Sunny Tew

Successfulimplementationof secondsandblasting line.Achieved record profitsafter tax of S$18.3million for FY2007and revenue crossedS$400 million.MILESTONESShareholders’Funds doubled toS$115.8 million.Issued 37,000,000new shares byway of PlacementShares.Awarded the GlobalTrader Programmestatus by InternationalEnterprise Singapore.Catering to futureexpansion by acquisitionof additional land inNusajaya, Johor andleasing Jurong Post Road.Successful placementof 37 million new sharesto institutional and highnetworth investors.Expanded physicalcapacity with 3new warehousesat Jalan Burohpremises.

CHAIRMAN’S STATEMENTWe are extremely pleased to report a good set of financial results for FY2007.FY2007 marks a record year for HG Metal. Net profit after income tax grew 32.0%to $18.3 million, compared to $13.9 million in FY2006, and revenue rose 20.8% to$438.1 million.Dear Shareholders,We are extremely pleased to report a good set of financial results for FY2007.FY2007 marks a record year for HG Metal. Net profit after income tax grew 32.0%to $18.3 million, compared to $13.9 million in FY2006, and revenue rose 20.8%to $438.1 million. This is the Group’s fifth straight year of revenue growth sinceHG Metal was listed in 2002. Earnings growth was driven by strong demandfrom key customers, higher steel prices, and increased demands from both theconstruction and the shipbuilding and ship-repair sectors.With demand for steel products expected to remain strong, the Group hasembarked on capacity expansion. The Group has just completed the constructionof 3 new warehouses at its existing premises at Jalan Buroh which will provideadditional covered storage space for our steel products. In January 2007,the Group also leased additional land of approximately 30,235 square metresat Jurong Port Road for 28 years. The Group will begin construction of 3 newwarehouses in the new calendar year.In February 2007, the Group has acquired 26.18 acres industrial land in theNusajaya Industrial Park, which is part of the Iskandar Development Region inJohor, Malaysia. The Group is currently evaluating various options on how bestto utilize the land to complement the future expansion of the Group.For our manufacturing arm , Oriental Metals, with the success of our firstsandblasting facility at Oriental Metals, we have added a second sandblastingline which has already started full operations. At the same time, to cater to stronggrowth in the contruction sector, we have reconfigured our existing pipe line toHG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007 3

CHAIRMAN’S STATEMENT (CONT’D)produce scaffolding pipes and scaffolding decks for use in the constructionsector.INDUSTRY TRENDSSingapore’s construction cycle is still powering strong, driven by Singapore’sstrong economic growth. Within the next few years major projects such as theIntegrated Resorts, Marina Business Financial Centre, Downtown MRT Line andpetrochemical plants are expected to be completed. Plans to redevelop OrchardRoad, Bras Basah Road and Bugis are also taking place. Many new condominiumand housing developments are underway, as developers appear increasinglyoptimistic about Singapore’s property market. According to the Building andConstruction Authority (“BCA”) of Singapore, annual construction demand isexpected to reach between S$19 and S$22 billion in 2007, and likely to sustain atthis high level in 2008 and 2009.Based on various industry reports, the offshore & marine industries are booming,with shipyards around the region enjoying record order books on the back of highoil prices. Shipyards and ship repair projects are lined up till 2010 and beyond,which should translate to continued strong demand for steel products in relatedmarine industries.With regards to steel supply, there is concerted effort by major steel makersaround the world to shift rising energy and raw materials by increasing steelprices by 6% to 12% in the first half of next year. Currently, there is a shortagein iron ore supply. Iron ore, the main ingredient in steel, is expected to rise 30%to 50% in prices.FUTURE PLANSHG Metal is looking to widen its range of steel products and enhance itscapabilities to offer a broader range of services.During the year, Galaxia has started the business of leasing steel plates. TheGroup has plans to expand its steel leasing business to include sheet piles,4HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

I-beams and H-beams in 2008. Galaxia will be well-positioned to take advantageof the many new constructions projects kicking in during 2008.We remain open to further acquisitions and investments that will be complementaryto current core businesses. Value-adding acquisitions and continued organicgrowth will propel us toward our goal of achieving annual sales of at least S$500million on or before 2009.Ultimately, HG Metal’s long-term business model is to achieve balanced revenuestreams from distribution, manufacturing, and services. In achieving such abalance, we aim to become one of the leading steel companies in Singapore andSouth East Asia.REWARDING OUR SHAREHOLDERSIn appreciation of the shareholders’ faith in the Company, the Directors arerecommending a final dividend of 1 cent per share on top of a special dividendof 0.25 cent per share, or 22.0% of FY2007 net earnings. The Directors are alsoproposing 1-for-3 bonus share issue to reward shareholders and enhance theliquidity of the shares.The year 2007 was a satisfying and encouraging year for HG Metal. I would liketo take this opportunity to thank our employees, bankers, suppliers and loyalshareholders for their continued support.Tan Chan TooExecutive ChairmanHG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007 5

6HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007 7

8 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007CULTIVATING COMPETENCIES

OPERATIONS &FINANCIAL REVIEWThe recovery of the steel prices in the early part of this year has broughtabout a positive impact to our financial performance. At the same time, therobust shipbuilding and repair sector as well as the recovering constructionmarket have fueled demand for our steel products. Our sales this year reachedanother record high of S$438.1 million, a 20.8% increase compared to FY06while profit after income tax rose 32.0% to S$18.3 million.The recovery of the steel prices in the early part ofthis year has brought about a positive impact toour financial performance. At the same time, therobust shipbuilding and repair sector as well as therecovering construction market have fueled demandfor our steel products. Our sales this year reachedanother record high of S$438.1 million, a 20.8%increase compared to FY06 while profit after incometax rose 32.0% to S$18.3 million.Gross profit rose 52.7% to S$49.9 million and grossmargins improved from 9.0% in FY06 to 11.4% in FY07,attributed to rising steel prices. With rising energy andraw materials costs coupled with worldwide shortageof iron ore supply, the main ingredient in steel, steelprices have been on the increase.Distribution costs rose 26.8% to S$5.4 million whileadministrative expenses increased by 44.7% to S$12.7million, in line with the increase of sales. On the otherhand, other operating expenses dropped to S$2.2million from S$4.0 million last year, mainly because ofthe decrease in allowance for doubtful debts.Overall, profit before income tax grew by 37.9% toS$22.5 million on the back of better sales and otherfavourable conditions mentioned while profit afterincome tax jumped from S$13.8 million in FY06 toS$18.3 million in FY07. Net margins improved from3.8% in FY06 to 4.2% in FY07.Our sandblasting facility at Oriental Metals startedfull operations in August 2006 and is currentlyHG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007 9

OPERATIONS & FINANCIAL REVIEW (CONT’D)running at full capacity. Giventhe strong demand to our firstfacility, we have installed asecond sandblasting facilityand it has begun fulloperation. OrientalMetals has alsoreconfiguredits existing pipeproduction line tostart producing scaffoldingpipes and scaffolding metal decksto meet the demand in the buoyant constructionindustry.In addition, Galaxia has also started its business ofleasing of steel plates during the year. By this newoperation, we hope to provide value-added servicesof stainless steel products to our customers inconstruction and shipbuilding industries.To meet the demand for steel products and at thesame time take advantage of the rising steel prices,we have increased our inventory levels during theyear. As of 30 September 07, inventories stood atS$182.4 million, compared to S$101.6 million lastyear. Trade & other receivables also increased toS$98.5 million, compared to S$92.1 million last year,in line with higher revenue. Trade & other payablesincreased from S$43.4 million to S$75.3 million, asof 30 September 07.Property, plant and building has increased fromS$12.6 million as of 30 September 2006 to S$13.3million as of 30 September 2007, after the setting upof our second sandblasting facility.Our net gearing improved from 2.0 times in FY06 to1.1 times in FY07. Shareholders’ funds also doubledfrom S$58.0 million last year to S$115.8 million as of30 September 2007.As part of our efforts to reward our shareholders, wewill be recommending a final dividend of 1 cent perordinary share, a special dividend of 0.25 cent perordinary share and a 1-for-3 bonus share issue forthis year.10 HG METAL MANUFACTURING LTD LIMITED ANNUAL ANNUAL REPORT REPORT 2007 2007

BOARD OF DIRECTORSMr Tan Ah BeeExecutive DirectorMr Lee Leng LokeExecutive DirectorMr Wee PiewChief Executive OfficerMr Tan Chan TooExecutive ChairmanMr Sia Ling SingNon Executive DirectorMr Gui Kim Young@ Gui Kim GanIndependent DirectorMr Ooi Seng SoonIndependent DirectorMr Poon Hon ThangIndependent DirectorHG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007 11

Executive ChairmanMr Tan Chan Too, Executive Chairman is one ofthe three founders of the Group. He has more than30 years of experience in the steel industry. He isresponsible for the overall strategy and businessdirection of the Group and is also actively involved inthe trading business of the Group.Chief Executive Officer overall operations of the Group, primarily in the areasHe has more than 10 years of experience in bankingBachelor of Accountancy (Honours) from the NationalUniversity of Singapore. He is a fellow member of theand a member of the Singapore Institute of Directors.Mr Wee is a member of the Nominating Committee.Executive DirectorMr Lee Leng Loke, Executive Director, is responsiblefor managing the day-to-day operations of OrientalMetals, one of the Group’s subsidiaries in themanufacturing arm. He has more than 20 years ofexperience in the steel industry. Mr Lee is a member ofthe Singapore Metals and Machinery Association. Hereceived a Diploma in Business Administration fromthe then National Productivity Board in 1987 and wasalso awarded an Advancement Professional Diplomain Business Innovation by the Leeds MetropolitanUniversity in the United Kingdom in 2000.Executive DirectorMr Tan Ah Bee, Executive Director, one of the threefounders of the Group, has more than 30 years ofexperience in the steel industry. He is an activemember of the Board of Directors.Non-Executive DirectorMr Sia Ling Sing, Non-Executive Director, wasappointed to the Board in 2003. Mr Sia is the ManagingDirector of the Lingco Group of companies, which areinvolved in shipbuilding and ship chartering. He is abusinessman with more than 30 years of experiencein the shipping industry.Independent DirectorMr Gui Kim Young @ Gui Kim Gan, IndependentDirector, is currently a director of a public accountingcorporation. Mr Gui currently also acts as IndependentDirector of three other listed companies. Mr Gui hasmore than 30 years of experience in accounting,audit and tax. He graduated from the then NanyangUniversity with a Bachelor of Commerce in 1973. He isAccountants of Singapore and a fellow member of theSingapore Institute of Directors. Mr Gui is the Chairmanof the Audit Committee and Remuneration Committeeand a member of the Nominating Committee.Independent DirectorMr Ooi Seng Soon, Independent Director, has moreis currently an Independent Director of another listedcompany. He graduated from the then University ofSingapore with a Bachelor of Arts degree in 1971. MrOoi is the Chairman of the Nominating Committee anda member of the Audit Committee.Independent DirectorMr Samuel Poon, Independent Director, is ex-bankerwith experience that spans almost three decades inat Citibank NA ( Singapore ), responsible for credit,marketing, remedial management and structured President at United Overseas Bank Ltd.(“UOB”)where he had been involved in corporate banking,He retired from UOB in 2006 after almost two decadesof service. He had held directorships in variousUOB’s associated companies and subsidiaries. Heis currently an Independent Director of another listedcompany. He graduated from the then NanyangUniversity of Singapore with a Bachelor’s in BusinessAdministration (1st Class Honours) in 1972. Mr Poonis member of the Audit Committee and RemunerationCommittee.

KEY EXECUTIVESMS FOONG LEE HENG, JASMINEChief Financial Offi cerMs Foong joined the Company in 2000. She isresponsible for all financial, treasury and accountingfunctions of the Group. She has more than 10 yearsexperience in audit and accounting. She is a fellowmember of the Association of Chartered CertifiedAccountants, UK and a member of the Institute ofCertified Public Accountants of Singapore.MS TAN YEE LEE, ELISEHead of SalesMs Tan Yee Lee, Elise joined the Company in 2007 tolead the Sales Team. Her key responsibilities includesales, marketing and procurement of Company’sproducts, strategizing the Company’s market position,developing new market opportunities, formulatingsales policies and procedures to improve efficiencyand providing better customer service. Ms Elise Tangraduated from NUS (B.Sc, Information Technologyin Business focus) and joined the group’s subsidiaryOriental Metals Pte Ltd in 2005, assisting sales andmarketing for the Company. Prior to joining theGroup, she has held various management positions ingovernment-related organizations.MS TAN YEE WENCredit ControllerMs Tan Yee Wen is responsible to access credit riskof customer and risk exposure of the Company so asto minimize the occurrence of bad debts and ensurecustomer’s payment period is within payment termsand limit. She also assists the Executive Chairman innegotiating and monitoring the purchase and salescontracts. Ms Tan graduated from NUS (B.Comp,Information Communications Management) andstarted her career in an established international steeltrading house and has accumulated her experiencesin the international trading field.MR OH CHIN HOCK, SAMWarehouse and Operation ManagerMr Sam Oh oversees the Company’s WarehouseOperations and Logistics. He leads a team ofwarehouse and logistic leaders to oversee the dayto-dayoperations. He is responsible of warehouseplanning and in charge of the security and safetymatters of the Company. Mr Oh holds an AdvancedDiploma in Business Administration (PSB) and Diplomain Logistics & Management (SIMM)MR SUNNY TEWIT Assistant ManagerMr Sunny Tew joined the Group in 2007 to oversee theInformation Technology aspects for both HG Metal andOriental Metals. His key responsibility is to improvethe Group’s operational efficiency through technology.He manages the Group’s IT Projects to developbetter Information Systems, planning the Group’snetwork and managing and supporting the users. Inaddition, he assists in establishing the Group’s marketpresence via Internet portals. Mr Tew holds a Mastersof Business (IT), Curtin University of Technology andhas accumulated more than 10 years of experiencefrom prior services with major IT firms.MR KIAT YAP CHUANFactory ManagerMr Kiat Yap Chuan, is the Factory Manager ofOriental Metals Pte Ltd, a wholly owned subsidiaryof the Company. He is responsible for overseeingthe production and manufacturing activities of ourmanufacturing unit. He has been with the predecessorcompany to Oriental Metals since 1968 and has morethan 30 years of experience in steel production.HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007 13

REAPING REWARDS

FINANCIAL HIGHLIGHTSTURNOVER BY REGION (%)Indonesia(14.83%)Others(2.83%)TURNOVER BY PRODUCTS (%)Beams(9.17%)Others(9.68%)Singapore(44.16%)Pipes(7.35%)MSLC(0.69%)Ship Plates /Steel Plates(56.05%)Malaysia(38.18%)Bars(17.06%)PROFIT BEFORE TAX S$ (‘000) TURNOVER S$ (‘000) SHAREHOLDERS FUND S$ (‘000)500120115.82520151054.321.07.316.322.545040035030025020015010050108.4174.7341.0362.8438.111010090807060504030201025.547.751.258.002003200420052006002007 2003 2004 2005 2006 20072003 2004 2005 2006 2007HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007 15

CORPORATE INFORMATIONBOARD OF DIRECTORSTAN CHAN TOOWEE PIEWLEE LENG LOKETAN AH BEESIA LING SINGGUI KIM YOUNG @ GUI KIM GANOOI SENG SOONPOON HON THANG, SAMUELSECRETARYFoong Lee Heng, JasmineREGISTERED OFFICENo. 30 Jalan Buroh Singapore 619486Tel: (65) 6268 2828 Fax: (65) 6268 3838Website: www.hgmetal.comSHARE REGISTRARM & C Services Private Limited138 Robinson Road #17-00 The Corporate OfficeSingapore 068906AUDITORSBDO RafflesCertified Public AccountantsPartner-in-charge: Lee Joo Hai(Appointed during financial year ended 30 September 2007)PRINCIPAL BANKERSOversea-Chinese Banking Corporate LimitedMalayan Banking BerhadUnited Overseas BankHongkong & Shanghai Banking Corporation Limited16 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

CORPORATE GOVERNANCE STATEMENTHG Metal Manufacturing Limited is committed to maintaining good standards ofcorporate governance so as to ensure greater transparency and protect the interestsof its shareholders. This statement highlights the corporate governance practices withspecific reference to the Code of Corporate Governance as prescribed by the SingaporeExchange Securities Trading Limited (“SGX-ST”).Board of DirectorsPrincipal 1 : The Board’s Conduct of its AffairsThe Board’s statutory responsibility is to protect and enhance long-term shareholdervalue. It meets at least twice in a year, supervises and approves the Group’s strategicdirections, major investments and funding decisions, proposal of dividends, reviews thefinancial performance of the Group and reviews interested person transactions.These functions are carried out either directly by the Board or through committees or asystem of delegation to management personnel. Such delegation improves operationalefficiency and encourages management decision-making while maintaining control overmajor group policies and decisions and minimizing costs.The Company Secretary attends all Board meetings, and her role includes inter alia,ensuring that Board procedures, applicable rules and regulations are compiled with.Management provides the Board with reports on the Company’s performance andfinancial position. Directors may take independent professional advice and receiverelevant training from time to time so as to enable them to discharge their duties.The attendance of the directors at meetings for the financial year ended 30September 2007 are as follows :Board ofDirectorsAuditCommitteeRemunerationCommitteeNominatingCommitteeHeld Attend Held Attend Held Attend Held AttendTan Chan Too 6 6 - - - - - -Wee Piew 6 6 - - - - 2 2Lee Leng Loke 6 6 - - - - - -Tan Ah Bee 6 5 - - - - - -Tian Chye Heng* 6 3 - - - - - -Sia Ling Sing 6 6 - - 3 3 - -Gui Kim Young @6 6 3 3 3 3 2 2Gui Kim GanOoi Seng Soon 6 5 3 2 - - 2 2Lee Bon Leong** 6 1 3 2 3 1 2 -Poon Hon Thang,Samuel***6 1 3 1 3 - - -* Resigned on 22 May 2007** Resigned on 20 April 2007*** Appointed on 15 May 2007When circumstances require, the members of the Board exchange views outside theformal environment of board meetings.HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200717

CORPORATE GOVERNANCE STATEMENTPrinciple 2 :Board’s CompositionThe Board currently consists of four Executive Directors, one Non-Executive Director andthree Independent Directors. At least one third of the Board is made up of IndependentDirectors. The independence of each director is reviewed annually.As provided for in the Company’s Articles of Association, one-third of the Board willretire and be eligible to seek re-election at each Annual General Meeting (“AGM”).Directors appointed by the Board during the financial year are subject to re-election byshareholders at the following Annual General Meeting.The Directors bring with them considerable experience in the steel industry, financialand business. The profile of each Director is provided in page 12 of the Annual Report.Principle 3 : Chairman and Chief Executive Office (“CEO”)There is a distinctive separation of responsibilities between the Chairman and the CEO.This is to ensure there is balance of power and authority at the top of the Company.The posts of Chairman and CEO are held by Mr. Tan Chan Too and Mr. Wee Piewrespectively.The Chairman schedules Board meetings and ensures the effective execution of Boarddecisions. The agenda for meetings is prepared in consultation with the Chairman andCEO.The CEO bears executive responsibility for the Group’s business. The CEO overseesthe daily running of the Group’s operations and is responsible to execute strategies andpolicies adopted by the Board.Principle 4 : Board MembershipThe Nominating Committee (“NC”) makes recommendations to the Board on all Boardappointments. The NC comprises the following three members:Mr Ooi Seng Soon ( Chairman ) : Independent DirectorMr Gui Kim Young @ Gui Kim Gan : Independent DirectorMr Wee Piew : CEOThe NC has adopted its terms of reference that describes the responsibilities of itsmembers. The NC is responsible for the identification and selection of new directors.The NC make recommendations to the Board on all Board appointments, review allnominations having regard to directors’ contributions and past performance, to assessthe effectiveness of the Board as a whole. The NC also determines annually whether ornot a director is independent.In considering the appointment of any new director, the NC ensures that the newdirector possesses the necessary skills, knowledge and experience that could facilitatethe Board in the making of sound and well-considered decisions.Under the Articles of Association of the Company, one-third of the directors shall retireby rotation. All retiring directors are eligible for re-election.18 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

CORPORATE GOVERNANCE STATEMENTPrinciple 5 : Board PerformanceThe NC assesses the effectiveness of the Board as a whole and the contribution byeach director to the effectiveness of the Board on an annual basis.The Remuneration Committee (“RC”) comprises entirely of non-executive directors ofthe Company. The Remuneration Committee is chaired by an independent director, withaccess to expert inside and/ or outside the Company. As at date of this report, the RCmembers are :In its assessment of the Board effectives, the NC takes into consideration the frequencyof the Board meetings, the rate at which issues raised are adequately dealt with and thereports from the various committees. In the like manner, the NC is able to assess thecontribution of each individual director to the effectiveness of the Board.Mr Gui Kim Young @ Gui Kim Gan ( Chairman )Mr Poon Hon Thang, SamuelMr Sia Ling SingIndependent DirectorIndependent DirectorNon-Executive DirectorThe NC has conducted a Board’s performance evaluation as a whole in FY2007,participated by all directors. The assessment parameters are broadly based on theattendance records at the meetings of the Board and the relevant board committees,intensity of participation at meetings, sense of independence, quality of contributionsand workload requirements.Principle 6 : Access to InformationThe Board has separate and independent access to the Management. Request forinformation from the Board are dealt with promptly. The Board is informed of all materialevents and transactions as and when they occur.Principle 7 : Procedures for Developing Remuneration PolisiesPrinciple 8 : Level and Mix of RemunerationPrinciple 9 : Disclosure on RemunerationThe RC is established for the purposes of ensuring that there is a formal and transparentprocedure for fixing the remuneration packages of individual directors. The overridingprinciple is that no director should be involved in deciding his own remuneration.The main duties of the RC are as follows:1. To review and recommend to the Board in consultation with senior management aframework of remuneration for executive directors, chief executive officer (“CEO”)and senior management staff; and2. To review the remuneration packages of all managerial staff that are related to anyof the executive directors or CEOThe RC takes into account the pay and employment conditions within the industry,as well as the Company’s relative performance and the performance of the individualdirectors and senior management staff when setting remuneration packages so as toattract, retain and motivate the directors and senior management staff needed to runthe Group successfully.HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200719

CORPORATE GOVERNANCE STATEMENTThe RC’s review covers all aspects of remuneration, including salaries, fees,allowances, bonuses and benefits-in-kind. The RC’s recommendations are submittedfor endorsement by the entire Board.Remuneration and Benefits of DirectorsA summary compensation table of the directors’ remuneration for the financial yearended 30 September 2007 is set out below:Remuneration BandNumber of Directors2007 2006$500,000 and above 4 3$250,000 to below $500,000 0 2Below $250,000 6 4Total 10 9Details of remuneration and fees paid to the directors for the financial year ended 30September 2007 are set out below:Name of DirectorSalary(%)Bonus(%)Fee(%)Others(%)Total(%)Tan Chan Too 36 63 - 1 100Wee Piew 40 60 - - 100Lee Leng Loke 40 60 - - 100Tan Ah Bee 27 73 - - 100Tian Chye Heng* 52 - - 48 100Sia Ling Sing - - 100 - 100Gui Kim Young @ Gui Kim Gan - - 100 - 100Ooi Seng Soon - - 100 - 100Lee Bon Leong** - - 100 - 100Poon Hon Thang, Samuel*** - - 100 - 100* Resigned on 22 May 2007** Resigned on 20 April 2007*** Appointed on 15 May 200720 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

CORPORATE GOVERNANCE STATEMENTEmployees whose remuneration exceeds S$150,000 and are immediate familymembers of a Director or the CEOThere is no employee who is related to a Director or the CEO whose remunerationexceeds S$150,000 in the Group’s employment for financial year ended 30 September2007.Five key executives :Foong Lee Heng, JasmineTan Yee Lee, EliseTan Yee WenOh Chin Hock, SamTew SunnyThe key executives fall within the remuneration band of below $250,000.Principle 10 : AccountabilityThe Board account to the shareholders through providing timely information relatingto the financial and operations of the Group as well as any issues faced by the Groupregularly and as and when required through announcement releases to the SGX-ST.Principle 11 : Audit CommitteeThe Audit Committee (“AC”) currently comprises the following three IndependentDirectors :Mr. Gui Kim Young @ Gui Kim Gan (Chairman)Mr. Ooi Seng SoonMr. Poon Hon Thang, SamuelThe AC met as necessary and performed the functions specified in its written Terms ofReference. The main Terms of Reference of the AC are :- reviews with the external auditors the audit plan and their audit report onevaluation of the system of internal controls and to monitor management’sresponse and actions to correct any noted deficiencies;- determines that no restrictions are being placed by management upon the workof external auditors;- reviews the financial statements of the Company and the consolidated financialstatements as well as the auditors’ report thereon;- reviews the appropriateness of half year and full year announcements prior tosubmission to the Board for adoption and release;- reviews interested person transactions;- evaluates the independence of external auditors and nominates them for reappointment;- has the authority to investigate any matter within its terms of reference.HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200721

CORPORATE GOVERNANCE STATEMENTExecutive Directors, Non-Executive Directors, Head of Finance and Company Secretaryhad been attending all the Audit Committee meetings. The AC has been given full accessto and co-operation of the Company’s management and has reasonable resources toenable it to discharge its function properly.The AC recommends to the Board of Directors the appointment and re-appointment ofauditors and their fees for shareholders’ approval and reviews the scope and results ofthe audit, and its cost-effectiveness.The AC reviewed the volume of non-audit services provided to the Group by the externalauditors, and is satisfied that the nature and extent of such services will not prejudicethe independence and objectivity of the external auditors. Independence of the externalauditors is reviewed by the AC annually.Principle 12 : Internal ControlsThe Board believes that, in the absence of any evidence to the contrary, the systemof internal control maintained by the Company’s management and that was in placethroughout the financial year and up to the date of this report provides reasonable, butnot absolute, assurance against material financial misstatements or loss, and includesthe safeguarding of assets, the maintenance of proper accounting records, the reliabilityof financial information, compliance with appropriate legislation, regulation and bestpractice, and the identification and containment of business risk.Principle 13 : Internal AuditThe Group has outsourced its internal audit function to Messrs Baker TillyTeoFoongWongLCLoong. The internal auditors report directly to the AC which is taskedto oversee and review the adequacy of the overall systems of internal controls withinthe Group. The internal auditors review the effectiveness of the Group’s material internalcontrols, including financial, operational and compliance controls, and risk managementpolicies.Principle 14 : Communication with ShareholdersPrinciple 15 : Greater shareholder participationThe Company endeavours to maintain constant and effective communication withshareholders through timely and comprehensive announcements. Material informationhelpful to shareholders is released on a timely basis. We disseminate our latest corporatenews, strategies and announcements promptly through SGXNET, press releases,various media as well as investor relations channels on our corporate website (http://www.hgmetal.com) and financial portal ( http://www.shareinvestor.com ).Shareholders are encouraged to attend the AGMs to ensure a high level ofaccountability.22 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

CORPORATE GOVERNANCE STATEMENTChairman of the AC, RC, and NC, or members of the respective committees standing infor them, as well as external auditors will be present and available to address questionsat General Meetings.The Group has issued guidelines on share dealings to Directors and all employees ofthe Group, setting out the implications on insider trading and the recommendations ofthe Best Practices Guide issued by SGX-ST. The Group has adopted a code of conductto provide guidance to its officers with regard to dealing in the Company’s shares andconfirms that the Company has complied with its own Best Practices Guide.Interested Person TransactionsThe Company has set out the procedures for review and approval of the Company’sinterested person transactions.Disclosure according to Rule 907 of the SGX-ST Listing Manual in respect of interestedperson transactions for financial year ended 30 September 2005 is stated in the tablebelow :Aggregate value of all interested persontransactions, conducted under shareholdersmandate pursuant to Rule 920 (excludingName of interested person transactions less than S$100,000)Super Marine Supplies Pte Ltd 2,513,405Lingco Shipbuilding Pte Ltd 1,664,504Risk ManagementThe financial risk management are outlined below:Fluctuations in steel pricesAs a distributor of steel products, the Group purchases a wide range of steel productsand maintain substantial inventories to be in a position to fulfil customers’ orders withina short lead time. The cost of steel products purchased is the main component of theGroup’s cost of sales for its steel distribution business. Prices of steel products aresubject to international price fluctuations of steel.Therefore, the Group is vulnerable toany fluctuations in prices of steel.The Group, with more than 30 years of knowledge and expertise gained in this lineof business, is able to make appropriate adjustments to its supplier choice, timing ofpurchase and shipment, contracting arrangement with its customers to address pricefluctuation risk.Credit risk of its customersThe Group extends credit terms ranging from 30 to 90 days to its customers, dependingon their credit worthiness. From time to time, in the ordinary course of business, certaincustomers may default on their payment. Such events may arise due to the inherentrisk from its customers’ business, risk pertaining to the political, economic, social andlegal environment of its customers’ jurisdiction and foreign exchange risk. In the eventthat the Group’s customers default on their payments, the Group would have to makeallowances for doubtful debts or incur write-offs, which will have an adverse impact onits profitability.HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200723

CORPORATE GOVERNANCE STATEMENTThe Group performs credit check and approval before granting credit to customers andimposes a credit limit and credit term on each customer. All credit accounts are subjectto monthly review.In addition, the Group is not dependant on any single customer or any single country.The Group has more than 600 customers. Hence, the Group is not exposed to significantcredit risk posed by any single customer.Foreign exchange exposureThe purchases of the Group are mainly denominated in US$ and its sales are mainlydenominated in S$. As a result, the Group is exposed to fluctuations in foreignexchange rates. For FY2007, approximately 80% of its total purchases were made inUS$, whilst approximately 90% and 10% of its total sales were denominated in S$ andUS$ respectively. Hence, the Group may be exposed to any significant fluctuation ofthe US$.The Group monitors the US$ exchange rates closely and will enter into forward contractson case to case basis to reduce its exposure.24 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

FINANCIAL CONTENTS26 Report of the Directors • 31 Statement by Directors • 32 Independent Auditors’ Report • 34 Balance Sheets36 Consolidated Income Statement • 37 Statement of Changes in Equity • 40 Consolidated Cash Flow Statement42 Notes to the Financial Statements • 112 Shareholders’ Information • 117 Notice of Annual General MeetingHG METAL MANUFACTURING LIMITED ANNUAL REPORT 200725

REPORT OF THE DIRECTORSThe Directors of the Company present their report to the members together with the audited consolidated financial statements of the Group and the balance sheet and statementof changes in equity of the Company for the financial year ended 30 September 2007.1. DirectorsThe Directors of the Company in office at the date of this report are:Tan Chan TooWee PiewLee Leng LokeTan Ah BeeSia Ling SingOoi Seng SoonGui Kim Young @ Gui Kim GanPoon Hon Thang, Samuel (appointed on 15 May 2007)2. Arrangements to enable Directors to acquire shares or debenturesNeither at the end of nor at any time during the financial year was the Company a party to any arrangement whose object is to enable the Directors of the Company toacquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.26 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

REPORT OF THE DIRECTORS (Continued)3. Directors’ interests in shares or debenturesAccording to the register of Directors’ shareholdings kept by the Company for the purposes of Section 164 of the Singapore Companies Act, Cap. 50, none of the Directorsof the Company holding office at the end of the financial year had any interest in the shares or debentures of the Company and its related corporations except as detailedbelow:Shareholdings registeredin the name of DirectorsShareholdings in which Directorsare deemed to have an interestBalance as at1 October2006Balance as at30 September2007Balance as at1 October2006Balance as at30 September2007Number of ordinary sharesCompanyHG Metal Manufacturing LimitedTan Chan Too 12,181,615 16,027,594 - -Wee Piew 1,450,157 2,030,218 - -Lee Leng Loke 3,822,257 5,351,159 - -Tan Ah Bee 10,475,333 14,665,466 - -Sia Ling Sing 7,260,000 12,040,000 14,350,000 20,090,000Ooi Seng Soon - - 20,000 28,000HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200727

REPORT OF THE DIRECTORS (Continued)3. Directors’ interests in shares or debentures (Continued)Certain Directors holding office as at 30 September 2007 had interest in the bonus warrants to subscribe for ordinary shares of the Company in cash on the basis of onebonus warrant for every four ordinary shares in the capital of the Company, at an exercise price of $0.4215 per share, as recorded in the register of Directors’ shareholdingsset out below:Warrantholdings registeredin the name of DirectorsWarrantholdings in which Directorsare deemed to have an interestBalance as at1 October2006Balance as at30 September2007Balance as at1 October2006Balance as at30 September2007Number of unissued ordinary shares underbonus warrants held by DirectorsCompanyHG Metal Manufacturing LimitedTan Chan Too 2,852,903 2,852,903 - -Wee Piew …350,039 …350,039 - -Lee Leng Loke …943,064 …943,064 - -Tan Ah Bee 2,618,833 2,618,833 - -Sia Ling Sing 1,371,250 1,371,250 3,370,000 3,370,000Ooi Seng Soon - - 5,000 5,000In accordance with the continuing listing requirements of the Singapore Exchange Securities Trading Limited, the Directors of the Company state that, according to theregister of Directors’ shareholdings, the Directors’ interests as at 21 October 2007 in the shares of the Company have not changed from those disclosed as at 30 September2007.28 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

REPORT OF THE DIRECTORS (Continued)4. Directors’ contractual benefitsSince the end of the previous financial year, no Director of the Company has received or become entitled to receive a benefit by reason of a contract made by the Companyor by a related corporation with the Director, or with a firm of which he is a member, or with a company in which he has a substantial financial interest, except as disclosedin the financial statements.5. Share optionsThere were no share options granted by the Company or its subsidiaries during the financial year.There were no shares issued during the financial year by virtue of the exercise of options to take up unissued shares of the Company or its subsidiaries.There were no unissued shares of the Company or its subsidiaries under options as at the end of the financial year.6. Audit committeeThe Audit Committee consists of three members, all of whom are non-executive Directors and independent Directors. During the financial year and at the date of this report,the Audit Committee comprised the following members:Gui Kim Young @ Gui Kim Gan (Chairman)Ooi Seng SoonPoon Hon Thang, Samuel (appointed on 15 May 2007)Lee Bon Leong (resigned on 20 April 2007)HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200729

REPORT OF THE DIRECTORS (Continued)6. Audit committee (Continued)The Audit Committee carries out its functions in accordance with Section 201B (5) of the Companies Act, Cap. 50, and the Code of Corporate Governance, including thefollowing:(i)(ii)(iii)(iv)(v)(vi)reviews the financial statements of the Company and of the Group before they are submitted to the Board for approval;reviews the audit plans with the external auditors;reviews management letters from the external auditors and response from the management;reviews the half yearly and full year results announcements of the Company and of the Group;makes recommendations to the Board on the appointment of external and internal auditors; andreviews the Interested Person Transactions as defined in Chapter 9 of the Listing Manual of the Singapore Exchange Securities Trading Limited (SGX-ST) as isrequired by SGX-ST and ensures that the transactions were on normal commercial terms and not prejudicial to the interests of the members of the Company.The Audit Committee held three meetings during the financial year.The Audit Committee has recommended to the Board of Directors the nomination of Messrs Ernst & Young in place of the retiring auditors, Messrs BDO Raffles, who arenot seeking re-appointment, as external auditors of the Company at the forthcoming Annual General Meeting.On behalf of the Board of Directors_____________________TAN CHAN TOODirector_________________________WEE PIEWDirectorSingapore9 January 200830 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

STATEMENT BY DIRECTORSThe Board of Directors is responsible for the preparation and fair presentation of the financial statements in accordance with the provisions of the Singapore Companies Act, Cap.50 (the “Act”) and Singapore Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation andfair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies, and makingaccounting estimates that are reasonable in the circumstances.In our opinion,(a)the accompanying financial statements comprising the balance sheets of the Group and of the Company, consolidated income statement, statement of changes in equityof the Group and of the Company and consolidated cash flow statement together with the notes thereon are properly drawn up in accordance with the provisions of the Actand Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 30 September 2007 and of theresults, changes in equity and cash flows of the Group and changes in equity of the Company for the financial year ended on that date; and(b)at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.On behalf of the Board of Directors_____________________TAN CHAN TOODirector_________________________WEE PIEWDirectorSingapore9 January 2008HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200731

INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OF HG METAL MANUFACTURING LIMITEDWe have audited the accompanying financial statements of HG Metal Manufacturing Limited (the “Company”) and its subsidiaries (the “Group”) which comprisethe balance sheets of the Group and of the Company as at 30 September 2007, income statement, statement of changes in equity of the Group and of theCompany and cash flow statement of the Group and the statement of changes in equity of the Company for the financial year then ended as set out on page 34 to 99, and asummary of significant accounting policies and other explanatory notes.Directors’ Responsibility for the Financial StatementsThe Company’s Directors are responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of the Singapore Companies Act,Cap. 50 (the “Act”) and Singapore Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparationand fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; andmaking accounting estimates that are reasonable in the circumstances.Auditor’s ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Thosestandards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from materialmisstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’sjudgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, theauditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate inthe circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of accounting estimates made by Directors, as well as evaluating the overall presentation of the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.32 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OF HG METAL MANUFACTURING LIMITED (Continued)OpinionIn our opinion,(a)(b)the accompanying consolidated financial statements of the Group and the balance sheet, and statement of changes in equity of the Company are properly drawn up inaccordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of theCompany as at 30 September 2007 and of the results, changes in equity and cash flows of the Group and the changes in equity of the Company for the financial year endedon that date, andthe accounting and other records required by the Act to be kept by the Company and by the subsidiaries incorporated in Singapore of which we are the auditors have beenproperly kept in accordance with the provisions of the Act.BDO RafflesCertified Public AccountantsSingapore9 January 2008HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200733

BALANCE SHEETSAS AT 30 SEPTEMBER 2007The GroupThe CompanyNote 2007 2006 2007 2006$ $ $ $Non-current assetsProperty, plant and equipment 4 13,276,065 12,550,330. 4,657,318 4,815,850.Intangible assets 5 174,817 224,545. 163,417 163,417.Investment in subsidiaries 6 - -. 6,600,926 6,380,866.Deferred tax assets 14 101,622 587,389. 424,100 917,967.13,552,504 13,362,264. 11,845,761 12,278,100.Current assetsInventories 7 182,409,753 101,614,106. 167,561,050 88,874,183.Trade and other receivables 8 98,547,379 92,132,268. 93,865,715 84,378,916.Cash and cash equivalents 9 31,120,986 19,601,129. 26,163,627 16,540,891.312,078,118 213,347,503. 287,590,392 189,793,990.Less:Current liabilitiesTrade and other payables 10 75,367,277 43,438,601. 71,315,717 42,092,192.Finance lease payables 11 298,204 327,522. - -.Bank borrowings 12 122,632,970 114,095,249. 114,220,911 103,197,976.Current income tax payable 3,590,094 1,779,406. 3,315,320 1,581,197.201,888,545 159,640,778. 188,851,948 146,871,365.Net current assets 110,189,573 53,706,725. 98,738,444 42,922,625.34 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

BALANCE SHEETSAS AT 30 SEPTEMBER 2007 (Continued)The GroupThe CompanyNote 2007 2006 2007 2006$ $ $ $Less :Non-current liabilitiesFinance lease payables 11 585,314 750,664. - -.Bank borrowings 12 3,178,291 2,036,661. 1,650,000 -.Derivative financial instruments 13 2,667,408 4,870,228. 2,667,408 4,870,228.6,431,013 7,657,553. 4,317,408 4,870,228.117,311,064 59,411,436. 106,266,797 50,330,497.Capital and reservesShare capital 15 78,196,688 35,273,598. 78,196,688 35,273,598.Capital reserve 16 2,527,096 100,610. 2,527,096 100,610.Hedging reserve 17 (2,187,275) (3,896,228) (2,187,275) (3,896,228)Foreign currency translation account 18 (87,865) (96,306) - -.Accumulated profits 37,358,676 26,663,873. 27,730,288 18,852,517.Equity attributable to equity holders of the Company 115,807,320 58,045,547. 106,266,797 50,330,497.Minority interests 1,503,744 1,365,889. - -.Total equity 117,311,064 59,411,436. 106,266,797 50,330,497.The accompanying notes form an integral part of these financial statements.HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200735

CONSOLIDATED INCOME STATEMENTFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007Note 2007 2006$ $Revenue 19 438,142,388 362,815,171Cost of sales (388,219,655) (330,118,244)Gross profit 49,922,733 32,696,927Other operating income 20 2,047,834 8,212,513Selling and distribution costs (5,424,659) (4,278,771)Administrative expenses (12,711,160) (8,782,552)Other operating expenses (2,250,260) (4,036,404)Finance costs 21 (9,045,630) (7,463,818)Profit before income tax 22 22,538,858 16,347,895Income tax expense 23 (4,225,819) (2,471,287)Profit after income tax 18,313,039 13,876,608.Attributable to:Equity holders of the Company 18,108,587 13,756,942.Minority interests 204,452 119,666.18,313,039 13,876,608.Earnings per share:Basic 24 8.05 cents 7.81 centsDiluted 24 6.73 cents 6.92 centsThe accompanying notes form an integral part of these financial statements.36 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

STATEMENTS OF CHANGES IN EQUITYFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007The GroupNoteSharecapitalAttributable to equity holders of the CompanyCapitalreserveHedgingreserveForeigncurrencytranslationaccountAccumulatedprofitsTotalMinorityinterestsTotal equity$ $ $ $ $ $ $ $Balance as at 1 October 2006 35,273,598 100,610 (3,896,228) (96,306) 26,663,873 58,045,547 1,365,889 59,411,436Cash flow hedges-fair value gains 13&17 - - 2,202,820 - - 2,202,820 - 2,202,820Currency translation adjustments 18 - - - 8,441 - 8,441 (56,876) (48,435)Deferred tax asset on hedging reserve 14 - - (493,867) - - (493,867) - (493,867)Net income directly recognised in equity - - 1,708,953 8,441 - 1,717,394 (56,876) 1,660,518Profit for the financial year - - - - 18,108,587 18,108,587 204,452 18,313,039Total recognised net income for thefinancial year - - 1,708,953 8,441 18,108,587 19,825,981 147,576 19,973,557Issue of shares 15 42,923,090 - - - - 42,923,090 - 42,923,090Gain from shares conversion 16 - 2,426,486 - - - 2,426,486 - 2,426,486Dividends 25 - - - - (7,413,784) (7,413,784) (9,721) (7,423,505)Balance as at 30 September 2007 78,196,688 2,527,096 (2,187,275) (87,865) 37,358,676 115,807,320 1,503,744 117,311,064HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200737

STATEMENTS OF CHANGES IN EQUITYFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)The GroupNoteSharecapitalSharepremiumAttributable to equity holders of the CompanyCapitalreserveHedgingreserveForeigncurrencytranslationaccountAccumulatedprofitsTotalMinorityinterestsTotal equity$ $ $ $ $ $ $ $ $Balance as at 1 October 2005 35,243,232 30,366 - (36,572) 15,099,830 50,336,856 861,766 51,198,622Effect of adopting FRS 39 13 - - - (4,870,228) - - (4,870,228) - (4,870,228)Deferred tax asset on hedging reserve 14 - - - 974,000 - - 974,000 - 974,000Currency translation adjustments 18 - - - - (59,734) - (59,734) (162,153) (221,887)Net expenses directly recognised in equity - - - (3,896,228) (59,734) - (3,955,962) (162,153) (4,118,115)Profit for the financial year - - - - - 13,756,942 13,756,942 119,666 13,876,608Total recognised net income andexpense for the financial year - - - (3,896,228) (59,734) 13,756,942 9,800,980 (42,487) 9,758,493Effect of Companies (Amendment) Act2005 30,366 (30,366) - - - - - - -Arising from acquisition of subsidiaries - - - - - - - 546,610 546,610Recognition of equity componentof convertible loan 12&16 - - 100,610 - - - 100,610 - 100,610Dividends 25 - - - - - (2,192,899) (2,192,899) - (2,192,899)Balance as at 30 September 2006 35,273,598 - 100,610 (3,896,228) (96,306) 26,663,873 58,045,547 1,365,889 59,411,436The accompanying notes form an integral part of these financial statements.38 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

STATEMENTS OF CHANGES IN EQUITYFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)The CompanyNoteSharecapitalSharepremiumCapitalreserveHedgingreserveAccumulatedprofitsTotalequity$ $ $ $ $ $Balance as at 1 October 2006 35,273,598 - 100,610 (3,896,228) 18,852,517 50,330,497Cash flow hedges-fair value gains 13&17 - - - 2,202,820 - 2,202,820Deferred tax asset on hedging reserve 14 - - - (493,867) - (493,867)Net income directly recognised in equity - - - 1,708,953 - 1,708,953Profit for the financial year - - - - 16,291,555 16,291,555Total recognised net income for the financial year - - - 1,708,953 16,291,555 18,000,508Issue of shares 15 42,923,090 - - - 42,923,090Gain from shares conversion 16 - - 2,426,486 - - 2,426,486Dividends 25 - - - - (7,413,784) (7,413,784)Balance as at 30 September 2007 78,196,688 - 2,527,096 (2,187,275) 27,730,288 106,266,797Balance as at 1 October 2005 35,243,232 30,366 - - 10,366,024 45,639,622Effect of adopting FRS 39 - - - (4,870,228) - (4,870,228)Deferred tax asset on hedging reserve 14 - - - 974,000 - 974,000Net income directly recognised in equity - - - (3,896,228) - (3,896,228)Profit for the financial year - - - - 110,679,392 10,679,392Total recognised net income for the financial year - - - ((3,896,228) 10,679,392 6,783,164Effect of Companies (Amendment) Act 2005 30,366 (30,366) - - - -Recognition of equity component ofconvertible loan 12&16 - - 100,610 - - 100,610Dividends 25 - - - - (2,192,899) (2,192,899)Balance as at 30 September 2006 35,273,598 - 100,610 (3,896,228) 18,852,517 50,330,497The accompanying notes form an integral part of these financial statements.HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200739

CONSOLIDATED CASH FLOW STATEMENTFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007Note 2007 2006$ $Cash flows from operating activitiesProfit before income tax 22,538,858 16,347,895Adjustments for:Amortised discount 60,271 40,339Gain on disposal of other investments - (1,645,521)Adjustment to minority interest (71,302) -Depreciation of property, plant and equipment 1,528,260 1,217,693Gain on disposal of plant and equipment (74,154) (84,242)Intangible assets written off 61,128 -Allowance for impairment in value of other investments written back - (1,478,739)Interest expense 9,045,630 7,463,818Interest income (261,762) (175,575)Currency realignment 21,361 (144,522)Operating profit before working capital changes 32,848,290 21,541,146Working capital changes:Fixed deposits pledged (385,037) 3,249Inventories (80,795,647) 1,868,048Trade and other receivables (6,415,111) 310,889Trade and other payables 31,928,676 715,575Cash (absorbed by)/generated from operations (22,818,829) 24,438,907Interest received 261,762 175,575Interest paid (9,045,630) (7,463,818)Income tax paid (2,423,232) (2,431,416)Net cash (used in)/from operating activities (34,025,929) 14,719,248Cash flows from investing activitiesAcquisition of subsidiaries, net of cash acquired 6 - (81,358)Proceeds from disposal of other investments - 7,444,262Purchase of intangible assets (11,400) (61,128)Purchase of property, plant and equipment 4 (2,069,921) (2,080,433)Proceeds from disposal of plant and equipment 84,495 157,604Net cash (used in)/from investing activities (1,996,826) 5,378,94740 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

CONSOLIDATED CASH FLOW STATEMENTFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)Note 2007 2006$ $Cash flows from financing activitiesNet proceeds/(repayments) from bank borrowings 19,619,080 (19,261,769)Dividends paid on the ordinary shares by the Company (7,413,784) (2,192,899)Dividends paid to minority shareholders (9,721) (5,801)Proceeds from shares placement 19,240,000 -Proceeds from share of profits from shares conversion 2,426,486 -Proceeds from right issues and warrants conversion 14,855,176 -Payment of issuance costs (1,172,086) -Repayment of finance lease payables (387,576) (392,987)Net cash from/(used in) financing activities 47,157,575 (21,853,456)Net change in cash and cash equivalents 11,134,820 (1,755,261)Cash and cash equivalents at beginning of financial year 19,506,994 21,262,255Cash and cash equivalents at end of financial year 9 30,641,814 19,506,994The accompanying notes form an integral part of these financial statements.HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200741

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007These notes form an integral part of and should be read in conjunction with the financial statements.1. General corporate informationThe balance sheet and statement of changes in equity of HG Metal Manufacturing Limited (“Company”) and the consolidated financial statements of the Company and itssubsidiary companies (the”Group”) for the financial year ended 30 September 2007 were authorised for issue in accordance with a Directors’ resolution dated 9 January2008.The Company is a public limited liability company incorporated and domiciled in Singapore with its registered office and principal place of business at 30 Jalan Buroh,Jurong Town, Singapore 619486. The Company’s registration number is 198802660D.The principal activities of the Company are those of investment holding and the business of trading of steel products.The principal activities of the subsidiaries are set out in Note 6 to the financial statements.2. Summary of significant accounting policies(a)Basis of preparation of financial statementsThe financial statements are prepared in accordance with Singapore Financial Reporting Standards (“FRS”) as required by the Singapore Companies Act, Cap. 50and are prepared under the historical cost convention, except as disclosed in the accounting policies below.The preparation of financial statements in conformity with FRS requires the Directors of the Company to exercise judgement in the process of applying the Group’sand the Company’s accounting policies and requires the use of accounting estimates and assumptions that affect the reported amounts of assets and liabilitiesand disclosure of contingent assets and liabilities at the balance sheet date, and the reported amounts of revenue and expenses during the financial year. Althoughthese estimates are based on the Directors’ best knowledge of historical experience and other factors, including expectations of future events that are believed tobe reasonable under the circumstances, actual results may ultimately differ from those estimates. These estimates and underlying assumptions are reviewed on anongoing basis. Revisions to accounting estimates are recognised in the financial year in which the estimate is revised if the revision affects only that financial year, orin the financial year of the revision and future financial years if the revision affects both current and future financial years.Critical accounting judgements and key sources of estimation uncertainty used that are significant to the financial statements are disclosed in Note 3 to the financialstatements.42 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)2. Summary of significant accounting policies (Continued)(a)Basis of preparation of financial statements (Continued)During the financial year, the Group and the Company adopted the new or revised FRS and Interpretations of FRS (“INT FRS”) that are relevant to their operationsand effective for the current financial year. Changes to the Group’s and the Company’s accounting policies have been made as required, in accordance with therelevant transitional provisions in the respective FRS and INT FRS. The adoption of the new or revised FRS and INT FRS did not result in any substantial changesto the Group’s and the Company’s accounting policies.FRS and INT FRS issued but not yet effectiveThe Group and the Company have not adopted the following FRS and INT FRS that have been issued but not yet effective:Effective date (Annualperiods beginning onor after)FRS 1 : Amendments to FRS 1 (revised), Presentation of Financial Statements (Capital Disclosures) 1 January 2007FRS 40 : Investment Property 1 January 2007FRS 107 : Financial Instruments: Disclosures 1 January 2007FRS 108 : Operating Segments 1 January 2009INT FRS 110 : Interim Financial Reporting and Impairment 1 November 2006INT FRS 111 : FRS 102 – Group and Treasury Share Transactions 1 March 2007INT FRS 112 : Service Concession Arrangements 1 January 2008The Group and the Company expect that the adoption of the above pronouncements, if applicable, will have no material impact on the financial statements in theperiod of initial application, except for FRS107 and the amendments to FRS 1 (revised) as indicated below:FRS 1, Amendments to FRS 1 (revised), Presentation of Financial Statements (Capital Disclosures)The amendment to FRS 1 (revised) requires the Group and the Company to make new disclosures to enable users of the financial statements to evaluate the Group’sand the Company’s objectives, policies and processes for managing capital.FRS 107, Financial Instruments: DisclosuresFRS 107 introduces new disclosures about financial instruments. It requires the disclosure of qualitative and quantitative information about exposure to risks arisingfrom financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk, including sensitivity analysis to market risk.HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200743

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)2. Summary of significant accounting policies (Continued)(b)Basis of consolidationThe consolidated financial statements comprise the financial statements of the Company and its subsidiaries made up to the end of the financial year. The financialstatements of the subsidiaries are prepared for the same reporting date as the parent company.The purchase method of accounting is used to account for the acquisitions of subsidiaries and businesses. The cost of an acquisition is measured as the fair valueof the assets given, equity instruments issued or liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiableassets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values on the date of acquisition,irrespective of the extent of any minority interests.Subsidiaries are consolidated from the date on which control is transferred to the Group to the date on which that control ceases. In preparing the consolidatedfinancial statements, inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised lossesare also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Where necessary, adjustments are made to the financialstatements of subsidiaries to ensure consistency of accounting policies with those of the Group.Any excess of the cost of business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities representsgoodwill. The goodwill is accounted for in accordance with the accounting policy for goodwill stated in Note 2 (e) to the financial statements.Any excess of the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of business combination is recognisedas negative goodwill in the consolidated income statement of the Group on the date of acquisition.Minority interests are that part of the net results of operations and of net assets of a subsidiary attributable to interests which are not owned directly or indirectlyby the Group. It is measured at the minorities’ share of the fair value of the subsidiaries’ identifiable assets and liabilities and contingent liabilities at the date ofacquisition by the Group and the minorities’ shares of changes in equity since the date of acquisition, except when the losses applicable to the minorities in asubsidiary exceed the minority interests in the equity of that subsidiary. In such cases, the excess and further losses applicable to the minorities are attributed tothe equity holders of the Company, unless the minorities have a binding obligation to, and are able to, make good the losses. When that subsidiary subsequentlyreports profits, the profits applicable to the minorities are attributed to the equity holders of the Company until the minorities’ shares of losses previously absorbedby the equity holders of the Company have been recovered.44 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200744Minority interests are presented in the consolidated balance sheet of the Group within equity, separately from the Company’s equity holders, and are separatelydisclosed in the consolidated income statement of the Group.

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)2. Summary of significant accounting policies (Continued)(c)Property, plant and equipmentProperty, plant and equipment are initially recorded at cost. Subsequent to initial recognition, property, plant and equipment are stated at cost less accumulateddepreciation and impairment in value, if any.The cost of property, plant and equipment includes expenditure that is directly attributable to the acquisition of the items. Dismantlement, removal or restorationcosts are included as part of the cost of property, plant and equipment if the obligation for dismantlement, removal or restoration is incurred as a consequence ofacquiring or using the property, plant and equipment.Depreciation is calculated on the straight-line method so as to write off the cost of the property, plant and equipment over their estimated useful lives as follows:YearsPlant and machinery 5 – 10Furniture and fittings 10Office equipment 3 – 10Renovation 5 – 10Motor vehicles 5The leasehold building of the Company is depreciated over the remaining lease period of 26 years from September 1998. The leasehold building of a subsidiary isdepreciated over the remaining lease period of 18 years from September 2001.The residual value, useful life and depreciation method of property, plant and equipment are reviewed at each balance sheet date to ensure that the residual values,period of depreciation and depreciation method are consistent with previous estimates and the expected pattern of consumption of future economic benefitsembodied in the items of property, plant and equipment.HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200745

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)2. Summary of significant accounting policies (Continued)(c)Property, plant and equipment (Continued)Subsequent expenditure relating to the property, plant and equipment that has already been recognised is added to the carrying amount of the asset when it isprobable that the future economic benefits, in excess of the standard of performance of the asset before the expenditure was made, will flow to the Group and theCompany, and the cost can be reliably measured. Other subsequent expenditure is recognised as an expense during the financial year in which it is incurred.On disposal of an item of property, plant and equipment, the difference between the net disposal proceeds and its carrying amount is taken to the incomestatement.(d)Impairment of non-financial assetsNon-financial assets other than goodwillThe carrying amounts of the Group’s and the Company’s non-financial assets are reviewed at each balance sheet date to determine whether there is any indicationof impairment in value and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If any such indication exists, theassets’ recoverable amount is estimated.An impairment in value is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unitis the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups. Impairment in value is recognised in theincome statement unless it reverses a previous revaluation, credited to equity, in which case it is charged to equity.The recoverable amount of an asset or cash-generating unit is the higher of its fair value less costs to sell and its value in use. Recoverable amount is determined forindividual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. The fair value less coststo sell is the amount obtainable from the sale of an asset or cash-generating unit in an arm’s length transaction between knowledgeable, willing parties, less costsof disposal. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end ofits useful life, discounted at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generatingunit for which the future cash flow estimates have not been adjusted.46 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

2. Summary of significant accounting policies (Continued)(d)Impairment of non-financial assets (Continued)Non-financial assets other than goodwill (Continued)An assessment is made at the balance sheet date as to whether there is any indication that an impairment in value recognised in prior periods for an asset may nolonger exist or may have decreased. If such indication exists, the recoverable amount is estimated. An impairment in value recognised in prior periods is reversedif there has been a change in the estimates used to determine the recoverable amount since the last impairment in value was recognised. An impairment invalue is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciationor amortisation, if no impairment in value had been recognised. Reversals of impairment in value are recognised in the income statement. After such a reversal,the depreciation or amortisation is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over itsremaining useful life.GoodwillGoodwill is tested annually for impairment, as well as when there is any indication that the goodwill may be impaired.combination. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit including the goodwill, the impairment in value ispro-rata on the basis of the carrying amount of each asset in the unit. An impairment in value recognised for goodwill is not reversed in subsequent period.(e)Intangible assetsGoodwillGoodwill acquired in a business combination is initially measured at cost being the excess of the cost of a business combination over the Group’s interest in theif any.Goodwill acquired in a business combination is included in intangible assets.Gains and losses on the disposal of a business combination include the carrying amount of goodwill relating to the entity or business sold.

FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)2. Summary of significant accounting policies (Continued)(e)Intangible assets (Continued)Computer Softwareand added to the original cost of the software. Costs associated with maintaining computer software are recognised as an expense as incurred.Computer software licences are stated at cost less accumulated amortisation and accumulated impairment in value, if any. These costs are amortised using the(f)Subsidiarieshalf of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether theGroup controls another entity.Investments in subsidiaries are stated at cost on the Company’s balance sheet less impairment in value, if any.(g)Financial assetsClassificationLoans and receivablesCompany’s cash management.in value.

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)2. Summary of significant accounting policies (Continued)(g)Financial assets (Continued)Recognition and derecognitionRegular purchases and sales of financial assets are recognised on trade-date, the date on which the Group and the Company commit to purchase or sell theasset.Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group and theCompany have transferred substantially all risks and rewards of ownership.On sale of a financial asset, the difference between the carrying amount and the net sale proceeds is recognised in the income statement. Any amount in the fairvalue reserve relating to the asset is also recognised in the income statement.Initial and subsequent measurementFinancial assets are initially recognised at fair value plus transaction costs.After initial recognition, loans and receivables are carried at amortised cost using the effective interest method, less impairment in value, if any.ImpairmentThe Group and the Company assess at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets isimpaired.Loans and receivablesAn allowance for impairment of loans and receivables is recognised when there is objective evidence that the Group and the Company will not be able to collect allamounts due according to the original terms of the receivables. The amount of allowance is the difference between the asset’s carrying amount and the presentvalue of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowanceaccount. The amount of the loss is recognised in the income statement.If, in a subsequent period, the amount of the impairment in value decreases and the decrease can be related objectively to an event occurring after the impairmentwas recognised, the previously recognised impairment in value shall be reversed either directly or by adjusting an allowance account. Any subsequent reversal ofan impairment in value is recognised in the income statement, to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversaldate.HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200749

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)2. Summary of significant accounting policies (Continued)(h) Financial liabilities (Continued)The accounting policies adopted for specific financial liabilities are set out below:(i)Trade and other payablesTrade and other payables is recognised initially at cost which represents the fair value of the consideration to be paid in the future, less transaction cost,for goods received or services rendered, whether or not billed to the Group and the Company, and are subsequently measured at amortised cost using theeffective interest method.Gains or losses are recognised in the income statement when the liabilities are derecognised as well as through the amortisation process.(ii)Finance lease payablesLeases in which the Group and the Company assume substantially the risks and rewards of ownership are classified as finance leases.Upon initial recognition, plant and equipment acquired through finance leases are capitalised at the lower of its fair value and the present value of the minimumlease payments. Any initial direct costs are also added to the amount capitalised.Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Lease payments are apportionedbetween finance charge and reduction of the lease liability. The finance charge is allocated to each period during the lease term so as to achieve a constantperiodic rate of interest on the remaining balance of the finance lease liability. Finance charge is recognised in the income statement.Contingent lease payments are recognised as an expense in the income statement in the financial year in which they are incurred.Capitalised leased asset are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty thatthe Group and the Company will obtain ownership by the end of the finance lease term.(iii)Bank borrowingsBorrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost. Any differencebetween the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using theeffective interest method.Borrowings are classified as current liabilities unless the Group and the Company have an unconditional right to defer settlement of the liability for at least12 months after the balance sheet date.50 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)2. Summary of significant accounting policies (Continued)(h)Financial liabilities (Continued)(iii)Bank borrowings (Continued)Borrowings which are due to be settled within twelve months after the balance sheet date are included in current borrowings in the balance sheet. Otherborrowings due to be settled more than twelve months after the balance sheet date are included in non-current borrowings in the balance sheet.Recognition and derecognitionFinancial liabilities are recognised on the balance sheet when, and only when, the Group and the Company become a party to the contractual provisions of thefinancial instrument.Financial liabilities are derecognised when the contractual obligation has been discharged or cancelled or expired.On derecognition of a financial liability, the difference between the carrying amount and the consideration paid is recognised in the income statement.(i)InventoriesInventories are stated at the lower of cost and net realisable value.Cost is determined on a “first-in, first-out” basis and comprises all costs of purchase, cost of conversion and other related charges incurred in bringing the inventoriesto their present location and condition. In the case of manufactured goods, cost includes cost of materials, direct labour and an appropriate portion of manufacturingoverheads.Net realisable value is the estimated selling price at which the inventories can be realised in the normal course of business after allowing for obsolete, slow-movingand defective inventories.(j)ProvisionsProvisions are recognised when the Group and the Company have a present legal or constructive obligation as a result of a past event, it is probable that an outflowof resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. The expensesrelating to any provisions are recognised in the income statement.If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to theliability. Where discounting is used, the increase in the provision due to the passage of time is recognised as finance costs.Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimates. If it is no longer probable that an outflow of resourcesembodying economic benefits will be required to settle the obligation, the provision is reversed.HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200751

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)2. Summary of significant accounting policies (Continued)(k)Convertible loanThe component of the convertible loan that exhibits characteristics of a liability is recognised as a liability in the balance sheet, net of issue costs. On the issue ofconvertible loan, the fair value of the liability component is determined using the market rate for an equivalent non-convertible notes; and this amount is carried as along-term liability on an amortised cost basis until extinguished on conversion or redemption.The remainder of the proceeds is allocated at the conversion option that is recognised and included in the shareholders’ equity, net of issue costs. The value of theconversion option is not changed in subsequent periods.(l)Derivative financial instruments and hedging activitiesThe Group’s and the Company’s activities expose it primarily to the financial risks of changes in foreign exchange rates.The Group and the Company use derivative financial instruments to hedge its risks associated with foreign currency fluctuations relating to certain firm commitmentsand forecasted transactions. The Group designates these as cash flow hedges of foreign currency risk.The use of derivative financial instruments is governed by the Group’s and the Company’s policies approved by the Board of Directors, which provide writtenprinciples on the use of financial derivatives consistent with the Group’s risk management strategy. The Group and the Company do not use derivative financialinstruments for speculative purposes. Derivative financial instruments are initially measured at fair value on the contract date, and are re-measured to fair value atthe reporting dates.Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are recognised directly in equity and theineffective portion (if any) is recognised immediately in the income statement. The Group’s and the Company’s policies with respect to hedging the foreign currencyrisk of a firm commitment is to designate it as a cash flow hedge. If the cash flow hedge of a firm commitment or forecast transaction results in the recognition of anasset or a liability, then, at the time the asset or liability is recognised, the associated gains or losses on the derivative that had previously been recognised in equityare included in the initial measurement of the asset or liability. For hedges that do not result in the recognition of an asset or a liability, amounts deferred in equity arerecognised in the income statement in the same period in which the hedged item affects the income statement.Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the income statement as they arise.Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. At that time,for forecasted transactions, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the forecasted transaction occurs.If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to the income statement.52 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)2. Summary of significant accounting policies (Continued)(m)Share capitalOrdinary shares are classified as equity. Incremental costs directly attributable to the issuance of new equity instruments are shown in equity as a deduction fromthe proceeds.(n)Revenue recognitionRevenue is measured at the fair value of the consideration received or receivable for the sale of goods and rending of services in the ordinary course of business.Revenue is presented, net of rebates and discounts and sales related taxes.Revenue from services rendered is recognised on the completion of services provided.Revenue from sale of goods is recognised upon passage of title to customers, which generally coincides with their deliveries and acceptances, and collectibility ofthe related receivables is reasonably assured.Rental income under operating leases is recognised in the income statement on a straight-line basis over the term of the lease.Dividend income is recognised in the income statement when the shareholder’s right to receive the payment is established.Interest income is recognised on a time-apportionment basis using the effective interest method.(o)Foreign currenciesThe individual financial statements of each entity in the Group are measured and presented in the currency of the primary economic environment in which the entityoperates (“functional currency”).The consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company are presented in Singapore dollars,which is the functional currency of the Company and the presentation currency of the consolidated financial statements.In preparing the financial statements, transactions in currencies other than the entity’s functional currency (“foreign currency”) are recorded at the rates of exchangeprevailing on the date of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are re-translated at the rates prevailing onthe balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are re-translated at the rates prevailing on the date whenthe fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not re-translated.HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200753

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)2. Summary of significant accounting policies (Continued)(o)Foreign currencies (Continued)Exchange differences arising on the settlement of monetary items and on re-translating of monetary items are included in the income statement for the financial year.Exchange difference arising on the re-translation of non-monetary items carried at fair value are included in the income statement for the financial year except fordifferences arising on the re-translation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items,any exchange component of that gain or loss is also recognised directly in equity.For the purpose of presenting consolidated financial statements of the Group and the balance sheet and statement of change in equity of the Company, the resultsand financial position of all the Group’s entities that have a functional currency different from the presentation currency are translated into the presentation currencyas follows:(i)assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of the balance sheet;(ii) income and expenses for each income statement are translated at average exchange rate for the financial year (unless this average is not a reasonableapproximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated using the exchangerates at the dates of the transactions); and(iii) all resulting exchange differences are recognised in the foreign currency translation reserve within equity.Goodwill and fair value adjustments arising on acquisition of a non-Singapore operation are treated as assets and liabilities of the non-Singapore operation and arerecorded in the functional currency of the non-Singapore operation and translated at the closing exchange rate at the balance sheet date.On disposal of a foreign operation, the cumulative amount of exchange differences deferred in equity relating to that foreign operation is recognised in the consolidatedincome statement as a component of the gain or loss on disposal.(p)LeasesWhen the Group and the Company is the lessor of an operating leaseRental income from operating leases (net of any incentives given to lessees) is recognised in the income statement on a straight-line basis over the lease term.Initial direct costs incurred by the Company in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised asan expense in the income statement over the lease term on the same basis as the lease income.54 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)2. Summary of significant accounting policies (Continued)(p)Leases (Continued)When the Group and the Company is the lessee of an operating leaseLeases of assets in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments madeunder the lease (net of any incentives received from the lessor) are recognised in the income statement on a straight-line basis over the period of the lease.When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as anexpense in the financial year in which termination takes place.(q)Employee benefitsDefined contribution planContributions to defined contribution plans are recognised as an expense in the income statement in the same financial year as the employment that gives rise tothe contributions.Employee leave entitlementEmployee entitlements to annual leave are recognised when they accrue to employees. An accrual is made for the estimated liability for unutilised annual leave asa result of services rendered by employees up to the balance sheet date.(r)Income tax expenseIncome tax expense for the financial year comprise current and deferred taxes. Income tax is recognised in the income statement except to the extent that it relatesto items recognised directly in equity, in which case such income tax is recognised in equity.Current tax is the expected tax payable on the taxable income for the financial year, using tax rates enacted or substantially enacted at the balance sheet date, andany adjustment to tax payable in respect of previous financial years.Deferred tax is provided, using the liability method, for temporary differences at the balance sheet date between the carrying amounts and tax bases of assets andHG METAL MANUFACTURING LIMITED ANNUAL REPORT 200755

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)2. Summary of significant accounting policies (Continued)(r)Income tax expense (Continued).liabilities in the financial statements. The amount of deferred tax provided is based on the manner of realisation or settlement of the carrying amount of assets andliabilities, using tax rates enacted or substantively enacted at the balance sheet date.A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferredtax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.Deferred tax assets and liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relateto the same tax authority and the Group and the Company intends to settle its current tax assets and liabilities on a net basis.Deferred tax liabilities are recognised for all taxable temporary differences associated with investments in subsidiaries, except where the timing of the reversal of thetemporary difference can be controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.(s)Finance costsInterest expenses and similar charges are expensed in the income statement in the financial year in which they are incurred. The interest component of finance leasepayments is recognised in the income statement at the effective interest rate applicable.(t)DividendsEquity dividends are recognised when they become legally payable. Interim dividends are recorded in the financial year in which they are declared payable. Finaldividends are recorded as a liability in the financial year in which the dividends are approved by the shareholders.3. Critical accounting judgements and key sources of estimation uncertaintyCritical judgements made in applying the accounting policiesIn the process of applying the accounting policies, the Directors of the Company are of the opinion that there are no critical judgements involved that have a significant effecton the amounts recognised in the financial statements except as discussed below.56 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)3. Critical accounting judgements and key sources of estimation uncertainty (Continued)Critical judgements made in applying the accounting policies (Continued)Impairment of investments in subsidiariesThe Directors of the Company follow the guidance of FRS 36 – Impairment of Assets, in determining whether investments in subsidiaries are other than temporary impairedrequires the assumption made regarding the duration and extent to which the fair value of an investment is less than its costs and the financial health of and near-termbusiness outlook for the investment, including factors such as industry and sector performance, changes in technology and operational and financing cash flow.Based on the Directors of the Company’s assessment, there is no requirement to provide for any allowance for impairment in value of investments in subsidiaries. TheCompany’s carrying amount of investments in subsidiaries at 30 September 2007 was $6,600,926 (2006:$6,380,866) respectively.Key sources of estimation uncertaintyThe key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a materialadjustment to the carrying amounts of assets and liabilities and reported amounts of revenue and expenses within the next financial year, are discussed below.(i)Depreciation of property, plant and equipmentThese assets are depreciated on a straight-line basis over their estimated useful lives. Directors of the Company estimate the useful lives of these assets to bewithin 3 to 10 years. The carrying amounts of the Group’s and of the Company’s property, plant and equipment as at 30 September 2007 were $13,276,065 (2006:$12,550,330) and $4,657,318 (2006: $4,815,850) respectively. Changes in the expected level of usage and technological developments could impact the economicuseful lives and the residual values of these assets, therefore future depreciation charges could be revised.(ii)Impairment of trade and other receivablesThe Directors establish allowance for doubtful receivables on a case-by-case basis when they believe that payment of amounts owed is unlikely to occur. Inestablishing these allowances, the Directors consider its historical experience and changes to its customers’ financial position. If the financial conditions ofreceivables were to deteriorate, resulting in impairment of their abilities to make the required payments, additional allowances may be required. The carrying amountof trade and other receivables for the Group and Company as at 30 September 2007 was $98,547,379 (2006: $92,132,268) and $93,865,715 (2006: $84,378,916)respectively.HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200757

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)3. Critical accounting judgements and key sources of estimation uncertainty (Continued)Key sources of estimation uncertainty (Continued)(iii)Inventories and related allowanceInventories are stated at the lower of cost and net realisable value. The Group and the Company primarily determine cost of inventories using the “first-in, first out”method. The Group and the Company estimates the net realisable value of inventories based on assessment of receipt or committed sales prices and providefor excess and obsolete inventories based on historical usage, estimated future demand and related pricing. In determining excess quantities, the Group and theCompany considers recent sales activities, related margin and market positioning of its products. These estimates are generally not subject to significant volatility,due to the long life cycles of its products. However, factors beyond its control, such as demand levels, technological advances and pricing competition, could changefrom period to period. If such factors had an adverse effect, the Group and the Company might be required to reduce the value of its inventories, which wouldadversely affect its results operations, cash flows and financial position. The carrying amount of inventories for the Group and Company as at 30 September 2007was $182,409,753 (2006: $101,614,106) and $167,561,050 (2006: $88,874,183) respectively.(iv)Impairment of goodwillTo determine whether there is an impairment of goodwill at balance sheet date, it is necessary to compare the carrying value of goodwill with the recoverable amountfrom the cash-generating unit to which the goodwill is allocated. The recoverable amount represents the present value of the estimated future cash flows expected toarise from the cash-generating unit. In arriving at the recoverable amount, Directors exercise judgement in estimating the future cash flows and the discount rate. Thecarrying amount of the Group’s and the Company’s goodwill at the balance sheet date was $174,817 (2006: 224,545) and $163,417 (2006: $163,417) respectively.(v)Income taxesThe Group has exposure to income taxes in numerous jurisdictions. Significant judgement is involved in determining the Group’s provision for income taxes. TheGroup recognises expected liabilities for tax based on an estimation of the likely taxes due, which requires significant judgement as to the ultimate tax determinationof certain items. Where the actual liability arising from these issues differs from these estimates, such differences will have an impact on income tax and deferred taxprovisions in the period when such determination is made. The carrying amount of the Group’s and the Company’s current income tax payable as at 30 September2007 was $3,590,094 (2006: $1,779,406) and $3,315,320 (2006: 1,581,197) respectively.58 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)4. Property, plant and equipmentPlant FurnitureLeasehold and and Office Motor2007 buildings machinery fittings equipment Renovation vehicles Total$ $ $ $ $ $ $The GroupCostBalance as at 1 October 2006 10,985,146 4,379,014 270,271 292,148 643,030 2,042,820 18,612,429Additions 251,035 1,469,663 32,621 69,912 - 439,598 2,262,829Disposals - - - (28,842) - (216,528) (245,370)Foreign currency realignment - (1,577) 81 311 277 7,662 6,754Balance as at 30 September 2007 11,236,181 5,847,100 302,973 333,529 643,307 2,273,552 20,636,642Accumulated depreciationBalance as at 1 October 2006 3,134,428 1,254,103 153,495 193,186 401,153 925,734 6,062,099Depreciation charge for the financial year 514,149 475,237 24,002 36,552 86,534 391,786 1,528,260Disposals - - - (28,842) - (206,187) (235,029)Foreign currency realignment - 218 81 225 276 4,447 5,247Balance as at 30 September 2007 3,648,577 1,729,558 177,578 201,121 487,963 1,115,780 7,360,577Net book valueAs at 30 September 2007 7,587,604 4,117,542 125,395 132,408 155,344 1,157,772 13,276,065HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200759

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)4. Property, plant and equipment (Continued)Plant FurnitureLeasehold and and Office Motor2006 buildings machinery fittings equipment Renovation vehicles Total$ $ $ $ $ $ $The GroupCostBalance as at 1 October 2005 9,418,263 2,982,994 267,603 269,164 558,932 2,107,175 15,604,131Additions 1,566,883 1,153,678 2,000 33,864 66,801 452,386 3,275,612Arising from acquisition of subsidiaries - 282,438 885 10,736 18,036 - 312,095Disposals - (33,340) - (20,685) - (500,595) (554,620)Foreign currency realignment - (6,756) (217) (931) (739) (16,146) (24,789)Balance as at 30 September 2006 10,985,146 4,379,014 270,271 292,148 643,030 2,042,820 18,612,429Accumulated depreciationBalance as at 1 October 2005 2,710,323 929,372. 127,337 193,419 326,615 1,054,678 5,341,744Depreciation charge for the financial year 424,105 342,869. 26,375 20,725 75,277 328,342 1,217,693Disposals - (16,280) - (20,359) - (444,619) (481,258)Foreign currency realignment - (1,858) (217) (599) (739) (12,667) (16,080)Balance as at 30 September 2006 3,134,428 1,254,103 153,495 193,186 401,153 925,734 6,062,099Net book valueAs at 30 September 2006 7,850,718 3,124,911. 116,776 98,962 241,877 1,117,086 12,550,33060 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)4. Property, plant and equipment (Continued)Plant FurnitureLeasehold and and Office Motor2007 buildings machinery fittings equipment Renovation vehicles Total$ $ $ $ $ $ $The CompanyCostBalance as at 1 October 2006 5,230,921 380,190 162,452 161,605 608,228 1,379,706 7,923,102Additions - 160,000 24,850 39,949 - 246,175 470,974Disposals - - - (6,098) - (92,250) (98,348)Balance as at 30 September 2007 5,230,921 540,190 187,302 195,456 608,228 1,533,631 8,295,728Accumulated depreciationBalance as at 1 October 2006 1,746,515 168,044 98,585 121,663 387,513 584,932 3,107,252Depreciation charge for the financial year 206,959 40,019 13,217 17,607 78,938 272,766 629,506Disposals - - - (6,098) - (92,250) (98,348)Balance as at 30 September 2007 1,953,474 208,063 111,802 133,172 466,451 765,448 3,638,410Net book valueAs at 30 September 2007 3,277,447 332,127 75,500 62,284 141,777 768,183 4,657,318HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200761

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)4. Property, plant and equipment (Continued)Plant FurnitureLeasehold and and Office Motor2006 buildings machinery fittings equipment Renovation vehicles Total$ $ $ $ $ $ $The CompanyCostBalance as at 1 October 2005 5,230,921 380,190 162,452 159,964 544,827 1,506,445 7,984,799Additions - - - 22,326 63,401 275,331 361,058Disposals - - - (20,685). - (402,070) (422,755).Balance as at 30 September 2006 5,230,921 380,190 162,452 161,605 608,228 1,379,706 7,923,102Accumulated depreciationBalance as at 1 October 2005 1,539,556 135,525 82,383 130,766 312,511 725,713 2,926,454Depreciation charge for the financial year 206,959 32,519 16,202 11,256 75,002 228,122 570,060Disposals - - - (20,359) - (368,903) (389,262).Balance as at 30 September 2006 1,746,515 168,044 98,585 121,663 387,513 584,932 3,107,252Net book valueAs at 30 September 2006 3,484,406 212,146 63,867 39,942 220,715 794,774 4,815,85062 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)4. Property, plant and equipment (Continued)During the financial year, the Group acquired property, plant and equipment with an aggregate cost of $2,262,829 (2006: $3,275,612) of which $192,908 (2006: $1,195,179)was acquired by means of finance lease. Cash payments of $2,069,921 (2006: $2,080,433) were made to purchase property, plant and equipment.As at the balance sheet date, the net book value of property, plant and equipment purchased under finance leases were as follows:The GroupThe Company2007 2006 2007 2006$ $ $ $Plant and machinery 963,349 1,080,768 - -Motor vehicles 389,090 320,950 - -Office equipment 9,396 12,244 - -1,361,835 1,413,962 - -Lease assets are pledged as security for the related finance lease liability.The net book value of motor vehicles registered in the name of certain Directors and employees who were holding these motor vehicles in trust for the Group and theCompany were as follows:The GroupThe Company2007 2006 2007 2006$ $ $ $As at 30 September 178,011 274,289 93,849 145,040HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200763

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)4. Property, plant and equipment (Continued)The net book value of leasehold properties of the Group and the Company that were mortgaged as security for bank borrowings (Note 12) were as follows:The GroupThe Company2007 2006 2007 2006$ $ $ $7,584,604 7,850,718 3,277,447 3,484,406As at the balance sheet date, the Group’s and the Company’s leasehold buildings are as follows:Location Description TenureApproximate build-up area(sq m)No. 28 Jalan Buroh Singapore 619484 Office/factory 22 years from 1 August 1997 13,687.8No. 30 Jalan Buroh Singapore 619486 Office/warehouse 30 years from 11 May 1994 31,907.364 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)5. Intangible assetsThe GroupComputerGoodwill software Total$ $ $CostBalance at 1 October 2005 163,417 - 163,417Additions - 61,128 61,128Balance at 30 September 2006 and 1 October 2006 163,417 61,128 224,545Additions - 11,400 11,400Written off - (61,128) (61,128)Balance at 30 September 2007 163,417 11,400 174,817Accumulated amortisationBalance at 1 October 2005 - - -Amortisation for the financial year - - -Balance at 30 September 2006 and 1 October 2006 - - -Amortisation for the financial year - - -Balance at 30 September 2007 - - -Carrying amountsAt 30 September 2007 163,417 11,400 174,817At 30 September 2006 163,417 61,128 224,545HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200765

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)5. Intangible assets (Continued)The Company2007 2006$ $GoodwillCarrying amountsAt beginning and end of the financial year 163,417 163,417Goodwill comprise purchased goodwill when the Company bought over the business operations of Hock Guan Hardware & Company, a partnership in 1988. As at 30September 2007, the Directors of the Company had determined that there is no indication that the goodwill had been impaired.The amortisation period for the computer software is 5 years, using the straight-line method from the first day of utilisation. As at 30 September 2007, the installation of thecomputer software has not been completed. Hence, the amortisation of this asset, on the same basis as other property assets, commences only when the asset is readyfor its intended use.6. Investment in subsidiariesThe Company2007 2006$ $Unquoted equity shares, at cost 6,600,926 6,380,866The Directors of the Company had assessed for impairment in value of investment in subsidiaries. From the assessment, no allowance for impairment in value of investmentin subsidiaries is required.66 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)6. Investment in subsidiaries (Continued)Details of the subsidiaries are as follows:Country ofEffective equity interestheld by the Groupincorporation/operations Principal activities2007 2006% %Held by the CompanyJin Heng Li Hardware Sdn. Bhd. (a) 59.23 59.23 Malaysia Trading in all types of hardwareOriental Metals Pte Ltd (b) 99.99 99.99 Singapore Trading and manufacturing of steel productsHG Metal Investments Pte Ltd (b) 100.00 100.00 Singapore Investment holdingHeld by the HG Metal Investments Pte LtdNiho (Singapore) Pte Ltd (b) 72.29 72.29 Singapore Wholesalers and distributors of various typesof metals and fabricated metalsGalaxia Pte Ltd (b) 100.00 100.00 Singapore Rental of metal platesHG Metal Manufacturing Sdn Bhd (c) 100.00 - Malaysia DormantHeld by Niho (Singapore) Pte LtdKunshan Niho Co Ltd (d) 72.29 72.29 People’s Republic Wholesalers and distributors of various typesof China of metals and fabricated metals(a) Audited by BDO Binder, Malaysia, a member firm of BDO International.(b) Audited by BDO Raffles, Singapore.(c) This subsidiary has not commenced operations since its incorporation.(d) Audited by BDO Shanghai Zhonghua, People’s Republic of China, a member firm of BDO International.Acquisition of subsidiaries in financial year 2006On 15 August 2006, the Group acquired 72.29% of the issued share capital of Niho (Singapore) Pte Ltd which owns 100% of the effective equity interest in Kunshan NihoCo. Ltd, for a cash consideration of $1,500,000.In financial year 2006, the acquired companies contributed revenue and net profit of $540,947 and $9,255 respectively to the consolidated income statement for the periodbetween the date of acquisition and the balance sheet date.HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200767

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)6. Investment in subsidiaries (Continued)The impact on the Group’s revenue and net profit for the financial year 2006 would have been $6,759,248 and $54,907 respectively if the acquisition had been completedon 1 October 2005.The fair value of the identifiable assets and liabilities of the businesses as at the date of acquisitions were:Carrying amountsbefore combinationFair value recognisedon acquisition2006 2006$ $Property, plant and equipment 312,095 312,095Inventories 1,210,420 1,210,420Cash and bank balances 1,418,642 1,418,642Trade and other receivables 1,544,816 1,544,816Income tax recoverable 3,500 3,500Trade and other payables (2,444,547) (2,444,547)Deferred tax liabilities (900) (900)Net identifiable assets acquired 2,044,026 2,044,026Minority interests (544,026)Total purchase consideration 1,500,000Purchase consideration paid by cash (1,500,000)Cash acquired 1,418,642Net cash outflow on acquisition of subsidiaries (81,358)68 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)7. InventoriesThe Group The Company2007 2006 2007 2006$ $ $ $Trading inventories 168,875,406 91,006,790 167,561,050 88,874,183Finished goods 5,725,273 3,676,757 - -Work-in-progress 3,839,143 2,133,396 - -Raw materials 3,969,931 4,797,163 - -182,409,753 101,614,106 167,561,050 88,874,1838. Trade and other receivablesThe GroupThe Company2007 2006 2007 2006$ $ $ $Trade receivablesThird parties 92,510,106 95,372,135. 82,003,096 85,721,857Amounts due by subsidiaries - -. 3,375,417 84,225Amounts due by related parties 43,711 170,162. 43,711 170,162Allowance for doubtful receivables (3,835,813) (3,886,737). (3,698,025) (3,697,641)88,718,004 91,655,560 81,724,199 82,278,603HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200769

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)8. Trade and other receivables (Continued)The GroupThe Company2007 2006 2007 2006$ $ $ $Other receivablesThird parties 262,661 33,526 2,061 -Staff loans 3,300 17,400 3,300 17,393Rental, utilities and other deposits 222,853 197,680 162,470 112,270Prepaid operating expenses 9,340,561 228,102 2,883,185 193,197Amounts due by subsidiaries (non-trade)- Advance payment for purchase of land - - 2,725,729 -- Deposit for the purchase of land - - 3,662,390 -- Others - - 2,702,381 1,777,4539,829,375 476,708 12,141,516 2,100,31398,547,379 92,132,268 93,865,715 84,378,916Movements in allowance for doubtful trade receivables are as follows:Balance at beginning of financial year 3,886,737 1,533,972 3,697,641 1,401,349Allowance charged to income statement 1,002,211 3,118,304 1,002,211 3,024,827Allowance written back to income statement (781,931) (669,838) (765,251) (728,535)Bad debts written off against allowance (271,204) (95,701) (236,576) -Balance at end of financial year 3,835,813 3,886,737 3,698,025 3,697,64170 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)8. Trade and other receivables (Continued)Trade receivables are non-interest bearing and are generally on 60 to 90 days credit term.The staff loans are unsecured, interest-free and repayable within the stipulated dates.The non-trade amounts due by subsidiaries are unsecured, interest-free and repayable on demand.Trade and other receivables are denominated in the following currencies:The GroupThe Company2007 2006 2007 2006$ $ $ $United States Dollar 12,971,119 8,887,827 15,572,187 8,887,827Ringgit Malaysia 1,979,856 1,973,394 - -Singapore Dollar 82,040,006 81,254,166 78,293,528 75,491,089Chinese Renminbi 1,556,398 16,881 - -98,547,379 92,132,268 93,865,715 84,378,9169. Cash and cash equivalentsThe GroupThe Company2007 2006 2007 2006$ $ $ $Cash at bank and on hand 20,298,416 14,426,869 19,606,141. 5,080,125Fixed deposits with banks 10,822,570 5,174,260 6,557,486 11,460,766Cash and cash equivalents as per balance sheets 31,120,986 19,601,129 26,163,627 16,540,891Fixed deposits pledged with bank (Note 12) (479,172) (94,135).Cash and cash equivalents per consolidated cash flow statement 30,641,814 19,506,994HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200771

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)9. Cash and cash equivalents (Continued)Fixed deposits bear interest ranging from 0.4 % to 3.34 % per annum (2006 : 2.13 % to 3.34 % per annum) and for tenures ranging from 1 to 365 days (2006 : 9 to 180 days).Cash and cash equivalents are denominated in the following currencies:The Group The Company2007 2006 2007 2006$ $ $ $United States Dollar 2,063,727 1,564,073 909,834 1,453,876Chinese Renminbi 101,010 32,725 - -Singapore Dollar 28,351,286 17,887,576 25,237,149 15,087,015Malaysian Ringgit 604,963 116,755 16,644 -31,120,986 19,601,129 26,163,627 16,540,89110. Trade and other payableThe Group The Company2007 2006 2007 2006$ $ $ $Trade payables 69,425,632 38,601,707 64,755,760 35,023,589Deposits from customers 77,832 77,832 45,832 45,832Accrued operating expenses 5,430,734 4,231,494 4,942,538 3,889,833Other payables 298,079 243,430 - -Amounts due to related parties - non-trade - 74,138 - -Amounts due to subsidiaries- trade - - 905,497 2,071,586- non-trade - - 531,090 851,352Provision for Director’s fee 135,000 210,000 135,000 210,00075,367,277 43,438,601 71,315,717 42,092,19272 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)10. Trade and other payable (Continued)Trade payables are non-interest bearing and are normally settled on 30 to 60 days’ term.The non-trade amounts due to subsidiaries and related parties are unsecured, interest-free and repayable on demand.Trade and other payables are denominated in the following currencies:The GroupThe Company2007 2006 2007 2006$ $ $ $United States Dollar 31,026,349 20,454,913 29,099,262 20,454,914Ringgit Malaysia 1,127,027 993,246 - -Singapore Dollar 42,428,845 21,986,659 42,216,455 21,637,278Chinese Renminbi 785,056 3,783 - -75,367,277 43,438,601 71,315,717 42,092,19211. Finance lease payablesAs at balance sheet date, the Group has obligations under finance leases that are repayable as follows:The Group2007Minimum leasepaymentsFuture financechargesPresent value oflease payments$ $ $Within one financial year 337,104 (38,900) 298,204After one financial year but less than five financial years 647,534 (62,220) 585,314984,638 (101,120) 883,5182006Within one financial year 367,782 (40,260) 327,522After one financial year but less than five financial years 834,553 (83,489) 750,6641,202,335 (123,749) 1,078,186Lease terms range from two to seven years with options to purchase at the end of the lease term. Interest is payable at average effective interest rates ranging from 4.67%to 6.60% (2006: 3.3% to 5.7%) per annum.HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200773

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)12. Bank borrowingsThe GroupThe Company2007 2006 2007 2006$ $ $ $SecuredCurrent liabilities- Term loans 1,710,595 1,500,000 1,000,000 1,000,000- Term loans (reclassified from non-current liabilities*) - 2,650,000 - 2,650,0001,710,595 4,150,000 1,000,000 3,650,000Non-current liabilities- Term loans 3,178,291 2,012,182 1,650,000 -4,888,886 6,162,182 2,650,000 3,650,000UnsecuredCurrent liabilities- Trust receipts 119,651,575 99,525,686 113,220,911 89,608,247- Invoice financing 1,270,800 463,834 - -- Term loan - 16,000 - -- Convertible loan (reclassified from non-current liabilities*) - 9,939,729 - 9,939,729120,922,375 109,945,249 113,220,911 99,547,976Non-current liabilities- Term loan - 24,479 - -120,922,375 109,969,728 113,220,911 99,547,976Total 25,811,261 116,131,910 115,870,911 103,197,97674 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)12. Bank borrowings (Continued)Bank borrowings are repayable as follows:The GroupThe Company2007 2006 2007 2006$ $ $ $Current liabilitiesWithin one financial year- secured 1,710,595 4,150,000 1,000,000 3,650,000- unsecured 120,922,375 109,945,249 113,220,911 99,547,976122,632,970 114,095,249 114,220,911 103,197,976Non-current liabilitiesAfter one financial year but within five financial years- secured 3,178,291 2,012,182 1,650,000 -- unsecured - 24,479 - -3,178,291 2,036,661 1,650,000 -* At the previous financial year-end, 30 September 2006, the Company had not conformed to banks’ covenants for the banking and credit facilities granted. Accordingly,all non-current portion of the bank loans and convertible loan of $2,650,000 and $9,939,729 respectively of the Group and the Company had been reclassified as currentin the balance sheet.SecuredThe secured portions of the bank borrowings of the Group and the Company are secured by way of:(i) legal mortgage over the leasehold buildings of the Group and of the Company with net book value of $7,587,604 (2006: $7,850,718) and $3,277,447 (2006:$3,484,406) respectively as at 30 September 2007; and(ii) pledge over the fixed deposits of a subsidiary (Note 9).HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200775

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)12. Bank borrowings (Continued)UnsecuredThe GroupAs at the balance sheet date, the unsecured portion of bank borrowings of a subsidiary, Oriental Metals Pte Ltd of $5,099,851 (2006: $9,917,439) was supported bycorporate guarantees given by the Company.The CompanyAs at the balance sheet date, the unsecured portion of bank borrowings of the Company of $113,220,911 (2006: $89,608,247) was supported by corporate guarantees givenby a subsidiary, Oriental Metals Pte Ltd.Interest rate risksThe weighted average effective interest rates of the borrowings at the balance sheet date were as follows:The Group The Company2007 2006 2007 2006% % % %Term loans 4.55 6.05 4.00 6.05Convertible loan - 4.32 - 4.32Trust receipts 7.16 6.14 7.19 5.78Invoice financing 5.78 7.93 - -Bank overdraft - 6.25 - 7.25Banker’s acceptance 3.76 - - -76 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)12. Bank borrowings (Continued)Carrying amounts and fair valuesThe carrying amounts of the current borrowings approximated their fair values.The carrying amounts and fair values of non-current borrowings were as follows:The GroupThe GroupCarrying amountsFair values2007 2006 2007 2006$ $ $ $Term loans 3,178,291 2,036,661 2,885,197 1,803,167The CompanyThe CompanyCarrying amountsFair values2007 2006 2007 2006$ $ $ $Term loans 1,650,000 - 1,428,977 -In 2005, the Company entered into a $10,000,000 convertible loan agreement (“2005 Convertible Loan Agreement“) with Oversea-Chinese Banking Corporation Limited(“OCBC”) for the purpose of corporate expansion and/or to be applied to general working capital requirements. On 15 August 2006, the Company and OCBC entered intoa revised Convertible Loan Agreement, for the purpose of re-financing the 2005 Convertible Loan Agreement. Under the revised Convertible Loan Agreement, OCBC hasan option to convert the loan amount into new ordinary share of the Company up to 27,700,831 at the exercise price of $0.361 per shares in the capital of the Company atany time until the maturity date on 5 July 2008.Proceeds from the convertible loan have been fully utilised in providing working capital for the Company.HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200777

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)12. Bank borrowings (Continued)Carrying amounts and fair values (Continued)The net proceeds received from the issue of the convertible loan have been split between the liability element and equity component, representing the fair value of theembedded option to convert the liability into equity of the Group and Company, as follows:The Groupand the Company2006$Nominal value of convertible loan issued 10,000,000Equity component (100,610)Liability component on initial recognition at 1 October 2005 9,899,390Interest expense 451,416Interest paid (411,077)Liability component at 30 September 2006 9,939,729The fair value was calculated using cash flows discounted at a borrowing rate of 3.27%. Interest expense on the convertible loan was calculated on the effective interestbasis by applying the interest rate of 3.63% per annum for an equivalent non-convertible loan at the date of issue of the convertible loan to the liability component of theconvertible loan.During the current financial year, OCBC had converted the entire convertible loan of $10,000,000 at exercise prices ranging from $0.305-$0.361 into 31,171,147 newordinary shares of the Company. These newly issued ordinary shares of the Company rank pari-passu with the existing issued ordinary shares of the Company.78 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)13. Derivative financial instrumentsThe Group and the Company2007 2006$ $Forward foreign exchange contracts 2,667,408 4,870,228The Group and the Company use currency derivatives to hedge significant future transactions and cash flows in foreign currency. The Group and the Company is party toa variety of forward foreign exchange contracts in the management of its exchange rate exposures. The instruments purchased are denominated in United States Dollarwhich is the currency of the Group’s and the Company’s purchases.At the balance sheet date, the total notional amount of outstanding forward foreign exchange contracts to which the Group and the Company are committed is as follows:The Group and the Company2007 2006$ $Foreign currency forward contracts 28,490,000 134,895,000The above derivatives are measured at fair value at each balance sheet date. Their fair values are determined based on the quoted market price for equivalent instrumentsat the balance sheet date. All these foreign currency forward contracts expire within the next financial year.Changes in fair value of hedging currency derivatives amounting to $2,202,820 (2006: $4,870,228) have been derecognised/( recognised) in the hedging reserve in equity.HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200779

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)14. Deferred tax assets/(liabilities)The Group and the CompanyThe GroupThe Company2007 2006 2007 2006$ $ $ $Deferred tax asset 480,133 974,000 480,133 974,000Deferred tax liabilities (378,511) (386,611) (56,033) (56,033)101,622 587,389 424,100 917,967Movement in deferred tax assets are follows:The GroupThe Company2007 2006 2007 2006$ $ $ $Balance at beginning of financial year 974,000 - 974,000 -Recognised in equity (493,867) 974,000 (493,867) 974,000Balance at end of financial year 480,133 974,000 480,133 974,000Deferred tax asset is in respect of the hedging reserve.Movements in deferred tax liabilities are as follows:GroupCompany2007 2006 2007 2006$ $ $ $Balance at beginning of financial year 386,611 332,080 56,033 56,033Recognised in income statement (8,100) 54,531 - -Balance at end of financial year 378,511 386,611 56,033 56,033Deferred tax liability arises as a result of tax effect of the excess of tax over book depreciation of certain property, plant and equipment.80 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

15. Share capitalThe Company2007 2006$ $Issued and fully-paid: 35,273,598 35,243,232 - 30,366 14,807,960 - 19,240,000 - 10,000,000 - 47,216 - (1,172,086) - 78,196,688 35,273,598 16. Capital reserve

FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)16. Capital reserve (Continued)Under the revised agreement, OCBC was granted an option to convert the loan amount into new ordinary shares of the Company at any time until maturity date on 5 July2008.The net proceeds received from the issue of convertible loan was split into the liability element and equity component, representing the fair value of the embedded optionof these conversion shares, net of certain expenses.conversion shares. The surplus has been recognised in the capital reserve and is distributable.17. Hedging reserveThe Group and the Company2007 2006$ $ 3,896,228 - - 3,896,228 (1,708,953) - 2,187,275 3,896,228

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)18. Foreign currency translation accountThe foreign currency translation account comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations that are notintegral to the operations of the Company and is non-distributable. Movement in this account is set out in the consolidated statement of changes in equity.19. RevenueRevenue of the Group and of the Company represents invoiced value of goods sold less goods returned and discounts allowed, net of goods and services tax. Revenue ofthe Group is in respect of external transactions only.20. Other operating incomeThe Group2007 2006$ $Allowance for doubtful trade receivables no longer required, now written back 781,931 669,838Claims and compensation received 146,171 152,862Bad trade receivables recovered - 3,288Commission income 31,449 28,792Foreign exchange gain, net 488,606 3,235,186Allowance for inventories obsolescence written back 45,000 561,646Gain on disposal of plant and equipment 74,154 84,242Gain on disposal of other investments - 1,645,521Allowance for impairment in value of other investments written back - 1,478,739Interest income- fixed deposits 260,751 170,143- current accounts with banks 1,011 5,432Rental income 174,793 147,975Sundry income 43,968 28,8492,047,834 8,212,513HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200783

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)21. Finance costsThe Group2007 2006$ $Interest expense- bank overdrafts 17,552 20,210- bankers’ acceptance 6,850 -- invoice financing 124,214 7,303- finance lease 49,688 21,529- term loans 260,058 295,542- trust receipts 8,495,371 6,667,818- convertible loan 91,897 451,4169,045,630 7,463,81822. Profit before income taxProfit before income tax is arrived at after charging the following:The Group2007 2006$ $Intangible assets written off 61,128 -Allowance made for- doubtful trade receivables 1,002,211 3,118,304Bad trade receivables written off 505 4,674Depreciation of property, plant and equipment 1,528,260 1,217,693Directors’ fees- Directors of the Company 135,000 210,000- Directors of subsidiaries 4,355 4,37884 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)22. Profit before income tax (Continued)Profit before income tax is arrived at after charging the following: (Continued)The Group2007 2006$ $Directors’ remuneration- Directors of the Company 3,126,854 3,170,709- Directors of subsidiaries 151,708 79,348Fees paid/payable for non-audit services- auditors of the Company 17,000 10,269- other auditors - 28,000Operating lease expenses 1,382,674 1,168,534Staff cost- Salaries, bonus and allowances 7,415,111 6,318,905- Employee contributions todefined contribution plan 398,789 307,805- Other staff welfare expenses 75,074 60,2777,888,974 6,686,987HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200785

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)23. Income tax expenseThe Group2007 2006$ $Current income tax- Current financial year 4,040,921 2,521,331- Under/(Over) provision in prior financial years 192,998 (104,575)4,233,919 2,416,756Deferred tax- Current financial year (14,918) 56,531- Under/(Over) provision in prior financial years 6,818 (2,000)(8,100) 54,531Total income tax expense in consolidated income statement 4,225,819 2,471,287Reconciliation of effective tax rateProfit before income tax 22,538,858 16,347,895Income tax calculated using statutory tax rate of 18% (2006: 20%) 4,056,994 3,269,579Tax effect of:- expenses not deductible for tax purposes 117,712 95,805- tax exempt revenue (47,897) (627,004)Effect of different tax rate in other countries 29,894 24,963Under/(Over) provision in prior financial years 192,998 (104,575)Tax exemption (127,398) (21,567)Under/(Over) provision of deferred tax in prior financial years 6,818 (2,000)Others (3,302) (163,914)4,225,819 2,471,28786 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)24. Earnings per share(a)Basic earnings per shareBasic earnings per share is calculated by dividing the Group’s profit attributable to equity holders by the weighted average number of ordinary shares in issue duringthe financial year.The earnings per share is calculated as follows:The Group2007 2006Net profit attributable to equity holders of the Company $18,108,587 $ 13,756,942Weighted average number of shares in issue during the financial year 225,003,420 176,216,160Basic earnings per share 8.05 cents 7.81 centsHG METAL MANUFACTURING LIMITED ANNUAL REPORT 200787

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)24. Earnings per share (Continued)(b)Diluted earnings per shareFor the purpose of calculating diluted earnings per share, profit attributable to equity holders of the Company and the weighted average numbers of ordinary sharesoutstanding are adjusted for the effects of all dilutive potential ordinary shares. The Company has two categories of dilutive potential ordinary shares: convertibleloan and bonus warrants.The Group2007 2006$ $Net profit attributable to equity holders of the Company 18,108,587 13,756,942Interest expense on convertible loan (net of tax) - 361,133Net profit used to determine diluted earnings per share 18,108,587 14,118,075Weighted average number of shares in issue for basic earnings per share during the financial year 225,003,420 176,216,160Adjustments for :- assumed full conversion of convertible loan - 27,700,831- assumed full exercise of bonus warrants 43,957,541 -268,960,961 203,916,991Diluted earnings per share 6.73 cents 6.92 centsA total of 96,499 warrants were converted during the current financial year with none being converted in 2006.The entrie convertible loan was converted into equity shares during the current financial year 2007.There was no dilution for the bonus warrants in the financial year 2006 because the exercise price of bonus warrants was higher than the fair value of the shares.88 HG Metal ManufacturinG liMited AnnuAl RepoRt 2007

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)25. Dividends2007 2006$ $A first and final dividend paid of Nil (2006: 1.25 cents) per ordinary share, less income tax at 20% for the financial year - 1,754,319A special dividend paid of 4 cents (2006: 0.3125 cents) per ordinary share consisting of 3.95 cents frankable dividends and 0.05 centsone-tier tax exempted dividends 7,413,784 438,5807,413,784 2,192,899The Directors of the Company recommended a special dividend in respects of financial year ended 30 September 2007 as follows:$Final tax-exempted dividend of 1 cent per ordinary share 3,185,240Special tax-exempt dividend of 0.25 cent per ordinary share 796,3103,981,550The proposed dividend:(i)(ii)(iii)is subject to the approval by the members of the Company at the forthcoming Annual General Meeting.is not accrued as a liability in the balance sheet in the current financial year in accordance with FRS 10 – Events After Balance Sheet Date; andwill be based on the issued share capital of the Company as at books closure date.HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200789

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)26. Significant transactions with related companies and related partiesFor the purposes of these financial statements, parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party orexercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control orcommon significant influence. Related parties may be individuals or other entities.In addition to the information disclosed elsewhere in the financial statements, the following were significant transactions between the Company and its related companiesand related parties on rates and terms agreed during the financial year:The GroupThe Company2007 2006 2007 2006With subsidiaries $ $ $ $Sales - - 9,039,441 4,951,884Purchases - - 4,253,606 1,733,878Rental expense - - - 16,000Management fee income - - 731,536 586,453Engineering services - - 372,000 240,000Dividend income - - 14,123 8,355With related parties*Sales 288,611 201,168 3,260,549 201,168* Excluding transactions conducted under a shareholders’ mandate pursuant to Rule 920 of the SGX Listing Manual.90 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)26. Significant transactions with related companies and related parties (Continued)The following transactions were conducted during the financial year pursuant to the shareholders’ mandate obtained under Rule 920 of the SGX Listing Manual:The Group2007 2006$ $Sales to related parties- Lingco Shipbuilding Pte Ltd 1,664,504 36,398- Super Marine Supplies Pte Ltd 2,513,405 1,108,637Compensation of key management personnelThe remuneration of Directors and other members of key management of the Group and of the Company during the financial year are as follows:The Group2007 2006$ $Directors of the CompanySalaries and other short-term employee benefits 2,997,136 3,146,960Post-employment benefits 129,718 23,749Key management personnelSalaries and other short-term employee benefits 439,658 435,245Post-employment benefits 42,968 42,2973,609,480 3,648,251HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200791

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)27. Commitments and contingent liabilitiesOperating lease commitmentsCompany as a lesseeAs at the balance sheet date, the Group and the Company have operating lease commitments for rental payable in subsequent accounting periods as follows:The GroupThe Company2007 2006 2007 2006$ $ $ $Future minimum lease paymentsWithin one financial year 1,367,932 853,312 960,048 503,375After one financial year but within five financial years 5,009,999 2,985,557 3,840,191 1,783,099After five financial years 19,188,595 7,971,287 17,254,035 5,795,07425,566,526 11,810,156 22,054,274 8,081,548The above operating lease commitments are based on existing rates. The lease agreements provide a periodic revision of such rates in the future.As at the balance sheet date, the Company have contracted with its subsidiary company for the following future minimum lease payments:The Company2007 2006$ $Future minimum lease paymentsWithin one financial year 89,378 63,264After one financial year but within five financial years 13,000 58,452102,378 121,71692 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)27. Commitments and contingent liabilities (Continued)Capital commitmentsAs at the balance sheet date, the Group and the Company had the following capital commitments contracted but not provided for in the financial statements:The GroupThe Company2007 2006 2007 2006$ $ $ $Purchase of software 651,875 - 651,875 -Purchase of plant & machinery 106,300 - - -Purchase of land 3,500,000 - - -Factory extension at No. 30 Jalan Buroh 2,247,676 220,000 2,247,676 220,000Factory extension 485,998 - - -Contingent liabilitiesIntra-group financial guarantees comprise corporate guarantees granted by the Company to banks in respect of banking facilities amounting to $13,708,000 (2006:$13,556,230) to secure banking facilities provided to certain subsidiaries. The financial guarantees will expire when the loans have been paid and discharged and/or whenthe banking facilities are no longer available to the subsidiaries. These financial guarantee contracts are accounted for as insurance contracts.The principal risk to which the Company is exposed is credit risk in connection with the guarantee contracts it has issued. The credit risk represents the loss that would berecognised upon a default by the subsidiaries, the guarantees were given on behalf of.There are no terms and conditions attached to the guarantee contracts that would have a material effect on the amount, timing and uncertainty of the Company’s futurecash flows.The intra-group financial guarantees are eliminated in preparing the consolidated financial statements.HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200793

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)27. Commitments and contingent liabilities (Continued)The GroupThe Company2007 2006 2007 2006$ $ $ $Letter of credit 42,789,099 14,168,256 37,714,571 13,235,279Credit facilities for subsidiaries 13,708,000 13,556,230 13,708,000 13,556,23056,497,099 27,724,486 51,422,571 26,791,509The amount of credit facilities utilised by the subsidiary company as at the balance sheet date amounted to $5,099,851 (2006: $10,890,416).In the opinion of the Directors, no loss is anticipated from these contingent liabilities.28. Segment reportingA segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or serviceswithin a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.Segment information is presented in respect of the Group’s business and geographical segments. The primary format, business segments, is based on the Group’smanagement and internal reporting structure.Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.Segment capital expenditure is the total costs incurred during the financial year to acquire segment assets that are expected to be used for more than one financial year.Business segmentsThe Group is organised into two main business segments. Segment assets consist primarily of property, plant and equipment, inventories, receivables, fixed deposits withbanks and cash and bank balances. Segment liabilities comprise operating liabilities. Capital expenditure comprises additions to property, plant and equipment.94 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)28. Segment reporting (Continued)Financial year ended 30 September 2007Trading Manufacturing Elimination The Group$ $ $ $REVENUESales to external customers 395,964,694 42,177,694 - 438,142,388Inter-segment sales 9,051,441 4,613,606 (13,665,047) -Total 405,016,135 46,791,300 (13,665,047) 438,142,388RESULTSSegment results 28,420,938 3,200,852 (299,064) 31,322,726Interest expense (8,157,352) (888,278) - (9,045,630)Interest income 242,360 19,402 - 261,762Profit before income tax 20,505,946 2,331,976 (299,064) 22,538,858Income tax expense (3,890,228) (335,591) - (4,225,819)Profit after income tax 16,615,718 1,996,385 (299,064) 18,313,039Minority interests (101,782) (102,670) - (204,452)Net profit for the financial year 16,513,936 1,893,715 (299,064) 18,108,587OTHER INFORMATIONCapital expenditure 1,306,201 1,048,000 (91,372) 2,262,829Depreciation expense 715,756 816,788 (4,284) 1,528,260ASSETS AND LIABILITIESSegment assets 311,720,623 35,944,990 (22,034,991) 325,630,622Segment liabilities 201,548,127 20,596,210 (13,824,779) 208,319,558HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200795

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)28. Segment reporting (Continued)Financial year ended 30 September 2006Trading Manufacturing Elimination The Group$ $ $ $REVENUESales to external customers 339,151,291 23,663,880. - 362,815,171Inter-segment sales 5,459,452 1,226,310. (6,685,762) -.Total 344,610,743 24,890,190. (6,685,762) 362,815,171RESULTSSegment results 22,872,415 2,398,063 (1,634,340) 23,636,138Interest expense (6,878,240) (585,578) - (7,463,818)Interest income 166,796 8,779 - 175,575Profit before income tax 16,160,971 1,821,264 (1,634,340) 16,347,895Income tax expense (2,099,250) (372,037) - (2,471,287)Profit after income tax 14,061,721 1,449,227 (1,634,340) 13,876,608Minority interests (117,092) (2,574) - (119,666)Net profit for the financial year 13,944,629 1,446,653 (1,634,340) 13,756,942OTHER INFORMATIONCapital expenditure 539,722 2,735,890 - 3,275,612Depreciation expense 624,543 593,150 - 1,217,693Capital expenditure arising from acquisition of subsidiaries 312,095 - - 312,095Allowance for impairment in value of other investments written back 1,478,739 -. - 1,478,739ASSETS AND LIABILITIESSegment assets 206,519,344 32,885,344 (12,694,921) 226,709,767Segment liabilities 153,400,090 19,442,584 (5,544,343) 167,298,33196 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)28. Segment reporting (Continued)Geographical segmentsThe Group’s business operates in these main geographical areas. Sales revenue is based on the country in which the customer is located. Segment assets consist primarilyof property, plant and equipment, inventories, receivables, fixed deposits with banks and cash and bank balances. Capital expenditure comprises additions to property,plant and equipment. Segment assets and capital expenditure are shown by the geographical area in which the assets are located.Financial year ended 30 September 2007Singapore Malaysia Indonesia Others Elimination The Group$ $ $ $ $ $Sales to external Customers 198,460,160 159,727,035 65,231,105 14,724,088 - 438,142,388Inter-segment sales 13,665,047 - - - (13,665,047) -Total 212,125,207 159,727,035 65,231,105 14,724,088 (13,665,047) 438,142,388Segment assets 336,468,172 10,312,374 - 2,552,113 (23,702,037) 325,630,622Capital expenditure 2,042,457 193,828 - 117,916 (91,372) 2,262,829Financial year ended 30 September 2006Sales to external Customers 164,305,350 122,056,140 67,668,025 8,785,656 - 362,815,171Inter-segment sales 6,685,762 - - - (6,685,762) -Total 170,991,112 122,056,140 67,668,025 8,785,656 (6,685,762) 362,815,171Segment assets 235,013,869 3,218,441 - 1,116,345 (12,638,888) 226,709,767Capital expenditure 3,096,948 178,664 - - - 3,275,612HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200797

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)29. Financial risk managementThe Group and the Company are exposed to financial risks arising from the normal course of business. The Group and the Company do not hold or issue derivative financialinstruments for trading purpose.(a)Credit riskThe Group and the Company have a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluation is performed on allcustomers. The Group and the Company have no significant concentration of credit risk.The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet.(b)Interest rate riskThe Group’s and the Company’s exposure to market risk for changes in interest rates relate primarily to interest-bearing fixed deposits and debt obligations withfinancial institutions. Sometimes, the Group and the Company use interest rate swap contracts to hedge the Group and the Company’s exposure to interest raterisks. As at the balance sheet date, the Group and the Company did not have any outstanding interest rate swap contracts.(c)Foreign currency riskThe Group and the Company transacts business in various foreign currencies, including the United States Dollar, Ringgit Malaysia, Euro and Chinese Renminbi andis therefore exposed to foreign exchange risk. The Group uses foreign currency forward contracts to hedge its exposure to foreign currency exchange risk arisingfrom purchases which are mainly denominated in United States Dollar.The Group and the Company have investments in foreign subsidiaries whose net assets are exposed to foreign currency translation risk.(d)Liquidity riskThe Group and the Company manage its liquidity risk by ensuring the availability of funding through an adequate amount of committed credit facilities from financialinstitutions. In addition, the Group and the Company also maintain surplus cash for future investment opportunities. Due to the nature of the Group’s and theCompany’s underlying business, management aims at maintaining flexibility in funding by keeping committed credit lines available.98 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)29. Financial risk management (Continued)(e)Fair valuesThe carrying amounts of the financial assets and liabilities in the financial statements represent their respective net fair values due to the relatively short-term maturingof these financial instruments.30. Events occurring subsequent to balance sheet dateSubsequent to the balance sheet date, the Company proposed a bonus issue of 106,174,534 new ordinary shares on the basis of 1 new ordinary share credited as fully paidfor every 3 existing ordinary shares held.HG METAL MANUFACTURING LIMITED ANNUAL REPORT 200799

APPENDIX1. INTRODUCTIONThe directors of HG Metal Manufacturing Limited (the “Company”) propose to renew the Mandate (as defined in Section 2.2 below) in relation to Interested PersonTransactions (defined in Section 2.4 below) with the Interested Persons (defined in Section 2.3 below).The purpose of this Appendix, to be circulated to shareholders of the Company (“Shareholders”) together with the Company’s annual report, is to provide the relevantinformation to the shareholders of the Company (the “Shareholders”) relating to the renewal of the Mandate.The approval of the Shareholders for the renewal of the Mandate will be sought at the Annual General Meeting (“AGM”) of the Company to be held at No. 28 Jalan Buroh,Jurong Town, Singapore 619484 on 29 January 2008 at 10 a.m.The SGX-ST takes no responsibility for the accuracy of any statements or opinions made in this Appendix.2. THE PROPOSED RENEWAL OF THE MANDATE2.1 CHAPTER 9 OF THE LISTING MANUALa) Chapter 9 of the Listing Manual (the “Listing Manual”) of the Singapore Exchange Securities Trading Limited (the “SGX-ST”) deals with transactions in which a listedcompany or any of its subsidiaries and associated companies propose to enter into with an interested person (defined below) of the listed company.b) In accordance with Chapter 9 of the Listing Manual, the listed company is required to make an immediate announcement, or to make an immediate announcementand seek its shareholders’ approval for an interested person transaction if the value of that transaction alone or on aggregation with other transactions conductedwith the same interested person during the financial year reaches, or exceeds, certain materiality thresholds.c) Except for certain transactions which, by reason of the nature of such transactions, are not considered to put the listed company at risk to its interested person andhence are excluded from the ambit of Chapter 9, immediate announcement and shareholders’ approval would be required in respect of transactions with interested100 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

APPENDIXpersons if certain financial thresholds (which are based on the value of the transaction as compared with the listed company’s latest audited net tangible assets(“NTA”)) are reached or exceeded. In particular, shareholders’ approval is required for an interested person transaction of a value equal to, or exceeds:(i) 5% of the group’s latest audited NTA; or(ii) 5% of the group’s latest audited NTA, when aggregated with other transactions entered into with the same interested person (as defined below) during thesame financial year. However, a transaction which has been approved by shareholders, or is the subject of aggregation with another transaction that has beenapproved by shareholders, need not be included in any subsequent aggregation.However, the above does not apply to any transaction below S$100,000.d) In relation to the Company, for the purposes of Chapter 9 of the Listing Manual, 5% of the latest audited NTA of the HG Metal Group would be approximately S$5.9million. This is computed based on the latest audited NTA of HG Metal Group for the financial period ended 30 September 2007 of approximately S$117.1 million.For the purposes of this Appendix, the HG Metal Group is defined as the Company and its subsidiaries.e) Chapter 9 of the Listing Manual permits a listed company, however, to seek a general mandate from its shareholders for recurrent transactions of a revenue or tradingnature or those necessary for its day-to-day operations such as the purchase and sale of supplies and materials (but not in respect of the purchase or sale of assets,undertakings or businesses) that may be carried out with the listed company’s interested persons (as defined below).f) Under the Listing Manual:(i)an “entity at risk” means:1) the listed company;2) a subsidiary of the listed company that is not listed on the SGX-ST or an approved exchange; or3) an associated company of the listed company that is not listed on the SGX-ST or an approved exchange, provided that the listed company and/or itssubsidiaries (the “listed group”), or the listed group and its interested person(s), has control over the associated company;HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007101

APPENDIX(ii)an “interested person” means a director, chief executive officer or controlling shareholder of the listed company or an associate of such director, chief executiveofficer or controlling shareholder;(iii) an “associate” in relation to an interested person who is a director, chief executive officer or controlling shareholder includes an immediate family member (thatis, the spouse, child, adopted-child, step-child, sibling or parent) of such director, chief executive officer or controlling shareholder, the trustees of any trust ofwhich the director/his immediate family, the chief executive officer/his immediate family or controlling shareholder/his immediate family is a beneficiary or, in thecase of a discretionary trust, is a discretionary object, and any company in which the director/his immediate family, the chief executive officer/his immediatefamily or controlling shareholder/his immediate family has or have an aggregate interest (directly or indirectly) of 30 per cent or more, and, where a controllingshareholder is a corporation, its subsidiary or holding company or fellow subsidiary or a company in which it and/or they have (directly or indirectly) an interestof 30% or more;(iv) an “approved exchange” means a stock exchange that has rules which safeguard the interests of shareholders against interested person transactions accordingto similar principles to Chapter 9 of the Listing Manual;(v) an “interested person transaction” means a transaction between an entity at risk and an interested person; and(vi) a “transaction” includes:-1) the provision or receipt of financial assistance;2) the acquisition, disposal or leasing of assets;3) the provision or receipt of services;4) the issuance or subscription of securities;5) the granting of or being granted options; and6) the establishment of joint ventures or joint investments; whether or not in the ordinary course of business, and whether or not entered into directly orindirectly.102 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

APPENDIX2.2 BACKGROUNDLingco Marine Pte Ltd (“Lingco”), a substantial shareholder of the Company, holds 6.31% of the issued and paid-up capital of the Company.Mr Sia Ling Sing, a non-executive Director of the Company appointed on 1 July 2003, personally holds 3.78% of the issued and paid-up capital of the Company as at 31December 2007. Mr Sia Ling Sing is also the Managing Director of Lingco and holds 30.17% in the capital of Lingco. The other shareholders of Lingco are family membersof Mr Sia Ling Sing except for one (1) shareholder who is an unrelated third party holding 4.39% in the capital of Lingco as at 31 December 2007. Lingco is, therefore, anassociate of Mr Sia Ling Sing for the purposes of Chapter 9 of the Listing Manual.Mr Sia Ling Sing also has shareholdings and directorships in other various companies which are in the business of shipbuilding, ship operation and chartering. Lingco ispart of this group of companies.The Directors envisage that the HG Metal Group will continue to transact with Super Marine as well as Lingco Shipbuilding Pte Ltd (“Lingco Shipbuilding”), a wholly-ownedsubsidiary of Lingco, for the sale of steel products, and these transactions with the Interested Persons may exceed 5% of the HG Metal Group’s NTA.As at an Extraordinary General Meeting of the Company held on 8 October 2002, Shareholders approved, inter alia, the grant of the mandate (the “Mandate”) to permit theCompany, its subsidiaries and associated companies or any of them to enter into the Interested Person Transactions (defined in Section 2.3 below), provided that suchtransactions are carried out in the normal course of business, at arm’s length and on normal commercial terms.2.3 CLASSES OF INTERESTED PERSONSThe Mandate will apply to transactions for the sale and purchase of steel products which are carried out with the following Interested Persons (the “Interested Persons”):(a)(b)Super Marine; andLingco Shipbuilding.HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007103

APPENDIX2.4 CATEGORIES OF INTERESTED PERSON TRANSACTIONSThe Mandate covers the sale and purchase of steel products to the Interested Persons (the “Interested Persons Transactions”).The Mandate does not cover any Interested Person Transaction which has a value below $100,000 as the threshold and aggregation requirements of Chapter 9 of theListing Manual do not apply to transactions below $100,000 each. Transactions with Interested Persons which are not covered by the Mandate will be subject to the relevantprovisions of Chapter 9 of the Listing Manual and the current review procedures adopted by the Company as disclosed on page 62 of the Company’s prospectus dated 13March 2002 (Reproduced in Annexure 1 to the Appendix).2.5 RATIONALE FOR THE MANDATEThe Mandate and the annual renewal thereof would obviate the need to make separate announcements and/or convene separate general meetings each time an InterestedPersons Transaction which crosses the relevant thresholds under Rules 905 and 906 of the Listing Manual is contemplated. The Mandate would therefore result in savingsin administrative time, inconveniences and expenses, while the review procedures to be implemented as set out below would enable the Interested Persons Transactions tobe entered into on arm’s length basis and normal commercial terms, without compromising Shareholders’ interests, the corporate objective of the HG Metal Group or theability of the HG Metal Group to respond to business opportunities.The review procedures to be implemented pursuant to the Mandate seek to ensure that the Interested Persons Transactions will comply with the review criteria set outbelow.Pursuant to Chapter 9 of the Listing Manual, the aggregate value of all Interested Persons Transactions conducted pursuant to the Mandate in each financial year will bedisclosed in the Company’s annual report for that year. In addition, the Company will announce the aggregate value of the Interested Persons transactions conductedpursuant to the Mandate for the financial periods which it is required to report on (in accordance with Rule 705 of the Listing Manual) within the time required for theannouncement of such report. These disclosures will be in the form set out in Rule 907 of the Listing Manual.The Mandate will continue to be in force subject to renewal by Shareholders at each annual general meeting of the Company.The Company will seek a fresh Mandate if the review procedures outlined below to be adopted for the Interested Persons transactions should become inappropriate, or if theaudit committee of the Company (the “Audit Committee”) is unable to ensure that such transactions are on normal commercial terms and are not prejudicial to the interestsof the Company and its minority Shareholders.104 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

APPENDIX2.6 REVIEW PROCEDURES FOR INTERESTED PERSON TRANSACTIONSTo ensure that the transactions with the Interested Persons are undertaken at arm’s length basis and on normal commercial terms, the Mandate will encompass the followingreview procedures:(a)the terms of each proposed transaction between the HG Metal Group and the Interested Persons should be no less favourable to the HG Metal Group than the termswhich could be extended to unrelated third parties, giving due consideration to all circumstances, quantitative and qualitative, of the transaction, which include butare not limited to the type of products, specification compliance, track record and financial position of the purchasers. Sale prices to Interested Persons will be basedon sale prices to unrelated third parties.The prices of the Company’s steel products are determined generally on a daily basis taking into account cost price, demand and supply and market conditions.There may be intra-day adjustments in certain circumstances such as news of an outbreak of war, in which case the adjustment will be upwards. All sale prices aredetermined and agreed upon based on the daily determined prices within the day of a verbal enquiry. Purchase orders will be issued based on the agreed prices anda sales contract signed when the steel products are ready for delivery. Sales to Interested Persons will be conducted in the same manner;(b)(c)the credit terms in relation to the Interested Persons transactions shall be no more favourable to the Interested Persons than those in relation to unrelated third partiesfor similar transactions. As at the Latest Practicable Date, the Company’s credit terms is 90 to 120 days. The maximum credit term of 120 days is only granted to theCompany’s regular customers with good credit standing. The value of such transactions is also usually higher. The payment terms for every customer is determinedby a credit review committee which currently consists of three executive Directors and the Company’s Head of Finance. The criteria that the committee applies indetermining the credit term includes the amount of credit exposure, credit standing of customers, past experience and industry practice. Credit terms in relation toInterested Persons transactions will be determined in the same manner;each Interested Persons transaction above $100,000 is to be approved by a Director (who shall not be an Interested Person to such Interested Persons transaction),and shall not be approved unless the pricing is:(i)(ii)determined in accordance with the Company’s usual business practices and policies;consistent with the usual margin given or price received by the HG Metal Group for the same or substantially similar type of transactions between the HG MetalGroup and unrelated third parties; and(iii) the terms of which are no more favourable to the Interested Persons than those extended to unrelated third parties.HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007105

APPENDIXContracts for the same or substantially similar types of transactions entered into between the HG Metal Group and unrelated third parties will be used as abasis of comparison in determining whether the price and terms offered to or received from an Interested Person are no more favourable than those extendedto unrelated third parties;(d)in addition, the Audit Committee will monitor the Interested Persons transactions, categorising each Interested Persons transaction as follows:(i)(ii)Category 1 : being an Interested Persons transaction where the value thereof is equal to or in excess of 10% of the NTA of the HG Metal Group or InterestedPersons transactions entered into with the same Interested Persons within the last 6 month period, where aggregated together is equal to or in excess of 10% ofthe NTA of the HG Metal Group (an Interested Persons transaction which has been approved by the Audit Committee, or is a subject of aggregation with anotherInterested Persons transaction that has been approved by the Audit Committee need not be included in any subsequent aggregation); andCategory 2 : being an Interested Persons transaction where the value thereof is below 10% of the NTA of the HG Metal Group.All Category 1 Interested Persons transactions shall be approved by the Audit Committee prior to entry whereas Category 2 Interested Persons transactions neednot require the approval of the Audit Committee but shall be subject to the periodic review of the Audit Committee. If any member of the Audit Committee has aninterest in a transaction, he will abstain from participating in the review and approval process in relation to that transaction; and(e)all Interested Persons transactions between the HG Metal Group and the Interested Persons should be properly documented and submitted to the Audit Committeefor review in accordance with the general review procedures adopted by the HG Metal Group inclusive of the control and verification procedures as set out in theletter by the independent financial adviser in respect of the Mandate for Interested Persons transactions which is set out in Annexure 2 to the Appendix.2.7 AUDIT COMMITTEE’S STATMENTThe audit committee of the Company comprises Mr Gui Kim Young @ Gui Kim Gan, Mr Ooi Seng Soon and Mr Poon Hon Thang, Samuel. The Audit Committee hasreviewed the terms of the Mandate subject to the renewal. The Audit Committee confirms that (i) the methods or procedures for determining the transaction prices of theInterested Person Transactions have not changed since approval of the Mandate was last given on 8 October 2002; and (ii) the review procedures for the Interested PersonTransactions, set out in Section 2.6 above, are sufficient to ensure that the Interested Person Transactions will be transacted on normal commercial terms and will not beprejudicial to the interests of the Company and its minority Shareholders.If, during the periodic reviews by the Audit Committee, it is of the view that the abovementioned review procedures are no longer appropriate or adequate to ensure that theInterested Person Transactions will be transacted on normal commercial terms and will not be prejudicial to the interests of the Company and its minority Shareholders, theCompany will revert to the Shareholders for a fresh mandate based on new guidelines and review procedures for the Interested Person Transactions.106 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

APPENDIX3. VALIDITY PERIOD OF THE RENEWED MANDATEIf approved by the Shareholders at the AGM, the renewed Mandate will take effect from the passing of the ordinary resolution relating thereto, and will (unless revokedor varied by the Company in general meeting) continue in force until the next annual general meeting of the Company. Approval from Shareholders will be sought for therenewal of the Mandate at the next annual general meeting and at each subsequent annual general meeting of the Company, subject to satisfactory review by the AuditCommittee of its continued application to the transactions with Interested Persons.4. DIRECTORS’ AND SUBSTANTIAL SHAREHOLDERS’ INTERESTS(a)Directors’ InterestsThe interests of the Directors in the Shares, as recorded in the Register of Directors’ Shareholding as at 31 December 2007, are as follows:-Direct InterestDeemed InterestDirectors No. of Shares % No. of Shares %Tan Chan Too 16,027,594 5.03 - -Wee Piew 2,030,218 0.01 - -Tan Ah Bee 14,665,466 4.60 - -Lee Leng Loke 5,351,159 1.68 - -Sia Ling Sing 12,040,000 3.78 20,090,000 (1) 6.31Gui Kim Young @ Gui Kim Gan - - - -Ooi Seng Soon - - - -Poon Hon Thang, Samuel - - - -NOTES:(1)Mr Sia Ling Sing is deemed interested in the 20,090,000 Shares held by Lingco by virtue of his 30.17% shareholding in Lingco.HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007107

APPENDIX(b)Substantial Shareholders’ InterestsThe interest of Substantial Shareholders in the Shares, as recorded in the Register of Substantial Shareholders as at 29 December 2007 are as follows:-Direct InterestDeemed InterestDirectors No. of Shares % No. of Shares %Tan Chan Too 16,027,594 5.03 - -Lingco Marine Pte Ltd 20,090,000 6.31 - -5. APPROVALS AND RESOLUTIONSYour approval for the proposed renewal of the Mandate is sought at the AGM.The Resolution relating to the renewal of the Mandate is contained in the Notice of AGM as Ordinary Resolution 8.2.6. ACTION TO BE TAKEN BY SHAREHOLDERSIf a Shareholder is unable to attend the AGM and wishes to appoint a proxy to attend and vote on his behalf, he should complete, sign and return the attached Proxy Formin accordance with the instructions printed thereon as soon as possible and, in any event, so as to reach the registered office of the Company at No 30 Jalan Buroh, JurongTown, Singapore 619486, not later than 48 hours before the time fixed for the AGM. Completion and return of the Proxy Form by a Shareholder will not preclude him fromattending and voting at the AGM in person if he so wishes.7. DIRECTORS’ RECOMMENDATIONSMr Sia Ling Sing, a director of the Company (“Directors”) and the Managing Director and 30.17% shareholder of Lingco, makes no recommendation as to how Shareholdersshould vote at the AGM in respect of the renewal of the Mandate. Save for Mr Sia Ling Sing who expresses no opinion on the General Mandate, the other Directors areconsidered independent for the purposes of the General Mandate and having considered the scope, rationale for and review methodology of the General Mandate, believethat the renewal of the Mandate is in the interests of all Shareholders. They therefore recommend that Shareholders vote in favour of Ordinary Resolution 8.2 relating to therenewal of the Mandate as set out in the Notice of AGM.108 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

APPENDIX8. DIRECTORS’ RESPONSIBILITY STATEMENTThe Directors collectively and individually accept full responsibility for the accuracy of the information given in this Appendix and confirm, having made all reasonableenquiries, that to the best of their knowledge and belief, the facts stated and opinions expressed in this Appendix are fair and accurate in all material respects as at theLatest Practicable Date and that there are no material facts the omission of which would make any statement in this Appendix misleading.ANNEXURE 1 TO THE APPENDIXREVIEW PROCEDURES FOR INTERESTED PERSON TRANSACTIONSAll Interested Person Transactions (as defined in Chapter 9A of the Listing Manual) with an interested person (as defined in Chapter 9A of the Listing Manual) (“Interested Person”)will be properly documented and submitted to our Audit Committee for half-yearly review to ensure that they are carried out on normal commercial terms and are not prejudicialto the interests of our shareholders.HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007109

APPENDIXDuring its periodic review or such other review deemed necessary by our Audit Committee, (including the examination of the nature of each Interested Person Transaction and itssupporting documents) our Audit committee will ensure that all Interested Person transactions are carried out in accordance with the following internal control procedures:-(i)Each Interested Person Transaction above $100,000 is to be approved by a Director (who shall not be an Interested Person to such Interested Person Transaction), and shallnot be approved unless the pricing is:-(a)(b)(c)determined in accordance with our usual business practices and policies;consistent with the usual margin given or price received by us for the same or substantially similar type of transactions between us and unrelated parties; andthe terms of which are no more favourable to the Interested Person than those extended to or received from unrelated parties.Contracts for the same or substantially similar types of transactions entered into between us and unrelated parties will be used as a basis of comparison in determiningwhether the price and terms offered to or received from an Interested Person are no more favourable than those extended to or received from unrelated parties,(ii)In addition, our Audit Committee will monitor the Interested Person Transactions entered into by us, categorising each Interested Person Transaction as follows:-(a)(b)Category 1 : being an Interested Person Transaction where the value thereof is in excess of 5% of the NTA of our Group; andCategory 2 : being an Interested Person Transaction where the value thereof is below or equal to 5% of the NTA of our Group.All Category 1 Interested Person Transactions shall be approved by the Audit Committee prior to entry whereas Category 2 Interested Person Transactions need notrequire the approval of our Audit Committee but shall be subject to the periodic review of our Audit Committee. If any member of our Audit Committee has an interest in atransaction, he will abstain from participating in the review and approval process in relation to that transaction.Our Audit Committee will also review all Interested Person Transactions to ensure that the prevailing rules and regulations of the SGX-ST (in particular Chapter 9A of theListing Manual of the SGX-ST) are complied with. In addition, we are subject to the relevant mandatory provisions in the Act and the rules prescribed in the Listing Manual.We will comply with the provisions of Chapter 9A of the Listing Manual in respect of all future Interested Person Transactions and if required under the Listing Manual of theSGX-ST or the Singapore Companies Act, we will seek our shareholders’ approval (where necessary) for such transactions.110 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

APPENDIXANNEXURE 2 TO THE APPENDIXCONTROL AND VERIFICATION PROCEDURES TO BE UNDERTAKEN BY THE AUDIT COMMITTEEThe General Mandate requires the Audit Committee to review all Interested Person Transactions to ensure that they are made on normal commercial terms and not prejudicial tothe interests of the Company and its minority Shareholders. The following control and verification procedures will be adopted:-(i)(ii)(iii)(iv)(v)(vi)(vii)(viii)the HG Metal Group shall maintain a register to record all Interested Person Transactions entered into pursuant to the General Mandate, with details on the nature ofthe transaction, the amount of and basis for fees and charges;the Audit Committee shall be provided with the register of Interested Person Transactions and such other relevant information which it may reasonably require, andit shall review the information at least half-yearly to ensure that they are carried out at arm’s length and in accordance with the procedures set out in Section 2.6 ofthe Appendix and this Annexure 2;the Audit Committee shall review the credit terms in relation to the Interested Person Transactions on a half-yearly basis to ensure that they are no more favourableto the Interested Persons than those in relation to unrelated third parties for similar transactions;the HG Metal Group undertakes to give its full co-operation to provide the Audit Committee with any further information which it requires to discharge its responsibilities,including providing the Audit Committee access to its books and records for the purpose of the review of the Interested Person Transactions;the HG Metal Group’s annual internal audit plan shall incorporate a review of all Interested Person Transactions entered into pursuant to the General Mandate;the Audit Committee shall, when it deems necessary, have the right to require the appointment of auditors or any independent professionals to review the terms andconditions outlined in Section 2.6 of the Appendix and this Annexure 2;if during its periodic reviews, the Audit Committee believes that the guidelines and procedures as stated above have become inappropriate and are no longersufficient to ensure that the interests of the Company and its minority Shareholders are not prejudiced and that the Interested Person Transactions are on normalcommercial terms, a fresh mandate based on new guidelines and procedures shall be sought from Shareholders; andif any member of the Audit Committee has an interest in an Interested Person Transaction, he shall abstain from participating in the review and approval process inrelation to that transaction.HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007111

SHAREHOLDERS STATISTICas at 17 December 2007Class of SharesVoting Rights- Ordinary Shares- On a show of hands : 1 vote- On a poll : 1 vote for each ordinary shareANALYSIS OF SHAREHOLDINGSRange of Shareholdings Number of Shareholders % Number of Shares %1 - 999 326 6.94 132,341 0.041,000 - 10,000 1,596 34.01 11,412,417 3.5810,001 - 1,000,000 2,742 58.43 128,079,565 40.211,000,001 and above 29 0.62 178,907,280 56.174,693 100.00 318,531,603 100.00Shareholding Held in Hands of PublicAs at 17 December 2007, the percentage of shareholdings held in the hands of the public was approximately 78.6% and Rule 723 of the Listing Manual is complied with.112 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

SHAREHOLDERS STATISTICas at 17 December 2007TOP 20 SHAREHOLDERS LISTS/No Name Number of Shares %1 Lingo Marine Pte Ltd 20,090,000 6.312 Tan Chan Too 16,027,594 5.033 Tan Ah Bee 14,665,466 4.604 Tian Chye Heng 13,222,132 4.155 Sia Ling Sing 12,040,000 3.786 Chong Thim Pheng 9,500,000 2.987 UOB Kay Hian Pte Ltd 8,787,642 2.768 Phillip Securities Pte Ltd 7,991,830 2.519 United Overseas Bank Nominees Pte Ltd 7,147,578 2.2410 OCBC Securities Private Ltd 7,096,165 2.2311 Hong Leong Finance Nominees Pte Ltd 6,694,500 2.1012 CIMB-GK Securities Pte. Ltd. 6,217,617 1.9513 Kim Eng Securities Pte. Ltd. 5,338,666 1.6814 Raffles Nominees Pte Ltd 4,518,000 1.4215 Oversea-Chinese Bank Nominees Pte Ltd 4,099,000 1.2916 BNP Paribas Nominees Singapore Pte Ltd 4,042,500 1.2717 Morgan Stanley Asia (S) Pte Ltd 3,835,000 1.2018 HSBC (Singapore) Nominees Pte Ltd 3,730,000 1.1719 DBS Nominees Pte Ltd 3,615,019 1.1320 Lee Leng Loke 3,351,159 1.05162,009,868 50.85HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007113

SHAREHOLDERS STATISTICas at 17 December 2007SUBSTANTIAL SHAREHOLDERSShareholdings beneficially held by thesubstantial shareholderOther shareholdings in which the substantial shareholderis deemed to be interestedSubstantial Shareholder No. of Shares (%) No. of Shares (%)Lingco Marine Pte Ltd 20,090,000 6.31 - -Tan Chan Too 16,027,594 5.03 - -114 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

WARRANTHOLDINGS STATISTICas at 17 December 2007ANALYSIS OF WARRANTHOLDINGSRange of Warrantholdings Number of Warrantholders % Number of Warrants %1 - 9991,000 - 10,00010,001 - 1,000,0001,000,001 and above317 20.62 123,634 0.28940 61.16 3,348,438 7.62269 17.50 19,760,711 44.9611 0.72 20,716,758 47.142,237 100.00 44,054,040 100.00HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007115

WARRANTHOLDINGS STATISTICas at 17 December 2007TOP 20 WARRANTHOLDERS LISTS/No Name Number of Warrants %1 Lingco Marine Pte Ltd 3,370,000 7.672 Tian Chye Heng 3,164,666 7.203 Tan Chan Too 2,769,570 6.304 Tan Ah Bee 2,618,833 5.965 United Overseas Bank Nominees Pte Ltd 1,720,920 3.926 Sia Ling Sing 1,371,250 3.127 UOB Kay Hian Pte Ltd 1,266,582 2.888 Lau Chee Leng 1,176,000 2.689 Soh Eng Ann 1,161,000 2.6410 Phillip Securities Pte Ltd 1,074,522 2.4411 CIMB-GK Securities Pte. Ltd. 1,023,415 2.3312 Lee Leng Loke 943,064 2.1513 Chan Kok Khoon 862,000 1.9614 Kiw Sin Wa 654,000 1.4915 Lau Chee Herng 500,000 1.1416 Baey Boon Lin 460,000 1.0517 Tang Peng Wai 410,000 0.9318 Chong Fay Heng 407,000 0.9319 Foong Pun Loh 400,500 0.9120 Chua Kian Lin 400,000 0.9125,753,322 58.61116 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

NOTICE OF ANNUAL GENERAL MEETINGNOTICE IS HEREBY GIVEN THAT the Annual General Meeting of the Company will be held at No. 28 Jalan Buroh, Jurong Town, Singapore 619484 on 29 January 2008 at 10.00a.m. to transact the following business :-Ordinary Business1. To receive and consider the audited accounts for the year ended 30 September 2007 and the reports of the Directors and Auditors thereon.2. To declare a tax exempt one-tier first and final dividend of 1 cent per share and a special dividend of 0.25 cent per share for the year ended 30 September 2007.3. To approve Directors’ Fees of S$135,000/- for the year ended 30 September 2007. [Year 2006 : S$210,000/-].4. To re-elect Mr Poon Hon Thang Samuel, a director retiring in accordance with Article 88 of the Company’s Articles of Association. [See Explanatory Note (a)]5. To re-elect Mr Gui Kim Young @ Gui Kim Gan, a director retiring by rotation in accordance with Article 89 of the Company’s Articles of Association. [See Explanatory Note(b)]6. To consider and, if thought fit, to pass the following resolution as an ordinary resolution:-“That pursuant to Section 153(6) of the Companies Act, Cap. 50, Mr Tan Ah Bee be re-appointed a director of the Company to hold office until the next annual general meeting ofthe Company.”7. To appoint Ernst & Young as auditors of the Company in place of BDO Raffles and to authorise the directors to fix their remuneration.Special Business8. To consider and, if thought fit, to pass the following resolutions with or without amendments as ordinary resolutions :-8.1 Authority To Issue SharesThat pursuant to Section 161 of the Companies Act, Cap. 50 and the listing rules of the Singapore Exchange Securities Trading Limited, authority be and is hereby givento the Directors of the Company to allot and issue shares (whether by way of rights, bonus or otherwise) and convertible securities in the Company at any time to suchpersons and upon such terms and conditions and for such purposes as the Directors may in their absolute discretion deem fit, provided that the aggregate number of sharesand convertible securities to be issued pursuant to this resolution does not exceed 50 per cent of the issued shares in the capital of the Company, of which the aggregateHG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007117

NOTICE OF ANNUAL GENERAL MEETINGnumber of shares and convertible securities to be issued other than on a pro rata basis to shareholders of the Company does not exceed 20 per cent of the issued sharesin the capital of the Company, and for the purpose of this resolution, the percentage of issued shares shall be based on the number of issued shares in the capital of theCompany at the time this resolution is passed (after adjusting for new shares arising from the conversion or exercise of convertible securities or exercise of share optionsor vesting of share awards which are outstanding or subsisting at the time this resolution is passed and any subsequent consolidation or subdivision of the Company’sshares), and unless revoked or varied by the Company in general meeting, such authority 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 required by law to be held, whichever is the earlier. [See Explanatory Note (c)]8.2 Renewal of Mandate for Interested Person Transactions.That :-(i) approval be and is hereby given for the purposes of Chapter 9 of the Listing Manual of the Singapore Exchange Securities Trading Limited for the Company, itssubsidiaries and associated companies or any of them to enter into any of the transactions falling within the categories of interested person transactions as described inthe Appendix to the Annual Report of the Company (the “Appendix”), with any party, who falls within the class of interested persons referred to in the Appendix, providedthat such transactions are carried out in the normal course of business, at arm’s length and on normal commercial terms and in accordance with the review proceduresfor the interested person transactions as set out in the Appendix;(ii) such approval shall, unless revoked or varied by the Company in general meeting, continue in force until the next Annual General Meeting of the Company; and(iii) the Directors be and are hereby authorised to complete and do all such acts and things (including executing all such documents as may be required) as they mayconsider expedient or necessary to give effect to this ordinary resolution. [See Explanatory Note (d)].9. To transact any other business which may properly be transacted at an Annual General Meeting.BY ORDER OF THE BOARDFOONG LEE HENG, JASMINECompany SecretarySingapore,11 January 2008118 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

NOTICE OF ANNUAL GENERAL MEETINGProxies :-A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote in his stead. A proxy need not be a member of the Company.An instrument appointing a proxy must be deposited at the Company’s registered office at No. 30 Jalan Buroh, Jurong Town, Singapore 619486 not less than 48 hours before thetime appointed for holding the meeting.Notes :-Explanatory Notes :-(a)(b)(c)(d)Mr Poon Hon Thang Samuel, if re-elected, will remain as a member of the Audit Committee and will be considered as an independent director.Mr Gui Kim Young @ Gui Kim Gan, if re-elected, will remain as Chairman of the Audit Committee and will be considered as an independent director.The ordinary resolution set out in item 8.1 above, if passed, will empower the Directors from the date of the above meeting until the date of the next Annual General Meeting,to issue shares and convertible securities in the Company. The number of shares and convertible securities which the Directors may issue under this resolution would notexceed 50% of the issued shares in the capital of the Company at the time this resolution is passed. For issues of shares and convertible securities other than on a pro ratabasis to all shareholders, the aggregate number of shares and convertible securities to be issued shall not exceed 20% of the issued shares in the capital of the Companyat the time this resolution is passed.The ordinary resolution set out in item 8.2 above, if passed, will renew the general mandate to allow the Company, its subsidiaries and associated companies or any of themto enter into certain interested person transactions with persons who are considered “interested persons” (as defined in Chapter 9 of the Listing Manual of the SingaporeExchange Securities Trading Limited.)HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007119

Explanatory Note for item 7 above:-1. Proposed change of auditorsBDO Raffles are not seeking re-appointment as external auditors. Rule 1203(d) of the SGX Listing Manual requires the Company to set out thereason for the change of auditors.The specific reason for BDO Raffles not seeking re-appointment is due to the spousal relationship between an audit partner of BDO Raffles (whohas recently joined BDO Raffles) and the Chief Financial Officer of the Company. As such, both the Company and its external auditors, BDORaffles are of the view that in the interest of promoting and maintaining transparency and good corporate governance, the external auditorsshould not seek re-appointment to avoid a potential situation where a conflict of interest may arise. Accordingly, the Company needs to appointnew auditors to replace BDO Raffles.1. ConfirmationsPursuant to Rule 1203(a), in connection with the proposed change of auditors, BDO Raffles has confirmed that they are not aware of anycircumstances or reasons, including professional reasons, why the new auditors should not accept appointment as auditors of the Company.Pursuant to Rule 1203(b) and (c), the Board of Directors has confirmed that there are no disagreements with BDO Raffles on accountingtreatments within the last twelve (12) months. In addition, the Board of Directors has also confirmed that it is not aware of any circumstancesconnected with the change of auditors that need to be brought to the attention of the Shareholders.The proposed change of auditors has been reviewed and recommended by the Audit Committee.

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PROXY FORMHG METAL MANUFACTURING LIMITED(Incorporated in the Republic of Singapore)(Company Registration No. 198802660D)IMPORTANT1 For investors who have used their CPF monies to buy shares of HG Metal Manufacturing Limited,this report is forwarded to them at the request of their CPF Approved Nominees and is sent solelyFOR INFORMATION ONLY.2 This Proxy Form is not valid for use by CPF Investors and shall be ineffective for all intents andpurposes if used or proposed to be used by them.3 CPF Investors who wish to attend the Annual General Meeting as OBSERVERS have to submittheir requests through their respective Agent banks so that their Agent banks may register with theCompany Secretary of HG Metal Manufacturing Limited not less than 48 hours before the timeappointed for holding the meeting.I/Weofbeing a member/members of HG Metal Manufacturing Limited hereby appoint, NRIC/Passport no.Name Address NRIC/ Passport No. No. Of Sharesand/or (delete as appropriate)Name Address NRIC/ Passport No. No. Of Sharesas my/our proxy/proxies to attend and to vote for me/us on my/our behalf and, if necessary, to demand a poll at the Annual General Meeting of the Company to be held at No. 28Jalan Buroh, Jurong Town, Singapore 619484 on 29 January 2008 at 10.00 a.m. and at any adjournment thereof.(Please indicate with an “X” in the spaces provided whether you wish your vote(s) to be cast for or against the resolutions as set out in the Notice of Annual General Meeting. In theabsence of specific directions, the proxy/proxies will vote or abstain as he/they may think fit, as he/they will on any other matters arising at the Annual General Meeting.)No. Resolutions For Against1 Adoption of reports and accounts2 Declaration of a first and final dividend and a special dividend3 Approval of Directors’ Fees4 Re-election of Mr Poon Hon Thang Samuel retiring under Article 885 Re-election of Mr Gui Kim Young @ Mr Gui Kim Gan retiring under Article 896 Re-appointment of Mr Tan Ah Bee under Section 153(6) of the Companies Act, Cap. 507 Appointment of Ernst & Young as auditors8.1 Authority to issue shares8.2 Renewal of Mandate for Interested Person TransactionsDated this _____ day of ________________ 2008Signature(s) of Member(s) or Common SealIMPORTANTPLEASE READ NOTES OVERLEAFHG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007121

PROXY FORMHG METAL MANUFACTURING LIMITED(Incorporated in the Republic of Singapore)(Company Registration No. 198802660D)Notes1 Please insert the total number of shares held by you. If you have shares entered against your name in the Depository Register (as defined in Section 130A of the CompaniesAct, Cap. 50), you should insert that number. If you have shares registered in your name in the Register of Members of the Company, you should insert that number. If youhave shares entered against your name in the Depository Register and shares registered in your name in the Register of Members, you should insert the aggregate number.If no number is inserted, this form of proxy will be deemed to relate to all the shares held by you.2 A member entitled to attend and vote at a meeting of the Company is entitled to appoint not more than two proxies to attend and vote on his behalf. A proxy need not bea member of the Company.3 The instrument appointing a proxy or proxies must be deposited at the Company’s registered office at No. 30 Jalan Buroh, Jurong Town, Singapore 619486 not less than 48hours before the time appointed for the meeting.4 Where a member appoints more than one proxy, he shall specify the number of shares to be represented by each proxy, failing which, the appointment shall be deemed tobe in the alternative.5 The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxyor proxies is executed by a corporation, it must be executed under its common seal or under the hand of its attorney or by an officer on behalf of the corporation.6 Where an instrument appointing a proxy or proxies is signed on behalf of the appointor by an attorney or other authority, the power of attorney or authority or a notariallycertified copy thereof must be lodged with the instrument of proxy, failing which the instrument of proxy may be treated as invalid.7 A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks fit to act as its representative at the meeting,in accordance with Section 179 of the Companies Act, Cap. 50.8 The Company shall be entitled to reject an instrument of proxy which is incomplete, improperly completed, illegible or where the true intentions of the appointor are notascertainable from the instructions of the appointor specified on the instrument of proxy. In addition, in the case of shares entered in the Depository Register, the Companymay reject an instrument of proxy if the member, being the appointor, is not shown to have shares entered against his name in the Depository Register as at 48 hours beforethe time appointed for holding the meeting, as certified by The Central Depository (Pte) Limited to the Company.122 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007

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A META FUSION DESIGN

HG METAL MANUFACTURING LTD • 30 JALAN BUROH SINGAPORE 619486TEL: 6268 2828 • FAX: 6268 3838 • WWW.HGMETAL.COM • E-MAIL: SALES@HGMETAL.COM