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Hoe Leong Corporation Ltd. Leong AR07.pdf · HOE LEONG CORPORATION LTD. CORPORATE PROFILE I CORPORATE INFORMATION Hoe Leong Corporation Ltd. was incorporated in Singapore on 18 November

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Page 1: Hoe Leong Corporation Ltd. Leong AR07.pdf · HOE LEONG CORPORATION LTD. CORPORATE PROFILE I CORPORATE INFORMATION Hoe Leong Corporation Ltd. was incorporated in Singapore on 18 November

Hoe Leong Corporation Ltd.6 Clementi Loop • Singapore 129814 • Tel : +65 6463 8666

• Fax : +65 6564 7252 • Registration No: 199408433W

www.hoeleong.com

Hoe Leong Corporation Ltd.

HL•COVER(03.03).ai 4/1/08 11:51:41 PMHL•COVER(03.03).ai 4/1/08 11:51:41 PM

Page 2: Hoe Leong Corporation Ltd. Leong AR07.pdf · HOE LEONG CORPORATION LTD. CORPORATE PROFILE I CORPORATE INFORMATION Hoe Leong Corporation Ltd. was incorporated in Singapore on 18 November

Mission StatementWe are committed in being the leader in trading, distributing as well as the designing and manufacturing of an extensive range of spare parts for heavy equipment and industrial machinery so as to meet the various demands and achieve absolute precision in the market place.

Page 3: Hoe Leong Corporation Ltd. Leong AR07.pdf · HOE LEONG CORPORATION LTD. CORPORATE PROFILE I CORPORATE INFORMATION Hoe Leong Corporation Ltd. was incorporated in Singapore on 18 November

HOE LEONG CORPORATION LTD.

CORPORATE PROFILE I CORPORATE INFORMATION

Hoe Leong Corporation Ltd. was incorporated in Singapore on 18 November 1994. It was successfully admitted to the Offi cial List of the Singapore Exchange Securities Trading Limited (“SGX-ST”) on 5 December 2005.

Its principal business activities are as follows:-• Trading and distributing an extensive range of equipment parts for both heavy equipment and industry machinery including brands such as Cargo Winch, Caterpillar, Cummins, Fiat Allis, Hitachi, Hyster, Kato, Kobelco, Komatsu, Mitsubishi, P&H and Sumitomo.

• Design and manufacture of equipment parts for both heavy equipment and industrial machinery under its own in-house brand names, “KBJ”, “OEM”, “ROSSI” and “TMI”. Initially, it out-sourced the manufacture of its products to overseas contract manufacturers. Since 2004, it has also commenced manufacturing certain equipment parts through its PRC subsidiaries.

Hoe Leong sells directly to end-users as well as through distributors in Singapore and overseas markets including Indonesia, Malaysia, the People’s Republic of China and the Emerging Markets (which includes India and the Middle East). End-users of its products are generally users of heavy equipment and industrial machinery in the agriculture, building and infrastructure construction, forestry, marine, mining and plantation industries.

Currently, Hoe Leong serves over 1,200 customers. It carries about 20,000 types of equipment parts in 25 categories for over 100 brands of products.

Page 4: Hoe Leong Corporation Ltd. Leong AR07.pdf · HOE LEONG CORPORATION LTD. CORPORATE PROFILE I CORPORATE INFORMATION Hoe Leong Corporation Ltd. was incorporated in Singapore on 18 November

02 I 03

BOARD OF DIRECTORSExecutive:James Kuah Geok Lin (Chairman and CEO)Paul Kuah Geok Khim (Executive Director)Peter Kuah Geok Koon (Executive Director)Quah Yoke Hwee (Executive Director)

Non-Executive:Ang Mong Seng (Independent Director)Lim Kok Hoong (Independent Director)Peter Boo Song Heng (Independent Director)

AUDIT COMMITTEELim Kok Hoong (Chairman)Ang Mong SengPeter Boo Song Heng

NOMINATING COMMITTEEPeter Boo Song Heng (Chairman)Ang Mong SengJames Kuah Geok Lin

REMUNERATION COMMITTEEAng Mong Seng (Chairman)Lim Kok HoongPeter Boo Song Heng

COMPANY SECRETARYEileen Koh

REGISTERED OFFICE6 Clementi Loop, Singapore 129814Tel : (65) 6463-8666 Fax : (65) 6564-7252Website : http://www.hoeleong.com

SHARE REGISTRARTricor Barbinder Share Registration Services(A division of Tricor Singapore Pte. Ltd.)8 Cross Street, #11-00 PWC BuildingSingapore 048424

AUDITORSKPMG16 Raffl es Quay, #22-00 Hong Leong BuildingSingapore 048581

Audit Partner-in-chargePhuoc TranPartner-in-charge since fi nancial year ended31 December 2004

PRINCIPAL BANKERSUnited Overseas Bank LimitedOversea-Chinese Banking Corporation Limited

Registration No. 199408433W

Page 5: Hoe Leong Corporation Ltd. Leong AR07.pdf · HOE LEONG CORPORATION LTD. CORPORATE PROFILE I CORPORATE INFORMATION Hoe Leong Corporation Ltd. was incorporated in Singapore on 18 November

HOE LEONG CORPORATION LTD.

CORPORATE STRUCTURE I FINANCIAL HIGHLIGHTS

HOE LEONG CORPORATION LTD.SINGAPORE

99%PT TRACKSPARE

(INDONESIA) 83.2%SHENYANG MILEQUIP

INDUSTRY CO., LTD(CHINA)

100% HO LEONG TRACTORSSDN. BHD.

(MALAYSIA)

100% JILIN KANTO BUHIN

CONSTRUCTION MACHINERY

MANUFACTURINGCO., LTD. (CHINA)

100% KUNSHAN

KANTO BUHINMANUFACTURING

CO., LTD.(CHINA)

100% HOE LEONG MACHINERY

(H.K.) LIMITED (HONG KONG)

71.4%TRACKSPARES (AUST) PTY. LTD.

(AUSTRALIA)

100% QUANZHOU KANTO BUHIN

MACHINERY MANUFACTURING CO., LTD (CHINA)

Our BrandsWe can readily provide assistance to customers with their requirements attributed by our extensive experience in the industry.

Our large and varied inventories and our regional sales network are benefi cial to our customers as they have easy accessibility to replacement parts, thereby shortening their downtime.

TMI MACCHINETRATTORI

Page 6: Hoe Leong Corporation Ltd. Leong AR07.pdf · HOE LEONG CORPORATION LTD. CORPORATE PROFILE I CORPORATE INFORMATION Hoe Leong Corporation Ltd. was incorporated in Singapore on 18 November

04 I 05

Revenue by Geographical segments ($’000)FY 2004 FY 2005 FY 2006 FY 2007

Singapore 3,468 3,346 2,585 2,641Malaysia 17,212 17,352 20,846 20,386Indonesia 18,716 17,845 20,823 20,142PRC and Hong Kong 7,984 7,173 7,188 7,041Emerging Markets[1] 6,420 7,313 9,162 10,158Others[2] 2,921 3,012 2,905 4,835Grand Total 56,721 56,041 63,509 65,203

1. Emerging Markets refer to India, Middle East, Pakistan and Russia.2. Others include Australia, Korea, Japan, Myanmar, Papua New Guinea, New Zealand, South Africa, Th ailand and Vietnam.

PRC and Hong Kong 11% Emerging Markets[1] 16%

Revenue By Geographical Segments In FY2007

Revenue by Business Activities ($ million) Segment results by Business Activities ($ million)

Net Profi t and Margin7

6

5

4

3

2

1

0

12.0%

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

0

10

20

30

40

50

60

70

80

0

1

2

3

4

5

6

7

8

FY2004 FY2005 FY2006 FY2004 FY2005 FY2006

FY2004 FY2005 FY2006

Net Profi t Net Margin

($ m

illio

n)

Others[2] 7% Singapore 4%

Indonesia 31% Malaysia 31%

FY2007 FY2007

FY2007

NAV Per Ordinary Share (in cents)30

25

20

15

10

5

0FY2004 FY2005 FY2006 FY2007

26.4

23.2 23.5

18.7

9.3

10.8

6.4

4.6

5.3 6.1 4.1 3.0

39.0

15.6 21.9 25.017.7

40.4

41.6 40.2

2.7

4.1

2.0

3.6

2.7 2.7 3.3 0.6

Trading and Distribution

Design and Manufacture

Trading and Distribution

Design and Manufacture

Page 7: Hoe Leong Corporation Ltd. Leong AR07.pdf · HOE LEONG CORPORATION LTD. CORPORATE PROFILE I CORPORATE INFORMATION Hoe Leong Corporation Ltd. was incorporated in Singapore on 18 November

HOE LEONG CORPORATION LTD.

CHAIRMANʼS STATEMENT

Dear Shareholders,

On behalf of the Board of Directors, I am pleased to present our Annual Report for the fi nancial year ended 31 December 2007 (“FY2007”).

We have made much progress for the year under review. One of the key areas of focus in FY2007 was the rationalisation of our China operations. During the period, we have seen increased orders for our own in-house brands of products, indicating increased acceptance from our customers. For fi nancial year ending 31 December 2008 (“FY2008”) and beyond, we intend to further our marketing eff orts for our own brands and we expect the percentage revenue contribution from this segment to continue to increase.

In addition, we are also expanding our geographical footprint through strategic partnerships. In early 2007, we have entered into a joint venture to enter the Australian market. Th e performance of this venture has been very encouraging and we have intentions to scale up our Australian operations in the near future. In addition to Australia, we are also assessing possible ventures into other markets such as the Middle East and India where we believe there are huge demand for our products.

Further to organic expansion, we are also looking at strategic investments or acquisitions that can accelerate our growth with the aim of enhancing the shareholders’ value at a faster pace. Th ere are many opportunities out there but we remain prudent about the risk exposure of such investments. However, we are pleased to share with you that, as at the date of printing of this Annual Report; we have successfully diversifi ed into the Oil & Gas sector through a joint venture to own and charter out a specialist barge.

Foundation for GrowthFY2007 had been a challenging year in terms of our fi nancial performance as we continue to lay the foundation for our future growth. Our turnover rose by 2.7% in FY2007 to $65.2 million as we received more orders from our Design and Manufacture segment. Gross profi t decline by 11.8% to $16.3 million in FY2007 as our China operations were aff ected by the rationalisation eff orts during this period.

We continue to carry a wide range of products as refl ected by the increase in our inventory level; from $35.5 million for the fi nancial year ended 31 December 2006 (“FY2006”) to $40.6 million in FY2007. At the same time, we are also actively expanding our network of over 1,200 customers from diverse industries. We will also continue to work closely with our principals and maintain our distributorships with well-known international names while developing our own brands for certain specifi c markets and products.

Expansion of our geographical presence will continue in strategic locations such as Australia, the Middle East and India where we believe there are strong demands. Currently, our key markets are still Malaysia and Indonesia which account for 31.3% and 30.9% of the revenue respectively.

Looking Forward Going forward, we recognize that any potential slowdown in the global economy may aff ect the Group’s operations. However, given that the emerging countries such as the Middle East and China are still spending top dollars on their infrastructural needs; at the same time, commodities prices have been strong and as this is expected to continue for the foreseeable future, we expect our business to remain robust.

Page 8: Hoe Leong Corporation Ltd. Leong AR07.pdf · HOE LEONG CORPORATION LTD. CORPORATE PROFILE I CORPORATE INFORMATION Hoe Leong Corporation Ltd. was incorporated in Singapore on 18 November

06 I 07

Improving our operations in China will be one of our key priorities for the coming year as we look to expand our customer network beyond the current base. We have received encouraging feedback from our customers since the introduction of our in-house brands and witnessed some switch-over to our range of in-house brands of equipment parts. In FY2008, we expect the revenue contribution from our Design and Manufacture segment to grow steadily.

While we recognize that our current business is still attractive, it is important to look beyond our traditional business. To further enhance our shareholders’ value, we are actively looking at strategic investments that have a faster rate of return than our current business. Although profi tability is one consideration, the management is also taking a prudent approach to ensure that the risk exposure is manageable. In the long term, our intention is to build up other business streams that have better visibility, which can help to diversify our risks and supplement our core business.

For instance, our recent diversifi cation into the Oil & Gas sector demonstrates our investment philosophy. We adopted a two-pronged strategy to mitigate our risk exposure. First, our partner has more than 25 years of experience in the business of chartering of vessels and supply of equipment to companies in the Oil & Gas sector. Second, we are limiting our exposure by maintaining the joint venture company as an asset owning and chartering company, akin to a shipping trust.

I am also happy to share with you that we have secured our fi rst bareboat charter agreement earlier this year (2008) based on a daily charter rate of US$8,000 for a minimal period of two years. In terms of returns, our assessment shows that we can expect return on equity and return on assets of approximately 45% and 15% respectively.

Going forward, we remain open to investment opportunities in other attractive sectors.

In AppreciationAt this juncture, I would like to take this opportunity to express our gratitude to all our professional parties, staff , business partners and our shareholders, for their assistance and support through the years.

As such, I am pleased to announce that, subject to shareholders’ approval, the Board of Directors is recommending a fi nal dividend of 0.5 Singapore cents per share for the fi nancial year ended 31 December 2007.

We hope that you will continue to support us as we work even harder to bring the company and its business to greater heights in FY2008 and beyond.

Kuah Geok LinChairman and CEO

While we recognize that

our current business

is still attractive, it

is important to look

beyond our traditional

business.

Page 9: Hoe Leong Corporation Ltd. Leong AR07.pdf · HOE LEONG CORPORATION LTD. CORPORATE PROFILE I CORPORATE INFORMATION Hoe Leong Corporation Ltd. was incorporated in Singapore on 18 November

HOE LEONG CORPORATION LTD.

OPERATION REVIEW

REVENUETh e Group’s revenue increased by approximately $1.7 million or 2.7% from $63.5 million in FY2006 to $65.2 million in FY2007. Th is was mainly due to the increase in revenue contribution from the Design and Manufacture segment.

Design and Manufacture SegmentRevenue from the Design and Manufacture segment increased approximately $3.1 million or 14.0% to $25.0 million in FY2007 from $21.9 million in FY2006. Th e growth was mainly driven by stronger market demand for our products in Malaysia, India, Singapore and Indonesia.

Trading and Distribution SegmentRevenue from our Trading and Distribution segment decreased approximately $1.4 million or 3.3% to $40.2 million in FY2007 from $41.6 million in FY2006. Th e Group reported lower revenue of approximately $3.2 million from Malaysia, Indonesia and the Middle East. Th is is attributable to customers switching over to our range of in-house brands of products off ered under

our Design and Manufacture segment from products off ered under the Trading and Distribution segment.

GEOGRAPHICAL GROWTHFor the year under review, revenue contribution from Emerging Markets and other regions increased by approximately $1.0 million and $1.9 million respectively. In FY2007, we have strategically entered the Australian market via a joint venture. We are encouraged by the performance of this market thus far and have further intentions to expand our presence in Australia. Even though this was the fi rst year of its operations, the joint venture has registered a positive contribution to our net profi t.

GROSS PROFITGross profi t declined by $2.2 million or 11.8% from $18.5 million in FY2006 to $16.3 million in FY2007. Gross profi t margin decreased slightly by four percentage points from 29% in FY2006 to 25% in FY2007. Th is is mainly due to increase in production overheads as we rationalised our China operations as well as an increase in raw material costs such as steel prices.

Page 10: Hoe Leong Corporation Ltd. Leong AR07.pdf · HOE LEONG CORPORATION LTD. CORPORATE PROFILE I CORPORATE INFORMATION Hoe Leong Corporation Ltd. was incorporated in Singapore on 18 November

08 I 09

EXPENSESDistribution expenses grew by approximately $0.5 million or 15.2% from $3.4 million in FY2006 to $3.9 million in FY2007 as we see higher sales turnover. Th ere is also a general increase in the cost of operation for the current year under review. Other expenses decreased by approximately $1.7 million or 37.5% from $4.4 million in FY2006 to $2.7 million in FY2007 mainly attributable to the write-back of excess allowance for obsolete inventories. BALANCE SHEETTrade and other receivables increased by approximately $2.4 million from $23.8 million as at 31 December 2006 to $26.2 million as at 31 December 2007. Th is was in tandem with higher revenue achieved in FY2007 as well as more attractive credit terms being granted to selected customers in our traditional markets and emerging markets.

CASH FLOW STATEMENTCash and cash equivalents (net of bank overdraft) increased by approximately $0.9 million from $2.3 million as at 31 December 2006 to $3.2 million as at 31 December 2007. Th is is attributable to (i) surplus of net proceeds from the issue of new ordinary shares over dividend paid out on 6 June 2007 of approximately $2.2 million which has been used by the Company for general working capital purposes; and (ii) fi nancing received from our suppliers.

ProspectsGoing forward, we will continue to focus on maintaining an extensive range of products. At the same time, we will be focusing on establishing our own branded products. With increased acceptance, we can expect increased orders and therefore increased activities for our China operations.

In addition to our traditional business segment, we will also continue to explore diversifi cation opportunities that will help to accelerate the appreciation of our shareholders’ value. We have since identifi ed the Oil & Gas sector as an attractive area to participate given the global demand for energy and rising energy prices. We therefore expect that the industry will continue to be attractive for the years to come.

Page 11: Hoe Leong Corporation Ltd. Leong AR07.pdf · HOE LEONG CORPORATION LTD. CORPORATE PROFILE I CORPORATE INFORMATION Hoe Leong Corporation Ltd. was incorporated in Singapore on 18 November

From left to right:, Mr Lim Kok Hoong, Mr Ang Mong Seng, Mr Quah Yoke Hwee, Mr James Kuah, Dr Peter Kuah, Mr Paul Kuah, Mr Peter Boo.

HOE LEONG CORPORATION LTD.

BOARD OF DIRECTORS

Mr James Kuah Geok Lin, Chairman and CEOMr James Kuah Geok Lin is our Chairman and CEO. He has been one of our Executive Directors since 18 November 1994. He was last re-elected a Director on 25 July 2003. He started as an architect in 1974 with the Housing Development Board. In 1978, Mr James Kuah joined the Company as a Director in charge of operations and played a key role in Company’s regional drive into Indonesia and Malaysia. Under his leadership, the Company was ranked 24th in the 2000 Enterprise 50 Award organized by Andersen Consulting and Th e Business Times with support from the Economic Development Board. His other advisory positions include that of Vice-President of the Singapore Metal and Machinery Association, Chairman of Nanyang Kuah Si Association, Vice-Chairman of the Singapore Ann Kway Association, Corporate member of the Singapore Institute of Architects and Vice-Chairman of the International Trade Committee of the Singapore Chinese Chamber of Commerce & Industry. He holds a Bachelor degree in Architecture from the University of Singapore.

Mr Paul Kuah Geok Khim, Executive DirectorMr Paul Kuah Geok Khim has been our Sales and Marketing Director (Overseas) since 22 December 1994 and was last re-elected a Director on 18 April 2007. He began his career with our Group in 1979. Prior to his present position, he was in charge of warehousing and inventory control, gaining valuable experience

in this fi eld. Presently, as a Sales and Marketing Director, he oversees all our branches operations and major export markets. With a team of business development personnel under him, he ensures that every business opportunity in the emerging market is well tapped.

Dr Peter Kuah Geok Koon, Executive DirectorDr Peter Kuah Geok Koon is our Manufacturing and Production Director in charge of the manufacturing and production operations in China. He joined the Board on 24 July 2001 and was last re-elected a Director on 18 April 2007. Since 1998, he has also been in charge of our Hong Kong subsidiary, Hoe Leong Machinery (H.K.) Limited where he is involved in its daily running, including sales development in Hong Kong and China. Dr Kuah joined our Company when it was established in 1994. Prior to joining us, he worked as a principal engineer in Deleuw Cather and Company, a USA engineering company. He has published more than ten papers in professional journals. In 1990, he was conferred a guest professorship by Chongqing Jiaotong University and has also been previously engaged by United Nations Development Plan to lecture in transportation in various universities in China. Dr Kuah was a German scholar and obtained a Diplom-Ing. (FH) degree in civil engineering from Fachhochschule fuer Technik, Stuttgart in 1979. He also obtained a Master degree in Civil Engineering from the University of Michigan, Ann Arbor, USA, in 1981 and a doctorate degree in Civil Engineering from the University of Maryland, College Park, USA in 1986.

Page 12: Hoe Leong Corporation Ltd. Leong AR07.pdf · HOE LEONG CORPORATION LTD. CORPORATE PROFILE I CORPORATE INFORMATION Hoe Leong Corporation Ltd. was incorporated in Singapore on 18 November

10 I11

Mr Quah Yoke Hwee, Executive DirectorMr Quah Yoke Hwee is our Sales and Marketing Director (Singapore). He joined the Board on 18 November 1994 and was appointed the Managing Director of the Company since 15 January 1996. He is responsible for overseeing the Company’s daily trading and distribution operations in Singapore and the after sales and front offi ce services. Mr Quah has more than 30 years of experience in the equipment parts trading and distribution business. He is a member of the River Valley High School Advisory Committee. He holds a H.S.C. “A” level certifi cate.

Mr Ang Mong Seng, Independent DirectorMr Ang Mong Seng was appointed as our Independent Director on 29 September 2005. Mr Ang is a Member of Parliament for Hong Kah GRC (Bukit Gombak). He is the Chief Operating Offi cer of EM Services Pte Ltd. He is also the Chairman of Hong Kah Town Council and Vice Chairman of South West Community Development Council. Mr Ang has 30 years of experience in Estate Management. Mr Ang is also an Independent Director of United Fiber System Ltd, Ecowise Holdings Ltd, AnnAik Ltd., Vicplas International Ltd and Chip Eng Seng Corporation Ltd. Mr Ang obtained a Bachelor of Arts degree from Nanyang University in 1973.

Mr Lim Kok Hoong, Independent DirectorMr Lim Kok Hoong was appointed as our Independent Director on 29 September 2005. Mr Lim has more than 32 years of audit experience. He has been a Managing Partner at Arthur Andersen Singapore till June 2002. In July 2002, he joined Ernst & Young Singapore as a Senior Partner and retired in June 2003. Mr Lim has extensive business experience especially in Singapore, Malaysia, Indonesia, Th ailand, the Philippines and Vietnam. He is currently an Audit Committee member of A*STAR and a board member of Singapore Tourism Board, where he is also the Chairman of their Audit Committee. Mr Lim is the Chairman of the Board of Directors of Parkway Trust Management Limited and also a board member of Genting International Public Limited Company, where he is the Chairman of their Audit Committee. He holds a Bachelor of Commerce degree from the University of Western Australia and is a member of the Institute of Chartered Accountants in Australia and the Institute of Certifi ed Public Accountants of Singapore.

Mr Peter Boo Song Heng, Independent DirectorMr Peter Boo Song Heng was appointed as our Independent Director on 29 September 2005. Mr Boo founded Material Handling Engineering Pte Ltd in 1975 and led the company to its listing on the SESDAQ in 1989. Th e company subsequently changed its name to MHE Holdings Ltd. In May 2000, he divested off his controlling interest in MHE Holdings Ltd and retired from the company. Since then, he has been sitting on the board of numerous companies in Singapore as well as overseas. He is currently a board member of Compact Metal Industries Ltd. and NTUC Healthcare Co-operative Ltd, where he is the Chairman of their Audit Committee. Mr Boo is also a board member and Treasurer of Bizlink Centre Singapore Ltd and a committee member of the Yellow Ribbon Fund. He holds a Diploma in Mechanical Engineering from Singapore Polytechnic.

Page 13: Hoe Leong Corporation Ltd. Leong AR07.pdf · HOE LEONG CORPORATION LTD. CORPORATE PROFILE I CORPORATE INFORMATION Hoe Leong Corporation Ltd. was incorporated in Singapore on 18 November

HOE LEONG CORPORATION LTD.

KEY MANAGEMENT TEAM I FINANCIAL STATEMENTS

Mdm Kuah Geok Khim, Operations ManagerMdm Kuah Geok Khim is our Operations Manager. She joined our Company in 1975 and is responsible for the administrative functions of the Group including general offi ce administration, the maintenance and procurement of offi ce equipment and computerisation. She is also in charge of our inventory management and management information system. In addition, she is responsible for our sales and purchases, shipping, import and export functions. She has completed secondary school education in Singapore.

Mdm Lim Gek Ser, Human Resource ManagerMdm Lim Gek Ser joined the Company in 2004 as a Human Resource Manager and is responsible for the Group Human Resource and administration including compensation and benefi ts, expatriate administration, human resource planning and development, overall employee relations and logistic functions of the Company. Prior to joining our Company, Ms Lim worked in both the service and manufacturing industries for more than 10 years in the same trade. She holds a Bachelor of Human Resource Management degree from Curtin University.

Mr Lim Lian Tuan, Director of Sales and Marketing,Ho Leong Tractors Sdn. Bhd.Mr Lim Lian Tuan is the Sales and Marketing Director of our wholly-owned subsidiary, Ho Leong Tractors Sdn Bhd (“HL Tractors”). He joined HL Tractors in 1987. He oversees our Group’s Malaysian operations. From 1984 to 1986, he worked in Ho Leong Machinery Sdn. Bhd. as a sales executive for the Malaysian operations. Prior to that Mr Lim worked as a sales executive with TAS Berhad and Trackspare Sdn Bhd, both of whom were distributors of equipment parts for both heavy equipment and industrial machinery. He holds the equivalent of a GCE ‘O’ level certifi cate.

Mr Quah Seng Kee, Business Development ManagerMr Quah Seng Kee is our Business Development Manager. He is in charge of developing our overseas markets. He worked at Pacaar International Inc, a company specialising in heavy duty truck sales as its District Manager and later joined Pactruss Corporation and subsequently ITS Marketing Pte Ltd (both companies dealing in heavy duty truck parts) as Managing Director. Prior to joining us in 2000, Mr Quah held the position of Regional Manager for PAI Industries Inc, also a dealer of heavy duty truck parts. Mr Quah graduated with a Diploma in Marketing from the Chartered Institute of Marketing in 1986 and obtained a Master of Business Administration degree from the University of Hull in 1993.

Mr Tan Wee Boon, Financial ControllerMr. Tan joined the Company in July 2007. He oversees the overall fi nancial and accounting functions of the Group. He holds a professional qualifi cation from the Association of Chartered Certifi ed Accountants (ACCA) of United Kingdom. He is a Fellow of ACCA of the United Kingdom and a member of Institute of Certifi ed Public Accountants of Singapore. He also holds a Bachelor degree in Business Administration from the National University of Singapore majoring in Finance.

Page 14: Hoe Leong Corporation Ltd. Leong AR07.pdf · HOE LEONG CORPORATION LTD. CORPORATE PROFILE I CORPORATE INFORMATION Hoe Leong Corporation Ltd. was incorporated in Singapore on 18 November

12 I 13

Financial Statements 14 Corporate Governance Report 27 Directors’ Report

33 Statement by Directors 34 Independent Auditors’ Report

36 Balance Sheets 37 Consolidated Income Statement

38 Consolidated Statement of Changes in Equity

39 Consolidated Cash Flow Statement 40 Notes to the Financial Statements

79 Supplementary Information 80 Shareholding Statistics

83 Notice of Annual General Meeting Proxy Form

Page 15: Hoe Leong Corporation Ltd. Leong AR07.pdf · HOE LEONG CORPORATION LTD. CORPORATE PROFILE I CORPORATE INFORMATION Hoe Leong Corporation Ltd. was incorporated in Singapore on 18 November

ANNUAL REPORT 2007 I 14

HOE LEONG CORPORATION LTD.

The Board of Directors (the “Board”) is committed to ensure high standards of corporate governanceto protect the interests of shareholders at the same time to enhance long term shareholders’value through corporate performance and accountability. The Board observes and adheres to theprinciples and guidelines set out in the Code of Corporate Governance 2005 (the “Code”). Wherethere are deviations from the Code, appropriate explanations are provided.

A. BOARD MATTERS

The Board’s Conduct of its Affairs

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

The Board is entrusted with the responsibility of the overall management of the company andtheir main duties are to:–

(a) provide entrepreneurial leadership, set strategic aims, and ensure that the necessary financialand human resources are in place for the company to meet its objective;

(b) approve board policies, strategic plans, and financial objectives of the Group and monitorthe performance of Management;

(c) approve annual budgets, funding, material investment and divestment proposals;

(d) approve half year and full year results and announcements and annual report;

(e) ensure an adequate system of internal controls and compliance with financial reportingrequirements;

(f) review the financial performance of the Group, proposal of dividends and review interestedperson transactions;

(g) approve the nomination of directors and appointment of key personnel; and

(h) assume responsibility for corporate governance.

To facilitate effective management, certain functions have been delegated by the Board to variousBoard Committees. The Board Committees operate under clearly defined terms of reference. TheChairman of the respective Committees will report to the Board on the outcome of the Committeemeetings.

Corporate Governance Report

Page 16: Hoe Leong Corporation Ltd. Leong AR07.pdf · HOE LEONG CORPORATION LTD. CORPORATE PROFILE I CORPORATE INFORMATION Hoe Leong Corporation Ltd. was incorporated in Singapore on 18 November

I 15

The Board conducts regular scheduled meetings during the year. Ad-hoc meetings are convenedwhen circumstances require. Article 106 of the Company’s Articles of Association permits meetingsof the Directors to be conducted by means of telephone conference or other methods ofsimultaneous communication by electronic or telegraphic means.

A record of the Directors’ attendances at Board and Board Committee meetings during the financialyear ended 31 December 2007 is disclosed as follows:

Audit Nominating RemunerationName of Director Board Committee Committee Committee

No. of No. of No. of No. ofmeetings Attendance meetings Attendance meetings Attendance meetings Attendance

James Kuah Geok Lin 2 2 – – 1 1 – –

Paul Kuah Geok Khim 2 2 – – – – – –

Peter Kuah Geok Koon 2 2 – – – – – –

Quah Yoke Hwee 2 2 – – – – – –

Ang Mong Seng 2 2 2 2 1 1 1 1

Lim Kok Hoong 2 2 2 2 – – 1 1

Peter Boo Song Heng 2 2 2 2 1 1 1 1

The Directors come from diverse backgrounds and possess varied expertise in audit, business,finance, industry and management fields. At meetings and as and when necessary, the Directorsare provided with regular updates on changes in the relevant laws and regulations to enablethem to make well-informed decisions. Where possible and when opportunity arises, the Directorswill be invited to locations within the Group’s operating businesses to enable them to obtain abetter perspective of the business and enhance their understanding of the Group’s operations.The Company will consider formulating training programmes, if the need arises.

Board Composition and Guidance

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

The Board comprises seven directors, three of whom are independent non-executive directors.

More than one third of the Board is independent. The strong independent element on the Boardensures that it is able to exercise objective and independent judgement on corporate affairs.

Page 17: Hoe Leong Corporation Ltd. Leong AR07.pdf · HOE LEONG CORPORATION LTD. CORPORATE PROFILE I CORPORATE INFORMATION Hoe Leong Corporation Ltd. was incorporated in Singapore on 18 November

ANNUAL REPORT 2007 I 16

HOE LEONG CORPORATION LTD.

The Executive Directors have extensive experience in the heavy equipment and industrial machineryequipment parts industry and the non-executive directors are experienced and successful in theirrespective professions. The Board’s structure, size and composition is reviewed annually by theNominating Committee who is of the view that the current size of the Board is appropriate,taking into account the nature and scope of the Group’s operations, to facilitate effective decisionmaking.

The Nominating Committee is satisfied that the Board comprises directors who as a group providecore competencies such as accounting, finance, business and management experience, industryknowledge, strategic planning experience and customer-based experience and knowledge to leadthe company effectively.

Chairman and Chief Executive Officer

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

The Chairman and Chief Executive Officer (“CEO”) of the Company is Mr James Kuah Geok Lin.The Board, after careful consideration, is of opinion that it is not necessary, under currentcircumstances, to separate the roles of the Chairman and CEO. This is after taking into considerationthe size, scope and nature of the operations of our Group, together with the strong presence ofour Independent Directors who ensure that decision-making is based on collective decision andthat there is no concentration of power and authority vested in one individual.

Our Chairman and CEO has played an instrumental role in developing the business of our Group.He has extensive industry experience and has also provided our Group with strong leadership andvision. It is hence the view of the Board that it is in the best interests of our Group to adopt asingle leadership structure, whereby the Chairman and CEO are the same individual.

The Chairman takes an active role in the management of the Group and also bears responsibilityfor the workings of the Board, ensuring the integrity and effectiveness of the governance processof the Board, ensuring that Board meetings are held regularly, and setting the Board meetingagenda in consultation with all members of the Board. The Chairman reviews board papers beforethey are presented to the Board and ensures that Board members are provided with adequateand timely information.

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Board Membership

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

The Nominating Committee (“NC”) is established for the purposes of ensuring that there is aformal and transparent process for all Board appointments. The NC comprises the following threemembers, majority of whom are independent non-executive directors:-

Mr Peter Boo Song Heng (Chairman)Mr Ang Mong Seng (Member)Mr James Kuah Geok Lin (Member)

The NC has adopted written terms of reference defining its membership, administration andduties. Duties and responsibilities of the NC include:

(a) to make recommendations to the Board on all board appointments having regard to thedirector’s contribution and performance;

(b) to determine annually whether a director is independent; and

(c) to assess the composition and effectiveness of the Board as a whole and to determine ifeach director has been adequately carrying out his duties.

Each member of our NC shall abstain from voting on any resolution in respect of his re-nominationas a director.

The search and nomination process for new directors, if any, will be through search companies,contacts and recommendations that go through the normal selection process, to cast its net aswide as possible for the right candidates.

Our Articles of Association require one-third of the Directors, or if their number is not a multipleof three, the number nearest to but not less than one-third of our Directors, to retire and subjectthemselves to re-election by the shareholders in every Annual General Meeting. In addition, allDirectors of the Company, including the Managing Director after his initial term of engagementas Managing Director, shall retire from office at least once every three years. A retiring Director iseligible for re-election at the meeting at which he retires.

The profiles of the Directors are disclosed on page 10 and 11 (“Board of Directors”) of thisannual report.

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Board Performance

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

The NC will decide how the Board’s performance is to be evaluated and propose objectiveperformance criteria, subject to the approval of the Board, which will address how the Board hasenhanced long-term shareholders’ value. The NC has in place an annual Board evaluation exerciseto assess the effectiveness of the Board and to facilitate discussion to enable the Board to dischargeits duties more effectively. Each member of the NC shall abstain from voting on any resolution inrespect of his performance as a director.

Notwithstanding that some of the Directors have multiple board representations, the NC is satisfiedthat each Director is able to and has been adequately carrying out his duties as a director of thecompany.

The Board and the NC have endeavoured to ensure that Directors appointed to the Board possessthe experience, knowledge and expertise relevant to the Group’s business.

Access to Information

Principle 6: In order to fulfill their responsibilities, Board members should be providedwith complete, adequate and timely information prior to Board meetingsand on an on-going basis.

Management provides the Board with adequate and timely information as well as a review of theGroup’s performance prior to the Board meetings. The Board has separate and independent accessto the Group’s senior management and company secretary, should they have any queries on theaffairs of the Group.

Should the Directors, whether as a group or individually, require independent professional advice,the company will bear the expenses incurred if such advice is required to enable the directors todischarge their duties professionally.

The company secretary attends all Board meetings and is responsible for ensuring that Boardprocedures are followed and that applicable rules and regulations (in particular the CompaniesAct and the SGX-ST Listing rules) are complied with.

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B. REMUNERATION MATTERS

Procedures for Developing Remuneration Policies

Principle 7: There should be a formal and transparent procedure for developing policyon executive remuneration and for fixing the remuneration packages ofindividual directors. No director should be involved in deciding his ownremuneration.

The Remuneration Committee (“RC”) is established for the purposes of ensuring that there is aformal and transparent process for developing policy and fixing the remuneration packages ofindividual directors. The RC comprises the following three independent non-executive directors:-

Mr Ang Mong Seng (Chairman)Mr Lim Kok Hoong (Member)Mr Peter Boo Song Heng (Member)

The RC has adopted written terms of reference defining its membership, administration and duties.Duties and responsibilities of the RC include:

(a) to review and recommend to the Board a framework of remuneration for the Board and keyexecutives;

(b) to review and determine specific remuneration packages for each Executive Director and theCEO which should cover all aspects of remuneration including but not limited to directors’fees, salaries, allowances, bonuses, options and benefits in kind;

(c) to review and recommend to the Board the terms of renewal of service contracts of Directors;

(d) to retain such professional consultancy firm as the committee may deem necessary to enableit to discharge its duties satisfactory;

(e) to consider various disclosure requirements for Directors’ remuneration, particularly thoserequired by regulatory bodies such as the SGX-ST, and ensure that there is adequate disclosurein the financial statements to ensure and enhance transparency between the Company andrelevant interested parties; and

(f) to carry out such other duties as may be agreed to by the RC and the Board.

The RC’s recommendations would be made in consultation with the Chairman of the Board andsubmitted for endorsement by the entire Board and no Director shall participate in decisions onhis/her own remuneration.

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Level and Mix of Remuneration

Principle 8: The level of remuneration should be appropriate to attract, retain andmotivate the directors needed to run the company successfully but thecompany should avoid paying more for this purpose. A significantproportion of executive directors’ remuneration should be structured soas to link rewards to corporate and individual performance.

It is the Group’s policy to set a level of remuneration that is appropriate to attract, retain andmotivate the directors. The independent non-executive directors receive directors’ fees in accordancewith their level of contribution, taking into account factors such as effort and time spent andresponsibilities of the directors. The Board may, if it considers necessary, consult experts on theremuneration of non-executive directors and would recommend the remuneration of the non-executive directors for approval at the Annual General Meeting (“AGM”).

The Company has entered into a service agreement with each of our Executive Directors, namelyJames Kuah Geok Lin, Paul Kuah Geok Khim, Peter Kuah Geok Koon and Quah Yoke Hwee andour Executive Officer, Mdm Kuah Geok Khim (collectively the “Appointees”) for an initial periodof three years commencing on 5 December 2005. The service agreements contain non-competitionand non-solicitation clauses, which are binding on the Appointees during their period of employmentwith the Company and for a period of 12 months after the cessation of their employment withthe Company. The Executive Directors do not receive directors’ fees. The remuneration of theAppointees comprise a basic salary fixed component which include the 13-month supplement anda variable component which include an incentive bonus (“Incentive Bonus”) at the end of everyfinancial year of the company based on the audited consolidated profit before tax (before theIncentive Bonus) of our Group. The Appointees are also entitled to other benefits including dental,optical and medical benefits, personal accident, hospitalization and surgical insurance and travellingand entertainment expenses incurred for the purposes of our Group’s business.

The service agreements of the Appointees shall be subject to termination:

(i) by the Company or any of the Appointees giving to the other at least three months’ writtennotice; or

(ii) without prior notice, upon the occurrence of certain specified events, including wilful neglectin the discharge of duties.

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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 toits remuneration policies to enable investors to understand the linkbetween remuneration paid to directors and key executives, andperformance.

A breakdown showing the level and mix of each individual Director’s remuneration for the yearended 31 December 2007 is disclosed in the table below:

Name of Directors Remuneration Incentive Other

band ($) Salary (%)# Bonus (%) Fees (%) benefits (%) Total (%)

James Kuah Geok Lin (1) 54 29 – 17 100

Paul Kuah Geok Khim (1) $250,000 to 62 29 – 9 100

Peter Kuah Geok Koon (1) $499,999 68 25 – 7 100

Quah Yoke Hwee (1) 62 30 – 8 100

Ang Mong Seng – – 100 – 100

Lim Kok Hoong$0 to

– – 100 – 100

Peter Boo Song Heng$249,999

– – 100 – 100

Note:(#) includes the 13-month supplement.(1) All of our Executive Directors, namely James Kuah Geok Lin, Paul Kuah Geok Khim, Peter Kuah Geok Koon and Quah

Yoke Hwee are siblings.

The table below shows the level and mix of the remuneration of our key executives (who are notdirectors) for the year ended 31 December 2007:

Otherbenefits and

Name of Executives Remuneration Incentive Variable allowances

band ($) Salary (%)# bonus (%) bonus (%) (%) Total (%)

Mdm Kuah Geok Khim (1) 69 24 5 2 100

Leow Quek Kien (2) 79 – 21 – 100

Lim Gek Ser $0 to $249,999 82 – 18 – 100

Lim Lian Tuan 67 – – 33 100

Quah Seng Kee 81 – 19 – 100

Tan Wee Boon (3) 85 – 15 – 100

Note:(#) includes the 13-month supplement.(1) Mdm Kuah Geok Khim is the sister of our Executive Directors, namely James Kuah Geok Lin, Paul Kuah Geok Khim,

Peter Kuah Geok Koon and Quah Yoke Hwee.(2) Mr Leow Quek Kien has tendered his resignation as Financial Controller of the Company. His last day with the

Company was on 8 June 2007.(3) Mr Tan Wee Boon has been appointed as Financial Controller of the Company on 24 July 2007.

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Save as disclosed above, there is no immediate family member of the directors and whoseremuneration exceeded $150,000 during the financial year.

C. ACCOUNTABILITY AND AUDIT

Accountability

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

One of the Board’s principal duties is to protect and enhance the long-term value and returns tothe shareholders of the Company. The accountability of the Board to the shareholders isdemonstrated through the presentation of the periodic financial statements as well as the timelyannouncements and news releases of significant corporate developments and activities so thatthe shareholders can have a detailed explanation and balanced assessment of the Group’s financialposition and prospects.

The Management presents to the Audit Committee the interim and full-year results for reviewsand recommends them to the Board for approval. The Board approves the results and authorizesthe release of the results to the SGX-ST and the public via SGXNET as required by the SGX-STListing Manual.

Audit Committee

Principle 11: The Board should establish an Audit Committee (“AC”) with written termsof reference which clearly set out its authority and duties.

The AC comprises the following three independent directors:-

Mr Lim Kok Hoong (Chairman)Mr Ang Mong Seng (Member)Mr Peter Boo Song Heng (Member)

The Board is of the view that the members of the AC are appropriately qualified, having accountingor related financial management expertise or experience as the Board interprets such qualification,to discharge their responsibilities.

As a sub-committee of the Board of Directors, it assists the Board in discharging their responsibilityto safeguard our assets, maintain adequate accounting records, and develop and maintain effectivesystems of internal control, with the overall objective of ensuring that our management createsand maintains an effective control environment in our Group. The AC will also review and supervisethe internal audit functions of the Group.

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Our AC will provide a channel of communication between our Board, our management and ourexternal auditors on matters relating to audit.

Our AC has adopted written terms of reference defining its membership, administration andduties. Duties and responsibilities of the AC include:

(a) review with the external auditors the audit plan, their evaluation of the system of internalaccounting controls, their letter to management and the management’s response;

(b) review the interim and annual financial statements and balance sheet and profit and lossaccounts before submission to our Board for approval, focusing in particular on changes inaccounting policies and practices, major risk areas, significant adjustments resulting from theaudit, compliance with accounting standards and compliance with the Listing Manual andany other relevant statutory or regulatory requirements;

(c) review the scope and results of the audit and its cost effectiveness and the independenceand objectivity of the external auditors. Where the auditors also supply a substantial volumeof non-audit services to the Company, the AC would keep the nature and extent of suchservices under review, seeking to balance the maintenance of objectivity and value for money;

(d) review the internal control procedures and ensure co-ordination between the external auditorsand our management, and review the assistance given by our management to the auditors,and discuss problems and concerns, if any, arising from the interim and final audits, and anymatters which the auditors may wish to discuss in the absence of our management at leastannually;

(e) review and discuss with the external auditors any suspected fraud or irregularity, or suspectedinfringement of any relevant laws, rules or regulations, which has or is likely to have amaterial impact on our Group’s operating results or financial position, and our management’sresponse;

(f) to review the independence and objectivity of the external auditors annually;

(g) consider the appointment or re-appointment of the external auditors and matters relating tothe resignation or dismissal of the auditors;

(h) review interested person transactions (if any) falling within the scope of Chapter 9 of theListing Manual;

(i) review potential conflicts of interest, if any;

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(j) undertake such other reviews and projects as may be requested by the Board, and willreport to the Board its findings from time to time on matters arising and requiring theattention of the AC; and

(k) generally undertake such other functions and duties as may be required by statute or theListing Manual, or by such amendments as may be made thereto from time to time.

In the event that any Director has a personal material interest in any contract or proposed contractor arrangement, he will abstain from reviewing that particular transaction or voting on the particularresolution.

Apart from the duties listed above, the AC shall commission and review the findings of internalinvestigations into matters where there is any suspected fraud or irregularity, or failure of internalcontrols or infringement of any Singapore law, rule or regulation which has or is likely to have amaterial impact on our Company’s operating results and/or financial position.

In performing its functions, the AC has explicit authority to investigate any matter within its termsof reference, having full access to and co-operation by management and full discretion to inviteany director or executive officer to attend meetings, and reasonable resources to enable it todischarge its function properly.

Internal Controls

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

The Board recognizes the importance of maintaining a sound system of internal controls tosafeguard the shareholders’ interest and investments and the Group’s assets. The AC has duringthe FY2007 reviewed and assessed the Group’s internal controls and had accepted therecommendations made by the appointed Internal Auditors. The Group is now in stages ofimplementing improvement to the Group’s existing internal controls.

The Board further recognizes that no systems of internal controls can provide absolute assuranceagainst occurrence of material errors, poor judgement in decision making, human errors orirregularities.

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Internal Audit

Principle 13: The Company should establish an internal audit function that isindependent of the activities it audits.

The Company has engaged the services of external consultant to perform its internal audit function.

The AC reviews annually the Internal Audit plan independently of Management and the internalauditors reports directly to the Chairman of AC.

Communication with Shareholders

Principle 14: Companies should engage in regular, effective and fair communication withshareholders.

The Company endeavours to communicate regularly, effectively and fairly with its shareholders.Timely, as well as, detailed disclosure is made to the public in compliance with SGX-ST guidelines.The Company does not practise selective disclosure. Price sensitive information is first publiclyreleased, either before the Company meets with any group of investors or analysts.

Shareholders are kept informed of developments and performance of the Group throughannouncements published via SGXNET and the press when necessary as well as in the annualreport. Other announcements are also made on an ad-hoc basis where applicable as soon aspossible to ensure timely dissemination of the information to shareholders.

Principle 15: Companies should encourage greater shareholder participation at AGMs,and allow shareholders the opportunity to communicate their views onvarious matters affecting the Company.

All shareholders of the Company receive the annual report of the Company and notice of AGMwithin the prescribed period. Participation of shareholders is encouraged at the Company’s generalmeetings. To facilitate voting by shareholders, the Company’s article allows shareholders to appointnot more than two proxies to attend and vote at the same general meeting. The Board ofDirectors (including the Chairman of the respective Board committees), Management, as well asthe external auditors will attend the Company’s AGM to address any questions that shareholdersmay have.

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D. DEALINGS IN SECURITIES

The Company has adopted the SGX-ST’s Best Practices Guide applicable to dealings in theCompany’s securities by its Directors, management and officers. Directors, management and officersof the Group who have access to price-sensitive, financial or confidential information are notpermitted to deal in the Company’s shares during the periods commencing one month before theannouncement of the Group’s half-year or full year results and ending on the date of theannouncements of such results.

Directors, management and officers of the Group are also required to observe insider trading lawsat all times even when dealing in securities within the permitted trading period. In addition, theDirectors, management and officers of the Group are discouraged from dealing in the Company’ssecurities on short-term considerations.

E. INTERESTED PERSON TRANSACTIONS

The Board had reviewed all interested person transactions for the financial year ended 31 December2007 and was satisfied that aggregate value of the transactions is below the threshold level as setout in SGX-ST’s Listing Rules and do not require any immediate announcement or obtainshareholders approval as defined under the Listing Rules.

F. MATERIAL CONTRACTS

Pursuant to Rule 1207(8) of the Listing Manual, the Company confirms that there was no materialcontract entered into between the Company and its subsidiaries which involved the interests ofany director or controlling shareholder, either still subsisting at the end of the financial year or ifnot then subsisting, which was entered into since the end of the previous financial year.

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We are pleased to submit this annual report to the members of the Company together with theaudited financial statements for the financial year ended 31 December 2007.

Directors

The directors in office at the date of this report are as follows:

Kuah Geok LinQuah Yoke HweeKuah Geok KhimKuah Geok KoonAng Mong SengLim Kok HoongPeter Boo Song Heng

Directors’ interests

According to the register kept by the Company for the purposes of Section 164 of the SingaporeCompanies Act, Chapter 50 (the Act), particulars of interests of directors who held office at theend of the financial year (including those held by their spouses and infant children) in shares,debentures, warrants and share options in the Company and its related corporations are as follows:

Holdings HoldingsName of director and corporation in at beginning at endwhich interests are held of the year of the year

Kuah Geok LinThe CompanyHoe Leong Corporation Ltd.

Ordinary shares– interests held 6,300,660 8,820,924

Warrants– interests held – 630,066

Ultimate Holding CompanyHoe Leong Co. (Pte.) Ltd.

Ordinary shares– interests held 288,600 288,600

Directors’ Report

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Holdings HoldingsName of director and corporation in at beginning at endwhich interests are held of the year of the year

SubsidiaryPT Trackspare

Ordinary shares of US$1,000 each fully paid– interests held 5 5

Quah Yoke HweeThe CompanyHoe Leong Corporation Ltd.

Ordinary shares– interests held 6,250,660 8,750,924

Warrants– interests held – 625,066

Ultimate Holding CompanyHoe Leong Co. (Pte.) Ltd.

Ordinary shares– interests held 288,600 288,600

Kuah Geok KhimThe CompanyHoe Leong Corporation Ltd.

Ordinary shares– interests held 6,250,660 8,750,924

Warrants– interests held – 625,066

Ultimate Holding CompanyHoe Leong Co. (Pte.) Ltd.

Ordinary shares– interests held 288,600 288,600

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Holdings HoldingsName of director and corporation in at beginning at endwhich interests are held of the year of the year

Kuah Geok KoonThe CompanyHoe Leong Corporation Ltd.

Ordinary shares– interests held 6,250,660 8,750,924

Warrants– interests held – 625,066

Ultimate Holding CompanyHoe Leong Co. (Pte.) Ltd.

Ordinary shares– interests held 288,600 288,600

Ang Mong SengThe CompanyHoe Leong Corporation Ltd.

Ordinary shares– interests held 100,000 100,000

Peter Boo Song HengThe CompanyHoe Leong Corporation Ltd.

Ordinary shares– interests held 100,000 140,000

Warrants– interests held – 10,000

Kuah Geok Lin, Quah Yoke Hwee, Kuah Geok Khim and Kuah Geok Koon have the followingdeemed interests in the Company and related corporations:

Holdings Holdingsat beginning at end

Corporation in which interests are held of the year of the year

The CompanyHoe Leong Corporation Ltd. 113,567,340 158,994,276

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By virtue of Section 7 of the Act, Kuah Geok Lin, Quah Yoke Hwee, Kuah Geok Khim and KuahGeok Koon are deemed to have an interest in all the other wholly-owned subsidiaries of HoeLeong Co. (Pte.) Ltd., at the beginning and at the end of the financial year.

There were no changes in any of the above mentioned interests in the Company between theend of the financial year and 21 January 2008.

Except as disclosed in this report, no director who held office at the end of the financial year hadinterests in shares, debentures, warrants or share options of the Company or of the relatedcorporations, either at the beginning or at the end of the financial year.

Neither at the end of nor at any time during the financial year, was the Company a party to anyarrangement whose objects are, or one of whose objects is, to enable the directors of the Companyto acquire benefits by means of the acquisition of shares in or debentures of the Company or anyother body corporate.

Except for salaries, bonuses and fees and those benefits that are disclosed in Note 22 to thefinancial statements, since the end of the last financial year, no director has received or becomeentitled to receive a benefit by reason of a contract made by the Company or a related corporationwith the director or with a firm of which he is a member or with a company in which he has asubstantial financial interest.

Share options

(a) Share options

During the financial year, there were:

(i) no options granted by the Company or its subsidiaries to any person to take up unissuedshares in the Company or its subsidiaries; and

(ii) no shares issued by virtue of any exercise of option to take up unissued shares of theCompany or its subsidiaries.

As at the end of the financial year, there were no unissued shares of the Company or itssubsidiaries under option.

(b) Warrants

During the financial year, the Company issued 75,516,000 right shares with 18,879,000detachable warrants. Each warrant entitles the warrant holder to subscribe for one newordinary share in the Company at the exercise price of $0.16 per share. The warrants do notentitle the holders of the warrants, by virtual of such holdings, to any rights to participate inany share issue of any other company. During the financial year, the Company issued 63,000new ordinary shares pursuant to the exercise of warrants as disclosed below.

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At the end of the financial year, details of the unissued ordinary shares of the Companyunder warrants are as follow:

Warrants WarrantsDate of outstanding Warrants Warrants Warants outstanding Date ofissue at 1/1/2007 issued exercised expired at 31/12/2007 expiration

30/5/2007 – 18,879,000 (63,000) – 18,816,000 30/5/2009

Except as reported above, there were no other options to take up unissued shares of theCompany or its subsidiaries that were outstanding as at the end of the financial year.

Audit Committee

The members of the Audit Committee during the year and at the date of this report are:

• Lim Kok Hoong (Chairman), non-executive director

• Ang Mong Seng, non-executive director

• Peter Boo Song Heng, non-executive director

The Audit Committee performs the functions specified in Section 201B of the Act, the SGXListing Manual and the Code of Corporate Governance.

The Audit Committee has held two meetings since the last directors’ report. In performing itsfunctions, the Audit Committee met with the Company’s external auditors to discuss the scope oftheir work, the results of their examination and evaluation of the Company’s internal accountingcontrol system. The Company’s internal audit function has been outsourced and the AuditCommittee has discussed the scope of the work with the appointed firm, the results of theirexamination and their evaluation of the Company’s internal accounting system, where appropriate.

The Audit Committee also reviewed the following:

• assistance provided by the Company’s officers to the internal and external auditors;

• financial statements of the Group and the Company prior to their submission to the directorsof the Company for adoption; and

• interested person transactions (as defined in Chapter 9 of the SGX Listing Manual).

The Audit Committee has full access to management and is given the resources required for it todischarge its functions. It has full authority and the discretion to invite any director or executiveofficer to attend its meetings. The Audit Committee also recommends the appointment of theexternal auditors and reviews the level of audit and non-audit fees.

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The Audit Committee is satisfied with the independence and objectivity of the external auditorsand has recommended to the Board of Directors that the auditors, KPMG, be nominated forre-appointment as auditors at the forthcoming Annual General Meeting of the Company.

Auditors

The auditors, KPMG, have indicated their willingness to accept re-appointment.

On behalf of the Board of Directors

Kuah Geok LinDirector

Quah Yoke HweeDirector

20 March 2008

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In our opinion:

(a) the financial statements set out on pages 36 to 78 are drawn up so as to give a true andfair view of the state of affairs of the Group and of the Company as at 31 December 2007and of the results, changes in equity and cash flows of the Group for the year ended onthat date in accordance with the provisions of the Singapore Companies Act, Chapter 50and Singapore Financial Reporting Standards; and

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

The Board of Directors has, on the date of this statement, authorised these financial statementsfor issue.

On behalf of the Board of Directors

Kuah Geok LinDirector

Quah Yoke HweeDirector

20 March 2008

Statement by Directors

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HOE LEONG CORPORATION LTD.

We have audited the financial statements of Hoe Leong Corporation Ltd. (the Company) and itssubsidiaries (the Group), which comprise the balance sheets of the Group and the Company as at31 December 2007, the income statement, statement of changes in equity and cash flow statementof the Group for the year then ended, and a summary of significant accounting policies andother explanatory notes, as set out on pages 36 to 78.

Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these financial statementsin accordance with the provisions of the Singapore Companies Act, Chapter 50 (the Act) andSingapore Financial Reporting Standards. This responsibility includes:

(a) devising and maintaining a system of internal accounting controls sufficient to provide areasonable assurance that assets are safeguarded against loss from unauthorised use ordisposition; and transactions are properly authorised and that they were recorded as necessaryto permit the preparation of true and fair profit and loss accounts and balance sheets andto maintain accountability of assets;

(b) selecting and applying appropriate accounting policies; and

(c) making accounting estimates that are reasonable in the circumstances.

Auditors’ responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. Weconducted our audit in accordance with Singapore Standards on Auditing. Those Standards requirethat we comply with ethical requirements and plan and perform the audit to obtain reasonableassurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin the financial statements. The procedures selected depend on the auditor’s judgement, includingthe assessment of the risks of material misstatement of the financial statements, whether due tofraud or error. In making those risk assessments, the auditor considers internal control relevant tothe entity’s preparation and fair presentation of the financial statements in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the entity’s internal control. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates madeby the management, as well as evaluating the overall presentation of the financial statements.

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

Independent Auditors’ ReportMembers of the CompanyHoe Leong Corporation Ltd.

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Opinion

In our opinion:

(a) the consolidated financial statements of the Group and the balance sheet of the Company,are properly drawn up in accordance with the provisions of the Act and Singapore FinancialReporting Standards to give a true and fair view of the state of affairs of the Group and ofthe Company as at 31 December 2007 and of the results, changes in equity and cash flowsof the Group for the year ended on that date; and

(b) the accounting and other records required by the Act to be kept by the Company have beenproperly kept in accordance with the provisions of the Act.

KPMGPublic Accountants andCertified Public Accountants

Singapore20 March 2008

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HOE LEONG CORPORATION LTD.

Group CompanyNote 2007 2006 2007 2006

$’000 $’000 $’000 $’000

Non-current assetsProperty, plant and equipment 3 17,893 18,563 12,812 13,295Subsidiaries 4 – – 13,899 13,639Deferred tax assets 5 13 – – –

17,906 18,563 26,711 26,934

Current assetsAssets held for sale 6 550 – – –Inventories 7 40,564 35,549 32,341 27,650Trade and other receivables 8 26,239 23,820 29,588 23,878Cash and cash equivalents 9 4,901 3,153 890 807

72,254 62,522 62,819 52,335

Total assets 90,160 81,085 89,530 79,269

Equity attributable to equity holdersof the Company

Share capital 10 46,563 37,778 46,563 37,778Currency translation reserve 11 (1,883) (1,745) – –Accumulated profits 4,710 8,318 4,463 7,780

49,390 44,351 51,026 45,558Minority interests 530 72 – –

Total equity 49,920 44,423 51,026 45,558

Non-current liabilitiesFinancial liabilities 12 1,301 1,777 1,138 1,777Deferred tax liabilities 5 37 22 37 22

1,338 1,799 1,175 1,799

Current liabilitiesTrade and other payables 13 9,706 7,706 8,211 6,300Financial liabilities 12 27,824 25,704 27,769 24,372Current tax payable 1,372 1,453 1,349 1,240

38,902 34,863 37,329 31,912

Total liabilities 40,240 36,662 38,504 33,711

Total equity and liabilities 90,160 81,085 89,530 79,269

Balance SheetsAs at 31 December 2007

The accompanying notes form an integral part of these financial statements.

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Note 2007 2006$’000 $’000

Revenue 14 65,203 63,509

Cost of sales (48,894) (45,026)

Gross profit 16,309 18,483

Other income 1,451 1,800

Distribution expenses (3,871) (3,361)

Administrative expenses (5,485) (5,401)

Other expenses (2,742) (4,387)

Results from operating activities 5,662 7,134

Finance income 37 31

Finance expense (1,395) (1,412)

Net finance expenses 15 (1,358) (1,381)

Profit before income tax 16 4,304 5,753

Income tax expense 17 (1,354) (1,677)

Profit for the year 2,950 4,076

Attributable to:

Equity holders of the Company 3,000 4,087

Minority interests (50) (11)

Profit for the year 2,950 4,076

Earnings per share

Basic earnings per share (cents) 18 1.29 2.16

Diluted earnings per share (cents) 18 1.23 2.16

The accompanying notes form an integral part of these financial statements.

Consolidated Income StatementYear ended 31 December 2007

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Totalattributable to

Currency equity holdersShare Share translation Accumulated of the Minority Totalcapital premium reserve profits Company interests equity$’000 $’000 $’000 $’000 $’000 $’000 $’000

At 1 January 2006 37,758 46 (958) 6,050 42,896 905 43,801

Translation differences relatingto financial statements offoreign subsidiaries – – (787) – (787) – (787)

Net losses recognised directlyin equity – – (787) – (787) – (787)

Net profit for the year – – – 4,087 4,087 (11) 4,076

Total recognised income andexpense for the year – – (787) 4,087 3,300 (11) 3,289

Expenses on issue of shares – (26) – – (26) – (26)

Transfer from share premiumaccount to share capitalupon implementation of theCompanies (Amendment)Act 2005 20 (20) – – – – –

Final dividend paid for 2005of $0.00964 per share(net of 20% tax) – – – (1,819) (1,819) – (1,819)

Acquisition of minority interests – – – – – (822) (822)

At 31 December 2006 37,778 – (1,745) 8,318 44,351 72 44,423

At 1 January 2007 37,778 – (1,745) 8,318 44,351 72 44,423

Translation differences relatingto financial statements offoreign subsidiaries – – (138) – (138) – (138)

Net losses recognised directlyin equity – – (138) – (138) – (138)

Net profit for the year – – – 3,000 3,000 (50) 2,950

Total recognised income andexpense for the year – – (138) 3,000 2,862 (50) 2,812

Issue of new shares 9,071 – – – 9,071 – 9,071

Issue of shares to minorityshareholder of subsidiary – – – – – 508 508

Expenses on issue of shares (286) – – – (286) – (286)

Final dividend paid for 2006of $0.035 per share(net of 18% tax) – – – (6,608) (6,608) – (6,608)

At 31 December 2007 46,563 – (1,883) 4,710 49,390 530 49,920

Consolidated Statement of Changes in EquityYear ended 31 December 2007

The accompanying notes form an integral part of these financial statements.

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Note 2007 2006$’000 $’000

Operating activitiesProfit before income tax 4,304 5,753Adjustments for:Depreciation 3 1,228 818Interest income 15 (37) (31)Finance expense 15 1,395 1,412Property, plant and equipment written off 431 –Negative goodwill on acquisition of minority interests – (221)Loss/(gain) on disposal of property, plant and equipment 173 (42)

7,494 7,689

Changes in working capital:Inventories (5,015) 1,169Trade and other receivables (2,420) (6,103)Trade and other payables (426) 242Cash generated from operations (367) 2,997Income taxes paid (1,435) (1,202)Cash flows (used in)/generated from operating activities (1,802) 1,795

Investing activitiesInterest received 37 31Purchase of property, plant and equipment (2,338) (2,283)Proceeds from disposal of property, plant and equipment 913 81Acquisition of additional interests from minority interests – (356)Cash flows used in investing activities (1,388) (2,527)

Financing activitiesDividends paid (6,608) (1,819)Interest paid (1,456) (1,188)(Decrease)/increase in non-trade amount due to others (474) 415Proceeds from/(repayment of) bills payable and trust receipts 3,078 (456)Payment of finance lease liabilities (171) (24)Proceeds from interest-bearing borrowings 4,117 7,500Repayment of interest-bearing borrowings (3,600) (6,859)Proceeds from issue of shares to minority shareholder of

subsidiary 508 –Proceeds from issue of shares 9,071 –Expenses for the issue of shares (286) (26)Cash flows generated from/(used in) financing activities 4,179 (2,457)

Net increase/(decrease) in cash and cash equivalents 989 (3,189)Cash and cash equivalents at beginning of year 2,336 5,793Effect of exchange fluctuations (124) (268)Cash and cash equivalents at end of year 9 3,201 2,336

Consolidated Cash Flow StatementYear ended 31 December 2007

The accompanying notes form an integral part of these financial statements.

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These notes form an integral part of the financial statements.

The financial statements were authorised for issue by the Board of Directors on 20 March 2008.

1 Domicile and activities

Hoe Leong Corporation Ltd. (the Company) was incorporated in the Republic of Singaporewith its registered office at 6 Clementi Loop, Singapore 129814.

The principal activities of the Group and of the Company are those relating to designing,manufacturing, sale and distribution of machinery parts.

The immediate and ultimate holding company during the financial year was Hoe Leong Co.(Pte.) Ltd., a company incorporated in the Republic of Singapore.

The consolidated financial statements relate to the Company and its subsidiaries (referredto as the Group).

2 Summary of significant accounting policies

2.1 Basis of preparation

The financial statements are prepared in accordance with Singapore Financial ReportingStandards (FRS).

The financial statements have been prepared on the historical cost basis except for certainfinancial assets and financial liabilities which are measured at fair value. The financialstatements are presented in Singapore dollars which is the Company’s functional currency,has been rounded to the nearest thousand, unless otherwise stated.

The preparation of financial statements in conformity with FRS requires management tomake judgements, estimates and assumptions that affect the application of policies andreported amounts of assets, liabilities, income and expenses. Actual results may differ fromthese estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions toaccounting estimates are recognised in the period in which the estimate is revised and inany future periods affected.

Notes to the Financial Statements

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2 Summary of significant accounting policies (cont’d)

2.1 Basis of preparation (cont’d)

In particular, information about significant areas of estimation uncertainty and criticaljudgements in applying accounting policies that have the most significant effect on theamount recognised in the financial statements are described in the following notes:

• Note 4 – measurement of impairment loss in respect of investment in subsidiaries.

• Note 7 – measurement of net realisable value of inventories. Inventories have beenwritten down to net realisable value to be consistent with the view thatassets should not be carried in excess of amounts expected to be realisedfrom their sale or use. Estimates of net realisable value are based on themost reliable evidence available at the balance sheet date. These estimatestake into consideration of market demand, competition, selling price andcost directly relating to events occurring after the end of the financial yearto the extent that such events confirm conditions existing at the end of thefinancial year.

• Note 8 – measurement of recoverable amounts of trade receivables. The Groupevaluates whether there is any objective evidence that trade receivables areimpaired, and determines the amount of impairment loss as a result of theinability of the customers to make required payments. The Group determinesthe estimates based on the ageing of the trade receivables balance, credit-worthiness, and historical write-off experience. If the financial condition ofthe customers were to deteriorate, actual write-offs would be higher thanestimated.

The accounting policies used by the Group have been applied consistently to all periodspresented in these financial statements.

2.2 Consolidation

Business combinations

Business combinations are accounted for under the purchase method. The cost of anacquisition is measured at the fair value of the assets given, equity instruments issued andliabilities incurred or assumed at the date of exchange, plus costs directly attributable tothe acquisition.

The excess of the Group’s interest in the net fair value of the identifiable assets, liabilitiesand contingent liabilities over the cost of acquisition is credited to the income statement inthe period of the acquisition.

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2 Summary of significant accounting policies (cont’d)

2.2 Consolidation (cont’d)

Subsidiaries

Subsidiaries are entities controlled by the Group. Control exists when the Group has thepower, directly to govern the financial and operating policies of an entity so as to obtainbenefits from its activities. In assessing control, potential voting rights presently exercisableare taken into account. The financial statements of subsidiaries are included in theconsolidated financial statements from the date that control commences until the date thatcontrol ceases. The accounting policies of subsidiaries have been changed where necessaryto align them with the policies adopted by the Group.

Transactions eliminated on consolidation

Intra-group balances and transactions and any unrealised income or expenses arising fromintra-group transactions, are eliminated in preparing the consolidated financial statements.Unrealised gains arising from transactions with equity accounted investees are eliminatedagainst the investment to the extent of the Group’s interest in the investee. Unrealisedlosses are eliminated in the same way as unrealised gains, but only to the extent that thereis no evidence of impairment.

Accounting for subsidiaries

Investments in subsidiaries are stated in the Company’s balance sheet at cost less accumulatedimpairment losses.

2.3 Foreign currencies

Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies ofGroup entities at the exchange rate at the date of the transaction. Monetary assets andliabilities denominated in foreign currencies at the reporting date are retranslated to thefunctional currency at the exchange rate at the reporting date. Non-monetary assets andliabilities denominated in foreign currencies that are measured at fair value are retranslatedto the functional currency at the exchange rate at the date on which the fair value wasdetermined. Foreign currency differences arising on retranslation are recognised in the incomestatement.

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2 Summary of significant accounting policies (cont’d)

2.3 Foreign currencies (cont’d)

Foreign operations

The assets and liabilities of foreign operations are translated to Singapore dollars at exchangerates prevailing at the reporting date. The income and expense of foreign operations aretranslated to Singapore dollars exchange rates prevailing at the dates of the transactions.

Foreign currency differences are recognised in the foreign currency translation reserve. Whena foreign operation is disposed of, in part or in full, the relevant amount in the foreignexchange translation reserve is transferred to the income statement.

2.4 Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation andimpairment losses.

Cost includes expenditure that is directly attributable to the acquisition of the asset. Thecost of self-constructed assets includes the cost of materials and direct labour, any othercosts directly attributable to bringing the assets to a working condition for its intended use,and the cost of dismantling and removing the items and restoring the site on which theyare located. Purchased software that is integral to the functionality of the related equipmentis capitalised as part of that equipment.

When parts of an item of property, plant and equipment have different useful lives, theyare accounted for as separate items (major components) of property, plant and equipment.

The cost of replacing part of an items of property, plant and equipment is recognised inthe carrying amount of the item if it is probable that the future economic benefits embodiedwithin the part will flow to the Group and its cost can be measured reliably. The costs ofthe day-to-day servicing of property, plant and equipment are recognised in the incomestatement as incurred.

Freehold land and construction-in-progress are not depreciated. Depreciation on otherproperty, plant and equipment recognised in the income statement on a straight-line basisover their estimated useful lives (or lease term, if shorter) of each part of an item ofproperty, plant and equipment.

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2 Summary of significant accounting policies (cont’d)

2.4 Property, plant and equipment (cont’d)

The estimated useful lives are as follows:

Freehold building and leasehold land and building – Over the remaining lease termranging from 19 to 50 years

Furniture, fittings and office equipment – 5 to 10 years

Material handling equipment – 5 to 10 years

Computers – 3 years

Motor vehicles – 5 years

Depreciation methods, useful lives and residual value are reviewed and adjusted asappropriate, at each reporting date.

2.5 Intangible assets – Goodwill

Goodwill

Goodwill and negative goodwill arise on the acquisition of subsidiaries.

Goodwill represents the excess of the cost of the acquisition over the Group’s interest inthe net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree.

Goodwill is measured at cost less accumulated impairment losses. Goodwill is tested forimpairment as described in note 2.8. Negative goodwill is recognised immediately in theincome statement.

Acquisitions of minority interests

Goodwill arising on the acquisition of minority interests in a subsidiary represents the excessof the cost of the additional investment over the carrying amount of the net assets acquiredat the date of exchange.

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2 Summary of significant accounting policies (cont’d)

2.6 Financial instruments

Non-derivative financial assets

Non-derivative financial instruments comprise trade and other receivables, cash and cashequivalents, financial liabilities and trade and other payables. These non-derivative financialinstruments are recognised initially at fair value plus any directly attributable transactioncosts. Subsequent to initial recognition, non-derivative financial instruments are measuredat amortised cost using the effective interest method, less any impairment losses.

A financial instrument is recognised if the Group becomes a party to the contractualprovisions of the instrument. Financial assets are derecognised if the Group’s contractualrights to the cash flows from the financial assets expire or if the Group transfers thefinancial assets to another party without retaining control or transfers substantially all therisks and rewards of the assets. Regular way purchases and sales of financial assets areaccounted for at trade date, i.e., the date that the Group commits itself to purchase or sellthe asset. Financial liabilities are derecognised if the Group’s obligations specified in thecontract expire or are discharged or cancelled.

Cash and cash equivalents comprise cash balances and bank deposits. Bank overdrafts thatare repayable on demand and that form an integral part of the Group’s cash managementare included as a component of cash and cash equivalents for the purposes of the cashflow statement.

Derivative financial instruments and hedging activities

The Group holds derivative financial instruments to hedge its foreign currency and interestrate risk exposures. Embedded derivatives are separated from the host contract and accountedfor separately if the economic characteristics and risks of the host contract and the embeddedderivative are not closely related, a separate instrument with the same terms as the embeddedderivative would meet the definition of a derivative, and the combined instrument is notmeasured at fair value through profit or loss.

Derivatives are recognised initially at fair value; attributable transaction costs are recognisedin the income statement when incurred. Subsequent to initial recognition, derivatives aremeasured at fair value.

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2 Summary of significant accounting policies (cont’d)

2.6 Financial instruments (cont’d)

Impairment of financial assets

A financial asset is assessed at each reporting date to determine whether there is anyobjective evidence that it is impaired. A financial asset is considered to be impaired ifobjective evidence indicates that one or more events have had a negative effect on theestimated future cash flows of that asset.

An impairment loss in respect of a financial asset measured at amortised cost is calculatedas the difference between its carrying amount, and the present value of the estimatedfuture cash flows discounted at the original effective interest rate.

Individually significant financial assets are tested for impairment on an individual basis. Theremaining financial assets are assessed collectively in groups that share similar credit riskcharacteristics.

All impairment losses are recognised in the income statement.

An impairment loss is reversed if the reversal can be related objectively to an event occurringafter the impairment loss was recognised. For financial assets measured at amortised cost,the reversal is recognised in the income statement.

Share capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of ordinary shares and share options arerecognised as a deduction from equity, net of any tax effects.

Where share capital recognised as equity is repurchased (treasury shares), the amount ofthe consideration paid, including directly attributable costs, net of any tax effects, is presentedas a deduction from equity. Where such shares are subsequently reissued, sold or cancelled,the consideration received is recognised as a change in equity. No gain or loss is recognisedin the income statement.

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2 Summary of significant accounting policies (cont’d)

2.7 Leases

When entities within the Group are lessees of a finance lease

Leased assets in which the Group assumes substantially all the risks and rewards of ownershipare classified as finance leases. Upon initial recognition, property, plant and equipmentacquired through finance leases are capitalised at the lower of its fair value and the presentvalue of the minimum lease payments. Subsequent to initial recognition, the asset isaccounted for in accordance with the accounting policy applicable to that asset. Leasedassets are depreciated over the shorter of the lease term and their useful lives. Lease paymentsare apportioned between finance expense and reduction of the lease liability. The financeexpense is allocated to each period during the lease term so as to produce a constantperiodic rate of interest on the remaining balance of the liability. Contingent lease paymentsare accounted for by revising the minimum lease payments over the remaining term of thelease when the lease adjustment is confirmed.

When entities within the Group are lessees of an operating lease

Where the Group has the use of assets under operating leases, payments made under theleases are recognised in the income statement on a straight-line basis over the term of thelease. Lease incentives received are recognised in the income statement as an integral partof the total lease payments made. Contingent rentals are charged to the profit and lossaccount in the accounting period in which they are incurred.

2.8 Impairment – non-financial assets

The carrying amounts of the Group’s non-financial assets, other than inventories and deferredtax assets, are reviewed at each reporting date to determine whether there is any indicationof impairment. If any such indication exists, the assets’ recoverable amounts are estimated.

An impairment loss is recognised if the carrying amount of an asset or its cash-generatingunit exceeds its recoverable amount. A cash-generating unit is the smallest identifiableasset group that generates cash flows that are largely independent from other assets andgroups. Impairment losses are recognised in the income statement unless it reverses aprevious revaluation, credited to equity, in which case it is charged to equity. Impairmentlosses recognised in respect of cash-generating units are allocated first to reduce the carryingamount of any goodwill allocated to the units and then to reduce the carrying amount ofthe other assets in the unit (group of units) on a pro rata basis.

The recoverable amount of an asset or cash-generating unit is the greater of its value inuse and its fair value less costs to sell. In assessing value in use, the estimated future cashflows are discounted to their present value using a pre-tax discount rate that reflects currentmarket assessments of the time value of money and the risks specific to the asset or cash-generating unit.

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2 Summary of significant accounting policies (cont’d)

2.8 Impairment – non-financial assets (cont’d)

Impairment losses recognised in prior periods are assessed at each reporting date for anyindications that the loss has decreased or no longer exists. An impairment loss is reversedif there has been a change in the estimates used to determine the recoverable amount. Animpairment loss is reversed only to the extent that the asset’s carrying amount does notexceed the carrying amount that would have been determined, net of depreciation oramortisation, if no impairment loss had been recognised.

2.9 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated usingthe weighted average cost formula and comprises all costs of purchase, costs of conversionand other costs incurred in bringing the inventories to their present location and condition.In the case of manufactured inventories and work-in-progress, cost includes an appropriateshare of production overheads based on normal operating capacity. Net realisable value isthe estimated selling price in the ordinary course of business, less the estimated costs ofcompletion and selling expenses.

2.10 Non-current assets held for sale

Non-current assets that are expected to be recovered primarily through sale rather thancontinuing use are classified as held for sale. Immediately before classification as held forsale, the assets are remeasured in accordance with the Group’s accounting policies. Thereaftergenerally the assets are measured at the lower of their carrying amount and fair value lesscost to sell. Impairment losses on initial classification as held for sale and subsequent gainsor losses on remeasurement are recognised in the income statement. Gains are not recognisedin excess of any cumulative impairment loss.

2.11 Employee benefits

Defined contribution plans

Obligations for contributions to defined contribution pension plans are recognised as anexpense in the income statement as incurred.

Short-term benefits

Short-term employee benefit obligations are measured on an undiscounted basis and areexpensed as the related service is provided.

A provision is recognised for the amount expected to be paid under short-term cash bonusor profit-sharing plans if the Group has a present legal or constructive obligation to paythis amount as a result of past service provided by the employee and the obligation can beestimated reliably.

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2 Summary of significant accounting policies (cont’d)

2.12 Provision

A provision is recognised if, as a result of a past event, the Group has a present legal orconstructive obligation that can be estimated reliably, and it is probable that an outflow ofeconomic benefits will be required to settle the obligation. Provisions are determined bydiscounting the expected future cash flows at a pre-tax that reflects current marketassessments of the time value of money and the risks specific to the liability.

2.13 Revenue recognition

Sale of goods

Revenue from the sale of goods is measured at the fair value of the consideration receivedor receivable, net of returns and allowances, trade discounts and volume rebates. Revenueis recognised when the significant risks and rewards of ownership have been transferred tothe buyer, recovery of the consideration is probable, the associated costs and possiblereturn of goods can be estimated reliably, and there is no continuing managementinvolvement with the goods, and the amount of revenue can be measured reliably.

Transfers of risks and rewards vary depending on the individual terms of the contract ofsale. For sales of goods, transfer usually occurs when the product is received at the customers’warehouse; however, for some international shipments, transfer occurs upon loading of thegoods on to the relevant carrier.

Rental income

Rental income receivable under operating leases is recognised in the income statement ona straight-line basis over the term of the lease. Lease incentives granted are recognised asan integral part of the total rental income to be received. Contingent rentals are recognisedas income in the accounting period in which they are earned.

2.14 Finance income and expense

Finance income comprises interest income on funds placed as bank deposits that arerecognised in the income statement. Finance expenses comprise interest expense onborrowings that are recognised in the income statement.

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2 Summary of significant accounting policies (cont’d)

2.15 Income tax expense

Income tax expense comprises current and deferred tax. Income tax expense is recognisedin the income statement except to the extent that it relates to items recognised directly inequity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax ratesenacted or substantively enacted at the reporting date, and any adjustment to tax payablein respect of previous years.

Deferred tax is recognised using the balance sheet method, providing for temporarydifferences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for taxation purposes. Deferred tax is not recognised forthe following temporary differences: the initial recognition of goodwill, the initial recognitionof assets or liabilities in a transaction that not a business combination and that affectsneither accounting nor taxable profit and differences relating to investments in subsidiariesto the extent that it is probable that they will not reverse in the foreseeable future. Deferredtax is measured at the tax rates that are expected to be applied to the temporary differenceswhen they reverse, based on the laws that have been enacted or substantively enacted bythe reporting date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offsetcurrent tax liabilities and assets and they relate to income taxes levied by the same taxauthority as the same taxable entity, or on different tax entities, but intend to settle currenttax liabilities and assets on a net basis or their tax assets and liabilities will be realisedsimultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxableprofits will be available against which temporary differences can be utilised. Deferred taxassets are reviewed at each reporting date and are reduced to the extent that it is nolonger probable that the related tax benefit will be realised.

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3 Property, plant and equipment

Furniture,Leasehold fittings Material

Freehold Freehold land and and office handling Motor Constructionland building building equipment equipment Computers vehicles -in-progress Total

Group $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000CostAt 1 January 2006 223 1,322 14,925 1,988 3,376 843 1,187 – 23,864Additions – – – 71 1,567 373 485 165 2,661Disposals – – – (5) (351) (2) (62) – (420)Transfers – – 182 (2) (15) – – (165) –Written off – – – (39) – – – – (39)Translation differences on

consolidation (6) (33) (33) (16) (171) (9) (19) – (287)At 31 December 2006 217 1,289 15,074 1,997 4,406 1,205 1,591 – 25,779Additions – – – 101 1,813 143 442 79 2,578Disposals – – – (1) (1,416) – (96) – (1,513)Reclassified to assets held

for sale – – (650) – 67 4 7 (78) (650)Written off – – – (9) (563) (34) (1) – (607)Translation differences on

consolidation 1 5 6 (12) 44 (9) (26) – 9At 31 December 2007 218 1,294 14,430 2,076 4,351 1,309 1,917 1 25,596

Accumulated depreciationAt 1 January 2006 – 266 1,739 1,888 999 768 974 – 6,634Depreciation charge for

the year – 26 311 42 248 100 91 – 818Disposals – – – (5) (69) – (49) – (123)Written off – – – (38) – – – – (38)Translation differences on

consolidation – (7) (3) (15) (25) (7) (18) – (75)At 31 December 2006 – 285 2,047 1,872 1,153 861 998 – 7,216Depreciation charge for

the year – 26 335 56 443 169 199 – 1,228Reclassified to assets held

for sale – – (100) – – – – – (100)Disposals – – – – (347) – (79) – (426)Written off – – – (8) (144) (23) (1) – (176)Translation differences on

consolidation – 1 – (12) 4 (9) (23) – (39)At 31 December 2007 – 312 2,282 1,908 1,109 998 1,094 – 7,703

Carrying amountAt 1 January 2006 223 1,056 13,186 100 2,377 75 213 – 17,230At 31 December 2006 217 1,004 13,027 125 3,253 344 593 – 18,563At 31 December 2007 218 982 12,148 168 3,242 311 823 1 17,893

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3 Property, plant and equipment (cont’d)

Furniture,Leasehold fittings Materialland and and office handling Motorbuilding equipment equipment Computers vehicles Total

Company $’000 $’000 $’000 $’000 $’000 $’000

Cost

At 1 January 2006 14,430 1,315 739 471 198 17,153

Additions – 14 16 354 390 774

Disposals – (5) – (2) – (7)

At 31 December 2006 14,430 1,324 755 823 588 17,920

Additions – 3 5 86 – 94

Disposals – – – (2) – (2)

At 31 December 2007 14,430 1,327 760 907 588 18,012

Accumulated depreciation

At 1 January 2006 1,702 1,255 638 438 131 4,164

Depreciation charge forthe year 290 24 37 85 30 466

Disposals – (5) – – – (5)

At 31 December 2006 1,992 1,274 675 523 161 4,625

Depreciation charge forthe year 290 20 26 146 95 577

Disposals – – – (2) – (2)

At 31 December 2007 2,282 1,294 701 667 256 5,200

Carrying amount

At 1 January 2006 12,728 60 101 33 67 12,989

At 31 December 2006 12,438 50 80 300 427 13,295

At 31 December 2007 12,148 33 59 240 332 12,812

The carrying amount of the property, plant and equipment of the Group and the Companyincludes amounts totalling $591,000 (2006: $427,000) and $323,000 (2006: $427,000)respectively in respect of office equipment and motor vehicles held under finance leaseagreements.

During the year, the Group acquired property, plant and equipment with an aggregate costof $2,578,000 (2006: $2,661,000), of which $240,000 (2006: $377,000) were under financeleases.

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3 Property, plant and equipment (cont’d)

The following property, plant and equipment are pledged as security to secure credit facilities:

Group2007 2006$’000 $’000

At carrying amount:

– leasehold land and building 12,148 12,438

– material handling equipment and motor vehicles 89 1,087

12,237 13,525

4 SubsidiariesCompany

2007 2006$’000 $’000

Equity investments, at cost 17,625 13,639

Allowance for impairment losses (3,726) –

Carrying amount 13,899 13,639

EffectiveCountry of equity held

Name of subsidiary incorporation by the Group2007 2006

% %

Ho Leong Tractors Sdn. Bhd. Malaysia 100 100

Hoe Leong Machinery (H.K.) Limited(a) Hong Kong 100 100

Quanzhou Kanto Buhin Machinery People’s Republic 100 –Manufacturing Co., Ltd.* of China

PT Trackspare(b) Indonesia 99 99

Jilin Kanto Buhin Construction Machinery People’s Republic 100 100Manufacturing Co., Ltd. of China

Shenyang Milequip Industry Co., Ltd. People’s Republic 83.2 83.2of China

Kunshan Kanto Buhin Manufacturing Co., Ltd. People’s Republic 100 100of China

Trackspares (Australia) Pty Ltd.(c) Australia 71.4 –

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4 Subsidiaries (cont’d)

Other member firms of KPMG International are auditors of significant foreign-incorporatedsubsidiaries.

(a) Audited by Maradebbie & Partners (Practising) CPA, Hong Kong.

(b) Audited by Drs Bernardi & Co., Indonesia.

(c) Audited by Fowler Board Chartered Accountants, Australia.

* A wholly-owned subsidiary held under Hoe Leong Machinery (H.K.) Limited.

Due to continued losses of a subsidiary, the Company performed an impairment review toassess the recoverable amount of the investment in the subsidiary. The estimated recoverableamount of the subsidiary was based on its estimated net selling price.

5 Deferred tax

Movements in deferred tax assets and liabilities of the Group (prior to offsetting of balances)during the year are as follows:

Recognised RecognisedAt in income At in income At

1 January statement 31 December statement 31 December2006 (note 17) 2006 (note 17) 2007

Group $’000 $’000 $’000 $’000 $’000

Deferred tax assets

Provisions 20 4 24 – 24

Others – (4) (4) 14 10

20 – 20 14 34

Deferred tax liabilities

Property, plant andequipment (42) (32) (74) (16) (90)

Others – 32 32 – 32

(42) – (42) (16) (58)

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5 Deferred tax (cont’d)

Deferred tax assets and liabilities of the Company (prior to offsetting of balances) areattributable to the following:

Company2007 2006$’000 $’000

Deferred tax assets

Provisions 21 20

Deferred tax liabilities

Property, plant and equipment (58) (42)

Deferred tax liabilities and assets are offset when there is a legally enforceable right to setoff current tax assets against current tax liabilities and when the deferred taxes relate tothe same taxation authority. The following amounts, determined after appropriate offsetting,are included in the balance sheet as follows:

Group Company2007 2006 2007 2006$’000 $’000 $’000 $’000

Deferred tax assets 13 – – –

Deferred tax liabilities (37) (22) (37) (22)

6 Assets held for sale

The leasehold building and land use rights of Jilin Kanto Buhin Construction MachineryManufacturing Co., Ltd., a subsidiary of the Group, is presented as held for sale followingthe decision on 18 April 2007 to cease its operations and to transfer it to another subsidiary,Kunshan Kanto Buhin Manufacturing Co., Ltd. As at 31 December 2007, the carryingamount of the leasehold building and land use rights is $550,000.

7 Inventories

Group Company2007 2006 2007 2006$’000 $’000 $’000 $’000

Raw materials 682 1,194 – –

Work-in-progress 1,191 1,782 – –

Finished goods 37,890 32,059 31,659 27,323

Goods-in-transit 801 514 682 327

40,564 35,549 32,341 27,650

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7 Inventories (cont’d)

In 2007, raw materials and changes in finished goods and work-in-progress, recognised incost of sales for the year, amounted to $47,142,000 (2006: $43,160,000).

Finished goods are stated after deducting an allowance for obsolete inventories amountingto $18,309,000 (2006: $19,886,000) and $15,917,000 (2006: $17,518,000) for the Groupand the Company respectively.

Change in estimates

During the year ended 31 December 2007, the Group reassessed its accounting estimatefor making allowance for obsolete inventories based on recent experience and price trends.The effect of the change in estimating allowance for obsolete inventories resulted in acredit of $2,773,000 recognised in the income statement in 2007. It is impractical to estimatethe effect of this change in future period.

8 Trade and other receivables

Group Company2007 2006 2007 2006$’000 $’000 $’000 $’000

Trade receivables 24,846 24,062 17,473 17,716

Impairment losses (1,567) (1,586) (211) (220)

Net receivables 23,279 22,476 17,262 17,496

Advance to suppliers 466 616 – –

Deposits 1,950 102 1,884 30

Recoverables 13 20 6 12

Rental receivables 21 24 21 24

Prepayments 336 527 154 134

Tax recoverables 109 11 – –

Others 62 – – –

Trade amounts due from:

– subsidiaries – – 9,027 6,049

– affiliated corporations 3 44 – –

Non-trade amounts due from:

– subsidiaries – – 1,234 133

26,239 23,820 29,588 23,878

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8 Trade and other receivables (cont’d)

Outstanding balances with related companies are unsecured and interest-free. There is noallowance for doubtful debts arising from the outstanding balances.

The maximum exposure to credit risk for trade receivables at the reporting date (by country)is:

Group Company2007 2006 2007 2006$’000 $’000 $’000 $’000

Singapore 473 554 9,556 10,956

Malaysia 9,524 9,320 1,681 1,508

Indonesia 6,934 6,589 1,420 960

People’s Republic of China/Hong Kong 1,337 1,941 – –

Emerging markets* 3,979 3,474 3,979 3,474

Others 1,032 598 626 598

23,279 22,476 17,262 17,496

* Emerging markets refer to India, Middle East, Pakistan and Russia.

Impairment losses

The ageing of trade receivables at the reporting date is:

Impairment ImpairmentGross losses Gross losses2007 2007 2006 2006$’000 $’000 $’000 $’000

Group

Not past due 7,185 – 7,486 –

Past due 0 - 30 days 3,799 – 3,913 –

Past due 31 - 120 days 7,908 – 5,758 –

Past due more than 120 days 5,954 1,567 6,905 1,586

24,846 1,567 24,062 1,586

Company

Not past due 4,391 – 6,201 –

Past due 0 - 30 days 2,733 – 3,594 –

Past due 31 - 120 days 8,775 – 6,760 –

Past due more than 120 days 1,574 211 1,161 220

17,473 211 17,716 220

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8 Trade and other receivables (cont’d)

Impairment losses (cont’d)

The change in impairment loss in respect of trade receivables during the year is as follows:

Group Company2007 2006 2007 2006$’000 $’000 $’000 $’000

At 1 January 1,586 1,424 220 101Impairment loss (reversed)/recognised (19) 162 (9) 119At 31 December 1,567 1,586 211 220

Based on historical default rates, the Group believes that no impairment allowance isnecessary in respect of trade receivables not past due and those that have past due, exceptfor certain specific doubtful receivables identified and for which impairment loss is recognised.Outstanding trade receivables are mainly arising by customers that have a good record withthe Group.

9 Cash and cash equivalentsGroup Company

Note 2007 2006 2007 2006$’000 $’000 $’000 $’000

Cash in hand and at banks 4,901 3,153 890 807Bank overdrafts (secured) 12 (1,700) (817)Cash and cash equivalents in the cash

flow statement 3,201 2,336

Included in cash at banks are amounts of $1,182,000 (2006: $1,061,000) held in countriesunder foreign exchange controls.

The weighted average effective interest rates per annum for cash at banks at the balancesheet date for the Group and Company are 1.76% (2006: 0.94%) and 2.53% (2006:2.10%) respectively. Interest rates reprice at intervals of one, three or six months.

10 Share capitalGroup and Company

2007 2006No. of shares No. of shares

(’000) (’000)Fully paid ordinary shares, with no par valueAt 1 January 188,791 188,791Issue of new shares– Rights cum warrants issue 75,516 –– Exercise of warrants 63 –

At 31 December 264,370 188,791

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10 Share capital (cont’d)

During the financial year, the following share issues were made by the Company:

• 75,516,000 rights shares at $0.12 each with 18,879,000 free detachable warrants atan exercise price of $0.16.

• 63,000 shares were issued at $0.16 each fully paid for cash upon the exercise ofwarrants.

At 31 December 2007, there were 18,816,000 warrants outstanding.

Each warrant entitles the warrant holder to subscribe for one new ordinary share in theCompany at the exercise price of $0.16 per share. The warrants do not entitle the holdersof the warrants, by virtual of such holdings, to any rights to participate in any share issueof any other company. The warrants were listed and quoted on the SGX-ST on 5 June2007 and expire on 30 May 2009.

The holders of ordinary shares are entitled to receive dividends as declared from time totime and are entitled to one vote per share at the meeting of the Company. All shares rankequally with regard to the Company’s residual assets.

Capital management

The Board’s policy is to maintain adequate capital base so as to maintain investors’, creditors’and market confidence and to sustain future development of the business. The Board ofDirectors monitors the return on capital, which the Group defines as net operating incomedivided by total shareholders’ equity excluding minority interests. The Board also monitorsthe level of dividends to ordinary shareholders. The Group funds its operations and growththrough a mix of equity and debts. This includes the maintenance of adequate lines ofcredit and assessing the need to raise additional equity where required.

There were no changes in the Group’s approach to capital management during the year.

Neither the Company nor any of its subsidiaries are subject to externally imposed capitalrequirement.

11 Currency translation reserve

The currency translation reserve of the Group comprises foreign exchange differences arisingfrom the translation of the financial statements of foreign entities whose functional currenciesare different from that of the Company.

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12 Financial liabilities

Group CompanyNote 2007 2006 2007 2006

$’000 $’000 $’000 $’000

Non-current liabilities

Secured bank loan A 873 1,455 873 1,455

Secured bank loan B 70 – – –

Finance lease liabilities 358 322 265 322

1,301 1,777 1,138 1,777

Current liabilities

Secured bank overdraft 9 1,700 817 1,700 817

Secured bank loan A 582 563 582 563

Secured bank loan B 19 – – –

Secured bank loan C – 1,332 – –

Secured bank loan D 4,000 – 4,000 –

Unsecured bank loan E 6,290 7,970 6,290 7,970

Unsecured bank loan F 4,000 4,000 4,000 4,000

Secured trust receipts 4,600 5,997 4,600 5,997

Unsecured trust receipts 6,540 4,965 6,540 4,965

Finance lease liabilities 93 60 57 60

27,824 25,704 27,769 24,372

Total financial liabilities 29,125 27,481 28,907 26,149

Interest-bearing borrowings

(i) The secured bank loans A and D, bank overdraft and trust receipts are secured by afirst legal mortgage over leasehold property of the Company with a book value of$12,148,000 (2006: $12,438,000).

(ii) The secured bank loan B is secured by chattel mortgages over the motor vehicles of asubsidiary with a carrying amount of $89,000 (2006: Nil), and a personal guaranteeby a director of a subsidiary.

(iii) The secured bank loan C was secured by certain property, plant and equipment of asubsidiary with a carrying amount of $Nil (2006: $1,088,000). The loan has been fullyrepaid in 2007.

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12 Financial liabilities (cont’d)

Finance lease liabilities

At 31 December 2007, the Group and the Company had obligations under finance leasesthat are repayable as follows:

2007 2006 Group Payments Interest Principal Payments Interest Principal

$’000 $’000 $’000 $’000 $’000 $’000

Payable:

Within 1 year 110 17 93 74 14 60

After 1 year but within 5 years 366 63 303 267 52 215

More than 5 years 67 12 55 132 25 107

543 92 451 473 91 382

Company

Payable:

Within 1 year 70 13 57 74 14 60

After 1 year but within 5 years 261 51 210 267 52 215

More than 5 years 67 12 55 132 25 107

398 76 322 473 91 382

Terms and debt repayment schedule

Terms and conditions of outstanding loans and borrowings are as follows:

2007 2006Face Carrying Face Carrying

Year of maturity value amount value amountGroup $’000 $’000 $’000 $’000

S$ floating rate loans

– loan A 2008 – 2010 1,455 1,455 2,018 2,018

– loan D 2008 4,000 4,000 – –

– loan E 2008 6,290 6,290 7,970 7,970

– loan F 2008 4,000 4,000 4,000 4,000

A$ fixed rate loan B 2008 – 2011 89 89 – –

RMB fixed rate loan C 2007 – – 1,332 1,332

Finance lease liabilities 2009 – 2014 451 451 382 382

Trust receipts 2008 11,140 11,140 10,962 10,962

Bank overdrafts Repayable on demand 1,700 1,700 817 817

29,125 29,125 27,481 27,481

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12 Financial liabilities (cont’d)

Terms and debt repayment schedule (cont’d)2007 2006

Face Carrying Face CarryingYear of maturity value amount value amount

Company $’000 $’000 $’000 $’000S$ floating rate loan– loan A 2008 – 2010 1,455 1,455 2,018 2,018– loan D 2008 4,000 4,000 – –– loan E 2008 6,290 6,290 7,970 7,970– loan F 2008 4,000 4,000 4,000 4,000Finance lease liabilities 2009 – 2014 322 322 382 382Trust receipts 2008 11,140 11,140 10,962 10,962Bank overdrafts Repayable on demand 1,700 1,700 817 817

28,907 28,907 26,149 26,149

The floating rate term loans bear interest of approximately 3% to 5% (2006: 3% to 5%)per annum and are repriced on monthly to half-yearly basis.

The A$ fixed rate loan bears interest of approximately 8% to 10% (2006: Nil) per annum.

Bank overdrafts are unsecured, repayable on demand and have a weighted average effectiveinterest rate of 6% (2006: 6%) per annum. Interest rates of bank overdrafts reprice at aninterval of 1 month.

The weighted average effective interest rate of trust receipts at the end of the financialyear is 6.34% (2006: 4.56%) per annum. Interest rate reprice at intervals of one, three orsix months.

The following are the expected contractual undiscounted cash inflows/(outflows) of financialliabilities, including interest payments and excluding the impact of netting agreements:

Carryingamount Cash flows

Contractual Within Morecash Within 1 to 5 than

Group flows 1 year years 5 years2007 $’000 $’000 $’000 $’000 $’000Non-derivative financial liabilitiesVariable interest rate loans 15,745 (15,954) (15,051) (903) –Fixed interest rate loan 89 (89) (70) (19) –Finance lease liabilities 451 (543) (110) (366) (67)Bank overdrafts 1,700 (1,700) (1,700) – –Trust receipts 11,140 (11,140) (11,140) – –Trade and other payables* 7,989 (7,989) (7,989) – –

(37,415) (36,060) (1,288) (67)

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12 Financial liabilities (cont’d)

Terms and debt repayment schedule (cont’d)Carryingamount Cash flows

Contractual Within Morecash Within 1 to 5 than

Group flows 1 year years 5 years2006 $’000 $’000 $’000 $’000 $’000Non-derivative financial liabilitiesVariable interest rate loans 13,988 (14,306) (12,770) (1,536) –Fixed interest rate loans 1,332 (1,377) (1,377) – –Finance lease liabilities 382 (473) (74) (399) –Bank overdrafts 817 (817) (817) – –Trust receipts 10,962 (10,962) (10,962) – –Trade and other payables* 6,070 (6,070) (6,070) – –

(34,005) (32,070) (1,935) –

2006Derivative financial liabilitiesForward exchange contracts used for

hedging – outflow 2,454 2,503 2,503 – –

Company

2007Non-derivative financial liabilitiesVariable interest rate loans 15,745 (15,954) (15,051) (903) –Finance lease liabilities 322 (398) (70) (261) (67)Trust receipts 11,140 (11,140) (11,140) – –Trade and other payables* 6,968 (6,968) (6,968) – –

(34,460) (33,229) (1,164) (67)2006Non-derivative financial liabilitiesVariable interest rate loans 13,988 (14,306) (12,770) (1,536) –Finance lease liabilities 382 (473) (74) (267) (132)Bank overdrafts 817 (817) (817) – –Trust receipts 10,962 (10,962) (10,962) – –Trade and other payables* 4,981 (4,981) (4,981) – –

(31,539) (29,604) (1,803) (132)2006Derivative financial liabilitiesForward exchange contracts used for

hedging – outflow 2,454 2,503 2,503 – –

* Excludes accrued expenses.

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13 Trade and other payables

Group Company2007 2006 2007 2006$’000 $’000 $’000 $’000

Trade payables 2,899 3,234 1,379 2,060

Bills payable (secured) 1,066 446 1,066 446

Bills payable (unsecured) 3,397 1,117 3,397 1,117

Other payables and accrued expenses 2,119 2,112 1,567 1,620

Deposits 225 233 225 229

Derivative liabilities – 49 – 49

Trade amounts due to:

– subsidiaries – – 298 387

– others – 41 – –

Non-trade amounts due to:

– subsidiaries – – 279 392

– others (loan) – 474 – –

9,706 7,706 8,211 6,300

Outstanding balances with related parties and loan amount due to others are unsecured,interest free and repayable on demand.

14 Revenue

Revenue represents sales of goods less discounts and returns.

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15 Finance income and expense

Group2007 2006$’000 $’000

Recognised in the income statement

Interest income from bank deposits 37 31

Finance income 37 31

Interest expense:

– interest-bearing borrowings (including bank overdrafts) (1,379) (1,409)

– finance lease liabilities (16) (3)

Finance expense (1,395) (1,412)

Net finance income and expense recognised in incomestatement (1,358) (1,381)

16 Profit before income tax

Profit before income tax includes the following:

Group2007 2006$’000 $’000

Non-audit fees paid to:

– auditors of the Company 12 6

– other auditors 85 85

Operating lease expenses 830 737

Exchange loss/(gain) 829 (112)

Allowance (written-back)/made for obsolete inventories (1,567) 1,613

Inventories written off – 367

Allowance made for doubtful receivables, net of write-back 28 177

Property, plant and equipment written off 431 –

Loss/(gain) on disposal of property, plant and equipment 173 (42)

Negative goodwill on acquisition of minority interests – (221)

Rental income (1,276) (1,394)

Staff costs 4,978 3,634

Contributions to defined contribution plans, included instaff costs 378 249

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17 Income tax expenseGroup

2007 2006$’000 $’000

Current tax expenseCurrent year 1,725 1,478Adjustments for prior years (373) 199

1,352 1,677Deferred tax expenseOrigination and reversal of temporary differences (21) –Underprovision in prior year 23 –Total income tax expense 2 –

1,354 1,677

Reconciliation of effective tax rateProfit before income tax 4,304 5,753Tax using the Singapore tax rate of 18% (2006: 20%) 775 1,151Effect of reduction in tax rates (2) –Effect of different tax rates in other countries 536 (1)Expenses not deductible for tax purposes 790 313Income not subject to tax (519) (19)(Over)/underprovided in prior years (351) 199Deferred tax asset not recognised 118 44Others 7 (10)

1,354 1,677

The Singapore corporate tax rate has been reduced from 20% to 18% with effect fromthe financial year ended 31 December 2007.

Deferred tax assets have not been recognised in respect of the following items:

Group Company2007 2006 2007 2006$’000 $’000 $’000 $’000

Deductible temporary differences 2,160 2,531 – –

Tax losses 1,029 – – –

The tax losses are subject to agreement by the tax authorities and compliance with taxregulations in the respective countries in which certain subsidiaries operate. The deductibletemporary differences do not expire under current tax legislation. Deferred tax assets havenot been recognised in respect of these items because it is not probable that future taxableprofit will be available against which the Group can utilise the benefits.

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18 Earnings per shareGroup

2007 2006$’000 $’000

Basic earnings per share is based on:

Net profit attributable to equity holders of the Company 3,000 4,087

No. of No. ofshares shares(’000) (’000)

Issued ordinary shares at beginning of the year 188,791 188,791

Effect of new shares issued 44,082 –

Weighted average number of ordinary shares at theend of the year 232,873 188,791

$’000 $’000Diluted earnings per share is based on:

Net profit attributable to equity holders of the Company 3,000 4,087

No. of No. ofshares shares(’000) (’000)

Weighted average number of ordinary shares used inthe calculation of basic earnings per share 232,873 188,791

Potential ordinary shares issuable under warrants 10,976 –

Adjusted weighted average number of ordinary sharesin issue 243,849 188,791

For the purpose of calculating the diluted earnings per ordinary share, the weighted averagenumber of ordinary shares in issue is adjusted to take into account the dilutive effectarising from the dilutive share options and contingently issueable shares, with potentialordinary shares weighted for the period outstanding.

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19 Segment reporting

Segment information is presented in respect of the Group’s business and geographicalsegments. The primary format for business segments is based on the Group’s managementand internal reporting structure.

Inter-segment pricing is determined on mutually agreed terms.

Segment results, assets and liabilities include items directly attributable to a segment aswell as those that can be allocated on a reasonable basis. Unallocated items comprisemainly property, plant and equipment, cash and bank balances, loans and expenses, corporateassets and head office expenses, and income tax assets and liabilities.

Segment capital expenditure is the total cost incurred during the period to acquire property,plant and equipment, and intangible assets other than goodwill.

Business segments

The Group comprises the following main business segments:

(i) Design and manufacture

Design, manufacture and sale of equipment parts for both heavy equipment andindustrial machinery under in-house brand names, “KBJ”, “OEM”, “ROSSI” and “TMI”.

(ii) Trading and distribution

Trading and distributing of an extensive range of equipment parts for both heavyequipment and industrial machinery sourced from third parties.

Geographical segments

The Group’s businesses operate in five principal geographical areas, namely, Singapore,Malaysia, Indonesia, People’s Republic of China (PRC)/Hong Kong and the Emerging Markets.

Emerging markets refer to India, Middle East, Pakistan and Russia.

In presenting information on the basis of geographical segments, segment revenue is basedon the geographical location of customers. Segment assets are based on the geographicallocation of the assets.

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19 Segment reporting (cont’d)

(a) Business segmentsDesign and Trading and

manufacture distribution Total operation2007 2006 2007 2006 2007 2006$’000 $’000 $’000 $’000 $’000 $’000

Revenue and expenses

Total external revenue 25,020 21,948 40,183 41,561 65,203 63,509

Segment results 601 3,289 3,610 2,045 4,211 5,334

Other income 1,451 1,800

Net finance costs (1,358) (1,381)

Income tax expense (1,354) (1,677)

Profit for the year 2,950 4,076

Assets and liabilities

Segment assets 33,605 21,542 35,010 36,529 68,615 58,071

Unallocated assets 21,545 23,014

Total assets 90,160 81,085

Segment liabilities 10,268 1,208 8,450 2,053 18,718 3,261

Unallocated liabilities 21,522 33,401

Total liabilities 40,240 36,662

Other segment information

Capital expenditure 2,578 2,661

Depreciation 1,228 818

Allowance (written-back)/made forobsolete inventories (1,567) 1,613

Allowance made for doubtful receivables, net of write-back 28 177

Inventories written off – 367

Property, plant and equipment written off 431 –

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19 Segment reporting (cont’d)

(b) Geographical segments

PRC/ Emerging Other TotalSingapore Malaysia Indonesia Hong Kong markets regions operation

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

2007

Revenue fromexternalcustomers 2,641 20,386 20,142 7,041 10,158 4,835 65,203

Segment assets 55,350 14,247 7,928 10,030 – 2,605 90,160

Capital expenditure 94 320 51 1,995 – 118 2,578

2006

Revenue fromexternalcustomers 2,585 20,846 20,823 7,188 9,162 2,905 63,509

Segment assets 42,748 15,195 7,886 11,121 3,525 610 81,085

Capital expenditure 775 9 62 1,815 – – 2,661

20 Financial risk management

Risk management is integral to the whole business of the Group. The Group has a systemof controls in place to create an acceptable balance between the cost of risks occurringand the cost of managing the risks. The management continually monitors the Group’s riskmanagement process to ensure that an appropriate balance between risk and control isachieved. Risk management policies and systems are reviewed regularly to reflect changesin market conditions and the Group’s activities.

The Audit Committee oversees how management monitors compliance with the Group’srisk management policies and procedures and reviews the adequacy of the risk managementframework in relation to the risks faced by the Group. The Audit Committee is assisted inits oversight role by Internal Audit. Internal Audit undertakes both regular and ad hocreviews of risk management controls and procedures, the results of which are reported tothe Audit Committee.

Credit risk

The Group has a credit policy in place which establishes credit limits for customers andmonitors their balances on an ongoing basis. Credit evaluations are performed on allcustomers requiring credit over a certain amount. Credit quality of customers is assessedafter taking into account its financial position and past experience with the customers.

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20 Financial risk management (cont’d)

Credit risk (cont’d)

The Group establishes an allowance for impairment that represents its estimate of incurredlosses in respect of trade and other receivables. The allowance account in respect of tradeand other receivables is used to record impairment losses unless the Group is satisfied thatno recovery of the amount owing is possible. At that point, the financial asset is consideredirrecoverable and the amount charged to the allowance account is written off against thecarrying amount of the impaired financial asset.

Cash and fixed deposits are placed with banks and financial institutions which are regulated.

At the balance sheet date, there is no significant concentration of credit risk. The maximumexposure to credit risk is represented by the carrying amount of each financial asset at thebalance sheet.

Liquidity risk

The Group monitors its liquidity risk and maintains a level of cash and cash equivalentsdeemed adequate by management to finance the Group’s operations and to mitigate theeffects of fluctuations in cash flows.

Market risk

Market risk is the risk that changes in market prices, such as interest rates and foreignexchange rates, will affect the Group’s income or the value of its holdings of financialinstruments. The objective of market risk management is to manage and control marketrisk exposures within acceptance parameters, while optimising the return on risk.

Interest rate risk

The Group’s fixed-rate borrowings are exposed to a risk of change in their fair value due tochanges in interest rates. The Group’s variable-rate borrowings are exposed to a risk ofchange in cash flows due to changes in interest rates. Short-term receivables and payablesare not exposed to interest rate risk.

Sensitivity analysis

For variable rate financial assets and liabilities, a change of 100bp in interest rate at thereporting date would increase/(decrease) profit before tax by the amounts shown below.This analysis assumes that all other variables, in particular foreign currency rates, remainconstant.

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20 Financial risk management (cont’d)

Interest rate risk (cont’d)

Profit before tax100bp 100bp

increase decrease$’000 $’000

Group

31 December 2007

Variable instruments (286) 286

31 December 2006

Variable instruments (258) 258

Foreign currency risk

The Group is exposed to foreign currency risk on sales, purchases and borrowing that aredenominated in currencies other than the respective functional currencies of Group entities.The currencies giving rise to this risk are primarily US dollar and Euro.

In respect of other monetary assets and liabilities held in currencies other than Singaporedollar, the Group ensures that the net exposure is kept to an acceptable level by buying orselling foreign currencies at spot rates, where necessary, to address short term imbalances.The Group uses forward exchange contracts to hedge its foreign currency risk, wherenecessary, the forward exchange contracts are rated over at maturity at market rates. At 31December 2007, the Group has outstanding forward exchange contracts with notionalamounts of approximately US$Nil (2006: US$1,600,000).

Owing to the nature of the Group’s operations, most transactions have maturity dates ofless than one year.

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20 Financial risk management (cont’d)

Foreign currency risk (cont’d)

The Group’s and Company’s exposures to foreign currencies are as follows:

31 December 2007 31 December 2006US US

Euro dollar Euro dollar$’000 $’000 $’000 $’000

Group

Trade and other receivables 12 7,167 105 6,044

Cash and cash equivalents 4 428 3 642

Trust receipts (1,768) (8,398) (3,250) (7,413)

Trade and other payables (3,112) (2,628) (1,482) (1,962)

(4,864) (3,431) (4,624) (2,689)

Company

Trade and other receivables 12 4,997 105 3,749

Cash and cash equivalents 4 346 3 636

Trust receipts (1,768) (8,398) (3,250) (7,413)

Trade and other payables (3,112) (2,628) (1,482) (1,962)

(4,864) (5,683) (4,624) (4,990)

Sensitivity analysis

A 10% strengthening of Singapore dollar against the following currencies at the reportingdate would increase/(decrease) profit before tax by the amounts shown below. This analysisassumes that all other variables, in particular interest rates, remain constant.

Group CompanyProfit Profit

before tax before tax$’000 $’000

31 December 2007

US dollar 343 568

Euro 486 486

31 December 2006

US dollar 269 499

Euro 462 462

A 10% weakening of Singapore dollar against the above currencies would have had theequal but opposite effect on the above currencies to the amounts shown above, on thebasis that all other variables remain constant.

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20 Financial risk management (cont’d)

Estimation of fair values

The following summarises the significant methods and assumptions used in estimating thefair values of financial instruments of the Group and Company.

Derivative

The fair value of forward exchange contracts is based on their listed market price, if available.If a listed market price is not available, fair value is estimated by discounting the differencebetween the contractual forward price and the current forward price for the residual periodto maturity of the contract using a risk-free interest rate (based on government bonds).

Non-derivative financial liabilities

Fair value, which is determined for disclosure purposes, is calculated based on the presentvalue of future principal and interest cash flows, discounted at the market rate of interestat the reporting date. For finance leases, the market rate of interest is determined byreference to similar lease agreements.

Other financial assets and liabilities

The carrying amounts of financial liabilities with a maturity of less than one year (includingtrade and other receivables, cash and cash equivalents, and trade and other payables) areassumed to approximate their fair values because of the short period to maturity. All otherfinancial assets and liabilities are discounted to determine their fair values.

The aggregate net fair values of recognised financial assets and liabilities which are notcarried at fair value in the balance sheet at 31 December are represented in the followingtable:

Carrying Fair Carrying Fairamount value amount value

Group 2007 2007 2006 2006$’000 $’000 $’000 $’000

Financial liabilities

Secured bank loans 1,455 1,536 3,350 3,544

Unrecognised loss (81) (194)

Company

Financial liabilities

Secured bank loans 1,455 1,536 2,018 2,167

Unrecognised loss (81) (149)

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21 Commitments

(a) Operating lease commitments

At 31 December 2007, the Group and the Company have commitments for futureminimum lease payments under non-cancellable operating leases as follows:

The Group leases land, warehouse and factory facilities under operating leases. Theleases typically run for an initial period of two to thirty years, with an option to renewafter that date. Lease payments are usually increased annually to reflect market rentals.None of the leases includes contingent rentals.

Group Company2007 2006 2007 2006$’000 $’000 $’000 $’000

Payable:

Within 1 year 453 509 362 343

After 1 year but within 5 years 1,503 1,621 1,449 1,374

After 5 years 14,795 14,342 14,795 14,342

16,751 16,472 16,606 16,059

(b) Operating lease receivables

The Group leases out its leasehold building owned by the Company (refer to Note 3).Non-cancellable operating lease rentals are receivable as follows:

Group and Company2007 2006$’000 $’000

Receivable:

Within 1 year 1,350 1,067

After 1 year but within 5 years 463 1,201

1,813 2,268

The leases typically run for an initial period of two to three years, with an option torenew the lease after that date. Usually, there is no change in lease rentals during thelease period.

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21 Commitments (cont’d)

(c) Capital commitments

At 31 December 2007, the Group has the following commitments:

Group Company2007 2006 2007 2006$’000 $’000 $’000 $’000

Capital expenditure contracted but notprovided for in the financial statements 43 7 – –

22 Related parties

For the purpose of these financial statements, parties are considered to be related to theGroup if the Group has the ability, directly or indirectly, to control the party or exercisesignificant influence over the party in making financial and operating decisions, or viceversa, or where the Group and the party are subject to common control or commonsignificant influence. Related parties may be individual or other entities. An affiliatedcorporation refers to a corporation other than a subsidiary and associated corporation,which is directly or indirectly under common management control or significant influenceof certain shareholders of the Company.

Other related party transactions

Other than those disclosed elsewhere in the financial statements, the transactions withrelated parties are as follows:

Group2007 2006$’000 $’000

Affiliated corporations

Rental and miscellaneous expenses 103 90

Rental income 84 82

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22 Related parties (cont’d)

Key management personnel compensation

Key management personnel of the Group are persons having the authority and responsibilityfor planning, directing and controlling the activities of the entity. The directors, departmentheads and the chief executive officer are considered as key management personnel of theGroup.

Group2007 2006$’000 $’000

Short-term employee benefits

– directors 1,497 1,581

– other key management personnel 698 644

2,195 2,225

23 Subsequent events

On 6 March 2008, the Group entered into a joint venture agreement with Supreme OilfieldServices Pte Ltd (SOS) to incorporate a new joint venture company, Supreme Energy Pte.Ltd. with a share capital of US$1 million in which the Group and SOS own 60% and 40%respectively. In accordance with the joint venture arrangement, both parties will extend afurther US$2.5 million to Supreme Energy Pte. Ltd. in proportion to the respectiveshareholdings, in the form of interest-free shareholders’ loan.

24 New accounting standards and interpretations not yet adopted

The Group has not applied the following accounting standards (including its consequentialamendments) and interpretations that have been issued as of the balance sheet date butare not yet effective:

FRS 23 Borrowing Costs

FRS 108 Operating Segments

INT FRS 111 FRS 102 Group and Treasury Share Transaction

INT FRS 112 Service Concession Arrangements

FRS 23 will become effective for the Group’s financial statements for the year ending 31December 2009. FRS 23 removes the option to expense borrowing costs and requires thatan entity to capitalise borrowing costs directly attributable to the acquisition, constructionor production of a qualifying asset as part of the cost of that assets.

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24 New accounting standards and interpretations not yet adopted(cont’d)

FRS 108 will become effective for the Group’s financial statements for the year ending 31December 2009. FRS 108, which replaces FRS 14 Segment Reporting, requires identificationand reporting of operating segments based on internal reports that are regularly reviewedby the Group’s chief operating decision maker in order to allocate resources to the segmentand to assess its performance.

Management is currently assessing the impact of FRS 108 on the format and extent ofdisclosures presented in the financial statements. This standard does not have any impacton the Group’s financial result or position.

The Group has not considered the impact of accounting standards issued after the balancesheet date.

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1 Directors’ remuneration – Group and Company

The number of directors in each of the remuneration bands are as follows:

Non-Executive executiveDirectors Directors Total

2007

$500,000 and above – – –

$250,000 to below $500,000 4 – 4

Below $250,000 – 3 3

Total 4 3 7

2 Interested person transactions

The number of directors in each of the remuneration bands are as follows:

Aggregate value Aggregate value ofof all transactions all transactions

(excluding transactions conducted underconducted under a shareholders’a shareholders’ mandate pursuant

mandate pursuant to Rule 920 of theto Rule 920) SGX Listing Manual

$’000 $’000

Interested person – –

Supplementary Information(SGX-ST Listing Manual disclosure requirements)

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Distribution of Shareholders by Size of Shareholdings as at 17 March 2008

Size of No. ofShareholdings Shareholders % No. of Shares %

1 - 999 106 9.42 48,748 0.02

1,000 - 10,000 389 34.58 1,925,619 0.73

10,001 - 1,000,000 617 54.84 40,765,958 15.42

1,000,001 and above 13 1.16 221,631,482 83.83

TOTAL 1,125 100.00 264,371,807 100.00

Twenty Largest Shareholders as at 17 March 2008

No. Shareholder’s Name Number of Shares Held %

1 HOE LEONG CO. (PTE.) LTD. 158,994,276 60.14

2 TAT HONG HOLDINGS LTD 14,253,800 5.39

3 KUAH GEOK LIN 8,820,924 3.34

4 KUAH GEOK KHIM 8,750,924 3.31

5 KUAH GEOK KOON 8,750,924 3.31

6 QUAH YOKE HWEE 8,750,924 3.31

7 KUAH GEOK KHIM 4,228,910 1.60

8 KIM ENG SECURITIES PTE. LTD. 2,138,500 0.81

9 OCBC SECURITIES PRIVATE LTD 1,698,200 0.64

10 DBS VICKERS SECURITIES (SINGAPORE) PTE LTD 1,535,100 0.58

11 ONG MUN WAH 1,414,000 0.53

12 NG KIM TECK 1,215,000 0.46

13 NUN KWONG HOLDINGS PTE LTD 1,080,000 0.41

14 UOB KAY HIAN PTE LTD 947,282 0.36

15 NOMURA SINGAPORE LIMITED 719,000 0.27

16 PHILLIP SECURITIES PTE LTD 697,350 0.26

17 CHEW CHENG 670,000 0.25

18 S.T.G ENGINEERING PTE LTD 590,000 0.22

19 LIM KIM PON 554,000 0.21

20 DBS NOMINEES PTE LTD 523,500 0.20

TOTAL 226,332,614 85.60

Shareholding statistics as at 17 March 2008

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HOE LEONG CORPORATION LTD.

Shareholding Statistics as at 17 March 2008

Class of shares : Ordinary shares fully paid

Voting rights : One vote per share

No. of issued and paid-up shares : 264,371,807

Register of Substantial Shareholders as at 17 March 2008

Direct Interest Deemed Interest

No. of Shares % No. of Shares %

Hoe Leong Co. (Pte.) Ltd. 158,994,276 60.14 – –

Tat Hong Holdings Ltd 15,463,000 5.85 – –

Kuah Geok Lin 8,820,924 3.34 158,994,276 * 60.14

Kuah Geok Khim 8,750,924 3.31 158,994,276 * 60.14

Kuah Geok Koon 8,750,924 3.31 158,994,276 * 60.14

Quah Yoke Hwee 8,750,924 3.31 158,994,276 * 60.14

Mdm Kuah Geok Khim 4,228,910 1.60 158,994,276 * 60.14

Note:

* Messrs Kuah Geok Lin, Kuah Geok Khim, Kuah Geok Koon, Quah Yoke Hwee and Mdm Kuah Geok Khim aredeemed to be interested in the shares held by Hoe Leong Co. (Pte.) Ltd. in the Company.

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Distribution of Warrantholders by Size of Warrantholdingsas at 17 March 2008

Size of No. ofWarrantholdings Warrantholders % No. of Warrants %

1 - 999 369 47.31 108,212 0.581,000 - 10,000 356 45.64 970,671 5.1610,001 - 1,000,000 53 6.79 5,012,747 26.641,000,001 and above 2 0.26 12,722,434 67.62

TOTAL 780 100.00 18,814,064 100.00

Twenty Largest Warrant Shareholders as at 17 March 2008

No. Warrantholder’s Name Number of Warrants Held %

1 HOE LEONG CO. (PTE.) LTD. 11,356,734 60.362 TAT HONG HOLDINGS LTD 1,365,700 7.263 KUAH GEOK LIN 630,066 3.354 KUAH GEOK KHIM 625,066 3.325 KUAH GEOK KOON 625,066 3.326 QUAH YOKE HWEE 625,066 3.327 KUAH GEOK KHIM 302,065 1.618 HO KIAU SENG 276,200 1.479 ZEN PROPERTY MANAGEMENT 227,000 1.2110 DBS VICKERS SECURITIES (SINGAPORE) PTE LTD 135,900 0.7211 LUI SIE LOONG 130,000 0.6912 TAN JUI YAK 101,351 0.5413 ONG MUN WAH 101,000 0.5414 CHUNG TZE TONG 100,000 0.5315 KOH CHEOH LIANG VINCENT 100,000 0.5316 UOB KAY HIAN PTE LTD 96,070 0.5117 HENG HWA HENG 69,000 0.3718 OCBC SECURITIES PRIVATE LTD 50,974 0.2719 TOH SOO CHENG 50,125 0.2720 NUN KWONG HOLDINGS PTE LTD 45,000 0.24

TOTAL 17,012,383 90.43

Percentage of Shareholding in the Hands of Public

As at 17 March 2008, approximately 18.92% of Hoe Leong’s issued ordinary shares is held by thepublic and, therefore, Rule 723 of the Listing Manual is complied with.

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NOTICE IS HEREBY GIVEN that the Annual General Meeting of the Company will be held atJurong Country Club, 9 Science Centre Road, Singapore 609078 (Albizia 1 at Level 2) on Thursday,24 April 2008 at 11.00 a.m. to transact the following business:-

AS ORDINARY BUSINESS

1. To receive and adopt the Audited Accounts of the Company for the financial year ended31 December 2007 and the Directors’ Report and the Auditors’ Report thereon.

(Resolution 1)

2. To declare a final one-tier tax-exempt dividend of 0.5 Singapore cents per ordinary share forthe financial year ended 31 December 2007. (Resolution 2)

3. To re-elect the following Directors retiring by rotation pursuant to Article 95(2) of theCompany’s Articles of Association:

(i) Mr Kuah Geok Lin (Resolution 3)

(ii) Mr Ang Mong Seng (Resolution 4)

Mr Kuah Geok Lin, who is an Executive Director, if re-elected, will continue to serve as amember of the Nominating Committee and will be considered as Non-Independent Director.

In accordance with the requirements of Rule 704(8) of the Singapore Exchange SecuritiesTrading Limited’s Listing Manual, Mr Ang Mong Seng, who is Non-Executive Director, ifre-elected, will continue to serve as the Chairman of the Remuneration Committee as wellas a member of the Audit Committee and Nominating Committee and will be considered asan Independent Director.

4. To approve payment of Directors’ fees of $110,000 for the financial year ended 31 December2007 (2006 : $110,000). (Resolution 5)

5. To re-appoint KPMG as auditors of the Company and to authorise the Directors to fix theirremuneration. (Resolution 6)

Notice of Annual General Meeting(Company Registration No. 199408433W)(Incorporated in the Republic of Singapore)

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AS SPECIAL BUSINESS

6. To consider and, if thought fit, to pass the following as an ordinary resolution with orwithout modifications:-

Authority To Allot And Issue Shares

”That pursuant to Section 161 of the Companies Act, Chapter 50, and the Listing Rules ofthe Singapore Exchange Securities Trading Limited, approval be and is hereby given to theDirectors of the Company at any time to such persons and upon such terms and for suchpurposes as the Directors may in their absolute discretion deem fit, to:

(a) (i) issue shares in the capital of the Company whether by way of rights, bonus orotherwise;

(ii) make or grant offers, agreements or options that might or would require sharesto be issued or other transferable rights to subscribe for or purchase shares(collectively, “Instruments”) including but not limited to the creation and issue ofwarrants, debentures or other instruments convertible into shares;

(iii) issue additional Instruments arising from adjustments made to the number ofInstruments previously issued in the event of rights, bonus or capitalisation issues;and

(b) (notwithstanding the authority conferred by the shareholders may have ceased to be inforce) issue shares in pursuance of any Instrument made or granted by the Directorswhile the authority was in force,

provided always that

the aggregate number of shares to be issued pursuant to this resolution (includingshares to be issued in pursuance of Instruments made or granted pursuant to thisresolution) does not exceed 50% of the Company’s total number of issued sharesexcluding treasury shares, of which the aggregate number of shares (including sharesto be issued in pursuance of Instruments made or granted pursuant to this resolution)to be issued other than on a pro rata basis to shareholders of the Company does notexceed 20% of the total number of issued shares excluding treasury shares of theCompany, and for the purpose of this resolution, the total number of issued sharesexcluding treasury shares shall be the Company’s total number of issued shares excludingtreasury shares at the time this resolution is passed, after adjusting for:

(a) new shares arising from the conversion or exercise of convertible securities,

(b) new shares arising from exercising share options or vesting of share awardsoutstanding or subsisting at the time this resolution is passed provided the optionsor awards were granted in compliance with Part VIII of Chapter 8 of the ListingManual of the Singapore Exchange Securities Trading Limited, and

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(c) any subsequent bonus issue, consolidation or subdivision of the Company’s shares,and

such authority shall, unless revoked or varied by the Company at a general meeting,continue in force until the conclusion of the next Annual General Meeting or the dateby which the next Annual General Meeting of the Company is required by law to beheld, whichever is the earlier.” (Resolution 7)

7. To transact any other ordinary business which may be properly transacted at an AnnualGeneral Meeting.

NOTICE OF BOOKS CLOSURE

NOTICE IS HEREBY GIVEN that the Register of Members and Share Transfer Books of the Companywill be closed on 9 May 2008 to determine the shareholders’ entitlements to the proposed dividend.Duly completed registrable transfers of shares received by the Company’s Share Registrar, TricorBarbinder Share Registration Services (a business division of Tricor Singapore Pte. Ltd.) at 8 CrossStreet, #11-00 PWC Building, Singapore 048424, up to 5.00 p.m. on 8 May 2008 will be registeredto determine shareholders’ entitlements to the proposed dividends. Subject as aforesaid, shareholderswhose securities accounts with The Central Depository (Pte) Limited are credited with ordinaryshares in the capital of the Company as at 5.00 p.m. on the Book Closure Date will be entitledto the dividend.

The proposed dividend, if approved by the members at the Annual General Meeting, will be paidon 23 May 2008.

BY ORDER OF THE BOARD

EILEEN KOH (MS)Company Secretary8 April 2008

Singapore

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ANNUAL REPORT 2007 I 86

HOE LEONG CORPORATION LTD.

Explanatory Notes:

1. The ordinary resolution in item 6 above is to authorise the Directors of the Company fromthe date of the above Meeting until the next Annual General Meeting to issue shares andconvertible securities in the Company up to an amount not exceeding in aggregate 50 percent of the total number of issued shares excluding treasury shares of the Company ofwhich the total number of shares and convertible securities issued other than on a pro ratabasis to existing shareholders shall not exceed 20 per cent of the total number of issuedshares excluding treasury shares of the Company at the time the resolution is passed, forsuch purposes as they consider would be in the interests of the Company. Rule 806(3) ofthe Listing Manual of Singapore Exchange Securities Trading Limited currently provides thatthe total number of issued shares excluding treasury shares of the Company for this purposeshall be the total number of issued shares excluding treasury shares at the time of thisresolution is passed (after adjusting for new shares arising from the conversion of convertiblesecurities or share options on issue at the time this resolution is passed and any subsequentconsolidation or subdivision of the Company’s shares). This authority will, unless revoked orvaried at a general meeting, expire at the next Annual General Meeting of the Company.

Notes:

1. A member of the Company entitled to attend and vote at the Meeting is entitled to appointnot more than two proxies to attend and vote in his stead.

2. A proxy need not be a member of the Company.

3. If the appointor is a corporation, the proxy must be executed under seal or the hand of itsduly authorised officer or attorney.

4. The instrument appointing a proxy must be deposited at the registered office of the Companyat 6 Clementi Loop, Singapore 129814 not later than 48 hours before the time appointedfor the Meeting.

Page 88: Hoe Leong Corporation Ltd. Leong AR07.pdf · HOE LEONG CORPORATION LTD. CORPORATE PROFILE I CORPORATE INFORMATION Hoe Leong Corporation Ltd. was incorporated in Singapore on 18 November

HOE LEONG CORPORATION LTD.(Company Registration No. 199408433W)(Incorporated in the Republic of Singapore)

PROXY FORM

I/We (Name)

of (Address)being *a member/members of Hoe Leong Corporation Ltd. (the “Company”), hereby appoint

NRIC/ Proportion ofName Address Passport No. shareholdings (%)

*and/or

or failing *him/them, the Chairman of the meeting as *my/our *proxy/proxies to vote for *me/us on *my/ourbehalf and, if necessary, to demand a poll, at the Annual General Meeting of the Company to be held atJurong Country Club, 9 Science Centre Road, Singapore 609078 (Albizia 1 at Level 2) on 24 April 2008,Thursday at 11.00 a.m. and at any adjournment thereof.

*I/We direct *my/our proxy/proxies to vote for or against the Ordinary Resolutions to be proposed at theAnnual General Meeting as indicated with an “X” in the spaces provided hereunder. If no specific directionsas to voting are given, the *proxy /proxies will vote or abstain from voting at *his/their discretion.

Ordinary Resolutions For Against

1. To receive and adopt the Directors’ Report and Audited Accounts for the financial yearended 31 December 2007 and the Auditors’ Report thereon. (Resolution 1)

2. To declare a final one-tier tax-exempt dividend of 0.5 Singapore cents per ordinary sharefor the financial year ended 31 December 2007. (Resolution 2)

3. To re-elect the following Directors retiring by rotation pursuant to Article 95(2) of theCompanyís Articles of Association:-

(i) Mr Kuah Geok Lin (Resolution 3)

(ii) Mr Ang Mong Seng (Resolution 4)

4. To approve payment of Directors’ fees of $110,000 for the financial year ended 31December 2007. (Resolution 5)

5. To re-appoint KPMG as Auditors of the Company and to authorise the Directors to fixtheir remuneration. (Resolution 6)

6. To approve the Ordinary Resolution pursuant to Section 161 of the Companies Act, Chapter50. (Resolution 7)

Dated this day of 2008

Signature(s) of Member(s)/Common Seal

* Delete accordingly✂

Important:

1. For investors who have used their CPF monies to buy Hoe LeongCorporation Ltd. shares, this Annual Report 2007 is forwarded tothem at the request of their CPF Approved Nominees and is sentFOR INFORMATION ONLY.

2. This Proxy Form is not valid for use by CPF investors and shall beineffective for all intents and purposes if used, or purported to beused, by them.

3. CPF Investors who wish to vote should contact their CPF ApprovedNominees.

Total Number of Shares Held

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Notes :

1. A member of the Company entitled to attend and vote at the Annual General Meeting is entitled to appoint notmore than two proxies to attend and vote in his stead. Such proxy need not be a member of the Company.

2. Where a member of the Company appoints two proxies, he shall specify the proportion of his shareholding (expressedas a percentage of the whole) to be represented by each such proxy.

3. The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney dulyauthorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must beexecuted either under its common seal or under the hand of its attorney or duly authorised officer.

4. A corporation which is a member of the Company may authorise by resolution of its directors or other governingbody such person as it thinks fit to act as its representative at the Annual General Meeting, in accordance with itsArticles of Association and Section 179 of the Companies Act, Chapter 50 of Singapore.

5. The instrument appointing proxy or proxies, together with the power of attorney or other authority (if any) underwhich it is signed, or notarially certified copy thereof, must be deposited at the registered office of the Company at6 Clementi Loop, Singapore 129814 not later than 48 hours before the time set for the Annual General Meeting.

6. A member should insert the total number of shares held. If the member has shares entered against his name in theDepository Register (as defined in Section 130A of the Companies Act, Chapter 50 of Singapore), he should insertthat number of shares. If the member has shares registered in his name in the Register of Members of the Company,he should insert the number of shares. If the member has shares entered against his name in the Depository Registerand shares registered in his name in the Register of Members of the Company, he should insert the aggregatenumber of shares. If no number is inserted, this form of proxy will be deemed to relate to all the shares held by themember of the Company.

7. The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperlycompleted or illegible or where the true intentions of the appointor are not ascertainable from the instructions of theappointor specified in the instrument appointing a proxy or proxies. In addition, in the case of members of theCompany whose shares are entered against their names in the Depository Register, the Company may reject anyinstrument appointing a proxy or proxies lodged if such members are not shown to have shares entered against theirnames in the Depository Register 48 hours before the time appointed for holding the Annual General Meeting ascertified by The Central Depository (Pte) Limited to the Company.

8. A Depositor shall not be regarded as a member of the Company entitled to attend the Annual General Meeting andto speak and vote thereat unless his name appears on the Depository Register 48 hours before the time set for theAnnual General Meeting.

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Contents 01 Mission Statement 02 Corporate

Profi le 03 Corporate Information

04 Corporate Structure 05 Financial

Highlights 06 Chairman’s Statement

08 Operation Review 10 Board of

Directors 12 Key Management Team

13 Financial Statements 14 Corporate

Governance Report 27 Directors’

Report 33 Statement by Directors

34 Independent Auditors’ Report

36 Balance Sheets 37 Consolidated

Income Statement 38 Consolidated

Statement of Changes in Equity

39 Consolidated Cash Flow Statement

40 Notes to the Financial Statements

79 Supplementary Information

80 Shareholding Statistics

83 Notice of Annual General Meeting

– Proxy Form

HL(IFC).indd 1HL(IFC).indd 1 4/2/08 12:06:19 AM4/2/08 12:06:19 AM

Page 91: Hoe Leong Corporation Ltd. Leong AR07.pdf · HOE LEONG CORPORATION LTD. CORPORATE PROFILE I CORPORATE INFORMATION Hoe Leong Corporation Ltd. was incorporated in Singapore on 18 November

Hoe Leong Corporation Ltd.6 Clementi Loop • Singapore 129814 • Tel : +65 6463 8666

• Fax : +65 6564 7252 • Registration No: 199408433W

www.hoeleong.com

Hoe Leong Corporation Ltd.

HL•COVER(03.03).ai 4/1/08 11:51:41 PMHL•COVER(03.03).ai 4/1/08 11:51:41 PM