

Trademark registration costs relate to fees paid to register the “L.A.C” trademark and are amortised over 20 years on a straight-line basis.

ii) Distribution rights Distribution rights relate to fees paid to GNC for the exclusive rights to distribute GNC products to other retailers, distributors and

merchants in Singapore and rights granted to third parties to distribute certain products exclusively in a specified territory for a limited period of time. The distribution fees paid to GNC are amortised over 20 years on a straight-line basis, and the third party distribution rights are amortised over the agreement period ranging from 1 to 4 years.

Product development costs Product development costs arising from development expenditure on a product is recognised as an intangible asset when the

Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete and the ability to measure reliably the expenditure during the development. Product development costs have a finite useful life and are amortised over the period of expected sales from the related product ranging from 2 to 3 years on a straight line basis.




2.13 Impairment of non-financial assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when

annual impairment testing for an asset (i.e. an intangible asset with an indefinite useful life, an intangible asset not yet available for use, or goodwill acquired in a business combination) is required, the Group makes an estimate of the asset’s recoverable amounts.

An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows expected to be generated by the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are combined by valuation multiples or other available fair value indicators.

Impairment losses of continuing operations are recognised in profit or loss in those expense categories consistent with the function of the impaired asset, except for assets that are previously revalued where the revaluation was taken to other comprehensive income. In this case the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses recognised for an asset other than goodwill may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in the profit or loss unless the asset is carried at revalued amount, in which case the reversal in excess of impairment loss previously recognised through the profit or loss is treated as a revaluation increase. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. The Group does not reverse in a subsequent period, any impairment loss recognised for goodwill.

2.14 Financial assets

Initial recognition and measurementFinancial assets are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. The Group determines the classification of its financial assets at initial recognition.

When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs.




2.14 Financial assets (cont’d)

Subsequent measurementThe subsequent measurement of financial assets depends on their classification as follows:

a) Financial assets at fair value through profit or lossFinancial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. This category includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by FRS 39. Derivatives, including separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value of the financial assets are recognised in profit or loss. Net gains or net losses on financial assets at fair value through profit or loss include exchange differences, interest and dividend income.

Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value through profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognised in profit or loss. Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required.

The Group has not designated any financial assets upon initial recognition at fair value through profit or loss.

b) Loan and receivablesNon-derivative financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less impairment. Gains and losses are recognised in profit or loss when the loan and receivables are derecognised or impaired, as well as through the amortisation process.

c) Available-for-sale financial assetsThe Group classifies its long-term investments as available-for-sale financial assets.

Available-for-sale financial assets include equity and debt securities. Equity investments classified as available-for sale are those which are neither classified as held for trading nor designated at fair value through profit or loss. Debt securities in this category are those which are intended to be held for an indefinite period of time and which may be sold in response to needs for liquidity or in response to changes in the market conditions.




2.14 Financial assets (cont’d)

c) Available-for-sale financial assets (cont’d)After initial recognition, available-for-sale financial assets are subsequently measured at fair value. Any gains or losses from changes in fair value of the financial asset are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in profit or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is derecognised.

Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less impairment losses.

DerecognitionA financial asset is derecognised where the contractual rights to receive cash flows from the asset have expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.

All regular way purchases and sales of financial assets are recognised on the trade date (i.e. the date that the Group commits to purchase the asset). Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned.

2.15 Impairment of financial assetsThe Group assesses at each balance sheet date whether there is any objective evidence that a financial asset or group of financial assets is impaired.

a) Financial assets carried at amortised costFor financial assets carried at amortised cost, the Group first assesses individually whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss on financial assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimate future cash flows discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. The impairment loss is recognised in profit or loss.




2.15 Impairment of financial assets (cont’d)

a) Financial assets carried at amortised cost (cont’d)When the asset becomes uncollectible, the carrying amount of impaired financial assets is reduced directly or if an amount was charged to the allowance account, the amounts charged to the allowance account are written off against the carrying value of the financial asset.

To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the profit or loss account, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

b) Financial assets carried at costIf there is objective evidence that an impairment loss on a financial asset carried at cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed in subsequent periods.

c) Available-for-sale financial assetsIn the case of equity investments classified as available-for-sale, objective evidence of impairment include (i) significant financial difficulty of the issuer or obligor, (ii) information about significant changes with an adverse effect that have taken place in the technological, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in equity instrument may not be recovered; and (iii) a significant or prolonged decline in the fair value of the investment below its costs. ‘Significant’ is to be evaluated against the original cost of the investment and ‘prolonged’ against the period in which the fair value has been below its original cost.

If an available-for-sale financial asset is impaired, an amount comprising the difference between its acquisition cost (net of any principal repayment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from other comprehensive income and recognised in profit or loss. Reversals of impairment losses in respect of equity instruments are not recognised in profit or loss; increase in their fair value after impairment are recognised directly in other comprehensive income.




2.15 Impairment of financial assets (cont’d)

c) Available-for-sale financial assets (cont’d)In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria as financial assets carried at amortised cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in profit or loss. Future interest income continues to be accrued based on the reduced carrying amount of the asset and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income. If, in a subsequent year, the fair value of a debt instrument increases and the increases can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed in profit or loss.

2.16 StocksStocks are valued at the lower of cost (assigned on a weighted average basis) and net realisable value. Costs include expenses incurred in bringing the stocks to their present location and condition.

Net realisable value is the estimated selling price in the ordinary course of business less estimated costs necessary to make the sale.

Allowance is made for deteriorated, damaged, obsolete and slow-moving stocks.

2.17 Cash and cash equivalentsCash and cash equivalents comprise cash on hand, demand deposits, and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in values. These also include bank overdrafts that form an integral part of the Group’s cash management.

2.18 Financial liabilities

Initial recognition and measurementFinancial liabilities include trade and other amounts payable, which are normally settled on 30-90 day terms, and payables to subsidiary companies, associated companies, affiliated companies and interest-bearing loans and borrowings. Financial liabilities are recognised on the balance sheet when, and only when the Group becomes a party to the contractual provisions of the financial instrument. The Group determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognised initially at fair value and in the case of other financial liabilities, plus directly attributable transaction costs.

Subsequent measurementThe measurement of financial liabilities depends on their classification as follows:




2.18 Financial liabilities (cont’d)

Financial liabilities at fair value through profit or lossFinancial liabilities at fair value through profit or loss includes financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value. Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

Subsequent to initial recognition, financial liabilities at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value of the financial liabilities are recognised in profit or loss.

The Group has not designated any financial liabilities upon initial recognition at fair value through profit or loss.

Other financial liabilitiesAfter initial recognition, other financial liabilities are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process.

DerecognitionA financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.

2.19 Financial guaranteeA financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due.

Financial guarantees are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequent to initial recognition, financial guarantees are recognised as income in profit or loss over the period of the guarantee. If it is probable that the liability will be higher than the amount initially recognised less amortisation, the liability is recorded at the higher amount with the difference charged to the profit or loss.

2.20 Borrowing costsBorrowing costs are capitalised as part of a qualifying asset if they are directly attributable to the acquisition, construction or production of a qualifying asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.




2.21 ProvisionsProvisions are recognised when the Group has a present obligation (legal or constructive) where, as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as finance costs.

a) Provision for warrantiesThe Group and the Company provides free repair services and free replacement of major components of its products for a period of one to two years after sales.

The costs of the warranty obligation under which the Group and the Company agree to remedy defects in its products are accrued at the time the related sales are recognised. Provision for warranty is accrued based on the estimated costs of fulfilling the total obligation, including handling and transportation costs. The costs are estimated by management based on historical experience. The assumptions used to estimate warranty accruals are reviewed periodically in light of actual experience.

b) Provision for restoration costsIn accordance with the lease agreements, the Group and the Company has an obligation to restore the retail outlets, warehouses and leasehold properties to their state and condition as at the commencement of the lease and to the satisfaction of the landlord. A provision is recognised at the balance sheet date for expected restoration cost based on past experience of sale outlets and warehouses closure.

2.22 Employee benefits

a) Defined contribution plansThe Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. In particular, the Singapore companies in the Group make contributions to the Central Provident Fund scheme in Singapore, a defined contribution pension scheme. Contributions to national pension schemes are recognised as an expense in the period in which the related service is performed.

b) Employee leave entitlementEmployee entitlements to annual leave are recognised as a liability when they accrue to employees. The estimated liability for leave is recognised for services rendered by employees up to balance sheet date.




2.22 Employee benefits (cont’d)

c) Defined benefit plansThe cost of providing benefits under defined benefit plan is determined separately for each plan using the projected unit credit method. Actuarial gains and losses are recognised as income or expense when the net cumulative unrecognised actuarial gains or losses for each individual plan at the end of the previous reporting period exceed 10% of the higher of the defined benefit obligation and the fair value of the plan assets at that date. These gains or losses are recognised over the expected average remaining working lives of the employees participating in the plans.

The past service costs are recognised as an expense on a straight-line basis over the average period until the benefits become vested. If the benefits are already vested, immediately following the introduction of, or changes to, a pension plan, past service costs are recognised immediately.

The defined benefit asset or liability is the aggregate of the present value of the defined benefit obligation (derived using a discount rate based on high quality corporate bonds) at the end of the reporting period plus an actuarial gains (less any actuarial losses) not recognised, reduced by past service costs not yet recognised and the fair value of plan assets out of which the obligations are to be settled directly. If such aggregate is negative, the asset is measured at the lower of such aggregate or the aggregate of cumulative unrecognised actuarial losses and past service costs and the present value of any economic benefits available in the form of refunds from the plan or reductions in the future contributions to the plan.

If the asset is measured at the aggregate of cumulative unreocgnised net actuarial losses and past service costs and the present value of any economic benefits available in the form of refunds from the plan or reductions in the future contributions to the plan:

- Net actuarial losses of the current period and past service costs of the current period are recognised immediately to the extent that they exceed any reduction in the present value of those economic benefits. If there is no change or an increase in the present value of the economic benefits, the entire net actuarial losses of the current period and past service costs of the current period are recognised immediately.

- Net actuarial gains of the current period after the deduction of past service costs of the current period exceeding any increase in the present value of the economic benefits stated above are recognised immediately. If there is no change or a decrease in the present value of the economic benefits, the entire net actuarial gains of the current period after the deduction of past service costs of the current period are recognised immediately.

Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurance policies. Plan assets are not available to the creditors of the Group, nor can they be paid directly to the Group. Fair value of plan assets is based on market price information and in the case of quoted securities, it is based on the published bid price.

The Group’s right to be reimbursed of some or all of the expenditure required to settle a defined benefit obligation is recognised as a separate asset at fair value when and only when reimbursement is virtually certain.




2.22 Employee benefits (cont’d)

d) Employee share option plansEmployees of the Group receive remuneration in the form of share options as consideration for services rendered (‘equity-settled transactions’).

The cost of equity-settled share-based payment transactions with employees for awards granted after 22 November 2002 is measured by reference to the fair value of the share options at the date on which the share options are granted, which takes into account market conditions and non-vesting conditions.

The cost of equity-settled transactions is recognised in profit or loss with a corresponding increase in the employee share option reserve, over the vesting period. The cumulative expenses recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The charge or credit to profit or loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition or non-vestiing condition, which are treated as vested irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied. In the case where the share option does not vest as the result of a failure to meet a non-vesting condition that is within the control of the Group or the employee, it is accounted for as a cancellation. In such case, the amount of the compensation cost that otherwise would be recognised over the remainder of the vesting period is recognised immediately in profit or loss upon cancellation. The employee share option reserve is transferred to retained earnings upon expiry of the share options. When the options are exercised, the employee share option reserve is transferred to share capital if new shares are issued, or to treasury shares if the options are satisfied by the reissuance of treasury shares.

2.23 Properties held-for-saleProperties held-for-sale are measured at the lower of carrying amount and fair value less costs to sell. Such non-current assets are classified as held for sale if their carrying amounts will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Property, plant and equipment and intangible assets once classified as held for sale are not depreciated or amortised.




2.24 RevenueRevenue is recognised to the extent that it is probable the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of consideration received or receivable, excluding discounts, rebates, and sales taxes or duty. The Group assesses its revenue arrangements to determine if it is acting as principal or agent. The Group has concluded that it is acting as a principal in all of its revenue arrangements. The following specific recognition criteria must also be met before revenue is recognised:

a) Sale of goodsRevenue is recognised upon the transfer of significant risk and rewards of ownership of the goods to the customer, which generally coincides with delivery and acceptance of the goods sold. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.

b) Franchise feesFranchise fees are recognised upon the execution of the Master Franchise Agreements unless collectibility is in doubt.

c) Royalty incomeRoyalty income is recognised upon the sale of goods by franchise outlets and the amount is determined based on a certain percentage of net sales in accordance with the terms of the Master Franchise Agreements unless collectibility is in doubt.

d) Interest incomeInterest income is recognised as interest accrues (using the effective interest method) unless collectibility is in doubt.

e) Dividend incomeDividend income is recognised when the Group’s right to receive payment is established.

f) Rental incomeRental income arising from operating leases on investment properties is accounted for on a straight-line basis over the lease terms. The aggregate costs of incentives provided to lessees are recognised as a reduction of rental income over the lease terms on a straight-line basis.




2.25 Taxes

a) Current income taxCurrent income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date, in the countries where the Group operates and generates taxable income.

Current income taxes are recognised in profit or loss except that tax relating to items recognised outside profit or loss, either in other comprehensive income or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

b) Deferred taxDeferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all temporary differences, except:

- where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

- in respect of taxable temporary differences associated with investments in subsidiary companies, associated companies and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except:

- where the deferred income tax asset relating to the deductible temporary difference arises 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 the accounting profit nor taxable profit or loss; and

- in respect of deductible temporary differences associated with investments in subsidiary companies, associated companies and interests in joint ventures, deferred income tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.




2.25 Taxes (cont’d)

b) Deferred tax (cont’d)The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each reporting period and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

c) Sales taxRevenues, expenses and assets are recognised net of the amount of sales tax except:

- Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

- Receivables and payables that are stated with the amount of sales tax included.

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

2.26 SegmentsFor management purposes, the Group is organised on a world-wide basis into two major operating businesses. The divisions are the basis on which the Group reports its primary segment information.

Segment revenue, expenses and results include transfers between business segments and between geographical segments. Such transfers take place at terms agreed between the parties during the financial year.

2.27 Share capital and share issuance expensesProceeds from issuance of ordinary shares are recognised as share capital in equity. Incremental costs directly attributable to the issuance of ordinary shares are deducted against share capital.

2.28 Government grantsGrants and subsidies from government are recognised at their fair value where there is a reasonable assurance that the grant/subsidy will be received and all attaching conditions will be complied with. When the grant or subsidy relates to an expense item, it is recognised as income over the periods necessary to match them on a systematic basis to the costs which it is intended to compensate. Where the grant relates to an asset, the fair value is credited to a deferred income account and is released to profit or loss over the expected useful life of the relevant asset by equal annual installments.



Summary of significant accounting policies (cont’d)

2.29 Cumulative preference sharesCumulative preference shares that exhibit the characteristics of a liability are recognised as a liability and accordingly, the corresponding dividends on these preference shares are charged as an interest expense in profit or loss.

Preference shares of a joint venture of the Group that have the potential to become redeemable upon occurrence of certain events as stipulated in the partnership agreement are recorded as a liability.

2.30 Contingencies

A contingent liability is:

(a) a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group; or

(b) a present obligation that arises from past events but is not recognised because:

(i) It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

(ii) The amount of the obligation cannot be measured with sufficient reliability.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group.

Contingent liabilities and assets are not recognised on the balance sheet of the Group, except for contingent liabilities assumed in a business combination that are present obligations and which the fair values can be reliably determined.

2.31 Treasury sharesThe Group’s own equity instruments, which are reacquired (treasury shares) are recognised at cost and deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments. Any difference between the carrying amount of treasury shares and the consideration received is recognised directly in equity.



3. Share capital and treasury shares

a) Share capital

Group and Company2010 2009$’000 $’000

Issued and fully paid: At beginning of year 662,516,431 (2009: 541,837,989) ordinary shares 49,252 42,574

Exercise of options under the OSIM Share Option Scheme : 450,000 (2009: 135,000) ordinary shares at $0.178 per share 80 24 337,500 (2009: 135,000) ordinary shares at $0.236 per share 80 32 143,000 (2009: Nil) ordinary shares at $0.506 per share 72 – 255,000 (2009: Nil) ordinary shares at $0.442 per share 113 – 86,400 (2009: Nil) ordinary shares at $0.488 per share 42 – 427,240 (2009: Nil) ordinary shares at $0.917 per share 534 – Issuance of Nil (2009: 120,408,442) rights shares – 6,622Issuance of 50,700,943 (2009: Nil) ordinary shares pursant to exercise of warrants 22,237 –At end of year 714,916,514 (2009: 662,516,431) ordinary shares 72,410 49,252

The holders of ordinary shares (except treasury shares) are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one

vote per share without restriction. The ordinary shares have no par value.

The Company has an employee share option scheme (Note 30) under which options to subscribe for the Company’s ordinary shares have been granted to employees.



3. Share capital and treasury shares (cont’d)

b) Treasury sharesGroup and Company

2010 2009$’000 $’000

Issued and fully paid: At beginning of period/year

4,538,000 (31 December 2009: Nil)ordinary shares (2,289) –

Acquired during the financial period/year

46,505,000 (31 December 2009: 4,538,000)ordinary shares (41,608) (2,289)

Treasury shares reissued pursuant to purchase of

NCI’s shares 8,500,0000 (31 December 2009: Nil) ordinary shares 6,235 –At end of period/year 42,543,000 (31 December 2009: 4,538,000) ordinary shares (37,662) (2,289)

Treasury shares relate to ordinary shares of the Company that is held by the Company.

The Company acquired 46,505,000 (2009: 4,538,000) shares in the Company through purchases on the SGX-ST during the financial year. The total amount paid to acquire the shares was $41,608,000 (2009: $2,289,000) and this was presented as a component within shareholders’ equity.

The Company reissued 8,500,000 (2009: Nil) treasury shares pursuant to acquisition of non-controlling interests’ shares at a weighted average exercise price of $0.7335 (2009: $Nil) each.

4. Enterprise expansion funds Up to financial year ended 31 December 2002, in accordance with the relevant laws and regulations of the People’s Republic of China (“PRC”), OSIM

International Trading (Shanghai) Co., Ltd and OSIM (China) Co., Ltd (“the subsidiary companies”) appropriated tax refunds from accumulated profits to enterprise expansion fund. The enterprise expansion fund may be used to increase the registered capital of the subsidiary companies, subject to approval from the PRC authorities. The enterprise expansion fund is not available for dividend distribution to the shareholders.



5. Capital reserves

a) China statutory reserve In accordance with the relevant laws and regulations of the PRC, OSIM International Trading (Shanghai) Co., Ltd and OSIM (China) Co., Ltd (“the

subsidiary companies”) are required to set up a statutory reserve by way of appropriations from its statutory net profit. The subsidiary companies are required to allocate at least 10% of its net profit to the statutory reserve until the balance of the statutory reserve reaches 50% of its registered capital. The statutory reserve may be used to offset accumulated losses or increase the registered capital of the subsidiary company, subject to approval from the PRC authorities. The statutory reserve is not available for dividend distribution to the shareholders.

Group Company2010 2009 2010 2009$’000 $’000 $’000 $’000

At beginning of year 1,640 636 – –Appropriation of profits during the year 2,363 1,004 – –At end of year 4,003 1,640 – –

b) Employees share option reserve Included in the capital reserves is the employees share option reserve. Employees share option reserve represents the equity-settled share

options granted to employees. The reserve is made up of the cumulative value of services received from employees recorded over the vesting period commencing from the grant date of equity-settled share options, and is reduced by the expiry, lapse and exercise of the share option.

Group Company2010 2009 2010 2009$’000 $’000 $’000 $’000

At beginning of year 700 748 700 748Lapse of employees share options (178) (48) (178) (48)Exercise of employees share options (142) – (142) – At end of year 380 700 380 700



5. Capital reserves (cont’d)

c) Reissuance of treasury shares Included in the capital reserves is the excess of market price over the weighted average exercise price of reissued treasury shares.

Group Company2010 2009 2010 2009$’000 $’000 $’000 $’000

Treasury shares reissued pursuant to purchase of non-controlling interests’ shares 480 – 480 –

Total capital reserves 4,863 2,340 860 700 6. Warrant reserve In 2008, the Company issued 135,459,476 warrants on the basis of one warrant for every four existing ordinary shares held by the shareholders of the

Company at an issue price of $0.09 for each warrant. Each warrant carries the right to subscribe for one new ordinary share in the capital of the Company at an exercise price of $0.35.

In 2009, the Company announced 2,083,351 additional warrants to be issued and allotted to the warrant holders as a consequence of the issuance of Rights Shares. The exercise price of the warrant for one new ordinary share in the capital of the Company remained at $0.35.

The value ascribed to the warrants less issue expenses is credited as a reserve in equity under warrant reserve and an appropriate amount is transferred to the share capital account as and when the warrants are exercised.

The warrants issued by the Company do not entitle the holders of the warrants, by virtue of such holdings, to any right to participate in any share issue of any other subsidiary companies.

During the financial year, 50,700,943 (2009: Nil) warrants were exercised and converted to ordinary shares. The number of warrants outstanding at the end of the financial year was 86,841,884 (2009: 137,542,827).

The proceeds from the issuance of warrants have been fully utilised for working capital purposes as at the balance sheet date.

Group Company2010 2009 2010 2009$’000 $’000 $’000 $’000

At beginning of year 12,191 12,191 12,191 12,191Exercise of warrants (4,492) – (4,492) –At end of year 7,699 12,191 7,699 12,191



7. Revaluation reserve The revaluation reserve records the adjustment to the fair value of subsidiary companies’ identifiable net assets at the date of acquisitions attributable to

previously held ownership interests.

Group2010 2009$’000 $’000

At beginning of year 5,237 5,237Reversal (Note 14) (2,513) –At end of year 2,724 5,237

8. Premium on purchase of non-controlling interests’ shares

Group2010 2009$’000 $’000

At beginning of year (7,862) (7,875) (Premium)/discount arising from purchase of non-controlling interests’ shares (Note 12c) (2,309) 13At end of year (10,171) (7,862)

9. Foreign currency translation reserve The foreign currency translation reserve records exchange differences arising from the translation of the financial statements of foreign operations whose

functional currencies are different from that of the Group’s presentation currency.

Group2010 2009$’000 $’000

At beginning of year (26,130) (25,617)Net effect of exchange differences arising from translation of financial statements of foreign operations (4,172) (513)At end of year (30,302) (26,130)



10. Fixed assets Group

Freehold land

Freehold buildings

Leasehold buildings

Plant and machinery Computers

Motor vehicles

Shop renovations

Furniture and fittings

Office equipment Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000Cost As at 1 January 2009 3,246 1,400 5,750 10,019 8,946 3,082 31,779 18,476 3,005 85,703Additions – – 110 79 483 2 4,397 1,204 10 6,285Disposals – – – (1) (3) (565) (3,130) (3,021) (47) (6,767)Transfer to properties

held-for-sale (Note 22) – – (3,253) – – – – – – (3,253)Net exchange differences – – (5) 6 5 (13) (105) 1,564 (31) 1,421

As at 31 December 2009

and 1 January 2010 3,246 1,400 2,602 10,103 9,431 2,506 32,941 18,223 2,937 83,389Additions – – – 209 689 352 10,595 613 116 12,574Disposals – – (2,230) (9) (173) (243) (2,791) (251) (47) (5,744)Write-off – – – – (13) – (1,298) (7,255) (14) (8,580)Net exchange differences – – (9) (1) (106) (57) (1,243) (205) (49) (1,670)

As at 31 December 2010 3,246 1,400 363 10,302 9,828 2,558 38,204 11,125 2,943 79,969 Accumulated depreciation and impairment As at 1 January 2009 30 135 1,583 6,765 7,646 2,084 25,343 10,461 2,187 56,234Depreciation charge for the year – 27 249 1,122 690 387 5,089 3,711 231 11,506Disposals – – – (1) (3) (448) (2,994) (1,758) (29) (5,233)Impairment loss (Note 34) – – 157 – – – 1,097 168 – 1,422Transfer to properties

held-for-sale (Note 22) – – (485) – – – – – – (485)Net exchange differences – – – 3 (12) (17) (333) 774 (25) 390 As at 31 December 2009

and 1 January 2010 30 162 1,504 7,889 8,321 2,006 28,202 13,356 2,364 63,834Depreciation charge

for the year – 27 64 1,160 806 307 5,987 1,188 508 10,047Disposals – – (1,332) (3) (170) (229) (2,648) (245) (40) (4,667)Write-off (Note 34) – – – – (13) – (851) (5,580) (14) (6,458)Net exchange differences – – (1) – (86) (50) (1,121) (104) (60) (1,422)As at 31 December 2010 30 189 235 9,046 8,858 2,034 29,569 8,615 2,758 61,334

Net carrying amount As at 31 December 2010 3,216 1,211 128 1,256 970 524 8,635 2,510 185 18,635As at 31 December 2009 3,216 1,238 1,098 2,214 1,110 500 4,739 4,867 573 19,555



10. Fixed assets (cont’d)

Company

Leasehold buildings

Plant and machinery Computers

Motor vehicles

Shop renovations

Furniture and

fittingsOffice

equipment Total$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

CostAs at As at 1 January 2009 2,230 9,733 2,682 1,452 4,887 3,721 817 25,522Additions – – 34 1 765 106 3 909Disposals – – – (565) (1,748) (879) – (3,192)As at 31 December 2009

and 1 January 2010 2,230 9,733 2,716 888 3,904 2,948 820 23,239Additions – – 122 87 972 71 5 1,257Disposals (2,230) – – (168) (712) (50) (2) (3,162)As at 31 December 2010 – 9,733 2,838 807 4,164 2,969 823 21,334

Accumulated depreciation and impairment As at 1 January 2009 1,205 6,585 2,672 995 4,807 2,718 610 19,592Depreciation charge for the year 67 1,059 28 176 219 294 72 1,915Disposals – – – (448) (1,748) (533) – (2,729)Impairment loss – – – – 503 5 – 508As at 31 December 2009

and 1 January 2010 1,272 7,644 2,700 723 3,781 2,484 682 19,286Depreciation charge for the year 61 1,059 66 99 122 105 72 1,584Disposals (1,333) – – (160) (712) (46) (1) (2,252)Impairment loss – – – – 341 1 – 342As at 31 December 2010 – 8,703 2,766 662 3,532 2,544 753 18,960

Net carrying amount As at 31 December 2010 – 1,030 72 145 632 425 70 2,374As at 31 December 2009 958 2,089 16 165 123 464 138 3,953




10. Fixed assets (cont’d)

Assets held under finance leases

As at 31 December 2010, the carrying amount of fixed assets held under finance leases are as follows:

Group2010 2009$’000 $’000

Motor vehicles 201 115

Assets pledged as security

In addition to assets held under finance leases, the Group’s freehold and leasehold land and buildings with carrying amounts of $4,454,000 were mortgaged to secure the bank loans and banking facilities of a subsidiary company.

Impairment of assets

Impairment loss on fixed assets was recognised in the following line item of the statement of comprehensive income as follows:

Group2010 2009$’000 $’000

Other operating expenses (Note 34) – 1,422

The impairment loss recognised by the Group largely represents the write-down of the carrying value of the leasehold building in 2009 to the lower of the carrying value and fair value less costs to sell. The recoverable amount was determined on the basis of the selling price under the provisional agreement entered with an external party in 2009.



11. Investment property

Group and Company2010 2009$’000 $’000

CostAt beginning of year – 821Transfer to properties held-for-sale (Note 22) – (821) At end of year – – Accumulated depreciation and impairment At beginning of year – 276Depreciation for the year – 23Transfer to properties held-for-sale (Note 22) – (299)At end of year – – Net carrying amount – –

12. Subsidiary companies

a) These comprise:Company

2010 2009$’000 $’000

Unquoted equity shares, at cost 96,381 87,810



12. Subsidiary companies (cont’d)

b) Details of subsidiary companies are as follows:

Name of company Principal activitiesCountry of incorporation

Percentage of equity held

Cost of investment

2010 2009 2010 2009% % $’000 $’000

Held by the Company

OSIM International Trading (Shanghai) Co., Ltd #

Import, trading and distribution of healthy lifestyle products

People’s Republic of China

100 100 295 295

OSIM (M) Sdn Bhd # Sale and marketing of healthy lifestyle products

Malaysia 87.57 87.57 9,640 9,640

OSIM (HK) CompanyLimited #

Sale and marketing of healthy lifestyle products

Hong Kong 100 100 17,700 17,700

OSIM (Taiwan) Co., Ltd # Sale and marketing of healthy lifestyle products

Taiwan 100 92.50 7,989 7,156

Global Active Limited # Specialty retailer and distributor of nutraceutical products

Singapore 94.52 82.84 49,749 42,011

OSIM (China) Co., Ltd # Sale and marketing of healthy lifestyle products


100 100 11,008 11,008

96,381 87,810




b) Details of subsidiary companies are as follows (cont’d):

Name of company Principal activitiesCountry of

incorporation Percentage of

equity held2010 2009

% %

Held through Global Active Limited

Nutri Active Pte Ltd # Wholesale of nutraceutical products and supplements

Singapore 94.52** 82.84**

Victoria House Pte Ltd # Retailing of nutraceutical products and supplements

Singapore 94.52** 82.84**

RichLife (Shanghai) Co., Ltd (formerly known as VHE Shanghai Limited)^

Wholesale and retailing of nutraceutical products and supplements


94.52** 82.84**

RichLife (Beijing) Co., Ltd ***



94.52**

82.84**

RichLife (Guangzhou) Co., Ltd &&&



94.52** 82.84**

Nutrition Imports Pty Ltd+ Wholesale of nutraceutical products and supplements

Australia 94.52** 82.84**

Green Valley Nutrition Pty Ltd +

Retailing of nutraceutical products and supplements

Australia 94.52** 82.84**

Held through Victoria House Pte Ltd

Victoria House SdnBhd #

Retailing of nutraceutical products and supplements

Malaysia 80.34** 70.41**

Nutri Active Sdn Bhd # Wholesale of nutraceutical products and supplements

Malaysia 80.34** 70.41**




b) Details of subsidiary companies are as follows (cont’d):



equity held2010 2009

% %

Held through OSIM (China) Co., Ltd

OSIM (Shenzhen) Trading Co., Ltd *



100** 100**

OSIM (Guangzhou) Trading Co., Ltd &



100** 100**

OSIM (Beijing) Trading Co., Ltd &&



100** 100**

OSIM (Hangzhou) Trading Co., Ltd ^^



100** 100**

# Audited by member firms of Ernst & Young Global, in the respective countries.+ Audited by Banks Group Assurance Pty Ltd, Chartered Accountants, Australia.^ Audited by Crowe Horwath, Certified Public Accountants Co., Ltd, People’s Republic of China.* Audited by Shenzhen Lianjie Great Wall Certified Public Accountants Co., Ltd, People’s Republic of China.& Audited by Guangdong Better Certified Public Accountants Co., Ltd, People’s Republic of China.&& Audited by Beijing Hengjie Certified Public Accountants Co., Ltd, People’s Republic of China.^^ Audited by Hangzhou Dadi, Certified Public Accountants Co., Ltd, People’s Republic of China.*** Audited by Beijing Dongcai Accounting Service Company, People’s Republic of China.&&& Audited by Guangzhou Kaitlong, Certified Public Accountant Co., Ltd, People’s Republic of China.** Group’s effective shareholdings.

c) Acquisition of additional interests in subsidiary companies in the financial year ended 31 December 2010

• GlobalActiveLimited(“GAL”) During the year, the Company acquired additional shares of GAL totalling 11.68% from the non-controlling interests.

The aggregate cash considerations and the fair value of the treasury shares issued for acquiring the additional interests were $1,023,000 and $6,715,000 respectively and these resulted in an increase in premium on purchase of non-controlling interests’ shares of $2,998,000.

As at 31 December 2010, the total percentage of equity held by the Company in GAL was 94.52%.



c) Acquisition of additional interests in subsidiary companies in the financial year ended 31 December 2010 (cont’d)

• OSIM(Taiwan)Co.,Ltd(“OSIM(Taiwan)”) During the year, the Company acquired additional interests of OSIM (Taiwan) totalling 7.50% from the non-controlling interests. The cash

consideration for acquiring the additional interests was $833,000 and this resulted in a decrease in premium on purchase of non-controlling interests shares of $689,000. As at 31 December 2010, the total percentage of equity held by the Company in OSIM (Taiwan) was 100%.

d) Acquisition of additional interests in subsidiary companies in financial year ended 31 December 2009

• GlobalActiveLimited(“GAL”) In 2009, the Company, acquired additional shares of GAL totalling 0.07% from the minority shareholders. The cash consideration for

acquiring the additional interests was $21,000 and this resulted in a decrease in premium on purchase of minority interests’ shares of $13,000. As at 31 December 2009, the total percentage of equity held by the Company in GAL was 82.84%.

e) Disposal of subsidiary companies of GAL in the financial year ended 31 December 2009

• VHEChinaLimited In 2009, GAL disposed of VHE China Limited, a dormant subsidiary company, for a total consideration of $1. This resulted in a gain of

$9,000 including translation gain.

• USBInc In 2009, GAL disposed of USB Inc. for a total consideration of $1. This resulted in a gain of $526,000 including translation gain.




13. Associated companies and a joint venture

a) These comprise:

Group Company2010 2009 2010 2009$’000 $’000 $’000 $’000

Unquoted equity shares, at cost 147,223 146,815 146,735 146,327

Share of post-acquisition losses of associated companies and a joint venture (24,854) (25,829) – –

Dividends received from associated companies (12,226) (12,226) – –Share of impairment loss of a joint venture (77,314) (77,314) – –Impairment losses on associated companies and a joint venture – – (145,414) (145,414)

32,829 31,446 1,321 913Translation reserve (19,086) (18,449) – –Losses on deemed changes in shareholdings in a joint venture (1,151) (1,151) – – 12,592 11,846 1,321 913



13. Associated companies and a joint venture (cont’d)

b) Details of associated companies are as follows:

Name of company Principal activities

Country of incorporation and place of business

Percentage of equity held

Cost of investment

2010 2009 2010 2009% % $’000 $’000

Held by the Company

Daito-OSIM Healthcare (Suzhou) Co., Ltd *

Manufacturer and exporter of healthy lifestyle products


30 30 346 346

Daito-OSIM (Thailand) Co., Ltd ^


Kingdom of Thailand 30 30 567 567

OSIM (Thai) Co., Ltd + Sale and marketing of healthy lifestyle products

Kingdom of Thailand 49 49 116 116

Hong Ming (China) Co.,Ltd #



19 – 408 –

1,437 1,029

* Audited by Welsen Certified Public Accountants Co., Ltd, People’s Republic of China. ^ Audited by Me Bless Audit Office Co., Ltd, Certified Public Accountants, Kingdom of Thailand. + Audited by Sunantanawat Karnbanchee, Certified Public Accountants, Kingdom of Thailand. # Audited by Suzhou Leader Co., Ltd, Certified Public Accountants, People’s Republic of China.

The Group has not recognised losses relating to OSIM (Thai) Co., Ltd where its share of losses exceeds the Group’s interest in this associated company. The Group’s share of unrecognised losses at the balance sheet date was $130,000 (2009: $311,000). The Group has no obligation in respect of these losses.




c) The summarised financial information of the associated companies, not adjusted for the proportion of ownership interest held by the Group, is as follows:

Associated companies 2010 2009 $’000 $’000Assets and liabilities: Current assets 61,955 53,609Non-current assets 12,152 11,584Total assets 74,107 65,193

Current and total liabilities (35,508) (28,119)

Results:Revenue 159,420 136,540Expenses (155,500) (134,930)Profit for the year 3,920 1,610

d) Details of a joint venture are as follows:



equity heldCost of

investment2010 2009 2010 2009

% % $’000 $’000

Held by the Company

OSIM-Brookstone Holdings, Inc (“OBH”)#

Innovative product development and sales of specialty lifestyle products

United States of America

55.56 55.56 145,298 145,298

# Audited by Price WaterhouseCoopers, Boston, the United States of America.

By virtue of a partnership agreement, the Company only has joint control, together with the rest of the joint-venture partners, over the financial and operating policies of OBH.

Upon the occurrence of certain events as stipulated in the partnership agreement, the management of OBH will be entitled to receive common shares of OBH. This would have the effect of diluting the Group’s interest in the joint venture.




d) Details of a joint venture are as follows (cont’d): The Group has not recognised losses relating to OBH where its share of losses exceeds the Group’s interest in this joint venture. The Group’s share

of unrecognised losses at the balance sheet date was $48,364,000 (2009: $32,447,000). The Group has no obligation in respect of these losses.

e) The aggregate amounts of each of the current assets, non-current assets, current liabilities, non-current liabilities, income and expenses related to the Group’s interests in the jointly-controlled entity are as follows:

Joint venture 2010 2009 $’000 $’000Assets and liabilities: Current assets 97,341 111,242Non-current assets 186,508 208,755Total assets 283,849 319,997

Current liabilities (53,664) (52,469)Non-current liabilities (283,683) (326,423)Total liabilities (337,347) (378,892)

Results: Revenue 353,846 347,055Expenses (108,491) (107,145)Loss for the year (15,917) (16,478)


NOTES TO THE FINANCIAL STATEMENTS – 31 December 2010 (cont’d)NOTES TO THE FINANCIAL STATEMENTS – 31 December 2010 (cont’d)

14. Intangible assets

Group

Franchiserights and

trademarksDistribution

rightsClub

membershipProduct

development Total$’000 $’000 $’000 $’000 $’000

CostAs at 1 January 2009 14,564 2,061 123 2,239 18,987Additions during the year 264 15 – – 279Transfer to key management personnel * – – (123) – (123)Write-off (27) – – – (27)Net exchange differences 53 20 – – 73As at 31 December 2009 and 1 January 2010 14,854 2,096 – 2,239 19,189Additions during the year 464 88 – – 552Write-off (290) – – – (290)Net exchange differences 11 8 – – 19As at 31 December 2010 15,039 2,192 – 2,239 19,470

Accumulated amortisation As at 1 January 2009 1,950 1,627 51 1,492 5,120

Amortisation for the year 767 184 6 747 1,704Transfer to key management personnel * – – (57) – (57)Write off (13) – – – (13)Net exchange differences 15 11 – – 26As at 31 December 2009 and 1 January 2010 2,719 1,822 – 2,239 6,780Amortisation for the year 1,158 71 – – 1,229Write off (98) – – – (98)Impairment loss 5,260 187 – – 5,447Net exchange differences (1) 8 – – 7As at 31 December 2010 9,038 2,088 – 2,239 13,365 Net carrying amount As at 31 December 2010 6,001 104 – – 6,105As at 31 December 2009 12,135 274 – – 12,409 * In 2009, the club membership was transferred to a key management personnel for $Nil consideration as part of the compensation for the key

management personnel. The estimated fair value of the club membership as at the date of transfer was $205,000.


NOTES TO THE FINANCIAL STATEMENTS – 31 December 2010 (cont’d)NOTES TO THE FINANCIAL STATEMENTS – 31 December 2010 (cont’d)

14. Intangible assets (cont’d)

Group

Franchiserights and

trademarksDistribution

rightsClub

membershipProduct

development$’000 $’000 $’000 $’000

Average remaining amortisation period (years) - 2010 14 14 – – Average remaining amortisation period (years) - 2009 15 15 – –

Amortisation expenses of intangible assets (excluding goodwill on consolidation) is included in the following line item in the statement of comprehensive

income.

Group2010 2009$’000 $’000

Amortisation expenses 1,229 1,704

Impairment loss recognised

During the year, an impairment loss of $5,447,000 (31 December 2009: $Nil) was recognised to write-down the carrying amount of franchise rights and trademarks and distribution rights attributable to a subsidiary in the Australia segment as management expects that the benefits from these intangible asset will no longer be derived through use. The impairment loss was offset against an existing surplus on the same assets carried in the revaluation reserve amounted to $2,513,000 and an amount of $2,934,000 was recognised in the statement of comprehensive income under the line item “other operating expenses”.

Goodwill on consolidation Group 2010 2009

$’000 $’000Cost:At beginning and end of year 23,836 23,836

Accumulated impairment:At beginning of year 13,293 3,689Impairment loss (Note 34) – 9,604At end of year 13,293 13,293

Net carrying amount of goodwill on consolidation 10,543 10,543

Total intangible assets 16,648 22,952




CompanyClub

membershipProduct

developmentTotal

$’000 $’000 $’000Cost:As at 1 January 2009 123 2,239 2,362Transfer to key management personnel * (123) – (123)As at 31 December 2009 – 2,239 2,239Write off – (2,239) (2,239)As at 31 December 2010 – – –

Accumulated amortisation As at 1 January 2009 51 1,492 1,543Amortisation for the year 6 747 753Transfer to key management personnel * (57) – (57)As at 31 December 2009 and 1 January 2010 – 2,239 2,239Write off – (2,239) (2,239)As at 31 December 2010 – – –

Net carrying amount As at 31 December 2010 – – –

As at 31 December 2009 – – –

* In 2009, the club membership was transferred to a key management personnel for $Nil consideration as part of the compensation for the key management personnel. The estimated fair value of the club membership as at the date of transfer was $205,000.

Impairment testing of goodwill

Goodwill acquired through business combinations has been allocated to three individual cash-generating units (“CGUs”), which are also the reportable segments, for impairment testing as follows:

• Singaporesegment; • Australiasegment;and • Malaysiasegment




Impairment testing of goodwill (cont’d)

Carrying amount of goodwill allocated to each of the Group’s CGU is as follows:

Goodwill on consolidation2010 2009$’000 $’000

Singapore segment 10,373 10,373Australia segment – – **Malaysia segment 170 170 10,543 10,543

The recoverable amount of a CGU is determined based on value-in-use calculation, using cash flow projections based on financial budgets approved by

management covering a five year period. The pre-tax discount rate applied to the cash flow projections and the forecasted growth rate during the five-year period are 11.6% (2009: 10.20%) and 5% (2009: 3%) per annum respectively.

The calculation of value in use for the CGU is most sensitive to the following assumptions:

Budgeted gross margin – Gross margin is based on average value achieved in the three years preceding the start of the budget period. The budgeted gross margin is kept constant over the five year period of cash flow projection.

Pre-tax discount rates – Discount rates reflect the current market assessment of the risks specific to the CGU. This is the benchmark used by management to assess operating performance and to evaluate future investment proposals. In determining appropriate discount rate for the CGU, regard has been given to the yield on a ten-year government bond at the beginning of the budgeted year.

Market share assumptions – These assumptions are important because management assesses how the CGU’s position, relative to its competitors, might change over the budget period. Management expects the Group’s share of the Singapore segment to be stable over the budget period.

** In 2009, an impairment loss was recognised to write-down the carrying amount of goodwill attributable to the Australia segment. The impairment loss of $9,604,000 was recognised in the statement of comprehensive income under the line item “other operating expenses”.



15. Long-term investmentGroup and Company

2010 2009$’000 $’000

Available-for-saleUnquoted debt securities, at cost 1 12,498 –Unquoted equity shares, at cost 930 930 13,428 930

1 Comprise senior preferred notes issued by OBH.

The unquoted investments are denominated in Japanese Yen and United States Dollars. The unquoted investments stated at cost have no market prices and the fair value cannot be reliably measured using valuation techniques.

16. Long-term receivablesGroup Company

2010 2009 2010 2009$’000 $’000 $’000 $’000

Long-term deposits (Note 20) 7,480 7,596 855 1,357

Long-term deposits relate to deposits placed for the lease of retail outlets and building.

17. Loan to associated company Loan to associated company is non-trade related, unsecured, interest-free and repayable on demand. Loan to associated company is to be settled in cash.

18. StocksGroup Company

2010 2009 2010 2009Balance sheet $’000 $’000 $’000 $’000

Finished goods 45,818 55,806 1,828 6,756Goods in transit 917 1,795 1,776 706 46,735 57,601 3,604 7,462



18. Stocks (cont’d)Group Company

2010 2009 2010 2009Statement of comprehensive income: $’000 $’000 $’000 $’000

Inventories recognised as an expense, being cost of sales 176,328 177,439 95,133 102,585Inclusive of the following charge:

- Inventories written-down 7,770 1,905 1,709 257

19. Trade debtorsGroup Company

2010 2009 2010 2009$’000 $’000 $’000 $’000

Trade debtors 39,102 35,296 4,956 6,056Allowance for doubtful debts (1,099) (2,726) (889) (2,608) 38,003 32,570 4,067 3,448

Trade debtors

Trade debtors are non-interest bearing and are generally on 30 to 90 day terms. They are recognised at their original invoice amounts which represents their fair values on initial recognition.

At the balance sheet date, trade receivables arising from export sales amounting to $164,000 (2009: $260,000) are arranged to be settled via letter of credits issued by reputable banks in countries where the customers are based.

Trade receivables denominated in foreign currencies at 31 December are as follows:

Group Company2010 2009 2010 2009$’000 $’000 $’000 $’000

United States Dollar 702 719 699 719Renminbi 103 24 – –Australia 3,265 112 – –



19. Trade debtors (cont’d)

Receivables that are past due but not impaired

The Group has trade receivables amounting to $5,847,000 (2009: $3,080,000) that are past due at the balance sheet date but not impaired. These receivables are unsecured and the analysis of their aging at the balance sheet date is as follows:

Group2010 2009$’000 $’000

Trade debtors past due:Lesser than 30 days 3,719 2,48030-60 days 1,077 32661-90 days 207 11091-120 days 109 69More than 120 days 735 95

5,847 3,080 Receivables that are impaired

The Group’s trade receivables that are impaired at the balance sheet date and the movement of the allowance account used to record the impairment is as follows:

GroupIndividually impaired

2010 2009$’000 $’000

Trade debtors - nominal amounts 1,099 2,726Less: Allowance for impairment (1,099) (2,726) – – Movement in allowance account:At 1 January 2,726 2,194 Charge for the year 736 2,086 Write back (727) (537) Written off (1,485) (1,017) Exchange differences (151) –At 31 December 1,099 2,726

Trade receivables that are individually determined to be impaired at the balance sheet date relate to debtors that are in significant financial difficulties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancements.



19. Trade debtors (cont’d)

Allowance for doubtful debts

For the year ended 31 December 2010, an impairment loss of $736,000 (2009: $2,086,000) is recognised in the “other operating expenses” in the statement of comprehensive income subsequent to a debt recovery assessment performed on trade debtors as at 31 December 2010.

20. Other debtors, deposits and prepaid operating expensesGroup Company

2010 2009 2010 2009$’000 $’000 $’000 $’000

Deposits 2,516 2,729 614 69Advances to employees 121 186 – –Other debtors 2,865 2,558 92 214Income tax recoverable 397 394 – –Prepaid operating expenses 2,652 2,207 1,141 930 8,551 8,074 1,847 1,213Other debtors, deposits and prepaid operating expenses due:

Within 12 months 8,551 8,074 1,847 1,213After 12 months (Note 16) 7,480 7,596 855 1,357

16,031 15,670 2,702 2,570 For the year ended 31 December 2010, an impairment loss of $92,000 (2009: $86,000) is recognised in the “other operating expenses” in the statement of

comprehensive income subsequent to a debt recovery assessment performed on other debtors as at 31 December 2010.

21. Due from/(to) subsidiary companies/related parties/associated companies/a joint venture These amounts are unsecured, interest free, repayable on demand and are to be settled in cash.



22. Properties held-for-saleGroup Company

2010 2009 2010 2009$’000 $’000 $’000 $’000

CostAt beginning of the year 4,074 – 821 –Transfer from fixed assets – 3,253 – –Transfer from investment property – 821 – 821Disposals (4,074) – (821) –At end of the year – 4,074 – 821

Accumulated depreciation and amortisationAt beginning of the year 784 – 299 –Transfer from fixed assets – 485 – –Transfer from investment property – 299 – 299Disposals (784) – (299) –At end of the year – 784 – 299

Net carrying amount – 3,290 – 522

In 2009, the Company and one of its subsidiary companies entered into provisional agreements with external parties to sell an investment property and a leasehold building within the next twelve months. During the year, the transactions were completed and the Group recorded an aggregate gain on disposal of $78,000.

Assets pledged as security

As at 31 December 2009, one of the Group’s properties held-for-sale with carrying amount of $2,768,000 is mortgaged to secure the Group’s bank loans (Note 27). The pledge was discharged by the bank when the loan was fully repaid during the year.

23. Cash and cash equivalents Group Company

2010 2009 2010 2009$’000 $’000 $’000 $’000

Cash and bank balances 56,364 33,913 26,503 11,687Fixed deposits 16,793 29,321 5,000 15,500Cash and cash equivalents in the consolidated cash flow statement 73,157 63,234 31,503 27,187



23. Cash and cash equivalents (cont’d)

Cash at banks earns interest at floating rate on daily bank deposit rates. Fixed deposits are made for varying period between one day and three months depending on the immediate cash requirements of the Group, and earn interests at the respective fixed deposit rates. The weighted effective interest rate of fixed deposits range from 0.25% to 1.35% (2009: 0.11% to 1.57%) per annum.

Fixed deposits amounting to $Nil (2009: $264,000) are pledged as collateral for bank loan (Note 27) and guarantee for purchases of stocks by a subsidiary company.

Cash and bank balances denominated in foreign currencies at 31 December are as follows:

Group Company2010 2009 2010 2009$’000 $’000 $’000 $’000

United States Dollar 8,266 3,348 6,375 2,647Ringgit Malaysia 1,454 2,393 – –Renminbi 8,487 141 5,971 –Canadian Dollar 413 29 413 –Japanese Yen 191 372 191 372

24. Trade creditors

Trade creditors are non-interest bearing and are normally settled on 30 to 150 day terms.

Trade payables denominated in foreign currencies at 31 December are as follows:

Group Company2010 2009 2010 2009$’000 $’000 $’000 $’000

United States Dollar 12,952 7,910 5,170 1,855Euro 149 80 149 80Renminbi 255 135 – –Australia Dollar 1,318 5,704 – –Japanese Yen 2,402 6,315 2,203 5,561


NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2010

25. Other creditors and accruals

Group Company2010 2009 2010 2009$’000 $’000 $’000 $’000

Other creditors 12,179 9,113 3,804 2,859Accrued operating expenses 20,433 9,189 8,506 1,718Deposits received 16,733 5,884 7,120 1,234Accrued payroll costs 4,627 9,885 1,278 4,132Fair value of forward contracts (Note 44b) – 32 – 32Deferred revenue 1,946 1,484 – – 55,918 35,587 20,708 9,975

Other creditors are non-interest bearing and are normally settled on 30 to 90-day terms.

Deferred revenue relates to the consideration received from the sale of goods that is allocated to the reward points issued under the Groups “VIP cards” programme. Deferred revenue is recognised in the statement of comprehensive income as revenue when the VIP points are redeemed in exchange for free goods.

Other creditors and operating expenses denominated in foreign currencies as at 31 December are as follows:

Group Company2010 2009 2010 2009$’000 $’000 $’000 $’000

United States Dollar 4,944 124 4,936 124Ringgit Malaysia 1,734 1,337 – –Renminbi 365 135 – –Australia Dollar 2,385 2,485 – –Japanese Yen 2,203 92 2,203 –


26. Provisions

GroupProvision for warranties

(Note A)Provision for restoration

costs (Note B) Total

2010$’000

2009$’000

2010$’000

2009$’000

2010$’000

2009$’000

At beginning of year 1,369 1,183 4,061 3,446 5,430 4,629 Provided during the year 1,359 326 575 355 1,934 681Utilised during the year (633) (117) (711) (166) (1,344) (283)Unused amounts reversed during the year – (16) – (70) – (86)Net exchange differences (110) (7) (228) 496 (338) 489At end of year 1,985 1,369 3,697 4,061 5,682 5,430

CompanyProvision for warranties

(Note A)Provision for restoration

costs (Note B) Total

2010$’000

2009$’000

2010$’000

2009$’000

2010$’000

2009$’000

At beginning of year 533 498 2,325 2,350 2,858 2,848 Provided during the year 487 35 30 45 517 80Utilised during the year (533) – (40) (70) (573) (70)At end of year 487 533 2,315 2,325 2,802 2,858

Note A Provision for warranties The Group provides one to two years of warranty to its customers on certain of its products, during which faulty products are repaired or

replaced. The amount of the provision for warranty is estimated based on sales volumes and past experience of the level of repairs and return. The estimation basis is reviewed on an ongoing basis and revised where appropriate.

As at 31 December 2010, the Group provided $1,985,000 (2009: $1,369,000) for expected warranty claims on merchandise sold during the year. The provision is expected to be utilised in the next financial year.

The above provision has not been discounted as the effect of discounting is not significant.

Note B Provision for restoration costs Provision for restoration costs of $3,697,000 (2009: $4,061,000) is the estimated costs of restoring leasehold premises, retail outlets and

warehouse, which are capitalised and included in the cost of fixed assets. The provision is expected to be utilised at the end of the lease terms.



27. Short-term bank loans Group

2010 2009$’000 $’000

Secured bank loan – New Taiwan dollars – 1,320Unsecured bank loans – Ringgit Malaysia 1,251 2,302 1,251 3,622

In 2009, the secured short term loan was secured by fixed deposits amounting to $264,000 and a freehold land and building of a subsidiary company (Note 10). During the year, the pledges were discharged by the bank when the secured short term loan was fully repaid in February 2010.

The unsecured short-term bank loans bear interest at the rates of 4.06% to 4.11% (2009: 3.310% to 5.050%) per annum and are repayable within the next twelve months from the balance sheet date.

28. Bank loans

Effective interest rate per annum Maturities Group Company

2010$’000

2009$’000

2010$’000

2009$’000

Bank loan A – Singapore dollars 4.13% 2010 – 2,115 – – Bank loan B – Singapore dollars 3.48% 2010 – 20,000 – 20,000Bank loan C – Ringgit Malaysia 6.74% 2011 357 761 – – 357 22,876 – 20,000Due within 12 months (357) (22,523) – (20,000)Due after 12 months – 353 – –

Bank loan A, taken up by a subsidiary company has been repaid during the year. This loan bore interest at the rate of 3.500% per annum for the first year, 4.1250% per annum for the second year, and thereafter at 0.750% per annum above the lending bank’s prevailing prime rate calculated on monthly rests basis. This loan was secured by the leasehold building of a subsidiary company and the subsidiary company had granted an option to an independent third party to purchase the leasehold building in the prior year. During the current year, the pledge was discharged by the bank.

Bank loan B, taken up by the Company, is repayable half yearly over a period of 5 years from the date of drawdown. This is a syndicated loan supported by corporate guarantees from fellow subsidiary companies. The loan bears interest at SGD Swap Offer Rate plus 2.000% per annum. This loan has been fully repaid in September 2010.

Bank loan C, taken up by a subsidiary company, is repayable in 36 monthly installments commencing from 1 month after the full drawdown. This loan is secured by a corporate guarantee from the Company and personal guarantee from a director of a subsidiary company. The bank loan bears interest at the rate of 6.000% per annum or 1.750% per annum over the 3 years effective cost of fund whichever is higher on monthly rests.



29. Obligations under finance leasesThe Group has finance leases for motor vehicles, plant and machinery, computers and shop renovations (Note 10). Lease terms range from 1 year to 5 years and do not contain restrictions concerning dividends, additional debt or further leasing. These leases have varying terms of renewal, purchase options and escalation clauses. The effective interest rates in the leases range from 2.80% to 8.50% (2009: 2.80% to 8.50%) per annum.

Future minimum lease payments under finance leases together with the present value of the net minimum lease payments are as follows:

MaturitiesMinimum lease

payments InterestPresent value of payments

Group $’000 $’000 $’000 2010 Not later than 1 year 2011 66 (8) 58More than 1 year and not later than 5 years 2013 128 (9) 119 194 (17) 1772009 Not later than 1 year 2010 64 (5) 59More than 1 year and not later than 5 years 2013 53 (4) 49 117 (9) 108

30. Employee benefitsEmployee benefits expense (including executive directors):

Group2010 2009$’000 $’000

Wages, salaries, bonuses and other costs 74,802 72,832Central Provident Fund contributions 4,550 6,006Pension costs (Note 30b) 52 50 79,404 78,888



30. Employee benefits (cont’d)

a) OSIM Share Option SchemeShare options are granted to confirmed full time employees and directors of the Group who are not controlling shareholders. The options will vest if the employee remains in service for one year period from the date of grant. The exercise price of the options is equal to the market price of the shares on the date of grant. Where the exercise price as determined by the market price on the date of grant is less than $0.05, the exercise price shall be $0.05. The contractual life of the options granted to executive directors and employees is ten years. There are no cash settlement alternatives.

There has been no cancellation or modification to the share option scheme during 2010 and 2009.

The following table illustrates the number and weighted average exercise prices (“WAEP”) of, and the movements in, share options during the year:

No. WAEP No. WAEP2010$’000

2010 $

2009 $’000

2009 $

Outstanding at beginning of year 4,171 0.74 4,582 0.62Lapsed during the year (562) 1.23 (141) 0.92Exercised during the year1 (1,699) 0.46 (270) 0.21Outstanding at end of year2 1,910 0.71 4,171 0.74Exercisable at end of year 1,910 0.71 4,171 0.74

1 The weighted average share price at the date of exercise for the options exercised was $0.46 (2009: $0.21).2 The range of exercise prices for options outstanding at the end of the year was $0.236 to $0.917 (2009: $0.178 to $0.917). The weighted

average remaining contractual life for these options is 2.28 years (2009: 3.28 years).

The fair value of share options as at the date of grant is estimated by an external valuer using a Trinomial option pricing model, taking into account the terms and conditions upon which the options were granted. The inputs to the model used are shown below:

Dividend yield (%) 22.00Expected volatility (%) 34.00Historical volatility (%) 34.00Risk-free interest rate (%) 1.346 to 1.792Expected life of option (years) 2 to 10Weighted average share price ($) 1.34

The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. No other features of the option grant were incorporated into the measurement of fair value.




b) Pension benefits planThis relates to the amount of pension cost provided for by a subsidiary company in Taiwan. This subsidiary company has a retirement plan covering all its regular employees. Benefits under the plan are based on the length of service and estimated based pay at the time of retirement. The subsidiary company made a monthly contribution at certain percentage of the salaries to the pension fund, which is administered by a pension committee and deposited in its name with the Central Trust of China.

Certain pension information is as follows:

i) Net periodic pension costs are as follows:

Group2010 2009$’000 $’000

Service cost 27 27Interest cost 40 40Expected returns on plan assets (27) (29) Net amortisation and deferral 12 12Net pension costs 52 50

ii) Based on the actuarial report which measures the pension assets and liabilities, the reconciliation between the funding status of pension plan and accrued pension liability was as follows:

Group2010 2009$’000 $’000

Benefit obligation Non-vested benefit obligation 1,121 792 Effect of projected future salary increase 1,372 980 Projected benefit obligation 2,493 1,772Fair value of plan assets (1,237) (1,210)Status of pension plan 1,256 562Unrecognised net transitional obligation (150) (162)Unamortised actuarial gain (661) –Provision for pension benefits 445 400




b) Pension benefits plan (cont’d)

iii) Changes in the present value of the projected benefit obligation are as follows:

Group2010 2009$’000 $’000

Benefit obligation at beginning of year 1,772 1,611Service cost 27 27Interest cost 40 40Actuarial loss on obligation 654 93Exchange differences on foreign plan – 1Benefit obligation at end of year 2,493 1,772

iv) Changes in the fair value of plan assets are as follows:

Group2010 2009$’000 $’000

Fair value at beginning of year (1,210) (1,176)Expected returns (27) (29)Contribution by employer (8) (8)Actuarial loss 8 3Fair value at end of year (1,237) (1,210)

v) Actuarial assumptions are as follows:

Group2010 2009

% %

Discount rate used in determining present values 2.00 2.25Future salary increase rate 3.00 3.00Expected rate of return of plan assets 2.00 2.25

The plan assets are deposited with the Bank of Taiwan and are managed by the government of the Republic of China.



31. Revenue Income from sale of goods is recognised upon delivery of goods and acceptance by customers.

32. Other operating incomeGroup

2010 2009$’000 $’000

Royalty income 1,663 776Repair income 2,516 3,804Government development grant 481 237 Grant income from jobs credit scheme 189 1,658Foreign currency gains, net 2,206 2,223Handling income 64 812Gain of disposal of subsidiary companies – 535Gain of disposal of fixed assets 4,962 –Gain of disposal of properties held-for-sale 78 –Rental income 846 386Income for extension of product warranty 448 533 Transportation income 401 281Spare parts income 791 1,063Others 770 40 15,415 12,348

During the financial year ended 31 December 2009, the Singapore Finance Minister announced the introduction of a Jobs Credit Scheme ( “the Scheme”). Under this Scheme, the Group received a 6% and 3% (2009: 12%) cash grant in March and June 2010 respectively on the first $2,500 of each month’s wages for each employee on their Central Provident Fund payroll. During the financial year, the Group received grant income of $189,000 (2009: $1,658,000) under the Scheme.



33. Directors’ remuneration

Number of directors of the Company in remuneration bands are as follows:

2010 2009

$500,000 and above 1 1$250,000 to $499,000 3 3Below $250,000 4 4 Total 8 8

34. Other operating expenses

The following items have been included in arriving at other operating expenses:

Group2010 2009$’000 $’000

Allowance for doubtful debts, net: - Trade 9 1,549- Non-trade 92 86Non-audit fees paid to: - Auditors of the Company 117 73- Other auditors * 37 68Impairment loss on goodwill (Note 14) – 9,604Impairment loss on fixed assets (Note 10) – 1,422Impairment loss on intangible assets (Note 14) 2,934 –Write off of fixed assets (Note 10) 2,122 –Write off of intangible assets (Note 14) 192 14Loss on disposal of fixed assets – 1,271Depreciation of fixed assets 10,047 11,506Depreciation of investment property – 23Amortisation of intangible assets (Note 14) 1,229 1,704Inventories written down 7,770 1,950

* Includes $Nil (2009: $54,000) paid to member firms of Ernst & Young Global.



35. Financial expenses and financial income

Group2010 2009$’000 $’000

(a) Financial expenses Interest expenses - bank loans 327 827 - lease obligations 12 20 - bills payable 562 397 - bank overdraft 3 9 - others 57 – 961 1,253

(b) Financial income Interest income - fixed deposits 67 50 - bank balances 130 52 - others – 17 197 119

36. Taxation

a) Major components of income tax expenseThe major components of income tax expense for the years ended 31 December 2010 and 2009 are:

GroupConsolidated statement of comprehensive income: 2010 2009

$’000 $’000Current income tax - Current year 15,082 9,399- Under/(over) provision in respect of previous years 574 (1,116)Deferred tax- Movement in temporary differences (1,346) 5,274- Overprovision in respect of previous years (44) (465)Withholding tax 3,615 914 Income tax expenses recognised in profit or loss 17,881 14,006



36. Taxation (cont’d) b) Reconciliation between tax expenses and accounting profit1

A reconciliation between the tax expense and the product of accounting profit multiplied by the applicable tax rate for the years ended 31 December 2010 and 2009 is as follows:

Group2010 2009$’000 $’000

Accounting profit before income tax 67,690 38,568Tax at the domestic rates applicable to profits in the countries where the Group operates 16,122 5,344Adjustments: Permanent differences/expenses not deductible for tax purpose 2,192 756Income not subject to taxation (5,968) (654) Difference in corporate tax rate and IHQ concessionary tax rate – (660)Effect of change in tax rates (724) (51)Under/(over) provision in respect of previous years 530 (1,581)Deferred tax assets not recognised 3,417 9,937Effect of partial tax exemption and tax relief (185) (60)Utilisation of tax losses/unabsorbed capital allowances from previous years (901) (897)Deferred tax for undistributed earnings of overseas subsidiary companies 70 928Share of results of associated companies and a joint venture (287) 30Withholding tax 3,615 914Income tax expense recognised in profit or loss 17,881 14,006

1 The reconciliation is prepared by aggregating separate reconciliations for each national jurisdiction.



36. Taxation (cont’d)

c) Deferred tax assets and liabilities as at 31 December relate to the following:

Group Company

Consolidatedbalance sheet

Consolidated statement of

comprehensive income Balance sheet

2010$’000

2009$’000

2010$’000

2009$’000

2010$’000

2009$’000

Deferred tax liabilities Excess of net book value over tax written down value of fixed assets (980) (2,126) (1,291) (698) (180) (271) Undistributed earnings of overseas subsidiary companies (884) (817) 67 517 – –Gross deferred tax liabilities (1,864) (2,943) (180) (271)

Deferred tax assetsProvisions 499 684 185 402 – 91 Unutilised tax losses 44 46 2 4,499 – –Unrealised profits on sale of inventories to related companies 1,081 728 (353) 89 – – Gross deferred tax assets 1,624 1,458 – 91 Net deferred tax liabilities* (240) (1,485) (180) (180)

Deferred income tax expenses (1,390) 4,809

* Including a translation loss of $145,000 (2009: $774,000).



36. Taxation (cont’d)

c) Deferred tax assets and liabilities as at 31 December relate to the following (cont’d): Deferred tax assets and liabilities are offset when there is a legally enforceable right to set-off current tax assets against current tax liabilities and

when the deferred taxes relate to the same taxation authority. The amounts determined after appropriate offsetting are included in the balance sheets as follows:

Group Company2010 2009 2010 2009$’000 $’000 $’000 $’000

Net deferred tax assets 1,624 1,366 – –Net deferred tax liabilities (1,864) (2,851) (180) (180) (240) (1,485) (180) (180)

Unrecognised tax losses and unabsorbed capital allowanceThe Group has tax losses and unabsorbed capital allowance of approximately $44,555,000 and $746,000 (2009: $37,014,000 and $1,481,000) that are available for offset against future taxable profits of the companies in which the losses arose, for which no deferred tax asset is recognised due to uncertainty of its recoverability. The use of these tax losses is subject to the agreement of the tax authorities and compliance with certain provisions of the tax legislation of the respective countries in which the companies operate.

d) The Group and the Company

The Company was awarded Development and Expansion Incentive (“DEI”) under the International Headquarters (“IHQ”) Award on 8 September 2004. The commencement date was 1 January 2005 and was for a period of 5 years. The qualifying income from IHQ activities during the 5-year period enjoyed a concessionary tax rate stipulated in the Economic Development Board’s (“EDB’s”) offer letter. The tax incentive has expired on 31 December 2009. The Company is currently liaising with the EDB on a new tax incentive. As such, the Company has provided for tax based on the corporate income tax rate of 17% for the current year.

OSIM International Trading (Shanghai) Co., Ltd and OSIM (China) Co., LtdAs a wholly foreign-owned enterprise registered in the Zone, Pudong New Area, the companies are subject to PRC income tax at the rate of 22% (2009: 20%).

OSIM (Taiwan) Co., LtdPursuant to the Income Tax Law (“ITL”), beginning with 1998, annual distributable net earnings as determined under the ITL that are not distributed to shareholders in the following year are subject to additional income tax at a rate of 10%. The 25% income tax and additional 10% tax paid by the Company for 1998 and onwards may be used by individual resident shareholders of the Company as individual income tax credits. Pursuant to the ITL, the additional 10% income tax paid may be used by the shareholders, other than domestic corporate shareholders as tax credits when the undistributed earnings are ultimately distributed.

According to the newly revised Income Tax Law of the Republic of China (“R.O.C.”) on 27 May 2010, the statutory tax rate of the Company is changed from 25% to 17% effective 1 January 2010.



37. Earnings per shareBasic earnings per share amounts are calculated by dividing profit for the year that is attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares (excluding treasury shares) outstanding during the year.

Diluted earnings per share amounts are calculated by dividing profit for the year that is attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares (excluding treasury shares) outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

The following table reflects the profit and share data used in the computation of basic and diluted earnings per share for the years ended 31 December:

Group2010 2009$’000 $’000

Profit for the year attributable to ordinary equity holders of the Company used in computation of basic and diluted earnings per share 50,069 23,334 Number of shares ’000 ’000Weighted average number of ordinary shares for basic earnings per share computation 678,818 634,603Effects of dilution:- share options 1,450 3,487- warrants 77,872 – *Weighted average number of ordinary shares adjusted for the effect of dilution 758,140 638,090

* Warrants are anti-dilutive as the 12-month average share price is below the price of warrants.

Since the end of the financial year, senior executives have exercised the options to acquire 865,500 (2009: 270,000) ordinary shares. There have been no other transactions involving ordinary shares or potential ordinary shares since the reporting date and before the completion of these financial statements.

For the purposes of calculating the diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to take into account the dilutive effect arising from the exercise of all outstanding share options granted to employees where such shares would be issued at a price lower than the fair value (average share price during the financial year). The difference between the number of shares to be issued at the exercise prices under the options and the number of shares that would have been issued at the fair value based on the assumed proceeds from the issue of these shares are treated as ordinary shares issued for no consideration. The number of such shares issued for no consideration is added to the weighted average number of ordinary shares outstanding in the computation of diluted earnings per share.



38. DividendsGroup and Company

2010 2009$’000 $’000

Declared and paid during the financial yearDividends on ordinary shares:- Final exempt (one-tier) dividend for 2009: 1.00 cents (2008: nil cents) per share 6,564 –- Interim exempt (one-tier) dividend for 2010: 1.00 cents (2009: nil cents) per share 6,697 –

13,261 – Proposed but not recognised as liability as at 31 December Dividends on ordinary shares, subject to shareholders’ approval at Annual General Meeting:

- A final exempt (one-tier) dividend of one cent (2009: one cent) per share for 2010 6,723 6,580



39. Related party disclosuresAn entity or individual is considered a related party of the Group and the Company for the purposes of the financial statements if: i) it possesses the ability (directly or indirectly) to control or exercise significant influence over the operating and financial decisions of the Group and the Company or vice versa; or ii) it is subject to common control or common significant influence.

a) Sale and purchase of goods and services

In addition to those related party information disclosed elsewhere in the financial statements, the following significant transactions between the Group/Company and related parties took place during the year on terms agreed between the parties:

Group Company2010 2009 2010 2009$’000 $’000 $’000 $’000

Sales of finished goods to: - Subsidiary companies – – 84,181 88,630 - Associated companies 1,813 1,988 1,813 1,988 - Joint venture 12,920 12,566 12,920 12,566 - Affiliated companies 3,793 5,648 561 710 Purchases of finished goods from: - Associated companies 75,887 51,820 47,821 36,628 - Joint venture 7 29 7 29 Royalty income: - Subsidiary companies – – 8,623 4,642 - Associated companies – 131 – 131 Spare part income: - Subsidiary companies – – 1,911 1,546 Management fees: - Subsidiary companies – – 1,443 516



39. Related party disclosures (cont’d) b) Compensation of key management personnel

Group2010 2009$’000 $’000

Short-term employee benefits* 7,284 5,637Central Provident Fund contributions 54 62Directors’ fees 173 173Total compensation paid to key management personnel 7,511 5,872Comprise amounts paid to:- Directors of the Company 6,834 5,284

- Other key management personnel 677 588 7,511 5,872

* The amount for 2009 includes the club membership transferred to a key management personnel (Note 14). The remuneration of key management personnel are determined by the remuneration committee having regard to the performance of individuals and market trends.

Directors’ interests in an employee share option plan

At 1 January 2010 and 31 December 2010, the following directors held options to purchase ordinary shares of the Company under the OSIM Share Option Scheme as follows:

At 1 January 2010

At 31 December 2010 Exercise Price Expiry Date

$Options to subscribe for ordinary sharesCharlie Teo Chay Lee 247,500 – 0.178 14.01.2011 247,500 247,500 0.236 14.01.2012 198,000 198,000 0.442 26.12.2012 95,040 – 0.917 15.02.2014Richard Leow Lian Soon 40 40 0.917 15.02.2014Peter Lee Hwai Kiat 144,000 – 0.442 26.12.2012

69,120 120 0.917 15.02.2014No share options were granted to the directors during the financial year.

Apart from the remuneration paid and share options granted to directors and key management, the Group did not enter into any significant transactions with related parties who are not members of the Group.



40. Non-cancellable operating lease commitmentsThe Group and the Company have lease commitments with respect to the rental of shop and office premises. The leases have varying terms, escalation clauses and renewal rights. The lease commitments include commitments for basic operating lease payments, as well as commitments for additional contingent rental payable when turnover of certain retail outlets exceeds pre-determined levels. Lease terms do not contain restrictions on the Group’s activities concerning dividends, additional debt or further leasing. Operating lease payments recognised in the statement of comprehensive income during the year amounted to $50,494,000 (2009: $45,308,000).

Future minimum lease payments payable under non-cancellable operating leases as at 31 December are as follows:

Group Company2010 2009 2010 2009$’000 $’000 $’000 $’000

Not later than 1 year 37,759 37,281 8,763 8,058Later than 1 year but not later than 5 years 53,199 50,426 21,279 20,007 Later than 5 years 7,788 3,678 1,869 1,869 98,746 91,385 31,911 29,934

41. Capital commitments

Group Company2010 2009 2010 2009$’000 $’000 $’000 $’000

Capital expenditure for shop renovations approved but not contracted 306 1,210 – –



42. Segment information For management purposes, the Group is organised into business units based on their products and services, and has two reportable operating segments as

follows:

i) Retail: Outlets and counters operated by the Group in selected shopping centers and departmental stores where the products are sold directly to end user customers.

ii) Distribution: Products distributed by the Group and franchisees in overseas markets.

Except as indicated above, no operating segments have been aggregated to form the above reportable operating segments.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects, as explained in the table below, is measured differently from operating profit or loss in the consolidated financial statements.

Group financing (including financial expenses) and income taxes are managed on a group basis and are not allocated to operating segments.

Transfer prices between operating segments took place at terms agreed between the parties during the financial year.



42. Segment information (cont’d) The Group is organised on a worldwide basis into two main operating divisions, namely retail and distribution, and their revenue, results and assets are

analysed as follows:

Retail Distribution AdjustmentsPer consolidated

financial statements2010 2009 2010 2009 2010 2009 2010 2009$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Revenue:Sales to external customers 476,143 451,132 32,595 25,635 – – 508,738 476,767 Inter-segment sales – – 142,166 142,453 (142,166) (142,453) – –

Total revenue 476,143 451,132 174,761 168,088 (142,166) (142,453) 508,738 476,767

Results:Interest income – – 197 119 – – 197 119 Depreciation and amortisation 9,505 10,769 1,771 2,464 – – 11,276 13,233 Share of profits of associated companies – – 975 692 – – 975 692 Impairment of non-financial assets 9,560 12,396 1,144 580 – – 10,704 12,976 Other non-cash expenses 4,248 901 828 2,086 – – 5,076 2,987 Segment results 41,949 25,018 26,948 12,636 (19,088) (13,092) 49,809 24,562

2010 2009 2010 2009 2010 2009 2010 2009$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Assets:Investments in associated companies – – 12,592 11,846 – – 12,592 11,846 Additions to non-current assets 11,819 5,476 14,213 1,088 – – 26,032 6,564 Segment assets 146,710 163,136 77,400 65,290 15,052 2,296 239,162 230,722Segment liabilities: 37,354 36,509 76,784 51,480 15,092 38,395 129,230 126,384


A

B

D

C

EF


42. Segment information (cont’d)Notes Nature of adjustments and eliminations to arrive at amounts reported in the consolidated financial statements

A Inter-segment revenues are eliminated on consolidation.

B Other non-cash expenses consist of write-off of fixed assets and intangible assets, provisions, and impairment of financial assets as presented in the respective notes to the financial statements.

C The following items are added to/(deducted from) segment profit to arrive at “profit before tax” presented in the consolidated statement of comprehensive income:

2010$’000

2009$’000

Share of profits of associated companies 975 692Profit from inter-segment sales (19,102) (12,531) Finance costs (961) (1,253) (19,088) (13,092)

D Additions to non-current assets consist of additions to property, plant and equipment, intangible assets, investment in an associated company and long-term investments.

E The following items are added to segment assets to arrive at total assets reported in the consolidated balance sheet:

2010$’000

2009$’000

Long-term investments 13,428 930Deferred tax assets 1,624 1,366 15,052 2,296

F The following items are added to segment liabilities to arrive at total liabilities reported in the consolidated balance sheet:

2010$’000

2009$’000

Deferred tax liabilities 1,864 2,851Provision for income tax 10,998 8,538Loans and borrowings 1,785 26,606Provision for pension benefits 445 400 15,092 38,395



42. Segment information (cont’d) Geographical information

Revenue and non-current assets information based on the geographical location of customers and assets respectively are as follows:

North Asia South AsiaAmerica/Africa/Europe/

Middle East/Oceania Total2010 2009 2010 2009 2010 2009 2010 2009$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

TurnoverSales to external customers 298,455 258,642 168,669 159,915 41,614 58,210 508,738 476,767 Non-current assets 11,711 9,585 23,152 25,130 420 7,792 35,283 42,507

Non-current assets information presented above consist of fixed assets and intangible assets.

43. Financial risk management objectives and policies The Group’s principal financial instruments, other than derivative financial instruments, comprise bank loans and overdraft, finance leases, and cash and

short term deposits. The main purpose of these financial instruments is to finance the Group’s operations. The Group has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations.

The Group also enters into derivative transactions, including principally forward currency contracts. The purpose is to manage the currency risks arising from the Group’s operations and its sources of financing.

It is, and has been throughout the year under review, the Group’s policy that no trading in derivative financial instruments shall be undertaken.

The main risks arising from the Group’s financial instruments are interest rate risk, liquidity risk, foreign exchange risk and credit risk. The board reviews and agrees policies for managing each of these risks and they are summarised below.

The following sections provide details regarding the Group’s and Company’s exposure to the above-mentioned financial risks and the objectives, policies and processes for the management of these risks.

a) Interest rate riskThe Group obtains additional financing through bank borrowings and leasing arrangements. The Group’s policy is to obtain the most favourable in-terest rates available without increasing its foreign currency exposure. Surplus funds are placed with reputable banks and/or financial institutions.

The Group’s policy is to manage its exposure to interest risks using a mix of fixed and variable rate debts.

The interest rate risk is deemed not significant by management as the Group does not have significant bank borrowings.



43. Financial risk management objectives and policies (cont’d)

b) Liquidity riskThe Group’s exposure to liquidity risks may arise due to mismatches of financial assets and liabilities.

In the management of liquidity risk, the Group monitors and maintains a level of cash and cash equivalents and banking facilities deemed adequate by management to finance the Group’s operations and mitigate the effect of fluctuations in cash flows.

The table below summaries the maturity profile of the Group’s and the Company’s financial liabilities at the balance sheet date based on contrac-tual undiscounted payments.

2010$’000

2009$’000

1 yearor less

1 to5 years

Over 5years Total

1 yearor less

1 to5 years

Over 5years Total

GroupTrade creditors 19,039 – – 19,039 21,211 – – 21,211 Other creditors and accruals 53,972 – – 53,972 34,103 – – 34,103 Due to related parties 79 – – 79 114 – – 114 Due to associated companies 19,651 – – 19,651 16,651 – – 16,651 Due to a joint venture 99 – – 99 223 – – 223 Short-term bank loans 1,251 – – 1,251 3,622 – – 3,622 Bank loans 357 – – 357 22,523 353 – 22,876 Finance leases 66 128 – 194 64 53 – 117 Bills payable 13,670 – – 13,670 8,773 – – 8,773

108,184 128 – 108,312 107,284 406 – 107,690 CompanyTrade creditors 7,503 – – 7,503 7,496 – – 7,496 Other creditors 20,708 – – 20,708 9,975 – – 9,975 Due to subsidiary companies 11,458 – – 11,458 2,223 – – 2,223 Due to associated companies 12,664 – – 12,664 11,542 – – 11,542 Due to a joint venture 99 – – 99 223 – – 223 Bank loan – – – – 20,000 – – 20,000 Bills payable 13,670 – – 13,670 8,445 – – 8,445

66,102 – – 66,102 59,904 – – 59,904




c) Foreign exchange riskThe Group has transactional currency exposures arising from sales or purchases that are denominated in a currency other than the respective func-tional currencies of Group entities, primarily SGD, Renminbi (“RMB”), Ringgit Malaysia (“RM”), New Taiwan dollars (“NTD”) and Hong Kong dollars (“HKD”). The foreign currencies in which these transactions are denominated are SGD, United States dollar (“USD”) and Japanese Yen (“JPY”).

Approximately 5% (2009: 5%) of the Group’s sales are denominated in foreign currencies while 62% (2009: 61%) of costs are denominated in the respective functional currencies of the Group’s entities. The Group’s trade receivable and trade payable balances at the balance sheet date have similar exposure.

The Group and the Company also hold cash and cash equivalent denominated in foreign currencies for working capital purposes. At the balance sheet date, such foreign currency balances are mainly in USD.

The Group uses foreign exchange contracts in managing its foreign exchange risk resulting from cash flows from anticipated transactions and financing arrangements denominated in foreign currencies, primarily the JPY and USD. Transaction risk is calculated in each foreign currency and includes foreign currency denominated assets and liabilities and firm and probable purchase and sale commitments.

Sensitivity analysis for foreign currency risk

The following table demonstrates the sensitivity of the Group’s profit net of tax to a reasonably possible change in the Group’s foreign currencies against the respective functional currencies of the Group’s entities, with all other variables held constant.

Group2010 2009$’000 $’000

Profit net of tax Profit net of tax

USD/SGD - strengthened 3% (2009: 3%) -656 -608 - weakened 3% (2009: 3%) +656 +608JPY/SGD - strengthened 3% (2009: 3%) -65 -147 - weakened 3% (2009: 3%) +65 +147RMB/SGD - strengthened 3% (2009: 3%) +274 – - weakened 3% (2009: 3%) -274 –RM/SGD - strengthened 3% (2009: 3%) +57 – - weakened 3% (2009: 3%) -57 –




d) Credit riskCredit risk, or the risk of counterparties defaulting, is managed through the application of credit approvals, credit limits and monitoring procedures.

As the nature of the Group’s business is in retail, the majority of outstanding trade receivables are due from department stores and financial institu-tions.

There are no significant concentrations of credit risk within the Group or the Company.

Exposure to credit riskAt the balance sheet date, the Group’s and the Company’s maximum exposure to credit risk is represented by the carrying amount of each class of financial assets recognised in the balance sheets.

Information regarding credit enhancements for trade debtors is disclosed in Note 19.

Credit risk concentration profile The Group determines concentrations of credit risk by monitoring the country and industry sector profile of its trade debtors on an on-going basis. The credit risk concentration profile of the Group’s trade debtors at the balance sheet date is as follows:

Group2010 2009

$’000 % of total $’000 % of totalBy region: North Asia 31,672 83.3% 26,981 82.9%South Asia 6,331 16.7% 5,477 16.8% Others – – 112 0.3% 38,003 100% 32,570 100%

By business segments: Retail 33,972 89.4% 31,626 97.1%Distribution 4,031 10.6% 944 2.9% 38,003 100% 32,570 100%

Financial assets that are neither past due nor impaired Trade and other debtors that are neither past due nor impaired are creditworthy debtors with good payment record with the Group. Cash and cash equivalents and derivatives that are neither past due nor impaired are placed with or entered into with reputable financial insti-tutions or companies with high credit ratings and no history of default.

Financial assets that are either past due or impairedInformation regarding financial assets that are either past due or impaired is disclosed in Note 19 (Trade debtors).



44. Financial instruments

a) Fair value of financial instruments • Fairvalueoffinancial instrumentsbyclasses thatarenotcarriedat fairvalueandwhosecarryingamountsare reasonable

approximation of fair value

Cash and cash equivalents and other current financial assets and liabilities, short-term and long-term borrowings

The carrying amounts of these financial assets and liabilities are reasonable approximation of fair values, either due to their short-term nature or that they are floating rate instruments that are re-priced to market interest rates on or near the balance sheet date.

• Fairvalueoffinancialinstrumentsbyclassesthatarenotcarriedoutatfairvalueandwhosecarryingamountsarenotreasonableapproximation of fair value

The fair value of financial assets and liabilities by classes that are not carried at fair value and whose carrying amounts are not reasonable approximation of fair value are as follows:

2010 2009

Group

Carryingamount

$’000

Estimatedfairvalue$’000

Carryingamount

$’000

Estimatedfairvalue$’000

Financial assets:Unquoted debt securities 12,498 (i) – –Unquoted equity shares 930 (i) 930 (i)Long-term receivables 7,480 7,309 7,596 6,981Financialliabilities:Obligations under finance leases 176 172 108 94 CompanyFinancial assets:Unquoted debt securities 12,498 (i) – –Unquoted equity shares 930 (i) 930 (i)Long-term receivables 855 835 1,357 1,247

(i) Fair value information has not been disclosed for the Group’s and the Company’s unquoted investments that are carried at cost because fair value cannot be measured reliably. These instruments represent ordinary shares and senior preferred shares in two external parties and a joint venture company that are not quoted on any market. The Group and the Company does not intend to dispose of these investments in the foreseeable future.



44. Financial instruments (cont’d)

a) Fair value of financial instruments (cont’d)

• Fairvalueoffinancialinstrumentsbyclassesthatarenotcarriedatfairvalueandwhosecarryingamountsarenotreasonableapproximation of fair value (cont’d)

Determination of fair value

Long-term receivables and obligations under finance leases

The fair values as disclosed in the table above are estimated by discounting expected future cash flows at market incremental lending rate for similar types of lending, borrowing or leasing arrangements at the balance sheet date.

Set out below is the carrying amounts of each of the category of the Group’s and the Company’s financial instruments that are carried on the financial statements:

2010Loans and receivables

Available-for-sale

$’000 $’000GroupAssetsLong-term investments (Note 15) – 13,428 Long-term receivables (Note 16) 7,480 – Trade debtors (Note 19) 38,003 – Other debtors and deposits 5,899 – Due from related parties – trade (Note 21) 467 – Due from related parties – non-trade (Note 21) 13 – Due from associated companies – non-trade (Note 21) 1 – Due from a joint venture – trade (Note 21) 1,828 – Fixed deposits (Note 23) 16,793 – Cash and bank balances (Note 23) 56,364 –

Total 126,848 13,428






2010

Liabilities at amortised

cost$’000

GroupLiabilitiesBank loans (Note 28) 357Obligations under finance leases (Note 29) 177Trade creditors (Note 24) 19,039Other creditors and accruals 53,972Due to related parties – non-trade (Note 21) 79Due to associated companies – trade (Note 21) 19,433Due to associated companies – non-trade (Note 21) 218Due to a joint venture – trade (Note 21) 99Short-term bank loans (Note 27) 1,251Bills payable to banks (unsecured) 13,670

Total 108,295







Available-for-sale

$’000 $’000GroupAssetsLong-term investments (Note 15) – 930Long-term receivables (Note 16) 7,596 –Loan to associated company (Note 17) 176 –Trade debtors (Note 19) 32,570 –Other debtors and deposits 5,867 –Due from related parties – trade (Note 21) 1,090 –Due from related parties – non-trade (Note 21) 4 –Due from associated companies – non-trade (Note 21) 32 –Due from a joint venture – trade (Note 21) 406 –Fixed deposits (Note 23) 29,321 –Cash and bank balances (Note 23) 33,913 –

Total 110,975 930






2009


cost$’000

GroupLiabilities Bank loans (Note 28) 22,876Obligations under finance leases (Note 29) 108Trade creditors (Note 24) 21,211Other creditors and accruals 34,103Due to related parties – non-trade (Note 21) 114Due to associated companies – trade (Note 21) 16,345Due to associated companies – non-trade (Note 21) 306Due to a joint venture – trade (Note 21) 223Short-term bank loans (Note 27) 3,622Bills payable to banks (unsecured) 8,773

Total 107,681







Available-for-sale

$’000 $’000CompanyAssets Long-term investments (Note 15) – 13,428 Long-term receivables (Note 16) 855 – Trade debtors (Note 19) 4,067 – Other debtors and deposits 706 – Due from subsidiary companies – trade (Note 21) 2,283 – Due from subsidiary companies – non-trade (Note 21) 1,556 – Due from associated companies – non-trade (Note 21) 1 – Due from a joint venture – trade (Note 21) 1,828 – Fixed deposits (Note 23) 5,000 – Cash and bank balances (Note 23) 26,503 –

Total 42,799 13,428






2010


cost$’000

Company (cont’d)Liabilities Trade creditors (Note 24) 7,503Other creditors and accruals (Note 25) 20,708Due to subsidiary companies – trade (Note 21) 33Due to subsidiary companies – non-trade (Note 21) 11,425Due to associated companies – trade (Note 21) 12,446Due to associated companies – non-trade (Note 21) 218Due to a joint venture – trade (Note 21) 99Bills payable to banks (unsecured) 13,670

Total 66,102







Available-for-sale

$’000 $’000CompanyAssets Long-term investments (Note 15) – 930 Long-term receivables (Note 16) 1,357 – Loan to associated company (Note 17) 176 – Trade debtors (Note 19) 3,448 – Other debtors and deposits 283 – Due from subsidiary companies – trade (Note 21) 9,148 – Due from subsidiary companies – non-trade (Note 21) 855 – Due from associated companies – non-trade (Note 21) 32 – Due from a joint venture – trade (Note 21) 406 – Fixed deposits (Note 23) 15,500 – Cash and bank balances (Note 23) 11,687 –

Total 42,892 930






2009


cost$’000

Company (cont’d)Liabilities Bank loans (Note 28) 20,000Trade creditors (Note 24) 7,496Other creditors and accruals (Note 25) 9,975Due to subsidiary companies – non-trade (Note 21) 2,223Due to associated companies – trade (Note 21) 11,236Due to associated companies – non-trade (Note 21) 306Due to a joint venture – trade (Note 21) 223Bills payable to banks (unsecured) 8,445

Total 59,904




b) Derivative financial instruments and hedging activities

Derivative financial instruments included in the balance sheets at 31 December are as follows:

2010 2009Group and Company Assets

$’000Liabilities

$’000Assets $’000

Liabilities$’000

Forward currency contracts* – – – 32Total held for trading liabilities – – – 32

* The above forward currency contracts are entered into for hedging purposes and hedge accounting is not applied.

Fair value hedges

Hedge of financial liabilities

As at 31 December 2010, the Group held forward currency contracts designated as hedges of the currency risk related to recognised financial liabilities.

The terms of the foreign currency contracts have been negotiated to match the terms of the financial liabilities.

These derivatives were assessed to be highly effective and the change in fair value of the financial liability attributable to the hedged risk, amounting to $Nil (2009: $32,000), is recognised as a liability at 31 December 2010 with a corresponding loss recognised in the profit or loss. This loss has been offset by an equivalent gain on the hedged risks.

45. Capital managementThe objective of the Group’s capital management is to ensure that it maintains healthy ratios in order to support its business operation and maximise shareholders value.

The Group manages its capital structure and makes adjustment to it, as deemed appropriate by management. In order to maintain or adjust the capital structure, the Group may issue new shares, declared dividend or any other means as deemed appropriate by management. No changes were made in the objectives, policies or processes during the years ended 31 December 2010 and 2009.

As disclosed in Note 5(a), two subsidiary companies of the Group are required by the Foreign Enterprise Law of the PRC to contribute to and maintain a non-distributable statutory reserve fund whose utilisation is subject to approval by the relevant PRC authorities. This externally imposed capital requirement has been complied with by the above-mentioned subsidiary companies for the financial years ended 31 December 2010 and 2009.



45. Capital management (cont’d)The Group regards net debt to include all loans and borrowings less cash and cash equivalent (including fixed deposits) and capital to include all equities attributable to the equity holders of the Company, less the abovementioned statutory reserve fund. Group 2010 2009 $’000 $’000

Short-term bank loans Note 27 1,251 3,622Bank loans Note 28 357 22,876Finance leases obligations Note 29 177 108Bills payable 13,670 8,773 15,455 35,379Less: - Cash and cash equivalent Note 23 (73,157) (63,234)Net cash (57,702) (27,855)Equity attributable to the equity holders of the Company 108,124 96,679Less: - China statutory fund (Note 5a) (4,003) (1,640)Total capital 104,121 95,039

The Group is currently in net cash position. The Group will continue to be guided by prudent financial policies of which gearing is an important aspect.

46. Authorisation of financial statements for issueThe financial statements for the year ended 31 December 2010 were authorised for issue in accordance with a resolution of the directors on 11 February 2011.



MAJOR PROPERTIES

Description Location Area (sq m) Tenure (years)Unexpired term of

lease (years)

Residential condominium Unit 8C, 1523-2Dong Fang Road, PudongNew Area, Shanghai, PRC

165 68 52

Strata units in commercial building 11F, 11F-1, 11F-2 and 11F-3,No.176, Jian Yi Road,Chung Ho City, Taipei, Taiwan

1,572 Freehold NA

Land (1) Jian Kang section,Chung Ho City, Taipei, Taiwan

779/10000 share of 30,072.47

Freehold NA

Note:-(1) This is the land on which the building at 11F, 11F-1, 11F-2 and 11F-3, No.176, Jian Yi Road, was constructed on.


Issued and Fully Paid-Up Capital (including Treasury Shares): 715,566,097Number of Issued Shares (excluding Treasury Shares): 673,023,097Number/Percentage of Treasury Shares: 42,543,000 (6.32%)Class Of Shares: Ordinary sharesVoting Rights (excluding Treasury Shares): One Vote Per Share

SIZE OF NO. OF SHAREHOLDINGS SHAREHOLDERS % NO. OF SHARES %

1 – 999 353 9.11 150,523 0.021,000 – 10,000 2,378 61.40 12,252,180 1.8210,001 – 1,000,000 1,113 28.74 58,152,973 8.641,000,001 & ABOVE 29 0.75 602,467,421 89.52TOTAL 3,873 100.00 673,023,097 100.00 TOP TWENTY SHAREHOLDERS NO. OF SHARES %

HSBC (SINGAPORE) NOMINEES PTE LTD 226,679,410 33.68RON SIM CHYE HOCK 125,004,978 18.57CITIBANK NOMINEES SINGAPORE PTE LTD 85,771,915 12.74 DBS NOMINEES PTE LTD 39,420,998 5.86 RAFFLES NOMINEES (PTE) LTD 24,966,000 3.71 UNITED OVERSEAS BANK NOMINEES PTE LTD 17,108,723 2.54 PHILLIP SECURITIES PTE LTD 8,266,668 1.23 DB NOMINEES (S) PTE LTD 8,216,171 1.22 KIM ENG SECURITIES PTE. LTD. 7,689,000 1.14 TEO SWAY HEONG 5,461,547 0.81 MORGAN STANLEY ASIA (SINGAPORE) PTE LTD 4,987,880 0.74 HSIEH WEN-HSU OR YANG PAO-FENG 4,511,560 0.67 DBSN SERVICES PTE LTD 4,341,503 0.65 CIMB SECURITIES (SINGAPORE) PTE LTD 4,258,807 0.63 HENG KHENG LONG OR CYNTHIA POA KHENG BEE 4,157,000 0.62 UOB KAY HIAN PTE LTD 3,936,200 0.58 OCBC SECURITIES PRIVATE LTD 3,204,175 0.48 LEOW LIAN SOON 2,950,000 0.44 CHOU JEN CHUNG 2,715,000 0.4 TEO CHAY LEE 2,296,540 0.34

TOTAL 585,944,075 87.05

SUBSTANTIAL SHAREHOLDERS DIRECT INTEREST DEEMED INTEREST %

RON SIM CHYE HOCK 220,757,978 183,920,157 60.13 56.55

PERCENTAGE OF SHAREHOLDING IN PUBLIC’S HAND Approximately 37% of the company’s shares are held in the hands of the public. Accordingly, the Company has complied with Rule 723 of the Listing Manual by SGX-ST.

SHAREHOLDINGS STATISTICSas at 11 February 2011

ExcludingTreasurysharesIncludingTreasuryshares


SIZE OF NO. OF SHAREHOLDINGS WARRANTHOLDERS % NO. OF WARRANTS %

1 – 999 131 33.00 27,574 0.031,000 – 10,000 175 44.08 615,341 0.7110,001 – 1,000,000 86 21.66 6,269,212 7.271,000,001 & ABOVE 5 1.26 79,373,774 91.99TOTAL 397 100.00 86,285,901 100.00 TOP TWENTY WARRANTHOLDERS NO. OF WARRANTS %

HSBC (SINGAPORE) NOMINEESS PTE LTD 45,408,838 52.63RON SIM CHYE HOCK 30,030,264 34.80BANK OF SINGAPORE NOMINEES PTE LTD 1,696,000 1.97CITIBANK NOMINEES SINGAPORE PTE LTD 1,208,199 1.40TEO SWAY HEONG 1,030,473 1.19DB NOMINEES (S) PTE LTD 982,158 1.14KIM ENG SECURITIES PTE. LTD. 593,319 0.69PHILLIP SECURITIES PTE LTD 381,155 0.44TEO CHAY LEE 371,122 0.43CIMB SECURITIES (SINGAPORE) PTE LTD 351,906 0.41NG POH CHENG 336,252 0.39LEOW LIAN SOON 304,614 0.35ENG HSI KO PETER 273,269 0.32OCBC SECURITIES PRIVATE LTD 228,477 0.26EIO HOCK CHUAR 207,000 0.24ONG KIAN MIN 198,633 0.23LIM CHOK FIN 168,000 0.19ONG CHEE BENG 87,000 0.10MISHA PRATAP NAMBIAR 77,656 0.09DBS VICKERS SECURITIES (S) PTE LTD 76,906 0.09

84,011,241 97.36

SUBSTANTIAL WARRANTHOLDERS DIRECT INTEREST DEEMED INTEREST %

RON SIM CHYE HOCK 75,410,926 1,030,473 88.59

WARRANTHOLDINGS STATISTICSas at 11 February 2011


Notice of Annual General Meeting 159

Appendix l 165

Appendix ll 175

Proxy Form 193


NOTICE IS HEREBY GIVEN that the Annual General Meeting of OSIM International Ltd (“the Company”) will be held at 65 Ubi Avenue 1, OSIM Headquarters, Singapore 408939 on Friday, 18 March 2011 at 2.30 p.m. for the following purposes:

AS ORDINARY BUSINESS

1. To receive and adopt the Directors’ Report and the Audited Accounts of the Company for the year ended 31 December 2010 together with the Auditors’ Report thereon. (Resolution 1)

2. To declare a final dividend of 1.00 cent per ordinary share for the year ended 31 December 2010. (Resolution 2)

3. To re-elect the following Director who retires pursuant to Article 97 of the Company’s Articles of Association and being eligible, offers himself for re-election:

Mr Colin Low Tock Cheong (Independent Director and member of the Audit Committee) (Resolution 3)

(Note: Mr Low will, upon re-election as Director of the Company, remain as a member of the Audit Committee, Remuneration and Nominating Committees and will be considered independent).

4. To re-elect the following Directors who retire pursuant to Article 92 of the Company’s Articles of Association and being eligible, offer themselves for re-election:

Ms Teo Sway Heong (Non-Executive Director) (Resolution 4)

Mr Leow Lian Soon (Executive Director) (Resolution 5)

5. To approve the payment of Directors’ fees of S$147,500 for the year ended 31 December 2010 (2009: S$147,500). (Resolution 6) 6. To re-appoint Messrs Ernst & Young LLP as the Company’s Auditors and to authorise the Directors to fix their remuneration. (Resolution 7)

7 To transact any other ordinary business which may properly be transacted at an Annual General Meeting.

NOTICE OF ANNUAL GENERAL MEETING


AS SPECIAL BUSINESS

To consider and if thought fit, to pass the following resolutions as Ordinary Resolutions, with or without any modifications:

8. Authority to issue shares up to 50 per centum (50%) of the issued shares in the capital of the Company(a) That pursuant to Section 161 of the Companies Act, Cap. 50 and Rule 806 of the Listing Manual of the Singapore Exchange Securities Trading

Limited, the Directors of the Company be authorised and empowered to:

(i) issue shares in the Company (“shares”) whether by way of rights, bonus or otherwise; and/or(ii) make or grant offers, agreements or options (collectively, “Instruments”) that might or would require shares to be issued, including but not

limited to the creation and issue of (as well as adjustments to) options, warrants, debentures or other instruments convertible into shares,

at any time and upon such terms and conditions and for such purposes and to such persons as the Directors of the Company may in their absolute discretion deem fit; and

(b) (notwithstanding the authority conferred by this Resolution may have ceased to be in force) issue shares in pursuance of any Instrument made or granted by the Directors of the Company while this Resolution was in force,

provided that:

(1) the aggregate number of shares (including shares to be issued in pursuance of the Instruments, made or granted pursuant to this Resolution) and Instruments to be issued pursuant to this Resolution shall not exceed fifty per centum (50%) of the total number of issued shares (excluding treasury shares) in the capital of the Company (as calculated in accordance with sub-paragraph (2) below), of which the aggregate number of shares and Instruments to be issued other than on a pro rata basis to existing shareholders of the Company shall not exceed twenty per centum (20%) of the total number of issued shares (excluding treasury shares) in the capital of the Company (as calculated in accordance with sub-paragraph (2) below);

(2) (subject to such calculation as may be prescribed by the Singapore Exchange Securities Trading Limited) for the purpose of determining the aggregate number of shares and Instruments that may be issued under sub-paragraph (1) above, the percentage of issued shares and Instruments shall be based on the total number of issued shares (excluding treasury shares) in the capital of the Company at the time of the passing of this Resolution, after adjusting for:

(a) new shares arising from the conversion or exercise of the Instruments or any convertible securities that have been issued pursuant to any previous shareholder approval and which are outstanding as at the date of the passing of this Resolution;

(b) new shares arising from exercising share options or vesting of share awards outstanding and subsisting at the time of the passing of this Resolution; and

(c) any subsequent bonus issue, consolidation or subdivision of shares;

NOTICE OF ANNUAL GENERAL MEETING (CONT’D)


(3) in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the Listing Manual of the Singapore Exchange Securities Trading Limited for the time being in force (unless such compliance has been waived by the Singapore Exchange Securities Trading Limited) and the Articles of Association of the Company; and

(4) unless revoked or varied by the Company in a general meeting, such authority shall continue in force (i) until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier or (ii) in the case of shares to be issued in pursuance of the Instruments, made or granted pursuant to this Resolution, until the issuance of such shares in accordance with the terms of the Instruments.[See Explanatory Note (i)] (Resolution 8)

9. Authority to issue shares under the OSIM Share Option SchemeThat pursuant to Section 161 of the Companies Act, Cap. 50, the Directors of the Company be authorised and empowered to offer and grant options under the OSIM Share Option Scheme (“the Scheme”) and to issue from time to time such number of shares in the capital of the Company as may be required to be issued pursuant to the exercise of options granted by the Company under the Scheme, whether granted during the subsistence of this authority or otherwise, provided always that the aggregate number of additional ordinary shares to be issued pursuant to the Scheme shall not exceed fifteen per centum (15%) of the total number of issued shares (excluding treasury shares) in the capital of the Company from time to time and that such authority shall, unless revoked or varied by the Company in a general meeting, continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier.[See Explanatory Note (ii)] (Resolution 9)

10. Renewal of Shareholders’ Mandate for Interested Person TransactionsThat for the purposes of Chapter 9 of the Listing Manual of the Singapore Exchange Securities Trading Limited:

(a) approval be given for the renewal of the mandate for the Company, its subsidiaries and target associated companies or any of them to enter into any of the transactions falling within the types of Interested Person Transactions as set out in Appendix I to the Annual Report dated 11 February 2011 ( “Appendix I”) with any party who is of the class of Interested Persons described in Appendix I, provided that such transactions are carried out in the normal course of business, at arm’s length and on commercial terms and in accordance with the guidelines of the Company for Interested Person Transactions as set out in Appendix I (the “Shareholders’ Mandate”);

(b) the Shareholders’ Mandate shall, unless revoked or varied by the Company in a general meeting, continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier; and

(c) authority be given to the Directors of the Company to complete and do all such acts and things (including executing all such documents as may be required) as they may consider necessary, desirable or expedient to give effect to the Shareholders’ Mandate as they may think fit.

[See Explanatory Note (iii)] (Resolution 10)




11. Renewal of Share Buy-back MandateThat:(1) for the purposes of Sections 76C and 76E of the Companies Act, Cap 50 of Singapore (the “Companies Act”), the exercise by the Directors of the

Company of all the powers of the Company to purchase or otherwise acquire issued ordinary shares in the capital of the Company (the “Shares”) not exceeding in aggregate the Maximum Limit (as hereafter defined), at such price or prices as may be determined by the Directors from time to time up to the Maximum Price (as hereafter defined), whether by way of:

(a) market purchase(s) on the SGX-ST; and/or(b) off-market purchase(s) (if effected otherwise than on the SGX-ST) in accordance with any equal access scheme(s) as may be determined

or formulated by the Directors as they consider fit, which scheme(s) shall satisfy all the conditions prescribed by the Companies Act,

and otherwise in accordance with all other laws and regulations and rules of the SGX-ST as may for the time being be applicable, be and is hereby authorised and approved generally and unconditionally (the “Share Purchase Mandate”);

(2) unless varied or revoked by the Company in general meeting, the authority conferred on the Directors of the Company pursuant to the Share Purchase Manadate may be exercised by the Dirctors at any time and from time to time during the period commencing from the date of the passing of this Resolution and expiring on the earlier of:(a) the date on which the next Annual General Meeting of the Company is held; and(b) the date by which the next Annual General Meeting of the Company is required by law to be held;

(3) In this Resolution:

“Average Closing Price” means the average of the last dealt prices of a Share for the five consecutive trading days on which the Shares are transacted on the SGX-ST immediately preceding the date of market purchase by the Company or, as the case may be, the date of the making of the offer pursuant to the off-market purchase, and deemed to be adjusted in accordance with the listing rules of the SGX-ST for any corporate action which occurs after the relevant five days period;

“date of the making of the offer” means the date on which the Company announces its intention to make an offer for the purchase or acquisition of Shares from holders of Shares, stating therein the purchase price (which shall not be more than the Maximum Price calculated on the foregoing basis) for each Share and the relevant terms of the equal access scheme for effecting the off-market purchase;

“Maximum Limit” means that number of issued Shares representing 10% of the total number of issued Shares as at the date of the passing of this Resolution (excluding any Shares which are held as treasury shares as at that date); and

“Maximum Price”, in relation to a Share to be purchased or acquired, means the purchase price (excluding brokerage, commission, applicable goods and services tax and other related expenses) which shall not exceed:(a) in the case of a market purchase of a Share, 105% of the Average Closing Price of the Shares; and(b) in the case of an off-market purchase of a Share pursuant to an equal access scheme, 110% of the Average Closing Price of the Shares;

and


(4) the Directors of the Company and/or any of them be and are hereby authorised to complete and do all such acts and things (including executing such documents as may be required) as they and/or he may consider expedient or necessary to give effect to the transactions contemplated and/or authorised by this Resolution.

[See Explanatory Note (iv)] (Resolution 11)

By Order of the Board

Lee Hwai KiatCompany SecretarySingapore, 3 March 2011



Explanatory Notes:(i) The Ordinary Resolution 8 in item 8 above, if passed, will empower the Directors of the Company from the date of this Meeting until the date of the next

Annual General Meeting of the Company, or the date by which the next Annual General Meeting of the Company is required by law to be held or such authority is varied or revoked by the Company in a general meeting, whichever is the earlier, to issue shares, make or grant instruments convertible into shares and to issue shares pursuant to such instruments, up to a number not exceeding, in total, 50% of the total number of issued shares (excluding treasury shares) in the capital of the Company, of which up to 20% may be issued other than on a pro-rata basis to existing shareholders of the Company.

For determining the aggregate number of shares that may be issued, the percentage of issued shares in the capital of the Company will be calculated based on the total number of issued shares (excluding treasury shares) in the capital of the Company at the time this Ordinary Resolution is passed after adjusting for new shares arising from the conversion or exercise of the Instruments or any convertible securities, the exercise of share options or the vesting of share awards outstanding or subsisting at the time when this Ordinary Resolution is passed and any subsequent bonus issue, consolidation or subdivision of shares.

(ii) The Ordinary Resolution 9 in item 9 above, if passed, will empower the Directors of the Company, from the date of this Meeting until the next Annual General Meeting of the Company, or the date by which the next Annual General Meeting of the Company is required by law to be held or such authority is varied or revoked by the Company in a general meeting, whichever is the earlier, to issue shares in the Company pursuant to the exercise of options granted or to be granted under the Scheme up to a number not exceeding in total (for the entire duration of the Scheme) fifteen per centum (15%) of the total number of issued shares (excluding treasury shares) in the capital of the Company from time to time.

(iii) The Ordinary Resolution 10 proposed in item 10 above, if passed, will authorise the Interested Person Transactions as described in Appendix I and recurring in the year and will empower the Directors of the Company to do all acts necessary to give effect to the Shareholders’ Mandate. This authority will, unless previously revoked or varied by the Company in a general meeting, expire at the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held whichever is the earlier.

(iv) The Ordinary Resolution 11 proposed in item 11 above, if passed, will authorise the Directors of the Company from the date of this Meeting until the next Annual General Meeting of the Company, or the date by which the next Annual General Meeting of the Company is required by law to be held or such authority is varied or revoked by the Company in a general meeting, whichever is the earlier, to purchase up to 10% of the total number of issued ordinary shares in the capital of the Company.

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 stead. A proxy need not be a Member of the Company.

2. The instrument appointing a proxy must be deposited at the Registered Office of the Company at 65 Ubi Avenue 1, OSIM Headquarters, Singapore

408939 not less than forty-eight (48) hours before the time appointed for holding the Meeting.



OSIM INTERNATIONAL LTD(Incorporated In The Republic of Singapore with Limited Liability)

(Company Registration No. 198304191N)

APPENDIX I IN RELATION TO DETAILS OF THEPROPOSED RENEWAL OF THE SHAREHOLDERS’ MANDATE FOR

INTERESTED PERSON TRANSACTION

11 February 2011This Appendix is circulated to Shareholders of OSIM International Ltd (the “Company”) together with the Company’s Annual Report. Its purpose is to provide Shareholders with the relevant information relating to, and to seek Shareholders’ approval for, the renewal of the Shareholders’ mandate to be tabled at the Annual General meeting to be held on 18 March 2011 at 2.30pm at 65 Ubi Avenue 1 OSIM Headquarters Singapore 408939.

The Notice of Annual General Meeting and a Proxy Form are enclosed with the Annual Report. The Singapore Exchange Securities trading Limited takes no responsibility for the correctness of any of the statements made, reports contained/referred to, or opinions expressed in this Appendix.

APPENDIX I


DEFINITIONSIn this appendix (“Appendix I”), the following definitions apply throughout unless otherwise stated:

“AGM” : the annual general meeting of the Company to be convened on 18 March 2011, notice of which is set out in the Annual Report 2010 despatched together with this Appendix I.

“Audit Committee” : the audit committee of the Company as at the date of this Appendix, comprising of Mr Tan Soo Nan (Chairman), Mr Colin Low Tock Cheong and Mr Sin Boon Ann.

“CDP” : the Central Depository (Pte) Limited

“Companies Act” : the Companies Act, Chapter 50, of Singapore as amended by the Companies (Amendment) Act

“Company” or “OSIM” : OSIM International Ltd

“Directors” : the Directors of the Company for the time being.

“Group” : the Group refers to the Company, its subsidiaries, joint ventures and associated companies

“Interested Persons Transactions” : defined in paragraph 3.2 of this Appendix

“Latest Practicable Date” : the latest practicable date prior to the printing of this Appendix, being 11 February 2011

“Listing Manual” : the listing manual of the SGX-ST, which became effective on July 1, 2002, including amendments made thereto up to the date of this Appendix.

“Notice of AGM” : the notice of AGM as set out on page 159 of this Annual Report

“NTA” : net tangible assets

“SGX-ST” : the Singapore Exchange Securities Trading Limited

“Shares” : ordinary shares in the capital of the Company. “Share Options” : options to subscribe for new Shares granted pursuant to share option schemes/plans implemented by the

Company.

“Shareholders” : registered holders of Shares, except that where the registered holder is CDP, the term “Shareholders” shall, where the context admits, mean the Depositors whose Securities Account are credited with Shares.

APPENDIX I (CONT’D)


“Shareholders’ Mandate” : defined in paragraph 2.4 of this Appendix

“$” and “cents” : Singapore dollars and cents, respectively.

“%” or “per cent” : Per centum or percentage

The terms “Depositor” and “Depository Agent” shall have the meanings ascribed to them respectively in Section 130A of the Companies Act.

Words importing the singular shall, where applicable, include the plural and vice versa. Words importing the masculine gender shall, where applicable, include the feminine and neuter genders. References to persons shall include corporations.

Any reference in this Appendix to any enactment is a reference to that enactment as for the time being amended or re-enacted. Any word defined under the Companies Act or any statutory modification thereof and not otherwise defined in this Appendix shall have the same meaning assigned to it under the Companies Act or any statutory modification thereof, as the case may be.

Any reference to a time of day in this Appendix is made by reference to Singapore time unless otherwise stated.



PROPOSED RENEWAL OF THE SHAREHOLDERS’ MANDATEFOR INTERESTED PERSON TRANSACTIONS

1. INTRODUCTION1.1 The purpose of this Appendix is to provide the Shareholders of the Company with information relating to, and to seek Shareholders’ approval at the AGM to

renew the Shareholders’ Mandate that will enable the Company to enter into transactions with the Interested Persons in compliance with Chapter 9 of the Listing Manual.

1.2 Pursuant to Chapter 9 of the Listing Manual, the Shareholders’ Mandate was renewed at an annual general meeting held on 12 April 2010, will continue in force until the forthcoming annual general meeting. Accordingly, the Directors propose that the Shareholders’ Mandate be renewed at the AGM to Shareholders’ Mandate to be held on 18 March 2011. The Shareholders’ Mandate will take effect from the date of the passing of the Ordinary Resolution approving the Shareholders’ Mandate until the next Annual General Meeting of the Company

1.3 There are no modifications to the existing Shareholders’ Mandate in relation to the nature of Interested Person Transactions which covers the following categories of transactions:

1.3.1 franchising, distribution and licensing agreements 1.3.2 the sale of healthy lifestyle products

1.4 There are no modifications to the review procedures for such transactions (as described in paragraph 3.4)

2. CHAPTER 9 OF THE LISTING MANUAL2.1 Chapter 9 (“Chapter 9”) of the Listing Manual of the SGX-ST deals with transactions in which a listed company or any of its subsidiaries or associated

companies (that are not listed on the SGX-ST or an approved exchange, provided that the listed group, or the listed group and its interested person(s) (as defined in paragraph 2.5.1) has control over) proposes to enter with a party who is an Interested Person (as defined below) of the listed company.

2.2 Save for transactions which are not considered to put the listed company at risk and which are therefore excluded from the ambit of Chapter 9, shareholder approval and/or an immediate announcement would be required in respect of transactions with Interested Persons if certain financial thresholds are reached or exceeded. Specifically, an immediate announcement is required for the following transactions of a certain threshold where:-

2.2.1 the value of a proposed transaction is equal to or exceeds 3% of the Group’s latest audited NTA; or 2.2.2 the aggregate value of all transactions entered into with the same Interested Person during the same financial year, is equal to or more than 3% of

the Group’s latest audited NTA. An announcement will have to be made immediately of the latest transaction and all future transactions entered into with that same interested person during the financial year,

and shareholder approval (in addition to an immediate announcement) is required where:-

2.2.3 the value of a proposed transaction is equal to or exceeds 5% of the latest Group’s audited NTA; or 2.2.4 the aggregate value of all transactions (including the subject transaction) entered into with the same Interested Person during the same financial

year, is equal to or more than 5% of the Group’s latest audited NTA. The aggregation will exclude any transaction that has been approved by shareholders previously, or is the subject of aggregation with another transaction that has been approved by shareholders.




2.3 For the purposes of aggregation, Interested Persons Transactions below $100,000 each are to be excluded.

2.4 Part VIII of Chapter 9 allows for a listed company to seek a mandate (the “Shareholders’ Mandate”) from its shareholders for recurrent transactions with Interested Person of a revenue or trading nature necessary for its day-to-day operations such as sales of supplies and materials, but not in respect to the purchase or sale of assets, undertakings or businesses.

2.5 For the purposes of Chapter 9:-

2.5.1 an “interested person” means a director, chief executive officer or controlling shareholder of the listed company, or an associate of such director, chief executive officer or controlling shareholder;

2.5.2 a “controlling shareholder” is a person who holds directly or indirectly 15% or more of the nominal amount of all voting shares in the listed company (unless otherwise excepted by SGX-ST) or in fact exercises control over a company; and

2.5.3 an “associate” in relation to any director, chief executive officer or controlling shareholder (being an individual) means his immediate family (i.e., spouse, children, adopted children, step-children, siblings and parents), the trustees of any trust of which he or his immediate family is a beneficiary or, in the case of a discretionary trust, is a discretionary object, and any company in which he and his immediate family together (directly or indirectly) have an interest of 30% or more. An “associate” in relation to a controlling shareholder (being a company) means any other company which is its subsidiary or holding company or is a subsidiary of such holding company or one in the equity of which it and/or such other company or companies taken together (directly or indirectly) have an interest of 30% or more.

.3. SHAREHOLDERS’ MANDATE

3.1 Background 3.1.1 The principal activities of OSIM are marketing, distributing and franchising of a comprehensive range of healthy lifestyle products. Other than Daito-

OSIM Healthcare Appliance (Suzhou) Co., Ltd, and Daito-OSIM (Thailand) Co., Ltd, all the Group’s production needs are outsourced, for example, to contract manufacturers in Japan and Taiwan as the Group focuses on its strengths in marketing and brand management. As at the Latest Practicable Date, the Group has 1,169 point-of-sales outlets over 30 countries worldwide.

3.1.2 It is envisaged that in the normal course of business of the Group, transactions involving the sale, purchase, provision or supply of services and/or products between the Group and Interested Persons will likely occur from time to time. Such transactions include, but are not limited to, licensing and distribution agreements, franchise agreements, transactions of a revenue and trading nature.

3.1.3 The Directors are seeking the approval from Shareholders for the proposed renewal, of the Shareholders’ Mandate for the Group to enter, in their

normal course of business, with the class of Interested Persons described in paragraph 3.3, into the Interested Person Transactions described in paragraph 3.2, provided that such transactions are made at arm’s length and on the Group’s normal commercial terms and not prejudicial to the interests of the Company and its minority Shareholders.

3.1.4 The Shareholders’ Mandate will take effect from the date of the passing of Ordinary Resolution 10 to be proposed at the AGM until the next annual

general meeting of the Company. Thereafter, approval from Shareholders for a subsequent renewal of the Shareholders’ Mandate will be sought at each subsequent Annual General Meeting of the Company.


3.2 Nature and Scope of the Interested Person Transactions Contemplated under the Shareholders’ Mandate 3.2.1 Franchising, distribution and licensing agreements

Within the ambit of this category are franchising arrangements with FK Marketing Ltd, and distribution and licensing agreements with the PRC affiliates (as defined in paragraph 3.3.1).

3.2.2 Sales of healthy lifestyle products

This category covers the sale of healthy lifestyle products such as, but not limited to, massage chairs, foot reflexology rollers, handheld massagers and fitness equipments to Interested Persons, including, without limitation, agreements for the sale, supply and distribution of such products.

3.3 Class of Interested Persons 3.3.1 Interested Person refers to a director, chief executive officer or controlling shareholder of OSIM, or an associate (as defined in paragraph 2.5.3 of

the Appendix) of such director, chief executive officer or controlling shareholder. The Shareholders’ Mandate, if renewed, will apply to the following class of Interested Persons only:

– OSIM (Langfang) Co., Ltd – OSIM (Guangzhou) Co., Ltd (the above collectively known as the “PRC affiliates”) – FK Marketing Ltd

Note: Ms Tao Dong Mei, who is the wife of Mr Leow Lian Soon, has a 90 per cent interest in the shares of OSIM (Langfang) Co., Ltd. As such, Mr Leow Lian Soon is deemed to have a 90 percent interest in the shares of the same company. Ms Tao Dong Mei and OSIM (Langfang) Co., Ltd each owns 50 per cent in OSIM (Guangzhou) Co., Ltd. Mr Francis Leow Lian Teck who is the brother of Mr Leow Lian Soon owns 50 percent interest in the shares of FK Marketing Ltd. Accordingly, Mr Leow Lian Soon is deemed to have a 50 percent interest in the shares of the aforementioned four companies.

3.3.2 Any person or company who, at the point in time when the transaction is proposed to be entered into, is an associate of any one or more of the persons named above. The term “associate” has the meaning set out in paragraph 2.5.3 of the Appendix.

3.3.3 Transactions with Interested Persons which do not fall within the ambit of the Shareholders’ Mandate shall be subject to the relevant provisions of Chapter 9 of the Listing Manual.

3.4 Review Procedures for Interested Person Transactions 3.4.1 To ensure that the Interested Person Transactions arising in the normal course of business of the Group are undertaken at arm’s length and on the

Group’s normal commercial terms, and will not be prejudicial to the interests of the Company and its minority Shareholders, the following guidelines will be implemented for the review and approval of Interested Person Transactions under the proposed renewal of the Shareholders’ Mandate:-(a) Franchising, distribution and licensing agreements No franchising, distribution and licensing fees are payable by the PRC Affiliates.




(b) Sales of healthy lifestyle products The sale of healthy lifestyle products by the Group shall not be approved unless the pricing policy and the terms are no more favorable to

the Interested Person than the usual commercial terms extended to unrelated third parties taking into consideration factors such as, but not limited to, market conditions, brand awareness and tax structures, in the relevant markets.

The selling price of products is reviewed by the Chief Executive Officer, the Chief Operating Officer and the Chief Financial Officer on a regular basis.

The following transactions are subject to review by the Audit Committee and approval by the Board of Directors:- (i) transactions of value above $1 million; or (ii) transactions with the same Interested Person with aggregated value of above 3% of the Company’s NTA. The Audit Committee

will review the transactions which are subject to the aggregation.

3.4.2 Each Interested Person Transaction will be properly documented and submitted to Audit Committee which will review such transactions on a quarterly basis to ensure that they are carried out on normal arm’s length and commercial terms.

3.4.3 In addition to the guidelines set out above, the Audit Committee of the Company will also undertake the following periodic reviews: (a) the Audit Committee will carry out an annual review to ascertain that the established guidelines and procedures for the Interested Person

Transactions have been compiled with; and (b) the Audit Committee will consider from time to time whether the established guidelines and procedures for the Interested Person Transactions

have become inappropriate or are unable to ensure that the transactions will be on the Group’s normal commercial terms and will not be prejudicial to the interests of the Company and its minority Shareholders.

(c) If a member of the Audit Committee has an interest in an Interested Person Transaction to be reviewed by the Audit Committee, he will abstain from any decision-making in respect of that transaction and the review and approval of that transaction will be undertaken by the remaining members of the Audit Committee.

4. Rationale and Benefit The Shareholders’ Mandate will enhance the ability of companies in the Group to pursue business opportunities which are time-sensitive in nature, and will

eliminate the need for OSIM to announce, or to announce and convene separate general meetings on each occasion to seek Shareholder prior approval for the entry by the relevant company in the Group into such transactions. This will substantially reduce the expenses associated with the convening of general meetings on an ad hoc basis, improve administrative efficacy considerably, and allow manpower resources and time to be channeled towards attaining other corporate objectives.

5. Validity Period of the Shareholders Mandate The renewal of the Shareholders Mandate will take effect from the passing of the ordinary resolution relating thereto, and will (unless revoked or varied by

the Company in general meeting) continue in force until the next Annual General Meeting of the Company following thereafter. Approval from Shareholders will be sought for the renewal of the Shareholders Mandate at the subsequent Annual General Meeting of the Company and each Annual General Meeting thereafter, subject to satisfactory review by the Audit Committee of its continued application to the transactions with Interested Persons.


6. Disclosure of Interested Person Transactions pursuant to Shareholders Mandate 6.1. The Company will announce the aggregate value of transactions conducted with Interested Persons pursuant to the Shareholders Mandate for

the quarterly financial periods which the Company is required to report on pursuant to the Listing Manual and within the time required for the announcement of such report.

6.2. Disclosure will also be made in the Company’s Annual Report of the aggregate value of transactions conducted with Interested Persons pursuant to the Shareholders Mandate during the financial year, and in the Annual Reports for subsequent financial years that the Shareholders Mandate continues in force, in accordance with the requirements of Chapter 9 of the Listing Manual.

7. INTERESTS OF DIRECTORS AND SUBSTANTIAL SHAREHOLDERS 7.1 Directors As at the Latest Practicable Date, the direct and indirect interests of each of the Directors in the Shares and Share Options of the Company are as

follows:-

Number of Shares Number of Warrants Number of Shares comprised in

outstanding Share Options

Direct Interest Indirect Interest Direct Interest Indirect InterestNumber %(1) Number %(1) Number %(2) Number %(2)

Ron Sim Chye Hock 220,757,978 30.85 183,920,157 25.70 75,410,926 54.83 1,030,473 0.75 –Teo Sway Heong 5,661,547 0.79 399,016,588 55.76 1,030,473 0.75 75,410,926 54.83 –Teo Chay Lee 2,296,540 0.32 300,000 0.04 365,500 0.27 – – 445,500Leow Lian Soon 2,950,000 0.41 – – 300,000 0.22 – – 40Lee Hwai Kiat 2,004,000 0.28 496,000 0.07 76 – – – 120Tan Soo Nan 10,000 0.001 – – – – – – –Sin Boon Ann – – – – – – – – –Colin Low Tock Cheong – – – – – – – – –Khor Peng Soon 52,000 0.0073 – – 29,446 0.02 – – –

Note:-(1) Based on the total issued and fully paid-up ordinary share capital of 715,566,097 shares as at the Latest Practicable Date.(2) Based on the total issued warrants of 137,542,827 as at the Latest Practicable Date

7.2 Substantial Shareholders As at 11 February 2011, being the Latest Practicable Date, the sole substantial Shareholder of the Company is Mr Ron Sim Chye Hock who has a direct interest in 220,757,978 shares and a deemed interest in 183,920,157 shares, together comprising 56.55 per cent of the total issued and fully paid-up ordinary share capital of the Company.

7.3 Mr Ron Sim Chye Hock and Mr Leow Lian Soon will abstain, and have undertaken to ensure that their associates will abstain, from voting at the AGM in respect of the Shares held by them respectively on Resolution 10 in the Notice of AGM on page 161 of the Annual Report relating to the proposed renewal of, the Shareholders’ Mandate for Interested Person Transactions.

7.4 Mr Ron Sim Chye Hock and Mr Leow Lian Soon will abstain, and have undertaken to ensure that their associates will abstain, from voting at the AGM in respect of the Shares held by them respectively on Resolution 11 in the Notice of AGM on page 162 of the Annual Report relating to the proposed renewal of, the Shareholders’ Mandate.




8. STATEMENT OF THE AUDIT COMMITTEE The Audit Committee of the Company has reviewed the terms of the proposed Shareholders’ Mandate subject to renewal. Having considered, inter alia, the

scope, the guidelines on review procedures, the rationale and the benefits of the Shareholders’ Mandate, the Audit Committee confirms that

(i) the review procedures for determining the prices of Interested Person Transactions have not changed since approval for the Shareholders’ Mandate was last given; and

(ii) the review procedures referred to in the above paragraph are sufficient to ensure that the Interested Person Transactions will be transacted on normal commercial terms and will not be prejudicial to the Shareholders nor disadvantageous to the Group. However, should the Audit Committee subsequently no longer be of this opinion, the Company will revert to the Shareholders for a fresh mandate based on new review procedures for transactions with Interested Persons.

An independent financial adviser’s opinion is not required for renewal of this general mandate as the Audit Committee has confirmed that the methods and procedures for determining the transaction prices have not changed since the last Shareholders’ approval and the foregoing said methods and procedures are sufficient to ensure that the transactions will be carried out on normal commercial terms and will not be prejudicial to the interests of the Company and its minority shareholders.

9. DIRECTORS’ RECOMMENDATION The Directors who are considered independent for the purpose of the proposed renewal of the Shareholders’ Mandate are Mr Colin Low Tock Cheong, Mr

Tan Soo Nan and Mr Sin Boon Ann (the “Independent Directors”). The Independent Directors are of the opinion that it is in the interests of the Group to be permitted to enter into the transactions in their normal course of business with the class of Interested Persons described in paragraph 3.3 of this Appendix provided that such transactions are made at arm’s length and on normal commercial terms and will not be prejudicial to the interest of the Company and its minority Shareholders, and in accordance with the guidelines set out in paragraph 3.4 of this Appendix. They accordingly recommend that Shareholders vote in favour of Resolution 10 set out in the Notice of AGM on page 161 of this Annual Report.

10. APPROVALS AND RESOLUTIONS Your approval for the proposed renewal of the Shareholders’ Mandate is sought at the Company’s AGM to be held at 65 Ubi Avenue 1, OSIM Headquarters,

Singapore 408939 on 18 March 2011 at 2.30 pm.

11. ACTION TO BE TAKEN BY SHAREHOLDERS If a Shareholder is unable to attend the AGM and wishes to appoint a proxy to attend and vote on his behalf, he should complete, sign and return the

enclosed Proxy Form in accordance with the instructions printed thereon as soon as possible and, in any event, so as to arrive at the registered office of the Company at 65 Ubi Avenue 1, OSIM Headquarters, Singapore 408939 not later than 48 hours before the time fixed for the AGM. Completion and return of the Proxy Form by a Shareholder does not preclude him from attending and voting at the AGM if he so wishes.

12. DOCUMENTS FOR INSPECTION The following documents may be inspected at the registered office of the Company during normal business hours from the date hereof up to and including

the date of the AGM:- (i) the Memorandum and Articles of Association of the Company; and (ii) the Annual Report of the Company and of the Group for the financial year ended 31 December 2010.


13. DIRECTORS’ RESPONSIBILITY STATEMENT The Directors collectively and individually accept responsibility for the accuracy of the information given in Appendix I and confirm, having made all

reasonable enquiries, that to the best of their knowledge and belief, the facts stated and the opinions expressed in this Appendix are fair and accurate in all material respects as at the date hereof and that there are no other material facts the omission of which would make any statement in this Appendix I misleading.

Yours faithfullyOSIM INTERNATIONAL LTD

Ron Sim Chye HockChairmanfor and on behalf of the Board



APPENDIX II

OSIM INTERNATIONAL LTD(Incorporated in the Republic of Singapore)(Company Registration No. 198304191N)

APPENDIX II IN RELATION TO DETAILS OF THEPROPOSED RENEWAL OF THE SHARE

BUY-BACK MANDATE

11 February 2011This Appendix II is circulated to Shareholders of OSIM International Ltd (the “Company”) together with the Company’s Annual Report. Its purpose is to provide Shareholders with the relevant information relating to, and to seek Shareholders’ approval for, the renewal of the Share Buy-back Mandate to be tabled at the Annual General Meeting to be held on 18 March 2011 at 2.30pm at 65 Ubi Avenue 1 OSIM Headquarters Singapore 408939.

The Notice of Annual General Meeting and a Proxy Form are enclosed with the Annual Report. The Singapore Exchange Securities trading Limited takes no responsibility for the correctness of any of the statements made, reports contained/referred to, or opinions expressed in this Appendix.


1. INTRODUCTION On 12 April 2010, the Company obtained shareholders’ approval at the Annual General Meeting (“2010 AGM”) of the Company to authorise the Directors

to exercise all powers of the Company to purchase acquire its issued ordinary shares in the capital of the Company (the “Shares”) (“Share Buy-back Mandate”) on the terms of the Share Buy-back Mandate which has taken effect from the date of 2010 AGM until the date on which the next annual general meeting (“AGM”) of the Company is held or is required by applicable law to be held, whereupon it will lapse unless renewed at such meeting. Accordingly, approval for the renewal of the Share Buy-back Mandate will be sought again at the AGM to be held on 18 March 2011.

2. DEFINITIONSIn this Circular, the following definitions apply throughout unless otherwise stated:

General

“Articles” : the Articles of Association of the Company, as amended from time to time

“Audit Committee” : the audit committee of the Company as at the date of this Circular, comprising of Mr Tan Soo Nan (Chairman), Mr Colin Low Tock Cheong and Mr Sin Boon Ann

“CDP” : the Central Depository (Pte) Limited

“CLOB trading system” : the Central Limit Order Book trading system

“Code” : Singapore Code on Take-overs and Mergers, as amended, supplemented or modified from time to time

“Companies Act” : the Companies Act, Chapter 50, of Singapore as amended or modified from time to time

“Companies (Amendment) Act” : the Companies (Amendment) Act 2005 of Singapore

“Company” or “OSIM” : OSIM International Ltd

“Directors” : the Directors of the Company for the time being

“Group” : the Group refers to the Company, its subsidiaries, joint ventures and associated companies

“Latest Practicable Date” : the latest practicable date prior to the printing of this Appendix, being 11th February 2011

“Listing Manual” : the listing manual of the SGX-ST, which became effective on July 1, 2002, including amendments made thereto up to the date of this Circular.

APPENDIX II (CONT’D)



“Maximum Price” : The maximum price to be paid for the Shares as determined by the Directors under paragraph 2.3.4 of the Letter to Shareholders contained in this Circular

“Notice of AGM” : the notice of AGM as set out on page 159 of this Annual Report

“NTA” : net tangible assets

“SGX-ST” : the Singapore Exchange Securities Trading Limited

“Securities Account” : securities accounts maintained by Depositors with CDP, but not including securities accounts maintained with a Depository Agent

“Shares” : ordinary shares in the capital of the Company

“Share Buy-back Mandate” : A general unconditional mandate given by Shareholders to authorise the Directors to purchase or acquire, on behalf of the Company, Shares, in accordance with the terms set out in the Circular as well as the rules and regulations set forth in the Companies Act and the Listing Manual

“Share Options” : options to subscribe for new Shares granted pursuant to share option schemes/plans implemented by the Company

“Shareholders” : registered holders of Shares, except that where the registered holder is CDP, the term “Shareholders” shall, where the context admits, mean the Depositors whose Securities Account are credited with Shares

“Warrants” : 137,542,827 Warrants issued during a Rights issue of Warrants on 28 May 2008 at an issue price of S$0.09 for each Warrant, each Warrant carrying the right to subscribe for one (1) ordinary share in the capital of the company at an exercise price of S$0.35 for each new share.

“$” and “cents” : Singapore dollars and cents, respectively

“%” or “per cent” : Per centum or percentage


The terms “Depositor” and “Depository Agent” shall have the meanings ascribed to them respectively in Section 130A of the Companies Act.

Words importing the singular shall, where applicable, include the plural and vice versa. Words importing the masculine gender shall, where applicable, include the feminine and neuter genders. References to persons shall include corporations.

Any reference in this Appendix to any enactment is a reference to that enactment as for the time being amended or re-enacted. Any word defined under the Companies Act or any statutory modification thereof and not otherwise defined in this Circular shall have the same meaning assigned to it under the Companies Act or any statutory modification thereof, as the case may be.

Any reference to a time of day in this Circular is made by reference to Singapore time unless otherwise stated.




3 RENEWAL OF THE SHARE BUY-BACK MANDATE

3.1 Rationale of Share Buy-back Mandate The renewal of the Share Buy-back Mandate would give the Company the flexibility to undertake buy-backs of the Shares at any time, subject to market

conditions, during the period when the Share Buy-back Mandate is in force. Further, Share purchases provide the Company with a mechanism to facilitate the return of surplus cash over and above its ordinary capital requirements in an expedient and cost-efficient manner. The Directors also expect that Share buy-backs may also help mitigate against short term volatility of share price and offset the effects of short term speculation. Share buy-backs will allow the Directors greater flexibility over the Company’s share capital structure with a view to enhancing the earnings and/or net asset value per share.

Shareholders can be assured that Share buy-backs by the Company would be made in circumstances where it is considered to be in the best interests of the Company, after taking into account the amount of surplus cash available and the prevailing market conditions. Further, the Directors do not propose to carry out buy-backs to such an extent that would, or in circumstances that might, result in a material adverse effect on the liquidity, the orderly trading of the Shares, the working capital requirements of the Company or its gearing positions which are, in the opinion of the Directors, appropriate from time to time, or result in the Company being de-listed from the SGX-ST. For example, the Directors will ensure that the Share buy-back will not be carried out to such an extent that the free float of the Company’s Shares held by the public falls to below ten per cent. (10%).

3.2 Share Buy-back Mandate Approval is being sought from Shareholders at the AGM for the renewal of the Share Buy-back Mandate for the purchase by the Company of its issued

Shares. If approved, the Share Buy-back Mandate will take effect from the date of the AGM and continue in force until the date of the next annual general meeting of the Company or such date as the next annual general meeting is required by law to be held, unless prior thereto, Share buy-backs are carried out to the full extent mandated or the Share Buy-back Mandate is revoked or varied by the Company in a general meeting. The Share Buy-back Mandate will be put to Shareholders for renewal at each subsequent annual general meeting of the Company.

Any purchase of its Shares by the Company has to be made in accordance with, and in the manner prescribed by, the Companies Act, the Listing Rules and such other laws and regulations as may for the time being be applicable.

3.3 Terms of the Proposed Share Buy-back Mandate The authority and limitations placed on the Share buy-back Mandate, if renewed at the AGM, are substantially the same as previously approved by the

Shareholders at the EGM. The authority and limits on the Share Buy-back Mandate are summarised below:

3.3.1 Maximum number of Shares Only Shares which are issued and fully paid-up may be purchased or acquired by the Company. The total number of Shares that may be purchased

or acquired by the Company is limited to that number of Shares representing not more than ten per cent. (10%) of the issued ordinary share capital of the Company as at the date of the EGM at which the Share Buy-back Mandate is approved (“Approval Date”). For the purposes of calculating the percentage of issued Shares, any Shares which are held by the Company as treasury shares will be disregarded for the purposes of computing the ten per cent. (10%) limit.


For illustrative purposes, on the basis of 715,566,097 Shares in issue as at the Latest Practicable Date, not more than 71,556,609 Shares (representing ten per cent. (10%) of the Shares in issue as at that date) may be purchased or acquired by the Company pursuant to the proposed Share Buy-back Mandate.

3.3.2 Duration of authority Purchases or acquisitions of Shares may be made, at any time and from time to time, from the Approval Date up to the earlier of:

(i) the date on which the next annual general meeting of the Company is held or required by law to be held; (ii) the date on which the authority contained in the Share Buy-back Mandate is varied or revoked by the Company in a general meeting; or (iii) the date on which the Share buy-backs are carried out to the full extent mandated.

3.3.3 Manner of purchases or acquisitions of SharesPurchases or acquisitions of Shares may be made by way of:

(i) on-market purchases (“Market Purchases”), transacted on the SGX-ST through the SGX-ST’s CLOB trading system or, as the case may be, any other stock exchange on which the Shares may for the time being be listed and quoted, through one or more duly licensed stockbrokers appointed by the Company for the purpose; and/or

(ii) off-market purchases (“Off-Market Purchases”) effected pursuant to an equal access scheme (as defined in section 76C of the Companies Act).

The Directors may impose such terms and conditions, which are consistent with the Share Buy-back Mandate, the Listing Rules and the Companies Act, as they consider fit in the interests of the Company in connection with or in relation to an equal access scheme or schemes. Under the Companies Act, an equal access scheme must satisfy all the following conditions:

(i) offers for the purchase of issued Shares shall be made to every person who holds issued Shares to purchase or acquire the same percentage of their issued Shares;

(ii) all of those persons shall be given a reasonable opportunity to accept the offers made; and

(iii) the terms of all the offers are the same, except that there shall be disregarded: (a) differences in consideration attributable to the fact that the offers may relate to Shares with different accrued dividend

entitlements; (b) (if applicable) differences in consideration attributable to the fact that the offers relate to Shares with different amounts remaining

unpaid; and (c) differences in the offers introduced solely to ensure that each member is left with a whole number of Shares.

In addition, the Listing Rules provides that, in making an Off-Market Purchase, the Company must issue an offer document to all Shareholders which must contain at least the following information:




(i) the terms and conditions of the offer; (ii) the period and procedures for acceptances; (iii) the reasons for the proposed Share buy-back; (iv) the consequences, if any, of Share buy-backs by the Company that will arise under the Code or other applicable takeover rules; (v) whether the Share buy-back, if made, would have any effect on the listing of the Shares on the SGX-ST; and (vi) details of any Share buy-backs (whether Market Purchases or Off-Market Purchases) made by the Company in the previous twelve (12)

months, giving the total number of Shares purchased, the purchase price per Share or the highest and lowest prices paid for the purchases, where relevant, and the total consideration paid for the purchases.

3.3.4 Maximum purchase priceThe purchase price (excluding brokerage, stamp duties, applicable goods and services tax and other related expenses) to be paid for the Shares will be determined by the Directors.

However, the purchase price to be paid for a Share as determined by the Directors must not exceed: (i) in the case of a Market Purchase, one hundred and five per cent. (105%) of the Average Closing Price (as defined hereinafter); and (ii) in the case of an Off-Market Purchase pursuant to an equal access scheme, one hundred and ten per cent. (110%) of the Average Closing

Price,

(the “Maximum Price”) in either case, excluding related expenses of the purchase or acquisition.

For the above purposes: “Average Closing Price” means the average of the closing market prices of the Shares over the last five (5) market days, on which transactions in the Shares were recorded, immediately preceding the day of the Market Purchase, and deemed to be adjusted for any corporate action that occurs after such five-market day period; “day of the making of the offer” means the day on which the Company announces its intention to make an offer for the purchase of Shares from Shareholders, stating the purchase price (which shall not be more than the Maximum Price calculated on the foregoing basis) for each Share and the relevant terms of the equal access scheme for effecting the Off-Market Purchase; and “market day” means a day on which the SGX-ST is open for trading in securities.

3.4 Status of purchased or acquired Shares Under the Companies Act, any Shares purchased or acquired by the Company are deemed cancelled immediately on purchase or acquisition, and all

rights and privileges attached to those Shares expire on cancellation, unless such Shares are held by the Company as treasury shares. Accordingly, the total number of issued Shares will be diminished by the number of Shares purchased or acquired by the Company and which are not held as treasury shares.

3.5 Treasury Shares Under the Companies Act, Shares purchased or acquired by the Company may be held or dealt with as treasury shares. Some of the provisions relating to

treasury shares under the Companies Act, are summarised below:-


3.5.1 Maximum Holdings The number of Shares held as treasury shares cannot at any time exceed ten per cent. (10%) of the total number of issued Shares.

3.5.2 Voting and Other Rights The Company cannot exercise any right in respect of treasury shares. In particular, the Company cannot exercise any right to attend or vote at meetings and for the purposes of the Companies Act, the Company shall be treated as having no right to vote and the treasury shares shall be treated as having no voting rights. In addition, no dividend may be paid, and no other distribution (whether in cash or otherwise) of the Company’s assets (including any distribution of assets to members on a winding up) may be made, to the Company in respect of the treasury shares. However, the allotment of Shares as fully paid bonus shares in respect of the treasury shares is allowed. Also, a subdivision or consolidation of any treasury share into treasury shares of a smaller amount is allowed so long as the total value of the treasury shares after the subdivision or consolidation is the same as before such subdivision or consolidation, as the case may be.

3.5.3 Disposal and Cancellation Where Shares are held as treasury shares, the Company may at any time:-(a) sell the treasury shares (or any of them) for cash; (b) transfer the treasury shares (or any of them) for the purposes of or pursuant to an employees’ share scheme; (c) transfer the treasury shares (or any of them) as consideration for the acquisition of shares in or assets of another company or assets of a

person; (d) cancel the treasury shares (or any of them); or (e) sell, transfer or otherwise use the treasury shares for such other purposes as may be prescribed by the Minister for Finance.

3.6 Source of funds Previously, any payment made by a company in consideration of the purchase or acquisition of its own Shares could only be made out of the Company’s distributable profits. The Companies Act now permits the Company to pay for the consideration for the purchase or acquisition of its Shares out of capital or profits provided the Company is solvent.

The Directors do not propose to exercise the Share Buy-back Mandate in a manner and to such an extent that the liquidity and capital adequacy position of the Group would be materially adversely affected.

3.7 Financial EffectsThe financial effects on the Company and the Group arising from purchases or acquisitions of Shares which may be made pursuant to the Share Buy-back Mandate will depend on, inter alia, whether the Shares are purchased or acquired out of profits and/or capital of the Company, the number of Shares purchased or acquired, the price paid for such Shares and whether the Shares purchased or acquired are held in treasury or cancelled.

Under the Companies Act, purchases or acquisitions of Shares by the Company may be made out of the Company’s profits and/or capital so long as the Company is solvent.



Where the consideration paid by the Company for the purchase or acquisition of Shares is made out of profits, such consideration (excluding brokerage, commission, goods and services tax and other related expenses) will correspondingly reduce the amount available for the distribution of cash dividends by the Company.

Where the consideration paid by the Company for the purchase or acquisition of Shares is made out of capital, the amount available for the distribution of cash dividends by the Company will not be reduced.

The financial effects on the Company and the Group, based on the financial statements of the Company and the Group for the financial year period 1 January 2010 to 31 December 2010, are based on the assumptions set out below.

3.7.1 Number of Shares Acquired or Purchased Although the Share Buy-back Mandate (if approved by Shareholders) will permit the Company to purchase or acquire up to 10% of its issued Shares (excluding treasury shares), based on the financial statements of the Company and the Group for the financial period 1 January 2010 to 31 December 2010, the purchase or acquisition of up to 10% of its issued Shares would not result in negative Shareholders’ funds. The illustrative financial effects shown below are based on a purchase or acquisition of Shares by the Company of up to 10% of its issued Shares which, based on the number of issued and paid-up Shares as at the Latest Practicable Date and assuming no further Shares are issued and no Shares are held by the Company as treasury shares on or prior to the AGM, is 715,566,097 Shares.

Shareholders should note that the financial effects set out below are for illustrative purposes only. It should be noted that the above analyses are based on the audited financial statement for the financial year ending 31 December 2010 and is not necessarily representative or future financial performance.

A 10% buy-back (and not any other percentage) was assumed so that a positive Shareholders’ funds could be maintained solely for the purposes of these illustrative financial effects. Although the Share Buyback mandate would authorize the Company to purchase or acquire up to ten per cent (10%) of the issued Shares, the Company may not necessarily purchase or acquire or be able to purchase or acquire the entire ten per cent (10%) of the total issued ordinary share capital of the Company. In additional, the Company may cancel all or part or the Shares repurchased or hold all or part of the Shares repurchased in treasury.

3.7.2 Maximum Price Paid for Shares Acquired or Purchased In the case of Market Purchases by the Company and assuming that the Company purchases or acquires 71,556,609 Shares at the maximum price of S$1.7157 for one Share (being the price equivalent to 10% above the Average Closing Price of the Shares immediately preceding the Latest Practicable Date), the maximum amount of funds required for the purchase or acquisition of 71,556,609 Shares is S$122,769,675.

In the case of Off-Market Purchases by the Company and assuming that the Company purchases or acquires 71,556,609 Shares at the maximum price of S$1.7974 for one Share (being the price equivalent to 10% above the Average Closing Price of the Shares immediately preceding the Latest Practicable Date), the maximum amount of funds required for the purchase or acquisition of 71,556,609 Shares is S$128,615,849.

3.7.3 Illustrative Financial Effects As at 31 December 2010, the Company holds 42,543,000 treasury shares, representing 5.9454% For illustrative purposes only and on the basis

of the assumptions set out in paragraphs 2.7.1 and 2.7.2 above, the financial effects of the purchase or acquisition of Shares by the Company



pursuant to the Share Buy-back Mandate are projected on the basis that the Company will have by then disposed of its current treasury shares at a price of S$1.80. (being the indicative price of the shares in the Company’s application for admission for trading on the Taiwan Stock Exchange on 10 December 2010) and the Company for the financial year period from 1 January 2010 to 31 December 2010 are set out below and assuming the following:(a) the purchase or acquisition of 71,556,609 Shares by the Company pursuant to the Share Buy-back Mandate by way of Market Purchases

made entirely out of capital and cancelled or held in treasury; (b) the purchase or acquisition of 71,556,609 Shares by the Company pursuant to the Share Buy-back Mandate by way of Market Purchases

made entirely out of borrowings and cancelled or held in treasury;

(c) the purchase or acquisition of 71,556,609 Shares by the Company pursuant to the Share Buy-back Mandate by way of Off-Market Purchases made entirely out of capital and cancelled or held in treasury;

(d) the purchase or acquisition of 71,556,609 Shares by the Company pursuant to the Share Buy-back Mandate by way of Off-Market Purchases made entirely out of borrowings and cancelled or held in treasury.

Market Purchases The financial effects set out below are for illustrative purposes only. However, the illustrations are based on historical numbers for the financial period 1 January 2010 to 31 December 2010 and are not necessarily representative of future financial performance.

Although the Share Buy-back Mandate would authorise the Company to purchase or acquire up to 10% of the issued Shares, the Company may not necessarily purchase or acquire part of or the entire 10% of the issued Shares. In addition, the Company may cancel all or part of the Shares repurchased or hold all or part of the Shares repurchased in treasury.

Although the Share Buy-Back Mandate would authorise the Company to purchase or acquire up to 10% of the issued Shares, the Directors will not exercise the Share Buy-back Mandate if the Group’s working capital requirements, current dividend policy for the financial year ending 31 December 2011 and ability to service its debts would be adversely affected.



Scenario 1 Market Purchases of up to 10% out of capital and cancelled

Group Company

Before Share Purchase $’000

After Share Purchase$’000



As at 31 December 20101)

Share Capital 72,411 72,411 72,411 72,411

Treasury Shares (37,662) (122,770) (37,662) (122,770)

Revenue Reserves 98,018 98,018 45,233 45,233

Capital Reserves 4,863 43,778 860 39,775

Warrant Reserve 7,699 7,699 7,699 7,699

Other Reserves (37,204) (37,204) – –

Shareholders’ Funds 108,124 61,932 88,540 42,348

NTA 93,277 47,084 88,233 42,041

Current Assets 167,482 121,289 45,767 14,264

Current Liabilities 126,066 126,066 71,945 86,634

Total Borrowings 15,454 15,454 13,670 28,359

Cash & Cash equivalents 73,158 26,965 31,503 –

Number of Shares(‘000) 715,566 715,566 715,566 715,566

Financial Ratios

Basic EPS (cents) 7.38 7.71 5.55 6.01

NTA per share (cents) 13.04 6.58 12.34 5.88

Current Ratio (times) 1.33 0.96 0.64 0.16

(Assumption: Company purchase or acquire at the price of S$1.7157 for one share, refer to section 3.7.2)



Scenario 2 Off-Market Purchases of up to 10% out of capital and cancelled

Group Company





As at 31 December 2010(1)

Share Capital 72,411 72,411 72,411 72,411

Treasury Shares (37,662) (128,616) (37,662) (128,616)



Warrant Reserve 7,699 7,699 7,699 7,699

Other Reserves (37,204) (37,204) – –


NTA 93,277 41,238 88,233 36,194

Current Assets 167,482 115,443 45,767 14,264



Cash & Cash equivalents 73,158 21,119 31,503 –

Number of Shares(‘000) 715,566 715,566 715,566 715,566

Financial Ratios

Basic EPS (cents) 7.38 7.71 5.55 6.01




Note: (1) The figures for the Group and the Company are based on the financial statements as at 31 December 2010.(2) Where purchased or acquired Shares are held in treasury, the share capital will remain unchanged.

Off-Market Purchases The financial effects set out below are for illustrative purposes only. However, the illustrations are based on historical numbers for the financial period 1 January 2010 to 31 December 2010 and are not necessarily representative of future financial performance.




Although the Share Buy-back Mandate would authorise the Company to purchase or acquire up to 10% of the issued Shares, the Company may not necessarily purchase or acquire part of or the entire 10% of the issued Shares. In addition, the Company may cancel all or part of the Shares repurchased or hold all or part of the Shares repurchased in treasury.

Although the Share Buy-Back Mandate would authorise the Company to purchase or acquire up to 10% of the issued Shares, the Directors will not exercise the Share Buy-back Mandate if the Group’s working capital requirements, current dividend policy for the financial year ending 31 December 2011 and ability to service its debts would be adversely affected.

Scenario 3 Market Purchases of up to 10% out of borrowings and cancelled

Group Company






Share Capital 72,411 72,411 72,411 72,411

Treasury Shares (37,662) (122,770) (37,662) (122,770)



Warrant Reserve 7,699 7,699 7,699 7,699

Other Reserves (37,204) (37,204) - –


NTA 93,277 47,084 88,233 42,040

Current Assets 167,482 244,059 45,767 122,344



Cash & Cash equivalents 73,158 149,735 31,503 108,080

Number of Shares(‘000) 715,566 715,566 715,566 715,566

Financial Ratios

Basic EPS (cents) 7.38 7.71 5.55 6.01


Current Ratio (times) 1.33 0.98 0.64 0.63 (Assumption: Company purchase or acquire at the price of S$1.7157 for one share, refer to section 3.7.2)


Scenario 4 Off-Market Purchases of up to 10% out of borrowings and cancelled

Group Company






Share Capital 72,411 72,411 72,411 72,411

Treasury Shares (37,662) (128,616) (37,662) (128,616)



Warrant Reserve 7,699 7,699 7,699 7,699

Other Reserves (37,204) (37,204) - –


NTA 93,277 41,238 88,233 36,194

Current Assets 167,482 244,059 45,767 122,344



Cash & Cash equivalents 73,158 149,735 31,503 108,080

Number of Shares(‘000) 715,566 715,566 715,566 715,566

Financial Ratios

Basic EPS (cents) 7.38 7.71 5.55 6.01




Note: (1) The figures for the Group and the Company are based on the financial statements as at 31 December 2010.(2) Where purchased or acquired Shares are held in treasury, the share capital will remain unchanged.




3.8 Taxation Shareholders who are in doubt as to their respective tax positions or the tax implications of Share purchases or acquisitions by the Company, or, who may

be subject to tax whether in or outside Singapore, should consult their own professional advisers.

3.9 Listing Status of the Shares The Listing Manual specifies that a listed company shall report all purchases or acquisitions of its shares to the SGX-ST not later than 9.00 a.m.: (a) in the case of a Market Purchase, on the market day following the day of purchase or acquisition of any of its shares; and (b) in the case of an Off-Market Purchase under an equal access scheme, on the second market day after the close of acceptances of the offer. Such announcement currently requires the inclusion of details of the total number of shares purchased, the purchase price per share or the highest and lowest prices paid for such shares, as applicable. While the Listing Manual does not expressly prohibit any purchase of shares by a listed company during any particular time or times, because the listed company would be regarded as an “insider” in relation to any proposed purchase or acquisition of its issued shares, the Company will not undertake any purchase or acquisition of Shares pursuant to the proposed Share Buy-back Mandate at any time after a price sensitive development has occurred or has been the subject of a decision until the price sensitive information has been publicly announced. In particular, the Company would not purchase or acquire any Shares through Market Purchases during the period of one month immediately preceding the announcement of the Company’s full-year results and the period of two weeks before the announcement of the Company’s financial statements for each of the first three quarters of its financial year. The Listing Manual requires a listed company to ensure that at least full ten per cent. (10%) of any class of its listed securities must be held by public shareholders. As at the Latest Practicable Date, approximately 37.89 per cent (37.89%) of the issued Shares are held by public Shareholders. There are 86,285,901warrants in issue of which approximately 12.6 per cent (12.6%) are held by public Shareholders. Accordingly, the Company is of the view that there is a sufficient number of the Shares in issue held by public Shareholders which would permit the Company to undertake purchases or acquisitions of its Shares through Market Purchases up to the full ten per cent (10%) limit pursuant to the Share Buy-back Mandate without affecting the listing status of the Shares on the SGX-ST, and that the number of the Shares remaining in the hands of the public will not fall to such a level as to cause market illiquidity or to affect orderly trading.

3.10 Take-over Obligations Appendix 2 of the Take-over Code contains the Share Buy-Back Guidance Note. The take-over implications arising from any purchase or acquisition by the

Company of its Shares are set out below.

3.10.1 Obligation to make a Take-over Offer If, as a result of any purchase or acquisition by the Company of its Shares, the proportionate interest in the voting capital of the Company of a

Shareholder and persons acting in concert with him increases, such increase will be treated as an acquisition for the purposes of Rule 14 of the Take-over Code. Consequently, a Shareholder or a group of Shareholders acting in concert with a Director could obtain or consolidate effective control of the Company and become obliged to make an offer under Rule 14 of the Take-over Code.

3.10.2 Persons Acting in ConcertUnder the Take-over Code, persons acting in concert comprise individuals or companies who, pursuant to an agreement or understanding (whether formal or informal) co-operate, through the acquisition by any of them of shares in a company, to obtain or consolidate effective control of that company. Unless the contrary is established, the following persons will, inter alia, be presumed to be acting in concert: (a) A company with any of its directors (together with their close relatives, related trusts as well as companies controlled by any of the


directors, their close relatives and related trusts); (b) A company with its parent company, subsidiaries, its fellow subsidiaries, any associated companies of the above companies, and any

company whose associated companies include any of the above companies. For this purpose, a company is an associated company of another company if the second company owns or control at least 20% but not more than 50% of the voting rights of the first-mentioned company;

(c) A company with any of its pension funds and employee share schemes; (d) A person with any investment company, unit trust or other fund in respect of the investment account which such person manages on a

discretionary basis; (e) A financial or other professional adviser, with its client in respect of the shareholdings of the adviser and the persons controlling, controlled

by or under the same control as the adviser and all the funds which the adviser manages on a discretionary basis, where the shareholding of the adviser and any of those funds in the client total 10% or more of the client’s equity share capital;

(f) Directors of a company, together with their close relatives, related trusts and companies controlled by any of them, which is subject to an offer or where the directors have reason to believe a bona fide offer for their company may be imminent;

(g) Partners; and (h) An individual, his close relatives, his related trusts, and any person who is accustomed to act according to his instructions and companies

controlled by any of the above. The circumstances under which Shareholders of the Company (including Directors) and persons acting in concert with them respectively will incur an obligation to make a take-over offer under Rule 14 after a purchase or acquisition of Shares by the Company are set out in Appendix 2 of the Take-over Code.

3.11 Effect of Rule 14 and Appendix 2 of the Take-over Code In general terms, the effect of Rule 14 and Appendix 2 is that, unless exempted (or if exempted, if such exemption is subsequently revoked), the Directors of the Company and persons acting in concert with them will incur an obligation to make a take-over offer for the Company under Rule 14 if, as a result of the Company purchasing or acquiring Shares, the voting rights of such Directors and their concert parties would increase to 30% or more, or if the voting rights of such Directors and their concert parties fall between 30% and 50% of the Company’s voting rights, the voting rights of such Directors and their concert parties would increase by 1% in any period of six months.

Under Appendix 2, a Shareholder not acting in concert with the Directors of the Company will not be required to make a take-over offer under Rule 14 if, as a result of the Company purchasing or acquiring its Shares, the voting rights of such Shareholder in the Company would increase to 30% or more, or, if such Shareholder holds between 30% and 50% of the Company’s voting rights, the voting rights of such Shareholder would increase by more than 1% in any period of six months. Such Shareholder need not abstain from voting in respect of the resolution authorising the Share Buy-back Mandate, unless so required under the Companies Act.

Based on substantial Shareholders’ notifications received by the Company as at the Latest Practicable Date which is set out in paragraph 3 of this Circular, none of the Substantial shareholders would become obliged to make a take-over offer for the Company under rule 14 of the Take-over Code as a result of the purchase by the Company of the maximum limit of ten per cent (10%) of its issued Shares.

Shareholders are advised to consult their professional advisers and/or the Securities Industry Council at the earliest opportunity as to whether an obligation to make a takeover offer would arise by reason of any share purchase by the Company.



4 INTERESTS OF DIRECTORS AND SUBSTANTIAL SHAREHOLDERS

4.1 Directors As at the Latest Practicable Date, the direct and indirect interests of each of the Directors in the Shares and Share Options of the Company are as

follows:-

Number of Shares Number of Warrants Number of Shares comprised in

outstanding Share Options

Direct Interest Indirect Interest Direct Interest Indirect InterestNumber %(1) Number %(1) Number %(2) Number %(2)

Ron Sim Chye Hock 220,757,978 30.85 183,920,157 25.70 75,410,926 54.83 1,030,473 0.75 –Teo Sway Heong 5,661,547 0.79 399,016,588 55.76 1,030,473 0.75 75,410,926 54.83 –Teo Chay Lee 2,296,540 0.32 300,000 0.04 365,500 0.27 – – 445,500Leow Lian Soon 2,950,000 0.41 – – 300,000 0.22 – – 40Lee Hwai Kiat 2,004,000 0.28 496,000 0.07 76 – – – 120Tan Soo Nan 10,000 0.001 – – – – – – –Sin Boon Ann – – – – – – – – –Colin Low Tock Cheong – – – – – – – – –Khor Peng Soon 52,000 0.0073 – – 29,446 0.02 – – –

Note:-(1) Based on the total issued and fully paid-up ordinary share capital of 715,566,097 shares as at the Latest Practicable Date.(2) Based on the total issued warrants of 137,542,827 as at the Latest Practicable Date

4.2 Substantial Shareholders As at the Latest Practicable Date, the only substantial Shareholder of the Company is Mr Ron Sim Chye Hock who has a direct interest in

220,757,978 shares and a deemed interest in 183,920,157 shares, together comprising 56.55 per cent of the total issued and fully paid-up ordinary share capital of the Company.

5. DIRECTORS’ RECOMMENDATION Proposed Renewal of the Share Buy-back Mandate The Directors are of the opinion that the proposed renewal of the Share Buy-back Mandate is in the best interest of the Company. Accordingly, they

recommend that Shareholders vote in favour of resolution 11 in the notice of AGM, being the ordinary resolution relating to the proposed renewal of the Share Buy-back Mandate.

6. APPROVALS AND RESOLUTIONS Your approval for the proposed renewal of the Share Buy-back Mandate is sought at the Company’s AGM to be held at 65 Ubi Avenue 1, OSIM Headquarters,

Singapore 408939 on 18 March 2011 at 2.30 pm or immediately after the AGM.

7. ACTION TO BE TAKEN BY SHAREHOLDERS If a Shareholder is unable to attend the AGM and wishes to appoint a proxy to attend and vote on his behalf, he should complete, sign and return the



enclosed Proxy Form in accordance with the instructions printed thereon as soon as possible and, in any event, so as to arrive at the registered office of the Company at 65 Ubi Avenue 1, OSIM Headquarters, Singapore 408939 not later than 48 hours before the time fixed for the AGM. Completion and return of the Proxy Form by a Shareholder does not preclude him from attending and voting at the AGM if he so wishes.

8. DOCUMENTS FOR INSPECTIONThe following documents may be inspected at the registered office of the Company during normal business hours from the date hereof up to and including the date of the AGM:-(1) the Memorandum and Articles of Association of the Company; and(2) the Annual Report of the Company and of the Group for the financial year ended 31 December 2010.

9. DIRECTORS’ RESPONSIBILITY STATEMENT The Directors collectively and individually accept responsibility for the accuracy of the information given in Appendix II and confirm, having made all

reasonable enquiries, that to the best of their knowledge and belief, the facts stated and the opinions expressed in this Appendix are fair and accurate in all material respects as at the date hereof and that there are no other material facts the omission of which would make any statement in this Appendix II misleading



OSIM INTERNATIONAL LTD[Company Registration No. 198304191N](Incorporated In The Republic of Singapore)

(Please see notes overleaf before completing this Form)

I/We, of

being a member/members of OSIM International Ltd (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

or failing the person, or either or both of the persons, referred to above , the Chairman of the Meeting as my/our proxy/proxies to vote for me/us on my/our behalf at the Annual General Meeting (the “Meeting”) of the Company to be held on 18 March 2011 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. The authority herein includes the right to demand or to join in demanding a poll and to vote on a poll.

(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 Accounts for the year ended 31 December 2010. 2 Declare a final dividend of 1.00 cent per ordinary share for the year ended 31 December 2010. 3 Re-election of Mr Colin Low Tock Cheong as an Independent Director 4 Re-election of Ms Teo Sway Heong as a Non-Executive Director 5 Re-election of Mr Leow Lian Soon as a Executive Director 6 Approval of Directors’ fees amounting to S$147,500 7 Re-appointment of Messrs Ernst & Young LLP as Auditors 8 Authority to issue new shares 9 Authority to issue shares under the OSIM Share Option Scheme 10 Renewal of Shareholders’ Mandate for Interested Person Transactions 11 Renewal of Share Buy-back Mandate

Dated this day of 2011 Total number of Shares in: No. of Shares

(a) CDP Register (b) Register of Members

Signature of Shareholder(s)or, Common Seal of Corporate Shareholder

PROXY FORM

IMPORTANT:1. For investors who have used their CPF monies to buy OSIM International Ltd’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.

#


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. Completion and return of this instrument appointing a proxy shall not preclude a member from attending and voting at the Meeting. Any appointment of a proxy or proxies shall be deemed to be revoked if a member attends the meeting in person, and in such event, the Company reserves the right to refuse to admit any person or persons appointed under the instrument of proxy to the Meeting.

5. The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at 65 Ubi Avenue 1, OSIM Headquarters, Singapore 408939 not less than 48 hours before the time appointed for the Meeting.

6. 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. Where the instrument appointing a proxy or proxies is executed by an attorney on behalf of the appointor, the letter or power of attorney or a duly certified copy thereof must be lodged with the instrument.

7. 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.

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 appointer 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.

annual report 2010 - 早报 › osim › pages › osim_ar2010.pdf · 2013-05-13 · annual report...

Documents