hg metal manufacturing limited

HG METAL MANUFACTURING LIMITED | Annual Report 2010

HG Metal Manufacturing Limited30 Jalan Buroh Buroh Singapore 619486

Tel: 6268 2828 • Fax: 6268 3838www.hgmetal.com • Email: [email protected]

HG

ME

TAL M

AN

UFA

CTU

RIN

G LIM

ITED

AN

NU

AL R

EP

OR

T 20

10

Contents 2 Chairman’s Statement 6 Group’s Managing

Director’s Message

8 Board Of Directors 10 Key Executives 11 Operations Review

13 Financial Highlights14 Corporate Information15 Corporate Governance 31 Financial Contents

2 HG Metal Manufacturing Limited

Chairman’sStatement

DEAR SHAREHOLDERS

FY2010 proved to be another challenging year for the Group. We began the year in the troughs of the economic meltdown, which adversely impacted the overall commodity market. This resulted in much uncertainty in demand and volatility in steel prices.

Revenue dropped from S$581.8 million in FY2009 to S$203.1 million in FY2010, as the Group experienced lower sales volumes and ended consolidation of the operations of BRC Asia Limited (“BRC”). Over the course of the year, the Group has reduced its shareholding in BRC from 43.67% to 23.94%. This allows the Group to continue to benefi t from BRC’s exposure to the public infrastructure and residential sector.

However, the gradual receding of the economic crisis has led to a cycle of restocking and capacity expansion amongst the industry in many of the nations across the region. Prices of steel products have also followed the increasingly positive sentiment to recover from 2Q2009 lows to reach relatively stable levels from the second half of 2010.

In line with the price improvements and gains from the reduction of its holdings in BRC, net profi t for the Group rebounded from a loss of S$58.8 million in FY2009 to a profi t of S$0.3 million in FY2010. This was achieved despite a conservative approach by the Group to further write down S$11.2 million worth of slow-moving inventories and S$1.7 million worth of inventories to net realisable value. This latest development represents the fi nal write down for inventories purchased during the peak of the steel cycle and the Group is now replenishing its stocks at current market levels.

A NEW LOOK HG METAL

Efforts have also been made by the management to bring in strategic investors who can add value to our operations. To that end, we are pleased to have received shareholder approval at an Extraordinary

We are p leased to have

received shareholder approval

at an Extraordinary General

Meeting held on 10 November

2010 to issue 163,850,000

new shares at S$0.095 each

to Oriental Castle Sdn Bhd

(“OCS”).

3ANNUAL REPORT 2010

General Meeting held on 10 November 2010 to issue 163,850,000 new shares at S$0.095 each to Oriental Castle Sdn Bhd (“OCS”). OCS also has a call option to subscribe for 153,000,000 new shares for S$0.095 each in HG Metal, which could potentially enlarge its shareholding to 29.0% assuming the exercise of the Call Option. The entry of OCS as HG Metal’s largest shareholder adds greater weight to the Group’s future strategic moves and opens many new business opportunities.

OCS was established in 1998 and is specializing in the foundation solutions business. It has since built up a strong market foothold throughout ASEAN and Greater China. Boasting a workforce of over 300 people, it has established itself as a one of the region’s major players in the foundation projects business with specialized one-stop services, products and commercially fl exible business schemes. This know-how compliments the Group’s strengths in commodity steel products.

The addition of OCS and the write down of our slow moving inventories, has laid the basis for HG Metal to start FY2011 on a more solid footing. While the Group will continue to adopt a prudent and conservative approach towards management of its inventory, we remain cautiously optimistic that overall steel demand in Asia will remain stable or increase during 2011. Given this scenario, we might finally be approaching the proverbial light at the end of the tunnel as we enter the new year.

We would like to take this opportunity to thank our management and staff for their hard work, dedication and loyalty to the Group. In addition, we would also like to thank all our customers, bankers, business associates, suppliers and shareholders for their continuing support and belief in our business.

MR. YAP XI MINGNon-Executive Chairman

The addit ion of OCS and

the write down of our slow

mov ing invento r ies , has

laid the basis for HG Metal

to start FY2011 on a more

solid footing.


Chairman’sStatement

亲爱的股东,

2010财政年度对于集团是一个极富挑战性的年度，我们从年

初就处于经济熔化的低谷中，当时的经济情况对于整体的商

品市场有诸多不利影响，从而导致需求量非常不明确，而且

钢铁价格反复无常。

营业收入从2009 财政年度的五亿八千一百八十万新元跌

至2010财政年度的两亿零三百一十万新元。这是由于集

团经历较低的销售量，并且结束了巩固BRC亚洲有限公司

(“BRC”)的运作。在这一年以来，集团减少了在BRC的股

份持有，从43.67% 降低到 23.94% 。这允许集团能够继续获

益于BRC在公共基础设施和住宅领域的曝光。

然而，经济危机逐渐缓和，促使许多区域国家的工业进入再

储存和扩展产量的周期，钢铁产品的价格也沿着日趋正面的

情绪，从2009财政年度第二季的低价恢复至2010财政年度

下半年相对稳定的水平。

由于价格的改进以及缩减在BRC的持有权所得的收益，集团

的净盈利从2009财政年度的五千八百八十万新元的损失回弹

至2010财政年度的三十万新元的盈利，能够获取这业绩是由

于集团采取保守措施，进一步写下价值一千一百二十万新元

的慢动库存，最近的动向是最后一次写下在钢铁周期顶峰期

间购买的库存。集团正以现时市场价格重新补充存货。

管理层也努力的带进可以为我们的运作增值的投资者。我们

非常高兴的得到股东批准，在2010年11月10日举行的特别大

我们非常高兴的得到股东批准，在2010年11月10日举行的特别大会，以每股0 . 0 9 5新元发布163 ,850 , 000的新股份于ORIENTAL CASTLE SDN BHD（“OCS”）。OCS也有一个购买选择权，以每股0.095新元认购在福源金属的153,000,000新股份。

5ANNUAL REPORT 2010

会，以每股0.095新元发布163,850,000的新股份于ORIENTAL

CASTLE SDN BHD（“OCS”）。OCS也有一个购买选择

权，以每股0.095新元认购在福源金属的153,000,000新股份。

如果动用这购买选择权，其股份持有将扩大到29.0%。OCS

的加入，成为福源金属最大的股东，将助力于集团未来的战

略措举，并且开启许多新商业机会。

OCS 在1998年成立，是专营基础解决方案的商业，自

此，OCS在东南亚国家和中国建立了强力的市场立足点，拥

有超过300人的劳工，OCS已成为区域内其中一个在基础项目

商业方面能够提供产品，一站式服务，及灵活商业计划的大

公司之一，这专门技能将加强集团在钢产品方面的强势。

OCS 的加入以及写下的慢动库存，为福源金属奠定了更稳

定的地位。进入2011年财政年度，集团对于其库存的管理

将继续采取慎密和保守的态度。而对于亚洲总体钢铁需求，

在2011年稳定或上升的预测下，我们仍然是谨慎地保持乐

观。以这个情况设想，我们很可能在进入新的一年中能够看

到黎明之前的曙光。

我们希望借此机会感谢我们的管理层和职员们的辛苦工作，

以及对集团的贡献和忠诚。并由衷地感谢我们所有的客户、

银行家、商务伙伴、供应商和股东对于我们的持续地支持

与信赖。

MR. YAP XI MING

非执行董事长

OCS的加入以及最后写下的慢动库存，为福源金属奠定了更稳定的地位进入2011财政年度。


Group’s ManagingDirector’s Message

DEAR SHAREHOLDERS

2010 marked a year of volatility and challenges for commodity players across the globe. As one of the largest steel stockists in Singapore and South East Asia, HG Metal was no exception to this trend.

Our revenue from trading activities decreased to S$132.1 million in FY2010, due to lower sales volumes. Our manufacturing arm also saw a decline in sales to S$71.0 million, as we only consolidated 2 months of revenues from BRC Asia Ltd, in which we reduced our stake in 1QFY2010. While total revenue declined to S$203.1 million in FY2010, we saw an increase in our gross profi t to S$23.7 million in FY2010, from S$15.5 million, in FY2009. This was primarily due to a return to profi tability for the trading business, after selling goods at a loss in FY2009. All in, the Group recorded a profi t after tax of S$0.3 million in FY2010, compared to a loss of S$58.8 million in FY2009.

We have also streamlined our balance sheet by writing down S$11.2 million worth of slow-moving inventories and S$1.7 million worth of inventories to net realisable value that were mainly purchased before the crisis. Gross gearing dropped to 0.31 times as at 30 September 2010, from 1.26 times as at 30 September 2009. This paves the way for the Group to embark on our latest strategic direction with our new substantial shareholder Oriental Castle Sdn Bhd (“OCS”).

THREE PRONGED APPROACH TO GROWTH

Our current business model leaves us vulnerable to market volatility and intense steel price swings. This situation is expected to exacerbate as mining companies and major steel mills shift from yearly to

We also intend to build upon

our reputation as a ‘one-stop

supermarket’ for steel products

by extending our reach into

the ‘non-standard’ product

space.

7ANNUAL REPORT 2010

quarterly modes of iron ore price settlement. It is against this changing competitive backdrop that we embark on a diversification strategy to engage new niche market businesses. In the coming few months, we plan to focus on getting closer to our customers, expand our product range as well as our manufacturing capabilities, and extend our geographic reach.

We aim to proactively engage our customers in the construction, civil engineering, marine engineering, energy, oil and gas, as well as offshore industries throughout ASEAN. The high technical specifi cations for these types of industries require a higher degree of customer service and call for more sophisticated logistics to allow packaged solutions and just in time deliveries. By providing such value-added services, we aim to compete on the basis of reliability, availability and product quality.

We also intend to build upon our reputation as a ‘one-stop supermarket’ for steel products by extending our reach into the ‘non-standard’ product space. Through the continuous refi ning of our inventory management process, we will increasingly add difficult-to-attain, higher grade products to our portfolio of more than 3,000 different kinds of steel products. This move will enhance the marketing capabilities of our sales teams, as they seek to meet the special needs for a variety of industries. While seeking to enhance our product offerings to customers, we will aim at improving and diversifying our manufacturing capabilities at the same time.

Regarding geographic expansion, we recognize the inherent advantage of being situated at a natural logistics hub boasting one of the busiest ports in the world. Singapore is already an established ‘steel platform’ in South East Asia attracting customers who cannot cover their steel requirements in their own domestic market. This situation presents an attractive opportunity to capture the region’s impressive growth potential. In doing so, we hope to lessen our reliance on the Singapore market, which accounted for 70.7% of FY2010 sales.

By focusing on these three areas for business growth, along with our current commodity business, we hope to establish ourselves as a regional market player with a well defi ned business model. We believe that the management experience of OCS, with 15 overseas offi ces and vertically integrated operations, places us in good stead as we reach for this goal.

APPRECIATION

Finally, I would very sincerely like to express my appreciation to our shareholders, customers and business associates for their trust in us and their unwavering support. In addition, I would like to thank the entire management and staff of HG Metal for their loyalty, tireless efforts and faith in the Company and to stand united in the face of a challenging and diffi cult year. We strongly believe that together we can take HG Metal to new heights and translate our vision and aspiration into reality.

MR. GOH KIAN SINManaging Director


Board Of Directors


Mr. Yap Xi Ming, was appointed to the Board in April 2010. Mr. Yap is the Managing Director of Chye Hin Hardware Pte Ltd, which is a stockist, importer & exporter for structurals and mild steel products. He is a businessman with more than 25 years of experience in the steel industry. Mr Yap is a member of the Remuneration Committee and Nominating Committee.

MR. GOH KIAN SIN

Managing Director

After serving for 10 years with a Bursa Malaysia listed company involved in the steel industry in Malaysia at senior management level, Mr. Goh set up his own group of companies – Oriental Castle Sdn. Bhd – in 1999. His companies’ activities include foundation solutions materials, steel fi bers, roofi ng products and car business. Mr Goh is a member of the Nominating Committee.

MR. TAN CHAN TOOExecutive Director

Mr. Tan Chan Too, is one of the three founders of the Group. He has more than 35 years of experience in the steel industry and is actively leading the commodity trading activities business of the Group.

MR. CHNG HEE KOKExecutive Director

Mr. Chng was appointed as an Executive Director and Chief Executive Offi cer on 4 Jan 2010. He relinquished the latter appointment on 2 Dec 2010. He was a Member of Parliament from 1984 to 2001 and served on statutory boards like Public Utilities Board and Sentosa Development Corporation. His past chief executive appointments of public listed companies include that of Yeo Hiap Seng Ltd, Scotts Holdings Ltd and Hartawan Holdings Ltd. Mr Chng holds a First Class Honours B. Eng from the University of Singapore and an MBA from the National University of Singapore. He also serves on the Boards of a number of public listed companies such as Pacifi c Century Regional Devt Ltd, Samudera Shipping Line Ltd, Full Apex Holdings Ltd and Peoples’ Food Holdings Ltd.

MR. WONG KEAN SHYONG, KENNNon-Executive Director

Mr. Wong has extensive commercial experience in the international steel trading industry. Between 1989 and 2002 he worked for the Marubeni Group, serving in the group’s offi ces in Japan, Singapore and Hong Kong, to join VSC Holdings in 2002, lastly holding the position of President - Construction Material Group in 2008.

Mr. Wong currently holds the position of Chief Marketing Offi cer – heading Oriental Sheet Piling China’s Steel Foundation Business as well as Oil and Gas and Civil Construction Division.

MR. YAP XI MING MR. GOH KIAN SIN MR. TAN CHAN TOO MR. CHNG HEE KOK

9ANNUAL REPORT 2010

MR. GUI KIM YOUNG @ GUI KIM GANIndependent Director

Mr. Gui Kim Young @ Gui Kim Gan, Independent Director, is practicing as a director of a public accounting corporation. Mr. Gui currently also acts as Independent Director of three other listed companies. Mr Gui has more than 30 years of experience in accounting, audit and tax. He graduated from the then Nanyang University with a Bachelor of Commerce in 1973. He is a Fellow of the Institute of Certifi ed Public Accountants of Singapore and a member of the Singapore Institute of Directors. Mr Gui is the Chairman of the Remuneration Committee, and a member of the Audit Committee and Nominating Committee.

DR. TAN ENG LIANGIndependent Director

Dr. Tan was appointed to the Board on 29 January 2010. He sits on the Boards of many companies, including a few public listed companies and has a wealth of experience. He was a Member of Parliament (1972 to 1980), the Senior Minister of State for National Development (1975 to 1978) and Senior Minister of State for Finance (1978 to 1979). He also served as the Chairman of the Urban Development Authority and the Singapore Sports Council. Dr. Tan has a Doctorate from Oxford University, England. Dr Tan has been awarded the Public Service Star (BBM), Public Service Star (BAR) and the Meritorious Service Medal by the Singapore Government. He is also a director of the following public listed corporations, namely, SunMoon

Food Company Limited, Tung Lok Restaurants (2000) Limited, Pokka Corporation (Singapore) Limited, United Engineers Limited, Progen Holdings Limited, Jackspeed Corporation Limited and Hartawan Holdings Limited. Dr. Tan is the Chairman of the Audit Committee and member of the Remuneration Committee and Nominating Committee.

MR. LING CHUN YEE, ROYIndependent Director

Mr. Roy Ling was appointed to the Board in Jan 2010. Mr Ling is currently the Managing Director of RL Capital Management, a boutique hedge fund focused on Asia investments. Prior to working for RL Capital, Mr Ling was a Vice President with JPMorgan’s Asia real estate investment banking team based out of Singapore. He was responsible for the origination and execution of investment banking mandates for regional clients. Prior to working for JPMorgan, Mr Ling worked for Lehman Brothers, Goldman Sachs and Salomon Smith Barney, performing a broad range of corporate finance, equity research and real estate fi nancings. Mr Ling is a Chartered Financial Analyst and was formerly on the Board of Directors of the CFA Society of Japan. Mr Ling graduated from INSEAD with a Global Executive MBA and from the National University of Singapore with a Bachelor of Business Administration with Honors. Mr Ling is the Chairman of the Nominating Committee and member of the Audit Committee and Remuneration Committee.

MR. WONG KEAN SHYONG, KENN

MR. GUI KIM YOUNG @ GUI KIM GAN

DR. TAN ENG LIANG MR. LING CHUN YEE, ROY


KeyExecutives

DR. PATRICK SEILChief Executive Offi cer

The Board appointed Dr. Patrick Seil to the position of CEO in December 2010. He is responsible for the overall strategy and business direction of the Group.

Dr. Patrick Seil holds a Doctorate in Natural Sciences from the Institute of Organic and Pharmaceutical Chemistry of the University of Innsbruck, Austria. He is also a fellow of the University of Tokyo, Japan.

He served for a total of 17 years at ARBED-Arcelor-ArcelorMittal in various positions in Luxembourg, Dubai and Singapore, lastly heading all downstream activities in Asia as Managing Director of ArcelorMittal Singapore. In 2008 he joined the Oriental Castle Group as CEO of Oriental Steel Pipe Sdn Bhd in Klang, Malaysia.

MS. FOONG LEE HENG, JASMINEChief Financial Offi cer

Ms. Foong joined the Company in 2000. She is responsible for all financial, treasury, accounting function and corporate advisory matters of the Group. She has more than 15 years experience in audit and accounting. She is a fellow member of the Association of Chartered Certifi ed Accountants, UK and a member of the Institute of Certifi ed Public Accountants of Singapore.

MS. TAN YEE LEE, ELISEHead of Sales

Ms. Tan Yee Lee, Elise joined the Company in 2007 to lead the Sales Team. Her key responsibilities include sales, marketing and procurement of Company’s products, strategizing the Company’s market position, developing new market opportunities, formulating sales policies and procedures to improve effi ciency and providing better customer service. Ms. Elise Tan graduated from NUS (B.Sc, Information Technology in Business focus) and joined the group’s subsidiary Oriental Metals Pte Ltd in 2005, assisting sales and marketing for the Company. Prior to joining the Group, she has held various management positions in government-related organizations.

MS. TAN YEE WENCredit Controller

Ms. Tan Yee Wen is responsible to access credit risk of customer and risk exposure of the Company so as to minimize the occurrence of bad debts and ensure customer’s payment period is within payment terms and limit. She also assists the Executive Director in negotiating and monitoring the purchase and sales contracts. Ms. Tan graduated from NUS (B.Comp, Information Communications Management) and started her career in an established international steel trading house and has accumulated her experiences in the international trading fi eld.

MR. KELVIN KOIT Manager

Mr. Kelvin Ko joined the Group in 2008 and manages the Information Technology matters for HG Metal and its subsidiary, Oriental Metals Pte Ltd. With Mr. Ko’s vast IT experience for 8 years and exposure from prior services with Multinational Corporation, he contributes positively to improve on the Group’s operational efficiency through technology, including effective management to develop effi cient business network, systems and full support to the end users. He is also equipped with good knowledge of new IT developments in the required fields. Mr. Ko is a professionally certified network Engineer and qualifi ed SAP Administrator.

From Left: 1) Ms. Tan Yee Wen, 2) Dr. Patrick Seil, 3) Mr. Kelvin Ko, 4) Ms. Tan Yee Lee, Elise, 5) Ms. Foong Lee Heng, Jasmine

1

2

3

4

5

11ANNUAL REPORT 2010

OperationsReview

HG Metal managed to deliver a much improved performance for the year ended 30 September 2010 (“FY2010”) in spite of the challenging business environment.

The Group’s revenue declined by 65.1% from S$581.8 million in FY2009 to S$203.1 million in FY2010, due to lower contributions from its trading and manufacturing business segments. Revenue from the trading segment decreased from S$274.1 million to S$132.1 million, as the Group witnessed weaker business conditions. Sales from the manufacturing arm fell from S$307.7 million to S$71.0 million , mainly due to the absence of revenue stream after the disposal of part of the Group’s holdings of BRC Asia Limited’s (“BRC”) shares in 1QFY2010.

Despite the lower sales, a recovery in steel prices and better inventory management led to a 53.3% surge in gross profi t to S$23.7 million in FY2010. This translated to an improvement of gross profi t margin from 2.7% in FY2009 to 11.7% in FY2010.

As a result of the Group’s implementation of cost cutting measures in a slow business environment, distribution expenses fell by 49.9% to S$1.6 million and

Despite the lower sales, a recovery in steel

prices and better inventory management

led to a 53.3% surge in gross profit to

S$23.7 million in FY2010. This translated

to an improvement of gross profi t margin

from 2.7% in FY2009 to 11.7% in FY2010.


OperationsReview

administrative expenses reduced by 43.3%to S$9.5 million. Finance expenses went down by 40.8% to S$6.9 million due to lower bank borrowings.

Other operating income jumped from S$4.4 million in FY2009 to S$8.3 million in FY2010, primarily due to a S$6.4 million gain from the disposal of BRC’s shares.

Other operating expenses halved to S$18.9 million in FY2010 from S$45.6 million in FY2009. The reduction in expenses were mainly due to lower inventories writedown and foreign exchange losses.

Summing up the above, the Group turned in a net profi t after tax of S$0.3 million in FY2010 from a net loss after tax of S$58.8 million in FY2009.

The Group’s inventories went down from S$140.5 million as at 30 Sep 2009 to S$62.5 million as at 30 Sep 2010. This was due to lower inventory purchases.

Trade and other receivables decreased by 64.3% to S$30.2 million while trade and other payables fell by 68.3% to S$31.5 million. Both declines were in line with the drop in revenue.

The Group’s operating cash fl ow plunged to S$11.6 million in FY2010 from S$173.6 million in FY2009, mainly due to lower inventories in FY2010. Investing cash infl ow amounted to S$12.0 million in FY2010, as compared to an investing cash outfl ow of S$35.0 million in FY2009, primarily due to the divestment of BRC’s stake in FY2010, proceeds from sale of properties located at Nusajaya, Johor, and absence of BRC-related acquisition expenses in FY2009. Financing cash fl ow came down to S$35.0 million from S$172.3 million because of reduced reliance on bank borrowings in FY2010.

The Group ended FY2010 with cash and short-term deposit of S$5.1 million (FY2009: S$16.4 million) and borrowings of S$30.4 million (FY2009: S$93.4 million), which contributed to a lower gearing ratio of 0.31 times (FY2009: 1.26 times).

The Group ended FY2010 with cash

and short-term deposit of S$5.1 million

(FY2009: S$16.4 million) and borrowings

of S$30.4 million (FY2009: S$93.4 million),

which contributed to a lower gearing ratio

of 0.31 times (FY2009: 1.26 times).


Earnings S$ (million)

58.070

50

90

110

130

06 07 08 09 10

115.8

136.5

100.598.6

362.8400

200

600

800

1000

06 07 08 09 10

438.1

732.9581.8

203.0

Turnover S$ (million) Shareholders Fund S$ (million)

13.9

10

-10

-15

-20

-25

-30

-35

-40

-45

-50

-55

-60

5

-5

15

20

25

30

06 07 08

09

10

18.3

22.7

(58.8)

0.3

FinancialHighlights

Turnover by Region (%) Turnover by Products (%)

BARSSINGAPORE MALAYSIA INDONESIA

OTHERS PIPESBEAMS

SHIP PLATES / STEEL PLATES

WIRE MESH /CUT AND BEND

OTHERS

OTHERS

2.8%

SINGAPORE

70.7%

MALAYSIA

18.1%

INDONESIA

8.4%

WIRE MESH /CUT AND BEND

19.7%

OTHERS

10.1%

BARS

17.0%

BEAMS

7.3%

PIPES

11.7% SHIP PLATES / STEEL PLATES

34.2%


CorporateInformation

BOARD OF DIRECTORS


MR. GOH KIAN SINManaging Director

MR. TAN CHAN TOOExecutive Director

MR. CHNG HEE KOKExecutive Director

MR. WONG KEAN SHYONG, KENNNon-Executive Director

MR. GUI KIM YOUNG@ GUI KIM GANIndependent Director

DR. TAN ENG LIANGIndependent Director

MR. LING CHUN YEE, ROYIndependent Director

SECRETARY

FOONG LEE HENG, JASMINE

REGISTERED OFFICE

30 JALAN BUROH SINGAPORE 619486tel: (65) 6268 2828fax: (65) 6268 3838www.hgmetal.com

SHARE REGISTRAR

M&C SERVICES PRIVATE LIMITED138 Robinson Road #17-00 The Corporate Offi ce Singapore 068906

AUDITORS

ERNST & YOUNG LLPPublic Accountants and Certifi ed Public Accountants Singapore

Partner-in-charge: Max Loh Khum Whai(Appointed in fi nancial year ended 30 September 2008)

PRINCIPAL BANKERS

OVERSEA-CHINESE BANKING CORPORATION LIMITED

UNITED OVERSEAS BANKLIMITED


Corporate Governance

CORPORATE GOVERNANCE STATEMENT

HG Metal Manufacturing Limited (the “Company”) is committed to complying with the Code of Corporate Governance 2005 (“Code”) so as to ensure greater transparency and to safeguard the interests of shareholders. This statement describes the Company’s corporate governance practices and activities with specifi c reference to the Code established by the Singapore Corporate Governance Committee and relevant sections of the Listing Manual issued by the SGX-ST.

1 BOARD MATTERS Principle 1: Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the success of the company. The Board works with Management to achieve this and the Management remains accountable to the Board.

1.1 Role of the Board

The Board of Directors (the “Board”) comprises 3 Executive Directors and 5 Non-Executive Directors. 3 of the 5 Non-Executive Directors are Independent Directors. The Board’s primary role is to protect and enhance long-term shareholder value. To fulfi ll this, apart from its statutory responsibilities, the Board principal functions include the following:

(a) approve the Group’s corporate and strategic directions;(b) establish goals for management and monitoring the achievement of these goals;(c) ensure management leadership of high quality, effectiveness and integrity;(d) approve annual budgets, investment and divestment proposals;(e) appointment of Board Directors and key managerial personnel; (f) ensuring an effective risk management framework is in place;(g) review fi nancial performance and implement fi nancial policies which incorporate risk management,

internal controls and reporting compliance; and(h) assume responsibilities for corporate governance.

1.2 Board Processes

To assist the Board in the discharge of its oversight function, certain functions have been delegated to various Board Committees, namely, the Audit Committee (“AC”), Nominating Committee (“NC”) and the Remuneration Committee (“RC”), each of which has its own written terms of reference. The minutes of the meeting of these committees are circulated among the Board.

Formal Board meetings will be held at least once every quarter to oversee the business affairs of the Group and approve any fi nancial or business strategies or objectives. Where necessary, additional Board meetings are held to deliberate on urgent substantive matters. The Board also approves transactions through circular resolutions which are circulated to the Board together with all relevant information relating to the proposed transaction.

The agenda for meetings is prepared in consultation with the Chairman and Chief Executive Offi cer. The Agenda and submissions are circulated in advance of the scheduled meetings.

16


HG Metal Manufacturing Limited

1.3 Directors’ meeting held in Financial Year 2010

The attendance of the directors at meetings for the fi nancial year ended 30 September 2010 are as follows:

Board of Directors

Audit Committee

Remuneration Committee

Nominating Committee

Held Attend Held Attend Held Attend Held Attend

Yap Xi Ming (1) 15 6 - - - - - -

Chng Hee Kok (2) 15 10 - - - - - -

Tan Chan Too 15 15 - - - - - -

Gui Kim Young @ Gui Kim Gan 15 15 6 6 4 4 2 2

Dr Tan Eng Liang (3) 15 8 6 3 4 2 2 -

Roy Ling Chung Yee (4) 15 8 6 3 4 3 2 1

Poon Hon Thang, Samuel (5) 15 3 6 3 4 1 2 1

Wee Piew (6) 15 3 - - - - 2 1

Lee Leng Loke (7) 15 3 - - - - - -

Sia Ling Sing (8) 15 8 6 2 4 2 2 1

(1) Appointed on 26 April 2010(2) Appointed on 4 January 2010(3) Appointed on 29 January 2010(4) Appointed on 4 January 2010(5) Resigned on 30 December 2009(6) Resigned on 4 January 2010(7) Resigned on 4 January 2010(8) Resigned on 1 April 2010

The directors were appointed based on their experience, stature and potential to contribute to the proper guidance of the Group and its businesses. As such, we believe that each individual director’s contributions can be refl ected in ways other than the reporting of attendances at Board meetings and/or Board committee meetings.



1.4 Matters Requiring Board Approval

The directors have identifi ed a few areas for which the Board has direct responsibility for decision making such as the following:

• approval of the quarterly results announcements;

• approval of the annual report and accounts;

• declaration of interim dividends and proposal of fi nal dividends;

• convening of shareholders’ meetings;

• approval of corporate strategy;

• authorisation of major transactions;

• approval of Board changes and appointments on Board committees;

• increase in investment in businesses and subsidiaries;

• divestment in any of the Group companies; and

• commitments to term loans and lines of credit from banks and fi nancial institutions by the Company.

While matters relating in particular to the Company’s objectives, strategies and policies require the Board’s direction and approval, Management is responsible for the day to day operation and administration of the Company in accordance with the objectives, strategies and policies set by the Board.

1.5 Training of Directors

Our directors are provided with extensive background information about our Group’s history, mission, values and business operations. Changes to regulations and accounting standards are monitored closely by management. To keep pace with such regulatory changes, the Company provides opportunities for ongoing education on Board processes and best practices as well as updates on relevant new laws and regulations. Directors also have the opportunity to visit the Group’s operational facilities and meet with management to gain a better understanding of the business operations. The Company has set up a more formal procedure for the issue of the appointment letter setting out the directors’ duties and obligations. Newly appointed directors shall also be briefed on the business and organisational structure of the Group and its strategic directions.

18



1.6 Board Composition and Balance

Principle 2: There should be a strong and independent element on the Board, which is able to exercise objective judgement on corporate affairs independently, in particular, from Management. No individual or small group of individuals should be allowed to dominate the Board’s decision making.

All directors exercise independent judgements and make decisions objectively in the best interest of the Company. The assessment criteria in the Chairman’s assessment of directors include intensity of participation at meetings, quality of interventions and special contribution.

The Board comprises members with diverse expertise and experience in the steel industry, fi nancial and business.

As of the date of this report, the Board comprises the following directors:

EXECUTIVE DIRECTORSMr Goh Kian Sin (Managing Director) - Appointed on 15 November 2010Mr Tan Chan TooMr Chng Hee Kok

NON-EXECUTIVE AND NON-INDEPENDENT DIRECTORMr Yap Xi Ming (Non-Executive Chairman)Mr Kenn Wong Kean Shyong – Appointed on 15 November 2010

INDEPENDENT NON-EXECUTIVE DIRECTORSDr Tan Eng LiangMr Gui Kim Young @ Gui Kim GanMr Roy Ling Chung Yee

The profi les of the Board are set out in pages 8 and 9 of the Annual Report.

The composition of the Board is determined in accordance with the following principles:

• the Board should comprise 8 to 10 directors. This number may be increased where it is felt that additional expertise is required in specifi c areas, or when an outstanding candidate is identifi ed;

• to form a strong independent element on the Board, it should comprise at least one-third of non-executive independent directors;

• the Board should have enough directors to serve on various committees of the Board without over-burdening the directors or making it diffi cult for them to fully discharge their responsibilities;

• the Board should comprise directors with a broad range of competencies and expertise both nationally and internationally; and

• directors appointed by the Board are subject to election by shareholders at the following Annual General Meeting (“AGM”) and thereafter, directors are subject to re-election according to the provisions in the Articles of Association. Article 89 of the Articles of Association of the Company states that one third of the directors shall retire from offi ce by rotation with the exception of the director holding offi ce as Managing Director.



The Board regularly examines its size and, with a view to determining the impact of its number upon effectiveness, decides on what it considers an appropriate size for itself taking into account the scope and nature of the Company’s operations. The composition of the Board is reviewed on an annual basis by the NC to ensure that the Board has the appropriate mix of expertise and experience to enable management to benefi t from a diverse perspective of issues that are brought before the Board. The NC is of the view that the Board comprises directors capable of exercising objective judgment on the corporate affairs of the Company independently of management and that no individual or small group of individuals dominate the Board’s decision-making process.

When a vacancy exists, through whatever cause, or where it is considered that the Board would benefi t from the services of a new director with particular skills and knowledge, the NC, in consultation with the Board, determines the selection criteria for the position based on the skills and knowledge deemed necessary for the Board to best carry out its responsibilities. Candidates may be suggested by directors or management or sourced from external sources. The NC will interview the candidates and assess them based on objective criteria approved by the Board such as integrity, independent mindedness, possession of the relevant skills required or skills needed to complement the existing Board members, ability to commit the time and effort to carry out his responsibilities, good decision making track record, relevant experience and fi nancial literacy. The NC will make a recommendation to the Board on the appointment. The Board then appoints the most suitable candidate who must stand for election at the next AGM of shareholders.

Particulars of interests of directors who held offi ce at the end of the fi nancial year in shares and share options in the Company and in related corporations (other than wholly-owned subsidiaries) are set out in the Directors’ Report.

1.7 Independent Members of the Board of Directors

The Board has 3 independent directors, representing at least one-third of the Board: Dr Tan Eng Liang, Mr Gui Kim Young @ Gui Kim Gan and Mr Roy Ling Chung Yee. The criteria for independence are based on the defi nition given in the Code, which considers an independent director as one who has no relationship with the Company, its related companies or its offi cers that could interfere, or be reasonably perceived to interfere, with the exercise of the director’s independent business judgement with a view to the best interest of the Company. The independence of each director is reviewed annually by the NC.

1.8 Chairman and Chief Executive Offi cer

Principle 3: There should be a clear division of responsibilities at the top of the company - the working of the Board and the executive responsibility of the company’s business - which will ensure a balance of power and authority, such that no one individual represents a considerable concentration of power.

The Company has a separate Non-Executive Chairman and a Chief Executive Offi cer, which ensures that there is a balance of power and authority, increased accountability and greater capacity of the Board for independent decision-making at the top of the Company. As at the date of this report, Mr Yap Xi Ming holds the post of Non-Executive Chairman, Mr Goh Kian Sin holds the post of Managing Director and Dr Patrick Seil holds the post of Chief Executive Offi cer.

20



The Non-Executive Chairman ensures that board meetings are held when necessary and sets the board meeting agenda (with the assistance of the company secretary and in consultation with the Managing Director and the Chief Executive Offi cer). The Chairman ensures that the board members are provided with complete, adequate and timely information. The Chairman ensures that procedures are introduced to comply with the Code and ensures effective communication within the board and with the shareholders.

The Board has delegated the daily operations of the Group to the Managing Director and the Chief Executive Offi cer. The Managing Director and the Chief Executive Offi cer leads the management team and executes the strategic plans in alignment with the strategic decisions and goals set out by the Board and ensures that the directors are kept updated and informed of the Group’s businesses.

1.9 Board Membership

Principle 4: There should be a formal and transparent process for the appointment of new directors to the Board.

The Board has delegated to the NC the functions of developing and maintaining a transparent and formal process for the appointment of new directors, making recommendations for directors who are due for retirement by rotation to seek re-election at general meeting and determining the independent status of each director. As at the date of this report, the NC comprises the following members, the majority of whom (including the Chairman) are independent:-

Mr Roy Ling Chung Yee (Chairman and Independent Director),Dr Tan Eng Liang (Independent Director)Mr Gui Kim Young @ Gui Kim Gan (Independent Director)Mr Yap Xi Ming (Non-Executive Chairman and Non-Executive Director)Mr Goh Kian Sin (Managing Director and Executive Director)

The NC is regulated by its terms of reference and its key functions include:-

• make recommendations to the Board on new appointments to the Board;

• determine orientation programs for new directors and recommend opportunities for the continuing training of the directors;

• make recommendations to the Board on the re-nomination of retiring directors standing for re-election at the Company’s AGM, having regard to the directors’ contribution and performance (e.g. attendance, preparedness, participation and candour);

• ensure that all directors submit themselves for re-nomination and re-election at regular intervals and at least every three years;

• determine annually whether or not a director is independent;

• review the size and composition of the Board with the objective of achieving a balanced Board in terms of the mix of experience and expertise;



• review the appointment of immediate family members (spouse, child, adopted child, step-child, sibling and parent) of any of the Company’s directors or substantial shareholders to managerial positions in the Company;

• determine whether a director who has multiple board representations is able to and has been adequately carrying out his duties as director of the Company;

• report to the board on its activities and proposals; and

• carry out such other duties as may be agreed to by the NC and the Board.

The NC meets at least once a year. The Company’s Articles of Association provide that, at each AGM, one-third of the directors for the time being (or, if their number is not a multiple of three, the number nearest to but not less than one-third) shall retire from offi ce by rotation. A retiring director is eligible for re-election by the shareholders of the Company at the AGM, and prior to nominating a retiring director for re-election, the NC will evaluate the director’s contribution and performance taking into consideration factors such as attendance, preparedness, participation and candour.

1.10 Board Performance

Principle 5: There should be a formal assessment of the effectiveness of the Board as a whole and the contribution by each director to the effectiveness of the Board.

We believe that Board performance is ultimately refl ected in the performance of the Group and the Company. The Board should ensure compliance with applicable laws and Board members should act in good faith, with due diligence and care in the best interests of the Group and the shareholders. In addition to these fi duciary duties, the Board is charged with two key responsibilities of setting strategic direction and ensuring that the Group is ably led. The Board, through the delegation of its authority to the NC, will review the Board’s composition annually to ensure that the Board has the appropriate mix of expertise and experience to lead the Group.

The NC assesses the effectiveness of the Board as a whole and the contribution by each director to the effectiveness of the Board on an annual basis.

In its assessment of the Board effectives, the NC takes into consideration the frequency of the Board meetings, the rate at which issues raised are adequately dealt with and the reports from the various committees. In the like manner, the NC is able to assess the contribution of each individual director to the effectiveness of the Board.

The NC has conducted a Board’s performance evaluation as a whole in FY2010, participated by all directors. The assessment parameters are broadly based on the attendance records at the meetings of the Board and the relevant board committees, intensity of participation at meetings, sense of independence, quality of contributions and workload requirements.

22



1.11 Access to Information

Principle 6: In order to fulfi l their responsibilities, Board members should be provided with complete, adequate and timely information prior to Board meetings and on an on-going basis.

Directors receive a regular supply of information from management about the Group so that they are equipped to play as full a part as possible in Board meetings. Detailed Board papers are circulated to all directors prior to the scheduled meetings so that members may better understand the issues beforehand, allowing for more time at such meetings for questions that members may have. The Board papers provided include background or explanatory information relating to matters to be brought before the Board. A presentation is made to the Directors at the Board meeting on budgets, forecasts and variances from the budget disclosed.

All directors have separate and independent access to the advice and services of the company secretary. The company secretary attends the Board and Board Committee meetings and assists the Chairman of the Board and Board Committee meetings in ensuring that the relevant procedures are followed and that applicable rules and regulations are complied with as well as ensuring good information fl ow within the Board and its committees, between senior management and the non-executive directors, facilitating orientation and assisting with professional development as required. The appointment and removal of the company secretary is a matter which is approved by the Board.

The Board also has separate and independent access to the Company’s senior management.

Each director has the right, at the Company’s expense, to seek independent legal and other professional advice concerning any aspect of the Group’s operations or undertakings in order to fulfi ll their duties and responsibilities as directors.

2 REMUNERATION MATTERS

2.1 Procedure for developing Remuneration Policies

Principle 7: There should be a formal and transparent procedure for developing policy on executive remuneration and for fi xing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration.

The Group’s remuneration policy is to provide compensation packages at market rates which reward successful performance and attract, retain and motivate directors and key management executives.

The RC comprises solely of non-executive directors, the majority of whom, including the Chairman, is independent. At the date of this report, the RC comprises the following members:-

Mr Gui Kim Young @ Gui Kim Gan (Chairman, and Independent Director), Dr Tan Eng Liang (Independent Director), Mr Roy Ling Chung Yee (Independent Director) Mr Yap Xi Ming (Non-Executive Chairman).



The RC meets at least once each year and at other times as required.

The RC is responsible for recommending to the Board a framework of remuneration for the directors and senior management which is submitted to the whole Board for endorsement. The RC reviews and approves recommendations on remuneration policies and packages for directors and senior management in the interests of improved corporate performance.

The RC’s review of remuneration packages takes into consideration the long term interests of the Group and ensures that the interests of the directors align with that of the shareholders. The review covers all aspects of remuneration, including but not limited to directors’ fees, salaries, allowances, bonuses, options, profi t sharing (where applicable) and benefi ts-in-kind.

In setting out the remuneration packages, the RC would take into consideration pay and employment conditions within the industry and in comparable companies. The remuneration packages should take into account the Company’s relative performance and the performance of the individual directors / senior management.

The RC’s recommendations are submitted to the entire Board. Each member of the RC shall abstain from voting on any resolution concerning his own remuneration.

The Directors’ fees to be paid for any one year are submitted for shareholders’ approval at the AGM.

2.2 Level and Mix of Remuneration

Principle 8: The level of remuneration should be appropriate to attract, retain and motivate the directors needed to run the company successfully but companies should avoid paying more than is necessary for this purpose. A signifi cant proportion of executive directors’ remuneration should be structured so as to link rewards to corporate and individual performance.

The remuneration packages of the Managing Director, Chief Executive Offi cer and the executive directors are determined based on the framework recommended by the RC. In doing so, the RC reviews the length of the fi xed appointment period, the notice period for termination and the terms of the compensation package in the event of the termination of any executive directors’ contracts of service to ensure that the terms of such clauses are not onerous to the Company. The executive directors’ framework of remuneration includes a fi xed element as well as a variable element in the form of a bonus and a profi t sharing incentive which is linked to the Company’s performance.

All non-executive Directors are paid a Director’s fee, with additional fees for serving as the chairman or member of a Board committee and attendance fees for Board and Board committee meetings. These fees are recommended by the RC and submitted to the Board for endorsement. The remuneration of non-executive directors should be appropriate to the level of contribution, taking into account factors such as effort and time spent, and responsibilities of the directors. Non-executive directors should not be over-compensated to the extent that their independence may be compromised.

24



2.3 Disclosure on Remuneration

Principle 9: Each company should provide clear disclosure of its remuneration policy, level and mix of remuneration, and the procedure for setting remuneration in the company’s annual report. It should provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to directors and key executives, and performance.

The remuneration of the Directors from the Company for the fi nancial year ended 30 September 2010 is as follows:-

Director BaseSalary Bonus Profi t

SharingDirector

FeesBenefi ts In

Kind TOTAL

S$250,000 to below S$500,000

Tan Chan Too 79% 6% 15% 100%

Chng Hee Kok 75% 9% 16% 100%

Below S$250,000 100%

Yap Xi Ming 100% 100%

Gui Kim Young @ Gui Kim Gan 100% 100%

Dr Tan Eng Liang 100% 100%

Ling Chung Yee, Roy 100% 100%

Poon Hon Thang, Samuel 100% 100%

Sia Ling Sing 100% 100%

Wee Piew 100% 100%

Lee Leng Loke 100% 100%

2.4 Remuneration of Employees Related to Directors

There is no employee who is related to a Director or the Chief Eexcutive Offi cer whose remuneration exceeds S$150,000 in the Group’s employment for fi nancial year ended 30 September 2010.

2.5 Remuneration of Top 5 Key Management Executives

KEY EXECUTIVES :Dr Patrick SeilFoong Lee Heng, JasmineTan Yee Lee, EliseTan Yee WenKelvin Ko Guan Huat

The key executives fall within the remuneration band of below $250,000.

The Company adopts a remuneration policy for staff comprising both a fi xed and variable component. The fi xed component is in the form of a base salary and allowances. The variable component is in the form of a variable bonus that is linked to the Company and each individual’s performance.



3 ACCOUNTABILITY AND AUDIT

Principle 10: The Board should present a balanced and understandable assessment of the company’s performance, position and prospects.

In presenting the annual fi nancial statements and quarterly announcements to shareholders as well as any price sensitive reports to the public, the Board aims to provide the shareholders with a balanced and understandable assessment of the Company’s and the Group’s performance, position and prospects.

The Board is provided with an analysis of the management accounts at the quarterly Board meetings which presents a balanced and understandable assessment of the Company’s performance, position and prospects.

3.1 Audit Committee

Principle 11: The Board should establish an Audit Committee with written terms of reference which clearly set out its authority and duties.

The AC comprises 3 members, all of whom including the Chairman are non-executive and independent directors. The AC’s members are:-

Dr Tan Eng Liang (Chairman, and Independent Director), Mr. Gui Kim Young @ Gui Kim Gan (Independent Director) Mr Roy Ling Chung Yee (Independent Director).

At least 2 members have accounting or related fi nancial management expertise or experience.

The AC’s main objective is to assist the Board in fulfi lling its fi duciary responsibilities relating to internal controls, overseeing the external audit process, reviewing the fi nancial information to be disclosed to the public and ensuring that arrangements are in place for the independent investigation and follow up of reports by staff of improprieties in fi nancial reporting and other matters. To achieve this, the AC ensures that its members have the appropriate qualifi cations to provide independent, objective and effective oversight.

Specifi cally, the AC meets periodically to perform the following functions:

(a) review the audit plans of the external and internal auditors;(b) review the external and internal auditors’ reports;(c) review the co-operation given by the Company’s offi cers to the external and internal auditors;(d) review the adequacy of the internal audit function;(e) evaluate the effectiveness of the Group’s system of internal controls, including fi nancial, operational

and compliance controls, and risk management, by reviewing written reports from internal and external auditors, and management responses and actions to correct any defi ciencies;

(f) review the fi nancial statements of the Company and the Group before their submission to the Board;(g) review non-audit services provided by the external auditors to satisfy itself that the nature and extent

of such services will not prejudice the independence and objectivity of the external auditors;(h) nominate external auditors for appointment or re-appointment and approve the remuneration

and terms of engagement of the external auditor;

26



(i) review the Group’s compliance with such functions and duties as may be required under the relevant statutes or the Listing Manual issued by SGX-ST, and by such amendments made thereto from time to time; and

(j) review interested person transactions (as defi ned in Chapter 9 of the Listing Manual issued by SGX-ST) to ensure that they are on normal commercial terms and arms’ length basis and not prejudicial to the interests of the Company or its shareholders in any way.

Apart from the duties listed above, the AC may commission and review the fi ndings of internal investigations into matters where there is suspected fraud or irregularity, or failure of internal controls or infringement of any Singapore and other applicable law, rule or regulation which has or is likely to have material impact on the Company’s or Group’s operating results and/or fi nancial position.

The AC meets from time to time with the Group’s external and internal auditors and the executive management to review accounting, auditing and fi nancial reporting matters so as to provide the necessary checks and balances to ensure that an effective control environment is maintained in the Group. The AC also studies proposed changes in accounting policies, examines the internal audit functions and discusses the accounting implications of major transactions. Furthermore, the AC advises the Board regarding the adequacy of the Group’s internal controls and the contents and presentation of its interim and annual reports. Based on the information provided to the AC, nothing has come to the AC’s attention that the system of internal controls and risk management is inadequate.

The AC is also authorised to investigate any matter within its terms of reference and has full access to and co-operation of the management and full discretion to invite any director or executive offi cer to attend its meetings, and reasonable resources to enable it to discharge its functions properly. The AC meets annually with the internal auditors and the external auditors, without the presence of the Company’s management to review the adequacy of audit arrangements, with particular emphasis on the scope and quality of their audits, and the independence and objectivity of the internal and external auditors.

The AC, having reviewed all non-audit services provided by the external auditors to the Group, is satisfi ed that the nature and extent of such services would not affect the independence of the external auditors.

3.2 Internal Controls

Principle 12: The Board should ensure that the Management maintains a sound system of internal controls to safeguard the shareholders’ investments and the company’s assets.

The Board recognises that it is responsible for the overall internal control framework, but accepts that no cost effective internal control system will preclude all errors and irregularities, as the system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss. The AC will:

• satisfy itself that adequate measures are in place to identify and mitigate any material business risks associated with the Group;

• ensure that a review of the effectiveness of the Group’s material internal controls, including fi nancial, operating and compliance controls and risk management, is conducted at least annually. Such review can be carried out by internal auditors/external auditors;



• ensure that the internal control recommendations made by internal and external auditors have been implemented by the management; and

• ensure the Board is in a position to comment on the adequacy of the internal controls of the Group.

Based on the discussions with the auditors and the management’s responses to the auditors’ recommendations for improvements to the Group’s internal controls, the Board is satisfi ed that there are adequate internal controls to safeguard the assets and ensure the integrity of fi nancial statements.

3.3 Whistle-Blowing Policy

The Group has adopted a constructive whistle-blowing policy and guideline in order to detect and deter any fraud or deliberate error in the preparation, evaluation, review or audit of any fi nancial statement, fi nancial reports and records of the Company.

Demonstrating its pledge to good corporate governance, the Group provides an avenue for employees to bring their complaints responsibly to report any possible improprieties in matters of fi nancial reporting or other matters that they may encounter to the AC or any other committees established by the Audit Committee for such purpose without fear of reprisal. The establishment of the whistle-blowing structure also augments the Group’s ability to detect potential fraud, providing another level of comfort and assurance to investors.

3.4 Internal Audit

Principle 13: The company should establish an internal audit function that is independent of the activities it audits.

The Group has outsourced its internal audit function to Messrs BDO Raffl es Consultants Pte Ltd. The aim of the internal audit function is to promote internal control in the Group and to monitor the performance and effective application of internal audit procedures. It supports the directors in assessing key internal controls through a structured review programme. The internal audit function is expected to meet or exceed the standard set by internationally recognised professional bodies including the Standards for the Professional Practice of Internal Auditing set by The Institute of Internal Auditors.

The internal audit function reports functionally to the Chairman of the AC and administratively to the Chief Executive Offi cer. The AC ensures that the internal audit function has adequate resources and has appropriate standing within the Group. The AC, on an annual basis, assesses the effectiveness of the internal auditors by examining:

• the scope of the internal auditors’ work;

• the quality of the reports;

• the relationship with the external auditors; and

• the independence of the areas reviewed.

The AC has reviewed the annual internal audit plan FY2010 and is satisfi ed that the internal audit functions have been adequately carried out.

28



4 COMMUNICATION WITH OUR SHAREHOLDERS

Principle 14: Companies should engage in regular, effective and fair communication with shareholders.Principle 15: Companies should encourage greater shareholder participation at AGMs, and allow shareholders the opportunity to communicate their views on various matters affecting the company.

The Company fi rmly believes in high standards of transparent corporate disclosure, pursuant to the SGX-ST’s Listing Rules and the Singapore Companies Act, whereby shareholders are informed of all major developments that affect the Group. Information is communicated to our shareholders on a timely basis. Where there is inadvertent disclosure made to a selected group, the Company will make the same disclosure publicly to all others as soon as practicable. Communication is made through:

• annual reports that are prepared and sent to all shareholders. The Board ensures that the annual report includes all relevant information about the Company and the Group, including future developments and other disclosures required by the Singapore Companies Act and Singapore Financial Reporting Standards;

• quarterly announcements containing a summary of the fi nancial information and affairs of the Group for that period;

• notices of and explanatory memoranda for AGMs and Extraordinary General Meetings;

• press releases on major developments of the Company and the Group;

• disclosure to the SGX-ST; and

• the Company’s website at http://hgmetal.listedcompany.com/ at which our shareholders can access information on the Group.

Moreover, our shareholders are encouraged to attend the AGM to ensure a high level of accountability and to be updated on the Company’s strategies and goals. The Company’s Articles allow a shareholder to appoint more than 2 proxies to attend a shareholder’s meeting on his behalf. The notice of the AGM is sent to our shareholders, together with explanatory notes, appendices or a circular on items of special business, at least 14 days before the meeting. The Chairmen of the AC, NC and RC are normally present and available to address questions relating to the work of their respective committees at general meetings. Furthermore, the external auditors are present to assist our Board in addressing any relevant queries by our shareholders.

Each item of special business included in the notice of the meeting is accompanied, where appropriate, by an explanation for the proposed resolution. Separate resolutions are proposed for substantially separate issues at the meeting.



5 DEALINGS IN SECURITIES

In accordance with Rule 1207(18) of the Listing Manual issued by SGX-ST, the Company notifi es all employees that they are prohibited from trading in the Company’s shares one month prior to the announcement of the Company’s full year results and 14 days before the announcement of the fi rst three quarters of the Company’s fi nancial results.

The Company has also issued a policy on Insider Trading to all employees which sets out the principles of relevant laws relating to insider trading which are applicable at all times.

6 INTERESTED PERSON TRANSACTIONS

The Company is required to comply with the requisite rules under Chapter 9 of the Listing Manual issued by SGX-ST for interested person transactions. To ensure compliance with Chapter 9, the AC meets quarterly to review if the Company will be entering into an interested person transaction in order to ensure that the interested person transactions are carried out on normal commercial terms and will not prejudicial to the interests of the shareholders.

Disclosure according to Rule 907 of the SGX-ST Listing Manual in respect of interested person transactions for fi nancial year ended 30 September 2010 is stated in the table below:

Name of interested person

Aggregate value of all interested person

transactions, conducted under shareholders

mandate pursuant to Rule 920 (excluding transactions

less than S$100,000)

Aggregate value of all interested person

transactions, conducted pursuant to Rule 920

(excluding transactions less than S$100,000 and

transaction conducted under shareholders’ mandate)

Lingco Shipbuilding Pte Ltd

Super Marine Supplies Pte Ltd

Nil

Nil

NA

NA

Chye Hin Hardware Pte Ltd

- Sales - Other Charges

NANA

1,256,000(816,000)

7 MATERIAL CONTRACTS

Save as disclosed in the audited fi nancial statements of this Annual Report, there are no material contracts of the Company or its subsidiaries involving the interest of the Managing Director, CEO, directors or controlling shareholder subsisting at the end of the fi nancial year ended 30 September 2010 or have been entered into since the end of the previous fi nancial year.

30



8 RISK MANAGEMENT

Management regularly reviews the Group’s business and operational activities to identify areas of signifi cant business risks as well as deliberate on appropriate measures to control and mitigate these risks. Management is accountable to the Board for ensuring the effectiveness of risk management and adherence to risk appetite limits.

On a day-to-day basis, business units have primary responsibility for risk management. The various business units provide the senior management with a timely assessment of key risk exposures and the associated management responses. These units also recommend risk appetite and control limits.

The signifi cant risk management policies are as disclosed in the audited fi nancial statements of this Annual Report.

The fi nancial risk management policies are outlined below:

Fluctuations in steel prices

As a distributor of steel products, the Group purchases a wide range of steel products and maintain substantial inventories to be in a position to fulfi l customers’ orders within a short lead time. The cost of steel products purchased is the main component of the Group’s cost of sales for its steel distribution business. Prices of steel products are subject to international price fl uctuations of steel. Therefore, the Group is vulnerable to any fl uctuations in prices of steel.

The Group, with more than 30 years of knowledge and expertise gained in this line of business, is able to make appropriate adjustments to its supplier choice, timing of purchase and shipment, contracting arrangement with its customers to address price fl uctuation risk.

Credit risk of its customers

The Group extends credit terms ranging from 30 to 120 days to its customers, depending on their credit worthiness. From time to time, in the ordinary course of business, certain customers may default on their payment. Such events may arise due to the inherent risk from its customers’ business, risk pertaining to the political, economic, social and legal environment of its customers’ jurisdiction and foreign exchange risk. In the event that the Group’s customers default on their payments, the Group would have to make allowances for doubtful debts or incur write-offs, which will have an adverse impact on its profi tability.The Group performs credit check and approval before granting credit to customers and imposes a credit limit and credit term on each customer. All credit accounts are subject to monthly review.

In addition, the Group is not dependant on any single customer or any single country. The Group has more than 600 customers. Hence, the Group is not exposed to signifi cant credit risk posed by any single customer.

Foreign exchange exposure

The purchases of the Group are mainly denominated in US$ and its sales are mainly denominated in S$. As a result, the Group is exposed to fl uctuations in foreign exchange rates. For FY2010, approximately 80% of its total purchases were made in US$, whilst approximately 90% and 10% of its total sales were denominated in S$ and US$ respectively. Hence, the Group may be exposed to any signifi cant fl uctuation of the US$.

The Group monitors the US$ exchange rates closely and will enter into forward contracts on case to case basis to reduce its exposure.


Contents 32 Directors’ Report 36 Statement by Directors37 Independent Auditors’

Report 39 Consolidated

Statement of Comprehensive Income

40 Balance Sheets41 Statements of Changes

in Equity44 Consolidated

Cash Flow Statement46 Notes to the

Financial Statements113 Shareholdings Statistics

115 Notice of Annual General Meeting

Proxy Form


The directors present their report to the members together with the audited consolidated financial statements of HG Metal Manufacturing Limited (the “Company”) and its subsidiaries (collectively the “Group”) and the balance sheet and statement of changes in equity of the Company for the financial year ended 30 September 2010.

Directors

The directors of the Company in offi ce at the date of this report are as follows:

Tan Chan TooGui Kim Young @ Gui Kim GanChng Hee Kok (appointed on 4 January 2010)Ling Chung Yee, Roy (appointed on 4 January 2010)Tan Eng Liang (appointed on 29 January 2010)Yap Xi Ming (appointed on 26 April 2010)Goh Kian Sin (appointed on 15 November 2010)Wong Kean Shyong (Kenn) (appointed on 15 November 2010)

Arrangements to enable directors to acquire shares or debentures

Neither at the end of nor at any time during the fi nancial year was the Company a party to any arrangement whose objects are, or one of whose objects is, to enable the directors of the Company to acquire benefi ts by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Directors’ interests in shares or debentures

According to the register of Directors’ shareholdings kept by the Company for the purposes of Section 164 of the Singapore Companies Act, Cap. 50, none of the directors of the Company holding offi ce at the end of the fi nancial year had any interest in the shares or debentures of the Company and its related corporations except as detailed below:

Shareholdings registered in the name of directors

Shareholdings in which directors are deemed to have an interest

Balance as at1 October

2009 or dateof appointment

Balance as at30 September

2010




2010

Number of ordinary shares

CompanyHG Metal Manufacturing LimitedTan Chan Too 21,355,187 21,455,187 – –Chng Hee Kok 666 666 – –Yap Xi Ming 5,710,000 5,710,000 80,646,574 80,646,574

Directors’ Report


Directors’ interests in shares or debentures (cont’d)

Certain directors holding offi ce as at 30 September 2010 had interests in warrants to subscribe for ordinary shares in the Company at an exercise price of $0.29 per share during the fi nancial year. Unexercised warrants had expired on 20 August 2010, as recorded in the register of directors’ warrant holdings set out below:

Warrant holdings registeredin the name of directors

Warrant holdings in which directorsare deemed to have an interest



Expired during the year


2010



Expired during the year


2010

Number of unissued ordinary shares under warrants held by directors

The Company


Tan Chan Too 3,910,743 (3,910,743) – – – –Chng Hee Kok 7,059 (7,059) – – – –

In accordance with the continuing listing requirements of the Singapore Exchange Securities Trading Limited, the directors of the Company state that the directors’ interests as at 21 October 2010 in the shares and warrants of the Company have not changed from those disclosed as at 30 September 2010.

Directors’ contractual benefi ts

Since the end of the previous fi nancial year, no director of the Company has received or become entitled to receive a benefi t by reason of a contract made by the Company or by a related corporation with the director, or with a fi rm of which he is a member, or with a company in which the director has a substantial fi nancial interest.

Share options

There were no share options granted by the Company or its subsidiaries during the fi nancial year.

There were no shares issued during the fi nancial year by virtue of the exercise of options to take up unissued shares of the Company or its subsidiaries.

There were no unissued shares of the Company or its subsidiaries under options as at the end of the fi nancial year.

Directors’ Report


Audit committee

The audit committee (AC) carried out its 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 fi nancial statements and the auditors’ report on the annual fi nancial statements of the Company before their submission to the board of directors

• Reviews effectiveness of the Company’s material internal controls, including fi nancial, 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 fi nancial 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

• Reviews interested person transactions in accordance with the requirements of the Singapore Exchange Securities Trading Limited’s Listing Manual

The AC, having reviewed all non-audit services provided by the external auditors to the Group, is satisfi ed 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 6 meetings during the year. 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.

Directors’ Report


Auditors

Ernst & Young LLP have expressed their willingness to accept reappointment as auditors.

On behalf of the Board of Directors,

Chng Hee KokDirector

Tan Chan TooDirector

Singapore31 December 2010

Directors’ Report


We, Chng Hee Kok and Tan Chan Too, being two of the directors of HG Metal Manufacturing Limited, do hereby state that, in the opinion of the directors:

(a) the accompanying balance sheets, consolidated statement of comprehensive income, statements of changes in equity, and consolidated cash fl ow 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 30 September 2010 and the results of the business, changes in equity and cash fl ows of the Group and the changes in equity of the Company for the year ended on that date, and

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

On behalf of the Board of Directors,

Chng Hee KokDirector

Tan Chan TooDirector

Singapore31 December 2010

Statementby Directors


We have audited the accompanying fi nancial statements of HG Metal Manufacturing Limited (the “Company”) and its subsidiaries (the “Group”) set out on pages 39 to 112, which comprise the balance sheets of the Group and the Company as at 30 September 2010, the statements of changes in equity of the Group and the Company and the statement of comprehensive income and cash fl ow statement of the Group for the year then ended, and a summary of signifi cant accounting policies and other explanatory notes.

Management’s responsibility for the fi nancial statements

Management is responsible for the preparation and fair presentation of these fi nancial statements in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the “Act”) and Singapore Financial Reporting Standards. This responsibility includes devising and maintaining a system of internal accounting controls suffi cient 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 profi t and loss accounts and balance sheets and to maintain accountability of assets; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ responsibility

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

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

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

Independent Auditors’ Reportfor the fi nancial year ended 30 September 2010

To the Members of HG Metal Manufacturing Limited


Opinion

In our opinion,

(a) the consolidated fi nancial 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 30 September 2010 and the results, changes in equity and cash fl ows of the Group and the changes in equity of the Company for the year ended on that date; and

(b) the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.

Ernst & Young LLPPublic Accountants and Certifi ed Public AccountantsSingapore31 December 2010

Independent Auditors’ Reportfor the fi nancial year ended 30 September 2010

To the Members of HG Metal Manufacturing Limited


Note 2010 2009$’000 $’000

Revenue 4 203,068 581,819Cost of sales (179,338) (566,338)

Gross profi t 23,730 15,481Other operating income 5 8,300 4,386Selling and distribution costs (1,579) (3,149)Administrative expenses (9,484) (16,736)Other operating expenses (18,940) (45,602)Finance costs 6 (6,920) (11,681)Share of joint venture profi ts 223 1,059Share of associate profi ts/(losses) 4,643 (67)

Loss before income tax 7 (27) (56,309)Income tax credit/(expense) 8 354 (2,493)

Profi t/(loss) after income tax 327 (58,802)

Other comprehensive incomeForeign currency translation 195 (276)Fair value loss on available for sale fi nancial assets – (1)Share of other comprehensive income of associates (190) –

Other comprehensive income for the year, net of tax 5 (277)

Total comprehensive income for the year 332 (59,079)

(Loss) / Profi t attributable to:Equity holders of the Company (2,483) (67,491)Non-controlling interests 2,810 8,689

327 (58,802)

Total comprehensive income attributable to:Equity holders of the Company (2,508) (67,664)Non-controlling interests 2,840 8,585

332 (59,079)

Earnings per share:

Basic (cents) 9 (0.32) (12.92)

Diluted (cents) 9 (0.29) (10.01)

Consolidated Statement of Comprehensive Incomefor the fi nancial year ended 30 September 2010

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


Group CompanyNote 2010 2009 2010 2009

$’000 $’000 $’000 $’000

Non-current assetsProperty, plant and equipment 10 32,173 60,569 23,753 18,389Intangible assets 11 434 26,236 384 538Investment in subsidiaries 12 – – 12,520 12,520Investment in joint venture 13 – 9,467 – –Investment in associates 14 32,963 646 713 713Available for sale fi nancial assets 15 – 28 – –

65,570 96,946 37,370 32,160

Current assetsInvestment held for trading 18 380 270 – –Inventories 19 62,504 140,511 49,733 78,407Trade and other receivables 20 30,235 84,730 36,145 59,078Prepaid expenses 75 307 14 80Cash and cash equivalents 21 5,108 16,373 1,165 1,387

98,302 242,191 87,057 138,952

Current liabilitiesDerivative fi nancial instruments 17 1,048 723 1,048 –Trade and other payables 22 31,458 99,123 27,216 42,887Finance lease payables 23 150 769 39 –Deferred revenue – 1,541 – –Bank borrowings 24 25,297 71,778 20,168 38,179Provision for income tax 19 3,878 – 267

57,972 177,812 48,471 81,333

Net current assets 40,330 64,379 38,586 57,619

Non-current liabilitiesFinance lease payables 23 477 1,265 129 –Bank borrowings 24 4,512 19,568 2,097 3,339Provision for retirement benefi ts 25 – 786 – –Deferred tax liabilities 16 297 6,688 – 172

5,286 28,307 2,226 3,511

100,614 133,018 73,730 86,268

Capital and reservesShare capital 26 111,730 111,730 111,730 111,730Other reserves 27 2,253 1,712 2,527 2,527Accumulated losses (15,412) (12,929) (40,527) (27,989)

Equity attributable to equity holders of the Company 98,571 100,513 73,730 86,268

Non-controlling interests 2,043 32,505 – –

Total equity 100,614 133,018 73,730 86,268

Balance Sheetsas at 30 September 2010



Attributable to equity holders of the Company

Sharecapital

Capitalreserve

Shareoption

reserve

Fairvalue

reserves

Premiumpaid on

acquisitionof minority

interest

Foreigncurrency

translationreserve

Accumu-lated

profi ts/(losses) Total

Non-controlling

interestsTotal

equity$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Group

Balance as at 1 October 2009 111,730 2,527 17 – (539) (293) (12,929) 100,513 32,505 133,018

Other comprehensive income for the year – – – 1 – (26) – (25) 30 5

Profi t for the year – – – – – – (2,483) (2,483) 2,810 327

Total comprehensive income for the year – – – 1 – (26) (2,483) (2,508) 2,840 332

Issue of shares in a subsidiary – – – – – – – – 550 550

Disposal of a subsidiary – – (17) – 539 44 – 566 (33,852) (33,286)

Balance as at 30 September 2010 111,730 2,527 – 1 – (275) (15,412) 98,571 2,043 100,614

Statements of Changes in Equityfor the fi nancial year ended 30 September 2010



Sharecapital

Capitalreserve

Shareoption

reserve

Premiumpaid on

acquisitionof minority

interest

Foreigncurrency

translationreserve

Accumu-lated

profi ts/(losses) Total

Non-controlling

interestsTotal

equity$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

GroupBalance as at 1 October 2008 78,203 2,527 – – (120) 55,938 136,548 14,483 151,031Purchase price allocation

adjustment (Note 12) – – – – – – – 15,805 15,805

As restated 78,203 2,527 – – (120) 55,938 136,548 30,288 166,836

Other comprehensive income for the year – – – – (173) – (173) (104) (277)

(Loss)/profi t for the year – – – – – (67,491) (67,491) 8,689 (58,802)Total comprehensive income for

the year – – – – (173) (67,491) (67,664) 8,585 (59,079)Employee share option scheme:- value of employee services – – 17 – – – 17 28 45Issue of shares 33,527 – – – – – 33,527 3,311 36,838Acquisition of minority interest

(Note 12) – – – – – – – (23,874) (23,874)Premium paid on acquisition of

minority interest (Note 12) – – – (539) – – (539) (518) (1,057)Capitalisation of advances from

shareholders in a subsidiary – – – – – – – 14,698 14,698Dividends (Note 28) – – – – – (1,376) (1,376) (13) (1,389)

Balance as at 30 September 2009 111,730 2,527 17 (539) (293) (12,929) 100,513 32,505 133,018

.


The accompanying accounting policies and explanatory notes form an integral part of the fi nancial statements



Sharecapital

Capitalreserves

Accumulatedprofi ts /(losses)

Totalequity

$’000 $’000 $’000 $’000

Company

Balance as at 1 October 2009 111,730 2,527 (27,989) 86,268Loss for the year, representing total

comprehensive income for the year – – (12,538) (12,538)

Balance as at 30 September 2010 111,730 2,527 (40,527) 73,730

Balance as at 1 October 2008 78,203 2,527 44,291 125,021Loss for the year, representing total

comprehensive income for the year – – (70,904) (70,904)Issue of shares 33,527 – – 33,527Dividends (Note 28) – – (1,376) (1,376)

Balance as at 30 September 2009 111,730 2,527 (27,989) 86,268




Note 2010 2009$’000 $’000

Cash fl ows from operating activitiesLoss before income tax (27) (56,309)Adjustments for:Loss on disposal of shares in an associate 1,910 –Bad debts recovered (5) –Dividend income (20) –Depreciation of property, plant and equipment 2,505 4,212Amortisation of computer software 167 156Loss on disposal of property, plant and equipment 284 92Gain on disposal of subsidiary (6,373) –Write down of inventories 12,875 23,294Allowance for doubtful debts, net 263 (33)Fair value (gain)/loss on derivatives (1,516) 492Fair value gain on investment held for trading (110) (70)Interest expense 6,920 11,681Interest income (28) (20)Gain on disposal of investment held for trading – (136)Share of joint venture profi ts (223) (1,059)Share of associate results (4,643) 67Share option expense – 45Amortisation of customer relationship 246 1,474Retirement benefi ts – 335Reversal of provision for onerous contracts – (1,417)Goodwill written off – 164Currency realignment (348) 166

Operating profi t/(loss) before working capital changes 11,877 (16,866)Working capital changes:Fixed deposits pledged (62) (29)Inventories 28,487 206,088Trade and other receivables 1,300 84,968Trade and other payables (25,994) (83,546)

Cash from operations 15,608 190,615Interest received 28 20Interest paid (4,579) (11,681)Income tax refund/(paid) 499 (5,357)

Net cash generated from operating activities 11,556 173,597

Cash fl ows from investing activitiesNet cash outfl ow on disposal of a subsidiary 12 (9,527) –Dividend income received from an associate 1,702 –Dividend income received from quoted investment 20 –Deposit received from sale of properties 916 –Purchase of intangible assets 11 – (58)Purchase of property, plant and equipment 10 (6,750) (10,839)Proceeds from disposal of property, plant and equipment 10,115 661Proceeds from disposal of investment held for trading – 936Investment in associate – (713)Acquisition of minority interest 12 – (24,931)Proceeds from sale of shares in an associate 14 15,474 –

Net cash generated from/(used in) investing activities 11,950 (34,944)

Consolidated Cash Flow Statementfor the fi nancial year ended 30 September 2010


Note 2010 2009$’000 $’000

Cash fl ows from fi nancing activitiesNet repayment of bank borrowings (35,072) (206,598)Dividends paid on the ordinary shares of the Company – (1,376)Dividends paid to minority shareholders of a subsidiary – (13)Proceeds from issue of new shares in the Company – 33,527Proceeds from issuance of shares in a subsidiary 12 550 3,311Repayment of fi nance lease payables (479) (1,143)

Net cash used in fi nancing activities (35,001) (172,292)

Net decrease in cash and cash equivalents (11,495) (33,639)Cash and cash equivalents at beginning of fi nancial year 15,843 49,482

Cash and cash equivalents at end of fi nancial year 21 4,348 15,843

Consolidated Cash Flow Statementfor the fi nancial year ended 30 September 2010



1. Corporate information

HG Metal Manufacturing Limited (“the Company”) is a public limited liability company incorporated in Singapore and is listed on the Singapore Exchange Securities Trading Limited (“SGX-ST”).

The registered offi ce and principal place of the Company is located at 30 Jalan Buroh, Singapore 619486.

The principal activities of the Company are those of investment holding and the business of trading of steel products. The principal activities of the subsidiaries are set out in Note 12 to the fi nancial statements.

2. Summary of signifi cant accounting policies

2.1 Basis of preparation

The consolidated fi nancial 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 fi nancial statements have been prepared on the historical cost basis except as disclosed in the accounting policies below.

The fi nancial 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 fi nancial year except that in the current fi nancial 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 October 2009. The adoption of these standards and interpretations did not have any effect on the fi nancial performance or position of the Group and the Company except as disclosed below:

FRS 1 Presentation of Financial Statements – Revised presentation

The revised FRS 1 requires owner and non-owner changes in equity to be presented separately. The statement of changes in equity will include only details of transactions with owners, with all non-owner changes in equity presented as a single line item. In addition, the revised standard introduces the statement of comprehensive income: it presents all items of income and expense recognised in profi t or loss, together with all other items of recognised income and expense, either in one single statement, or in two linked statements. The Group has elected to present this statement as one single statement.

Notes to the Financial Statements– 30 September 2010



2. Summary of signifi cant accounting policies (cont’d)

2.2 Changes in accounting policies (cont’d)

FRS 108 Operating Segments

FRS 108 requires disclosure of information about the Group’s operating segments and replaces the requirement to determine primary and secondary reporting segments of the Group. The Group determined that the reportable operating segments are the same as the business segments previously identifi ed under FRS 14 Segment Reporting. Additional disclosures about each of the segments are shown in Note 31.

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 October 2009, the Group adopted both revised standards at the same time in accordance with their transitional provisions.

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 signifi cant accounting policies resulting from the adoption of the revised FRS 103 include:

– Transaction costs would no longer be capitalised as part of the cost of acquisition but will be expensed immediately;

– Consideration contingent on future events are recognised at fair value on the acquisition date and any changes in the amount of consideration to be paid will no longer be adjusted against goodwill but recognised in profi t or loss;

– The Group elects for each acquisition of a business, to measure non-controlling interest at fair value, or at the non-controlling interest’s proportionate share of the acquiree’s identifi able net assets, and this impacts the amount of goodwill recognised; and

– When a business is acquired in stages, the previously held equity interests in the acquiree is remeasured to fair value at the acquisition date with any corresponding gain or loss recognised in profi t 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 October 2009 are not adjusted.

48




2.2 Changes in accounting policies (cont’d)

FRS 27 Consolidated and Separate Financial Statements (revised)

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

– A change in the ownership interest of a subsidiary that does not result in a loss of control is accounted for as an equity transaction. Therefore, such a change will have no impact on goodwill, nor will it give rise to a gain or loss recognised in profi t or loss;

– Losses incurred by a subsidiary are allocated to the non-controlling interest even if the losses exceed the non-controlling interest in the subsidiary’s equity; and

– When control over a subsidiary is lost, any interest retained is measured at fair value with the corresponding gain or loss recognised in profi t or loss.

According to its transitional provisions, the revised FRS 27 has been applied prospectively, and does not impact the Group’s consolidated fi nancial statements in respect of transactions with non-controlling interests, attribution of losses to non-controlling interests and disposal of subsidiaries before 1 October 2009. 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:

Description

Effective for annual periods beginning on

or after

Improvements to FRSs issued in 2009:– Amendments to FRS 1 Presentation of Financial Statements 1 January 2010– Amendments to FRS 7 Statement of Cash Flows 1 January 2010– Amendments to FRS 17 Leases 1 January 2010– Amendments to FRS 36 Impairment of Assets 1 January 2010– FRS 39 Financial Instruments: Recognition and Measurement 1 January 2010– Amendments to FRS 105 Non-current Assets Held for Sale and Discontinued

Operations1 January 2010

– Amendments to FRS 108 Operating Segments 1 January 2010– Amendments to FRS 32 Financial Instruments: Presentation - Classifi cation of Rights

Issues1 February 2010

INT 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

The directors expect that the adoption of the other standards and interpretations above will have no material impact on the fi nancial statements in the period of initial application.




2.4 Foreign currency

Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Exchange differences arising on the settlement of monetary items or on translating monetary items at the balance sheet date are recognised in profi t or loss except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign operations, which are recognised initially in other comprehensive income and accumulated under foreign currency translation reserve in equity. The foreign currency translation reserve is reclassifi ed from equity to profi t or loss of the Group on disposal of the foreign operations.

The assets and liabilities of foreign operations are translated into SGD at the rate of exchange ruling at the balance sheet date and their profi t or loss are translated at the weighted average exchange rates for the year. The exchange differences arising on the translation are recognised in other comprehensive income. On disposal of a foreign operation, the cumulative amount recognised in foreign currency translation reserve relating to that particular foreign operation is recognised in profi t or loss.

2.5 Subsidiaries and principles of consolidation, joint ventures and associates

(a) Subsidiaries

A subsidiary is an entity over which the Group has the power to govern the fi nancial and operating policies so as to obtain benefi ts from its activities.

In the Company’s separate fi nancial statements, investments in subsidiaries are accounted for at cost less impairment losses. On disposal of an investment in a subsidiary, the difference between the net disposal proceeds and the carrying amount of the investment is taken to profi t or loss.

50




2.5 Subsidiaries and principles of consolidation, joint ventures and associates (cont’d)

(b) Principles of consolidation

Business combinations from 1 October 2009

The consolidated fi nancial statements comprise the fi nancial statements of the Company and its subsidiaries as at the end of the reporting period. The fi nancial statements of the subsidiaries used in the preparation of the consolidated fi nancial 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, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full.

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

Business combinations are accounted for by applying the acquisition method. Identifi able 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 fi nancial assets and liabilities assumed for appropriate classifi cation 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 profi t or loss or as change to other comprehensive income. If the contingent consideration is classifi ed as equity, it is not be remeasured until it is fi nally 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 profi t 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 identifi able net assets.

Any excess of the sum of the fair value of the consideration transferred in the business combination, the amount of non-controlling interest in the acquiree (if any), and the fair value of the Group’s previously held equity interest in the acquiree (if any), over the net fair value of the acquiree’s identifi able assets and liabilities is recorded as goodwill. The accounting policy for goodwill is set out in Note 2.9(a). In instances where the latter amount exceeds the former, the excess is recognised as gain on bargain purchase in profi t or loss on the acquisition date.





(b) Principles of consolidation (cont’d)

Business combinations before 1 October 2009

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 identifi able 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 signifi cantly modifi es the cash fl ows that would otherwise be required under the contract.

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

Transactions with non-controlling interests

Non-controlling interest represents the equity in subsidiaries 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 equity holders’ ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to refl ect the changes in their relative interests in the subsidiary. 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.

52





(c) Joint ventures

A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control, where the strategic fi nancial and operating decisions relating to the activity require the unanimous consent of the parties sharing control. The Group recognises its interest in joint venture using the equity method of accounting.

The most recent available audited fi nancial statements of the joint venture are used by the Group in applying the equity method. Where the dates of the audited fi nancial statements used are not co-terminous with those in the Group, the share of results is based on the last audited fi nancial statements available and the unaudited management fi nancial statements made up to the end of the Group’s accounting period. Consistent accounting policies are applied for like transactions and events in similar circumstances.

In the Company’s separate fi nancial statements, investment in joint venture is accounted for at cost less impairment losses.

(d) Associates

An associate is an entity, not being a subsidiary or a joint venture, in which the Group has signifi cant infl uence. An associate is equity accounted for from the date the Group obtains signifi cant infl uence until the date the Group ceases to have signifi cant infl uence over the associate.

The Group’s investments in associates are accounted for using the equity method. Under the equity method, the investment in associates is carried in the balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the associates.

Goodwill relating to associates 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 associate’s identifi able asset, liabilities and contingent liabilities over the cost of the investment is deducted from the carrying amount of the investment and is recognised as income as part of the Group’s share of results of the associate in the period in which the investment is acquired.

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

The Group’s share of the profi t or loss of its associates is shown on the face of profi t or loss after tax and non-controlling interests in the subsidiaries of associates.

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




2.6 Property, plant and equipment

All items of property, plant and equipment are initially recorded at cost. Subsequent to initial recognition, property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.

The cost of property, plant and equipment includes expenditure that is directly attributable to the acquisition of the items. Dismantlement, removal or restoration costs are included as part of the cost of property, plant and equipment if the obligation for dismantlement, removal or restoration is incurred as a consequence of acquiring or using the property, plant and equipment.

Freehold land has unlimited useful life and therefore is not depreciated.

Depreciation of an asset begins when it is available for use and is computed on the straight line basis over the estimated useful life of the asset as follows:

Leasehold buildings – 11 to 41 yearsPlant and machinery – 4 to 19 yearsFurniture and fi ttings – 4 to 10 yearsOffi ce equipment – 3 to 10 yearsRenovation – 5 to 10 yearsMotor vehicles – 4 to 10 years

Assets under construction included in property plant and equipment are not depreciated as these assets are not yet available for use.

The residual value, useful life and depreciation method of property, plant and equipment are reviewed at each balance sheet date to ensure that the residual value, period of depreciation and depreciation method are consistent with previous estimates and the expected pattern of consumption of the future economic benefi ts embodied in the items of property, plant and equipment.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefi ts are expected from its use or disposal. Any gain or loss on derecognition of the asset is included in profi t or loss in the year the asset is derecognised.

54




2.7 Impairment of non-fi nancial 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 an annual impairment assessment for an asset is required, the Group makes an estimate of the asset’s recoverable amount.

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

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. 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 increase 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 profi t or loss.

2.8 Financial assets

Financial assets are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the fi nancial instrument.

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

A fi nancial asset is derecognised where the contractual right to receive cash fl ows from the asset has expired. On derecognition of a fi nancial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that has been recognised directly in other comprehensive income is recognised in profi t or loss.

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




2.8 Financial assets (cont’d)

(a) Financial assets at fair value through profi t or loss

Financial assets held for trading are classifi ed as fi nancial assets at fair value through profi t or loss. Financial assets held for trading are derivatives (including separated embedded derivatives) or fi nancial assets acquired principally for the purpose of selling in the near term.

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

(b) Loans and receivables

Financial assets with fi xed or determinable payments that are not quoted in an active market are classifi ed as loans and receivables. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in profi t or loss when the loans and receivables are derecognised or impaired, and through the amortisation process.

(c) Available-for-sale fi nancial assets

Available-for-sale fi nancial assets are fi nancial assets that are not classifi ed in any of the other categories. After initial recognition, available-for-sale fi nancial assets are measured at fair value. Any gains or losses from changes in fair value of the fi nancial 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 profi t or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassifi ed from equity to profi t or loss as a reclassifi cation adjustment when the fi nancial asset is derecognised.

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

56




2.9 Intangible assets

(a) Goodwill

Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less accumulated impairment losses.

For the purpose of impairment testing, goodwill acquired is allocated, from the acquisition date, to each of the Group’s cash-generating units that are expected to benefi t from the synergies of the combination.

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, by comparing the carrying amount of the cash-generating unit, including the allocated goodwill, with the recoverable amount of the cash-generating unit. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised in profi t 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 operations on or after 1 January 2005 are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated in accordance with the accounting policy set out in Note 2.4.

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

(b) Other intangible assets

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

Intangible assets with fi nite 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 fi nancial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefi ts 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 fi nite lives is recognised in profi t or loss in the expense category consistent with the function of the intangible asset.




2.9 Intangible assets (cont’d)

(b) Other intangible assets (cont’d)

Intangible assets with indefi nite 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 indefi nite useful life is reviewed annually to determine whether the useful life assessment continues to be supportable. If not, the change in useful life from indefi nite to fi nite 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 profi t or loss when the asset is derecognised.

Computer software

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specifi c software. Direct expenditure, which enhances or extends the performance of computer software beyond its specifi cations and which can be reliably measured, is recognised as a capital improvement and added to the original cost of the software. Costs associated with maintaining computer software are recognised as an expense as incurred.

Computer software licences are stated at cost less accumulated amortisation and impairment in value, if any. These costs are amortised using the straight line method over their estimated useful lives of 5 years.

Trademark

Trademark was acquired in a business combination. The useful life of the trademark is estimated to be indefi nite because management believes there is no foreseeable limit to the period over which the trademark is expected to generate net cash infl ows for the Group.

Customer Relationship

Customer relationship was acquired in a business combination and is amortised on a straight line basis over its estimated useful life of 7 years.

2.10 Inventories

Inventories are stated at the lower of cost and net realisable value. Costs incurred in bringing the inventories to their present location and condition are accounted for as follows:

– Raw materials: purchase costs on a weighted average cost basis;

– Finished goods and work-in-progress: costs of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. These costs are assigned on a weighted average cost basis.

58




2.11 Impairment of fi nancial assets

The Group assesses at each balance sheet date whether there is any objective evidence that a fi nancial asset is impaired.

(a) Assets carried at amortised cost

If there is objective evidence that an impairment loss on fi nancial assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash fl ows discounted at the fi nancial 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 profi t or loss.

When the asset becomes uncollectible, the carrying amount of impaired fi nancial 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 fi nancial asset.

To determine whether there is objective evidence that an impairment loss on fi nancial assets has been incurred, the Group considers factors such as the probability of insolvency or signifi cant fi nancial diffi culties of the debtor and default or signifi cant delay in payments.

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

(b) Assets carried at cost

If there is objective evidence (such as signifi cant adverse changes in the business environment where the issuer operates, probability of insolvency or signifi cant fi nancial diffi culties of the issuer) that an impairment loss on fi nancial assets 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 fl ows discounted at the current market rate of return for a similar fi nancial asset. Such impairment losses are not reversed in subsequent periods.

(c) Available-for-sale fi nancial assets

Signifi cant or prolonged decline in fair value below cost, signifi cant fi nancial diffi culties of the issuer or obligor, and the disappearance of an active trading market are considerations to determine whether there is objective evidence that investment securities classifi ed as available-for-sale fi nancial assets are impaired.

If an available-for-sale fi nancial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in profi t or loss, is transferred from equity to profi t or loss. Reversals of impairment losses in respect of equity instruments are not recognised in profi t or loss. Reversals of impairment losses on debt instruments are recognised in profi t or loss if the increase in fair value of the debt instrument can be objectively related to an event occurring after the impairment loss was recognised in profi t or loss.




2.12 Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and 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 insignifi cant risk of changes in value. These also include bank overdrafts that form an integral part of the Group’s cash management.

2.13 Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outfl ow of economic resources will be required to settle the obligation and the amount of the obligation can be estimated reliably.

Provisions are reviewed at each balance sheet date and adjusted to refl ect the current best estimate. If it is no longer probable that an outfl ow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that refl ects, where appropriate, the risks specifi c to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a fi nance cost.

2.14 Derivative fi nancial instruments and hedging activities

The Group’s and the Company’s activities expose it primarily to the fi nancial risks of changes in foreign exchange rates.

The Group and the Company use derivative fi nancial instruments to hedge its risks associated with foreign currency fl uctuations relating to certain fi rm commitments and forecasted transactions. The Group designates these as cash fl ow hedges of foreign currency risk.

The use of derivative fi nancial instruments is governed by the Group’s and the Company’s policies approved by the Board of Directors, which provide written principles on the use of fi nancial derivatives consistent with the Group’s risk management strategy. The Group and the Company do not use derivative fi nancial instruments for speculative purposes. Derivative fi nancial instruments are initially measured at fair value on the contract date, and are re-measured to fair value at the reporting dates.

Changes in the fair value of derivative fi nancial instruments that are designated and effective as hedges of future cash fl ows are recognised directly in equity and the ineffective portion (if any) is recognised immediately in profi t or loss. The Group’s and the Company’s policies with respect to hedging the foreign currency risk of a fi rm commitment is to designate it as a cash fl ow hedge. If the cash fl ow hedge of a fi rm commitment or forecast transaction results in the recognition of an asset or a liability, then, at the time the asset or liability is recognised, the associated gains or losses on the derivative that had previously been recognised in equity are included in the initial measurement of the asset or liability. For hedges that do not result in the recognition of an asset or a liability, amounts deferred in equity are recognised in profi t or loss in which the same period the hedged item affects the profi t or loss.

Changes in the fair value of derivative fi nancial instruments that do not qualify for hedge accounting are recognised in profi t or loss as they arise.

60




2.14 Derivative fi nancial instruments and hedging activities (cont’d)

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifi es for hedge accounting. At that time, for forecasted transactions, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to profi t or loss.

2.15 Financial liabilities

Financial liabilities are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the fi nancial instrument.

Financial liabilities are recognised initially at fair value, plus, in the case of fi nancial liabilities other than derivatives, directly attributable transaction costs.

Subsequent to initial recognition, derivatives are measured at fair value. Other fi nancial liabilities (except for fi nancial guarantees) are measured at amortised cost using the effective interest method.

For fi nancial liabilities other than derivatives, gains and losses are recognised in profi t or loss when the liabilities are derecognised, and through the amortisation process. Any gains or losses arising from changes in fair value of derivatives are recognised in profi t or loss. Net gains or losses on derivatives include exchange differences.

A fi nancial liability is derecognised when the obligation under the liability is extinguished. When an existing fi nancial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modifi ed, such an exchange or modifi cation 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 profi t or loss.

2.16 Leases

(a) As lessee

Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the fi nance 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 profi t 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 profi t or loss on a straight-line basis over the lease term. The aggregate benefi t of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.




2.16 Leases (cont’d)

(b) As lessor

Leases where the Group retains substantially all the risks and rewards of ownership of the asset are classifi ed 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 2.22.

2.17 Employee benefi ts

Defi ned contribution plans

The Group participates in the national pension schemes as defi ned 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 defi ned contribution pension scheme. Contributions to defi ned contribution pension schemes are recognised as an expense in the period in which the related service is performed.

Employee leave entitlement

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

Termination benefi ts

Termination benefi ts are payable when employment is terminated before the normal retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefi ts. The Group recognises termination benefi ts when it is demonstrably committed to either terminate the employment of current employees according to a detailed plan without possibility of withdrawal; or providing termination benefi ts as a result of an offer made to encourage voluntary redundancy. In the case of an offer made to encourage voluntary redundancy, the measurement of termination benefi ts is based on the number of employees expected to accept the offer. Benefi ts falling due more than 12 months after balance sheet date are discounted to present value.

2.18 Financial guarantees

A fi nancial guarantee contract is a contract that requires the issuer to make specifi ed payments to reimburse the holder for a loss it incurs because a specifi ed 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, fi nancial guarantees are recognised as income in profi t 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 profi t or loss.

62




2.19 Income taxes

(a) Current tax

Current tax assets and liabilities 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.

Current taxes are recognised in profi t or loss except to the extent that the tax relates to items recognised outside profi t or loss, either in other comprehensive income or directly in equity.

(b) Deferred tax

Deferred 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 fi nancial reporting purposes.

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

– Where the deferred tax 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 accounting profi t nor taxable profi t or loss;

– In respect of temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled by the Company and it is probable that the temporary differences will not reverse in the foreseeable future; and

– In respect of deductible temporary differences and carry-forward of unused tax credits and unused tax losses, if it is not probable that taxable profi t will be available against which the deductible temporary differences and carry-forward of unused tax credits and unused tax losses can be utilised.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that suffi cient taxable profi t will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profi t will allow the deferred tax asset to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date.

Deferred income tax relating to items recognised outside profi t or loss is recognised outside profi t or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition.




2.19 Income taxes (cont’d)

(b) Deferred tax (cont’d)

Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.

(c) Sales tax

Revenues, expenses and assets are recognised net of the amount of sales tax except:

– Where the sales tax incurred in 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.

2.20 Borrowing costs

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

2.21 Dividends

Equity dividends are recognised when they become legally payable. Interim dividends are recorded in the fi nancial year in which they are declared payable. Final dividends are recorded as a liability in the fi nancial year in which the dividends are approved by the shareholders.

2.22 Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable for the sale of goods and rendering of services in the ordinary course of business. Revenue is presented, net of rebates and discounts and sales related taxes.

Revenue from engineering and sand blasting services is recognised when services are rendered.

Revenue from sale of goods is recognised upon the transfer of signifi cant risk and rewards of ownership of the goods to the customer. Revenue is not recognised to the extent where there are signifi cant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.

64




2.22 Revenue recognition (cont’d)

Rental income under operating leases is recognised in profi t or loss on a straight-line basis over the term of the lease.

Dividend income is recognised in profi t or loss when the Group’s right to receive payment is established.

Interest income is recognised using the effective interest method.

2.23 Segment reporting

For management purposes, the Group is organised into operating segments based on their products and services which are independently managed by the respective segment managers responsible for the performance of the respective segments under their charge. The segment managers report directly to the management of the Company who regularly review the segment results in order to allocate resources to the segments and to assess the segment performance. Additional disclosures on each of these segments are shown in Note 31, including the factors used to identify the reportable segments and the measurement basis of segment information.

2.24 Share capital and share issue expenses

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

2.25 Contingencies

A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be confi rmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly within the control of the Group.

Contingent liabilities and assets are not recognised on the balance sheet of the Group.

3. Signifi cant accounting judgements and estimates

The preparation of the Group’s fi nancial 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 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.



3. Signifi cant accounting judgements and estimates (cont’d)

3.1 Judgements made in applying accounting policies

In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those involving estimations, which has the most signifi cant effect on the amounts recognised in the fi nancial statements:

(i) Impairment of investments in subsidiaries

The directors of the Company follow the guidance of FRS 36 – Impairment of Assets, in determining whether investments in subsidiaries are other than temporary impaired. This requires assumptions made regarding the duration and extent to which the fair value of an investment is less than its costs and the fi nancial health of and near-term business outlook for the investment, including factors such as industry and sector performance, changes in technology and operational and fi nancing cash fl ow.

Based on the directors’ assessment, there is no requirement to provide for any allowance for impairment in value of investments in subsidiaries. The Company’s carrying amount of investments in subsidiaries at the balance sheet date is disclosed in Note 12 to the fi nancial statements.

(ii) Income taxes

The Group has exposure to income taxes in various jurisdictions. Signifi cant judgement is involved in determining the Group-wide provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the fi nal tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The carrying amount of the Group’s income tax payables and deferred tax liabilities at the balance sheet date was $19,000 (2009: $3,878,000) and $297,000 (2009: $6,688,000) respectively.

(iii) Impairment of goodwill

To determine whether there is an impairment of goodwill at balance sheet date, it is necessary to compare the carrying value of goodwill with the recoverable amount from the cash-generating unit to which the goodwill is allocated. The recoverable amount represents the present value of the estimated future cash fl ows expected to arise from the cash-generating unit. In arriving at the recoverable amount, the Group exercises judgement in estimating the future cash fl ows and the discount rate. The carrying amount of the Group’s goodwill at the balance sheet date is disclosed in Note 11 to the fi nancial statements.

66



3. Signifi cant accounting judgements and estimates (cont’d)

3.2 Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year, are discussed below.

(i) Depreciation of property, plant and equipment

These assets are depreciated on a straight-line basis over their estimated useful lives. The Group estimates the useful lives of these assets to be within 3 to 41 years. The carrying amounts of the Group’s property, plant and equipment at the balance sheet date are disclosed in Note 10 to the fi nancial statements. 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.

(ii) Impairment of trade and other receivables

The Group establishes allowance for doubtful receivables on a case-by-case basis when they believe that payment of amounts owed is unlikely to occur. In establishing these allowances, the Group considers its historical experience and changes to its customers’ fi nancial position. If the fi nancial conditions of receivables were to deteriorate, additional allowances may be required. The carrying amount of trade and other receivables for the Group at the balance sheet date is disclosed in Note 20 to the fi nancial statements.

(iii) Inventories and related allowance

Inventories are stated at the lower of cost and net realisable value. The Group primarily determines cost of inventories using the “weighted average” method. The Group estimates the net realisable value of inventories based on assessment of receipt or committed sales prices and provides for excess and obsolete inventories based on historical usage, estimated future demand and related pricing. In determining excess quantities, the Group considers recent sales activities, related margins and market positioning of its products. These estimates are generally not subject to signifi cant volatility, due to the long life cycles of its products. However, factors beyond its control, such as demand levels, technological advances and pricing competition, could change from period to period. If such factors had an adverse effect, the Group might be required to reduce the value of its inventories, which would adversely affect its results, cash fl ows and fi nancial position. The carrying amount of inventories for the Group at the balance sheet date is disclosed in Note 19 to the fi nancial statements.

4. Revenue

Revenue of the Group and of the Company represents the invoiced value of goods sold less goods returned and discounts allowed, net of goods and services tax. Revenue of the Group is in respect of external transactions only.



5. Other operating income

Group2010 2009

$’000 $’000

Allowance for doubtful trade receivables no longer required, now written back 396 1,947

Claims and compensation received 460 491Fair value gain on investment held for trading 110 70Bad debts recovered 5 10Dividend income 20 12Gain on disposal of investment held for trading – 136Commission income 201 1,019Interest income- fi xed deposits 27 16- current accounts with banks 1 4Rental income 499 444Gain on disposal of subsidiary (Note 12) 6,373 –Other income 208 237

8,300 4,386

6. Finance costs

Group2010 2009$’000 $’000

Interest expense- bank overdrafts – 16- bankers’ acceptance 23 16- bridging loans 414 141- fi nance lease 40 135- term loans 3,644 1,321- trust receipts 946 8,602- late payment 1,728 1,120- advances from customer – 195

6,795 11,546Other fi nance costs- invoice fi nancing 26 92- others 99 43

6,920 11,681

68



7. Profi t/(loss) before income tax

Profi t / (loss) before income tax is arrived at after debiting/(crediting) the following:

Group2010 2009$’000 $’000

Foreign exchange loss, net 77 12,143Amortisation of computer software 167 156Write down of inventories to net realisable value 12,875 23,294Allowance made for doubtful trade receivables 659 1,914Depreciation of property, plant and equipment 2,505 4,212Loss on disposal of property, plant and equipment 284 92Amortisation of customer relationship 246 1,474Fair value (gain)/loss on derivatives, net (1,516) 492Goodwill written off – 164Fees paid/payable for non-audit services- auditors of the Company 3 –- other auditors 18 58Operating lease expenses 2,062 3,186Directors fees 156 130Staff cost (including directors)- Salaries, bonus and allowances 6,885 18,990- Employer’s contributions to defi ned contribution plan 1,104 1,315- Other staff welfare expenses 157 3,209- Retirement benefi ts – 335- Share option expense – 45Reversal of provision for onerous contracts – (1,417)Loss on disposal of shares in an associate (Note 14) 1,910 –

The reversal of provision for onerous contracts recorded for fi nancial year ended 30 September 2009 arose from BRC Asia Limited. The provision was reversed as the costs to meet the obligations under the contracts no longer exceeded their sales values.



8. Income tax expense

Group2010 2009

$’000 $’000Current income tax- Current fi nancial year 1,128 3,086- Over provision in respect of prior years (1,144) (110)- Loss carry back relief (62) –

(78) 2,976

Deferred tax- Current fi nancial year (123) (240)- Over provision in respect of prior years (153) (243)

(276) (483)

Total income tax (credit)/expense recognised in profi t or loss (354) 2,493

On 3 October 2007, the Company was awarded the Global Trader Programme (“GTP”) status by International Enterprise Singapore. Under the GTP, the Company’s qualifying income will be taxed at a concessionary rate of 10% for a 4 year period commencing from 1 August 2007, subject to compliance with Section 43P of the Income Tax Act Cap. 134 and with the regulations prescribed in the International Enterprise Singapore Award Letter.

The reconciliation between tax expense and the product of accounting loss multiplied by the applicable corporate tax rate for the years ended 30 September 2010 and 2009 are as follows:

Group2010 2009

$’000 $’000

Loss before income tax (27) (56,309)

Income tax calculated using statutory tax rate of 17% (2009: 17%) (5) (9,573)Tax effect of:- expenses not deductible for tax purposes 1,106 442- income not subject to tax (1,103) (62)- Loss carry back relief (62) –Effect of different tax rate in other countries (68) (37)(Over)/underprovision in respect of prior years (1,297) (353)Tax exemption (1) (53)Effect of reduction in tax rate – (80)Deferred tax assets not recognised 1,935 12,389Tax calculated on share of joint venture and associate profi ts (827) (180)Benefi ts from previously recognised tax losses (17) –Others (15) –

(354) 2,493

70



8. Income tax expense (cont’d)

During the year, certain Singapore companies in the Group have elected for the enhanced loss carry back relief system which was introduced and applicable from YA 2009. The loss carry back relief system allows companies to utilise their unabsorbed capital allowances and tax losses against assessable income for up to three preceding year of assessments. The maximum amount of unutilised qualifying deduction that may be carried back for each year of assessment is $200,000. The utilisation of unabsorbed capital allowances and tax losses is subject to the approval of the Singapore tax authorities.

9. Earnings per share

(a) Basic earnings per share

Basic earnings per share is calculated by dividing the Group’s (loss) attributable to equity holders by the weighted average number of ordinary shares in issue during the fi nancial year.

The earnings per share is calculated as follows:

Group2010 2009

Net loss attributable to equity holders of the Company ($ 2,483,000) ($ 67,491,000)

Weighted average number of shares in issue during the fi nancial year 775,672,000 522,188,000

Basic earnings per share (0.32 cents) (12.92 cents)



9. Earnings per share (cont’d)

(b) Diluted earnings per share

For the purpose of calculating diluted earnings per share, (loss) attributable to equity holders of the Company and the weighted average number of ordinary shares outstanding are adjusted for the effects of all dilutive potential ordinary shares.

Group2010 2009

Net loss attributable to equity holders of the Company ($ 2,483,000) ($ 67,491,000)

Weighted average number of shares in issue for basic earnings per share during the fi nancial year 775,672,000 522,188,000

Incremental shares from assumed warrant conversions 69,333,000 152,108,000

845,005,000 674,296,000

Diluted earnings per share (0.29 cents) (10.01 cents)

72



10. Property, plant and equipment

Freeholdland Buildings

Leasehold buildings

Plant andmachinery

Furnitureand

fi ttingsOffi ce

equipment RenovationMotor

vehiclesConstruction

in progress Total

Group $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Cost

Balance as at 1 October 2008

- As previously stated 10,995 – 33,509 46,901 2,810 381 817 2,916 5,840 104,169

- Purchase price allocation adjustment (Note 12) – – – 3,433 – – – – – 3,433

- As restated 10,995 – 33,509 50,334 2,810 381 817 2,916 5,840 107,602

Additions 316 – 75 2,080 4 61 45 185 9,065 11,831

Disposals/write off – – – (1,945) (13) (214) (50) (110) – (2,332)

Reclassifi cations 250 – (250) – (1,603) 1,603 – – – –

Exchange differences (276) – – (2) (1) – – (10) (79) (368)

Balance as at 30 September 2009 and 1 October 2009 11,285 – 33,334 50,467 1,197 1,831 812 2,981 14,826 116,733

Additions – – – 696 80 26 889 746 5,745 8,182

Disposals/write off (11,394) – – (386) – (75) (13) (509) (3,778) (16,155)

Divestment of a subsidiary – – (18,131) (43,676) (912) (1,461) – (422) – (64,602)

Reclassifi cations 380 334 – – – – – – (714) –

Exchange differences 369 5 – (9) 1 – 1 19 126 512

Balance as at 30 September 2010 640 339 15,203 7,092 366 321 1,689 2,815 16,205 44,670

Accumulated depreciation

Balance as at 1 October 2008 – – 14,180 35,006 2,355 238 366 1,395 – 53,540

Charge for the year – – 1,123 2,213 46 191 151 488 – 4,212

Disposals/write off – – – (1,248) (12) (202) (20) (98) – (1,580)

Reclassifi cations – – – – (1,361) 1,361 – – – –

Exchange differences – – – (1) – – – (7) – (8)

Balance as at 30 September 2009 and 1 October 2009 – – 15,303 35,970 1,028 1,588 497 1,778 – 56,164

Charge for the year – 4 870 912 45 63 178 433 – 2,505

Disposals/write off – – – (66) – (69) (13) (329) – (477)

Divestment of subsidiary – – (10,164) (33,193) (872) (1,343) – (130) – (45,702)

Exchange differences – – – (3) – – – 10 – 7

Balance as at 30 September 2010 – 4 6,009 3,620 201 239 662 1,762 – 12,497

Net book value

As at 30 September 2010 640 335 9,194 3,472 165 82 1,027 1,053 16,205 32,173

As at 30 September 2009 11,285 – 18,031 14,497 169 243 315 1,203 14,826 60,569



10. Property, plant and equipment (cont’d)

Leasehold buildings

Plant andmachinery

Furnitureand fi ttings

Offi ceequipment Renovation

Motorvehicles

Constructionin progress Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Company

Cost

Balance as at 1 October 2008 8,597 720 140 218 569 1,857 5,439 17,540

Additions 75 341 – 1 45 33 5,457 5,952

Disposal/write off – (160) – (20) – (109) – (289)

Balance as at 30 September 2009 8,672 901 140 199 614 1,781 10,896 23,203

Additions – 184 – 20 500 292 5,309 6,305

Disposal/write off – – – (60) – (3) – (63)

Balance as at 30 September 2010 8,672 1,085 140 159 1,114 2,070 16,205 29,445

Accumulated depreciation

Balance as at 1 October 2008 2,292 270 66 147 321 917 – 4,013

Charge for the year 405 79 14 24 104 324 – 950

Disposal/write off – (32) – (20) – (97) – (149)

Balance as at 30 September 2009 2,697 317 80 151 425 1,144 – 4,814

Charge for the year 408 92 13 22 105 300 – 940

Disposal/write off – – – (60) – (2) – (62)

Balance as at 30 September 2010 3,105 409 93 113 530 1,442 – 5,692

Net book value

As at 30 September 2010 5,567 676 47 46 584 628 16,205 23,753

As at 30 September 2009 5,975 584 60 48 189 637 10,896 18,389

During the fi nancial year, the Group acquired property, plant and equipment with an aggregate cost of $8,182,000 (2009: $11,831,000) of which $632,000 (2009: $992,000) was acquired by means of fi nance lease and $800,000 (2009: Nil) relates to provision for reinstatement costs. Cash payments of $6,750,000 (2009: $10,839,000) were made to purchase property, plant and equipment.

As at the balance sheet date, the net book value of property, plant and equipment purchased under fi nance leases were as follows:

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

Plant and machinery 180 2,916 – –Motor vehicles 749 474 359 –Offi ce equipment – 7 – –

929 3,397 359 –

74



10. Property, plant and equipment (cont’d)

Lease assets are pledged as security for the related fi nance lease liability.

The net book value of motor vehicles registered in the name of certain Directors and employees who were holding these motor vehicles in trust for the Group and the Company were as follows:

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

As at 30 September 359 273 359 156

The net book value of property, plant and equipment of the Group and the Company that were mortgaged as security for bank borrowings (Note 24) were as follows:

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

Freehold land and leasehold properties 9,194 23,242 5,567 2,723

Properties under construction in progress 16,205 – 16,205 –

25,399 23,242 21,772 2,723



11. Intangible assets

Trademark GoodwillComputer

softwareCustomer

relationship Total$’000 $’000 $’000 $’000 $’000

Group

Cost

Balance at 1 October 2008 13,840 3,115 779 10,318 28,052Additions – – 58 – 58Write off – (164) (3) – (167)

Balance at 30 September 2009 13,840 2,951 834 10,318 27,943Divestment of a subsidiary (13,840) (2,951) – (10,318) (27,109)

Balance at 30 September 2010 – – 834 – 834

Accumulated amortisation

Balance at 1 October 2008 – – 77 – 77Additions – – 156 1,474 1,630

Balance at 30 September 2009 – – 233 1,474 1,707Additions – – 167 246 413Divestment of a subsidiary – – – (1,720) (1,720)

Balance at 30 September 2010 – – 400 – 400

Carrying amounts

At 30 September 2010 – – 434 – 434

At 30 September 2009 13,840 2,951 601 8,844 26,236

76



11. Intangible assets (cont’d)

GoodwillComputer

software Total$’000 $’000 $’000

Company

Cost

Balance at 1 October 2008 164 768 932Write-off (164) – (164)

Balance at 30 September 2009 – 768 768Additions – – –

Balance at 30 September 2010 – 768 768

Accumulated amortisation

Balance at 1 October 2008 – 77 77Additions – 153 153

Balance at 30 September 2009 – 230 230Additions – 154 154

Balance at 30 September 2010 – 384 384

Carrying amounts

At 30 September 2010 – 384 384

At 30 September 2009 – 538 538

Goodwill of $164,000 of the Company comprises purchased goodwill when the Company bought over the business operations of Hock Guan Hardware & Company, a partnership in 1988. The goodwill was written off during fi nancial year ended 30 September 2009 as the operations were loss-making.

The amortisation period for the computer software is 5 years, using the straight-line method from the fi rst day of utilisation. The amortisation period for customer relationship is 7 years using the straight-line method from the date of acquisition.

Impairment testing of goodwill and trademark in the prior year

The goodwill of $2,951,000 arising from business combination and trademark had been allocated to BRC Asia Limited as a cash-generating unit (CGU) for impairment testing. The recoverable amount had been determined using market value based on published prices.



12. Investment in subsidiaries

Company2010 2009$’000 $’000

Unquoted equity shares, at cost 12,520 12,520

The directors of the Company had assessed for impairment in value of investment in subsidiaries. From the assessment, no allowance for impairment in value of investment in subsidiaries is required.

Details of the subsidiaries are as follows:

Name of subsidiaries Principal activities

Country ofincorporation/

business

Effective equityinterest heldby the Group

2010 2009% %

Held by the Company

Jin Heng Li Hardware Sdn. Bhd. (2)

Trading in all types of hardware Malaysia 59.23 59.23

Oriental Metals Pte Ltd (1) Trading and manufacturing of steel products and provisions of engineering and sandblasting services

Singapore 99.99 99.99

HG Metal Investments Pte Ltd (1)

Investment holding Singapore 100.00 100.00

Held by HG Metal Investments Pte Ltd

Niho (Singapore) Pte Ltd (1)

(Note B)Wholesalers and distributors of various types of metals and fabricated metals


Galaxia Pte Ltd (1) Rental of metal plates Singapore 100.00 100.00

HG Metal Manufacturing Sdn Bhd (2)

Dormant Malaysia 100.00 100.00

HG Metal Pte Ltd (1)

(Note A(ii))Investment holding Singapore 100.00 51.00

78



12. Investment in subsidiaries (cont’d)

Name of subsidiaries Principal activities


business

Effective equityinterest heldby the Group

2010 2009% %

Held by Niho (Singapore)Pte Ltd

Kunshan Niho Co Ltd (3) Wholesalers and distributors of various types of metals and fabricated metals

People’s Republicof China

59.03 72.29

Held by HG Metal Manufacturing Sdn Bhd

Nusajaya Steel Sdn Bhd (2) Dormant Malaysia 70.00 70.00

Held by HG Metal Pte Ltd

BRC Asia Limited (1)

(Note A)Prefabrication and trading of steel reinforcement products and manufacture and sale of wire mesh fences

Singapore – 43.67

Held by BRC Asia Limited

BRC China Limited (4) Dormant Hong Kong – 43.67

(1) Audited by Ernst & Young LLP, Singapore.

(2) Audited by RSM Robert, Teo, Kuan & Co., Malaysia.

(3) Audited by Suzhou Ren Tai Certifi ed Public Accountants Partnership, People’s Republic of China.

(4) Audited by Cheung & Yue, Certifi ed Public Accountants.




(A) BRC Asia Limited

(i) Financial year ended 30 September 2009

On 18 September 2008, the Group’s 51% subsidiary, HG Metal Pte Ltd acquired 56.14% of the issued share capital of BRC Asia Limited (“BRC”), a company listed on the Singapore Exchange. Upon acquisition, BRC became a subsidiary of the Group and the Group’s effective equity interest in BRC was 28.63%. The effective date of acquisition was deemed to be on 30 September 2008.

During the fi nancial year ended 30 September 2009, the Group performed a detailed purchase price allocation exercise to determine the fair value of BRC’s assets, liabilities and contingent liabilities acquired. The Group’s 2008 comparative information had been restated to refl ect the revised fair values of BRC on acquisition and the following adjustments were made:

At date ofacquisition Restated Adjustment

$’000 $’000 $’000

Adjustments to fair values of BRC on acquisition

Property, plant and equipment 16,326 19,759 3,433Customer relationship – 10,318 10,318Trademark – 13,840 13,840Inventories 73,140 87,319 14,179Deferred tax liability (914) (6,649) (5,735)

As a result of the adjustments, there was an increase in the minority interest of $15,805,000 to $28,552,000. There was also a corresponding reduction in goodwill of $20,230,000, resulting in a total goodwill arising on acquisition of $2,951,000. These adjustments did not have an effect on profi t or loss for the year ended 30 September 2008.

Acquisition of minority interest

During the fi nancial year ended 30 September 2009, the subsidiary, HG Metal Pte Ltd, acquired an additional 29.48% equity interest in BRC from its minority interest for a cash consideration of $24,931,000. The book value of the additional interest acquired was $23,874,000. As a result of this acquisition, the Group’s effective interest in BRC increased from 28.63% to 43.67%. The difference between the consideration and the book value of the interest acquired by HG Metal Pte Ltd is $1,057,000 of which $539,000 is refl ected in equity of the Group as premium paid on acquisition of minority interest.

80




(ii) Financial year ended 30 September 2010

Capital reduction in HG Metal Pte Ltd (“HGMPL”)

At an Extraordinary General Meeting held on 26 October 2009, the shareholders of HGMPL approved the following:

– Capitalisation of advances from minority shareholders of $17,055,000.

– Capital reduction of paid-up capital of $46,356,000. The reduction in paid-up capital of $31,756,000 relating to the minority shareholders was to be satisfi ed by the transfer of 281,927,381 shares in BRC.

Approval from the High Court of Republic of Singapore was obtained on 30 October 2009 and the capital reduction was completed on 26 November 2009 with the transfer of BRC shares to the minority shareholders. Accordingly, HGMPL became a wholly-owned subsidiary of the Group. BRC ceased to be a subsidiary of the Group on that date and the Group recognised a gain of $6,373,000 relating to the disposal. Consequently, the Group’s retained interest in BRC is accounted for as an investment in associate (Note 14).

The net identifi able assets and liabilities of BRC at the date of disposal and cash fl ow effect of the disposal are as follows:

$’000

Property, plant and equipment 18,900Intangible assets 25,389Investment in joint venture 9,690Available for sale fi nancial assets 28Trade and other receivables 58,453Inventories 36,645Cash and cash equivalents 9,527

158,632

Bank borrowings (26,608)Trade and other payables (25,999)Provision for retirement benefi ts (786)Deferred revenue (1,867)Finance lease payables (1,560)Derivative fi nancial instruments (500)Provision for taxation (4,280)Deferred tax liability (6,115)

(67,715)

Net identifi able assets 90,917

Net cash outfl ow on disposal of subsidiary:Cash and cash equivalents of subsidiary 9,527




(B) Niho (Singapore) Pte Ltd (“Niho”)

During the year, Niho allotted and issued 550,000 ordinary shares to the minority shareholder at an issue price of $550,000. As such, the Group’s interest in Niho was diluted to 59.03%.

13. Investment in joint venture

For the fi nancial year ended 30 September 2010, the Group has a Nil% (2009: 50%) equity interest in a joint-controlled entity, Anhui BRC & Ma Steel Weldmesh Co. Ltd, that is held through its former subsidiary, BRC. This joint venture is incorporated in the People’s Republic of China (“PRC”). Its principal activity is to market and manufacture steel welded wire mesh and other forms of wire and reinforcing steel products for use in the construction industry in the PRC.

Group2010 2009$’000 $’000

Unquoted shares, at cost – 6,076Share of post-acquisition reserves – 3,194Share of changes recognised directly in joint venture’s equity – 197

– 9,467

The summarised fi nancial information of the joint venture for the fi nancial year ended 30 September 2010, representing the Group’s Nil% (2009: 50%) share of the assets and liabilities of the joint venture acquired are as follows:

Group2010 2009$’000 $’000

Assets and liabilities:

Current assets – 16,487Non-current assets – 2,757

Total assets – 19,244

Current liabilities – (4,057)Non-current liabilities – (5,720)

Total liabilities – (9,777)

Net assets – 9,467

Profi t net of tax 223 1,059

82



14. Investment in associates

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

Shares, at cost 30,279 713 713 713Share of associate results, net of

dividend income 2,874 (67) – –Share of changes recognised

directly in associate’s equity (190) – – –

32,963 646 713 713

Fair value of investment in an associate for which there is published price quotation 26,795 – – –

Name of associates Principal activities


business

Effective equityinterest held by the

Group and Company2010 2009

% %

Held by the Company

POS-SEA Pte Ltd (1) Commission agent for procurement of steel products and materials


Held by HG Metal Pte Ltd

BRC Asia Limited (2) Prefabrication and trading of steel reinforcement products and manufacture and sale of wire mesh fences

Singapore 23.94 –

(1) Audited by Lee Seng Chan & Co, Singapore.(2) Audited by Ernst & Young LLP, Singapore.



14. Investment in associates (cont’d)

The summarised fi nancial information of the associate, not adjusted for the proportion of ownership interest held by the Group, is as follows:

Group2010 2009$’000 $’000

Assets and liabilities:Total assets 151,181 2,660

Total liabilities (61,498) (3)

Results:Revenue 296,563 978

Profi t/(loss) for the year 21,815 (273)

Disposal of shares in an associate, BRC Asia Limited

On 26 November 2009, the Group’s retained interest in BRC Asia Limited is accounted for as an investment in associate (Note 12). Subsequently, the Group disposed of 80,641,080 and 28,000,000 shares in BRC Asia Limited in January 2010 and March 2010 respectively for a total cash consideration of $15,474,000. The Group recorded a loss totalling $1,910,000 (Note 7) as a result of the disposals. Following the disposals, the Group had a 27.50% interest in BRC Asia Limited.

Of the above transactions, 5,000,000 shares in BRC Asia Limited was disposed of to the directors and key management personnel of BRC Asia Limited for a cash consideration of $675,000. The Group recognised a loss of $125,000 from this disposal.

Dilution of interest in an associate, BRC Asia Limited

On 6 April 2010, BRC Asia Limited allotted and issued 100,000,000 new ordinary shares to third parties. As a result, the Group’s equity interest in BRC Asia Limited decreased from 27.50% to 23.94% and the fi nancial effect of the dilution of interest was a loss of approximately $288,000.

15. Available-for-sale fi nancial assets

Group2010 2009

$’000 $’000Equity instruments- quoted – 28- unquoted, at cost – *

– 28

* carrying amount is less than $1,000.

84



16. Deferred tax

Deferred income tax as at 30 September relates to the following:

Group

Consolidated balance sheetConsolidated statement of

comprehensive income2010 2009 2010 2009$’000 $’000 $’000 $’000

Deferred tax assets:

Unutilised tax losses – – – 19

– –

Deferred tax liabilities:

Differences in depreciation for tax purposes 297 3,071 (276) (42)

Provisions – (466) – (120)Intangible assets – 4,083 – (265)Others – – – (75)

297 6,688

Deferred income tax expense (276) (483)

CompanyBalance Sheet

2010 2009$’000 $’000

Deferred tax liabilities:

Differences in depreciation for tax purposes – (172)

At the balance sheet date, the Group has tax losses of approximately $84,403,000 (2009: $73,118,000) that are available for offset against future taxable profi ts 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.



17. Derivative fi nancial instruments

Group

Contract/NotionalAmount 2010

Contract/NotionalAmount 2009

$’000 $’000 $’000 $’000Assets Liabilities Assets Liabilities

Forward currency contracts – – – 53,907 – 723

Warrants 7,488 – 1,048 – – –

Company

Warrants 7,488 – 1,048 – – –

The Company issued 60,000,000 warrants to Oversea-Chinese Banking Corporation Limited and United Overseas Bank Limited (the “lenders”) in conjunction with the $39 million term loan facility provided by the lenders. The term loan facility has a tenure period of one year from the date of the facility agreement of 21 October 2009. The warrants carry the rights to subscribe for shares at an exercise price of $0.1248 per share for a period of 3 years from 23 November 2009.

The above derivatives are measured at fair value at each balance sheet date. The warrants are valued using a valuation model. The inputs to the model include assumptions regarding dividend yield and volatility of share price. The fair values of forward currency contracts are determined based on the quoted market price for equivalent instruments at the balance sheet date.

18. Investment held for trading

Group2010 2009

$’000 $’000

Equity instruments (quoted) 380 270

86



19. Inventories

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

Trading inventories 48,964 79,353 46,155 75,875Finished goods 3,583 8,055 – –Goods in transit 3,796 28,842 3,578 2,532Work-in-progress 1,281 795 – –Raw materials 4,880 23,466 – –

62,504 140,511 49,733 78,407

Group2010 2009$’000 $’000

Inventories recognised as expense in cost of sales 171,775 538,460Write-down of inventories to net realisable value 12,875 23,294

20. Trade and other receivables

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

Trade receivablesThird parties 26,675 86,919 17,618 23,738Amounts due from subsidiaries – – 44 764Amounts due from related parties 1,845 1,329 865 360Allowance for doubtful receivables (3,755) (4,342) (3,650) (3,518)

24,765 83,906 14,877 21,344

Other receivablesThird parties 4,744 104 35 57Allowances for doubtful receivables – (25) – –Rental, utilities and other deposits 726 679 265 309Amounts due from subsidiaries (non-

trade) – – 22,792 39,159Amounts due from related parties – 33 – 33Amounts due from joint venture – 33 – –Allowances for doubtful receivables

from subsidiaries (non-trade) – – (1,824) (1,824)

5,470 824 21,268 37,734

Total 30,235 84,730 36,145 59,078



20. Trade and other receivables (cont’d)

Receivables that are past due but not impaired

The Group has trade receivables amounting to $10,759,000 (2009: $48,665,000) 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 receivables past due:- Less than 30 days 5,935 29,410- 30 - 60 days 2,146 11,887- 61 - 90 days 923 3,252- 91 - 120 days 912 923- More than 120 days 843 3,193

10,759 48,665

Receivables that are impaired

The Group’s trade receivables that are impaired at the balance sheet date and the movement of the allowance accounts used to record the impairment are as follows:

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

Trade receivables –nominal amounts 3,755 4,342 3,650 3,518Less: Allowance for impairment (3,755) (4,342) (3,650) (3,518)

– – – –

Movement in allowance accounts:

Balance at 1 October 4,342 7,141 3,518 5,908Charge for the year 659 1,914 480 1,780Written back (396) (1,947) (348) (1,942)Bad debts written off against

allowance (9) (2,763) – (2,228)Arising from disposal of subsidiary (692) – – –Exchange differences (149) (3) – –

Balance at 30 September 3,755 4,342 3,650 3,518

88



20. Trade and other receivables (cont’d)

Trade receivables that are individually determined to be impaired at the balance sheet date relate to debtors that are in signifi cant fi nancial diffi culties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancements.

Trade receivables are non-interest bearing and are generally on 30 to 120 days credit terms.

The non-trade amounts due from subsidiaries and related parties are unsecured, interest-free and repayable on demand.

21. Cash and cash equivalents

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

Cash at bank and on hand 4,491 15,843 1,165 1,387Fixed deposits with banks 617 530 – –

Cash and fi xed deposits 5,108 16,373 1,165 1,387

Fixed deposits bear interests ranging from 2.20% to 2.85% per annum (2009: 3.7% to 3.79%per annum) and for tenures of 365 days (2009: 365 days).

For the purpose of the consolidated cash fl ow statement, cash and cash equivalents comprise the following at the balance sheet date:

Group2010 2009$’000 $’000

Cash and fi xed deposits 5,108 16,373Fixed deposits pledged with bank

(Note 24) (617) (530)Bank overdrafts (Note 24) (143) –

Cash and cash equivalents 4,348 15,843



22. Trade and other payables

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

Trade payables 17,522 57,000 14,565 26,672Deposits from customers 436 2,516 329 931Accrued operating expenses 1,450 12,747 979 1,765Other payables 989 2,464 629 1,926Advances from shareholders 31 17,085 – –Amounts due to subsidiaries- trade – – 2,465 4,022- non-trade – – 77 268Amounts due to related parties- trade 7,498 6,864 7,498 6,856- non-trade – 447 – 447Amounts due to associates- trade 2,732 – 174 –Provision for reinstatement costs 800 – 500 –

Total 31,458 99,123 27,216 42,887

Trade payables are non-interest bearing and are normally settled on 30 to 120 days’ term.

The non-trade amounts due to subsidiaries, related parties and advances from shareholders are unsecured, interest-free and repayable on demand.

The movement in provision for reinstatement costs is as follows:

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

At 1 October – – – –Additions 800 – 500 –

At 30 September 800 – 500 –

90



23. Finance lease payables

As at balance sheet date, the Group and Company have obligations under fi nance leases that are repayable as follows:

Minimum lease

payments

Futurefi nance

charges

Presentvalue

of lease payments

$’000 $’000 $’000Group

2010Within one fi nancial year 180 (30) 150After one fi nancial year but less than fi ve fi nancial years 506 (58) 448

After fi ve fi nancial years 30 (1) 29

716 (89) 627

2009Within one fi nancial year 879 (110) 769After one fi nancial year but less than fi ve fi nancial years 1,387 (122) 1,265

2,266 (232) 2,034

Company

2010Within one fi nancial year 43 (4) 39After one fi nancial year but less than fi ve fi nancial years 143 (14) 129

186 (18) 168

2009Within one fi nancial year – – –After one fi nancial year but less than fi ve fi nancial years – – –

– – –

Lease terms range from one to fi ve years with options to purchase at the end of the lease term. Interest is payable at average effective interest rates ranging from 2.19% to 5.94% (2009: 2.80% to 5.19%) per annum.



24. Bank borrowings

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

CurrentSecured- Term loans 4,430 2,740 3,993 900- Trust receipts 14,932 – 14,932 –- Bankers acceptance 1,027 1,193 – –- Bank overdrafts 143 – –

20,532 3,933 18,925 900

Unsecured- Trust receipts 2,294 63,572 – 36,096- Invoice fi nancing – 740 – –- Bridging loans 2,471 3,533 1,243 1,183

4,765 67,845 1,243 37,279

Total current borrowings 25,297 71,778 20,168 38,179

Non-current liabilities

Secured- Term loans – 9,244 – –

Unsecured- Bridging loans 4,512 10,324 2,097 3,339

Total non-current borrowings 4,512 19,568 2,097 3,339

Secured

The secured portions of the bank borrowings of the Group and the Company are secured by way of:

(i) legal mortgage over the freehold land and leasehold properties (Note 10) of the Group and of the Company with net book value of $25,399,000 (2009: $23,242,000) and $21,772,000 (2009: $2,723,000) respectively as at 30 September 2010;

(ii) pledge over the fi xed deposits of the Group’s Malaysian subsidiaries (Note 21); and

(iii) fi xed and fl oating charge over all assets of the Company.

The secured bank borrowings of the Company are also supported by corporate guarantees given by a subsidiary, Oriental Metals Pte Ltd.

92



24. Bank borrowings (cont’d)

Unsecured

Group

As at the balance sheet date, unsecured bank borrowings amounting to $Nil (2009: $13,096,000) of certain subsidiaries are supported by corporate guarantees given by the Company.

Company

As at the balance sheet date, unsecured bank borrowings amounting to $Nil (2009: $36,096,000) of the Company was supported by corporate guarantees given by a subsidiary, Oriental Metals Pte Ltd.

The Group’s bank borrowings have the following maturity dates and interest rates:

Interest rates per annumMaturity 2010 2009

Term loans 2010 - 2019 2.80% - 8.55% 2.05% - 6.35%Bankers acceptance 2010 3.05% 2.19%Trust receipts 2010 3.02% - 4.30% 1.44% - 3.87%Bridging loans 2013 5% 5%Bank overdrafts - 8.05% -

25. Provision for retirement benefi ts

One of the Group’s subsidiaries granted a retirement benefi t scheme to employees who commenced employment with the subsidiary prior to 1 January 1983. The retirement benefi ts are calculated based on one week’s pay for each full year of service at the employee’s last drawn basic salary at date of retirement.

The present value of the defi ned retirement benefi t obligation recognised in the balance sheets are as follows:

Group2010 2009

$’000 $’000

Balance at beginning of fi nancial year 786 451Disposal of the subsidiary (Note 12) (786) –Charged to profi t or loss – 335

Service cost – 321Interest cost – 14

Balance at end of fi nancial year – 786



25. Provision for retirement benefi ts (cont’d)

The principal actuarial assumptions at the balance sheet date are as follows:

Group2010 2009$’000 $’000

Discount rate at 30 September - 3%Future salary increases - 3%Resignation rate - 0%

26. Share capital

Group and Company2010 2009$’000 $’000

Issued and fully-paid:

775,671,962 (2009: 424,714,561) ordinary shares at 1 October 111,730 78,203Issue of Nil (2009: 125,957,401) ordinary shares from rights issues – 11,336Issue of Nil (2009: 225,000,000) ordinary shares from shares placement – 22,500Issuance cost – (309)

775,671,962 (2009: 775,671,962) ordinary shares at 30 September 111,730 111,730

The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restrictions. The ordinary shares have no par value.

During the fi nancial year ended 30 September 2005, the Company issued 44,054,040 warrants by way of a bonus issue of one bonus warrant for every four ordinary shares held. These warrants carry the rights to subscribe for shares at an exercise price of $0.4215 per share for a period of 5 years from 20 August 2005. 96,499 warrants and 13,500 warrants were converted to ordinary shares in the fi nancial years ended 2007 and 2008 respectively. In Feburary 2008, the Company issued 106,177,458 bonus shares. As a result, additional warrants of 14,647,411 were issued and the warrants exercise price was adjusted to $0.32.

In February 2009, the Company issued 125,957,401 shares in the capital of the Company via a rights issue. 3,457,917 additional warrants were issued and the exercise price was adjusted to $0.3100 as a result of the rights issue. The net proceeds of $11,111,000 had been fully utilised by the Company for general corporate and working capital purposes.

In August 2009, the Company issued another 225,000,000 shares in the capital of the Company via a shares placement. The exercise price of the outstanding warrants was adjusted to $0.2900 as a result of the shares placement. The net proceeds of $22,416,000 had been fully utilised by the Company in the following manner:

94



26. Share capital (cont’d)

(i) $7,500,000 for repayment of a bank loan;

(ii) $4,940,000 for acquisition of minority interest in a subsidiary; and

(iii) $9,976,000 for the Company’s general corporate and working capital purposes.

The 62,049,369 unexercised warrants had expired on 20 August 2010.

The Company issued 60,000,000 warrants to Oversea-Chinese Banking Corporation Limited and United Overseas Bank Limited (Note 17). The warrants carry the rights to subscribe for shares at an exercise price of $0.1248 per share for a period of 3 years from 23 November 2009.

As at balance sheet date, there were outstanding warrants of 60,000,000 (2009: 62,049,369).

27. Other reserves

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

Capital reserve (a) 2,527 2,527 2,527 2,527Share option reserve – 17 – –Premium paid on acquisition of

minority interest (Note 12) – (539) – –Foreign currency translation

reserve (b) (275) (293) – –Fair value reserves (c) 1 – – –

2,253 1,712 2,527 2,527

(a) Capital reserve

In 2005, the Company entered into a $10,000,000 convertible loan agreement (2005 Convertible Loan Agreement) with Oversea-Chinese Banking Corporation Limited (“OCBC”) for the purpose of expansion and/or to be applied to general working capital requirements. On 15 August 2006, the Company and OCBC entered into a revised Convertible Loan Agreement for refi nancing the 2005 Convertible Loan Agreement which granted OCBC the right to convert the loan amount into new ordinary shares of the Company at any time until maturity date on 5 July 2008.

The net proceeds received from the issue of the convertible loan were split into the liability element and equity component, representing the fair value of the embedded option to convert the liability into equity of the Group and the Company. Accordingly, $101,000 was credited to capital reserve in the fi nancial year ended 30 September 2006.



27. Other reserves (cont’d)

OCBC exercised its option to convert the entire convertible loan of $10 million into 31,171,147 new ordinary shares of the Company during the fi nancial year 30 September 2007. In accordance with the terms of the revised convertible loan agreement, the Company was entitled to a certain percentage of share of profi ts earned by OCBC from the sale of these conversion shares, net of certain expenses.

Subsequently OCBC sold the shares and a sum of $2,426,000 was received by the Company as its share from the net profi t earned by OCBC on the disposal of the conversion shares. The Company has recorded the consideration received as capital reserve.

(b) Foreign currency translation reserve

The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of the fi nancial statements of foreign operations whose functional currencies are different from that of the Group’s presentation currency. Movement in this account is set out in the consolidated statement of changes in equity.

(c) Fair value reserves

Fair value reserves represents the cumulative fair value changes, net of tax, of available for sale fi nancial assets until they are disposed of or impaired.

28. Dividends

Company2010 2009

$’000 $’000

A fi rst and fi nal tax-exempt dividend of Nil cent (2009: 0.25 cent) per ordinary share – 1,376

96



29. Signifi cant transactions with related companies and related parties

In addition to the information disclosed elsewhere in the fi nancial statements, the following were signifi cant transactions between the Company and its related companies and related parties on rates and terms agreed during the fi nancial year:

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

With subsidiariesSales – – 97 10,420Purchases – – 4,012 9,064Rental income – – 58 94Management fee income – – 344 181Other income (commission income) – – 27 18Dividend income – – 18 3,818Rental expense – – – 21Other expense – – 3 –

With associatesSales 84 – – –Purchases 5,985 – – –Rental income 30 9 – –Other income 5 15 – –Dividend income 1,702 – – –

With companies of which a director is related to a director of the Company

Sales 3,770 5,581 3,770 5,581Purchases 74 – 74 –Rental expense 32 – 32 –

With shareholder corporations of a subsidiary

Sales 1,637 31,116 1,473 28,813Purchases 7,037 25,306 7,037 16,812Rental income 9 – 9 –Other charges 47 1,119 47 1,119

With companies related to a director of the Company

Sales 1,276 133 574 –Purchases 24 2,347 24 –Other charges 816 – 816 –



29. Signifi cant transactions with related companies and related parties (cont’d)

Compensation of key management personnel

The remuneration of Directors and other members of key management of the Group and of the Company during the fi nancial year are as follows:

Group2010 2009$’000 $’000

Directors of the CompanySalaries and other short-term employee benefi ts 1,290 1,190Employer’s contributions to defi ned contribution plan 20 25

Key management personnelSalaries and other short-term employee benefi ts 426 461Employer’s contributions to defi ned contribution plan 36 44

1,772 1,720

30. Commitments and contingent liabilities

Operating lease commitments

The Group and the Company as lessee

As at the balance sheet date, the Group and the Company have operating lease commitments for rental payable in subsequent accounting periods as follows:

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

Future minimum lease paymentsWithin one fi nancial year 1,463 2,350 1,126 1,309After one fi nancial year but within fi ve fi nancial years 5,732 8,197 4,497 3,811

After fi ve fi nancial years 17,837 30,701 16,665 14,372

25,032 41,248 22,288 19,492

The above operating lease commitments are based on existing rates. The lease agreements provide for a periodic revision of such rates in the future.

98



30. Commitments and contingent liabilities (cont’d)

The Group and the Company as lessor

As at the balance sheet date, the Group and the Company have contracted with their tenants for the following future minimum lease payments:

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

Within one fi nancial year 533 417 380 239After one fi nancial year but within fi ve fi nancial years 385 205 234 130

After fi ve fi nancial years – 75 – –

918 697 614 369

Capital commitments

As at the balance sheet date, the Group and the Company had the following capital commitments contracted but not provided for in the fi nancial statements:

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

Purchase of plant and machinery – 220 – –Factory extension for leasehold

properties – 11,296 – 11,296Construction of new warehouse 5,754 811 5,754 –Purchase of property – 74 – –

Contingent liabilities

Guarantees

Intra-group fi nancial guarantees comprise corporate guarantees granted by the Company to banks in respect of banking facilities amounting to $33,672,000 (2009: $33,094,000) to secure banking facilities provided to certain subsidiaries. The fi nancial guarantees will expire when the loans have been paid and discharged and/or when the banking facilities are no longer available to the subsidiaries.

The principal risk to which the Company is exposed is credit risk in connection with the guarantee contracts it has issued. The credit risk represents the loss that would be recognised upon a default by the subsidiaries for which, the guarantees were given on behalf of.

There are no terms and conditions attached to the guarantee contracts that would have a material effect on the amount, timing and uncertainty of the Company’s future cash fl ows.



30. Commitments and contingent liabilities (cont’d)

The amount of credit facilities utilised by the subsidiary companies as at the balance sheet date amounted to $2,391,000 (2009: $10,082,000).

In the opinion of the directors, no loss is anticipated from these guarantees.

In the previous year, a subsidiary provided a corporate guarantee to its joint venture partner for the borrowings of its joint venture. Those borrowings amounted to $3,120,000 at 30 September 2009.

The fair values of the fi nancial guarantee contracts have not been recognised on the balance sheet at 30 September 2010 of the Group as the Group is of the view that the fair values of the corporate guarantees are not signifi cant and that no material losses will arise in respect of the guarantees provided at the date of these fi nancial statements.

31. 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. The trading segment is a supplier of steel products.

II. The manufacturing segment produces steel products and provides related engineering and sandblasting services.

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 profi t or loss.

Transactions between operating segments are generally based on terms determined on commercial basis.

100



31. Segment information (cont’d)

TradingManu-

facturing

Adjustment/Elimi-

nation Group$’000 $’000 $’000 $’000

Financial year ended 30 September 2010

REVENUESales to external customers 132,113 70,955 – 203,068Inter-segment sales (Note A) 97 4,374 (4,471) –

Total 132,210 75,329 (4,471) 203,068

RESULTSSegment results (7,774) 7,815 1,958 1,999Interest expense (6,325) (595) – (6,920)Interest income 27 1 – 28Share of joint venture results – 223 – 223Share of associate results 30 4,613 – 4,643

Profi t/(loss) before income tax (14,042) 12,057 1,958 (27)Income tax credit 354

Profi t after income tax 327Non-controlling interests (2,810)

Net loss for the fi nancial year (2,483)

OTHER INFORMATIONDebit / (Credit):

Investment in associates 688 32,275 – 32,963Additions to non-current assets

(Note B) 7,266 609 307 8,182Depreciation and amortisation 1,239 1,687 (8) 2,918Write down of inventories 12,322 553 – 12,875Fair value gain from derivatives (1,293) (223) – (1,516)

ASSETS AND LIABILITIESSegment assets (Note A) 169,580 30,404 (36,112) 163,872

Total assets 163,872

Segment liabilities (Note A) 91,067 11,963 (40,088) 62,942Tax payable 19Deferred tax liabilities 297

Total liabilities 63,258




TradingManu-

facturing

Adjustment/Elimi-

nation Group$’000 $’000 $’000 $’000

Financial year ended 30 September 2009

REVENUESales to external customers 274,147 307,672 – 581,819Inter-segment sales (Note A) 10,457 11,002 (21,459) –

Total 284,604 318,674 (21,459) 581,819

RESULTSSegment results (63,422) 18,374 (592) (45,640)Interest expense (8,953) (2,728) – (11,681)Interest income 16 4 – 20Share of joint venture results – 1,059 – 1,059Share of associate results (67) – – (67)

Profi t/(loss) before income tax (72,426) 16,709 (592) (56,309)Income tax expense (2,493)

Loss after income tax (58,802)Non-controlling interests (8,689)

Net loss for the fi nancial year (67,491)

OTHER INFORMATIONDebit / (Credit):

Investment in associates 646 – – 646Investment in joint venture – 9,467 – 9,467Additions to non-current assets

(Note B) 10,361 1,502 26 11,889Depreciation and amortisation 1,275 4,579 (12) 5,842Write down of inventories 22,959 335 – 23,294Fair value loss from derivatives 67 425 – 492

ASSETS AND LIABILITIESSegment assets (Note A) 181,431 199,262 (41,556) 339,137

Total assets 339,137

Segment liabilities (Note A) 152,763 87,154 (44,364) 195,553Tax payable 3,878Deferred tax liabilities 6,688

Total liabilities 206,119

102




Notes:

(A) Segment assets and liabilities include balances with companies in the Group. Inter-segment sales, assets and liabilities are eliminated on consolidation.

(B) Additions to non-current assets consist of additions to property, plant and equipment and intangible assets

Geographical information

External sales Non-current assets2010 2009 2010 2009

$’000 $’000 $’000 $’000

Singapore 143,505 475,473 31,128 71,368Malaysia 36,764 53,809 1,479 15,437Indonesia 17,148 31,622 – –Others 5,651 20,915 – –

203,068 581,819 32,607 86,805

Non-current assets information presented above consist of property, plant and equipment and intangible assets as presented in the consolidated balance sheet.



32. Financial Instruments

Classifi cation of fi nancial instruments

Fair value through profi t

and loss

Loans andrecei-

vablesAvailable-

for-sale

Liabilities at amortised

cost$’000 $’000 $’000 $’000

Group

2010

AssetsInvestment held for trading 380 – – –Trade and other receivables – 30,235 – –Cash and cash equivalents – 5,108 – –

Total 380 35,343 – –

LiabilitiesDerivative fi nancial instruments 1,048 – – –Trade and other payables – – – 31,458Finance lease payables – – – 627Bank borrowings – – – 29,809

Total 1,048 – – 61,894

2009

AssetsAvailable-for-sale fi nancial assets – – 28 –Investment held for trading 270 – – –Trade and other receivables – 84,730 – –Cash and cash equivalents – 16,373 – –

Total 270 101,103 28 –

LiabilitiesDerivative fi nancial instruments 723 – – –Trade and other payables – – – 99,123Finance lease payables – – – 2,034Bank borrowings – – – 91,346

Total 723 – – 192,503

104



32. Financial Instruments (cont’d)

Classifi cation of fi nancial instruments (cont’d)

Fair value through

profi t andloss

Loansand

recei-vables

Liabilitiesat

amortised cost

$’000 $’000 $’000

Company

2010

AssetsTrade and other receivables – 36,145 –Cash and cash equivalents – 1,165 –

Total – 37,310 –

LiabilitiesDerivatives 1,048 – –Trade and other payables – – 27,216Finance lease payables – – 168Bank borrowings – – 22,265

Total 1,048 – 49,649

2009

AssetsTrade and other receivables – 59,078 –Cash and cash equivalents – 1,387 –

Total – 60,465 –

LiabilitiesTrade and other payables – – 42,887Bank borrowings – – 41,518

Total – – 84,405



32. Financial Instruments (cont’d)

Fair values

The fair value of a fi nancial instrument is the amount at which the instrument could be exchanged or settled between knowledgeable and willing parties in an arm’s length transaction, other than in a forced or liquidation sale.

Financial instruments whose carrying amount approximates fair value

Management has determined that the carrying amounts of derivative fi nancial instruments, investment held for trading, available-for-sale fi nancial instruments, trade and other receivables, cash and bank balances, trade and other payables, and bank borrowings reasonably approximate their fair values either due to their short term nature or that they are fl oating rate instruments that are re-priced to market interest rates on or near the balance sheet date.

33. Financial risk management

The Group and the Company is exposed to fi nancial risks arising from its operations and the use of fi nancial instruments. The key fi nancial risks include credit risk, liquidity risk, interest rate risk, foreign currency risk and market price risk. The Board of directors reviews and agrees policies and procedures for the management of these risks, which are executed by the Chief Financial Offi cer.

The following sections provide details regarding the Group’s and Company’s exposure to the above-mentioned fi nancial risks and the objectives, policies and processes for the management of these risks.

(a) Credit risk

Credit risk is the risk of loss that may arise on outstanding fi nancial instruments should a counterparty default on its obligations. The Group’s and Company’s credit risk arise primarily from trade and other receivables. For other fi nancial assets (including available for sale fi nancial assets, derivatives fi nancial instruments, investment held for trading and cash and cash equivalents), the Group and the Company minimise credit risks by dealing exclusively with high credit rating counterparties.

The Group and Company have a credit policy in place and the exposure to credit risk is monitored on an on-going basis. Credit review, which takes into account qualitative and quantitative factors like business performance and profi le of the customers, is performed and approved by the management before credit is granted. The customer’s payment profi le and credit exposures are monitored on an on-going basis by the Credit controller.

At 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 fi nancial assets recognised in the balance sheets including derivatives with positive fair values.

106



33. Financial risk management (cont’d)

(a) Credit risk (cont’d)

The Group’s trade receivables concentration profi le by geographical areas and industry sectors as at balance sheet date are as follows:

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

By country:- Singapore 17,282 71,174 11,742 12,910- Malaysia 4,350 6,523 1,264 3,784- Indonesia 2,218 4,395 1,358 4,065- Others 915 1,814 513 585

24,765 83,906 14,877 21,344

By industry sectors:- Trading 12,433 14,510 8,710 9,149- Construction 2,107 54,921 1,597 1,796- Shipping 1,751 6,729 568 6,134- Others 8,474 7,746 4,002 4,265

24,765 83,906 14,877 21,344

Financial assets that are neither past due nor impaired

Cash and cash equivalents and derivative fi nancial instruments that are neither past due nor impaired are placed with or entered into with reputable fi nancial institutions with high credit ratings and have no history of default. Trade and other receivables that are neither past due nor impaired are with creditworthy debtors with good payment record with the Group.

Financial assets that are either past due or impaired

Information regarding fi nancial assets that are either past due or impaired is disclosed in Note 15 (Available-for-sale fi nancial assets), Note 18 (Investment held for trading) and Note 20 (Trade and other receivables)

(b) Liquidity risk

Liquidity risk is the risk that the Group or the Company will encounter diffi culty in meeting fi nancial obligations due to shortage of funds. The Group’s and Company’s exposure to liquidity risks arises primarily from mismatches of the maturities of fi nancial assets and liabilities.

The Group and the Company manages its liquidity risk by ensuring the availability of funding through an adequate amount of committed credit facilities from fi nancial institutions. In addition, the Group and Company also maintain surplus cash for future investment opportunities.




(b) Liquidity risk (cont’d)

The following are the contractual maturities of fi nancial assets and liabilities of the Group and Company at balance sheet date based on contractual undiscounted payments.

Withinone year

Two tofi ve years

Afterfi ve years Total

$’000 $’000 $’000 $’000Group

As at 30 September 2010

Financial assets:

Investment held for trading 380 – – 380Trade and other receivables 30,235 – – 30,235Cash and cash equivalents 5,108 – – 5,108

Total undiscounted fi nancial assets 35,723 – – 35,723

Financial liabilities:

Derivatives 1,048 – – 1,048Trade and other payables 31,458 – – 31,458Finance lease payables 180 506 31 717Bank borrowings 25,678 4,899 – 30,577

Total undiscounted fi nancial liabilities 58,364 5,405 31 63,800

Total net undiscounted fi nancial liabilities (22,641) (5,405) (31) (28,077)

108





Withinone year

Two tofi ve years

Afterfi ve years Total

$’000 $’000 $’000 $’000Group


Financial assets:

Available-for-sale fi nancial assets – 28 – 28

Investment held for trading 270 – – 270Trade and other receivables 84,730 – – 84,730Cash and cash equivalents 16,373 – – 16,373

Total undiscounted fi nancial assets 101,373 28 – 101,401


Derivative 723 – – 723Trade and other payables 99,123 – – 99,123Finance lease payables 879 1,387 – 2,266Bank borrowings 73,050 17,508 5,713 96,271

Total undiscounted fi nancial liabilities 173,775 18,895 5,713 198,383

Total net undiscounted fi nancial liabilities (72,402) (18,867) (5,713) (96,982)





Withinone year

Two tofi ve years Total

$’000 $’000 $’000Company


Financial assets:

Trade and other receivables 36,145 – 36,145Cash and cash equivalents 1,165 – 1,165

Total undiscounted fi nancial assets 37,310 – 37,310


Derivatives 1,048 – 1,048Trade and other payables 27,216 – 27,216Finance lease payables 43 142 185Bank borrowings 20,414 2,263 22,677

Total undiscounted fi nancial liabilities 48,721 2,405 51,126

Total net undiscounted fi nancial liabilities (11,411) (2,405) (13,816)


Financial assets:

Trade and other receivables 59,078 – 59,078Cash and cash equivalents 1,387 – 1,387

Total undiscounted fi nancial assets 60,465 – 60,465


Trade and other payables 42,887 – 42,887Bank borrowings 38,303 3,771 42,074

Total undiscounted fi nancial liabilities 81,190 3,771 84,961

Total net undiscounted fi nancial liabilities (20,725) (3,771) (24,496)

110




(c) Interest rate risk

Interest rate risk is the risk that the fair value or future cash fl ows of the Group’s and the Company’s fi nancial instruments will fl uctuate because of changes in market interest rates. The Group’s and the Company’s exposure to interest rate risk arises primarily from fi nance lease payables and bank borrowings. The Group does not hedge its investment in fi xed rate debt securities as they have active secondary or resale markets to ensure liquidity. All of the Group’s and the Company’s fi nancial assets and liabilities at fl oating rates are contractually re-priced at intervals of less than 3 months (2009: less than 3 months) from the balance sheet date.

The Group’s and Company’s exposure to interest rate risk relate primarily to interest-bearing fi xed deposits and debt obligations with fi nancial institutions. The Group and the Company may use interest rate swap contracts to hedge the Group and the Company’s exposure to interest rate risks. The Group and Company did not have any outstanding interest rate swap contracts at the balance sheet date.

Sensitivity analysis for interest rate risk

At the balance sheet date, if interest rates had been 8 (2009: 2) basis points lower/higher with all other variables held constant, the Group’s income and equity would have been approximately $22,000 (2009: $17,000) higher/lower, arising mainly as a result of higher/lower interest income/expense on fi xed deposits and debt obligations with fi nancial institutions.

A similar change in interest rates would have increased/decreased the Company’s income and equity by approximately $18,000 (2009: $8,000).

(d) Foreign currency risk

The Group has transactional currency exposures arising from sales or purchases that are denominated in a currency other than the respective functional currencies of the Group entities, primarily the Singapore Dollar and Malaysian Ringgit. The foreign currencies in which these transactions are denominated are mainly the US Dollar (“USD”).

The Group and the Company also hold cash and cash equivalents denominated in foreign currencies for working capital purposes. At the balance sheet date, such foreign currency balances (mainly in USD) amounted to $700,000 (2009: $1,516,000) and $250,000 (2009: $190,000) for the Group and Company respectively.

The Group uses foreign currency forward contracts to hedge its exposure to foreign currency exchange risk arising from purchases which are mainly denominated in USD. The Group’s trade receivable and trade payable balances at the balance sheet date have similar exposures.

The Group is exposed to currency translation risk arising from its net investments in foreign operations, including Malaysia, Hong Kong and People’s Republic of China (PRC). The Group’s net investments in Malaysia, Hong Kong and PRC are not hedged as currency positions in Ringgit, HKD and RMB are considered to be long-term in nature.




(d) Foreign currency risk (cont’d)

Sensitivity analysis for foreign currency risk

The following table demonstrates the sensitivity of the Group’s profi t net of tax to a reasonably possible change in the USD and Ringgit exchange rates against the respective functional currencies of the Group entities, with all other variables held constant.

Profi t net of tax2010 2009

$’000 $’000Group

USD/SGD - strengthened 2% (2009: 2%) (534) (1,009) - weakened 2% (2009: 2%) 534 1,009

RM/SGD - strengthened 2% (2009: 2%) – 2 - weakened 2% (2009: 2%) – (2)

Statement of comprehensive income

2010 2009$’000 $’000

Company

USD/SGD - strengthened 2% (2009: 2%) (472) (259) - weakened 2% (2009: 2%) 472 259

RM/SGD - strengthened 2% (2009: 2%) – 2 - weakened 2% (2009: 2%) – (2)

(e) Market price risk

Market price risk is the risk that fair value or future cash fl ows of the Group’s fi nancial instruments will fl uctuate because of changes in market prices (other than interest or exchange rates). The Group is exposed to equity price risk arising from its investment in quoted equity instruments. These instruments are quoted on the SGX-ST in Singapore and are classifi ed as held for trading and available for sale fi nancial assets.

Sensitivity analysis for equity price risk

At the balance sheet date, if the STI had been 2% (2009: 2%) higher/lower with all other variables held constant, the Group’s income would have been $1,500 (2009: $1,000) higher/lower, arising as a result of higher/lower fair value gains in held for trading equity instruments. The Group does not have signifi cant exposure to equity price risk for available for sale fi nancial assets.

112



34. Capital management

The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value.

The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the years ended 30 September 2010 and 30 September 2009.

The Group monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Group’s policy is to keep the gearing ratio below 70%. The Group includes within net debt, loans and borrowings and fi nance lease payables less cash and cash equivalents. Capital includes equity attributable to the equity holders of the parent.

2010 2009$’000 $’000

Finance lease payables 627 2,034Bank borrowings 29,809 91,346Less:Cash and cash equivalents (5,108) (16,373)

Net debt 25,328 77,007Equity attributable to equity holders of the Company 98,571 100,513

Capital and net debt 123,899 177,520

Gearing ratio 20% 43%

35. Subsequent event

At an Extraordinary General Meeting held on 10 November 2010, the shareholders approved the issue of 163,850,000 new ordinary shares at $0.095 per share to Oriental Castle Sdn Bhd (“OCS”). OCS has also been granted a call option to subscribe for 153,000,000 new ordinary share at $0.095 per share in the Company or such other number representing 14% of the enlarged share capital of the Company as at the date of the exercise of the call option. The call option is exercisable for a period of one year from the date of the Subscription Agreement with OCS of 19 July 2010.

36. Approval of fi nancial statements

The financial statements were approved and authorised for issue by the board of directors on 31 December 2010.


Class of Shares - Ordinary SharesVoting Rights - On a show of hands : 1 vote - On a poll : 1 vote for each ordinary share

ANALYSIS OF SHAREHOLDINGS Number of

ShareholdersNumber of

SharesRange of Shareholdings % %

1 - 999 377 5.64 180,224 0.02 1,000 - 10,000 1,033 15.45 7,177,582 0.76 10,001 - 1,000,000 5,218 78.07 398,640,997 42.43 1,000,001 and above 56 0.84 533,523,159 56.79

6,684 100.00 939,521,962 100.00

Shareholding Held in Hands of Public

As at 17 December 2010, the percentage of shareholdings held in the hands of the public was approximately 70.74% and Rule 723 of the Listing Manual is complied with.

TOP 20 SHAREHOLDERS LIST

S/No Name of ShareholderNumber of

Shares %

1 DMG & Partners Securities Pte Ltd 164,683,278 17.532 Chye Hin Hardware Pte Ltd 80,646,574 8.583 UOB Kay Hian Pte Ltd 30,496,012 3.254 HSBC (Singapore) Nominees Pte Ltd 25,388,832 2.705 Citibank Nominees Singapore Pte Ltd 23,768,463 2.536 Sia Ling Sing 21,453,333 2.287 Tan Ah Bee 19,553,954 2.088 OCBC Securities Private Ltd 17,239,223 1.839 Kim Eng Securities Pte. Ltd. 10,869,990 1.1610 Est of Tian Chye Heng, Deceased 10,729,509 1.1411 United Overseas Bank Nominees Pte Ltd 8,307,044 0.8812 DBS Nominees Pte Ltd 7,806,362 0.8313 Phillip Securities Pte Ltd 7,741,993 0.8214 CIMB Securities (S) Pte Ltd 6,884,885 0.7315 Tan Wai See 6,550,000 0.7016 Yap Xi Ming 5,710,000 0.6117 Yee Hang @ See Fann 5,089,000 0.5418 Lee Leng Loke 4,802,317 0.5119 Tan Lay Choon 4,501,000 0.4820 DBS Vickers Securities (S) Pte Ltd 4,488,351 0.48

466,710,120 49.66

Shareholdings Statistics as at 17 December 2010


Number of shares : 939,521,962Class of shares : Ordinary shareVoting rights : One vote per share

SUBSTANTIAL SHAREHOLDERS

Direct interests Deemed interestsNo. of shares % No. of shares %

Oriental Castle Sdn. Bhd. 163,850,000 17.44 – (1) –Chye Hin Hardware Pte. Ltd. 80,646,574 8.58 – –Goh Kian Sin – – 163,850,000 (2) 17.44 Hew Yuen Hin – – 163,850,000 (3) 17.44 Yap Xi Ming 5,751,554 0.61 80,646,574 (4) 8.58 Tan Kim Seng 3,300,088 0.35 80,646,574 (5) 8.58

Notes:

(1) Oriental Castle Sdn. Bhd. is entitled to subscribe for a further 153,000,000 ordinary shares (or such other number representing 14% of the enlarged share capital of the Company) pursuant to a call option which has not been exercised.

(2) Goh Kian Hin is deemed interested in the 163,850,000 shares registered in the name of Oriental Castle Sdn. Bhd. by virtue of Section 7 of the Companies Act, Cap. 50.

(3) Hew Yuen Hin is deemed interested in the 163,850,000 shares registered in the name of Oriental Castle Sdn. Bhd. by virtue of Section 7 of the Companies Act, Cap. 50.

(4) Yap Xi Ming is deemed interested in the 80,646,574 shares registered in the name of Chye Hin Hardware Pte. Ltd. by virtue of Section 7 of the Companies Act, Cap. 50.

(5) Tan Kim Seng is deemed interested in the 80,646,574 shares registered in the name of Chye Hin Hardware Pte. Ltd. by virtue of Section 7 of the Companies Act, Cap. 50.

Statistics ofSubtantial Shareholders as at 17 December 2010


Notice of Annual General Meeting

HG METAL MANUFACTURING LIMITED(Company Registration No. 198802660D) (Incorporated in the Republic of Singapore)

NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the Annual General Meeting of HG Metal Manufacturing Limited (“the Company”) will be held at 28 Jalan Buroh, Singapore 619484 on Friday, 28 January 2011 at 10.00 a.m. for the following purposes:

AS ORDINARY BUSINESS

1. To receive and adopt the Directors’ Report and the Audited Accounts of the Company and the Group for the year ended 30 September 2010 together with the Auditors’ Report thereon. (Resolution 1)

2. To re-elect the following Directors of the Company retiring pursuant to Articles 88 and 89 of the Articles of

Association of the Company: Mr Yap Xi Ming (Retiring under Article 88) (Resolution 2) Mr Goh Kian Sin (Retiring under Article 88) (Resolution 3) Mr Wong Kean Shyong (Kenn) (Retiring under Article 88) (Resolution 4) Mr Tan Chan Too (Retiring under Article 89) (Resolution 5)

[See Explanatory Note (i)]

3. To re-appoint the following directors of the Company retiring under Section 153(6) of the Companies Act, Chapter. 50, to hold offi ce from the date of this Annual General Meeting until the next Annual General Meeting of the Company.

Dr Tan Eng Liang (Resolution 6) Mr Gui Kim Young (Resolution 7)

[See Explanatory Note (ii)]

4. To approve the payment of Directors’ fees of S$163,750 for the year ended 30 September 2010 (previous year: S$126,333). (Resolution 8)

5. To re-appoint Ernst & Young LLP as the Auditors of the Company and to authorise the Directors of the Company to fi x their remuneration. (Resolution 9)

6. To transact any other ordinary business which may properly be transacted at an Annual General Meeting.

116



AS SPECIAL BUSINESS

To consider and if thought fi t, to pass the following resolutions as Ordinary Resolutions, with or without any modifi cations: 7. Authority to issue shares in the capital of the Company pursuant to Section 161 of the Companies Act, Cap.

50 and Rule 806 of the Listing Manual of the Singapore Exchange Securities Trading Limited (“SGX-ST”)

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:

(a) (i) issue shares in the Company (“shares”) whether by way of rights, bonus or o t h e r w i s e ; 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 fi t; 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,

(the “Share Issue Mandate”)

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 fi fty 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 SGX-ST for the purpose of determining the aggregate number of shares and Instruments that may be issued under sub-paragraphs (1) above, the percentage of issued shares and Instruments shall be based on the 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;

(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 consolidation or subdivision of shares;



(3) in exercising the Share Issue Mandate conferred by this Resolution, the Company shall comply with the provisions of the Listing Manual of the SGX-ST for the time being in force (unless such compliance has been waived by the SGX-ST) and the Articles of Association of the Company; and

(4) unless revoked or varied by the Company in a general meeting, the Share Issue Mandate 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 (iii)] (Resolution 10)

By Order of the Board

Foong Lee HengSecretarySingapore11 January 2011

Explanatory Notes:

(i) Mr Yap Xi Ming will, upon re-election as a Director of the Company, remain as Non-Executive Chairman, a member of the Nominating Committee and the Remuneration Committee, and will be considered non-independent.

Mr Goh Kian Sin will, upon re-election as a Director of the Company, remain as Managing Director and a member of the Nominating Committee, and will be considered non-independent.

Mr Wong Kean Shyong, Kenn will, upon re-election as a Director of the Company, remain as Non-Executive Non-Independent Director.

Mr Tan Chan Too will, upon re-election as a Director of the Company, remain as Executive Director.

(ii) The effect of the Ordinary Resolution 6 and 7 above, is to re-appoint the directors of the Company who are over 70 years of age.

Dr Tan Eng Liang will, upon re-election as a Director of the Company, remain as Chairman of the Audit Committee, a member of the Nominating Committee and the Remuneration Committee and will be considered independent.

Mr Gui Kim Young will, upon re-election as a Director of the Company, remain as a member of the Audit Committee and the Nominating Committee, and the Chairman of the Remuneration Committee and will be considered independent.

118



(iii) The Ordinary Resolution 10 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) other than on a pro-rata basis to shareholders in the capital of the Company.

For the purpose of 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 consolidation or subdivision of shares.

*Notes

1. A Member entitled to attend and vote at the Annual General Meeting (the “Meeting”) is entitled to appoint not more than two proxies 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 Offi ce of the Company at not less

than forty-eight (48) hours before the time appointed for holding the Meeting.


This page is intentionally left blank

HG METAL MANUFACTURING LIMITEDCompany Registration No. 198802660D(Incorporated In The Republic of Singapore)

PROXY FORM(Please see notes overleaf before completing this Form)

IMPORTANT:

1. For investors who have used their CPF monies to buy HG Metal Manufacturing Limited’s shares, this Report is forwarded to them at the request of the CPF Approved Nominees and is sent solely FOR INFORMATION ONLY.

2. This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them.

3. CPF investors who wish to attend the Meeting as an observer must submit their requests through their CPF Approved Nominees within the time frame specifi ed. If they also wish to vote, they must submit their voting instructions to the CPF Approved Nominees within the time frame specifi ed to enable them to vote on their behalf.

I/We, of

being a member/members of HG Metal Manufacturing Limited (the “Company”), hereby appoint:

Name NRIC/Passport No. Proportion of ShareholdingsNo. of Shares %

Address

and/or (delete as appropriate)

Name NRIC/Passport No. Proportion of ShareholdingsNo. 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 at 28 Jalan Buroh, Singapore 619484 on 28 January 2011 at 10.00 a.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 specifi c 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 Against1 Directors’ Report and Audited Accounts for the year ended 30 September 20102 Re-election of Mr Yap Xi Ming as a Director3 Re-election of Mr Goh Kian Sin as a Director4 Re-election of Mr Wong Kean Shyong (Kenn) as a Director5 Re-election of Mr Tan Chan Too as a Director6 Re-appointment of Dr Tan Eng Liang as a Director7 Re-appointment of Mr Mr Gui Kim Young as a Director8 Approval of Directors’ fees amounting to S$163,750/-9 Re-appointment of Ernst & Young LLP as Auditors10 Authority to issue shares and convertible securities pursuant to Section 161 of the

Companies Act, Chapter 50.

Dated this day of 2011

Total number of Shares in: No. of Shares

(a) CDP Register

Signature of Shareholder(s) (b) Register of Membersor, Common Seal of Corporate Shareholder *Delete where inapplicable

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 defi ned 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 specifi es 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 offi ce of the Company at 30 Jalan Buroh, Singapore 619486 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 offi cer 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 certifi ed 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 fi t to act as its representative at the Meeting, in accordance with Section 179 of the Companies Act, Chapter 50.

General:

The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible, or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specifi ed 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 certifi ed by The Central Depository (Pte) Limited to the Company.

HG METAL MANUFACTURING LIMITED | Annual Report 2010

HG Metal Manufacturing Limited30 Jalan Buroh Buroh Singapore 619486

Tel: 6268 2828 • Fax: 6268 3838www.hgmetal.com • Email: [email protected]

HG

ME

TAL M

AN

UFA

CTU

RIN

G LIM

ITED

AN

NU

AL R

EP

OR

T 20

10

REVISION TO THE NOTICE OF ANNUAL GENERAL MEETING

The Company wishes to inform that the attached Notice of Annual General Meeting (“Revised Notice of AGM”) and the Proxy Forms (“Revised Proxy Form”) will supersede the Notice of Annual General Meeting and Proxy Form as set out from pages 115 to 122 of the Annual Report for the financial year ended 30 September 2010 (“Annual Report”). Shareholders are advised to refer to the attached Revised Notice of AGM and the Revised Proxy Form when reading the Annual Report. By Order of the Board Foong Lee Heng Company Secretary 12 January 2011

2

HG METAL MANUFACTURING LIMITED (Incorporated in the Republic of Singapore) (Company Registration No. 198802660D)

Registered Office: 30 Jalan Buroh

Singapore 619486

NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the Annual General Meeting of HG Metal Manufacturing Limited (“the Company”) will be held at 28 Jalan Buroh, Singapore 619484 on Friday, 28 January 2011 at 10.00 a.m. for the following purposes: AS ORDINARY BUSINESS 1. To receive and adopt the Directors’ Report and the Audited Accounts of the

Company and the Group for the year ended 30 September 2010 together with the Auditors’ Report thereon.

(Resolution 1)

2. To re-elect the following Directors of the Company retiring pursuant to Articles 88

and 89 of the Articles of Association of the Company: Mr Yap Xi Ming (Retiring under Article 88) (Resolution 2) Mr Tan Chan Too (Retiring under Article 89) (Resolution 3)

[See Explanatory Note (i)]

3. To re-appoint the following directors of the Company retiring under Section 153(6) of the Companies Act, Chapter. 50, to hold office from the date of this Annual General Meeting until the next Annual General Meeting of the Company.

Dr Tan Eng Liang (Resolution 4)

Mr Gui Kim Young (Resolution 5)

[See Explanatory Note (ii)]

4. To approve the payment of Directors’ fees of S$163,750 for the year ended

30 September 2010 (previous year: S$126,333). (Resolution 6) 5. To re-appoint Ernst & Young LLP as the Auditors of the Company and to authorise

the Directors of the Company to fix their remuneration. (Resolution 7)

6. To transact any other ordinary business which may properly be transacted at an Annual General Meeting.

3

AS SPECIAL BUSINESS To consider and if thought fit, to pass the following resolutions as Ordinary Resolutions, with or without any modifications: 7. Authority to issue shares in the capital of the Company pursuant to Section

161 of the Companies Act, Cap. 50 and Rule 806 of the Listing Manual of the

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

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: (a) (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,

(the “Share Issue Mandate”) 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 SGX-ST 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 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; (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 consolidation or subdivision of shares;

4

(3) in exercising the Share Issue Mandate conferred by this Resolution, the

Company shall comply with the provisions of the Listing Manual of the SGX-ST for the time being in force (unless such compliance has been waived by the SGX-ST) and the Articles of Association of the Company; and

(4) unless revoked or varied by the Company in a general meeting, the Share Issue

Mandate 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 (iii)]

(Resolution 8)

By Order of the Board Foong Lee Heng Secretary Singapore 12 January 2011

Explanatory Notes:

(i) Mr Yap Xi Ming will, upon re-election as a Director of the Company, remain as Non-Executive Chairman, a member of the Nominating Committee and the Remuneration Committee, and will be considered non-independent. Mr Tan Chan Too will, upon re-election as a Director of the Company, remain as Executive Director.

(ii) The effect of the Ordinary Resolution 4 and 5 above, is to re-appoint the directors of

the Company who are over 70 years of age.

Dr Tan Eng Liang will, upon re-election as a Director of the Company, remain as Chairman of the Audit Committee, a member of the Nominating Committee and the Remuneration Committee and will be considered independent.

Mr Gui Kim Young will, upon re-election as a Director of the Company, remain as a member of the Audit Committee and the Nominating Committee, and the Chairman of the Remuneration Committee and will be considered independent.

5

(iii) The Ordinary Resolution 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) other than on a pro-rata basis to shareholders in the capital of the Company. For the purpose of 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 consolidation or subdivision of shares.

*Notes

1. A Member entitled to attend and vote at the Annual General Meeting (the “Meeting”) is entitled to appoint not more than two proxies 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 not less than forty-eight (48) hours before the time appointed for holding the Meeting.

6

HG METAL MANUFACTURING LIMITED

Company Registration No. 198802660D

(Incorporated In the Republic of Singapore) PROXY FORM

(Please see notes overleaf before completing this Form)

I/We,

of

being a member/members of HG Metal Manufacturing Limited (the “Company”), hereby appoint:

Proportion of Shareholdings Name

NRIC/Passport

No. No. of Shares %

Address

and/or (delete as appropriate)

Proportion of Shareholdings Name

NRIC/Passport No. 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 at 28 Jalan Buroh, Singapore 619484 on 28 January 2011 at 10.00 a.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.

IMPORTANT:

1. For investors who have used their CPF monies to buy HG Metal Manufacturing Limited’s shares, this Report is forwarded to them

at the request of the CPF Approved Nominees and is sent solely FOR INFORMATION ONLY.

2. This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them.

7

(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 30 September 2010

2 Re-election of Mr Yap Xi Ming as a Director

3 Re-election of Mr Tan Chan Too as a Director

4 Re-appointment of Dr Tan Eng Liang as a Director

5 Re-appointment of Mr Mr Gui Kim Young as a Director

6 Approval of Directors’ fees amounting to S$163,750/-

7 Re-appointment of Ernst & Young LLP as Auditors

8 Authority to issue shares and convertible securities pursuant to Section 161 of the Companies Act, Chapter 50.

Dated this day of 2011

Total number of Shares in:

No. of Shares

(a) CDP Register Signature of Shareholder(s) (b) Register of

Members

or, Common Seal of Corporate

Shareholder

*Delete where inapplicable

8

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 30 Jalan Buroh, Singapore 619486 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.

General: The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible, or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of Shares entered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the member, being the appointor, is not shown to have Shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding the Meeting, as certified by The Central Depository (Pte) Limited to the Company.

hg metal manufacturing limited

Documents