the right elements -...

1 Annual Report 2005

• FLEXIBILITY • ADAPTABILITY • LIMITLESS

Annual Report 2005

The Right Elements

2Hitchins Group Ltd

1932The Company wasfounded as a timberand veneer businessin East London,England by Mr WilliamG. Hitchins

1951Hitchins moved to NewZealand to establish abusiness in specialtychemicals.

1966Our RegionalHeadquarter wasestablished inSingapore to serveAsian Markets

1994Obtained ISO 9002:1994 certifi cationUpgraded toISO9001: 2000 certification in 2004

1989Local Managementbuy-out in Singapore,establishing the currentHitchins Group ofCompanies

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Chairman’s Statement 2

Board of Directors 4

Past and Present Directorships 5

Key Executive Officers 6

Corporate Profile 7

Group Structure 10

Hitchins Distribution Network 11

Financial Review 14

Financial Highlights 15

Corporate Information 16

Corporate Governance Statement 17

Financial Contents 23

Statistics of Shareholdings 59

Notice of the Annual General Meeting 61

Proxy Form 63

CONTENTS

MILESTONE


1996Hitchins Headquarterand Singaporeoperations moved toJoo Koon Circle

1997Leading Singaporeventure capitalist firm,UOB VentureManagement, becamea shareholder of theCompany

1997A manufacturingfacility, which nowserves as our mainproduction plant,was established inShanghai, China

2003Hitchins Group Ltd waslisted on the SGX-ST,Sesdaq

Contributing to a greener future, we arecommitted in providing the bestgreening concepts, quality productsand services to protect and enhancethe built environment.

The Hitchins’ Belief

2Hitchins Group Ltd 2 Chairman’s Statement

I am pleased to present the annual report of HitchinsGroup Ltd (‘the Group’) for the financial year ended 30 June2005 (‘FY2005’).

RESULTS

The Group operated in another highly competitive year, asthe overall construction industry did not show significantimprovement in Singapore and The People’s Republic ofChina. The Group’s overall revenue decreased by 2.70% or$0.28 mil, from $10.38 mil in FY2004 to $10.10 mil in FY2005.

The Group’s loss before tax increased by $0.47 mil, from lossof $14k in FY2004 to $0.48 mil in FY2005 and loss aftertax increased by $0.42 mil or 376.67%, from $0.11 mil inFY2004 to $0.53 mil in FY2005. The losses were attributedby the decreased in revenue and gross margins fromSingapore and PRC, also provision for impairment ontrade receivables, bad debts written off and increased indistribution cost.

The basic earnings per share of the Group decreased from(0.10) cents in FY2004 to (0.49) cents in FY2005. The Group’snet asset value decreased by 0.54 cents to 4.75 cents.

PROSPECTS

The People’s Republic of China Operation (“PRC”)Although the building and construction industry is expectedto slow down somewhat due to bottlenecks in energy supplyand land constraints, nevertheless it is still expected to berobust and our PRC operation will continue to focus on

Dear Shareholders,

Hitchins Group Ltd

• FLEXIBILITYin ManagementLeaders who are fluid in

thinking out-of-the-box in an

ever-changing market.

3 Annual Report 20053Chairman’s Statement

selective infrastructure and commercial projects. More effortswill be put in to monitor and tighten credit controls and inhighly competitive markets such as Beijing and Dalian we willbe launching a range of lower cost products targeted mainlyfor retailing directly to contractors.

MalaysiaIt is expected that residential developments will continue tospur the growth of the building and construction industry inMalaysia, with the emergence of higher end residentialdevelopments in the main cities. In tandem with our emphasison premium quality products, it is expected that our productswould see a higher demand for such developments.

Singapore (including regional markets)The building and construction industry in Singapore continuesto be highly competitive and while it is not expected to contractfurther, improvement in market demands for our products maynot see significant growth for FY2005.

However with the successful launch of the Punggol PilotProject for our roof garden system in March 2005, we haveseen greater awareness for such green roofs, leading to theaward of the HDB Hub green roof tender to our subsidiary.With the award of “Green Label” by the SingaporeEnvironment Council in March 2005 to three of our mainwaterproofing products, our Group will continue to focus ourmarketing efforts on this new market.

Our Group will continue to focus on expanding our regionalmarket coverage while creating depth in the existing onessuch as Indonesia, Thailand and India. The appointment of adistributor and agent in UAE to cover the Middle East marketis expected to enhance our regional operations.

ACKNOWLEDGEMENT

I wish to convey my deepest appreciation to all employees ofthe Group for their dedication in the past year and year tocome. Also, on behalf of the Board, I would like to thank allour valued customers, business associates and shareholdersfor their unwavering support through the years.

Yours truly,Wong Seong Khuen

Chairman & Managing Director

Annual Report 2005

4Hitchins Group Ltd 4 Board of Directors

WONG SEONG KHUEN is the Chairman and Managing Directorof our Group responsible for the overall management, strategicplanning and direction of our Group. Mr Wong is also responsiblefor the technical aspects of our Group’s operations. Mr Wong firstjoined our Company in 1978 and has held various positions includingTechnical Manager and Regional Technical Director in our Group.He has more than 27 years of experience in the building protectionindustry. He holds a degree in Building Surveying from the CentralQueensland University and Technician Diploma in Civil Engineeringfrom the Singapore Polytechnic. Mr Wong is a Member of theAustralian Institute of Building Surveyors, Member of the SingaporeInstitute of Arbitrators, Member of the Singapore Institute of Builder,Council Member of the Singapore Concrete Institute and Memberof the Singapore Institute of Directors.

NG TIAN HUAT is the Business Development Director responsiblefor all marketing activities of our Group. Backed by more than 30years of experience in the building related industry, Mr Ngspearheads our Group’s efforts in seeking out new businessdevelopment opportunities. He has been with the Company for 24years during which he held various positions including TechnicalManager, Sales Engineer and Regional Marketing Manager.Mr Ng holds a Technician Diploma in Civil Engineering from theSingapore Polytechnic.

YEO HOON SENG is an Executive Director who joined our Groupin 1994 after CRG Contractors Pte Ltd was acquired by our Group.Mr. Yeo is primarily responsible for overseeing our Group’scontracting operations and supporting the PRC market. Prior tojoining our Group, Mr Yeo held the position of Project Executivewith the then DBS Land Limited. He holds a Technician Diploma inBuilding from the Singapore Polytechnic, a Diploma in Sales andMarketing from the Marketing Institute of Singapore and a Diplomain Marketing from the Institute of Marketing, UK. Mr Yeo is a memberof the Marketing Institute of Singapore and the Chartered Instituteof Marketing, UK.

NG KIM KHUAN is an Executive Director who joined our Groupas a manager in 1989 and is responsible for overseeing our Group’soperations in Malaysia. Mr Ng was appointed as our Director in1993. Prior to joining our Group, Mr Ng held the position of MarketingManager of Beiersdorf Ag, a listed company in Germany. Mr Ngholds a Masters degree in Business Administration from OklahomaCity University.

KIM LENG CHOON is an Executive Director who joined our Groupas a director of Hitchins Da-Sheng Holdings Ltd in 1996 and wassubsequently appointed General Manager of Shanghai Hitchins DaSheng Waterproofing Materials Co. Ltd in 1997. Mr Kim is based inShanghai and is responsible for overseeing our Groups’ operationsin the PRC. Mr Kim was involved in the drafting of a NationalStandard (GB 18445-2001, Cementitious capillary crystallinewaterproofing materials) under the National Materials Quality Controland Testing Authority, PRC. This National Standard has beenadopted throughout the PRC. Prior to joining our Group, Mr Kimwas an entrepreneur with his own businesses in PRC since 1992.

MARK YEO WEE TIONG joined our Company as a non-Executive Director in 1997. Currently, he is a Director at UOB VentureManagement responsible for fund raising, deal sourcing, investmentvaluation, structuring and divestment. Prior to joining the venturecapital industry, he spent 6 years working for Smith BarneyShearson, HG Asia (Singapore) Pte Ltd and N M Rothschild & Sons(Singapore) Ltd specialising in corporate finance transactionswhere he was involved in advisory services on mergers andacquisitions, corporate restructuring and public listings. Mr Yeostarted his career in 1988 in the audit division of Ernst & Young inNew Zealand. He has been a board member of several public listedand private companies including TPA Strategic Holdings Ltd, TiongWoon Corporation Ltd, Simplex Holdings and Speedy-TechElectronics. He holds a Bachelor of Commerce Degree with a doublemajor in Accounting and Marketing from the University of Canterburyin New Zealand.

Board ofDirectors

• Kim Leng Choon • Ng Tian Huat • Wong Seong Khuen • Yeo Hoon Seng • Ng Kim Khuan

Hitchins Group Ltd

5 Annual Report 20055Board of Directors

TAN CHONG HUAT is an Independent Director of our Group. Hewas appointed to the Board of Directors on 16 December 2002.Currently, Mr Tan is a partner of KhattarWong, a leading lawpractice in Singapore. He was appointed the chief representativeof the Beijing office of a Singapore Joint Law Venture. He is anadvocate and solicitor of the Supreme Court of Singapore, and aCommissioner for Oaths. He is also admitted as a solicitor in Englandand Wales. Mr Tan is a member of the Singapore Institute ofArbitration, and an accredited arbitrator with the China InternationalEconomic & Trade Arbitration Commission. He is a member of theEconomic Committee, Singapore Chinese Chambers of Commerce& Industry and Singapore Institute of Directors. He is also an electedcouncil member of the Singapore Scout Association. Mr Tan is anad-hoc lecturer for several post-graduate degree programsconducted by the Nanyang Technological University, Singapore. Heis also a visiting professor at the Beijing Normal University. He hasauthored 2 leading literature on PRC investment laws. Mr Tan isalso chairman of several corporate governance committees of publiclisted companies in Singapore. Mr Tan graduated with a degree inlaw from the National University of Singapore.

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 Directorof an architectural company known as TSP Architects & PlannersPte Ltd since 1995. Prior thereto, he was a principal partner in TSPArchitects & Planners since 1979. Dr Goh holds a Diploma inArchitecture from the Birmingham School of Architecture, a Bachelorof Science (Honours) degree in Architecture from the University ofAston and an Honorary Doctor of the University from the Universityof Central England. Dr Goh is a Fellow Member of the SingaporeInstitute of Architects, a Associate of the Malaysian Institute ofArchitects, a Corporate Member of the Royal Institute of BritishArchitects and a Fellow of the Society of Project Managers. Dr Gohis a former nominated member of parliament.

SITOH YIH PIN is an Independent Director of our Company. Hewas appointed to the Board of Directors on 16 December 2002. Heis a Certified Public Accountant and a partner of a certified publicaccounting firm, Nexia Tan & Sitoh. Currently, he is the Advisor toPotong Pasir Grassroots Organisations. Mr Sitoh holds a Bachelorof Accountancy (Honours) degree from the National University ofSingapore and is an Associate Member of the Institute of CharteredAccountants in Australia.

• Goh Chong Chia • Tan Chong Huat • Sitoh Yih Pin • Mark Yeo Wee Tiong

Annual Report 2005

Past And PresentDirectorships Of Other Listed Companies

Present directorships Past directorships held in the last 3 yearsWong Seong Khuen Nil Nil

Ng Tian Huat Nil Nil

Yeo Hoon Seng Nil Nil

Ng Kim Khuan Nil Nil

Kim Leng Choon Nil Nil

Mark Yeo Wee Tiong • AA Group Holdings Ltd • Tiong Woon Corporation Holdings Ltd• TPA Strategic Holdings Ltd

Sitoh Yih Pin • Allied Technologies Limited • Bio -Treat Technology Limited

• Joinn Holdings Limited (formerly known • CWT Distribution Limited as Cytech Software Limited) • Fibrechem Technologies Limited• GKE International Limited • Futuristic Group Ltd (formerly known as• Labroy Marine Limited Futuristic Image Builder Ltd)• Lian Beng Group Ltd • KS Energy Services Limited (formerly known• Meiban Group Ltd as KS Tech Ltd)• Nera Telecommunications Ltd • WPG International Pte Ltd (formerly known as• PNE Micron Holdings Ltd WPG International Limited)• United Food Holdings Limited

Goh Chong Chia Nil Nil

Tan Chong Huat Asia Environment Holdings Ltd Nil

Asia Silk Holdings Pte LtdAsiapharm Group LimitedRichland Logistics Holdings LtdSuperior Fastening Technology Limited

Sinwa Limited

6Hitchins Group Ltd 6 Key Executive Officers

Key Executive Officers

LIEW BO CHUAN, JOHN is the ChiefFinancial Officer of our Group. He joined usin March 2004 overseeing all aspects ofGroup’s finance, tax planning, riskmanagement, internal control, corporategovernance, investor relations andinvolvement in mergers and acquisitionsdeal. He is also responsible for the Group

human resource management and Information technologymanagement. Mr Liew has more than 21 years of experience in thefinancial and accounting field. Prior to joining us, he was with TPAStrategic Holdings Ltd as Chief Financial Officer from 1999 to 2004January. He was formerly the Financial Controller of CSE GlobalLtd (formerly known as CSE Systems and Engineering Ltd) from1996 to 1999 and also had worked with Aida Stamping TechnologyPte Ltd as Accounts and Administration Manager from 1992 to 1996.He holds a Masters of Business in Professional Accounting and aGraduate Diploma in Accounting, both from the Victoria Universityof Technology in Australia. He is a Professional National AccountantsMember of the Institute of Accountants in Australia, an AssociateMember of the CPA Australia, a Fellow Member of the Associationof Accounting Technicians, UK, Professional Member of theSingapore Human Resource Institute and Member of the SingaporeInstitute of Directors.

TANG KAH PONG is the BusinessDevelopment Manager who assists ourExecutive Director (Regional) in our Group’sbusiness development efforts in the AsiaPacific region under Hitchins (F.E.) MarketingPte Ltd. Prior to joining our Group in 1993,Mr Tang held technical and sales positions ofvarious companies such as Shenyong

Enterprise Co. Pte Ltd and L&M Prestressing Pte Ltd. Mr Tang wasa trainer for the Certificate Waterproofing Supervision Course andcurrently he is a trainer for the Good Industry Practices –Waterproofing for Internal Wet Areas Course at the ConstructionIndustry Training Institute. Mr Tang holds a Technician Diploma inBuilding from the Singapore Polytechnic.

PERUMAL NAIDU is the RegionalMarketing Manager who assists ourExecutive Director (Regional) in ourGroup’s marketing efforts in ASEAN regionunder Hitchins (F.E.) Marketing Pte Ltd. MrNaidu first joined our Group as a MarketingExecutive in 1992. Mr Naidu left our Group

to join the Central Christian Church as anintern from 1997 to 1998 and CSR South East Asia Pte Ltd as asenior marketing executive from 1998 to 2000. Mr Naidu rejoinedour Group in 2000 as a Marketing Manager. Mr Naidu holds aDiploma in Sales and Marketing from the Marketing Institute ofSingapore and a Technician Diploma in Civil Engineering from theSingapore Polytechnic.

JUMARI BIN AHMAD is the OperationsManager (Installation) in charge of theinstallation division for our Group underRenesco injection (Waterproofing) Pte Ltd(Renesco). He is responsible for training thesite staff of our approved Applicators in theproper manner of installing our Group’sproducts and for inspecting the work carried

out by our approved Applicators to ensure that the requisitestandards are maintained. Mr Ahmad has been with our Group since1978 when he joined our Company as a Site Supervisor. Mr Ahmadassumed the position of Site Manager in Renesco 1990.

POK MEI LIN is the spouse of Wong SeongKhuen, Managing Director and controllingshareholder of our Group. Mdm Pok firstjoined our subsidiary, CRG Contractors PteLtd (CRG) as a Non-Executive director in1993. Subsequently, she joined asAdministrative Manager in 1994 and wasmade an executive director of CRG in 1996.

She is responsible for all the administrative functions of CRGincluding operational budget, recruiting activities and overseesaccounts receivables. She is also oversees the implementation ofthe ISO 9001 quality management systems as the managementrepresentative. On the group level Mdm Pok also assists in payrollprocessing for the Singapore operations. Prior to the joining CRG,she held position in Singapore Telecom as Senior Technical Offi cerwith 18 years of experience in the Line Plant Planning Department.She holds a Techinician Diploma in Architectural Draftsmanship fromthe Singapore Polytechnic. Mdm Pok is also a Non-Executivedirector of Hitchins International Pte Ltd.

GEE KIM FAH is the General Manager(Project and Contract) in charge of the projectand contract division for our Group underCRG Contractors Pte Ltd. He joined us inFebruary 2003 and is responsible in theoverall developing and executing of site plan.He leads and directs a team of waterproofingprofessional into achieving project’s

milestone and quality deliverables. He holds a degree of Building inConstruction Economics from University of Technology, Sydney anda diploma in Building Management from Nee Ann PolytechnicSingapore. Mr Gee had more than 21 years of experience in projectmanagement in the building and construction industry. Prior tojoining us, he was he worked as a Project and Site Manager withvarious main construction companies such as Bestbuild Pte. Ltd;Eng Lim Construction Pte Ltd, Torie Construction Pte Ltd, SumKeong Construction Pte Ltd from 1986 to February 2003. He wasalso with Housing & Development Board from 1981 to 1986 asTechnical Officer.

Hitchins Group Ltd


• ADAPTABILITYin Usage

1st Prize Award Winning exhibit at Singapore Blooms(Sky Rise Category) 18 November 2003

Annual Report 2005

Corporate ProfileEstablished since 1932, Hitchins Group Limited is a leading waterproofing specialist inAsia with expertise in preservation, restoration and maintenance of buildings andconcrete structures. An ISO 9001:2000 certified organisation, the Group is committedto quality.

With more than 70 years of track record, Hitchins has preserved many historical andmodern buildings from rapid deterioration, and restored them to their original splendourin countries all across Asia and beyond.

Supported by a strong R&D team, Hitchins is committed to developing and manufacturingspecialty chemicals used by the Group to provide integrated solutions for the bestwaterproofing and building protection.

In the new millennium, trust Hitchins to contribute to a greener future.

Corporate Profile

Our products continually respond tothe call for an evergreen environment.

8Hitchins Group Ltd 8 Corporate ProfileHitchins Group Ltd

Hitchins offers these building protection systems as solutions to yourbuilding problems:

• Roof, basement & wall waterproofing systems

• Decorative & weather-resistant coatings

• Chemical-resistant wall and floor finishes

• Structural & waterproofing grouting systems

• Concrete repair & protection systems

• Concrete joint treatments

• Roof Gardens

This approach to providing solutions is supported by our unique assuranceof quality. This gives our customers a “peace of mind”. In addition, theHitchins Group is involved in complementary business (roof gardens,concrete roof tiles and car-refurbishing products) that are synergistic withits core waterproofing and coating businesses.

The Hitchins Group is a Singapore-based, fullyintegrated group of companies that is engagedin every level of the building protection businessto serve the various needs of our customers inthe building industry.

The Hitchins Group is, directly and throughsubsidiaries, engaged in these areas:

• Research & Development

• Manufacturing

• Marketing & Distribution

• Application of Waterproofing Systems

& Coatings

• Concrete Repair & Grouting

• Maintenance & Defects Investigation

• Technical Consultation & Services

Innovative, Relevant Solutions for theUrban Landscape

Global PerspectiveIntegrated Business Solutions

9 Annual Report 20059Corporate Profile Annual Report 2005

Global PerspectiveQuality Assurance

Stringent In-House Quality Control SystemHitchins Quality Control Team ensures materials andproducts meet high predetermined standards

ISO 9001: 2000 CertificationHitchins quality management system is certified by theBureau Veritas Quality International (BVQI)

Solution SelectionHitchins technical team offers services that will give ourcustomers the best value

Approved Applicator SystemAll Hitchins products are applied only by approved &trained applicators

Site AuditsOur team of trained and experienced Hitchins“application specialists” conduct random audits on ourapplicators’ work

WarrantyHitchins’ Process Performance Warranty provided forall projects installed by approved applicators withHitchins’ products

Fidelity FundHitchins’ warranties are backed by its unique InternationalFidelity Fund

An Integral Part of Our Values

10Hitchins Group Ltd

Group Structure

10 Group StructureHitchins Group Ltd

100%Hitchins LaboratoryPte Ltd

42.8%Aeroroof IndustriesSdn Bhd

98%Hitchins BorneoSdn Bhd

100%Hitchins-DashengHoldings Pte Ltd

100%Hitchins InternationalPte Ltd

100%Renesco Injection(Waterproofing) Pte Ltd

100%CRG ContractorsPte Ltd

100%Hitchins (Malaysia)Sdn Bhd

100%Ampero (Malaysia)Sdn Bhd

100%Shanghai DashengWaterproofingMaterials Co., Ltd

HITCHINS GROUP LTD

60%Daku AsiaPte Ltd

100%Helms IndustriesPte Ltd

100%Hitchins (F.E.)Marketing Pte Ltd


Headquarter Office Applicator

BANGLADESHBRUNEICHINAHONG KONGINDIAINDONESIASOUTH KOREAMALAYSIAMYANMARPHILIPPINESSINGAPORESRI LANKATHAILANDUAEVIETNAM

11Hitchins Distribution Network Annual Report 2005

Hitchins Distribution NetworkSINGAPOREHitchins Group Ltd30, Toh Guan Road#07-01 ODC DistricentreSingapore 608840Telephone: (65) 6861 1177Facsimile: (65) 6863 4240Email: [email protected]

Research & DevelopmentHitchins (Laboratory) Pte Ltd51, Science Park Road#04-16, The AriesSingapore Science Park IISingapore 117586Telephone: (65) 6872 9272Facsimile: (65) 6872 0493Email: [email protected]

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

MALAYSIAHitchins (Malaysia)Sendirian BerhadNo. 26 Jalan 4/10BSpring Crest Industrial Park68100 Batu Caves, Selangor,MalaysiaTelephone: (60-3) 6185 8888Facsimile: (60-3) 6185 0668Email [email protected]

CHINAShanghai Hitchins Da ShengWaterproofing Materials Co., LtdNo. 58, 699 Nong, Bei Qing LuHua Cao Zhen, Ming Hang QuShanghai P.R. ChinaPost Code 201107Telephone: (86-21) 6221 9815/7/9Facsimile: (86-21) 6221 9812Email: [email protected]

Shanghai Marketing OfficeNo. 37, 380 Nong, Tian Yao Qiao LuRoom 803 Nan Xi Gong YuShanghaiPost Code 200030Telephone: (86-21) 6486 4399Facsimile: (86-21) 6486 4812

Beijing Rep. OfficeNo. 3, Yan Jing Li Zhong JieBlock 5, Room 702 Kai Tai Gong YuChao Yang QuBeijingPost Code 100025Telephone: (86-10) 6595 1400Facsimile: (86-10) 6506 0316

Dalian Rep. OfficeNo. 379, Hua Bei LuRoom 707 Zhong Lian Ping GuanSha He Kou QuDalianPost Code 116033Telephone: (86-411) 6652061 x 707Facsimile: (86-411) 6650673

Nanjing Rep. OfficeRoom 710 No.57 Shan Xi RoadGu Lou DistrictNanjing ChinaPost Code 210009Telephone (86-25) 83739026Facsimile (86-25) 83736679

Singapore

BruneiMalaysia

Indonesia

Vietnam

Philippines

Hong Kong

South Korea

China

Thailand

Myanmar

Bangladesh

Sri Lanka

India

UAE

Widening our Global Reach to the UAE.

12Hitchins Group Ltd 12Hitchins Group Ltd

The Green Label certification by Singapore Environmental Council bears testimony to Hitchinscontinuing drive to protecting and enhancing the built environment.

Supported by a strong R&D team, Hitchins develops and manufactures specialty chemicals used by theGroup to provide environmental friendly integrated solutions for waterproofing and building protection.

FORMDEX UNIFLEX

Cemetitious Waterproofing System

A two component cemetitious waterproofingmembrane, Formdex Uniflex has excellentadhesion, and flexural and tensile strength;and is an effective and permanentwaterproofing solution to all masonrystructures.

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

FORMAK 629

Concealed Waterproofing System

High in tensile strength, Formak 629 is asingle component, solvent free liquid appliedelastomeric waterproofing membrane basedon poly-isoprene polymers. It contains nobitumen or coal tar and will not causestaining to marble, tiles or tiles grout.

Areas of usageConcealed roofs, non-insulated decks

TRAFFIGARD TOPCOAT

Exposed Waterproofing System

Traffigard Topcoat is a decorative, liquid-applied membrane of heavy-bodiedacrylic polymer gel. It is reinforced withfiberglass mat application for maximumstrength and durability.

Areas of usageAll general exposed roofs

Hitchins Group Ltd 30 Toh Guan Road #07-01 ODC Districentre Singapore (608840) Telephone: (65) 6861 1177 Fax: (65) 6863 4240 Website: www.hitchins.com

032 002Environmentally Friendly

Paint / Coating

13 Annual Report 200513 Annual Report 2005

• LIMITLESSin Boundaries The sky is the limit for

opportunities and growth.

14Hitchins Group Ltd 14 Financial ReviewHitchins Group Ltd

The Group’s overall revenue by activities decreased by 2.70%or $0.28 mil from $10.38 mil in FY2004 to $10.10 mil inFY2005. Manufacturing and Sales revenue from externalcustomers decreased by 12.97% or $0.65 mil from $5.01 milin FY2004 to $4.36 mil in FY2005. Whereas, Installationrevenue from external customers increased by 6.86% or$0.37 mil from $5.37 mil in FY2004 to $5.74 mil in FY2005.

In FY2005, revenue from Malaysia showed a significantincrease of 46.35% or $0.49 mil over FY2004. However,revenue from the People’s Republic of China (“PRC”),Singapore and the region have decreased by 27.2% or $0.53mil and 3.28% or $0.24 mil respectively.

The industrial climate in the PRC, Singapore and the regionis very competitive. The decrease in revenue was mainlyattributed to tighter credit control, site not ready to take deliveryand price competition.

The Group’s FY2005 gross profit declined by 8.4% or$0.36 mil against the FY2004 results partly due to adecline in the People’s Republic of China’s revenuecontribution. The Group’s year to year gross profit hasdecreased from 41.03% or $4.26 mil in FY2004 to 38.63%or $3.90 mil, mainly due to the overall increase in rawmaterial cost and stiff market competition.

Other operating income increased by 49.70% or $0.14 mil,from $0.28 mil in FY2004 to $0.42 mil in FY2005. The increasewas mainly due to income received from surrendering of keyman insurance policy, provision for doubtful debts writtenback and net of foreign currencies exchange gain.

Distribution expenses increased by 19.46% or $0.27 mil from$1.38 mil in FY2004 to $1.65 mil in FY2005. The increasewas mainly due to the increase of sales commission paidduring the year and overseas travelling cost.

Administrative expenses decreased by 17.36% or $0.45 milfrom $2.60 mil in FY2004 to $2.15 mil in FY2005. Thedecrease was due to the reduction of staff cost, compliancecost, legal and professional fees.

Other operating expenses increased by 83.77% or $0.43 mil,from $0.51 mil in FY2004 to $0.94 mil in FY2005. Theincrease was due to specific provision of PRC’s debts, baddebts written-off and stock written-off during the year ofreporting, etc.

Finance cost increased by $6k or 8.72% from $66k in FY2004to $72k in FY2005, the increase was mainly due to tradereceivables financing cost and overdraft interest.

The Group’s loss before tax increased by $0.47 mil, from lossof $14k in FY2004 to $0.48 mil in FY2005 and loss after taxincreased by $0.42 mil or 376.67%, from $0.11 mil in FY2004to $0.53 mil in FY2005.

The basic earnings per share of the Group decreased from(0.10) cents in FY2004 to (0.49) cents in FY2005. The Group’snet asset value decreased by 0.54 cents to 4.75 cents.

Balance Sheet and CashflowsThe Group’s property, plant and equipment decreased mainlyfrom the manufacturing and sales segment due to depreciationduring the year. The decrease in receivables was mainly dueto better credit control and collections from the manufacturingand sales segment.

The increase in borrowings was mainly due to short-termborrowings from finance company and bank overdraft for itsoperating activities.

The Group’s net cash from operating activities improved fromFY2004 deficit of $0.41 mil to FY2005 deficit of $0.20 mil.This was mainly due to better collections. The cash flow frominvesting activities improved mainly due to the decrease infixed assets acquisition.

The overall Group’s cash and cash equivalents in FY2005decreased by $0.71 mil to $0.20 mil partly due to fixed depositpledge with banks for credit facilities.

Financial Review

15 Annual Report 200515Financial Highlights Annual Report 2005

Financial Highlights

(a) Basic earnings/(losses) per ordinary share has been calculatedbased on the weighted average number of ordinary shares of108,600,000 (2004:108,600,000), (2003:94,850,877) and (2001to 2002:82,658,000) shares of S$0.01 each.

Revenue ByGeographical Segment(S$million) 2001 2002 2003 2004 2005

Singapore andother regions 7.10 8.32 6.87 7.38 7.13

PRC 1.02 2.33 1.41 1.94 1.42

Malaysia 2.12 1.97 1.02 1.06 1.55

Total 10.24 12.62 9.30 10.38 10.10

Revenue ByBusiness Segment(S$million) 2001 2002 2003 2004 2005

Manufacturingand Sales 5.87 7.31 5.49 5.01 4.36

Installation 4.37 5.31 3.81 5.37 5.74

Total 10.24 12.62 9.30 10.38 10.10

(b) Diluted loss per ordinary share in FY2005 has beencalculated based on the weighted average number of108,672,355 ordinary shares of S$0.01 each.

Group’s Revenue (S$ million) Net Assets Value (cent)

Profit / Loss before Tax (S$ million) Earnings per Share (cent)

10.24

12.62

9.3010.38 10.10

2001 2002 2003 2004 2005

1.88

4.39

5.24 5.29

4.75

2001 2002 2003 2004 2005

0.29

2.70

-0.26-0.01

-0.48

2001 2002 2003 2004 2005

0.42

2.63

-0.46-0.10

-0.49

2001 2002 2003 2004 2005

16Hitchins Group Ltd 16 Corporate InformationHitchins Group Ltd

BOARD OF DIRECTORSWong Seong Khuen - Chairman / Managing Director

Ng Tian Huat - Business Development Director

Yeo Hoon Seng - Executive Director

Ng Kim Khuan - Executive Director

Kim Leng Choon - Executive Director

Mark Yeo Wee Tiong - Non Executive Director

Goh Chong Chia - Independent Director

Sitoh Yih Pin - Independent Director

Tan Chong Huat - Independent Director

AUDIT COMMITTEESitoh Yih Pin - Chairman

Goh Chong Chia

Tan Chong Huat

REMUNERATION COMMITTEEGoh Chong Chia - Chairman

Tan Chong Huat

Ng Tian Huat

NOMINATING COMMITTEETan Chong Huat - Chairman

Goh Chong Chia

Wong Seong Khuen

SECRETARYChew Kok Liang

REGISTERED OFFICE30 Toh Guan Road

#07-01 ODC Districentre

Singapore 608840

Website: http://www.hitchins.com

REGISTRARLim Associates (Pte) Ltd

10 Collyer Quay #19-08

Ocean Building

Singapore 049315

AUDITORSChio Lim & Associates

18 Cross Street

#08-01, Marsh & McLennan Centre

Singapore 048423

www.ChioLim.com.sg

Partner-in-charge : Lim Lee Meng

Date of appointment: 25 October 2004

PRINCIPAL BANKERSUnited Overseas Bank Limited

The Bank of East Asia, Limited

Corporate Information

Our Products

17 Annual Report 2005Corporate Governance Statement

Corporate Governance Statement

Hitchins Group Ltd (the “Company”) is committed to maintaining high standards of corporate governance within theCompany and its subsidiary companies (the “Group”) and has put in place various policies and practices that willsafeguard the interests of shareholders and enhance shareholders’ value based on the Code of Corporate of Governance(the “Code”) issued by the Corporate Governance Committee and Best Practices Guide issued by the SingaporeExchange Securities Trading Limited (the “SGX-ST”).

This statement describes the Company’s corporate governance processes and activities with specific reference to theCode 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 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 ofaccountability to our shareholders, the Board has established a Nominating Committee (NC), a RemunerationCommittee (RC) and an Audit Committee (AC). All Committees are chaired by an independent director, with the majorityof members being non-executive and independent. The Committees operate within clearly defined terms of referenceand functional procedures.

The Board conducts regular scheduled meetings on a yearly basis. Ad-hoc meetings may also be convened at suchother times as may be necessary to address any specific significant matters that may arise. The Company’s Articles ofAssociation 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 follow:

Director Board Nominating Remuneration AuditCommittee Committee Committee

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

Wong Seong Khuen 2 2 2 2 - - - -Ng Tian Huat 2 2 - - 2 2 - -Yeo Hoon Seng 2 2 - - - - - -Ng Kim Chuan 2 2 - - - - - -Mark Yeo Wee Tiong 2 2 - - - - - -Kim Leng Choon 2 1 - - - - - -Sitoh Yih Pin 2 2 - - - - 2 2Goh Chong Chia 2 2 2 2 2 2 2 2Tan Chong Huat 2 2 2 2 2 2 2 2

18Hitchins Group Ltd Corporate Governance Statement

Newly appointed Directors will be given an orientation programme with materials provided to familiarise them with thebusiness and organisation structure of the Group as well as given opportunities to visit the Group’s operational facilitiesand meet management staff so as to gain a better understanding of the Group’s business. However, as no new Directorwas appointed, it was not necessary to conduct an orientation-training programme. The Company has an on-goingtraining 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 disclosureobligations of the Company or its Directors, Directors are kept informed of such changes through circulated updates orbriefings during Board meetings or at specially-convened sessions conducted by professionals.

Principle 2: Board Composition and Balance

The Board currently comprises:

Executive DirectorsWong Seong Khuen, Chairman and Managing DirectorNg Tian HuatYeo Hoon SengNg Kim KhuanKim Leng Choon

Non-Executive DirectorMark Yeo Wee Tiong

Independent DirectorsSitoh Yih PinGoh Chong ChiaTan 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, takinginto account the scope and nature of the operations of the Company. They are of the view that no individual or smallgroup 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 ofthe Company.

The Board has not adopted the recommendation of the Code to have separate directors appointed as the Chairmanand the Managing Director. This is because the Board is of the view that there is a sufficiently strong and independentelement 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 thesize and scope of the affairs and operations of the Group. The Managing Director need not retire by rotation as providedin 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 itsduties 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”) andthe 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 allDirectors (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 whomare Independent Directors:

Tan Chong Huat - Chairman, Independent DirectorGoh Chong Chia - Member, Independent DirectorWong 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,

particular 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 reviewsand evaluates the performance and effectiveness of the Board as a whole for each financial year, and submits its reportto 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 orre-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, adequateand timely information to the Board on the Group’s affairs and issues that require the Board’s decision as well asongoing 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 Secretaryat all times.

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

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

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 DirectorTan Chong Huat - Member, Independent DirectorNg 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 Companysuccessfully; and

• in the case of Independent Directors, appropriate for the purpose of giving them an incentive to make meaningfulcontributions 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 ofall 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 aseffort and time spent and their responsibilities. The fees are subject to approval by the shareholders at each AnnualGeneral Meeting (“AGM”). Save as disclosed herein, the Non-Executive and Independent Directors do not receive anyremuneration from the Company.

The Company had on 13 December 2002 entered into separate service agreements with Wong Seong Khuen, Ng TianHuat, Yeo Hoon Seng, Ng Kim Khuan and Kim Leng Choon respectively for an initial period of 3 years, which isrenewable thereafter for such period as the Board may decide.

Principle 9: Disclosure on Remuneration

Remuneration of DirectorsBelow $250,000 9

A breakdown, showing the level and mix of each Director’ remuneration in FY 2005 is as follows:

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

Wong Seong Khuen 95 0 5 0 100Ng Tian Huat 84 0 16 0 100Yeo Hoon Seng 95 0 5 0 100Ng Kim Khuan 100 0 0 0 100Kim Leng Choon 93 0 7 0 100Mark Yeo Wee Tiong 0 0 0 0 0Goh Chong Chia 0 0 0 100 100Tan Chong Huat 0 0 0 100 100Sitoh Yih Pin 0 0 0 100 100

Remuneration of Top 5 Key ExecutivesBelow $250,000 5

A breakdown, showing the level and mix of each of the top five key executive’s remuneration in FY 2005 is as follows:

Name of Executive Salary Bonus Benefits Total% % % %

Liew Bo Chuan John 94 6 0 100Tang Kah Pong, Dexter 87 7 6 100Jumari Bin Ahmad 88 7 5 100Perumal Naidu 85 7 8 100Gee Kim Fah 87 7 6 100

Remuneration of Employee who is an Immediate Family Member of a DirectorThere are currently no employees who are immediate family members of a Director whose remuneration exceeded$150,000 during FY 2005.


Principle 10: Accountability

In presenting the annual financial statements and announcements of financial results to shareholders, it is the aim ofthe Board to provide shareholders with a balanced and understandable assessment of the Company’s and Group’sperformance, position and prospects. Management provides the AC and the Board with balanced and understandablemanagement 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 - ChairmanGoh Chong Chia - MemberTan Chong Huat - Member

The AC has scheduled a minimum of 2 meetings in each financial year. The meetings shall be held, inter alia, for thefollowing 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 orirregularity, or failure of internal controls or infringement of any law, rule or regulation which has or is likely to have amaterial 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 theadequacy of audit arrangement, with emphasis on the scope and quality of their audit, the independence, objectivityand observations of the auditors. Having reviewed the nature and extent of non-audit services provided by the externalauditors over the year being reported on, the AC is satisfied that the rendering of such services did not affect theindependence 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 ofthe shareholders and the Group’s assets. To achieve this, internal reviews are constantly being undertaken to ensurethat the system of internal controls maintained by the Group is sufficient to provide reasonable assurance that theGroup’s assets are safeguarded against loss from unauthorized use or disposition, transactions are properly authorizedand 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 ofmanagement 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 internalcontrol is adequate, taking into consideration the corporate structure and scope of the Company’s operations, to safeguardthe Group’s assets against loss from unauthorized use or disposition, to ensure that transactions are properly authorizedand 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 contractsand expenditures for projects and capital spending, and which are also subject to approval by the Board.

AC will continuously review the cost-effectiveness and adequacy of the Group’s internal control system with the externalauditors 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-STand the Companies Act, Chapter 50 of Singapore, the Board’s policy is that shareholders shall be informed of all majordevelopments of the Company. Information is communicated to shareholders on a timely basis through SGXNET andthe press.

The Company does not practice selective disclosure. Price sensitive information is first publicly released through SGXNETbefore the Company meets with any group of investors or analysts. Results and annual reports are announced orissued 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, shareholderswill be given the opportunity and time to air their views and ask Directors questions regarding the Company.

4. DEALING IN SECURITIES

The Company has adopted policies in line with the Best Practices Guide set out in the Listing Manual of the SGX-ST ondealings in the Company’s securities.

The Company prohibits its officers from dealing in the Company’s shares on short-term considerations or when they arein possession of unpublished price-sensitive information. They are not allowed to deal in the Company’s shares duringthe period commencing one month before the announcement of the Company’s quarterly, half-yearly or full year resultsand ending on the date of the announcement of the results. Directors and executives are also expected to observeinsider-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 theprocedures for review and approval of the Company’s interested person transactions. The AC and the Board review allmaterial transactions with interested persons.

No interested person transaction of a value exceeding S$100,000 was entered into by the Group during FY2005.


Financial

CONTENTS

Report of the Directors 24

Statement of Directors 28

Auditors’ Report 29

Balance Sheets 30

Consolidated Income Statement 31

Statements of Changes in Equity 32

Consolidated Cash Flow Statement 33

Notes to Financial Statements 34


Report of the Directors

The directors of the Company are pleased to present their report together with the audited financial statements of theCompany and of the Group for the financial year ended 30 June 2005.

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 arrangementwhose object is to enable the directors of the Company to acquire benefits by means of the acquisition of sharesor debentures of the Company or any other body corporate except as disclosed in paragraph 5 for the shareoptions.

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 capitaland debentures of the Company and related corporations as recorded in the register of directors’ shareholdingskept by the Company under section 164 of the Companies Act, Cap. 50 except as follows :

Direct Interest Deemed InterestName of directors andcompanies in which interest At beginning At end At beginning At endare held of the year of the year of the year of the year

Hitchins Group Ltd Ordinary shares of $0.01 each Ordinary shares of $0.01 each

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

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

The directors’ interests as at 21 July 2005 were the same as those at the end of the financial year.

25 Annual Report 2005Report of the Directors

4. CONTRACTUAL BENEFITS OF DIRECTORS

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

5. OPTIONS TO TAKE UP UNISSUED SHARES

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

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

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 yearsand 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 theirassociates and whose participation and actual number of shares granted under the Scheme and terms ofany 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 theaverage of the last dealt price per share as indicated in the daily official list or any other publication published bythe SGX-ST for the 5 consecutive days immediately preceding the date of grant (the “Market Price”). Optionswill 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 1,000shares 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 introducedby the Remuneration Committee from time to time.

26Hitchins Group Ltd Report of the Directors

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 $0.01 each of theCompany are as follows :

Number of share optionsDate Options Options Exerciseof grant outstanding outstanding price Exerciseof options at 01/07/2004 Cancelled at 30/06/2005 per share period

28/04/2004 2,172,000 (362,000) 1,810,000 $0.08 28/04/2005 to 28/04/201428/04/2004 1,629,000 (271,500) 1,357,500 $0.08 28/10/2005 to 28/04/201428/04/2004 1,629,000 (271,500) 1,357,500 $0.08 28/04/2006 to 28/04/2014

5,430,000 (905,000) 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 beengranted 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 unissuedshares 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 orany 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 anysuch 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)

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, andtheir report on the financial statements and the assistance given by the Company’s officers to them;

● Reviewed the annual and interim financial statements and announcements of the Group and the Companyprior to their submission to the directors of the Company for adoption; and

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

27 Annual Report 2005Report of the Directors

6. AUDIT COMMITTEE (Cont’d)

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

The Audit Committee has recommended to the Board of Directors that the auditors, Chio Lim & Associates, benominated for re-appointment as auditors at the forthcoming 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 preliminaryfinancial statements, as announced on 22 August 2005, which would materially affect the Group’s and theCompany’s operating and financial performance as at the date of this report.

8. AUDITORS

The auditors, Chio Lim & Associates, have expressed their willingness to accept re-appointment.

ON BEHALF OF THE DIRECTORS

Wong Seong KhuenDirector

Ng Tian HuatDirector

9 September 2005


Statement of Directors

In the opinion of the directors, the accompanying financial statements set out on pages 30 to 58 are drawn up so as togive a true and fair view of the state of affairs of the Company and of the Group as at 30 June 2005 and changes inequity of the Company and of the Group, and of the results and cash flows of the Group for the financial year thenended and at the date of this statement there are reasonable grounds to believe that the Company will be able to payits debts as and when they fall due.

ON BEHALF OF THE DIRECTORS

Wong Seong KhuenDirector

Ng Tian HuatDirector

9 September 2005


Auditors’ ReportAuditors’ Report To The Members Of Hitchins Group Ltd

We have audited the accompanying financial statements of Hitchins Group Ltd for the year ended 30 June 2005. Thesefinancial statements are the responsibility of the Company’s directors. Our responsibility is to express an opinion onthese financial statements based on our audit. The financial statements for the year ended 30 June 2004 were auditedby other auditors (other than Chio Lim & Associates) whose report dated 12 September 2004 expressed an unqualifiedopinion on those financial statements.

We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we planand perform the audit to obtain reasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing the accounting principles used and significant estimates madeby the directors, as well as evaluating the overall financial statements presentation. We believe that our audit providesa 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 ofthe 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 theGroup and of the Company as at 30 June 2005 and the results, changes in equity and cash flows of the Groupand 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 subsidiariesincorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisionsof the Act.

Chio Lim & AssociatesCertified Public Accountants

Singapore

9 September 2005

Partner in charge of audit: Lim Lee Meng(Effective from financial year ended 30 June 2005)


Balance Sheetsas at 30 June 2005

Group CompanyNotes 2005 2004 2005 2004

$ $ $ $

ASSETSCurrent assets :Cash and cash equivalents 5 1,522,644 1,813,361 308,817 306,267Trade receivables 6 5,781,107 6,389,272 77,338 168,578Other receivables and prepayments 7 368,443 588,807 2,665,264 3,563,633Inventories 8 1,164,643 1,012,244 2,954 13,735

Total current assets 8,836,837 9,803,684 3,054,373 4,052,213

Non-current assets :Investments in associates 9 – – – –Investments in subsidiaries 10 – – 1,765,574 1,365,574Property, plant and equipment 11 1,284,625 1,581,136 269,962 396,271Deferred tax assets 22 11,839 – – –Other investments 12 16,395 8,175 14,625 8,175

Total non-current assets 1,312,859 1,589,311 2,050,161 1,770,020

Total assets 10,149,696 11,392,995 5,104,534 5,822,233

LIABILITIES AND EQUITYCurrent liabilities :Short-term borrowings 13 800,271 647,073 585,951 639,507Trade payables and accrued liabilities 14 2,403,249 3,027,225 154,014 971,727Other payables 15 1,259,880 1,363,285 1,236,655 1,007,248Income tax payable 54,962 50,124 – –Current portion of finance leases 16 113,127 100,453 44,402 44,402

Total current liabilities 4,631,489 5,188,160 2,021,022 2,662,884

Non-current liabilities :Deferred tax 22 98,473 98,488 – –Finance leases 16 266,485 357,103 153,229 197,631

Total non-current liabilities 364,958 455,591 153,229 197,631

Capital and reserves :Issued capital 17 1,086,000 1,086,000 1,086,000 1,086,000Other reserves 2,977,772 2,974,004 3,225,012 3,225,012Accumulated profits/(losses) 1,089,477 1,689,240 (1,380,729) (1,349,294)

Total equity 5,153,249 5,749,244 2,930,283 2,961,718

Total liabilities and equity 10,149,696 11,392,995 5,104,534 5,822,233

See accompanying notes to financial statements.


Consolidated Income Statementyear ended 30 June 2005

GroupNotes 2005 2004

$ $

Revenue 19 10,103,057 10,383,710

Cost of sales (6,200,580) (6,123,308)

Gross profit 3,902,477 4,260,402

Other operating income 418,489 279,551

Distribution costs (1,648,574) (1,379,992)

Administrative expenses (2,146,098) (2,596,956)

Other operating expenses (938,662) (510,782)

Finance costs 20 (71,676) (65,924)

Loss before income tax 21 (484,044) (13,701)

Income tax expense 22 (45,190) (97,325)

Loss for the year (529,234) (111,026)

Loss per share (cents) of $0.01 each

– Basic 23 (0.49) (0.10)

– Diluted 23 (0.49) (0.10)



Statements of Changes in Equityyear ended 30 June 2005

Foreignexchange

Issued Share translation Statutory Accumulatedcapital premium reserves reserves Profits Total

$ $ $ $ $ $

Group

Balance at 30 June 2003 1,086,000 2,906,265 (298,457) 30,602 1,961,913 5,686,323

Overprovision of issue

expenses in prior year – 318,747 – – – 318,747

Transfer to statutory reserves – – – 161,647 (161,647) –

Foreign currency translation

differences (Not recognised

in the income statement) – – (144,800) – – (144,800)

Net loss for the year – – – – (111,026) (111,026)

Balance at 30 June 2004 1,086,000 3,225,012 (443,257) 192,249 1,689,240 5,749,244

Foreign currency translation

differences (Not recognised

in the income statement) – – (66,761) – – (66,761)

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

Net loss for the year – – – – (529,234) (529,234)

Balance at 30 June 2005 1,086,000 3,225,012 (510,018) 262,778 1,089,477 5,153,249

(a) (a)(b)

AccumulatedIssued Share profits/capital premium (losses) Total

$ $ $ $

Company

Balance at 30 June 2003 1,086,000 2,906,265 273,586 4,265,851

Overprovision of issue

expenses in prior year – 318,747 – 318,747

Net loss for the year – – (1,622,880) (1,622,880)

Balance at 30 June 2004 1,086,000 3,225,012 (1,349,294) 2,961,718

Net loss for the year – – (31,435) (31,435)

Balance at 30 June 2005 1,086,000 3,225,012 (1,380,729) 2,930,283

(a)

(a) Not available for distribution as cash dividends(b) Refer to Note 18 for details.



Group2005 2004

$ $

Cash flows from operating activities :Loss before income tax (484,044) (13,701)Adjustments for : Depreciation expenses 376,393 413,105 Loss/(gain) on disposal of plant and equipment 3,994 (17,493) Changes in fair values of other investments 4,415 (2,675) Plant and equipment written off – 4,057 Loss on disposal of club membership – 10,500 Dividend income (420) (1,814) Interest income (13,641) (16,007) Interest expense 71,676 65,924

Operating (loss)/profit before working capital changes (41,627) 441,896Trade receivables 608,165 (444,319)Other receivables and prepayments 220,364 86,348Inventories (152,399) (201,928)Trade payables and accrued liabilities (623,976) (68,270)Other payables (103,405) (4,664)

Cash used in operations (92,878) (190,937)Interest received 13,641 16,007Interest paid (71,676) (65,924)Income tax paid (52,206) (172,890)

Net cash used in operating activities (203,119) (413,744)

Cash flows from investing activities :Proceeds from disposal of plant and equipment 8,972 17,429Proceeds from disposal of other investment – 1,500Purchase of plant and equipment (Note 5) (75,208) (387,200)Purchase of other investment (12,635) –Dividend received 420 1,814

Net cash used in investing activities (78,451) (366,457)

Cash flows from financing activities :Increase/(decrease) in short-term borrowings 45,926 (17,781)Decrease in finance leases (112,830) (85,522)Increase in cash and cash equivalent (restricted in use) (Note 5) (312,542) (37,000)

Net cash used in financing activities (379,446) (140,303)

Net effect of exchange rate changes in consolidating foreign subsidiaries (30,082) (59,604)

Net decrease in cash and cash equivalents (691,098) (980,108)Cash and cash equivalents at beginning of year 907,111 1,941,169Effect of exchange rate changes (19,433) (53,950)

Cash and cash equivalents at end of year (Note 5) 196,580 907,111

Consolidated Cash Flow Statementyear ended 30 June 2005



Notes to Financial Statements30 June 2005

1. GENERAL

The Company is incorporated in Singapore. The financial statements are presented in Singapore dollars. Theyare drawn up in accordance with the provisions of the Companies Act, Cap. 50 and the Singapore FinancialReporting Standards. The financial statements were approved and authorised for issue by the board of directorson 9 September 2005.

The Company is principally an investment holding company. It is listed on the Singapore Exchange SecuritiesTrading Limited.

The principal activities of the subsidiaries are disclosed in Note 10 to the financial statements.

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ACCOUNTING CONVENTION – The financial statements are prepared under the historical cost conventionmodified to include revaluation of certain financial assets.

BASIS OF PRESENTATION – The consolidation accounting method is used for the consolidated financialstatements which includes the financial statements made up to 30 June each year of the Company and of thosecompanies in which it holds, directly or indirectly through subsidiaries, over 50 percent of the shares and votingrights. The consolidated financial statements are prepared using uniform accounting policies for like transactionsand 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 forassociate in the Group financial statements. The results of investees acquired or disposed of during the financialyear are consolidated from the respective dates of acquisition or up to the dates of disposal. On disposal theattributable amount of unamortised goodwill is included in the determination of the gain or loss on disposal.

SUBSIDIARIES – In the Company’s own financial statements, the investments in subsidiaries are carried atcost less any provision for impairment. The net book values of the subsidiaries are not necessarily indicative ofthe amounts that would be realised in a current market exchange.

ASSOCIATE – An associate is an entity in which the Company has a substantial financial interest (usually notless than 20% of the voting power), significant influence and that is neither a subsidiary nor a joint venture of theCompany. Significant influence is the power to participate in the financial and operating policy decisions of theassociate but is not control over those policies. Investments in the associates are included in the Group’s financialstatement under the equity method of accounting. The investments in associates are carried in the Groupbalance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the associate, less anyimpairment in value. The income statement reflects the Group’s share of the results of operations of the associate.In the Company’s own financial statements, the investments in associates are stated at cost less any provisionfor impairment in value. The net book values of the associates were not necessarily indicative of the amountsthat would be realised in a current market exchange. Profits and losses resulting from transactions between theGroup and an associate are recognised in the financial statements only to the extent of unrelated investors’interests in the associate. Unrealised losses are also eliminated unless the transaction provides evidence of animpairment of the asset transferred. Accounting policies of associates have been changed where necessary toensure consistency with the policies adopted by the Group.


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

NON-CURRENT INVESTMENT – Non-current listed investments held as available-for-sale financial assets arestated at fair value by reference to the transaction price or other market prices. If such market prices are notreliably determinable, the fair value is estimated as the sum of all future cash payments or receipts, discounted,if the effect of doing so would be material, using the prevailing market rates of interest of an issuer with a similarcredit rating. The transactions are recorded at the trade date method. A gain or loss on remeasuring available-for-sale financial assets or liability to fair value (other than those relating to hedges) is recognised in the incomestatement.

REVENUE RECOGNITION – Revenue from sale of goods is recognised when significant risks and rewards ofownership are transferred to the buyer and the amount of revenue and the costs of the transaction (includingfuture costs) can be measured reliably. Revenue from rendering of services is recognised by reference to thestage of completion of the transaction at the balance sheet date determined by the proportion of that costincurred to date bear to the estimated total cost of the transactions and the amount of revenue, stage of completionand costs of transactions (including future costs to complete) can be measured reliably. Revenue from renderingof services that are of a short duration is recognised when the services are completed. Interest revenue isrecognised on a time-proportion basis using the effective interest rate. Dividend revenue is recognised when theshareholder’s right to receive the dividend is legally established. Revenue is measured at the fair value of theconsideration received or receivable, taking into account the amount of any trade discounts and volume rebatesallowed by entity.

CONTRACT WORK-IN-PROGRESS – When the outcome of a construction contract can be estimated reliably,contract revenue and contract costs associated with the contract are recognised as revenue and expensesrespectively by reference to the stage of completion of the contract activity at the balance sheet date using theproportion that contract costs incurred for work performed to date bear to the estimated contract cost method.Contract costs consist of costs that relate directly to the specific project costs that are attributable to contractactivity in general and can be allocated to the project and such other costs are specifically chargeable to thecustomer under the terms of the contract. When it is probable that total contract costs will exceed total contractrevenue, the expected loss is recognised as an expense immediately. The long-term work in progress projectshave operating cycles longer than one year. The current assets include amounts relating to the long-term contractsrealisable over a period in excess of one year.

INVENTORIES – Inventories are measured at the lower of cost (first in first out method) and netrealisable value.

PROPERTY, PLANT AND EQUIPMENT – Property, plant and equipment are carried at cost less any accumulateddepreciation and any accumulated impairment losses. Depreciation is provided on gross carrying amounts inequal annual instalments over the estimated useful lives of the assets. The annual rates of depreciation areas follows :

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

Fully depreciated assets still in use are retained in the financial statements.

The useful life of an item of property, plant and equipment is reviewed periodically and, if expectations aresignificantly different from previous estimates, the depreciation charge for the current and future periods areadjusted.

IMPAIRMENT OF ASSETS – At each reporting date an assessment is made as to whether there is any indicationthat a depreciable or amortisable asset may be impaired. If any such indication exists, an estimate is made ofthe recoverable amount of the asset. A provision is made for the excess of the carrying amount over the recoverableamount. The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs tosell and its value in use.

Notes to Financial Statements

36Hitchins Group Ltd Notes to Financial Statements


BORROWING COSTS – All borrowing costs are recognised as an expense in the period in which they areincurred.

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

FOREIGN CURRENCY FINANCIAL STATEMENTS – The foreign entities determine the appropriate functionalcurrency as it reflects the primary economic environment in which the entities operate. Transactions in foreigncurrencies are recorded in the functional currency at the rates ruling at the dates of the transactions. At eachbalance sheet date, recorded monetary balances and balances measured at fair value that are denominated inforeign currencies are reported at rates ruling at the balance sheet and fair value dates respectively. All realisedand unrealised exchange adjustment gains and losses are dealt with in the income statement. For consolidatingin the Singapore dollars financial statements assets and liabilities are translated at year end rates of exchangeand the income and expense items are translated at average rates of exchange for the year. The resultingtranslation adjustments (if any) are accumulated in a separate component of shareholders’ equity until thedisposal of the entities.

INCOME TAX – The income taxes are accounted using the asset and liability method that requires the recognitionof taxes payable or refundable for the current year and deferred tax liabilities and assets for the future taxconsequence of events that have been recognised in the financial statement or tax returns. The measurementsof current and deferred tax liabilities and assets are based on provisions of the enacted tax laws; the effects offuture changes in tax laws or rates are not anticipated. The measurement of deferred tax assets is reduced, ifnecessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realised.A deferred tax liability is recognised for all taxable temporary differences unless the deferred tax liability arisesfrom (a) goodwill for which amortisation is not deductible for tax purposes; or (b) the initial recognition of anasset 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).

RETIREMENT BENEFITS COSTS – Contributions to defined contribution retirement benefit plans are recordedas an expense as they fall due. Contributions made to government managed retirement benefit plan such as theCentral Provident Fund in Singapore which specifies the employer’s obligations are dealt with as definedcontribution retirement benefit plans.

SHARE BASED COMPENSATION – The cost or other obligation is not recognised as an expense when theshare options are granted to the employees. However the issued capital (nominal value) and share premium areincreased by the amount received from the employee.

LEASES – A finance lease is recognised as an asset and as liability in the balance sheet at amounts equal at theinception of the lease to the fair value of the leased assets or, if lower, at the present value of the lease paymentsbased on the interest rate implicit in the lease. The excess of the lease payments over the recorded leaseobligations are treated as finance charges which are allocated to each lease term so as to produce a constantrate of charge on the remaining balance of the obligations. The assets are depreciated as owned depreciableassets. Leases where the lessor effectively retains substantially all the risks and benefits of ownership of theleased assets are classified as operating leases. For operating leases, lease payments are recognised as anexpense in the income statement on a straight line basis unless another systematic basis is representative ofthe time pattern of the user’s benefit, even if the payments are not on that basis.

37 Annual Report 2005Notes to Financial Statements


ACCOUNTING ESTIMATES – The preparation of financial statements in conformity with generally acceptedaccounting principles requires the directors to make estimates and assumptions that affect the reported amountsof assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statementsand the reported amounts of revenues and expenses during the reporting period. Actual results could differ fromthose estimates. Apart from those involving estimates, management has made judgements in the process ofapplying the entity’s accounting policies that have the most significant effect on the amounts recognised in thefinancial statements.

LIABILITIES AND PROVISIONS – A liability and 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 economicbenefits will be required to settle the obligation and reliable estimate can be made of the amount of the obligation.It is measured at the amount payable. A provision is made for unutilised staff holiday leave.

A provision for warranty is recognised for all products under warranty at the balance sheet date based on certainpercentage of the sale of these products which represents the best estimate of the Group’s contractual obligationsat the balance sheet date.

CASH AND CASH EQUIVALENTS – Cash and cash equivalents for the cash flow statement includes cash andcash equivalents less bank overdraft.

FAIR VALUE OF FINANCIAL INSTRUMENTS – The carrying values of cash, cash equivalents, accountsreceivable, other current financial assets, short-term borrowings, accounts payable and other current financialliabilities approximate their fair values due to the short-term maturity of these instruments. The fair value of long-term debt was not determined because the book value approximates the fair value. Those financial assets andliabilities that have a fixed maturity are measured at amortised cost using the effective interest rate method.Those that do not have a fixed maturity are measured at cost. All financial assets are subject to review forimpairment.

RISK MANAGEMENT POLICIES FOR FINANCIAL INSTRUMENTS

CREDIT RISKS ON FINANCIAL ASSETS – Financial assets that are potentially subject to concentrations ofcredit risk consist principally of cash, cash equivalents and trade and other accounts receivable. The directorsbelieve that the financial risks associated with these financial instruments are minimal. The cash and cashequivalents are placed with high credit quality institutions. An ongoing credit evaluation is performed of itsdebtors’ financial condition and a provision for impairment is maintained based upon the expected collectibilityof all accounts receivable. There is no significant concentration of credit risk, as the exposure is spread over alarge number of counterparties and customers unless otherwise disclosed in the note to the financial statements.

OTHER RISKS ON FINANCIAL INSTRUMENTS – The interest, foreign exchange risks, and changes in fairvalues are monitored from time to time and any gains and losses are included in the income statement unlessotherwise stated. There is exposure to interest rate price risk for financial instruments with a fixed interest rateand to interest rate or cash flow risk for financial instrument with a floating interest rate that is reset as marketrates change. There is also exposure to changes in foreign exchange rates and liquidity of businesses. Forwardcontracts or other arrangements are not utilised to minimise these risks. Also such forward contracts or otherarrangements are not used for trading or speculative purposes. At 30 June 2005 there were no sucharrangements, interest rate swap contracts or other derivative instruments outstanding.


3. RELATED COMPANY TRANSACTIONS

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

Some of the Company’s transactions and arrangements and terms thereof are arranged by or between membersof the Group and the effects of these on the basis determined between the parties are reflected in these financialstatements. The intercompany balances are without fixed repayment terms and interest unless stated otherwise.The balances stated approximate their fair values.

4. OTHER RELATED PARTY TRANSACTIONS

Related parties are entities with common direct or indirect shareholders and or directors or management. Partiesare considered to be related if one party has the ability to control the other party or exercise significant influenceover the other party in making financial and operating decision. They include the associate and individual persons.

Some of the Group’s transactions and arrangement are with related parties and the effect of these on the basisdetermined between the parties are reflected in these financial statements. The balances are without fixedrepayment terms and interest unless stated otherwise. The balances stated approximate their fair values.

Significant related party transactions:

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

2005 2004$ $

Other fee income 3,240 16,200

5. CASH AND CASH EQUIVALENTS

Group Company2005 2004 2005 2004

$ $ $ $

Not restricted in use 896,102 1,499,361 2,362 2,362Restricted in use (a) 626,542 314,000 306,455 303,905

1,522,644 1,813,361 308,817 306,267

Analysis of above amount denominated in foreign currencies:-

Chinese Renminbi 633,688 862,414 – –Malaysian Ringgit 410,078 490,441 – –

The rate of interest for the cash on interest earning account are between 1.5% to 2.9% (2004 : 1.5% to 3%) peryear for the Group and 1.5% to 1.75% (2004 : 1.5% to 1.75%) per year for the Company respectively.

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


5. CASH AND CASH EQUIVALENTS (Cont’d)

CASH AND CASH EQUIVALENTS IN THE CONSOLIDATED CASH FLOW STATEMENTS

Group2005 2004

$ $

As above 1,522,644 1,813,361Bank Overdraft (Note 13) (699,522) (592,250)Cash restricted in use (626,542) (314,000)

Cash and cash equivalents at end of year 196,580 907,111

NON CASH TRANSACTION – Addition to plant and equipment during the year ended 30 June 2005 amountingto $34,886 (2004: $88,872) were financed by new finance lease.

6. TRADE RECEIVABLES

Group Company2005 2004 2005 2004

$ $ $ $

Outside parties 6,995,202 7,527,550 704,648 807,216Retention receivable 845,144 718,709 – –Less provision for impairment (2,059,239) (1,856,987) (627,310) (638,638)

5,781,107 6,389,272 77,338 168,578

Movements in above provision :-Balance at beginning of year 1,856,987 1,802,835 638,638 666,810Foreign currency translation difference (9,097) (20,864) – –Charged (reversed) to income statement 279,154 158,128 (11,328) (28,172)Used (67,805) (83,112) – –

Balance at end of year 2,059,239 1,856,987 627,310 638,638

Analysis of above amount denominated in foreign currenciesChinese Renminbi 1,064,954 1,415,029 – –Malaysian Ringgit 1,228,009 856,427 – –

Trade receivables amounted to $277,001 (2004:Nil) are factored to a financial institution (Note 13).

The average credit period generally granted to the customers of the Group is about 30 to 120 days (2004: 30 to120 days) excluding all items provided for. A provision for impairment of trade receivables is established whenthere is objective evidence that management will not be able to collect all amounts due according to the originalterms of receivables. The carrying amount of trade receivables approximates to their fair value. Short-durationreceivables with no stated interest rate are normally measured at original invoice amount unless the effect ofimputing interest would be significant.


7. OTHER RECEIVABLES AND PREPAYMENTS

Group Company2005 2004 2005 2004

$ $ $ $

Subsidiaries (Note 3 and 10) – – 2,648,415 3,383,872Provision for impairment – subsidiaries – – (125,377) (164,394)Associates (Note 4 and 9) – 195,674 – 195,674Provision for impairment – associates – (30,000) – (30,000)Deposits to secure services 94,729 120,208 49,327 50,102Tax recoverable 75,428 63,916 75,084 38,285Other receivables 170,679 202,236 7,458 62,561Prepayments 27,607 36,773 10,357 27,533

368,443 588,807 2,665,264 3,563,633

Movements in above provisions: Company2005 2004

$ $

Provision for impairment – subsidiariesBalance at beginning of year 164,394 –Charged (reversed) to income statement (4,451) 164,394Used (34,566) –

Balance at end of year 125,377 164,394

Group and Company2005 2004

$ $

Provision for impairment – associateBalance at beginning of year 30,000 –Charged to income statement – 30,000Used (30,000) –

Balance at end of year – 30,000


8. INVENTORIES

Group Company2005 2004 2005 2004

$ $ $ $

Finished goods, at cost 671,062 755,615 – –Raw materials, at cost 196,782 209,632 2,954 13,735Contract work-in-progress 296,799 46,997 – –

1,164,643 1,012,244 2,954 13,735

Contract work-in-progress comprises: Group2005 2004

$ $

Costs incurred and attributable profits 2,184,839 1,345,776Less : Progress payments received (1,048,435) (842,022)

Progress payments receivable included in trade receivable (941,713) (622,746)

194,691 (118,992)

Included in the accompanying balance sheet as follows :-Costs and attribute profits less anticipated losses, in excess of progress payments on uncompleted contracts 296,799 46,997

Customer progress payments in excess of costs and attributable profits less anticipated losses on uncompleted contracts (Note 14) (102,108) (165,989)

194,691 (118,992)


9. INVESTMENTS IN ASSOCIATES

Group Company2005 2004 2005 2004

$ $ $ $

Unlisted equity shares at cost to company 239,253 288,253 239,253 239,253Share of post-acquisition losses (239,253) (288,253) – –Provision for impairment – – (239,253) (239,253)

– – – –

Analysis of above amount denominated in foreign currency:Malaysian Ringgit 239,253 239,253 239,253 239,253

The fair value of the associates as available-for-sale financial assets is deemed to be not reliably measurable asthe probabilities of the various estimates within the range cannot be reasonably assessed as used in estimatingfair values. Consequently the investment is carried at cost less provision for impairment.

Name of associates, country of incorporation, Percentage ofplace of operations and principal activities equity

held by group2005 2004

% %

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

Held by subsidiary – Hitchins International Pte LtdICR Hitchins Pte Ltd (b) (struck off on 24 March 2005) – 49SingaporeTrading, sale, import and distribution of car finishing chemicals products.

(a) Not audited. This associate does not contribute significantly to the Group’s results.(b) Financial statements for the year ended 30 June 2004 were audited by firm of accountants other than

member firms of Howarth International of which Chio Lim & Associates, Singapore is a member.

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


10. INVESTMENTS IN SUBSIDIARIES

Company2005 2004

$ $

Unlisted equity shares, at cost 3,362,688 3,362,688Provision for impairment (1,597,114) (1,997,114)

1,765,574 1,365,574

Net book value 3,988,540 4,153,099

Movement in the above provision:Balance at beginning of year 1,997,114 1,997,114Reversed to income statement (400,000) –

Balance at end of year 1,597,114 1,997,114

Analysis of above amount denominated in foreign currencies:Chinese Renminbi 1,542,247 1,542,247Malaysian Ringgit 97,737 97,737

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

Name of subsidiaries, country of incorporation, Percentage Cost in booksplace of operations and principal activities of equity of company

2005 2004 2005 2004% % $ $

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

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

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

Hitchins International Pte Ltd (a) (b) 100 100 10,000 10,000SingpaporeInvestment holding.

Hitchins Borneo Sendirian Berhad (d) 98 98 9,900 9,900BruneiRoofing and fire protection specialists and suppliers ofspecialised and suppliers of specialised building materials.

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


10. INVESTMENTS IN SUBSIDIARIES (Cont’d)

Name of subsidiaries, country of incorporation, Percentage Cost in booksplace of operations and principal activities of equity of company

2005 2004 2005 2004% % $ $

Interest held by :CompanyAmpero (M) Sdn Bhd (b) (c) 100 100 96,669 96,669MalaysiaSupply of specialised building materials

Hitchins (Malaysia) Sedirian Berhad (b) (c) 100 100 1,068 1,068MalaysiaSupply of specialised buildings materials.

Hitchins (Laboratory) Pte Ltd (e) 100 100 2 2SingaporeInactive

3,362,688 3,362,688

The interest held by the subsidiaries are listed below :

Name of subsidiaries, country of incorporation, Percentage Cost in booksplace of operations and principal activities of equity of subsidiaries

2005 2004 2005 2004% % $ $

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

Advanced Coatings Pte Ltd (b) (Struck off on 27 April 2005) – 100 – 50,000SingaporeInactive

Hitchins-Da Sheng Holdings Pte LtdShanghai Hitchins Da Sheng Waterproofing Materials Co., Ltd (b) (c) 100 100 1,542,247 1,542,247People’s Republic of ChinaManufacture and supply of specialised building materials.


10. INVESTMENTS IN SUBSIDIARIES (Cont’d)

Percentage Cost in booksof equity of subsidiaries

2005 2004 2005 2004% % $ $

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

(a) Audited by Chio Lim & Associates.(b) Financial statements for the year ended 30 June 2004 were audited by firm of accountants other than

member firms of Horwarth International of which Chio Lim & Associates, Singapore is a member.(c) Audited by member firms of Horwath International of which Chio Lim & Associates, Singapore is a member.(d) Audited by firm of accountants other than member firms of Howarth International of which Chio Lim &

Associates, Singapore is a member.(e) Not audited. This subsidiary does not contribute significantly to the group’s results.

The fair value of the subsidiaries as available-for-sale financial assets is deemed to be not reliably measurableas the probabilities of the various estimates within the range cannot be reasonably assessed as used in estimatingfair values. Consequently the investment is carried at cost less provision for impairment.

11. PROPERTY, PLANT AND EQUIPMENT

Leaseholdland and Leasehold Motor Plant andbuilding improvements vehicles equipment Total

Group $ $ $ $ $

Cost:At beginning of year 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 and write off – – (123,259) (21,665) (144,924)

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

Accumulated depreciation:At beginning of year 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 and write off – – (110,293) (21,665) (131,958)

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

Depreciation for last year 62,648 5,858 203,025 141,574 413,105

Net book value:

At beginning of year 611,233 23,305 718,108 228,490 1,581,136

At end of year 540,971 18,251 519,920 205,483 1,284,625


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

Motor Plant andvehicles equipment Total

Company $ $ $

Cost:At beginning and end of year 365,888 910,777 1,276,665

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

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

Depreciation for last year 61,330 110,734 172,064

Net book value:

At beginning of year 271,098 125,173 396,271

At end of year 202,770 67,192 269,962

Certain plant and equipment are under finance lease agreement (see Note 16).

12. OTHER INVESTMENTS

Group Company2005 2004 2005 2004

$ $ $ $

At beginning of year 8,175 5,500 8,175 5,500Additions during the year 12,635 – 8,505 –Changes in fair value (4,415) 2,675 (2,055) 2,675

At end of year 16,395 8,175 14,625 8,175

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


13. SHORT-TERM BORROWINGS

Group Company2005 2004 2005 2004

$ $ $ $

Advances against trade receivables factored (Note 6) 100,749 – – –Bank loan (secured) – 7,566 – –Bank overdraft (secured) 699,522 592,250 585,951 592,250Trust receipts (secured) – 47,257 – 47,257

Total short-term borrowings 800,271 647,073 585,951 639,507

All the short-term borrowings are interest bearing.

The bank loan, bank overdrafts and other credit facilities for the Group and the Company are covered by fixeddeposit pledged with the banks.

Interest rates for the short-term borrowings vary from 6.5% to 7.5% (2004: 6.16% to 8.9%) per year.

14. . TRADE PAYABLES AND ACCRUED LIABILITIES

Group Company2005 2004 2005 2004

$ $ $ $

Outside parties and accrued liabilities 2,183,957 2,726,259 154,014 613,162Subsidiaries (Notes 3 and 10) – – – 358,565Contract-work-in-progress (Note 8) 102,108 165,989 – –Provision for warranties 117,184 134,977 – –

2,403,249 3,027,225 154,014 971,727

Analysis of above amount denominated in foreign currencies:

US Dollars 155,969 85,721 – –Euro Dollars 80,417 46,243 – 46,243Swiss France 148,001 214,975 – 214,975Chinese Renminbi 298,945 126,782 – –Malaysian Ringgit 225,287 386,564 – –

The average credit period granted by trade creditors of the Group is about 30 to 90 days (2004: 30 to 90 days).

Movement in the provision for warranties: Group2005 2004

$ $

Balance at beginning of year 134,977 138,691Foreign currency translation difference (542) (1,123)Charged to income statement 70,777 113,896Used (88,029) (116,487)

Balance at end of year 117,183 134,977


15. OTHER PAYABLES

Group Company2005 2004 2005 2004

$ $ $ $

Subsidiaries (Notes 3 and 10) – – 306,243 –Associates (Note 4 and 9) – 95,567 – –Director (Note 4) 1,595 14,393 – –Related party (Note 4) 240,406 – 166,365 178,641Dividend payable (a) 745,193 745,193 745,193 745,193Other payables 272,686 508,132 18,854 83,414

1,259,880 1,363,285 1,236,655 1,007,248

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

16. FINANCE LEASES

GroupMinimum Finance Present

2005 payments charges value$ $ $

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

Net book value of plant and equipment under finance leases 348,240

Minimum Finance Present2004 payments charges value

$ $ $

Minimum lease payments payable:Due within one year 121,533 (21,080) 100,453Due within 2 to 5 years 356,979 (53,304) 303,675Due after 5 years 64,437 (11,009) 53,428

542,949 (85,393) 457,556



16. FINANCE LEASES (Cont’d)

CompanyMinimum Finance Present

2005 payments charges value$ $ $


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


Minimum Finance Present2004 payments charges value

$ $ $


Due within one year 52,585 (8,183) 44,402Due within 2 to 5 years 194,734 (29,659) 165,075Due after 5 years 38,442 (5,886) 32,556

285,761 (43,728) 242,033


It is the Group’s policy to lease certain of its plant and equipment under finance leases. The lease terms rangefrom 3 to 5 years. The interest rates for finance leases are about 3% per year. Interest rates are fixed at contractdate. All leases are on a fixed repayment basis and no arrangements have been entered into for contingentrental payments. All lease obligations are denominated in Singapore dollars except for certain lease obligationsthat are denominated in Malaysian Ringgit amounting to $53,017 (2004 : $71,520). The fair value of the leaseobligations approximates to their carrying amount. The obligations under finance leases are secured by thelessor’s charge over the leased assets.


17. ISSUED CAPITAL

Group and Company2005 2004

$ $

Authorised :200,000,000 ordinary shares of $0.01 each 2,000,000 2,000,000

Issued and fully paid :108,600,000 ordinary shares of $0.01 each 1,086,000 1,086,000

Share option:

The Hitchins Share Option Scheme (the “Scheme”) of the Company was approved and adopted by its membersat 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 grantof 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 yearsand 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 associatesand whose participation and actual number of shares granted under the Scheme and terms of any optiongranted 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 theaverage of the last dealt price per share as indicated in the daily official list or any other publication published bythe SGX-ST for the 5 consecutive days immediately preceding the date of grant (the “Market Price”). Options willnot 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 1,000shares 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 introducedby the Remuneration Committee from time to time.


17. ISSUED CAPITAL (Cont’d)

Details of the options granted to under the scheme to take up unissued ordinary shares of $0.01 each of theCompany are as follows :

Number of share optionsDate Options Options Exerciseof grant outstanding outstanding price Exerciseof options at 01/07/2004 Cancelled at 30/06/2005 per share period

28/04/2004 2,172,000 (362,000) 1,810,000 $0.08 28/04/2005 to 28/04/201428/04/2004 1,629,000 (271,500) 1,357,500 $0.08 28/10/2005 to 28/04/201428/04/2004 1,629,000 (271,500) 1,357,500 $0.08 28/04/2006 to 28/04/2014

5,430,000 (905,000) 4,525,000

18. STATUTORY RESERVE

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

19. REVENUE

Group2005 2004

$ $

Trading revenue 4,360,628 5,009,719Contract revenue 5,742,429 5,373,991

10,103,057 10,383,710

20. FINANCE COSTS

Group2005 2004

$ $

Interest expenses on bank loan and overdrafts 49,142 36,590Interest expense on finance leases 22,534 20,878Interest expenses on trust receipts and bill payable – 8,456

71,676 65,924


21. LOSS BEFORE INCOME TAX

The following item have been included in arriving at loss before income tax :-

Group2005 2004

$ $

Auditors’ remuneration : auditors of the Company – current year 50,500 68,000 – overprovision for prior year – (6,469) other auditors – current year 15,824 11,315 – underprovision for prior year 5,104 1,966Non-audit fees paid to : – auditors of the Company 8,200 15,900 – other auditors – 1,808Bad debts written off – trade 19,146 8,493 – non-trade 87,861 –Changes in fair value of other investments 4,415 (2,675)Changes in inventories and work in progress (increase) (152,399) (201,928)Cost of purchases 3,976,422 4,130,647Depreciation of property, plant and equipment 376,393 413,105Dividend income from investments (420) (1,814)Directors’ fees - directors of the Company 81,575 81,627Directors’ remuneration : - – Directors of the Company 702,683 722,252 – Directors of the subsidiaries 57,372 57,408Foreign exchange adjustment gain (38,519) (46,407)Interest income from fixed deposits (included in other operating income) (13,641) (16,007)Inventory written off 34,628 3,363Loss on disposal of club membership – 10,500Loss/(gain) on disposal of property, plant and equipment 3,994 (17,493)Property, plant and equipment written off – 4,057Professional fee paid to a firm in which a director was a member 17,933 37,742Provision for warranties 70,777 113,896Provision for impairment on trade receivables 279,154 158,128Provision of impairment on other receivables – associate (non trade) – 30,000

22. INCOME TAX EXPENSE

Group2005 2004

$ $

Current 57,044 67,841Deferred (11,854) 29,484

Total income tax expense 45,190 97,325


22. INCOME TAX EXPENSE (Cont’d)

The income tax expense varied from the amount of income tax expense determined by applying the Singaporeincome tax rate of 20.0% (2004: 20.0%) to loss before income tax as a result of the following differences:

Group2005 2004

$ $

Income tax benefit at the statutory rate (96,809) (2,740)Non-allowable items 165,119 2,928Effect of difference in tax rates 14,517 36,942Tax exemption (43,413) –Deferred tax valuation allowance 10,248 110,313Overprovision of tax in prior years (3,166) (47,958)Other items less than 3% each (1,306) (751)Change in tax rate – (1,409)

Total income tax expense 45,190 97,325

The net deferred tax amounts in the balance sheet are as follows:

Group Company2005 2004 2005 2004

$ $ $ $

Deferred tax liabilities:Excess of net book value of plant and equipment over tax written down value 5,043 20,944 16,659 25,350Other timing differences 95,041 119,132 – –

Total deferred tax liabilities 100,084 140,076 16,659 25,350

Deferred tax assets:General provision (2,000) (18,800) – –Tax losses carryforwards (515,120) (516,210) (197,674) (97,256)

Total deferred tax assets (517,120) (535,010) (197,674) (97,256)

Net deferred tax assets (417,036) (394,934) (181,015) (71,906)Deferred tax assets valuation allowance 503,670 493,422 181,015 71,906

Balance 86,634 98,488 – –


22. INCOME TAX EXPENSE (Cont’d)

Included in the accompanying balance sheet as follows:

Group Company2005 2004 2005 2004

$ $ $ $

Deferred tax assets (11,839) – – –Deferred tax liabilities 98,473 98,488 – –

Net balance 86,634 98,488 – –

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

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

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

23. LOSS PER SHARE

The loss per share is calculated by dividing the Group’s loss attributable to shareholders after extraordinaryitems by the weighted number of shares of $0.01 each in issue during the year.

Group2005 2004

$ $

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 (529,234) (111,026)

Weighted average number of fully paid ordinary shares of $0.01 each in issue during the year for the purposes of basic loss per share 108,600,000 108,600,000

Effect of dilutive potential ordinary share :Share options 72,355 40,794

Weighted average number of ordinary shares for the purposes of diluted loss of share 108,672,355 108,640,794

Basic loss per share is based on the weighted average number of ordinary shares outstanding during eachperiod. The diluted loss per share is based on the weighted average number of ordinary shares and dilutiveordinary share equivalents outstanding during each period. The ordinary share equivalents included in thesecalculations are shares of ordinary share issuable upon assumed exercise of share options which would havea dilutive effect.



24. STAFF COSTS

Group2005 2004

$ $

Staff costs including directors 2,201,859 2,540,584Contributions to defined contribution plans 221,541 283,304

Total staff costs 2,423,400 2,823,888

25. NUMBER OF EMPLOYEES

Group Company2005 2004 2005 2004

Number of employees at end of year(including directors) 149 147 6 6

26. CONTINGENT LIABILITIES

Contingent liabilities not provided for in the financial statements of the Group and Company at balance sheetdate are as follows:-

Group Company2005 2004 2005 2004

$ $ $ $

UnsecuredPerformance bond 132,120 42,120 – –

Secured (Note 5)Banker’s guarantees given by the Company 13,236 13,236 13,236 13,236Banker’s guarantees given by a subsidiary 9,315 9,315 – –Banker’s guarantees in favour of a subsidiary – – 37,251 37,251

22,551 22,551 50,487 50,487



27. OPERATING LEASE COMMITMENTS

At the balance sheet date, the commitments in respect of operating leases with a term of more than one yearwere as follows :

Group Company2005 2004 2005 2004

$ $ $ $

Within one year 222,726 282,074 196,596 219,498Within two to five years 66,321 247,873 22,676 204,003After five years 128,296 20,600 – –

417,343 550,547 219,272 423,501

Rental expense for the year 263,028 290,122

Operating lease payments represents rentals payable by the Group and Company for certain of its office andwarehouse. The leases at ODC Districentre are for 3 years starting from 2003. The lease rental terms arenegotiable for extension of lease period at the prevailing market rates then.

28. 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 primarysegment 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 protectionmaterials.

Manufacturing &Sales Installation Eliminations Consolidated

2005 2004 2005 2004 2005 2004 2005 2004$ $ $ $ $ $ $ $

REVENUEExternal sales 4,360,628 5,009,719 5,742,429 5,373,991 – – 10,103,057 10,383,710Inter-segment sales 2,224,415 2,258,657 240,009 360,076 (2,464,424) (2,618,733) – –

Total revenue 6,585,043 7,268,376 5,982,438 5,734,067 (2,464,424) (2,618,733) 10,103,057 10,383,710

RESULTS (137,011) 792,662 970,606 610,495 833,595 1,403,157

Results unallocated (1,245,963) (1,350,934)Finance costs (71,676) (65,924)

Loss before income tax (484,044) (13,701)Income tax expenses (45,190) (97,325)

Net loss for the year (529,234) (111,026)



28. FINANCIAL INFORMATION BY SEGMENTS (Cont’d)

Manufacturing &Sales Installation Eliminations Consolidated

2005 2004 2005 2004 2005 2004 2005 2004$ $ $ $ $ $ $ $

OTHER INFORMATIONSegment assets 5,133,287 6,465,220 5,016,409 4,927,775 10,149,696 11,392,995

Segment liabilities 3,321,171 3,816,306 1,675,276 1,678,833 4,996,447 5,495,139Unallocated corporate liabilities – 148,612

Consolidated total liabilities 4,996,447 5,643,751

Capital expenditure 80,992 436,046 29,102 158,889 110,094 594,935Depreciation 284,935 307,969 91,458 105,136 376,393 413,105Provision for warranty 26,213 – 44,564 113,896 70,777 113,896

Segment results, assets and liabilities include items directly attributable to segment as well as those that can beallocated 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 andcontract work-in-progress. Unallocated items mainly comprise cash and cash equivalents, long-term borrowings,income tax payable, other receivables and prepayments and deferred tax. Segment capital expenditure is thetotal cost incurred during the year to acquire property, plant and equipment directly attributable to each segment.

Geographical segments: The Group’s three major divisions operate in three principal geographical areas, namelySingapore and other regions, Malaysia and People’s Republic of China (“PRC”).

The following table shows the distribution of the Group’s consolidated sales by geographical segments basedon the location of the customers:

Revenue byGeographical Markets

2005 2004$ $

Singapore & other regions 7,136,377 7,378,745Malaysia 1,550,026 1,059,135People’s Republic of China 1,416,654 1,945,830

10,103,057 10,383,710

The following table shows the carrying amount of segment assets by geographical area in which the assets arelocated:

Carrying amount of Additions to property,Segment assets plant and equipment

2005 2004 2005 2004$ $ $ $

Singapore & other regions 5,366,137 6,163,593 76,718 283,981Malaysia 2,112,650 1,986,177 7,865 50,917People’s Republic of China 2,670,909 3,243,225 25,511 260,037

10,149,696 11,392,995 110,094 594,935



29. CHANGES AND ADOPTION OF ACCOUNTING STANDARDS

The following Singapore Financial Reporting Standards will be effective from 1 January 2005. A few of the newstandards may result in material adjustments to the financial position, results of operations, or cash flows for thefollowing year.

FRS 1 (revised 2004) Presentation of Financial StatementsFRS 2 (revised 2004) InventoriesFRS 8 (revised 2004) Accounting Policies, Changes in Accounting Estimates and ErrorsFRS 10 (revised 2004) Events after the Balance Sheet DateFRS 16 (revised 2004) Property, Plant and EquipmentFRS 17 (revised 2004) LeasesFRS 21 (revised 2004) The Effects of Changes in Foreign Exchange RatesFRS 24 (revised 2004) Related Party DisclosuresFRS 27 (revised 2004) Consolidated and Separate Financial StatementsFRS 28 (revised 2004) Investments in AssociatesFRS 32 (revised 2004) Financial Instruments: Disclosure and PresentationFRS 33 (revised 2004) Earnings per ShareFRS 36 (revised 2004) Impairment of AssetsFRS 38 (revised 2004) Intangible AssetsFRS 39 (revised 2004) Financial Instruments: Recognition and MeasurementFRS 102 (revised 2004) Share-based PaymentsFRS 103 (issued 2004) Business Combinations

30. COMPARATIVE FIGURES

The financial statements for the year ended 30 June 2004 were audited by other auditors (other than Chio Lim& Associates) whose report dated 12 September 2004 expressed an unqualified opinion on those financialstatements.

Certain reclassifications have been made to the prior year’s financial statements to enhance comparability withcurrent year’s financial statements. The reclassifications are not significant.



Statistics of Shareholdingsas at 13 September 2005

SHARE CAPITAL

Authorised Share Capital : $2,000,000

Issued and fully Paid-Up Capital : $1,086,000

Class of Shares : Ordinary shares of $0.01 each with 1 vote per shares

DISTRIBUTION OF SHAREHOLDINGS

Size of Shareholdings No. of No. of

Shareholders % Share %

1 - 999 - - - -

1,000 - 10,000 231 49.25 1,051,000 0.97

10,001 - 1,000,000 228 48.62 16,020,000 14.75

1,000,001 and above 10 2.13 91,529,000 84.28

TOTAL : 469 100.00 108,600,000 100.00

TWENTY LARGEST SHAREHOLDERS

No. Name No. of Share %

1. Ng Tian Huat 27,080,000 24.94

2. Wong Seong Khuen 27,080,000 24.94

3. Kim Leng Choon 12,684,000 11.68

4. Ng Kim Khuan 8,619,500 7.94

5. Yeo Hoon Seng 4,060,000 3.74

6. Phillip Securities Pte Ltd 3,321,000 3.06

7. United Overseas Bank Nominees Pte Ltd 3,045,500 2.80

8. Lim & Tan Securities Pte Ltd 2,165,000 1.99

9. OCBC Securities Private Ltd 1,915,000 1.76

10. Kim Eng Securities Private Ltd 1,559,000 1.44

11. Khoo Chye Huat 600,000 0.55

12. Kwah Lee Lee 501,000 0.46

13. Sim Kok Hai 400,000 0.37

14. DBS Nominees Pte Ltd 399,000 0.37

15. Quek Siew Suah 350,000 0.32

16. Goh Seng Chee 320,000 0.29

17. Choo Liong Gee Esmond 300,000 0.28

18. Yap Ah Heng 254,000 0.23

19. Lim Lee Cheng @ Lim Lay Chin 250,000 0.23

20. Overseas Chinese Bank Nominees Pte Ltd 240,000 0.22

TOTAL : 95,143,000 87.61

60Hitchins Group Ltd Statistics of Shareholdings

SUBSTANTIAL SHAREHOLDERS

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

Name of Shareholder Direct Interest Deemed Interest Total Interest %

Ng Tian Huat 27,080,000 - 27,080,000 24.94%

Wong Seong Khuen 27,080,000 - 27,080,000 24.94%

Kim Leng Choon 12,684,000 - 12,684,000 11.68%

Yeo Hoon Seng 4,060,000 5,000,000 9,060,000 8.34%

Ng Kim Khuan 8,619,500 - 8,619,500 7.94%

PUBLIC SHAREHOLDINGS

Approximately 22.16% of the Company’s shares are held in the hands of public. Accordingly, the Company has

complied with Rule 723 of the Listing Manual.


Notice of the Annual General MeetingHITCHINS GROUP LTD(Co. Reg. No. 196600189D)(Incorporated in the Republic of Singapore)

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 24th day of October 2005 at 9.00 a.m. to transact the followingbusiness:

ORDINARY BUSINESS

1. To receive and adopt the Directors’ Report and Audited Accounts for the financial year ended30 June 2005. Resolution 1

2. To approve the proposed Directors’ fees of $80,000 (2004: $80,000). Resolution 2

3. To re-elect Mr Ng Tian Huat pursuant to Article 109 of the Articles of Association. Resolution 3

4. To re-elect Mr Goh Wan Cha @ Goh Chong Chia pursuant to Article 109 of the Articlesof Association. Resolution 4

Mr Goh Wan Cha @ Goh Chong Chia will, upon re-election as a Director of the Company, remainas the member of the Audit Committee. He will be considered independent for the purposes ofRule 704(8) of Listing Manual of the Singapore Exchange Securities Trading Limited.

5. To re-elect Mr Tan Chong Huat pursuant to Article 109 of the Articles of Association. Resolution 5

Mr Tan Chong Huat will, upon re-election as a Director of the Company, remain as the member ofthe Audit Committee. He will be considered independent for the purposes of Rule 704(8) of ListingManual of the Singapore Exchange Securities Trading Limited.

6. To re-appoint Messrs Chio Lim & Associates as Auditors of the Company and to authorise theDirectors to fix their remuneration. Resolution 6

7. To transact any other business of the Company which may properly be transacted at an AnnualGeneral 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 ExchangeSecurities Trading Limited, the Directors be and are hereby authorised to issue shares in the Company (whether byway of bonus issue, rights issue or otherwise) at any time and upon such terms and conditions and for suchpurposes 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 issuedshare capital of the Company, of which the aggregate number of shares to be issued other than on a pro-ratabasis 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 percentageof issued share capital shall be based on the issued share capital of the Company at the time this Resolution ispassed, after adjusting for:

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

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


(c) unless revoked or varied by the Company in general meeting, such authority conferred by thisResolution shall continue in force until the conclusion of the next Annual General Meeting ofthe Company or the date by which the next Annual General Meeting of the Company is requiredby 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 herebyauthorised to allot and issue from time to time such number of shares as may be required to beissued pursuant to the exercise of the options granted under the Hitchins Employees’ ShareOption Scheme (the “Scheme”) provided always that the aggregate number of shares to beissued pursuant to the Scheme shall not exceed 15% of the total issued share capital of theCompany from time to time.” Resolution 8

By Order of the Board

Chew Kok LiangCompany Secretary

Date: 8 October 2005

Explanatory Notes:

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

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

Note:

1. A member entitled to attend and vote this meeting is entitled to appoint a proxy to attend and vote in his stead. Aproxy 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 GuanRoad, #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.

Notice of the Annual General Meeting


Proxy FormHITCHINS GROUP LTD(Co. Reg. No. 196600189D)(Incorporated in the Republic of Singapore)

IMPORTANT:

1 For Investors who have used their CPF monies tobuy Hitchins Group Ltd shares, this Report isforwarded to them at the request of the CPFApproved Nominees and is sent solely FORINFORMATION ONLY.

2 This Proxy Form is not valid for use by CPF investorsand shall be ineffective for all intents and purposesif used or purported to be used by them.

IMPORTANT: Please see notes overleaf before completing this form

Number of Shares Held (Note 5)

(a) CDP Register

(b) Register of Members

I/We, (Name)

of (Address)

being the holder(s) of ordinary shares of S$0.01 each in the capital of HITCHINS GROUP LTD (the “Company”), herebyappoint the Chairman of the Annual General Meeting (Note 2) of the Company or:

Name Address NRIC/Passport ShareholdingsNumber 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 theAnnual General Meeting of the Company to be held at 30, Toh Guan Road, #07-01, ODC Districentre, Singapore608840 on 24th October 2005 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 ofvoting 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 Tian Huat as a Director

4 Re-election of Mr Goh Wan Cha @ Goh Chong Chia as a Director

5 Re-election of Mr Tan Chong Huat as a Director

6 Re-appointment of Messrs Chio Lim & Associates 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 2005

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

✁


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 particularsof 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 eachproxy.

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 inSection 130A of the Companies Act, Chapter 50 of Singapore), you should insert that number of Shares. If you have Shares registered in yourname in the Register of Members, you should insert that number of Shares. If you have Shares entered against your name in the DepositoryRegister and Shares registered in your name in the Register of Members, you should insert the aggregate number of Shares entered against yourname in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing aproxy 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. Wherethe instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under the common seal of the corporation orunder 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 ODCDistricentre, 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 dulycertified copy thereof must (failing previous registration with the Company) be lodged with the instrument of proxy, failing which the instrument maybe 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 itsrepresentative at the meeting, in accordance with Section 179 of the Companies Act (Cap 50).

The Company SecretaryHitchins Group Ltd

(Co. Reg. No. 196600189D)

30, Toh Guan Road,#07-01, ODC Districentre

Singapore 608840

Fold this flap for sealing

2nd fold here

1st fold here

AffixPostageStamp

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 thetrue intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. Inaddition, in the case of Shares entered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if themember, being the appointor, is not shown to have Shares entered against his name in the Depository Register 48 hours before the time appointed forholding the Meeting, as certified by The Central Depository (Pte) Limited to the Company.


Hitchins Group Ltd(Company’s Registration No. 196600189D)

30 Toh Guan Road#07-01 ODC DistricentreSingapore 608840Tel: (65) 6861 1177Fax: (65) 6863 4240Email: [email protected]: www.hitchins.com

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