The Natural Choice

The Natural Choice

HitchinsSince 1932

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We at the Hitchins Group pride ourselves on our environmental conscience and infuse the distinctive designs of all our products and projects with this outlook. The dividers with pictures of nature and accompanying copywriting develop this theme, while the choice of green and quality recycled paper for the front cover and the review section further underscores it. With this environmental outlook driving Hitchins, we aspire to indeed be The Natural Choice.

The Natural Choice+

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Contr ibut ing to a greener future, we are committed to providing the best greening concepts, qual i t y produc ts and ser v ices to protec t and enhance the bui l t environment.

02 Hitchins Group Ltd • Annual Report 2006

The Hitchins’ Belief+

Contents +03 M i lestones04 Chairman’s Statement06 Board of Direc tors09 Management Team12 Corporate Struc ture13 Distr ibut ion Net work14 Corporate I nformation16 Corporate Prof i le19 Financia l Review20 Financia l H ighl ights21 Corporate Governance Statement30 Financia l Contents90 Stat ist ic of Shareholdings92 Not ice of Annual General Meet ing Prox y Form

Milestones

The Company wasfounded as a t imberand veneer bus inessin East London,England by M r Wi l l iamG. H i tchins

H itchins Group Ltd was l i s ted on the SGX-ST, Sesdaq

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1932

H itchins moved to NewZealand to establ i sh abus iness in spec ia l t ychemica ls .

1951

Our RegionalHeadquar ter wasestabl i shed inS ingapore to ser veAs ian Mark ets

1966

Local Managementbuy- out in S ingapore,establ i sh ing the cur rent H i tchins Group of Companies

1989

Obta ined ISO 9002 :1994 cer t i f icat ionUpgraded toISO9001 : 2000 cer t i f icat ion in 2004

1994

H itchins Headquar terand S ingaporeoperat ions moved toJoo K oon Ci rc le

1996

Leading S ingaporeventure capi ta l i s t f i rm,UOB VentureManagement , becamea shareholder of theCompany

A manufac tur ingfac i l i t y, which nowser ves as our mainproduc t ion p lant ,was establ i shed inShanghai , China

1997 2003

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Obta ined ISO 14001 :2004

2005


Dear Shareholders,

On behalf of the Board of Directors, I am pleased to present the financial performance of Hitchins Group Ltd (‘the Group’) for the financial year ended 30 June 2006 (“FY2006”).

ResultsThe Group overa l l revenue has improved by $1 .61 mi l l ion f rom $10 .10 mi l l ion in FY2005 to $11 .71 mi l l ion in FY2006 represent ing an increase of 15 .89% year- on-year. The increase was main ly f rom our S ingapore and the regional bus iness segment , which have regis tered a growth of 15 .88% or $1 .13 mi l l ion over FY2005 . Revenue f rom the People’s Republ ic of China and Malays ia have increased 30 .79% or $0 .44 mi l l ion and 2 .35% or $0 .04 mi l l ion respec t ive ly.

Operat ing in a genera l ly s t i f f compet i t ive bus iness envi ronment , our Group’s gross margin decreased f rom 38 .63% in FY2005 to 32 .92% in FY2006 main ly due to the overa l l increase in the insta l la t ion

bus iness segment ’s mater ia l and subcontrac tor cost .

I n consequence of the dec l ine in gross margin an the reduc t ion in prov is ion for impai rment on t rade rece ivables , sa les commiss ion and inventor ies wr i t ten- of f, our Group incur red a loss before tax of $0 .29 mi l l ion represent ing a decrease by $0 .26 mi l l ion f rom FY2005 loss before tax of $0 .55 mi l l ion . Our Group’s loss a f ter tax decreased by $0 .41 mi l l ion or 68 .33% f rom $0 .60 mi l l ion in FY2005 to $0 .19 mi l l ion .

Business OutlookS i n g a p o r e ( i n c l u d i n g r e g i o n a l m a r ke t s )The bui ld ing and construc t ion industr y in S ingapore has shown a pos i t ive growth in the second

quar ter of 2006 and according to s tat i s t ics prov ided by Bui ld ing and Construc t ion Author i t y (BCA) , an increase of 13 .2% of overa l l contrac ts awarded was regis tered over the cor responding per iod of the prev ious year. On a year-on-year bas is , our S ingapore operat ions saw a s igni f icant increase of 15 .89% in revenue. We wi l l cont inue to focus on secur ing more spec i f icat ions especia l ly for the upcoming projec ts such as the I ntegrated Resor ts and the Mar ina Downtown developments . We wi l l a l so engage in fur ther developing our exper t i se and mark et share in the roof garden (green roof ) segment as wel l as our emphas is on produc ts and technologies which contr ibutes towards a “greener ” out look for bui ld ings.

On the regional front, we will continue

Chairman’s Statement+

to expand our mark et coverage in As ia , par t icu lar ly in Tha i land, I ndia and Vietnam. We would expec t that our s t rategic par tnersh ip and the deployment of a fu l l - t ime mark et ing engineer based in U.A .E . wi l l enhance our revenue f rom the M iddle East mark et . P R CAlthough revenue f rom our PRC operat ions showed an increase of 30 .79% over the preceding year, the mark et remained h ighly compet i t ive with many compet i tors dr iv ing

pr ices down. We wi l l cont inue to be se lec t ive in our b idding for pro jec ts in the k ey c i t ies such as Be i j ing, Shanghai , Nanj ing and Dal ian and wi l l focus on ser v ic ing repeated customers such as the Shanghai Construc t ion Group, the Hutchinson Whampoa as wel l as the Shui On Group as they expand into second t ier c i t ies . I am pleased to repor t that our PRC operat ion was awarded the ISO 14001 for Env i ronmenta l Management Systems and th is , together with our ear l ie r cer t i f icat ion for ISO 9001 , wi l l enhance our compet i t ive edge in prov id ing both qual i t y and envi ronmenta l ly - f r iendly produc ts and ser v ices to the more d iscern ing c l ients . M a l a y s i aThe unvei l ing and the intended implementat ion of the 9th Malays ia P lan by the government wi l l boost up the bui ld ing and construc t ion industr y, especia l ly in the publ ic sec tor and th is i s expec ted to prov ide a revenue st ream to complement our ex is t ing dependence on pr ivate developments .

C o n c l u s i o nI am exc i ted by the potent ia l growth in some of the mark ets which we are cur rent ly engaged in and as we move for ward into the new f i sca l year, we wi l l cont inue to seek out s t rategic par tnersh ip to enhance our bus iness capabi l i t y and resources . Ac k n o w l e d g e m e n t I wish to convey my deepest apprec iat ion to the members of the Board and a l l employees of the Group for the i r dedicat ion and contr ibut ions. On behal f o f the Board, I would l i k e to express my s incere thanks to a l l our va lued customers , bus iness assoc iates and shareholders for the i r conf idence and unwaver ing suppor t through the years .

Yours t ru ly,

Wo n g S e o n g K h u e nChai rman & Managing Di rec tor

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Board of Directors+

WONG SEONG KHUEN is the Managing Director of our Group with responsibilities for the overall management, strategic planning and direction of our Group. Mr Wong is also responsible for the technical aspects of our Group’s operations. Mr Wong first joined our Company in 1978 and has held various positions including Technical Manager and Regional Technical Director in our Group. He has more than 28 years of experience in the building protection industry. He holds a degree in Building Surveying from the Central Queensland University and Technician Diploma in Civil Engineering from the Singapore Polytechnic. Mr Wong is a Member of the Australian Institute of Building Surveyors, Member of the Singapore Institute of Arbitrators, Member of the Singapore Institute of Builder, Council Member of the Singapore Concrete Institute and a Member of the Singapore Institute of Directors.

NG TIAN HUAT is the Business Development Director of our Group. He is responsible for all marketing activities of our Group. Backed by more than 31 years of experience in the building related industry, Mr Ng spearheads our Group’s efforts in seeking out new business development opportunities. He has been with the Company for 25 years during which he held various positions including Technical Manager, Sales Engineer and Regional Marketing Manager. Mr Ng holds a Technician Diploma in Civil Engineering from the Singapore Polytechnic.

YEO HOON SENG is an Executive Director of our Group. He joined our Group in 1994 after CRG Contractors Pte Ltd was acquired into our Group. Mr Yeo is primarily responsible for overseeing our Group’s contracting operations and supporting the PRC market. Prior to joining our Group, Mr Yeo held the position of Project Executive with the then DBS Land Limited. He holds a Technician Diploma in Building from the Singapore Polytechnic, a Diploma

in Sales and Marketing from the Marketing Institute of Singapore and a Diploma in Marketing from the Institute of Marketing, UK. Mr Yeo is a member of the Marketing Institute of Singapore and the Chartered Institute of Marketing, UK.

KIM LENG CHOON is an Executive Director of our Group. He joined our Group as a director of Hitchins Da-Sheng Holdings Ltd in 1996 and was subsequently appointed General Manager of Shanghai Hitchins Da Sheng Waterproofing Materials Co. Ltd in 1997. Mr Kim is based in Shanghai and is responsible for overseeing our Groups’ operations in the PRC. Mr Kim was involved in the drafting of a National Standard (GB 18445-2001, Cementitious capillary crystalline waterproofing materials) under the National Materials Quality Control and Testing Authority, PRC. This National Standard has been adopted throughout the PRC. Prior to joining our Group in 1996, Mr Kim was an entrepreneur with his own businesses in PRC since 1992.

WONG SEONG KHUEN NG TIAN HUAT YEO HOON SENG KIM LENG CHOON

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NG KIM KHUAN is an Executive Director of our Group. Mr Ng joined our Group as a manager in 1989 and is responsible for overseeing our Group’s operations in Malaysia. Mr Ng was appointed as our Director in 1993. Prior to joining our Group in 1989, Mr Ng held the position of Marketing Manager of Beiersdorf Ag, a listed company in Germany. Mr Ng holds a Masters degree in Business Administration from Oklahoma City University.

MARK YEO WEE TIONG joined our company as a non-Executive Director in 1997. Currently, he is a Director at UOB Venture Management responsible for fund raising, deal sourcing, investment valuation, structuring and divestments. Prior to joining the venture capital industry, he spent 6 years working for Smith Barney Shearson, HG Asia (Singapore) Pte Ltd and N M Rothschild & Sons (Singapore) Ltd specialising in corporate finance transactions where he was involved in advisory services on mergers and acquisitions, corporate restructuring and

public listings. Mr Yeo started his career in 1988 in the audit division of Ernst & Young in New Zealand. He has been a board member of several public listed and private companies. He holds a Bachelor of Commerce Degree with a double major in Accounting and Marketing from the University of Canterbury in New Zealand.

TAN CHONG HUAT is an Independent Director of our Company. He was appointed to the Board of Directors on 16 December 2002. Currently, Mr Tan is a partner of KhattarWong, a leading law practice in Singapore. He was appointed the chief representative of the Beijing office of a Singapore Joint Law Venture. He is an advocate and solicitor of the Supreme Court of Singapore, and a Commissioner for Oaths. He is also admitted as a solicitor in England and Wales. Mr Tan is a member of the Singapore Institute of Arbitration, and an accredited arbitrator with the China International Economic & Trade Arbitration Commission. He is a member of the Economic Committee,

Singapore Chinese Chambers of Commerce & Industry and Singapore Institute of Directors. He is also an elected council member of the Singapore Scout Association. Mr Tan is an ad-hoc lecturer for several post-graduate degree programs conducted by the Nanyang Technological University, Singapore. He is also a visiting professor at the Beijing Normal University. He has authored 2 leading literature on PRC investment laws. Mr Tan is also chairman of several corporate governance committees of public listed companies in Singapore. Mr Tan graduated with a degree in law from the National University of Singapore.

MARK YEO WEE TIONG TAN CHONG HUATNG KIM KHUAN

SITOH YIH PIN

Name of Directors

Wong Seong Khuen

Ng Tian Huat

Yeo Hoon Seng

Ng Kim Khuan

Kim Leng Choon

Mark Yeo Wee Tiong

Sitoh Yih Pin

Goh Chong Chia

Tan Chong Huat

Past And PresentDirectorships Of Other Listed Companies

Present directorships

Nil

Nil

Nil

Nil

Nil

• AA Group Holdings Ltd

• China Precision Technology Limited

• TSH Corporation Limited (formerly known as TPA Strategic Holdings Ltd)

• Allied Technologies Limited

• Joinn Holdings Limited (formerly known as Cytech Software Limited)

• GKE International Limited

• Labroy Marine Limited

• Lian Beng Group Limited

• Meiban Group Ltd (formerly known as Meiban Plastic Limited)

• Nera Telecommunications Ltd

• PNE Micron Holdings Ltd

• United Food Holdings Limited

Nil

• Asia Environment Holdings Ltd

• Asiapharm Group Ltd

• Richland Group Limited

• Superior Fastening Technology Limited

• Sinwa Limited

• Zhonghui Holdings Ltd


Board of Directors+

Past directorships held in the last 3 years

Nil

Nil

Nil

Nil

Nil

• Bio -Treat Technology Limited

• CWT Limited (formerly known as CWT Distribution Limited)

• Fibrechem Technologies Limited

• Futuristic Group Ltd (formerly known as Futuristic

Image Builder Ltd)

Nil

Nil

GOH CHONG CHIA

SITOH YIH PIN is an Independent Director of our Company. He was appointed to the Board of Directors on 16 December 2002. He is a Certified Public Accountant and a partner of a certified public accounting firm, Nexia Tan & Sitoh. Currently, he is the Advisor to Potong Pasir Grassroots Organisations. Mr Sitoh holds a Bachelor of Accountancy (Honours) degree from the National University of Singapore and is an Associate Member of the Institute of Chartered Accountants in Australia.

GOH CHONG CHIA is an Independent Director of our Company. He was appointed to the Board of Directors on 16 December 2002. Dr Goh is an Architect and has been the deputy managing director of an architectural company known as TSP Architects & Planners Pte Ltd since 1995. Prior thereto, he was a principal partner in TSP Architects & Planners since 1979. Dr Goh holds a Diploma in Architecture from the Birmingham School of Architecture, a Bachelor of Science (Honours) degree in Architecture from the University of Aston and an Honorary Doctor of the University from the University of Central England. Dr Goh is a Fellow Member of the Singapore Institute of Architects, an Associate of the Malaysian Institute of Architects, a Corporate Member of the Royal Institute of British Architects and a Fellow of the Society of Project Managers. Dr Goh is a former nominated member of parliament.

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LIEW BO CHUAN, JOHN is the Chief Financial Officer of our Group. He joined us in Mar 2004 overseeing all aspects of Group’s finance, tax planning, risk management, internal control, corporate governance, investor relations and involvement in mergers and acquisitions deal. He is also responsible for the Group human resource management and Information technology management. Mr Liew has more than 22 years of experience in the financial and accounting field. Prior to joining us, he was with TPA Strategic Holdings Ltd as Chief Financial Officer from 1999 to 2004 January. He was formerly the Financial Controller of CSE Global Ltd (formerly known as CSE Systems and Engineering Ltd) from 1996 to 1999 and also had worked with Aida Stamping Technology Pte Ltd as Accounts and Administration Manager from 1992 to 1996. He holds a Masters of Business in Professional Accounting and a Graduate Diploma in Accounting, both from the Victoria University in Melbourne, Australia. Mr Liew is a Professional National Accountants Member of the National Institute of Accountants in Australia, an Associate Member of the CPA Australia, a Fellow Member of the Association of Accounting Technicians UK, a Professional Member of the Singapore Human Resource Institute and a Member of the Singapore Institute of Directors.

TANG KAH PONG is the Business Development Manager of our Group. He assists our Executive Director (Regional) in our Group’s business development efforts in the Asia Pacific region. Prior to joining our Group in 1993, Mr Tang held technical and sales positions of various companies such as Shenyong Enterprise Co. Pte Ltd and L&M Prestressing Pte Ltd. Mr Tang was a trainer for the Certificate Waterproofing Supervision Course and currently he is a trainer for the Good Industry Practices – Waterproofing for Internal Wet Areas Course at the Construction Industry Training Institute. Mr Tang holds a Technician Diploma in Building from the Singapore Polytechnic.

PERUMAL NAIDU is the Regional Marketing Manager of our Group. He assists our Executive Director (Regional) in our Group’s marketing efforts in ASEAN region. Mr Naidu first joined our Group as a Marketing Executive in 1992. Mr Naidu left our Group to join the Central Christian Church as an intern from 1997 to 1998 and CSR South East Asia Pte Ltd as a senior marketing executive from 1998 to 2000. Mr Naidu rejoined our Group in 2000 as a Marketing Manager. Mr Naidu holds a Diploma in Sales and Marketing from the Marketing Institute of Singapore and a Technician Diploma in Civil Engineering from the Singapore Polytechnic.

LIEW BO CHUAN, JOHN TANG KAH PONG PERUMAL NAIDU

Management Team+


Management Team+

JUMARI BIN AHMAD is the Operations Manager (Installation) in charge of the installation division for our Group under Renesco Injection ( Waterproofing) Pte Ltd (Renesco). He is responsible for training the site staff of our approved Applicators in the proper manner of installing our Group’s products and for inspecting the work carried out by our approved Applicators to ensure that the requisite standards are maintained. Mr Ahmad has been with our Group since 1978 when he joined our Company as a Site Supervisor. In 1990, he assumed the position of Site Manager in Renesco.

POK MEI LIN is the spouse of Wong Seong Khuen, Managing director and controlling shareholder of our Group. Mdm Pok first joined our subsidiary, CRG Contractors Pte Ltd (“CRG”) as a Non-Executive director in 1993. Subsequently, she joined as Administrative Manager in 1994 and was made an executive director of CRG in 1996. She is responsible for all the administrative functions of CRG including operational budget, recruiting activities and oversees accounts receivables. She also oversees the implementation of the ISO 9002 quality management systems as the management representative. On the group level Mdm Pok also assists in payroll processing for the Singapore operations. Prior to joining CRG, she held position in Singapore Telecom as Senior Technical Officer with 18 years of experience in the Line Plant Planning Department. She holds a Technician Diploma in Architectural Draftsmanship from the Singapore Polytechnic. Mdm Pok is also a Non-Executive director of Hitchins International Pte Ltd.

GEE KIM FAH is the General Manager (Project and Contract) in charge of the project and contract division for our Group under CRG Contractors Pte Ltd. He joined us in February 2003 and is responsible in the overall developing and executing of site plan. He leads and directs a team of waterproofing professional into achieving project’s milestone and quality deliverables. He holds a degree of Building in Construction Economics from University of Technology, Sydney and a diploma in Building Management from Nee Ann Polytechnic Singapore. Mr Gee had more than 22 years of experience in project management in the building and construction industry. Prior to joining us, he worked as a Project and Site Manager with various main construction companies such as Bestbuild Pte Ltd; Eng Lim Construction Pte Ltd, Torie Construction Pte Ltd, Sum Keong Construction Pte Ltd from 1986 to February 2003. He was also with Housing & Development Board from 1981 to 1986 as Technical Officer.

JUMARI BIN AHMAD POK MEI LIN GEE KIM FAH

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11Like trees irrigated by a stream,

our projects exist in symbiotic harmony with the elements.

Corporate Structure+12 Hitchins Group Ltd • Annual Report 2006

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Distribution Network+

SINGAPOREHitchins Group Ltd 30 Toh Guan Road #07-01 ODC Districentre Singapore 608840 Telephone: (65) 68611177 Facsimile: (65) 68634240 Email: [email protected]

Research & Development Hitchins (Laboratory) Pte Ltd 51, Science Park Road #04-16, The Aries Singapore Science Park II Singapore 117586 Telephone: (65) 68729272 Facsimile: (65) 68720493 Email: [email protected]

BRUNEIHitchins (Borneo) Sendirian Berhad P.O. Box 1675 Bandar Seri Begawan 1916 Telephone: (673-2) 652561 Facsimile: (673-2) 652563

MALAYSIAHitchins (Malaysia) Sendirian Berhad No. 26 Jalan 4/10B Spring Crest Industrial Park 68100 Batu Caves, Selangor, Malaysia Telephone: (60-3) 61858888 Facsimile: (60-3) 61850668 Email: [email protected]

CHINAShanghai Hitchins Da Sheng Waterproofing Materials Co., Ltd No. 58, 699 Nong, Bei Qing Gong Lu Hua Cao Zhen, Ming Hang Qu Shanghai P.R. China Post Code 201107. Telephone: (86-21) 62219815/7/9 Facsimile: (86-21) 62219812Email: [email protected]

Shanghai Marketing OfficeNo. 37, 380 Nong, Tian Yao Qiao Lu Room 803 Nan Xi Gong Yu Shanghai P.R. China Post Code 200030. Telephone: (86-21) 64864399 Facsimile: (86-21) 64864812

Beijing Rep. OfficeNo. 3, Yan Jing Li Zhong Jie Block 5, Room 702 Kai Tai Gong Yu Chao Yang Qu Beijing P.R. China Post Code 100025. Telephone: (86-10) 65951400 Facsimile: (86-10) 65060316

Nanjing Rep. OfficeNo.57, Shan Xi Road Gu Lou Qu, Room 710 Nanjing P.R. China Post Code 210009. Telephone: (86-25) 83739026 Facsimile (86-25) 83736679

Dalian Rep. OfficeNo.1, Xing Gong Nan We Jie Unit 1-12-1-2 Block D Xin Tian Di Guang Chang Sha He Kou Qu Dalian P.R. China Post Code 116021. Telephone: (86-411) 83895105 Facsimile (86-411) 83895165

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Corporate Information+

BOARD OF DIRECTORS Wong Seong Khuen - Chairman / Managing Director Ng Tian Huat - Business Development DirectorYeo Hoon Seng - Executive DirectorNg Kim Khuan - Executive DirectorKim Leng Choon - Executive DirectorMark Yeo Wee Tiong - Non Executive DirectorGoh Chong Chia - Independent Director Sitoh Yih Pin - Independent DirectorTan Chong Huat - Independent Director

AUDIT COMMITTEESitoh Yih Pin - ChairmanGoh Chong ChiaTan Chong Huat

REMUNERATION COMMITTEE Goh Chong Chia - Chairman Tan Chong Huat Ng Tian Huat

NOMINATING COMMITTEE Tan Chong Huat - Chairman Goh Chong Chia Wong Seong Khuen

SECRETARY Chew Kok Liang

REGISTERED OFFICE 30 Toh Guan Road #07-01 ODC Districentre Singapore 608840 Website: http:// www.hitchins.com

REGISTRARLim Associates (Pte) Ltd10 Collyer Quay #19-08Ocean BuildingSingapore 049315

AUDITORSRSM Chio Lim18 Cross Street#08-01, Marsh & McLennan CentreSingapore 048423www.rsmchiolim.com.sgPartner-in-charge: Goh Swee Hong(Effective from financial year ended 30 June 2006)

PRINCIPAL BANKERSUnited Overseas Bank LimitedThe Bank of East Asia, Limited


Like Lotus leaves covering a lake’s surface, our environmental

conscience envelops all the designs we undertake.

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Established since 1932, Hitchins Group Limited is a leading waterproofing special ist in Asia with exper tise in preser vation, restoration and maintenance of bui ldings and concrete structures. An ISO 9001:2000 & ISO 14001:2004 cer t i f ied organisation, the Group is committed to qual ity.

With more than 70 years of t rack record, H itchins has preser ved many histor ical and modern bui ldings f rom rapid deter iorat ion, and restored

them to their or iginal splendour in countr ies a l l across As ia and beyond.

Suppor ted by a strong R&D team, H itchins is committed to developing and manufac tur ing specia l t y chemicals used by the Group to provide integrated solut ions for the best waterproof ing and bui lding protec t ion. I n the new mi l lennium, t rust H itchins to contr ibute to a greener future.


H itchins of fers these bui lding protec t ion systems as solut ions to your bui ld ing problems:

•Roof, basement & wal l waterproof ing systems

•Decorat ive & weather- res is tant coat ings

•St ruc tura l & waterproof ing grout ing systems

•Concrete repai r & protec t ion systems

•Concrete jo int t reatments

•Roof garden systems

The H itchins Group is a S ingapore -based, fu l ly integrated group of companies that engaged in ever y level of bui ld ing protec t ion business to ser ve the var ious needs of our customers in the bui lding industr y. Direc t ly and through

subsidiar ies, we are engaged in these areas :

•Research & Development

•Manufac tur ing

•Mark et ing & Dist r ibut ion

•Appl icat ion of Waterproof ing Systems & Coat ings

•Concrete Repai r & Grout ing

•Roof Garden Systems

•Maintenance & Defec ts I nvest igat ion

•Technica l Consul tat ion & Ser v ices

This approach to providing solut ions is suppor ted by our unique assurance of qual i t y. This gives our customers a “peace of mind”.

Integrated Business SolutionsInnovative, Relevant Solutions for the Urban Landscape

Corporate Profile+

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Str ingent I n-House Q ual it y Control SystemH itchins Qual i t y Contro l Team ensures mater ia l s and produc ts meet h igh predetermined standards

ISO 9001: 2000 and ISO 14001:2004 CertificationHitchins quality management system and environmental management system are certif ied by the Bureau Veritas Quality International (BVQI) & National Quality Assurance Limited respectively.

Hitchins technical team offers services that wil l give our customers the best value

Approved Applicator SystemAl l H i tchins produc ts are appl ied only by approved & t ra ined appl icators

Site AuditsOur team of t ra ined and exper ienced H i tchins“appl icat ion specia l i s ts” conduc t random audits on our appl icators’ work

Warrant yH itchins’ Process Per formance War rant y prov ided for a l l pro jec ts insta l led by approved appl icators with H i tchins’ produc ts

Fidel it y FundH itchins’ war rant ies are back ed by i t s unique I nternat ional Fide l i t y Fund

Quality AssuranceAn Integral Part of Our Values

Our Commitment To You

Environmentally Friendly+


The G reen L ab el cer t i f icat ion by S ingapore Envi ronmenta l Counci l bears test imony to H i tchins cont inuing dr ive to protec t ing and enhancing the bui l t env i ronment .

Suppor ted by a s t rong R&D team, H i tchins develops and manufac tures spec ia l t y chemica ls used by the Group to prov ide envi ronmenta l f r iendly integrated so lut ions for waterproof ing and bui ld ing protec t ion .

FORMDEX UNIFLEXCemetit ious Waterproofing System

A t wo component cemet i t ious waterproof ing membrane, Formdex Uni f lex has excel lent adhes ion , and f lexura l and tens i le s t rength ; and i s an ef fec t ive and permanent waterproof ing so lut ion to a l l masonr y s t ruc tures .

Areas of usageWet areas , swimming pools , water features , etc .

FORMAK 629Concealed Waterproofing System

H igh in tens i le s t rength , Formak 629 i s a s ingle component , so lvent f ree l iquid appl ied e lastomer ic waterproof ing membrane based on poly- i soprene polymers . I t conta ins no b i tumen or coa l tar and wi l l not cause s ta in ing to marble , t i les or t i les grout .

Areas of usageConcealed roofs , non- insulated decks

TR AFFIGARD TOPCOATExposed Waterproofing System

Traf f igard Topcoat i s a decorat ive, l iqu id appl ied membrane of heavy-bodied acr y l ic polymer gel . I t i s e inforced with f iberglass mat appl icat ion for maximum st rength and durabi l i t y.

Areas of usageAl l genera l exposed roofs

032 002Environmental ly Fr iendly

Paint / Coating

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Financial Review+

The Group’s overall revenue increased by 15.89% or $1.61 million from $10.10 million in FY2005 to $11.71 million in FY2006. Manufacturing and Sales revenue from external customer increased by 16.83% or $0.74 million from S$4.36 million in FY2005 to S$5.10 million in FY2006. Whereas, Installation revenue from external customers increased by 15.18% or $0.87 million from $5.74 million in FY2005 to $6.61 million in FY2006.

The Group’s overall revenue by geographical segment from Singapore and the region have shown a significant improvement of 15.88% or $1.13 million over FY2005, mainly from the installation business segment. The revenue from the People’s Republic of China and Malaysia has increased by 30.79% or $0.44 million and 2.35% or $0.04 million respectively.

The Group’s full year gross profit decreased by 1.21% or $ 0.04 million, from $3.90 million in FY2005 to $3.86 million in FY2006. Whereas, the year on year gross margin decreased by 5.7% from 38.63% in FY2005 to 32.92% in FY2006 due to the overall increase in installation business segment’s material and subcontractor’s cost of sales.

Other operating income decreased by 84.71% or $0.14 million, from $0.16 million in FY2005 to $0.02 million in FY2006. The decrease was mainly due to a one time income received from surrendering of key man insurance policy in FY2005.

Finance expenses decreased by $0.20 million or 48.58% from $0.41 million in FY2005 to $0.21 million in FY2006, the decrease were mainly due to the reduction in provision for impairment on trade receivables.

Distribution expenses decreased by 8.17% or $0.16 million from $1.67 million in FY2005 to $1.51 million in FY2006, mainly due to the decrease in sales commission paid during the year in the People’s Republic of China.

Administrative expenses remain relatively the same for both financial years.

Other charges decreased mainly due to reduction in inventories written-off.

The Group’s loss before tax decreased by $0.26 million, from loss of $0.55 million in FY2005 to $0.29 million in FY2006 and loss after tax decreased by $0.41 million or 68.33% from $0.60 million in FY2005 to $0.19 million in FY2006.

The basic loss per share of the Group decreased from (0.55) cents in FY2005 to (0.18) cents in FY2006. The Group’s net asset value decreased from 4.75 cents to 4.46 cents.

Balance Sheet and Cashflows

Non-Current AssetsReduction in consolidation non-current

assets was mainly due to depreciation for the year ended 30 June 2006.

Current AssetsTrade receivables increased was mainly from our China operation in line with its overall increase in revenue. Whereas, the increase in other receivables was due to refundable tax credits and prepayment on professional fees for the year ended 30 June 2006.

Current LiabilitiesThe increase in payables was due to increase in material purchase for contract manufacturing in tandem with the overall increase in revenue.

Non-Current LiabilitiesThe reduction of non current liabilities was mainly due to repayment of interest bearing loan and write back on over provision of deferred tax liabilities.

CashflowThe Group’s net cash from operating activities improved to $0.43 million in FY 2006, mainly due to better inventory and trade debtors’ turnover.

The net cash used in investing activities remains relatively unchanged.

The overall Group’s cash and cash equivalents in FY2006 improved from $0.20 million to $0.30 million.

Financial Highlights+20 Hitchins Group Ltd • Annual Report 2006

REVENUE BY BUSINESS SEGMENT (S$ MILLION)

FY 02 FY03 FY04 FY05 FY06

10

9

8

7

6

5

4

3

2

1

0

MANUFACTURING & SALESINSTALLATION

7.31

5.49

5.01

4.36

5.095.31

3.81

5.37 5.

74

6.61

REVENUE BY GEOGRAPHICAL SEGMENT (S$ MILLION)


10

9

8

7

6

5

4

3

2

1

0

SINGAPORE & OTHER REGIONSPRC

MALAYSIA

8.32

6.87

7.38

7.13

8.26

2.33

1.41 1.

94

1.42 1.

851.97

1.02 1.06 1.

55

1.59

GROUP PROFORMA FINANCIAL HIGHLIGHTS


16

14

12

10

8

6

4

2

0

-2

GROUP REVENUE (S$ MILLION)NET ASSET VALUE (CENTS)EARNINGS / (LOSSES) PER SHARE (CENTS)PROFIT / (LOSS) BEFORE TAx (S$ MILLION)

12.6

2

9.30 10

.38

10.1

0

11.7

0

4.39 5.

24 5.29

4.75

4.46

2.63

0.46 0.10

0.55 0.18

2.70

0.26 0.01

0.55

0.29

(a) Basic earnings / (losses) per ordinary share has been calculated based on the weighted average number of ordinary shares of 108,600,000 (2005: 108,600,000) ,(2004:108,600,000) ,(2003:94,850,877) and (2002:82,658,000) shares (b) Diluted earnings / (losses) per ordinary share in FY2006 has been calculated based on the weighted average number of 108,600,000 ordinary shares.

Corporate Governance Statement

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Hitchins Group Ltd (the “Company”) is committed to maintaining high standards of corporate governance within the Company and its subsidiary companies (the “Group”) and has put in place various policies and practices that will safeguard the interests of shareholders and enhance shareholders’ value based on the Code of Corporate Governance (the “Code”) issued by the Corporate Governance Committee and the Listing Manual.

This statement describes the Company’s corporate governance processes and activities with specific reference to the Code of Corporate Governance (the “Code”).

1. BOARD MATTERS

Principle 1: The Board’s Conduct of Its Affairs

The Board is responsible for the overall management of the business and corporate affairs of the Group.

Matters which specifically require the Board’s decision or approval are those involving: -

Corporate strategy and business plans;

major investment and divestment proposals;

funding requirements of the Group;

nominations of Board Directors and appointment of key executives;

approving the recommended framework of remuneration for the Board and key executives;

half year and full year results for announcement, the annual report and accounts;

material acquisitions and disposal of assets;

corporate or financial restructuring; and

share issuance and the proposing of dividends.

To assist in the execution of its responsibilities and in recognition of the importance of having a high standard of accountability to our shareholders, the Board has established a Nominating Committee (NC), a Remuneration Committee (RC) and an Audit Committee (AC). All Committees are chaired by an independent director, with the majority of members being non-executive and independent. The Committees operate within clearly defined terms of reference and functional procedures.

The Board conducts regular scheduled meetings on a yearly basis. Ad-hoc meetings may also be convened at such other times as may be necessary to address any specific significant matters that may arise. The Company’s Articles of Association allow Directors to attend and participate in Board meetings by means of a telephone conference.



As at the date of this report, the Directors’ attendance at Board and Committee Meetings are as follows: -

DirectorBoard Nominating Remuneration Audit

No. Held No. Attended No. Held No. Attended No. Held No. Attended No. Held No. Attended

Wong Seong Khuen 2 2 2 2 – – – –

Ng Tian Huat 2 2 – – 2 2

Yeo Hoon Seng 2 2 – – – – – –

Ng Kim Khuan 2 2 – – – – – –

Mark Yeo Wee Tiong 2 2 – – – – – –

Kim Leng Choon 2 2 – – – – – –

Sitoh Yih Pin 2 2 – – – – 2 2

Goh Chong Chia 2 2 2 2 2 2 2 2

Tan Chong Huat 2 2 2 2 2 2 2 2

Newly appointed Directors will be given an orientation programme with materials provided to familiarise them with the business and organisational structure of the Group. They will also be given opportunities to visit the Group’s operational facilities and meet management staff so as to gain a better understanding of the Group’s business. However, as there were no new Directors appointed, it was not necessary to conduct an orientation programme. The Company has an on-going training budget for the existing Directors to fund the Directors’ training when the need arises.

To keep pace with changes in regulations and accounting standards which have a significant bearing on the disclosure obligations of the Company or its Directors, Directors are kept informed of such changes through circulated updates or briefings during Board meetings or at specially-convened sessions conducted by professionals.


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Principle 2: Board Composition and Balance

The Board currently comprises: -

Executive Directors Wong Seong Khuen, Chairman and Managing Director Ng Tian Huat Yeo Hoon Seng Ng Kim Khuan Kim Leng Choon

Non-Executive Director Mark Yeo Wee Tiong Independent Directors Sitoh Yih Pin Goh Chong Chia Tan Chong Huat

The NC reviewed the independence of each Independent Director and is of the view that these Directors are independent.

The NC also examined the composition of the Board and notes that decision making thus far has been effective, taking into account the scope and nature of the operations of the Company. They are of the view that no individual or small group of individuals dominates the Board’s decision-making process.

Principle 3: Chairman and Chief Executive Officer

Wong Seong Khuen (“Mr. Wong”) is currently the Chairman of the Board (the “Chairman”) and the Managing Director of the Company.

The Board has not adopted the recommendation of the Code to have separate directors appointed as the Chairman and the Managing Director. This is because the Board is of the view that there is a sufficiently strong and independent element on the Board which is able to exercise objective judgment on corporate affairs of the Group independently, taking into account factors such as the number of non-executive and independent directors on the Board, as well as the size and scope of the affairs and operations of the Group. The Managing Director need not retire by rotation as provided in the Articles of Association of the Company.

As the Chairman, Mr. Wong is responsible for, among others, scheduling meetings that enable the Board to perform its duties responsibly while not interfering with the flow of the Company’s operations, exercising control over the quality, quantity and timeliness of the flow of information between the management of the Company (the “Management”) and the Board, and assisting in ensuring compliance with the Company’s guidelines on corporate governance.



Principle 4: Board Membership

The Company adopts a formal and transparent process of appointing new Directors to the Board and ensures that all Directors (other than the Managing Director) submit themselves for re-nomination and re-election at regular intervals. The NC oversees this aspect of corporate governance, and currently comprises the following members, two of whom are Independent Directors: -

Tan Chong Huat – Chairman, Independent Director Goh Chong Chia – Member, Independent Director Wong Seong Khuen – Member, Executive Director

The principal functions of the NC are as follows: -

to re-nominate existing Directors, having regard to their contribution and performance; to determine on an annual basis whether or not a Director is independent; and to decide whether a Director is able to and has been adequately carrying out his duties as a Director of the Company, particularly when the Director has

multiple Board representations.

Principle 5: Board Performance

The NC, in considering the re-appointment of any Director, evaluates the performance of the Director. The NC reviews and evaluates the performance and effectiveness of the Board as a whole for each financial year, and submits its report to the Board. The review parameters for evaluating each director include, inter alia, the following: -

(a) attendance at board / committee meetings;

(b) participation at meetings;

(c) involvement in management; and

(d) availability for consultation and advice, when required.

Each member of the NC shall abstain from voting on any resolution in respect of the assessment of his performance or re-nomination as a Director.

Principle 6: Access to Information

In order to ensure that the Board is able to fulfill its responsibilities, the management will provide complete, adequate and timely information to the Board on the Group’s affairs and issues that require the Board’s decision as well as ongoing reports relating to the operational and financial performance of the Group and the Company.

The Board has separate and independent access to the Company’s senior management and the Company Secretary at all times.

The Board, either individually or as a group, in the furtherance of their duties, takes independent professional advice, if necessary, at the Company’s expenses.

The Company Secretary attends all Board Meetings and ensures that Board procedures are followed and that rules and regulations applicable to the Company are complied with.


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2. REMUNERATION MATTERS

Principle 7: Procedures for Developing Remuneration Policies

The RC comprises the following members, two of whom are Independent Directors: -

Goh Chong Chia – Chairman, Independent Director Tan Chong Huat – Member, Independent Director Ng Tian Huat – Member, Executive Director

The overall objective of the RC is to help the Board to ensure that the remuneration paid is: -

appropriate for the purpose of attracting, retaining and motivating the Directors and executives to run the Company successfully; and in the case of Independent Directors, appropriate for the purpose of giving them an incentive to make meaningful contributions to the Board, while at the same

time maintaining their independence.

Principle 8: Level and Mix of Remuneration

The Company has in place, procedures which facilitate a formal and transparent process by which the remuneration of all Executive Directors and at least the top five executives (in terms of aggregate remuneration and not being directors) is fixed.

All Non-Executive and Independent Directors have no service agreements with the Company. They are paid Directors’ fees, which are determined by the Board, appropriate to their level of contributions taking into account factors such as effort and time spent and their responsibilities. The fees are subject to approval by the shareholders at each Annual General Meeting (“AGM”). Save as disclosed herein, the Non-Executive and Independent Directors do not receive any remuneration from the Company.

The Company had on 13 December 2002 entered into separate service agreements with Wong Seong Khuen, Ng Tian Huat, Yeo Hoon Seng, Ng Kim Khuan and Kim Leng Choon respectively for an initial period of 3 years. The said service agreements were extended for another year expiring on 13 December 2006 which is renewable thereafter for such period as the Board may decide.



Principle 9: Disclosure on Remuneration

Remuneration of Directors

Below $250,000 9

A breakdown, showing the level and mix of each Director’s remuneration in FY 2006 is as follows: -

Name of Director Salary Bonus Benefits Fees Total % % % % %

Wong Seong Khuen 95 0 5 0 100 Ng Tian Huat 83 0 17 0 100 Yeo Hoon Seng 95 0 5 0 100 Ng Kim Khuan 100 0 0 0 100 Kim Leng Choon 93 0 7 0 100 Mark Yeo Wee Tiong 0 0 0 100 100 Goh Chong Chia 0 0 0 100 100 Tan Chong Huat 0 0 0 100 100 Sitoh Yih Pin 0 0 0 100 100

Remuneration of Top 5 Key Executives

Below $250,000 5

A breakdown, showing the level and mix of each of the top five key executive’s remuneration in FY 2006 is as follows: -

Name of Executive Salary Bonus Benefits Total % % % %

Liew Bo Chuan John 92 8 0 100 Tang Kah Pong, Dexter 84 7 9 100 Jumari Bin Ahmad 84 7 9 100 Perumal Naidu 83 7 10 100 Gee Kim Fah 85 7 8 100

Remuneration of Employee who is an Immediate Family Member of a Director

There are currently no employees who are immediate family members of a Director whose remuneration exceeded $150,000 during FY 2006.


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Principle 10: Accountability

In presenting the annual financial statements and announcements of financial results to shareholders, it is the aim of the Board to provide shareholders with a balanced and understandable assessment of the Company’s and Group’s performance, position and prospects. Management provides the AC and the Board with balanced and understandable management accounts of the Company’s and Group’s performance, position and prospects on a regular basis.

Principle 11: Audit Committee (AC)

The AC members, all of whom are Independent Directors are: -

Sitoh Yih Pin – Chairman Goh Chong Chia – Member Tan Chong Huat – Member

The AC has scheduled a minimum of 2 meetings in each financial year. The meetings shall be held, inter alia, for the following purposes: -

reviewing the announcement of the half year and full year results;

reviewing the audit plans of the Company’s external auditors;

reviewing the co-operation given by the Company’s officers to the external auditors;

discussing problems and concerns, if any, arising from the interim and final audits;

appraising and reporting to the Board on the audits undertaken by the external auditors, the adequacy of disclosure of information, and the appropriateness and quality of the system of management and internal controls;

nominating external auditors for re-appointment; and

reviewing interested person transactions, as defined in the Listing Manual of the SGX-ST.

In addition, the AC is given the task of commissioning investigations into matters where there is suspected fraud or irregularity, or failure of internal controls or infringement of any law, rule or regulation which has or is likely to have a material impact on the Company’s operating results or financial position, and to review its findings.

The AC will meet with the external auditors, without the presence of management, when necessary, to review the adequacy of audit arrangement, with emphasis on the scope and quality of their audit, the independence, objectivity and observations of the auditors. Having reviewed the nature and extent of non-audit services provided by the external auditors over the year being reported on, the AC is satisfied that the rendering of such services did not affect the independence and objectivity of the external auditors.



Principle 12: Internal Controls

The Group believes in the importance of maintaining a sound system of internal controls to safeguard the interests of the shareholders and the Group’s assets. To achieve this, internal reviews are constantly being undertaken to ensure that the system of internal controls maintained by the Group is sufficient to provide reasonable assurance that the Group’s assets are safeguarded against loss from unauthorized use or disposition, transactions are properly authorized and proper financial records are being maintained.

The Board is of the opinion that the Group’s existing internal controls are adequate and satisfactory.

As part of the statutory audit on financial statements, the external auditors report to the AC and the appropriate level of management any material weaknesses in financial internal controls over the areas which are significant to the audit.

Principle 13: Internal Audit

At present, the Company has no separate internal audit function. The Board believes that the existing system of internal control is adequate, taking into consideration the corporate structure and scope of the Company’s operations, to safeguard the Group’s assets against loss from unauthorized use or disposition, to ensure that transactions are properly authorized and to ensure that proper financial records are being maintained.

The key element in the Group’s internal control systems is the control which senior management exercises over contracts and expenditures for projects and capital spending, and which are also subject to approval by the Board.

The AC will continuously review the cost-effectiveness and adequacy of the Group’s internal control system with the external auditors and shall assess the need for a separate internal audit function when Group grows in size and complexity.

3. COMMUNICATION WITH SHAREHOLDERS

Principle 14: Communication with Shareholders Principle 15: Shareholder Participation

In line with the continuous disclosure obligations of the Company and pursuant to the Listing Manual of the SGX-ST and the Companies Act, Chapter 50 of Singapore, the Board’s policy is that shareholders shall be informed of all major developments of the Company. Information is communicated to shareholders on a timely basis through SGXNET and the press.

The Company does not practice selective disclosure. Price sensitive information is first publicly released through SGXNET before the Company meets with any group of investors or analysts. Results and annual reports are announced or issued within the mandatory period. These are also available on the Company’s website.

All shareholders of the Company will receive a copy of the Annual Report and Notice of AGM. At AGMs, shareholders will be given the opportunity and time to air their views and ask Directors questions regarding the Company.


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4. DEALING IN SECURITIES

The Company has adopted policies in line with Listing Rule 1207 of the Listing Manual of the SGX-ST on dealings in the Company’s securities.

The Company prohibits its officers from dealing in the Company’s shares on short-term considerations or when they are in possession of unpublished price-sensitive information. They are not allowed to deal in the Company’s shares during the period commencing one month before the announcement of the Company’s quarterly, half-yearly or full year results and ending on the date of the announcement of the results. Directors and executives are also expected to observe insider-trading laws at all times.

5. INTERESTED PERSON TRANSACTIONS

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

No interested person transaction of a value exceeding S$100,000 was entered into by the Group during FY2006.

Financial Contents+31 Repor t of the Direc tors37 Statement of Direc tors38 Auditors’ Repor t39 Balance Sheets40 Consol idated I ncome Statement41 Statements of Changes in Equit y43 Consol idated Cash Flow Statement4 4 N o t e s t o F i n a n c i a l S t a t e m e n t s


Report of the Directors

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The directors of the Company are pleased to present their report together with the audited financial statements of the Company and of the Group for the financial year ended 30 June 2006.

1. DIRECTORS AT DATE OF REPORT

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

Wong Seong KhuenNg Tian HuatYeo Hoon SengNg Kim KhuanKim Leng ChoonMark Yeo Wee TiongGoh Chong ChiaSitoh Yih PinTan Chong Huat

2. ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE BENEFITS BY MEANS OF THE ACQUISITION OF SHARES AND DEBENTURES

Neither at the end of the financial year nor at any time during the financial year did there subsist any arrangement whose object is to enable the directors of the Company to acquire benefits by means of the acquisition of shares or debentures of the Company or any other body corporate except as disclosed in paragraph 5 for the share options.



3. DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES

The directors of the Company holding office at the end of the financial year had no interest in the share capital and debentures of the Company and related corporations as recorded in the register of directors’ shareholdings kept by the Company under section 164 of the Companies Act, Cap. 50 except as follows:

Direct Interest Deemed Interest

Name of directors and companies in which interest are held

At beginning of the year

At end of the year

At beginning of the year

At end of the year

Hitchins Group Ltd Ordinary shares

Wong Seong Khuen 27,080,000 27,080,000 – – Ng Tian Huat 27,080,000 27,080,000 – – Yeo Hoon Seng 7,060,000 9,067,000 2,000,000 –Ng Kim Khuan 8,619,500 8,619,500 – – Kim Leng Choon 12,684,000 12,933,000 – –

By virtue of section 7 of the Companies Act, Mr Wong Seong Khuen and Mr Ng Tian Huat are deemed to have an interest in all the related corporations of the Company.

The directors’ interests as at 21 July 2006 were the same as those at the end of the financial year.

4. CONTRACTUAL BENEFITS OF DIRECTORS

Since the beginning of the financial year, no director of the Company has received or become entitled to receive a benefit which is required to be disclosed under Section 201(8) of the Companies Act, Cap. 50, by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest except as disclosed in the financial statements.

5. OPTIONS TO TAKE UP UNISSUED SHARES

The Hitchins Share Option Scheme (the “Scheme”) of the Company was approved and adopted by its members at an Extraordinary General Meeting held on 13 December 2002. The Scheme provides an opportunity for employees (including Executive Directors of the Group) to have a personal stake in the shareholdings of the Company.

The reserved size of the Scheme is 15% of the issued share capital of the Company on the relevant date of grant of options.


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5. OPTIONS TO TAKE UP UNISSUED SHARES (Cont’d)

The Scheme is administered by the Remuneration Committee comprising:

Goh Chong Chia (Chairman and Independent Director) Tan Chong Huat (Member and Independent Director) Ng Tian Huat (Member and Executive Director)

The following persons are eligible to participate in the Scheme:

(i) Confirmed full-time employees of the Company and/or subsidiaries who have attained the age of 21 years and above and or before the relevant date of offer of an option;

(ii) Executive Directors of the Company; and

(iii) Persons who qualify under (i) or (ii) and who are controlling shareholders of the Company and their associates and whose participation and actual number of shares granted under the Scheme and terms of any option granted to them have been approved by independent shareholders in general meeting.

Non-Executive Directors are not eligible to participate in the Scheme.

Under the rules of the Scheme, options will be granted at the prevailing market price of the shares based on the average of the last dealt price per share as indicated in the daily official list or any other publication published by the SGX-ST for the 5 consecutive days immediately preceding the date of grant (the “Market Price”). Options will not be granted at a discount to the Market Price.

Options are exercisable, in whole or in part (provided that an option is exercised in part in respect of 1,000 shares or any multiple thereof ) as follows:

(i) up to 40% of the option at any time after 12 months of the date of grant;

(ii) the next 30% of the option at any time after 18 months of the date of grant;

(iii) the balance 30% of the option at any time after 24 months of the date of grant; and

(iv) before the end of 120 months of the date of grant of the option, subject to such other conditions introduced by the Remuneration Committee from time to time.



5. OPTIONS TO TAKE UP UNISSUED SHARES (Cont’d)

Details of the options granted to under the scheme to take up unissued ordinary shares of the Company are as follows:

Date of grant of options

Number of share options outstanding at 01/07/05

and 30/06/06Exercise price

per share Exercise period

28/04/2004 1,810,000 $0.08 28/04/2005 to 28/04/201428/04/2004 1,357,500 $0.08 28/10/2005 to 28/04/201428/04/2004 1,357,500 $0.08 28/04/2006 to 28/04/2014

4,525,000

Since the commencement of the scheme, no options have been granted to the Directors of the Company, controlling shareholders of the Company or their associates and no participant under the scheme has been granted 5% or more of the total options available under the scheme.

During the financial year, there were no shares issued by virtue of any exercise of option to take up unissued shares of the Company or any corporation in the Group.

Other than disclosed above, during the financial year, no option to take up unissued shares of the Company or any corporation in the Group was granted.

The options granted by the Company do not entitle the holders of the options, by virtue of such holding, to any such rights to participate in any share issue of any other Company.

6. AUDIT COMMITTEE

The members of the Audit Committee at the date of this report are as follows :

Sitoh Yih Pin (Chairman of Audit Committee and Independent Director)Goh Chong Chia (Independent Director)Tan Chong Huat (Independent Director)


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6. AUDIT COMMITTEE (Cont’d)

The Audit Committee performs the functions specified by section 201B(5) of the Companies Act. Among others, it performed the following functions:

Reviewed with the external auditors the external audit plan;

Reviewed with the external auditors their evaluation of the Company’s internal accounting controls, and their report on the financial statements and the assistance given by the Company’s officers to them;

Reviewed the announcements of annual and interim financial statements for the Group and the Company prior to their submission to the director of the Company for adoption; and

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

Other functions performed by the Audit Committee are described in the report on corporate governance included in the annual report.

The Audit Committee has recommended to the Board of Directors that the auditors, RSM Chio Lim, be nominated for re-appointment as auditors at the next Annual General Meeting of the Company.

7. SUBSEQUENT DEVELOPMENTS

There are no significant developments subsequent to the release of the Group’s and the Company’s preliminary financial statements, as announced on 29 August 2006, which would materially affect the Group’s and the Company’s operating and financial performance as of the date of this report.



8 AUDITORS

The auditors, RSM Chio Lim, have expressed their willingness to accept re-appointment. This audit firm was known as Chio Lim & Associates before 11 January 2006.

ON BEHALF OF THE DIRECTORS

Wong Seong KhuenDirector

Ng Tian HuatDirector

7 September 2006

Statement of Directors

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In the opinion of the directors, the accompanying financial statements are drawn up so as to give a true and fair view of the state of affairs of the Company and of the Group as at 30 June 2006 and changes in equity of the Company and of the Group, and of the results and cash flows of the Group for the financial year then ended and at the date of this statement there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

ON BEHALF OF THE DIRECTORS

Wong Seong KhuenDirector

Ng Tian HuatDirector

7 September 2006

Auditors’ ReportTo The Members Of Hitchins Group Ltd


We have audited the accompanying financial statements of Hitchins Group Ltd for the year ended 30 June 2006. These financial statements are the responsibility of the Company’s directors. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion,

(a) the consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Companies Act, Cap. 50 (the “Act”) and the Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 30 June 2006 and the results, changes in equity and cash flows of the Group and the changes in equity of the Company for the year ended on that date; and

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

RSM Chio Lim Certified Public Accountants

Singapore

7 September 2006

Partner in charge of audit: Goh Swee Hong(Effective from financial year ended 30 June 2006)

Balance SheetsAs at 30 June 2006

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Group CompanyNotes 2006 2005 2006 2005

$ $ $ $(restated) (restated)

ASSETSCurrent assets :Cash and cash equivalents 4 1,704,336 1,522,644 313,879 308,817Trade and other receivables 5 6,740,356 6,149,550 1,753,615 1,486,355

Inventories 6 949,480 1,164,643 – 2,954

Total current assets 9,394,172 8,836,837 2,067,494 1,798,126

Non-current assets :Investments in associates 7 – – – –Investments in subsidiaries 8 – – 3,021,821 3,021,821Other investments 9 – 16,395 – 14,625Property, plant and equipment 10 1,013,898 1,284,625 151,035 269,962

Deferred tax assets 20 11,540 11,839 – –

Total non-current assets 1,025,438 1,312,859 3,172,856 3,306,408

Total assets 10,419,610 10,149,696 5,240,350 5,104,534

See accompanying notes to financial statements.

Group CompanyNotes 2006 2005 2006 2005

$ $ $ $(restated) (restated)

LIABILITIES AND EQUITYCurrent liabilities :Short-term borrowings 11 903,597 800,271 678,430 585,951Trade and other payables 12 4,216,564 3,663,129 1,486,740 1,390,669Current tax payable 129,834 54,962 45,100 –Current portion of financeleases 13 99,056 113,127 42,241 44,402

Total current liabilities 5,349,051 4,631,489 2,252,511 2,021,022

Non-current liabilities :Deferred tax liabilities 20 46,656 98,473 – –Finance leases 13 177,467 266,485 110,988 153,229

Total non-current liabilities 224,123 364,958 110,988 153,229

Total liabilities 5,573,174 4,996,447 2,363,499 2,174,251

Equity:Share capital 14 4,311,012 4,311,012 4,311,012 4,311,012Other reserves (257,787) (166,770) 80,470 80,470Retained earnings/(accumulated losses) 793,211 1,009,007 (1,514,631) (1,461,199)

Total equity 4,846,436 5,153,249 2,876,851 2,930,283

Total liabilities and equity 10,419,610 10,149,696 5,240,350 5,104,534

Consolidated Income StatementYear ended 30 June 2006


GroupNotes 2006 2005

$ $(restated)

Revenue 17 11,708,761 10,103,057

Cost of sales (7,853,325) (6,200,580)

Gross profit 3,855,436 3,902,477

Other operating income 24,859 162,572

Financial income 18 78,417 222,517

Financial expense 18 (289,058) (632,189)

Distribution costs (1,513,840) (1,667,600)

Administrative expenses (2,409,236) (2,477,935)

Other credits/(charges) 19 (32,068) (61,912)

Loss before income tax (285,490) (552,070)

Income tax credits/(expense) 20 91,795 (45,190)

Loss for the year (193,695) (597,260)

Loss per share for loss attributable to the equity holders of the Company (expressed in cents per share)

– Basic 21 (0.18) (0.55)

– Diluted 21 (0.18) (0.55)


Statements of Changes in EquityYear ended 30 June 2006

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ForeignShare currency

Share Statutory option translation Retainedcapital reserves reserve reserves earnings Total

$ $ $ $ $ $

Group

Balance at 30 June 2004 4,311,012 192,249 – (443,257) 1,689,240 5,749,244

FRS 102 adjustment (Note 29) – – 12,444 – (12,444) –

Restated balance at 30 June 2004 4,311,012 192,249 12,444 (443,257) 1,676,796 5,749,244

Exchange differences on translating foreign operations (net loss recognized directly in equity) – – – (66,761) – (66,761)

Transfer to statutory reserves – 70,529 – – (70,529) –

FRS 102 adjustment (Note 29) – – 68,026 – – 68,026

Net loss for the year – – – – (597,260) (597,260)

Total recognized income/(loss) for the year – 70,529 68,026 (66,761) (667,789) (595,995)

Restated balance at 30 June 2005 4,311,012 262,778 80,470 (510,018) 1,009,007 5,153,249

Exchange differences on translating foreign operations (net loss recognized directly in equity) – – – (113,118) – (113,118)

Transfer to statutory reserves – 22,101 – – (22,101) –

Net loss for the year – – – – (193,695) (193,695)

Total recognized income/(loss) for the year – 22,101 – (113,118) (215,796) (306,813)

Balance at 30 June 2006 4,311,012 284,879 80,470 (623,136) 793,211 4,846,436

(a) & (b) (a) (a)

(a) Not available for distribution as cash dividends(b) Refer to Note 16 for details.


Statements of Changes in EquityYear ended 30 June 2006


ShareShare option Accumulated

capital reserve losses Total$ $ $ $

Company

Balance at 30 June 2004 4,311,012 – (1,349,294) 2,961,718

FRS 102 adjustment (Note 29) – 12,444 (12,444) –

Restated balance at 30 June 2004 4,311,012 12,444 (1,361,738) 2,961,718

FRS 102 adjustment (Note 29) – 68,026 – 68,026

Net loss for the year – – (99,461) (99,461)

Restated balance at 30 June 2005 4,311,012 80,470 (1,461,199) 2,930,283

Net loss for the year – – (53,432) (53,432)

Balance at 30 June 2006 4,311,012 80,470 (1,514,631) 2,876,851

(a)

(a) Not available for distribution as cash dividends

Consolidated Cash Flow StatementYear ended 30 June 2006

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Group2006 2005

$ $(restated)

Cash flows from operating activities :Loss for the year (193,695) (597,260)Adjustments for :

Income tax (credit)/expense (91,795) 45,190Depreciation expenses 365,382 376,393(Gain)/Loss on disposal of plant and equipment (4,962) 3,994Loss on disposal of other investments 514 – Changes in fair values of other investments – 4,415Share-based compensation – 68,026Dividend income – (420)Interest income (20,599) (13,641)Interest expense 80,794 71,676

Operating profit/(loss) before working capital changes 135,639 (41,627)Trade receivables and other receivables (399,150) 828,529Inventories 215,163 (152,399)Trade and other payables 553,435 (727,381)

Cash generated from/(used in) operations 505,087 (92,878)Income tax paid (73,064) (52,206)

Net cash generated from/(used in) operating activities 432,023 (145,084)

Cash flows from investing activities :Interest received 20,599 13,641Disposal of plant and equipment 14,251 8,972Disposal of other investments 15,881 – Purchase of plant and equipment (Note 4) (102,869) (75,208)Purchase of other investment – (12,635)Dividend received – 420

Net cash used in investing activities (52,138) (64,810)


Group2006 2005

$ $(restated)

Cash flows from financing activities :Interest paid (80,794) (71,676)Increase in short-term borrowings 27,561 45,926Increase in cash and cash equivalent (restricted in use) (Note 4) (6,658) (312,542)Decrease in finance leases (121,089) (112,830)

Net cash used in financing activities (180,980) (451,122)

Net effect of exchange rate changes in consolidating subsidiaries (79,546) (30,082)

Net increase/(decrease) in cash 119,359 (691,098)Cash at beginning of year 196,580 907,111Effect of foreign exchange rate adjustments (20,090) (19,433)

Cash at end of year (Note 4) 295,849 196,580

Notes to Financial Statements30 June 2006


1. GENERAL

The Company is incorporated in Singapore. The financial statements are presented in Singapore dollars. They are drawn up in accordance with the provisions of the Companies Act, Cap. 50 and the Singapore Financial Reporting Standards. The financial statements were approved and authorised for issue by the board of directors on 7 September 2006.

The Company’s principal activities are those of investment holding and relating to the distribution of specialised building materials. It is listed on the Singapore Exchange Securities Trading Limited.

The principal activities of the subsidiaries are disclosed in Note 8 to the financial statements.

The registered office is: 30 Toh Guan Road #07-01 ODC DistriCentre Singapore 608840. The Company is domiciled in Singapore.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ACCOUNTING CONVENTION – The financial statements are prepared under the historical cost convention, modified to include the revaluation of certain financial assets and financial liabilities as disclosed where appropriate in these financial statements.

BASIS OF PRESENTATION – The consolidation accounting method is used for the consolidated financial statements which include the financial statements made up to the balance sheet date each year of the Company and of those companies in which it holds, directly or indirectly through subsidiaries, over 50 percent of the shares and voting rights (its subsidiaries including special purpose entities). The consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances. All significant intragroup balances and transactions, including income, expenses and dividends, are eliminated in full on consolidation. The equity accounting method is used for associates in the Group financial statements. The results of the investees acquired or disposed of during the financial year are consolidated from the respective dates of acquisition or up to the dates of disposal. On disposal the attributable amount of goodwill is included in the determination of the gain or loss on disposal.

BASIS OF PREPARATION – The preparation of financial statements in conformity with generally accepted accounting principles requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The estimates and assumptions are reviewed on an ongoing basis. Apart from those involving estimations, management has made judgements in the process of applying the entity’s accounting policies. The areas requiring management’s most difficult, subjective or complex judgements, or areas where assumptions and estimates are significant to the financial statements, are disclosed at the end of this footnote, where applicable.


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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

CASH AND CASH EQUIVALENTS – Cash and cash equivalents include bank and cash balances and any highly liquid debt instruments purchased with an original maturity of three months or less. Cash for the cash flow statement includes cash and cash equivalents less bank overdrafts payable on demand that form an integral part of cash management and cash subject to restriction.

TRADE RECEIVABLES – After initial recognition at fair value, trade receivables are measured at amortised cost using the effective interest method but short-duration receivables with no stated interest rate are normally measured at original invoice amount unless the effect of imputing interest would be significant. Trade receivables are stated after provision for impairment. A trade receivable amount is regarded as impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition and that loss event has an impact on the estimated future cash flows of the financial asset that can be reliably estimated. The carrying amounts of trade receivables are assumed to approximate their fair value. The amount of the provision is recognised in the income statement. Normally no interest is charged on trade receivables.

LOANS AND OTHER RECEIVABLES - Loans and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than those held for trading, designated as available for sale and are not substantially recoverable, other than because of credit deterioration, which are classified as available for sale. Items with a short duration are not discounted. After initial recognition such financial assets, including derivatives that are assets, are measured at their fair values, without any deduction for transaction costs that may be incurred on sale or other disposal, except for the non-current financial assets that are loans and receivables which are measured at amortised cost using the effective interest method less provision for impairment. These items are included in the balance sheet in loan receivables and trade and other receivables as current assets or as non-current assets where the maturities are greater than 12 months after the balance sheet date.

INVENTORIES – Inventories are measured at the lower of cost (first in first out method) and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Cost includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. A write down on cost is made for where the cost is not recoverable or if the selling prices have declined.

CONTRACTS WORK-IN-PROGRESS – When the outcome of a long-term contract can be estimated reliably, the revenue and costs associated with the contract are recognised as revenue and expenses respectively by reference to the stage of completion of the contract activity at the balance sheet date using the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs method. Contract costs consist of costs that relate directly to the specific project, costs that are attributable to contract activity in general and can be allocated to the project and such other costs as are specifically chargeable to the customer under the terms of the contract. Variations in contract work, claims and incentive payments are included to the extent that they have been agreed with the customer. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. The long-term work in progress projects have operating cycles longer than one year. The Company includes in current assets amounts relating to the long-term contracts realisable over a period in excess of one year.




SUBSIDIARIES – A subsidiary is an entity including unincorporated and special purpose entities that are controlled by the Company. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity. In the Company’s own separate financial statements, the investments in subsidiaries are stated at cost less any provision for impairment in value. The net book values of the subsidiaries are not necessarily indicative of the amounts that would be realised in a current market exchange.

ASSOCIATES – An associate is an entity including an unincorporated entity in which the Company has a substantial financial interest (usually not less than 20% of the voting power), significant influence and that is neither a subsidiary nor a joint venture of the Company. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. Investments in associates are carried in the Group balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the associate. In the Company’s own separate financial statements the investment in associate are stated at cost less any provision for impairment in value. The net book values of the associates are not necessarily indicative of the amounts that would be realised in a current market exchange.

OTHER INVESTMENTS – Other investments with a quoted market price in an active market and derivatives that are not designated as hedges are classified as financial assets held for trading or those designated at fair value through profit or loss at inception. They are initially measured at its fair value and are classified as non-current assets if they are not held for trading or are not expected to be realised within 12 months of the balance sheet date. These are stated at fair value using the portfolio basis. A gain or loss on remeasuring trading financial assets to fair value (other than those relating to hedges) is recognised in the income statement. The transactions are recorded at the trade date.

BUSINESS COMBINATIONS – Business combinations are accounted for by applying the purchase method. The cost of a business combination includes the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the acquirer, in exchange for control of the acquiree; plus any costs directly attributable to the business combination. Any excess of the cost over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities so recognised is accounted for as goodwill. The excess of acquirer’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost is accounted for as “negative goodwill”. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under FRS 103 are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with FRS 105 Non-Current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised but is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired. An impairment loss in respect of goodwill is not reversed. There was no negative goodwill.

MINORITY INTERESTS – Any minority interest in the acquiree (subsidiary) is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.


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PROPERTY, PLANT AND EQUIPMENT – Depreciation is provided on a straight-line basis to allocate the gross carrying amounts less their residual values over their estimated useful lives of each part of an item of property, plant and equipment. The annual rates of depreciation are as follows:

Leasehold land and building – Over the terms of lease which is 3.6% to 4.5% Leasehold improvements – 10 years or 10% Motor vehicles – 2.5 to 10 years or 10% to 40% Plant & equipment – 1 – 10 years or 10% to 100%

An asset is depreciated when it is available for use until it is derecognised even if during that period the item is idle. Fully depreciated assets still in use are retained in the financial statements.

Property, plant and equipment are carried at cost less any accumulated depreciation and any accumulated impairment losses. The residual value and the useful life of an asset is reviewed at least at each financial year-end and, if expectations differ from previous estimates, the changes are accounted for as a change in an accounting estimate, and the depreciation charge for the current and future periods are adjusted. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item and is recognised in the income statement.

IMPAIRMENT OF NON-FINANCIAL ASSETS – At each reporting date an assessment is made whether there is any indication that a depreciable or amortisable asset may be impaired. If any such indication exists, an estimate is made of the recoverable amount of the asset. Irrespective of whether there is any indication of impairment, an annual impairment test is performed at the same time every year on an intangible asset with an indefinite useful life or an intangible asset not yet available for use. The impairment loss is the excess of the carrying amount over the recoverable amount and is recognised in the income statement unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). At each reporting date non-financial assets other than goodwill with impairment loss recognised in prior periods are assessed for possible reversal of the impairment. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

IMPAIRMENT OF FINANCIAL ASSETS – All financial assets except those measured at fair value through profit or loss are subject to review for impairment. A financial asset or a group of financial assets is impaired and impairment losses are incurred if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Losses expected as a result of future events, no matter how likely, are not recognised.




FINANCIAL LIABILITIES – Financial liabilities including bank and other borrowings when recognised initially are measured at fair value plus, in the case of items not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial liability. After initial recognition these are measured at amortised cost and any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method except for financial liabilities at fair value through profit or loss. Such liabilities, including derivatives that are liabilities, are measured at fair value. Liabilities are classified as current liabilities unless there is an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

LIABILITIES AND PROVISIONS – A liability or provision is recognised when there is a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. These include trade and other payables and where the effect of the time value of money is material, the amount recognised is the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.

LEASES AS A LESSEE – A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of an asset. At the commencement of the lease term, a finance lease is recognised as an asset and as liability in the balance sheet at amounts equal to the fair value of the leased asset or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease. The discount rate used in calculating the present value of the minimum lease payments is the interest rate implicit in the lease, if this is practicable to determine; if not, the lessee’s incremental borrowing rate is used. Any initial direct costs of the lessee are added to the amount recognised as an asset. The excess of the lease payments over the recorded lease liability are treated as finance charges which are allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents are charged as expenses in the periods in which they are incurred. The assets are depreciated as owned depreciable assets. Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased assets are classified as operating leases. For operating leases, lease payments are recognised as an expense in the income statement on a straight-line basis over the term of the relevant lease unless another systematic basis is representative of the time pattern of the user’s benefit, even if the payments are not on that basis. Lease incentives received are recognised in the income statement as an integral part of the total lease expense.

SHARE CAPITAL – Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction from the proceeds. Where the Company reacquires its own equity instruments as treasury shares, the consideration paid, including any directly attributable incremental cost is deducted from equity attributable to the Company’s equity holders until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders and no gain or loss is recognised in the income statement.

FAIR VALUE OF FINANCIAL INSTRUMENTS – The carrying values of current financial assets and financial liabilities including cash, accounts receivable, short-term borrowings, accounts payable approximate their fair values due to the short-term maturity of these instruments. The fair values of long-term debts are not disclosed unless there are significant items at the end of the year and are disclosed in the relevant notes.


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REVENUE RECOGNITION – The revenue amount is the fair value of the consideration received or receivable from the gross inflow of economic benefits during the period arising from the course of the ordinary activities of the entity and it is shown net of related tax, estimated returns, discounts and volume rebates. Revenue from sale of goods is recognised when significant risks and rewards of ownership are transferred to the buyer, there is neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, the amount of revenue and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Revenue from rendering of services is recognised by reference to the stage of completion of the transaction at the balance sheet date determined by the proportion of the cost incurred to date bear to the estimated total cost of the transaction and the amount of revenue, stage of completion, and the costs incurred for the transaction and the costs to complete the transaction can be measured reliably. Revenue from rendering of other services that are of short duration is recognised when the services are completed. Interest revenue is recognised on a time-proportion basis using the effective interest rate that takes into account the effective yield on the asset. Rental revenue is recognised on a time-proportion basis that takes into account the effective yield on the asset. Dividend revenue from investments is recognised when the shareholder’s right to receive the dividend is legally established.

FOREIGN CURRENCY TRANSACTIONS – The functional currency is the Singapore dollar as it reflects the primary economic environment in which the entity operates. Transactions in foreign currencies are recorded in Singapore dollars at the rates ruling at the dates of the transactions. At each balance sheet date, recorded monetary balances and balances measured at fair value that are denominated in foreign currencies are reported at the rates ruling at the balance sheet and fair value dates respectively. All realised and unrealised exchange adjustment gains and losses are dealt with in the income statement.

FOREIGN CURRENCY FINANCIAL STATEMENTS – The foreign entities determine the appropriate functional currency as it reflects the primary economic environment in which the entities operate. In translating the financial statements of a foreign entity for incorporation in the consolidated financial statements the assets and liabilities denominated in currencies other than the functional currency of the Company are translated at year end rates of exchange and the income and expense items are translated at average rates of exchange for the year. The resulting translation adjustments (if any) are accumulated in a separate component of equity until the disposal of the foreign entity.

BORROWING COSTS – All borrowing costs that are interest and other costs incurred in connection with the borrowing of funds costs are recognised as an expense in the period in which they are incurred except for borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset that necessarily take a substantial period of time to get ready for their intended use or sale are capitalised as part of the cost of that asset until substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete. The interest expense is calculated using the effective interest rate method.

INCOME TAX – The income taxes are accounted using the asset and liability method that requires the recognition of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequence of events that have been recognised in the financial statements or tax returns. The measurements of current and deferred tax liabilities and assets are based on provisions of the enacted or substantially enacted tax laws; the effects of future changes in tax laws or rates are not anticipated. Income tax expense represents the sum of the tax currently payable and deferred tax. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same income tax authority. The carrying amount of deferred tax assets is reviewed at each balance sheet date and is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realised. A deferred tax amount is recognised for all temporary differences, unless the deferred tax amount arises from (a) goodwill for which amortisation is not deductible for tax purposes; or (b) the initial recognition of an asset or liability in a transaction which (i) is not a business combination; and (ii) at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). A deferred tax liability is not recognised for all taxable temporary differences associated with investments in subsidiaries, branches and associates, and interests in joint ventures because (a) the Company is able to control the timing of the reversal of the temporary difference; and (b) it is probable that the temporary difference will not reverse in the foreseeable future.




EMPLOYEE BENEFITS – Contributions to defined contribution retirement benefit plans are recorded as an expense as they fall due. The entity’s legal or constructive obligation is limited to the amount that it agrees to contribute to the fund. This includes the government managed retirement benefit plan such as the Central Provident Fund in Singapore. For employee leave entitlement the expected cost of short-term employee benefits in the form of compensated absences is recognised in the case of accumulating compensated absences, when the employees render service that increases their entitlement to future compensated absences; and in the case of non-accumulating compensated absences, when the absences occur.

SHARE-BASED COMPENSATION – For the equity-settled share-based compensation transactions, the fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed on a straight-line basis over the vesting period is determined by reference to the fair value of the options granted excluding the effect of non-market conditions such as profitability and sales growth targets. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Fair value is measured using the Black-Scholes pricing model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. At each balance sheet date, the entity revises its estimates of the number of options that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the income statement, with a corresponding adjustment to equity. The proceeds received net of any directly attributable transaction costs are credited to share capital when the options are exercised. See Note 29 for change in accounting policy.

SEGMENT REPORTING – a business segment is a distinguishable component of an enterprise that is engaged in providing an individual product or service or a group of related products of services and that is subject to risks and returns that are different from those of other business segments. A geographical segment is a distinguishable component of an enterprise that is engaged in providing products or services within a particular economic environment and that is subject to risks and returns that are different from those of components operating in other economic environments.

CRITICAL JUDGEMENTS, ASSUMPTIONS AND ESTIMATION UNCERTAINTIES

The critical judgements made in the process of applying the entity’s accounting policies that have the most significant effect on the amounts recognised in the financial statements and the key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

Critical accounting judgements:

ALLOWANCES FOR DOUBTFUL ACCOUNTS – An allowance is made for doubtful accounts for estimated losses resulting from the subsequent inability of the customers to make required payments. If the financial conditions of the customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required in future periods. Management specifically analyses accounts receivables and analyses historical bad debt, customer creditworthiness, current economic trends and changes in our customer payment terms when making a judgement to evaluate the adequacy of the allowance for doubtful accounts. At the balance sheet date, the receivables are measured at fair value and their fair values might change materially within the next financial year but these changes would not arise from assumptions or other sources of estimation uncertainty at the balance sheet date.


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Critical accounting judgements: (Cont’d)

WARRANTY CLAIMS – Certain products are covered by product warranty plans of varying periods. A related provision is made for future warranty claims after taking into account the historical warranty claim information, as well as recent trends that might suggest that past cost information may differ from future claims. The warranty obligations are affected by actual product failure rates (field failure rates) and by material usage and service delivery costs incurred in correcting a product failure. The amount at the balance sheet date was $131,702.

Critical assumptions and estimation uncertainties:

ESTIMATED IMPAIRMENT OF SUBSIDIARIES – When a subsidiary is in net equity deficit and has suffered operating losses a test is made whether the investment in the investee has suffered any impairment, in accordance with the stated accounting policy. This determination requires significant judgement. An estimate is made of the future profitability of the investee, and the financial health of and near-term business outlook for the investee, including factors such as industry and sector performance, and operational and financing cash flow. The amount of the relevant investment net of provision for impairment is $3,021,821 at the balance sheet date. If the actual profitability of the investee is lower than management’s estimates at 30 June 2006, the carrying value of the investment would need to reduced.

RISK MANAGEMENT POLICIES FOR FINANCIAL INSTRUMENTS

GENERAL RISK MANAGEMENT PRINCIPLES – The entity’s financial instruments comprise borrowings, some cash and liquid resources, and various items, such as trade and other receivables, trade and other payables, that arise directly from its operations. The main purpose of these financial instruments is to raise finance for the entity’s operations. The main risks arising from the entity’s financial instruments are credit risk, interest risk, liquidity risk and foreign currency risk. The management reviews and agrees policies for managing each of these risks and they are summarised below.

CREDIT RISK ON FINANCIAL ASSETS – Financial assets that are potentially subject to concentrations of credit risk and failures by counterparties to discharge their obligations consist principally of cash, cash equivalents and trade and other accounts receivable. The management believes that the financial risks associated with these financial instruments are minimal. The cash and cash equivalents and other liquid financial assets are placed with high credit quality institutions. An ongoing credit evaluation is performed of the debtors’ financial condition and a loss from impairment is recognised in the income statement. There is no significant concentration of credit risk, as the exposure is spread over a large number of counter-parties and customers unless otherwise disclosed in the notes to the financial statements.

OTHER RISKS ON FINANCIAL INSTRUMENTS – The main risks arising from the entity’s financial instruments are interest risk, liquidity risk and foreign currency risk. The operations are financed through a mixture of retained earnings and borrowings. Borrowings are in the desired currencies at both fixed and floating rates of interest. The policy is to retain flexibility in selecting borrowings at both fixed and floating rates interest. There is exposure to interest rate price risk for financial instruments with a fixed interest rate and to interest rate or cash flow risk for financial instruments with a floating interest rate that is reset as market rates change. Interest rate swaps are not used to generate the desired interest profit and to manage the exposure to interest rate fluctuations. There is also exposure to liquidity. As regards liquidity, the policy has to ensure continuity of funding and where necessary a certain percentage of the borrowings should mature in two to five years. Short-term flexibility is achieved by overdraft facilities. There is also exposure to changes in foreign exchange rates arising from foreign currency transactions and balances and changes in fair values. These exposures and changes in fair values from time to time are monitored and any gains and losses are included in the income statement unless otherwise stated in the notes to the financial statements. There is no policy to reduce currency exposures through forward currency contracts, derivatives transactions or other arrangements.



3. RELATED PARTY TRANSACTIONS

A related party is an entity or person that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common or joint control with, the entity in governing the financial and operating policies, or that has an interest in the entity that gives it significant influence over the entity in financial and operating decisions. It also includes members of the key management personnel or close members of the family of any individual referred to herein and others who have the ability to control, jointly control or significantly influence by or for which significant voting power in such entity resides with, directly or indirectly, any such individual. This includes parents, subsidiaries, fellow subsidiaries, associates, joint ventures and post-employment benefit plans, if any.

3.1 Related companies:

Related companies in these financial statements refer to members of the Company’s group of companies.

There are transactions and arrangements between the Company and members of the Group and the effects of these on the basis determined between the parties are reflected in these financial statements. The current intercompany balances are unsecured without fixed repayment terms and interest unless stated otherwise. For non-current balances an interest is imputed based on the cost of borrowing less the interest rate if any provided in the agreement for the balance.

Intragroup transactions and balances that have been eliminated in the consolidated financial statements are not disclosed as related party transactions and balances below.

3.2. Other related parties:

There are transactions and arrangements between the Company and related parties and the effects of these on the basis determined between the parties are reflected in these financial statements. The current related party balances are unsecured without fixed repayment terms and interest unless stated otherwise. For non-current balances interest is imputed based on the cost of borrowing less the interest rate if any provided in the agreement for the balance.

Significant related party transactions:

In addition to the transactions and balances disclosed elsewhere in the notes to the financial statements, this item includes the following:

Related party2006

$2005

$

Other fee income 5,240 3,240


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3. RELATED PARTY TRANSACTIONS (Cont’d)

3.3. Key management compensation:

Group2006

$2005

$

Salaries and other short-term employee benefits 858,942 841,630

The above amounts are included under employee benefits expense. Included in the above amounts are following items:

2006$

2005$

Directors’ remuneration of directors of the Company 708,957 702,683Directors’ fees 90,000 80,000

Fees to a firm in which a director is a member 13,967 17,933

Further information about the remuneration of individual directors is provided in the report on corporate governance.

Key management personnel are directors and those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly. The above amounts for key management compensation during the year are for nine directors and other key management personnel. The above amounts include compensation if any of the certain key management personnel and directors of the Company who received compensation from subsidiaries in their capacity as directors and or executive of those subsidiaries.



3. RELATED PARTY TRANSACTIONS (Cont’d)

3.4. Other payables to related parties:

The trade receivables and payables balances arising from sales and purchases of goods and services are disclosed elsewhere in the notes to the financial statements.

The movements in other payables to related parties are as follows:

Director Related party2006

$2005

$2006

$2005

$

Group

Other payables:Balance at beginning of year 1,595 1,595 240,406 234,589Amounts paid out during the year (40) – (47,222) (20,689)Amounts received on behalf during the year – – 34,751 26,506

Balance at end of year 1,555 1,595 227,935 240,406

Related party2006

$2005

$

Company

Other payables:Balance at beginning of year 166,365 178,641Amounts paid out during the year (7,610) (12,276) Amounts received on behalf during the year 2,642 –

Balance at end of year 161,397 166,365


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4. CASH AND CASH EQUIVALENTS

Group Company2006

$2005

$2006

$2005

$

Not restricted in use 1,071,136 896,102 2,291 2,362Restricted in use (a) 633,200 626,542 311,588 306,455

1,704,336 1,522,644 313,879 308,817

Analysis of above amount denominated in foreign currencies:

Chinese Renminbi 479,216 633,688 – –Malaysian Ringgit 619,751 410,078 – –

The rate of interest for the cash on interest earning account are between 0.825% to 1.8% (2005: 1.5% to 2.9%) per year for the Group and 1.5% to 1.8% (2005: 1.5% to 1.75%) per year for the Company. These approximate the weighted effective interest rate.

(a) These are for fixed deposits held by bankers to cover bankers’ guarantees and credit facilities granted.

Cash and cash equivalents in the consolidated cash flow statements

Group2006

$2005

$

As shown above 1,704,336 1,522,644Bank Overdraft (Note 11) (775,287) (699,522)Cash restricted in use (633,200) (626,542)

Cash and cash equivalents at end of year 295,849 196,580

NON CASH TRANSACTION – Addition to plant and equipment during the year amounting to $18,000 (2005: $34,886) were financed by new finance lease.



5. TRADE AND OTHER RECEIVABLES

Group Company2006

$2005

$2006

$2005

$

Trade receivables:Outside parties 7,408,171 6,995,202 701,460 704,648Retention receivable 884,354 845,144 – –Less provision for impairment (2,182,519) (2,059,239) (697,267) (627,310)Subsidiaries (Note 3 and 8) – – 17,229 –

Other receivables:Subsidiaries (Note 3 and 8) – – 1,523,431 1,392,168Provision for impairment – subsidiaries – – (138,138) (125,377)Deposits to secure services 89,310 94,729 57,537 49,327Tax recoverable 267,084 75,428 267,084 75,084Outside parties 216,022 170,679 478 7,458Prepayments 57,934 27,607 21,801 10,357

Total trade and other receivables 6,740,356 6,149,550 1,753,615 1,486,355

Movements in above provision:-

Balance at beginning of year 2,059,239 1,886,987 752,687 803,032Foreign currency translation difference (17,892) (9,097) – –Charged (reversed) for trade receivable to income statement included in financial income and (expense) 133,565 279,154 69,957 (11,328)Change (reversed) for subsidiaries to income statement included in financial income and (expense) – – 12,761 (4,451) Charged for trade receivables against accrued liabilities 18,795 – – –Used/Bad debts written off (11,188) (97,805) – (34,566)

Balance at end of year 2,182,519 2,059,239 835,405 752,687


Chinese Renminbi 1,523,956 1,064,954 – –Malaysian Ringgit 1,390,113 1,228,009 – –

Trade receivables amounting to $158,653 (2005: $277,001) and $27,675 (2005: Nil) are factored to a financial institution and discounted with a bank (Note 11) respectively.


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5. TRADE AND OTHER RECEIVABLES (Cont’d)

Concentration of trade receivables customers:

Group Company2006

$2005

$2006

$2005

$

Top 1 customer 206,205 205,941 – 66,530Top 2 customers 384,465 331,029 – –Top 3 customers 532,253 408,755 – –

The average credit period generally granted to trade receivable customers of the Group is about 30 to 120 days (2005: 30 to 120 days) excluding all items provided for.

Current receivables with a short duration are not discounted and the carrying values are assumed to approximate the fair value.

6. INVENTORIES

Group Company2006

$2005

$2006

$2005

$

Finished goods 438,904 671,062 – –Raw materials 297,618 196,782 – 2,954Contract work-in-progress 212,958 296,799 – –

Balance at end of year 949,480 1,164,643 – 2,954



6. INVENTORIES (Cont’d)

Contract work-in-progress comprises:

Group2006

$2005

$

Aggregate amount of costs incurred and recognised profits (less recognised losses) to date on uncompleted contracts 1,304,755 2,184,839Less progress payments received and receivable to date (1,145,027) (1,990,148)

Net amount due from contract customers at end of year 159,728 194,691

Included in the accompanying balance sheet as follows:

As an asset under inventories 212,958 296,799As a liability under trade payables (Note 12) (53,230) (102,108)

159,728 194,691

Contract retention receivables as an asset under trade receivables 884,354 845,144

7. INVESTMENTS IN ASSOCIATES

Group Company2006

$2005

$2006

$2005

$

Unlisted equity shares at cost 239,253 239,253 239,253 239,253Share of post-acquisition losses (239,253) (239,253) – – Less provision for impairment – – (239,253) (239,253)

– – – –

The investment is carried at cost less provision for impairment.


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7. INVESTMENTS IN ASSOCIATES (Cont’d)

Percentage ofequity held

Name of associates, country of incorporation, 2006 2005place of operations and principal activities % %

Held by the CompanyAeroroof Industries Sdn Bhd (a) 43 43MalaysiaManufacture of concrete roof tiles

(a) Not audited. This associate does not contribute significantly to the Group’s results as it is dormant.

Share of losses of associate exceeding the amount of the investment are not recognised as losses in the income statement. The Group has not provided any guarantee or undertaking in favour of the associate.

8. INVESTMENTS IN SUBSIDIARIES

Company2006

$2005

$

Quasi-equity loan (a) 1,256,247 1,256,247Unquoted shares, at cost 3,362,688 3,362,688Less provision for impairment (1,597,114) (1,597,114)

Total at cost 3,021,821 3,021,821


Chinese Renminbi 1,542,247 1,542,247Malaysian Ringgit 97,737 97,737



8. INVESTMENTS IN SUBSIDIARIES (Cont’d)

The investment is carried at cost less provision for impairment.

(a) This loan is an interest free quasi-equity loan from the Company to Hitchins-Da Sheng Holdings Pte Ltd (“HDSH”), the wholly-owned subsidiary of Hitchins Group Ltd (“HGL”), which holds 100% equity interest in Shanghai Hitchins Da Sheng Waterproofing Materials Co., Ltd. The loan from HGL to HDSH is quasi-equity in nature and HGL does not expect the repayment of the interest free loan by HDSH in the foreseeable future.

The following is listing of all the subsidiaries held by the Company:

Percentageof equity held

Cost of the investments

Name of subsidiaries, country of incorporation, 2006 2005 2006 2005place of operations and principal activities % % $ $

Interest held by CompanyHitchins (F.E.) Marketing Pte Ltd (a) 100 100 736,489 736,489SingaporeDistribution of specialised building materials.

Hitchins-Da Sheng Holdings Pte Ltd (a) 100 100 424,060 424,060SingaporeInvestment holding and supply of specialised building materials.

CRG Contractors Pte Ltd (a) 100 100 2,059,500 2,059,500SingaporeProvision of waterproofing works and contractors for construction works of any kind.

Hitchins International Pte Ltd (a) 100 100 10,000 10,000Singpapore Investment holding.


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The following is listing of all the subsidiaries held by the Company: (Cont’d)

Percentageof equity held

Cost of the investments


Hitchins Borneo Sendirian Berhad (b) 98 98 9,900 9,900BruneiRoofing and fire protection specialists and supplier of specialised building materials.(Audited by Lee and Raman Certified Public Accountants)

Renesco Injection (Waterproofing) Pte Ltd (a) 100 100 25,000 25,000SingaporeSupply of specialised building materials and waterproofing services.

Ampero (M) Sdn Bhd (b) 100 100 96,669 96,669MalaysiaSupply of specialised building materials(Audited by Horwath Malaysia)

Hitchins (Malaysia) Sedirian Berhad (b) 100 100 1,068 1,068Malaysia Supply of specialised buildings materials.(Audited by Horwath Malaysia)

Hitchins (Laboratory) Pte Ltd (c) 100 100 2 2Singapore Inactive

3,362,688 3,362,688




The interests held by the subsidiaries are listed below:

Percentage of equity

Cost in books of subsidiaries


Hitchins (F.E.) Marketing Pte LtdHelms Industries Pte Ltd (a) 100 100 10,000 10,000Singapore Supply of specialised building materials.

Hitchins-Da Sheng Holdings Pte LtdShanghai Hitchins Da Sheng Waterproofing Materials Co., Ltd (b) 100 100 1,542,247 1,542,247People’s Republic of China Manufacture and supply of specialised building materials.(Audited by Horwath China Shanghai)

Hitchins International Pte LtdDaku Asia Pte Ltd (a) 75 60 60,001 60,000SingaporeSupply of specialised building materials.

(a) Audited by RSM Chio Lim.

(b) Other auditors. Audited by firms of accountants other than member firms of RSM International of which RSM Chio Lim in Singapore is a member. Their names are indicated above.

(c) Not audited as it is inactive and immaterial.


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9. OTHER INVESTMENTS

Group Company2006

$2005

$2006

$2005

$

Movements during the year – at fair value:

Fair value at beginning of year 16,395 8,175 14,625 8,175Additions – 12,635 – 8,505Disposals (16,395) – (14,625) – Decrease in fair value – (4,415) – (2,055)

Fair value at end of year – 16,395 – 14,625

Balance is made up of:

Quoted equity shares in corporations at fair value through profit and loss – 16,395 – 14,625

The investment represents investment in listed equity securities which provide an opportunity for return through dividend income and trading gains. The fair values of these securities are based on quoted market prices.



10. PROPERTY, PLANT AND EQUIPMENT

Leasehold land and building

Leasehold improvements

Motorvehicles

Plant andequipment Total

Group $ $ $ $ $

Cost:At beginning of year 1 July 2004 748,662 48,074 1,435,510 1,274,304 3,506,550Foreign currency translation difference (10,813) (675) (7,486) (3,820) (22,794)Additions – 1,271 22,800 86,023 110,094Disposals – – (123,259) (21,665) (144,924)

At end of year 30 June 2005 737,849 48,670 1,327,565 1,334,842 3,448,926

Accumulated depreciation:At beginning of year 1 July 2004 137,429 24,769 717,402 1,045,814 1,925,414Foreign currency translation difference (1,354) (284) (1,732) (2,178) (5,548)Depreciation for the year 60,803 5,934 202,268 107,388 376,393Disposals – – (110,293) (21,665) (131,958)

At end of year 30 June 2005 196,878 30,419 807,645 1,129,359 2,164,301

Net book value:At end of year 30 June 2005 540,971 18,251 519,920 205,483 1,284,625


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10. PROPERTY, PLANT AND EQUIPMENT (Cont’d)

Leasehold land and building

Leasehold improvements

Motorvehicles

Plant andequipment Total

Group (Cont’d) $ $ $ $ $

Cost:At beginning of year 1 July 2005 737,849 48,670 1,327,565 1,334,842 3,448,926Foreign currency translation difference (18,271) (1,226) (12,710) (6,825) (39,032)Additions 3,261 – 55,743 61,865 120,869Disposals – – (49,251) (429,499) (478,750)

At end of year 30 June 2006 722,839 47,444 1,321,347 960,383 3,052,013

Accumulated depreciation:At beginning of year 1 July 2005 196,878 30,419 807,645 1,129,359 2,164,301Foreign currency translation difference (6,727) (892) (9,057) (5,431) (22,107)Depreciation for the year 65,040 5,974 194,473 99,895 365,382Disposals – – (49,251) (420,210) (469,461)

At end of year 30 June 2006 255,191 35,501 943,810 803,613 2,038,115

Net book value:At end of year 30 June 2006 467,648 11,943 377,537 156,770 1,013,898




Group (Cont’d)

The depreciation expense is charged as follows: Cost of sales Administrative expenses Total$ $ $

2005 41,672 334,721 376,3932006 32,543 332,839 365,382

Motor

vehiclesPlant and

equipment TotalCompany $ $ $

Cost:At beginning of year 1 July 2004 and end of year 30 June 2005 365,888 910,777 1,276,665

Accumulated depreciation:At beginning of year 1 July 2004 94,790 785,604 880,394Depreciation for the year 68,328 57,981 126,309

At end of year 30 June 2005 163,118 843,585 1,006,703

Net book value:At end of year 30 June 2005 202,770 67,192 269,962


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Motor

vehiclesPlant and

equipment TotalCompany (Cont’d) $ $ $

Cost:At beginning of year 1 July 2005 365,888 910,777 1,276,665Additions – 721 721Disposals – (388,612) (388,612)

At end of year 30 June 2006 365,888 522,886 888,774

At beginning of year 1 July 2005 163,118 843,585 1,006,703Additions 68,328 46,240 114,568Disposals – (383,532) (383,532)

At end of year 30 June 2006 231,446 506,293 737,739

Net book value:At end of year 30 June 2006 134,442 16,593 151,035

Certain plant and equipment are under finance lease agreement (see Note 13).



11. SHORT-TERM BORROWINGS

Group Company2006 2005 2006 2005

$ $ $ $

Advances against trade receivables factored (Note 5) 100,635 100,749 – –Bills discounted 27,675 – – –Bank overdrafts (secured) 775,287 699,522 678,430 585,951

Total short-term borrowings 903,597 800,271 678,430 585,951

All the short-term borrowings are interest bearing. The range of floating interest rates paid were as follows:

2006 2005

Advances against trade receivables factored 6.0% to 7.0% 6.0% to 7.0%Bills discounted 7.0% –Bank overdrafts 6.0% to 7.75% 6.0% to 7.0%

The above interest rates approximate the weighted effective interest rate. Certain of the bank overdrafts and other credit are covered by fixed deposit pledged with the banks.


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12. TRADE AND OTHER PAYABLES

Group Company2006

$2005

$2006

$2005

$

Trade payables:Outside parties and accrued liabilities 2,852,344 2,183,957 199,480 154,014Subsidiaries (Notes 3 and 8) – – 187,511 –Minority shareholder of subsidiary 4,037 – – –Contract work-in-progress (Note 6) 53,230 102,108 – –Provision for warranties 131,702 117,184 – –

Other payables:Subsidiaries (Notes 3 and 8) – – 156,017 306,243Director (Note 3) 1,555 1,595 – –Related party (Note 3) 227,935 240,406 161,397 166,365Dividend payable (a) 745,193 745,193 745,193 745,193Other payables 200,568 272,686 37,142 18,854

Total trade and other payables 4,216,564 3,663,129 1,486,740 1,390,669


US Dollar – 155,969 – –UAE Dirham 37,020 – – –Euro 94,195 80,417 – –Swiss Franc 93,648 148,001 – –Chinese Renminbi 322,132 298,945 – –Malaysian Ringgit 469,525 225,287 – –

(a) This dividend payable to Mr Wong Seong Khuen and Mr Ng Tian Huat, who are also the directors of the Company, was declared and approved by shareholders prior to the Company’s public listing on the Singapore Exchange Securities Trading Limited.

The average credit period taken to settle trade payables of the Group is about 30 to 90 days (2005: 30 to 90 days). The other payables are with short-term durations.

The notional amount is deemed to reflect the fair value.



12. TRADE AND OTHER PAYABLES (Cont’d) Movement in the provision for warranties:

Group2006

$2005

$

Balance at beginning of year 117,184 134,977Foreign currency translation difference (1,399) (541)Provision charged to income statement included in cost of sales 92,678 70,777Used (76,761) (88,029)

Balance at end of year 131,702 117,184

13. FINANCE LEASES LIABILITIES

Group

Minimum Finance Presentpayments charges value

2006 $ $ $

Minimum lease payments payable:Due within one year 115,271 (16,215) 99,056Due within 2 to 5 years 195,584 (29,136) 166,448Due after 5 years 13,731 (2,712) 11,019

324,586 (48,063) 276,523

Net book value of plant and equipment under finance leases 225,763


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13. FINANCE LEASES LIABILITIES (Cont’d)

Group (Cont’d)


2005 $ $ $

Minimum lease payments payable:Due within one year 134,405 (21,278) 113,127Due within 2 to 5 years 287,551 (41,340) 246,211Due after 5 years 25,002 (4,728) 20,274

446,958 (67,346) 379,612


Company


2006 $ $ $

Minimum lease payments payable:Due within one year 49,894 (7,653) 42,241Due within 2 to 5 years 130,698 (19,710) 110,988

180,593 (27,363) 153,229




13. FINANCE LEASES LIABILITIES (Cont’d) Company (Cont’d)


2005 $ $ $

Minimum lease payments payable:Due within one year 52,584 (8,182) 44,402Due within 2 to 5 years 175,462 (26,553) 148,909Due after 5 years 5,130 (810) 4,320

233,176 (35,545) 197,631


It is the Group’s policy to lease certain of its plant and equipment under finance leases. The lease terms range from 3 to 5 years. The rates of interest for finance leases are about 2.4% to 6.6% per year. There is an exposure to fair value interest risk because the interest rates are fixed at contract date. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. All lease obligations are denominated in Singapore dollars except for certain lease obligations amounting to $33,356 (2005: $53,017) that are denominated in Malaysian Ringgit. The obligations under finance leases are secured by the lessor’s charge over the leased assets. The fair value of the lease liabilities approximates the carrying amounts.

14. SHARE CAPITAL

Group and CompanyNumber

of sharesIssued

share capital $

Ordinary shares:Balance at beginning and end of year 30 June 2005 108,600,000 1,086,000Transfer of share premium balance – 3,225,012

Balance at end of year 30 June 2006 108,600,000 4,311,012


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14. SHARE CAPITAL (Cont’d)

With the changes to the Companies Act, Cap 50, effective from 30 January 2006, there is the removal of the concept of par value and authorised capital and there is no share premium account. The Company had a share premium account balance of $3,225,012 at 30 January 2006. This amount has now been included in share capital as required by the changes to the Companies Act.

The ordinary shares carry no right to fixed income.

15. SHARE-BASED COMPENSATION

Share option:

The Hitchins Share Option Scheme (the “Scheme”) of the Company was approved and adopted by its members at an Extraordinary General Meeting held on 13 December 2002.

The Scheme is administered by the Remuneration Committee comprising:

Goh Chong Chia (Chairman and Independent Director) Tan Chong Huat (Member and Independent Director) Ng Tian Huat (Member and Executive Director)

The reserved size of the Scheme is 15% of the issued share capital of the Company on the relevant date of grant of options.

The following persons are eligible to participate in the Scheme:

(i) Confirmed full-time employees of the Company and/or subsidiaries who have attained the age of 21 years and above and or before the relevant date of offer of an option;

(ii) Executive Directors of the Company; and

(iii) Persons who qualify under (i) or (ii) and who are controlling shareholders of the Company and their associates and whose participation and actual number of shares granted under the Scheme and terms of any option granted to them have been approved by independent shareholders in general meeting.

Non-Executive Directors are not eligible to participate in the Scheme.

Under the rules of the Scheme, options will be granted at the prevailing market price of the shares based on the average of the last dealt price per share as indicated in the daily official list or any other publication published by the SGX-ST for the 5 consecutive days immediately preceding the date of grant (the “Market Price”). Options will not be granted at a discount to the Market Price.



15. SHARE-BASED COMPENSATION (Cont’d)

Options are exercisable, in whole or in part (provided that an option is exercised in part in respect of 1,000 shares or any multiple thereof ) as follows:

(i) up to 40% of the option at any time after 12 months of the date of grant;

(ii) the next 30% of the option at any time after 18 months of the date of grant;

(iii) the balance 30% of the option at any time after 24 months of the date of grant; and

(iv) before the end of 120 months of the date of grant of the option, subject to such other conditions introduced by the Remuneration Committee from time to time.

Details of the options granted to under the scheme to take up unissued ordinary shares of the Company are as follows:

Date of grant of options Number of share options outstanding at 01/07/05 and 30/06/06 Exercise price per share Exercise Period

28/04/2004 1,810,000 $0.08 28/04/2005 to 28/04/201428/04/2004 1,357,500 $0.08 28/10/2005 to 28/04/201428/04/2004 1,357,500 $0.08 28/04/2006 to 28/04/2014

4,525,000

Share option reserve:

Group Company2006

$2005

$2006

$2005

$

At beginning of year 1 July as previously reported – – – –Cumulative effect on adoption of FRS 102 80,470 12,444 80,470 12,444

Restated balance at beginning of year 1 July 80,470 12,444 80,470 12,444Share based expense recognised in income statement – 68,026 – 68,026

At end of year 30 June 80,470 80,470 80,470 80,470

The expense for the year allocated in the income statement as follows:

Administrative expenses – 68,026 – 68,026


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15. SHARE-BASED COMPENSATION (Cont’d)

The Group adopted FRS 102 Share-based Payment with effect from 1 January 2005. The accounting policy and changes are disclosed in Note 2 and Note 29 in these financial statements respectively.

The fair values of the options are estimated on the date of grant using the Black-Scholes option pricing model with the following assumption used for grants:

Weighted average share price $0.08

Weighted average exercise price $0.08

Dividend yield expected –

Risk-free annual interest rate 3.26%

Volatility expected 1.14%Expected option term of years, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. 10 years

16. STATUTORY RESERVE

A subsidiary, Shanghai Hitchins Da Sheng Waterproofing Materials Co., Ltd is required by the relevant People’s Republic of China (“PRC”) regulations and its Articles of Association to allocate where applicable certain percentage of profit after taxation after deducting accumulated losses as determined in accordance with PRC accounting standards and regulations to the statutory reserve surplus fund until such reserves reaches 50% of the subsidiary’s registered capital subject to certain restriction set out in the Company Law of the PRC, and the company’s Articles of Associations. Part of the reserves may be converted to increase its registered capital.

17. REVENUE

Group2006

$2005

$

Trading revenue 5,094,517 4,360,628Contract revenue 6,614,244 5,742,429

11,708,761 10,103,057



18. FINANCIAL INCOME AND (EXPENSE)

Group2006

$2005

$

Bad debts written off trade receivables (832) (19,146)Bad debts written off other receivables (338) (87,861)Bad debts written back trade receivables – 10,000Dividend income from other investment – 420Foreign exchange transaction gains/(losses) (15,197) 38,519Interest expense (80,794) (71,676)Fair value adjustment on other investments – (4,415)Interest income 20,599 13,641Loss on disposal of other investments (514) – Provision for impairment on trade receivables (191,383) (449,091)Provision for impairment on trade receivables written back 57,818 159,937

(210,641) (409,672)

Presented in the income statement as:Financial income 78,417 222,517Financial expense (289,058) (632,189)

Finance income and (expense) net (210,641) (409,672)


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19. OTHER CREDITS / (CHARGES)

Group2006

$2005

$

Gain / (loss) on disposal of plant and equipment 4,962 (3,994)Plant and equipment expensed off (300) (2,062)Inventories written off (30,599) (34,628)Others (6,131) (21,228)

(32,068) (61,912)

20. INCOME TAX (CREDITS)/EXPENSE

Group2006

$2005

$

Current tax (credit)/expense (40,277) 57,044Deferred tax expense (51,518) (11,854)

Total income tax (credit)/expense (91,795) 45,190



20. INCOME TAX (CREDITS)/EXPENSE (Cont’d)

The income tax benefit varied from the amount of income tax benefit determined by applying the Singapore income tax rate of 20.0% (2005: 20.0%) to loss before income tax as a result of the following differences:

Group2006

$2005

$(restated)

Loss before income tax (285,490) (552,070)

Income tax expense (benefit) at the statutory rate (57,098) (110,414)Non-allowable items 67,071 178,724Tax exemption (5,491) (43,413)Deferred tax valuation allowance (130,442) 10,248Overprovision of tax in prior years 13,710 (3,166)Effect of difference in tax rate 7,844 14,517 Other items less than 3% each 12,611 (1,306)

Total income tax (credit)/expense (91,795) 45,190


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20. INCOME TAX (CREDITS)/EXPENSE (Cont’d)

The deferred tax amounts are as follows:

Group Balance sheetNet change in consolidated

income statement2006

$2005

$2006

$2005

$

Deferred tax liabilities:Excess of net book value of plant and equipment (14,193) (5,043) (9,150) 15,901Other timing differences (42,855) (95,041) 52,186 24,091

Total deferred tax liabilities (57,048) (100,084) 43,036 39,992

Deferred tax assets:Excess of tax written down value of plant equipment 18,274 – 18,274 – Provision 5,061 2,000 3,061 (16,800)Tax losses carryforwards 371,825 515,120 (143,295) (1,090)

Total deferred tax assets 395,160 517,120 (121,960) (17,890)

Net deferred tax assets 338,112 417,036 (78,924) 22,102Deferred tax assets valuation allowance (373,228) (503,670) 130,442 (10,248)

Balance (35,116) (86,634) 51,518 11,854

Included in the accompanying balance sheet as follows:

Group2006

$2005

$

Deferred tax assets (11,540) (11,839)Deferred tax liabilities 46,656 98,473

Net balance 35,116 86,634



20. INCOME TAX EXPENSE (Cont’d)

The deferred tax (assets)/liabilities are not expected to be settled/used within one year.

An allowance is made to the extent that it is not probable that taxable profit will be available against which the unused tax loss carryforwards can be utilised. The realisation of the future income tax benefits from tax loss carryforwards and temporary differences from capital allowances is available for an unlimited future period subject to the conditions imposed by law including the retention of majority shareholders as defined. Where provision for deferred tax arising from temporary differences has been offset against the above tax loss carryforwards, such provision for deferred tax will be required to be set up when the tax losses are utilised in the future.

There are no income tax consequences of dividends to shareholders of the Company.

Temporary differences arising in connection with interests in subsidiaries are insignificant.

21. LOSS PER SHARE

The loss per share is calculated by dividing the Group’s loss attributable to shareholders by the weighted number of shares in issue during the year.

Group2006

$2005

$

(restated)

The calculation of the loss per share is based on the following:Loss attributable to shareholders for the purposes of basic and diluted loss per share (193,695) (597,260)

Weighted average number of fully paid ordinary shares each in issue during the year for the purposes of basic loss per share 108,600,000 108,600,000Effect of dilutive potential ordinary share : Share options – 72,355

Weighted average number of ordinary shares for the purposes of diluted loss of share 108,600,000 108,672,355

Basic loss per share ratio is based on the weighted average number of common shares outstanding during each period. The diluted loss per share is based on the weighted average number of ordinary shares and dilutive common share equivalents outstanding during each period. The common share equivalents included in these calculations are shares of common share issuable upon assumed exercise of share options which would have a dilutive effect.


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21. LOSS PER SHARE (Cont’d)

Impact of changes in accounting policy under FRS 102 Share-based compensation

The impact of changes in accounting policy under FRS 102 Share-based compensation on the amounts reported for loss per share is as follows:

Impact on basicloss per share

Impact on dilutedloss per share

2006 2005 2006 2005Cents Cents Cents Cents

Share-based payments recognized as an expense – (0.06) – (0.06)

Total impact of changes in accounting policy – (0.06) – (0.06)

22. EMPLOYEE BENEFITS EXPENSE

Group2006

$2005

$

Employee benefits expense including directors 2,989,617 2,584,013Contributions to defined contribution plans 262,002 229,851

Total employee benefits expense 3,251,619 2,813,864

23. ITEMS IN THE INCOME STATEMENT

In addition to the charges and credits disclosed elsewhere in the notes to the financial statements, the income statement includes the following charges:

2006$

2005$

Non-audit fee paid to auditors included under administrative expenses 8,300 8,200

Changes in inventories and work-in-progess (215,161) 152,397

Cost of inventories purchased 4,982,162 4,341,114



24. CONTINGENT LIABILITIES

(a) Contingent liabilities not provided for in the financial statements of the Group and Company at balance sheet date are as follows:

Group Company2006

$2005

$2006

$2005

$

Guarantees in favour of a subsidiary – – 21,200 37,251

The guarantees are provided by the guarantor without charge.

(b) As at 30 June 2006, the subsidiary, Shanghai Hitchins Da Sheng Waterproofing Materials Co., Ltd has not included turnover arising from sale of goods of RMB3,755,033 in the company’s Value Added Tax and Enterprise Income Tax returns on a timely basis. Should this come to the attention of the People’s Republic of China’s (“PRC“) tax authorities, they could consider this as a breach of certain PRC laws and regulations in respect of Value Added Tax and Enterprise Income Tax. It is however not possible to ascertain with any degree of reasonable certainty the amount of tax penalty which may be imposed by the PRC tax authorities and any other consequential actions that may be taken by the PRC authorities for the apparent breaches of certain PRC laws and regulations in respect of Value Added Tax and Enterprise Income Tax.

The sales and the corresponding income tax and VAT tax have been accrued in the consolidated financial statements as at 30 June 2006. However, no provision for tax penalties has been made in the consolidated financial statements.

25. OPERATING LEASE PAYMENT COMMITMENTS

At the balance sheet date the total of future minimum lease payments under non-cancellable operating leases are as follows:

Group Company2006

$2005

$2006

$2005

$

Not later than one year 197,900 222,726 176,000 196,596Later than one year and not later than five years 314,306 66,321 274,706 22,676Later than five years. 99,000 128,296 – –

611,206 417,343 450,706 219,272

Rental expense for the year 325,156 263,028 183,932 169,682

Operating lease payments are for rentals payable by the Group and Company for certain of its office premises and warehouse. The leases at ODC Districentre are for 3 years starting from 14 April 2006. The lease rental terms are negotiable for extension of lease period at the prevailing market rates then.


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26. FINANCIAL INFORMATION BY SEGMENTS

Business segments: For management purposes, the Group is organised into two major operating divisions – manufacturing & sales and installation. The divisions are the basis on which the Group reports its primary segment information.

Principal activities as follows:

Manufacturing & sales: The manufacturing and sales of waterproofing and concrete protection materials.

Installation: The provision of installation services for such waterproofing and concrete protection materials.

Manufacturing & Sales Installation Eliminations Consolidated2006 2005 2006 2005 2006 2005 2006 2005

$ $ $ $ $ $ $ $(restated)

REVENUEExternal sales 5,094,517 4,360,628 6,614,244 5,742,429 – – 11,708,761 10,103,057Inter-segment sales 2,629,711 2,224,415 322,949 240,009 (2,952,660) (2,464,424) – –

Total revenue 7,724,228 6,585,043 6,937,193 5,982,438 (2,952,660) (2,464,424) 11,708,761 10,103,057

RESULTS 260,834 (137,011) 516,663 970,606 777,497 833,595

Unallocated results (982,193) (1,313,989)

Interest expense (80,794) (71,676)

Loss before income tax (285,490) (552,070)Income tax expenses/(credit) 91,795 (45,190)

Net loss for the year (193,695) (597,260)



26. FINANCIAL INFORMATION BY SEGMENTS (Cont’d)

Manufacturing & Sales Installation Eliminations Consolidated2006 2005 2006 2005 2006 2005 2006 2005

$ $ $ $ $ $ $ $

OTHER INFORMATIONSegment assets 5,368,146 5,133,287 5,039,924 5,004,570 10,408,070 10,137,857Unallocated deferred tax assets 11,540 11,839

10,419,610 10,149,696

Segment liabilities 3,997,837 3,249,275 1,398,847 1,593,737 5,396,684 4,843,012Unallocated tax liabilities 176,490 153,435

5,573,174 4,996,447

Capital expenditure 87,856 80,992 33,013 29,102 120,869 110,094Depreciation 284,773 284,935 80,609 91,458 365,382 376,393Provision for warranty (21,834) 26,213 114,747 44,564 92,913 70,777

Segment results, assets and liabilities include items directly attributable to segment as well as those that can be allocated on a reasonable basis. Segment assets consist of trade receivables, inventories, contract work-in-progress, property, plant and equipment. Segment liabilities include trade payables and accrued liabilities and contract work-in-progress. Unallocated items mainly comprise income tax payable and deferred tax. Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment directly attributable to each segment.


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26. FINANCIAL INFORMATION BY SEGMENTS (Cont’d)

Geographical segments:

The Group’s two major divisions operate in three principal geographical areas, namely Singapore and other regions, Malaysia and People’s Republic of China (“PRC”).

The following table provides an analysis of the Group revenue by geographical market based on the location of the customers:

Revenue by Geographical Markets

2006 2005$ $

Singapore & other regions 8,269,539 7,136,377Malaysia 1,586,397 1,550,026People’s Republic of China 1,852,825 1,416,654

11,708,761 10,103,057

The following is an analysis of the carrying amount of segment assets, and additions to property, plant and equipment, analysed by geographical area in which the assets are located:

Carrying amount ofSegment Assets

Additions to Property,Plant and Equipment

2006$

2005$

2006$

2005$

Singapore & other regions 5,208,427 5,366,137 62,093 76,718Malaysia 2,365,588 2,100,811 17,347 7,865People’s Republic of China 2,834,055 2,670,909 41,429 25,511Unallocated deferred tax assets 11,540 11,839 – –

10,419,610 10,149,696 120,869 110,094



27. CHANGES AND ADOPTION OF FINANCIAL REPORTING STANDARDS

For the year ended 30 June 2006 the following Singapore Financial Reporting Standards were adopted for the first time:

FRS 1 (revised 2004) Presentation of Financial Statements FRS 2 (revised 2004) Inventories FRS 8 (revised 2004) Accounting Policies, Changes in Accounting Estimates and Errors FRS 10 (revised 2004) Events after the Balance Sheet Date FRS 16 (revised 2004) Property, Plant and Equipment FRS 17 (revised 2004) Leases FRS 21 (revised 2004) The Effects of Changes in Foreign Exchange Rates FRS 24 (revised 2004) Related Party Disclosures FRS 27 (revised 2004) Consolidated and Separate Financial Statements FRS 28 (revised 2004) Investments in Associates FRS 32 (revised 2004) Financial Instruments: Disclosure and Presentation FRS 33 (revised 2004) Earnings per Share FRS 36 (revised 2004) Impairment of Assets FRS 38 (revised 2004) Intangible Assets (*) FRS 39 (revised 2004) Financial Instruments: Recognition and Measurement FRS 41 Agriculture (*) FRS 102 Share-based Payments FRS 103 Business Combinations FRS 104 Insurance Contracts (*) FRS 105 Non-current assets held for sale and discontinued operations (*)

(*) Not applicable to the entity.

Adoption of the above new standards has resulted in some changes in the detailed application of the accounting policies and some modifications to financial statement presentation (see Note 28). However, the new standards did not affect the results for the current or prior periods.


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28. FUTURE CHANGES IN ACCOUNTING STANDARDS

The following Singapore Financial Reporting Standards that have been issued will be effective in future. The transfer to the new standards from the effective dates is not expected to have a material impact on the financial statements.

Effective Date (Annual periods No. Title beginning on or after)

FRS 1 Presentation of Financial Statements - Amendments relating to capital disclosures 1.1.2007 FRS 10 Events after the Balance Sheet Date 1.1.2007 FRS 12 Income Taxes 1.1.2007 FRS 14 Segment Reporting 1.1.2007 FRS 17 Leases 1.1.2007 FRS 19 Employee Benefits 1.1.2007 FRS 32 Financial Instruments: Presentation 1.1.2007 FRS 33 Earnings per Share 1.1.2007 FRS 39 Financial Instruments: Recognition and Measurement 1.1.2007 FRS 39 Implementation Guidance 1.1.2007 FRS 40 Investment Property (*) 1.1.2007 FRS 101 First-time Adoption of Financial Reporting Standards 1.1.2007 FRS 101 Implementation Guidance 1.1.2007 FRS 102 Share-based Payment 1.1.2007 FRS 103 Business Combinations 1.1.2007 FRS 104 Insurance Contracts (*) 1.1.2007 FRS 104 Implementation Guidance - Revisions relating to FRS 107 Financial Instruments: Disclosures 1.1.2007 FRS 107 Financial Instruments: Disclosures - Implementation Guidance 1.1.2007 INT FRS 105 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds (*) 1.1.2007

(*) Not applicable to the entity.



29. CHANGES IN ACCOUNTING POLICIES, RECLASSIFICATIONS AND COMPARATIVE FIGURES

Effective from 1 July 2005 certain Singapore Financial Reporting Standards were adopted as mentioned in Note 26. Adoption of the standards has resulted in some changes in the detailed application of the accounting policies and some modifications to financial statements presentation and these changes are summarised below:

GroupAfter reclassification/

restatementBefore reclassification/

restatement Difference$ $ $

2005 Balance sheetTrade and other receivables #1 6,149,550 – 6,149,550Trade receivables #1 – 5,781,107 (5,781,107)Other receivables and prepayments #1 – 368,443 (368,443)Trade and other payables #1 (3,663,129) – (3,663,129)Trade payables and accrued liabilities #1 – (2,403,249) 2,403,249Other payables #1 – (1,259,880) 1,259,880Retained earnings brought forward #3 (1,679,796) (1,689,240) 12,444Share option reserve #3 (80,470) – (80,470)

2005 Income statementOther operating income #2 (162,572) (418,489) 255,917Financial income #2 (222,517) – (222,517)Financial expense #2 632,189 – 632,189Finance cost #2 – 71,676 (71,676)Distribution cost #2 1,667,600 1,648,574 19,026Administrative expenses #2,#3 2,477,935 2,146,098 (331,837)Other (credits) charges #2 61,912 – 61,912Other operating expenses #2 – 938,662 (938,662)


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29. CHANGES IN ACCOUNTING POLICIES, RECLASSIFICATIONS AND COMPARATIVE FIGURES (Cont’d)

CompanyAfter reclassification/

restatementBefore reclassification/

restatement Difference$ $ $

2005 Balance sheetTrade and other receivables #1 1,486,355 – 1,486,355Trade receivables #1 – 77,338 (77,338)Other receivables and prepayments #1 – 2,665,264 (2,665,264)Investment in subsidiaries #1 3,021,281 1,765,574 1,256,247Trade and other payables #1 (1,390,669) – (1,390,669)Trade payables and accrued liabilities #1 – (154,014) 154,014Other payables #1 – (1,236,655) 1,236,655Share option reserve #3 80,470 – 80,470Retained earnings #3 1,461,199 1,380,729 (80,470)

#1. Reclassifications have been made to the prior year’s financial statements to enhance comparability with current year’s financial statements.

#2. New line items arising from the adoption of FRS 39.

#3. The Group adopted FRS 102 Share-based Payment with effect from 1 January 2005. Therefore the figures for 2005 have been adjusted as follows:

Group Company2005

$2005

$

Increase / (decrease) in following items:Share option reserve (Note 15) 80,470 80,470Retained earnings brought forward (12,444) (12,444)Administrative expenses (68,026) (68,026)

Basic loss per share (Cents per share) (0.06)Diluted loss per share (Cents per share) (0.06)

#4. Cash flow statement

In view of the above changes, consequential reclassifications were made to the cash flow statement, including using the figure for net loss instead of the figure for loss before income tax.

Statistics of ShareholdingsAs at 12 September 2006


SHARE CAPITAL

Issued and fully Paid-up Capital : $1,086,000Class of Shares : Ordinary shares with 1 vote per share

DISTRIBUTION OF SHAREHOLDINGS

Size of Shareholdings No.of Shareholders % No. of share %

1 - 999 0 0.00 0 0.001,000 - 10,000 221 49.00 977,000 0.9010,001 - 1,000,000 220 48.78 16,420,000 15.121,000,001 AND ABOVE 10 2.22 91,203,000 83.98

TOTAL: 451 100.00 108,600,000 100.00

SUBSTANTIAL SHAREHOLDERS(substantial shareholders as shown in the register of substantial shareholders)

Name of Shareholders Direct Interest Deemed Interest Total Interest %

Ng Tian Huat 27,080,000 – 27,080,000 24.94Wong Seong Khuen @ Kwan Seong Khuen 27,080,000 – 27,080,000 24.94Kim Leng Choon 12,933,000 – 12,933,000 11.91Yeo Hoon Seng 9,067,000 – 9,067,000 8.35Ng Kim Khuan 8,619,500 – 8,619,500 7.94

PUBLIC SHAREHOLDINGSApproxiamtely 21.93% of the Company’s shares are held in the hands of public. Accordingly, the Company has complied with Rule 723 of the Listing Manual.

Statistics of ShareholdingsAs at 12 September 2006

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TWENTY LARGEST SHAREHOLDERS

NO. NAME NO. OF SHARES %

1 NG TIAN HUAT 27,080,000 24.942 WONG SEONG KHUEN @ KWAN SEONG KHUEN 27,080,000 24.943 PHILLIP SECURITIES PTE LTD 8,789,000 8.094 NG KIM KHUAN 8,619,500 7.945 KIM LENG CHOON 7,933,000 7.306 YEO HOON SENG 4,067,000 3.747 OCBC SECURITIES PRIVATE LTD 2,360,000 2.178 LIM & TAN SECURITIES PTE LTD 2,000,000 1.849 UNITED OVERSEAS BANK NOMINEES PTE LTD 1,718,500 1.5810 KIM ENG SECURITIES PTE. LTD. 1,556,000 1.4311 KHOO CHYE HUAT 600,000 0.5512 DBS NOMINEES PTE LTD 409,000 0.3813 SIM KOK HAI 400,000 0.3714 YAP AH HENG 360,000 0.3315 QUEK SIEW SUAH 350,000 0.3216 GOH SENG CHEE 320,000 0.2917 CHUA AH CHING 306,000 0.2818 CHOO LIONG GEE DESMOND 300,000 0.2819 ANG NAM WAH 289,000 0.2720 GOH CHOON HIANG 270,000 0.25

TOTAL 94,807,000 87.30

Notice of the Annual General Meeting


NOTICE IS HEREBY GIVEN THAT the Annual General Meeting of the Company will be held at 30, Toh Guan Road, #07-01, ODC Districentre, Singapore 608840 on the 23rd day of October 2006 at 9.00 a.m. to transact the following business:

ORDINARY BUSINESS

1. To receive and adopt the Directors’ Report and Audited Accounts for the financial year ended 30 June 2006. Resolution 1 2. To approve the proposed Directors’ fees of $90,000 (2005: $80,000). Resolution 2 3. To re-elect Mr Ng Kim Khuan pursuant to Article 109 of the Articles of Association. Resolution 3

4. To re-elect Mr Yeo Hoon Seng pursuant to Article 109 of the Articles of Association. Resolution 4

5. To re-elect Mr Mark Yeo Wee Tiong pursuant to Article 109 of the Articles of Association. Resolution 5

6. To re-appoint Messrs RSM Chio Lim as Auditors of the Company and to authorise the Directors to fix their remuneration. Resolution 6 7. To transact any other business of the Company which may properly be transacted at an Annual General Meeting.

SPECIAL BUSINESS

To consider and if thought fit to pass the following as Ordinary Resolutions:

8. “That pursuant to Section 161 of the Companies Act, Cap. 50, and the listing rules of the Singapore Exchange Securities Trading Limited, the Directors be and are hereby authorised to issue shares in the Company (whether by way of bonus issue, rights issue or otherwise) at any time and upon such terms and conditions and for such purposes and to such persons as the Directors may, in their absolute discretion, deem fit provided that:

(a) the aggregate number of shares to be issued pursuant to this Resolution does not exceed 50% of the issued share capital of the Company, of which the aggregate number of shares to be issued other than on a pro-rata basis to existing shareholders of the Company does not exceed 20% of the Company’s issued share capital;

(b) for the purpose of determining the aggregate number of shares that may be issued under (a) above, the percentage of issued share capital shall be based on the issued share capital of the Company at the time this Resolution is passed, after adjusting for:

(i) new shares arising from the conversion or exercise of any convertible securities or employee share options that are outstanding when this Resolution is passed, and

(ii) any subsequent consolidation or subdivision of shares; and

Notice of the Annual General Meeting

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(c) unless revoked or varied by the Company in general meeting, such authority conferred by this Resolution shall continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier.” Resolution 7

9. “That pursuant to Section 161 of the Companies Act, Cap. 50, the directors be and are hereby authorised to allot and issue from time to time such number of shares as may be required to be issued pursuant to the exercise of the options granted under the Hitchins Employees’ Share Option Scheme (the “Scheme”) provided always that the aggregate number of shares to be issued pursuant to the Scheme shall not exceed 15% of the total issued share capital of the Company from time to time.”

Resolution 8

By Order of the Board

Chew Kok LiangCompany Secretary

Date:6th October 2006

Explanatory Notes:

a. The proposed ordinary resolution 7 in item 8 above, if passed, will empower the Directors from the date of the Annual General Meeting until the date of the next Annual General Meeting to issue further shares in the Company. The maximum number of shares, which the Directors may issue under this resolution, shall not exceed the quantum set out in the resolution.

b. The proposed ordinary resolution 8 in item 9 above, if passed, will empower the Directors to issue shares in the Company pursuant to the Hitchins Employees’ Share Option Scheme, which was duly approved at the Extraordinary General Meeting of the Company held on 13 December 2002.

Note:

1. A member entitled to attend and vote at this meeting is entitled to appoint a proxy to attend and vote in his stead. A proxy need not be a member of the Company.

2. If a proxy is to be appointed, the form must be deposited at the registered office of the Company, at 30, Toh Guan Road, #07-01, ODC Districentre, Singapore 608840 not less than 48 hours before the meeting.

3. The form of proxy must be signed by the appointor or his attorney duly authorised in writing.

4. In case of joint shareholders, all holders must sign the form of proxy.

This page has been intentionally left blank.

HITCHINS GROUP LTD(Company Registration Number 196600189D)(Incorporated in the Republic of Singapore)

PROXY FORM – ANNUAL GENERAL MEETING(Please see notes overleaf before completing this form)

I/We, (Name) of (Address)

being the holder(s) of ordinary shares in the capital of HITCHINS GROUP LTD (the “Company”), hereby appoint the Chairman of the Annual General Meeting (Note 2) of the Company or:

Name AddressNRIC/Passport

NumberShareholdings

Number (Note 3) (%)

and/or (delete as appropriate)

as my/our proxy/proxies, to attend and vote for me/us on my/our behalf and, if necessary, to demand a poll, at the Annual General Meeting of the Company to be held at 30, Toh Guan Road, #07-01, ODC Districentre, Singapore 608840 on 23 October 2006 at 9.00 a.m. and at any adjournment thereof.

I/We direct my/our proxy/proxies to vote in the manner indicated below. If no specific direction as to the manner of voting is given, my/our proxy/proxies may vote or abstain at his discretion.

No. Resolution (Note 4) For Against

1 Adoption of Directors’ Report and Accounts

2 Approval of Directors’ Fees

3 Re-election of Mr Ng Kim Khuan as a Director

4 Re-election of Mr Yeo Hoon Seng as a Director

5 Re-election of Mr Mark Yeo Wee Tiong as a Director

6 Re-appointment of Messrs RSM Chio Lim as Auditors

7 Authority to issue additional shares pursuant to Section 161

8 Authority to issue shares pursuant to Share Option Scheme

Dated this day of 2006 Number of Shares Held (Note 5)

(a) CDP Register

(b) Register of Members

Signature of Shareholder(s) or, Common Seal (Note 6)

IMPORTANT:

i. For Investors who have used their CPF monies to buy Hitchins Group Ltd’s shares, this Report is forwarded to them at the request of the CPF Approved Nominees and is sent solely FOR INFORMATION ONLY.

ii. This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them.

Notes:

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

2. If any other proxy/proxies is/are to be appointed, please strike out “Chairman of the Annual General Meeting” and insert the name(s) and particulars of the proxy/proxies to be appointed in the blank space provided.

3. Where a Shareholder appoints two proxies, the appointments shall be invalid unless he specifies the number of Shares to be represented by each proxy.

4. IMPORTANT: If you wish to vote “FOR” the Resolution, please indicate an “X” in the box marked “FOR” the Resolution. If you wish to vote “AGAINST” the Resolution, please indicate an “X” in the box marked “AGAINST” the Resolution.

5. Please insert the total number of Shares held by you. If you have Shares entered against your name in the Depository Register (as defined in Section 130A of the Companies Act, Chapter 50 of Singapore), you should insert that number of Shares. If you have Shares registered in your name in the Register of Members, you should insert that number of Shares. If you have Shares entered against your name in the Depository Register and Shares registered in your name in the Register of Members, you should insert the aggregate number of Shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the Shares held by you.

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

7. The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at 30, Toh Guan Road, #07-01 ODC Districentre, Singapore 608840 not later than 48 hours before the time appointed for the Annual General Meeting.

8. Where an instrument appointing a proxy is signed on behalf of the appointor or by an attorney, the power of attorney (or other authority) or a duly certified copy thereof must (failing previous registration with the Company) be lodged with the instrument of proxy, failing which the instrument may be treated as invalid.

9. A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks it to act as its representative at the meeting, in accordance with Section 179 of the Companies Act (Cap 50).

General:

The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of Shares entered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the member, being the appointor, is not shown to have Shares entered against his name in the Depository Register 48 hours before the time appointed for holding the Meeting, as certified by The Central Depository (Pte) Limited to the Company.

HitchinsSince 1932

30 Toh Guan Road, #07-01 ODC Dist r icentre S ingapore 608840 Te l : (65) 6861 1177 Fax : (65) 6863 4240Emai l : i r@hitchins .com Webs i te : www.hi tchins .com

(Company ’s Regist rat ion No.196600189D)HITCHINS GROUP LTD

Date post:	12-Sep-2021
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