ANNUAL REPORT

Middle East Development Singapore Ltdannual report 200703MILESTONES2006 September:• M E Development LLC signed agreement to take a strategic stake in HitchinsGroup LtdDecember:• Hitchins secured the “Green Label” award for another one of its waterproofingproducts, Sealflex, for meeting internationally accepted eco-standards2007 January:• M E Development LLC completed the acquisition ofa strategic stake in Hitchins Group Ltd• Hitchins Group Ltd changed its name toMiddle East Development Singapore Ltd (MEDS)• Change in composition of Board of Directors• Share Placement was completedApril:• Rights Issue was completed and fully subscribed• MEDS signed construction management agreementswith M E Development LLC for five of its propertydevelopment projects in Dubai and one in Bahrain.The company is seeking shareholders’ approval forthese agreements on 26 October 2007.

Middle East Development Singapore Ltdannual report 200705Project Management BusinessThe recent project and constructionmanagement agreements for five ofMED projects in Dubai - and one inBahrain (which are considered InterestedPerson Transactions) are now pendingshareholders’ approval at an EGM to beconvened on October 26, 2007.Upon approval, the agreements willsignal the start of our new business inproperty management. The five propertydevelopment projects in Dubai are TheArabian Crowne and Windsor Towerin Dubailand and the Red Residence,Kensington Royale and Sports Plaza inDubai Sports City. In Bahrain, it is theDiamond Plaza.The Group would earn a management feeof about S$31.3 million over a period of 24to 36 months.The six projects are premium, luxurydevelopments that cater for well-heeledlocals and foreigners. They will serve toestablish the Group’s reputation as a projectmanager of high-end, luxury developmentsand provide a foothold in a fast-growingmarket in the Middle East.Future Growth ProspectsReal estate developments and project andconstruction management services will bethe key drivers fuelling the growth for thefuture and we will look out for investmentopportunities that are synergistic andstrategic to our core business.In the Middle East, our controllingshareholder is pursuing the developmentof integrated townships in Yemen, Djiboutiand Syria. We will seek to leverage on theseopportunities.We will also explore property developmentsin China and Singapore.We seek to position our waterproofingbusiness to capitalize on the opportunitiesavailable in the Middle East in addition tothe existing markets in Asia. This divisionis also in the process of commercializing aneco friendly nano-titanium dioxide basedphoto-catalytic self-cleaning coating foruse in buildings.The Singapore Government’s acceleratedefforts to keep buildings environmentallyfriendly offer opportunities for our RoofGarden System and we will explore exportmarkets for this product too.Industry OutlookThe industry outlook for our core marketsin Asia and the Middle East is encouraging.In Singapore, for example, the Building andConstruction Authority has recently uppedits construction demand forecast for 2007,from between S$17 billion and S$19 billionto between S$19 billion and S$22 billion.In the Middle East, particularly in Dubai,prospects are rosy, given the strongforeign demand for property and expectedeconomic growth of 11% according tothe Dubai Strategic Plan 2015. As for thebooming China economy, the World Bankexpects it to grow by 11.3% in 2007.Given the optimistic outlook in the variousmarkets where we operate, I am confidentthat the year ahead will be an exciting andfruitful one for our company. Also, I wouldlike to take this opportunity to thank all ourbusiness associates, shareholders, staff andmy fellow directors for their contributionand support toward the success of ourcompany.Yours Faithfully,Dr. Oussama Al-DimashkiExecutive Chairman and CEO

Middle East Development Singapore Ltdannual report 200707Mr. Issam Farid HalabiNon Executive DirectorMr. Halabi has more than 30 years of experience in project management, planning and engineering for largeprojects in the hospitality, education, health and infrastructure sectors. These include the ConferenceCentre in Kuwait, Teebah Hospital in Saudi Arabia and the Gresik Power Station in Indonesia.He graduated with a Bachelor of Science in Construction Engineering and a Master of Science in CivilEngineering with Honours from Brussels University. He is a Member of the Middle East Shopping Council,Construction Management Association of America and the UAE Society of Engineers.He joined M E Development LLC as Vice President for Technical Affairs in March 2007.Mr. Toh Wing YewNon Executive DirectorMr. Toh holds a Bachelor of Engineering (Honours) from the University of Malaya, Malaysia, a Master ofBusiness Administration from Cranfield University, United Kingdom and a Diploma in Investment from theInstitute of Banking and Finance, Singapore, where he won the Gold Medal.He currently runs his own business and management consultancy practice. He was the Group GeneralManager and then the Managing Director of Hitchins (Far East) Pte Ltd from Nov 1997 to Jan 2001 priorto its name change to Hitchins Group Ltd and Initial Public Offering on SESDAQ.He is also an Independent Non Executive Director of ConnectCounty Holdings Bhd, which is listed on theMESDAQ market of Bursa Malaysia.Mr. Hoon Tai MengIndependent DirectorMr. Hoon, an advocate and solicitor, is currently a Partner of KhattarWong.He has a Bachelor of Commerce degree in accountancy from Nanyang University, Singapore and a LLB(Honours) from the University of London. He is a Fellow of the Chartered Institute of ManagementAccountants (United Kingdom), a Fellow of Association of Chartered Certified Accountants (UnitedKingdom), a Fellow Certified Public Accountant (Singapore) and a Barrister-at-Law (Middle Temple). Hewas appointed an Independent Director, Nominating Committee Chairman and Member of Remunerationand Audit Committees on 18 January 2007. He also holds directorships in Chip Eng Seng Corporation Ltd,Federal International (2000) Ltd, Equation Corp Limited, Intraco Limited, Time Watch Investments Ltdand Sin Ghee Huat Corporation Ltd.Mr. Tan Song KoonIndependent DirectorMr. Tan, who graduated from Nanyang University (Singapore) in 1979 majoring in Economics, Banking andFinance, was appointed an Independent Director, Audit Committee Chairman and Member of NominatingCommittee on 18 January 2007 and a Member of Remuneration Committee on 20 April 2007.He has more than 25 years of hands-on and overall management experience in business development,manufacturing operations, new business start-up and corporate finance.He is also a director of Fuji Offset Plates Manufacturing Ltd and its subsidiaries, Super Multi Vending PteLtd, Super Vending Pte Ltd and an Independent Director of Time Watch Investments Ltd, Fujian ZhenyunPlastics Industry Co Ltd and Eco Water Ltd.Mr. Tee Tua BaIndependent DirectorMr. Tee was appointed an Independent Director of the Company in 2007. He is currently the RemunerationCommittee Chairman and Member of the Nominating and Audit Committees of the Company.A lawyer by training, he joined the Police Force in 1967 and became Commissioner of Police from July1992 to July 1997. Upon his retirement, he served as High Commissioner to Brunei from 1997 to 2001.He was Ambassador to the Arab Republic of Egypt and was also accredited as Ambassador to Jordan, theUnited Arab Emirates and as High Commissioner to Cyprus from 2002 to 2006.He is presently Ambassador Designate (Non-Resident) to the United Arab Emirates.

08Middle East Development Singapore Ltdannual report 2007ManagementTEAMMr. Goh Tcheng HionMr. Goh Tcheng Hion is the Finance Manager of the Group. Mr. Goh joined the Group in May 2007 andis responsible for overseeing all aspects of finance, tax planning, risk management and internal control.Prior to joining the Group, Mr. Goh held the position of Finance Manager in an Indonesian subsidiary ofa Singapore listed company.He holds a Bachelor of Accountancy degree from the Nanyang Technological University. He is a CertifiedPublic Accountant, Institute of Certified Public Accountants of Singapore (ICPAS) and a CharteredFinancial Analyst, CFA Institute (USA).Mr. Khoo Koh SeongMr. Khoo Koh Seong joined as Project Director in May 2007 to drive the new Project Managementbusiness. A Civil Engineer by training, he gained extensive experience in project engineering andmanagement with a major Singapore construction company, LKN Construction Pte Ltd, where he servedas Executive Director from October 1990 to December 2002, and later as Managing Director fromDecember 2002 to May 2006. He was involved in a wide range of projects including civil engineeringas well as hotels, residential and commercial buildings in Singapore, Malaysia, China and Indonesia.Mr. Khoo worked with Millennium & Copthorne International Limited as its representative for its hotelproject in Beijing from June 2006 to April 2007.Mr. Khoo holds a Technician Diploma in Civil Engineering from the Singapore Polytechnic and a Bachelorof Science (Honours) in Civil Engineering from the University of Strathclyde, Glasgow, UK. He is aMember of the Institution of Engineers Singapore, the Institution of Engineers Malaysia, the Institutionof Civil Engineers UK, a Chartered Engineer and a registered Professional Engineer in Malaysia.Mr. Ng Kim KhuanMr. Ng Kim Khuan manages the subsidiaries in Malaysia under our waterproofing division. Prior to joiningthe Group in 1989, Mr. Ng was the Marketing Manager of a listed German MNC based in Malaysia. Mr. Nghas a total of 25 years of commercial experience in diverse industries.He holds a Masters Degree in Business Administration with Honours from Oklahoma City University.He also holds a Diploma from The Chartered Institute of Marketing and a Graduate Diploma from TheInstitute of Commercial Management UK.Mr. Yeo Hoon SengMr. Yeo Hoon Seng manages the installation arm of our waterproofing division in Singapore and providessupport to our PRC subsidiary. He joined the Group in 1994 after CRG Contractors Pte Ltd was acquiredby Hitchins Group Ltd. Prior to joining the Group, Mr. Yeo was a Project Executive with the then DBSLand Limited.He holds a Technician Diploma in Building from the Singapore Polytechnic, a Diploma in Sales andMarketing from the Marketing Institute of Singapore and a Diploma in Marketing from the CharteredInstitute of Marketing, UK. Mr. Yeo is currently a member of the Marketing Institute of Singapore (MIS).

Middle East Development Singapore Ltdannual report 200709CorporateSTRUCTURE100% Hitchins (FE) Marketing Pte Ltd100% Helms Industries Pte Ltd100% Hitchins International Pte Ltd75% Daku Asia Pte Ltd100% Hitchins Laboratory Pte Ltd100% CRG Contractors Pte Ltd100% Renesco Injection (Waterproofing) Pte Ltd100% Hitchins (Malaysia) Sdn Bhd100% Ampero (Malaysia) Sdn Bhd42.8% Aeroroof Industries Sdn Bhd100% Hitchins – Da Sheng Holdings Pte Ltd100% Shanghai Hitchins Da ShengWaterproofing Materials Co., Ltd98% Hitchins Borneo Sdn Bhd

10Middle East Development Singapore Ltdannual report 2007The KensingtonRoyale

Middle East Development Singapore Ltdannual report 200711FinancialREVIEWDistribution expenses rose by 5% to S$1.6million from S$1.5 million owing to highersales commission paid in People’s Republicof China and Malaysia, rental cost andmarketing related expenses.Administrative expenses went up by 19.10%to S$2.8 million owing to the set-up cost forthe corporate office.Financial ReviewThe result for the financial year underreview is attributable mainly to our existingwaterproofing business as the ProjectManagement business is still awaitingshareholders’ approval.The Group’s revenue for FY07 registereda small 0.85% rise to S$11.81 million. Thisgave rise to a higher gross profit of S$4million while Gross Profit margin edgedup slightly to 33.73%. On segmentalbusiness performance, the Installationbusiness improved in revenue by 3.16% toS$6.83 million but the Manufacturing andSales business saw a 2.16% decline inrevenue to about S$4.98 million.There was a credit of S$0.03 million for FY07compared to a charge of S$0.03 million forFY06. This was largely due to a decrease ininventories written down to a net realizablevalue and an increase in gain on disposal offixed assets.The Group’s loss before tax decreased by50% to S$0.14 million but loss after taxwent up by S$0.13 million to S$0.32 millionfor FY07.The Group’s basic loss per share improvedby 0.02 cents to 0.16 cents. However, netasset value per share improved from 4.46cents to 4.66 cents.Geographically, there was a shift in revenuemix. Revenue in Malaysia soared by 35.14%while revenue from Singapore and People’sRepublic of China declined by 1.95% and15.99% respectively.Other operating income went up fromS$0.025 million to S$0.057 million owing toinsurance claim and legal fee recovery.There was Financial Income of S$0.25million in FY07 and this was due toreduction in provision for doubtful debts,write back of doubtful debt and an increasein fixed deposit interest.The Arabian Crowne

12Middle East Development Singapore Ltdannual report 2007FinancialREVIEWBalance Sheet and Cash flowNon-Current AssetsThe slight reduction in Group’s non-currentassets by 1.78% was mainly the result of thedisposal of fixed assets.Current AssetsThe Group’s current assets of S$22.97 millionaccounted for 95.79% of the total assets asat 30 June 2007. Trade receivables rose,due primarily to slower collection. The risein other receivables was due to the increasein prepayment, deposits and other advancesarising from the set-up of the corporateoffice.Current LiabilitiesThe Group’s current liabilities of S$5.20million represented 96.3% of the totalliabilities as at 30 June 2007. The dip incurrent liabilities was due to the reductionin bank overdraft being partially offset byan increase in trade and other payables.Non-Current LiabilitiesThe reduction of non-current liabilities wasmainly due to repayment of interest-bearingfinance lease.Cash flowThe Group’s net cash used for operatingactivities was S$1.44 million, due to slowerdebt collection and an increase in otherreceivables arising from the set-up ofcorporate office.The net cash used in investing activities,particularly in the purchase of plant andmachinery, was S$0.15 million.The net cash from financing activities,mainly from proceeds from issue of shares,was S$13.74 million.The Diamond plaza

Middle East Development Singapore Ltdannual report 200713The Red Residence

14Middle East Development Singapore Ltdannual report 2007CorporateINFORMATIONBoard of DirectorsDr. Oussama Al-DimashkiMr. Huang Wooi TeikMr. Wong Seong KhuenMr. Kim Leng ChoonMr. Ng Tian HuatMr. Issam Farid HalabiMr. Toh Wing YewMr. Hoon Tai MengMr. Tan Song KoonMr. Tee Tua BaAudit CommitteeMr. Tan Song Koon (Chairman)Mr. Hoon Tai MengMr. Tee Tua BaRemuneration CommitteeMr. Tee Tua Ba (Chairman)Mr. Hoon Tai MengMr. Tan Song KoonNominating CommitteeMr. Hoon Tai Meng (Chairman)Mr. Tee Tua BaMr. Tan Song Koon- Executive Chairman and CEO- Managing Director- Managing Director- Executive Director- Executive Director- Non Executive Director- Non Executive Director- Independent Director- Independent Director- Independent DirectorSecretaryMr. Chew Kok LiangRegistered Office30 Toh Guan Road#07-01 ODC DistricentreSingapore 608840Corporate Office80 Raffles Place #22-21UOB Plaza 2Singapore 048624RegistrarLim Associates (Pte) Ltd3 Church Street #08-01Samsung HubSingapore 049483AuditorRSM Chio Lim18 Cross Street#08-01, Marsh & McLennan CentreSingapore 048423Partner-in-charge: Goh Swee Hong(Effective from Financial Year ended 30 June 2006)Principal BankerUnited Overseas Bank Limited

Middle East Development Singapore Ltdannual report 200715FinancialHIGHLIGHTSRevenue by BusinessSegment (S$ Million)Revenue By GeographicalSegment (S$ Million)876543215.493.815.015.374.365.745.096.614.986.839876543216.871.411.027.381.941.067.131.421.558.261.851.598.111.562.140FY 03 FY 04 FY 05 FY 06 FY 070FY 03 FY 04 FY 05 FY 06 FY 07Manufacturing & SalesInstallationSingapore PRC MalaysiaGroup ProformaFinancial Highlights1412109.3010.3810.1011.7011.818645.245.294.754.464.6620(0.46)(0.26)(0.10)(0.10)(0.55)(0.55)(0.18)(0.29)(0.16)(0.14)-2FY 03 FY 04 FY 05 FY 06 FY 07Group Revenue (S$ Million) Net Asset Value (Cents)Earnings / (Loss) Per Share (Cents) Profit / (Loss) Before Tax (S$ Million)(a) Basic loss per ordinary share has been calculated based on the number of ordinary shares of 203,159,158 (2006:108,600,000), (2005:108,600,000),(2004:108,600,000),(2003:94,850,877) shares.(b) Diluted loss per ordinary share in FY07 has been calculated based on the weighted average number of 285,190,990 ordinary shares.

16Middle East Development Singapore Ltdannual report 2007DistributionNETWORKWATERPROOFING PRODUCTSSouth KoreaChinaUAEBangladeshHong KongIndiaSri LankaMyanmarThailandVietnamMalaysiaSingaporeBruneiPhilippinesIndonesiaHeadquarters Office ApplicatorSINGAPOREHitchins (FE) Marketing Pte Ltd30 Toh Guan Road #07-01 ODCDistricentre Singapore 608840Telephone: (65) 68611177Facsimile: (65) 68634240Email: hitchins@hitchins.comHitchins (Laboratory) Pte Ltd51, Science Park Road #04-16, The AriesSingapore Science Park II Singapore 117586Telephone: (65) 68729272Facsimile: (65) 68720493Email: lab@hitchins.comBRUNEIHitchins (Borneo) Sendirian BerhadP.O. Box 1675 Bandar Seri Begawan 1916Telephone: (673-2) 652561Facsimile: (673-2) 652563MALAYSIAHitchins (Malaysia) Sendirian BerhadNo. 26 Jalan 4/10B Spring Crest IndustrialPark 68100 Batu Caves, Selangor, MalaysiaTelephone: (60-3) 61858888Facsimile: (60-3) 61850668Email: hitchins@streamyx.comCHINAShanghai Hitchins Da ShengWaterproofing Materials Co., LtdNo. 58, 699 Nong, Bei Qing Gong Lu HuaCao Zhen, Ming Hang Qu Shanghai P.R.China Post Code 201107.Telephone: (86-21) 62219815/7/9Facsimile: (86-21) 62219812Email: samkim@hitchins.comShanghai Marketing OfficeNo. 37, 380 Nong, Tian Yao Qiao LuRoom 803 Nan Xi Gong Yu Shanghai P.R. ChinaPost Code 200030.Telephone: (86-21) 64864399Facsimile: (86-21) 64864812Beijing Rep. OfficeNo. 3, Yan Jing Li Zhong Jie Block 5,Room 702 Kai Tai Gong Yu Chao Yang QuBeijing P.R. China Post Code 100025.Telephone: (86-10) 65951400Facsimile: (86-10) 65060316Nanjing Rep. OfficeNo.57, Shan Xi Road Gu Lou Qu,Room 710 Nanjing P.R. China Post Code 210009.Telephone: (86-25) 83739026Facsimile (86-25) 83736679Dalian Rep. OfficeNo.1, Xing Gong Nan We Jie Unit 1-12-1-2Block D Xin Tian Di Guang Chang Sha HeKou Qu Dalian P.R. China Post Code 116021.Telephone: (86-411) 83895105Facsimile (86-411) 83895165

Middle East Development Singapore ltdannual report 2007 17CORPORATE GOVERNANCESTATEMENTMiddle East Development Singapore Ltd. (the “Company”) is committed to maintaining high standards of corporate governance withinthe Company and its subsidiary companies (the “Group”) and has put in place various policies and practices that will safeguard theinterests of shareholders and enhance shareholders’ value based on the Code of Corporate Governance 2005 (the “Code”) issued by theCorporate Governance Committee. Effective corporate governance supports the Company’s belief in transparency, and helps it to beforward-looking with fresh ideas, and more decisive in the execution of strategies and initiatives. It is also an effective safeguard againstfrauds and irregularities.This statement describes the Company’s corporate governance processes and activities with specific reference to the Code. Where thereare deviations from the Code, appropriate explanations will be provided.(A)BOARD MATTERSTHE BOARD’S CONDUCT OF AFFAIRSPrinciple 1: Every company should be headed by an effective Board to lead and control the company. The Board is collectivelyresponsible for the success of the company. The Board works with Management to achieve this and the Management remains accountableto the Board.The Board of Directors (the “Board”) is responsible for the overall management of the business and corporate affairs of the Group.Matters which specifically require the Board’s decision or approval are those involving:-• corporate strategy and business plans;• major investment and divestment proposals;• funding requirements of the Group;• nominations of Board Directors and appointment of key executives;• approving the recommended framework of remuneration for the Board and key executives;• half year and full year results for announcement, the annual report and accounts;• material acquisitions and disposal of assets;• corporate or financial restructuring; and• share issuance and the proposing of dividends.To assist the Board in the execution of its responsibilities and in recognition of the importance of having a high standard of accountabilityto our shareholders, the Board is supported by three committees, namely the Nominating Committee (“NC”), the RemunerationCommittee (“RC”) and the Audit Committee (“AC”). These Committees operate within clearly defined terms of reference and functionalprocedures, which are reviewed on a regular basis.Board meetings are conducted regularly on a half-yearly basis and ad-hoc meetings are convened at such other times as may be necessaryto address any specific significant matters that may arise. Important matters concerning the Group are also put to the Board for itsdecision by way of written resolutions. A Board meeting may also be conducted by way of tele–conference and video conference.

18Middle East Development Singapore ltdannual report 2007CORPORATE GOVERNANCESTATEMENTThe number of Board and Board Committee Meetings held during the financial year and the attendance of directors at these meeting isset out as follows:-Name Board NominatingCommitteeNo. ofMeetingsHeldNo. ofMeetingsAttendedNo. ofMeetingsHeldNo. ofMeetingsAttendedRemunerationCommitteeNo. ofMeetingsHeldNo. ofMeetingsAttendedAuditCommitteeNo. ofMeetingsHeldNo. ofMeetingsAttendedDr Oussama Al-Dimashki (1) 3 3 - - - - - -Huang Wooi Teik (1) 3 3 - - - - - -Wong Seong Khuen 5 5 1* 1* - - - -Kim Leng Choon 5 5 - - - - - -Ng Tian Huat 5 4 - - 1* 1* - -Issam Farid Halabi (2) 1 0 - - - - - -Toh Wing Yew (1) 3 3 - - - - - -Hoon Tai Meng (1) 3 3 - - 2 2 2 2Tan Song Koon (1) 3 3 - - 2 2 2 2Tee Tua Ba (1) 3 3 - - 2 2 1** 1**Goh Chong Chia (3) 2* 2* 1* 1* 1* 1* 1* 1*Ng Kim Khuan (3) 2* 2* - - - - - -Sitoh Yih Pin (3) 2* 2* - - - - 1* 1*Tan Chong Huat (3) 2* 1* 1* 1* 1* 1* 1* 1*Tor Steven Boswick (4) 2 1 - - - - 1 1Yeo Hoon Seng (3) 2* 2* - - - - - -Mark Yeo Wee Tiong (3) 2* 2* - - - - - -(1)Appointed on 18 January 2007(2)Appointed on 24 August 2007(3)Resigned on 18 January 2007(4)Appointed on 18 January 2007 and resigned on 13 March 2007* Number of meetings held before the committees were reconstituted on 18 January 2007** Mr Tee Tua Ba was appointed as a member of the Audit Committee with effect from 20 April 2007.Newly appointed Directors will be given an orientation programme with materials provided to familiarise them with the Group’s businessoperations, strategic directions, directors’ duties and responsibilities and the corporate governance practices. They will also be givenopportunities to visit the Group’s operational facilities and meet management staff so as to gain a better understanding of the Group’sbusiness. The Company has an on-going training budget for the existing Directors to fund the Directors’ training when the need arises.To keep pace with changes in regulations and accounting standards which have a significant bearing on the disclosure obligations of theCompany or its Directors, Directors are kept informed of such changes through circulated updates or briefings during Board meetings orat specially-convened sessions conducted by professionals.

Middle East Development Singapore ltdannual report 2007 19CORPORATE GOVERNANCESTATEMENTTraining for DirectorsThe Board has received relevant training to familiarise themselves with the roles and responsibilities of a director of a public listedcompany in Singapore. Management would conduct briefings and orientation programmes to familiarise newly appointed Directors withthe various businesses and operations of the Group.BOARD COMPOSITION AND BALANCEPrinciple 2: There should be a strong and independent element on the Board, which is able to exercise objective judgment on corporateaffairs independently, in particular, from management. No individual or small group of individuals should be allowed to dominate theBoard’s decision making.Presently the Board consists of ten members, three of whom are Independent Directors:-Executive DirectorsDr Oussama Al-DimashkiHuang Wooi TeikWong Seong KhuenKim Leng ChoonNg Tian HuatChief Executive Officer and ChairmanManaging DirectorManaging DirectorNon-Executive DirectorsIssam Farid HalabiToh Wing YewIndependent DirectorsHoon Tai MengTan Song KoonTee Tua BaThe NC considers an “independent” Director as one who has no relationship with the Company, its related corporation or its officers thatcould interfere or be reasonably perceived to interfere, with the exercise of the Director’s independent business judgment.The NC has reviewed the independence of each Independent Director and is of the view that these Directors are independent. The Boardis currently made up of slightly less than one-third of Independent Directors. The Board may appear to be large for the size of its presentoperations. The NC may consider, in consultation with the Board, recommend to streamline the size of the Board to be compatible withthe size of its operations or to look for a suitable Independent Director to be appointed to the Board in future. The NC, in consultationwith the Board, will determine the selection criteria and select the candidate with the appropriate expertise and experience for theposition.The NC also examined the composition of the Board on an annual basis to ensure that the Board has the appropriate mix of expertise andexperience, and collectively possess the necessary core competencies for effective functioning and informed decision-making.

20Middle East Development Singapore ltdannual report 2007CORPORATE GOVERNANCESTATEMENTNon-Executive and Independent Directors exercise no management functions in the Company or its subsidiary. Although all the directorshave equal responsibility for the performance of the Group, the role of the Non-Executive and Independent Directors is particularlyimportant in ensuring that the strategies proposed by the executive management are fully discussed and rigorously examined and takeaccount of the long-term interests, not only of the shareholders, but also of employees, customers, suppliers and the many communitiesin which the Group conducts business. The NC considers its Non-Executive and Independent Directors to be of sufficient calibre andnumber and their views to be of sufficient weight that no individual or small group of individuals dominates the Board’s decision-makingprocess.CHAIRMAN AND CHIEF EXECUTIVE OFFICERPrinciple 3: There should be a clear division of responsibilities at the top of the company - the working of the Board and the executiveresponsibility of the company’s business - which will ensure a balance of power and authority, such that no one individual representsa considerable concentration of power.Dr Oussama Al-Dimashki (“Dr Oussama”) is currently the Chairman of the Board (the “Chairman”) and the Chief Executive Officer (the“CEO”) of the Company.To ensure that the decision-making process of the Group is not unnecessarily hindered and with the presence of a strong independentelement, the Board is of the opinion that the need to separate the roles of the Chairman and CEO is not necessary for the time being. Itis with this in mind that the Board felt that the CEO and the Chairman of the Board should be the same person.The Group’s Executive Chairman and CEO, Dr Oussama plays an important role in propelling the growth of the Group and providesstrong leadership and strategic vision for the Group. He also has responsibilities for overseeing the day-to-day operations, formulatingbusiness strategy and charting the corporate direction of the Group. As Chairman and CEO, he also schedules Board meetings, overseespreparation of the agenda, exercises control over quality, quantity and timeliness of the flow of information between Management andthe Board and ensures the Group’s compliance with the Code.All major decisions made by the Executive Chairman and CEO are reviewed by the AC. His performance and appointment to the Boardis reviewed periodically by the NC and his remuneration package is reviewed periodically by the RC. The members of both the NC andRC are independent. The Board therefore believes there are adequate safeguard against vesting too much power and authority in asingle individual.NOMINATING COMMITTEEBOARD MEMBERSHIPPrinciple 4: There should be a formal and transparent process for the appointment of new directors to the Board. As a principle of goodcorporate governance, all directors should be required to submit themselves for re-nomination and re-election at regular intervals.The NC was reconstituted on 18 January 2007 following the appointments of Mr Hoon Tai Meng, Mr Tee Tua Ba and Mr Tan Song Koonas Independent Directors on 18 January 2007. The NC currently comprises of three Independent Directors. Mr Hoon Tai Meng chairs theNC, with Mr Tee Tua Ba and Mr Tan Song Koon as members.The Company adopts a formal and transparent process of appointing new Directors to the Board and ensures that all Directors (otherthan the Managing Director) submit themselves for re-nomination and re-election at regular intervals.

Middle East Development Singapore ltdannual report 2007 21CORPORATE GOVERNANCESTATEMENTThe NC shall hold at least one meeting per year. The key functions of the NC under the Terms of Reference are, inter alia:-(i)(ii)(iii)(iv)(v)(vi)(vii)to set up and implement procedures to facilitate a formal and transparent process for appointing, re-nomination, re-electing andremoving incumbents to/from the Board;to review the independence of each Director;to assess the qualifications, knowledge, skills, expertise and experience of the proposed Director;to review the performance and contribution of each Director;to review and evaluate the performance of the Board as a whole for each financial year, and submit its report to the Board;to adopt any performance measurement tool which it deems appropriate; andto study and identify the training needs of each Director, with a view to achieving an appropriate mix and balance of skills suchthat the Board as a whole possesses the core competencies required by the Code.In its search, nomination and selection process for new directors, the NC identifies the key attributes that an incoming director shouldhave, based on a matrix of the attributes of the existing Board and the requirements of the Group. After endorsement by the Board ofthe key attributes, the NC taps on the resources of directors’ personal contacts and recommendations of potential candidates, and goesthrough a shortlisting process. If candidates identified from this process are not suitable, executive recruitment agencies are appointedto assist in the search process. Interviews are set up with potential candidates for NC members to assess them, before a decision isreached.The Directors will submit themselves for re-nomination and re-election at regular intervals of at least once every three years. Under theCompany’s existing Articles of Association, one-third of the Directors for the time being (other than the Managing Director) shall retirefrom office by rotation (or if their number is not a multiple of three, the number nearest to but not less than one-third) at each annualgeneral meeting of the Company.BOARD PERFORMANCEPrinciple 5: There should be a formal assessment of the effectiveness of the Board as a whole and the contribution by each director tothe effectiveness of the Board.The NC, in considering the re-appointment of any Director, evaluates the performance of the Director. The NC reviews and evaluatesthe performance and effectiveness of the Board as a whole for each financial year, and submits its report to the Board. The reviewparameters for evaluating each director include, inter alia, the following: -(a)(b)(c)(d)attendance at Board / committee meetings;participation at meetings;involvement in management; andavailability for consultation and advice, when required.Each member of the NC shall abstain from voting on any resolution in respect of the assessment of his performance or re-nomination asa Director.

22Middle East Development Singapore ltdannual report 2007CORPORATE GOVERNANCESTATEMENTACCESS TO INFORMATIONPrinciple 6: In order to fulfil their responsibilities, Board members should be provided with complete, adequate and timely informationprior to Board meetings and on an on-going basis.In order to ensure that the Board is able to fulfill its responsibilities, the Management will provide complete, adequate and timelyinformation to the Board on the Group’s affairs and issues that require the Board’s decision as well as ongoing reports relating to theoperational and financial performance of the Group and the Company.The Board has separate and independent access to the Company’s senior management and the Company Secretary at all times.The Board, either individually or as a group, in the furtherance of their duties, takes independent professional advice, if necessary, atthe Company’s expenses.The Company Secretary attends all Board and Committee meetings and is responsible for ensuring that proper procedures at such meetingsare followed. Together with the Management, they are responsible for ensuring that the Company complies with the requirements of theSingapore Companies Act, Listing Manual of the Singapore Exchange Securities Trading Limited (the “SGX-ST”) and other rules andregulations that are applicable to the Company.The appointment and removal of the Company Secretary are subject to the approval of the Board.(B)REMUNERATION MATTERSREMUNERATION COMMITTEEPROCEDURES FOR DEVELOPING REMUNERATION POLICIESPrinciple 7: There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing theremuneration packages of individual directors. No director should be involved in deciding his own remuneration.The RC was reconstituted on 18 January 2007 following the appointments of Mr Tee Tua Ba, Mr Hoon Tai Meng and Mr Tan Song Koon asIndependent Directors on 18 January 2007. The current RC comprises of three Independent Directors, namely, Mr Tee Tua Ba, Mr HoonTai Meng and Mr Tan Song Koon, with Mr Tee Tua Ba chairing the RC.The RC shall hold at least one meeting per year. The key functions of the RC under the Terms of Reference are, inter alia:-(i)(ii)(iii)to set up and implement procedures to facilitate a formal and transparent process by which the remuneration of all Directors andat least the top five executives is fixed;to adopt such performance measurement tolls as may be appropriate for the purpose of assessing the performance and contributionof Directors and executives in an objective and fair manner;the remuneration of Non-Executive Directors shall be appropriate to the level of their contribution, taking into account factorssuch as effort and time spent, and their responsibilities;

Middle East Development Singapore ltdannual report 2007 23CORPORATE GOVERNANCESTATEMENT(iv)(v)(vi)in recommending remuneration package, to take into account pay and employment conditions within the industry and incomparable companies, as well as the company’s relative performance and the performance of individual Directors;to consider the appropriateness of having a share option scheme for the Company as well as the categories of employees whoshould be part of the scheme; andto review the drafts of all service contracts to be entered into between an Executive Director and the Company before giving itsrecommendations to the Board.The members of the RC shall not participate in any decision concerning their remuneration. No Director will be involved in determininghis own remuneration.The RC has full authority to engage any external professional advice on matters relating to remuneration as and when the need arises.LEVEL AND MIX OF REMUNERATIONPrinciple 8: The level of remuneration should be appropriate to attract, retain and motivate the directors needed to run the companysuccessfully but companies should avoid paying more than is necessary for this purpose. A significant proportion of executive directors’remuneration should be structured so as to link rewards to corporate and individual performance.The Company has in place, procedures which facilitate a formal and transparent process by which the remuneration of all ExecutiveDirectors and at least the top five executives (in terms of aggregate remuneration and not being directors) is fixed.The Company had entered into separate service agreement with Dr Oussama, Mr Huang Wooi Teik, Mr Wong Seong Khuen, Mr Ng TianHuat and Mr Kim Leng Choon for a period of one year with effect from 18 January 2007, renewable year to year.DISCLOSURE ON REMUNERATIONPrinciple 9: Each company should provide clear disclosure of its remuneration policy, level and mix of remuneration, and the procedurefor setting remuneration in the company’s annual report. It should provide disclosure in relation to its remuneration policies to enableinvestors to understand the link between remuneration paid to directors and key executives, and performance.

24Middle East Development Singapore ltdannual report 2007CORPORATE GOVERNANCESTATEMENTRemuneration of DirectorsA breakdown of each Director’s remuneration, in percentage terms showing the level and mix in FY 2007, is as follows:-Name Salary (%) Bonus (%) Benefits (%) Fees (%) Total (%)Below $250,000Dr Oussama Al-Dimashki (1) 100 0 0 0 100Huang Wooi Teik (1) 82 0 18 0 100Wong Seong Khuen 82 14 4 0 100Kim Leng Choon 85 15 0 0 100Ng Tian Huat 73 13 14 0 100Issam Farid Halabi (2) 0 0 0 0 0Toh Wing Yew (1) 0 0 0 100 100Hoon Tai Meng (1) 0 0 0 100 100Tan Song Koon (1) 0 0 0 100 100Tee Tua Ba (1) 0 0 0 100 100Goh Chong Chia (3) 0 0 0 100 100Ng Kim Khuan (3) 88 12 0 0 100Sitoh Yih Pin (3) 0 0 0 100 100Tan Chong Huat (3) 0 0 0 100 100Tor Steven Boswick (4) 0 0 0 100 100Yeo Hoon Seng (3) 81 14 5 0 100Mark Yeo Wee Tiong (3) 0 0 0 100 100(1)Appointed on 18 January 2007(2)Appointed on 24 August 2007(3)Resigned on 18 January 2007(4)Appointed on 18 January 2007 and resigned on 13 March 2007Remuneration of Top 4 Key ExecutivesA breakdown of each of the top four key executive’s remuneration, in percentage terms showing the level and mix in FY 2007, is asfollows:-Name Salary (%) Bonus (%) Benefits (%) Total (%)Below $250,000Goh Tcheng Hion 100 0 0 100Khoo Koh Seong 84 0 16 100Ng Kim Khuan 88 12 0 100Yeo Hoon Seng 81 14 5 100

Middle East Development Singapore ltdannual report 2007 25CORPORATE GOVERNANCESTATEMENTRemuneration of Employee who is an Immediate Family Member of a DirectorThere are currently no employees who are immediate family members of a Director or CEO whose remuneration exceeds $150,000during FY 2007.(C)ACCOUNTABILITY AND AUDITACCOUNTABILITYPrinciple 10: The Board should present a balanced and understandable assessment of the company’s performance, position andprospects.In presenting the annual financial statements and announcements of financial results to shareholders, it is the aim of the Board to provideshareholders with a balanced and understandable assessment of the Company’s and Group’s performance, position and prospects.Management provides the AC and the Board with balanced and understandable management accounts of the Company’s and Group’sperformance, position and prospects on a regular basis.AUDIT COMMITTEEPrinciple 11: The Board should establish an Audit Committee with written terms of reference which clearly set out its authority andduties.The AC was reconstituted on 18 January 2007 following the appointments of Mr Tan Song Koon, Mr Hoon Tai Meng and Mr Tee Tua Baas Independent Directors on 18 January 2007. The current AC, chaired by Mr Tan Song Koon, comprises of three Independent Directors(that is Mr Tan Song Koon, Mr Hoon Tai Meng and Mr Tee Tua Ba ). The AC meets periodically at least twice yearly to review accounting,auditing and financial reporting matters so as to ensure that an effective system of control is maintained within the Group.The Company has adopted and has complied with the principles of corporate governance under the Code in relation to the roles andresponsibilities of the AC.The Board is of the view that the members of the AC are appropriately qualified, having the necessary accounting or related financialmanagement expertise or experience to discharge their responsibilities.The AC meets at least half-yearly and when circumstances require. The key functions of the AC under the Terms of Reference are, interalia:-(i)To review with the external auditors:-(a)(b)(c)(d)(e)(f)(g)(h)the audit plan, including the nature and scope of the audit before the audit commences,their evaluation of the system of internal accounting controls,their audit report,the assistance given to them by the Company’s officers,the scope and results of the internal audit procedures,the balance-sheet and profit and loss account of the Company,their management letter and Management’s response andany suspected fraud, irregularity or infringement of any Singapore law, rule or regulation, which has or is likely to have amaterial impact on the Company’s operations, results or financial position.

26Middle East Development Singapore ltdannual report 2007CORPORATE GOVERNANCESTATEMENT(ii)(iii)(iv)(v)(vi)(vii)to discuss with the external auditors any problems or concerns arising from their interim and final audits, and any other matterswhich the external auditors may wish to discuss;to ensure co-ordination where more than one audit firm is involved;to monitor the scope and results of the external audit, its cost effectiveness and the independence and objectivity of the externalauditors and give recommendations to the Board and the Company in general meeting regarding the appointment, re-appointmentor removal of the external auditors;to ensure that the internal audit function has adequately resources and appropriate standing within the Company;to appoint any person(s) to carry out the internal audit function;to ensure that the internal auditor meets or exceeds the standards set by nationally or internationally recognized professionalbodies including the Standards for the Professional Practice of Internal Auditing set by the Institute of Internal Auditors;(viii) to review the quarterly, half-yearly and full year financial statements of the Company and the Group, including announcementsrelating thereto, to shareholders and the SGX-ST, and thereafter to submit them to the Board for approval;(ix)(x)(xi)to review interested person transactions (as defined in the Listing Manual) and report its findings to the Board;to undertake such other reviews and projects as may be requested by the Board or as the Committee may consider appropriate;andto undertake such other functions and duties as may be required by law or by the Listing Manual, as amended from time totime.Apart from the duties listed above, the AC is given the task of commissioning investigations into matters where there is suspected fraudor irregularity, or failure of internal controls or infringement of any law, rule or regulation which has or is likely to have a material impacton the Company’s operating results or financial position, and to review its findings.The AC is in the process of setting up a whistle blowing policy whereby accessible channels are provided for employees to raise concernsabout possible improprieties in matters of financial reporting or other matters which they become aware and to ensure that:(i)(ii)(iii)independent investigations are carried out in an appropriate and timely manner,appropriate action is taken to correct the weaknesses in internal controls and policies which allowed the perpetration of fraudand/or misconduct and to prevent a recurrence, andadministrative, disciplinary, civil and/or criminal actions that are initiated following the completion of investigations are appropriatebalanced and fair, while providing reassurance that they will be protected from reprisals or victimization for whistle-blowing ingood faith and without malice.The AC will meet with the external auditors, without the presence of Management, when necessary, to review the adequacy of auditarrangement, with emphasis on the scope and quality of their audit, the independence, objectivity and observations of the auditors.Having reviewed the nature and extent of non-audit services provided by the external auditors over the year being reported on, the ACis satisfied that the rendering of such services did not affect the independence and objectivity of the external auditors.In addition, all future transactions with related parties shall comply with the requirements of the Listing Manual. As required by paragraph1(9)(e) of Appendix 2.2 of the Listing Manual, the Directors shall abstain from voting in any contract or arrangement, or proposedcontract or arrangement in which he has a personal material interest.

Middle East Development Singapore ltdannual report 2007 27CORPORATE GOVERNANCESTATEMENTINTERNAL CONTROLSPrinciple 12: The Board should ensure that the management maintains a sound system of internal controls to safeguard the shareholders’investments and the company’s assets.The Group believes in the importance of maintaining a sound system of internal controls to safeguard the interests of the shareholdersand the Group’s assets. To achieve this, internal reviews are constantly being undertaken to ensure that the system of internal controlsmaintained by the Group is sufficient to provide reasonable assurance that the Group’s assets are safeguarded against loss fromunauthorized use or disposition, transactions are properly authorized and proper financial records are being maintained.The Board is of the opinion that the Group’s existing internal controls are adequate and satisfactory.As part of the statutory audit on financial statements, the external auditors report to the AC and the appropriate level of managementany material weaknesses in financial internal controls over the areas which are significant to the audit.INTERNAL AUDITPrinciple 13: The company should establish an internal audit function that is independent of the activities it audits.At present, the Company has no separate internal audit function. The Board believes that the existing system of internal control isadequate, taking into consideration the corporate structure and scope of the Company’s operations, to safeguard the Group’s assetsagainst loss from unauthorized use or disposition, to ensure that transactions are properly authorized and to ensure that proper financialrecords are being maintained.The key element in the Group’s internal control systems is the control which senior management exercises over contracts and expendituresfor projects and capital spending, and which are also subject to approval by the Board.The AC will continuously review the cost-effectiveness and adequacy of the Group’s internal control system with the external auditorsand shall assess the need for a separate internal audit function when Group grows in size and complexity.(D)COMMUNICATION WITH SHAREHOLDERSCOMMUNICATION WITH SHAREHOLDERSPrinciple 14: Companies should engage in regular, effective and fair communication with shareholders.GREATER SHAREHOLDER PARTICIPATIONPrinciple 15: Companies should encourage greater shareholder participation at AGMs, and allow shareholders the opportunity tocommunicate their views on various matters affecting the company.In line with the continuous disclosure obligations of the Company and pursuant to the Listing Manual of the SGX-ST and the CompaniesAct, Chapter 50 of Singapore, the Board’s policy is that shareholders shall be informed of all major developments of the Company.Information is communicated to shareholders on a timely basis through SGXNET and the press.

28Middle East Development Singapore ltdannual report 2007CORPORATE GOVERNANCESTATEMENTThe Company does not practice selective disclosure. Price sensitive information is first publicly released through SGXNET before theCompany meets with any group of investors or analysts. Results and annual reports are announced or issued within the mandatoryperiod. These are also available on the Company’s website.All shareholders of the Company will receive a copy of the Annual Report and Notice of Annual General Meeting (the “AGM”). At AGMs,shareholders will be given the opportunity and time to air their views and raise any questions. The external auditors are present toaddress shareholders’ queries on the conduct of audit and the preparation and content of the auditors’ report. In addition, the Chairmenof the AC, RC and NC will normally be available at the meeting to answer those questions relating to the work of these committees.(E)DEALING IN SECURITIESThe Company has adopted a Code of Conduct to provide guidance with respect to dealings in the Company’s securities by directors andofficers of the Group in compliance with the SGX-ST’s Listing Manual.Directors and officers of the Group are prohibited to deal in the Company’s shares when they are in possession of unpublished pricesensitiveinformation during the periods commencing one month before the announcement of the Group’s quarterly, half-yearly or fullyear results and ending on the date of the announcement of such results, or on short-term considerations when they are in possessionof unpublished price-sensitive information on the Group. To provide further guidance to employees on dealing in the Company’s shares,the Company has adopted a Code of Conduct on transactions in the Company’s shares. The Code of Conduct was modelled after the BestPractices Guide with some modifications. Directors and executives are also expected to observe insider-trading laws at all times.(F)INTERESTED PERSON TRANSACTIONSThe Company has adopted an internal policy in respect of any transactions with interested persons and has set out the procedures forreview and approval of the Company’s interested person transactions. The AC and the Board review all material transactions with interestedpersons to ensure that all interested person transactions are conducted on arm’s length basis and on normal commercial terms.On 20 April 2007, the Company announced that it had entered into a conditional project and construction management agreementwith M E Development LLC and a conditional project and construction management agreement with Advance Middle East, a companyregistered in Manama, Kingdom of Bahrain, which is a wholly-owned subsidiary of M E Development LLC (collectively the “ProjectConstruction Management Agreements”). The Directors of the Company are convening an Extraodinary General Meeting to be heldon 26 October 2007 to seek the approval of the Shareholders for (i) the Project Construction Management Agreements; and (ii) theproposed Shareholders’ Mandate for Interested Person Transactions.Save for the above, no interested person transaction of a value exceeding S$100,000 was entered into by the Group during FY 2007.

Middle East Development Singapore ltdannual report 2007 29REPORT OF THEDIRECTORSThe directors present their report to the shareholders together with the audited financial statements of the Company and of the Groupfor the financial year ended 30 June 2007.1. DIRECTORS AT DATE OF REPORTThe directors of the Company in office at the date of this report are :Dr Oussama Al-Dimashki (Chief Executive Officer and Chairman, appointed on 18 January 2007)Huang Wooi Teik (Managing Director, appointed on 18 January 2007)Wong Seong Khuen(Managing Director)Kim Leng Choon(Executive Director)Ng Tian Huat(Executive Director)Issam Farid Halabi (Non-Executive Director, appointed on 24 August 2007)Toh Wing Yew (Non-Executive Director, appointed on 18 January 2007)Tan Song Koon (Independent Director, appointed on 18 January 2007)Hoon Tai Meng (Independent Director, appointed on 18 January 2007)Tee Tua Ba (Independent Director, appointed on 18 January 2007)As set out in the Company’s circular to the shareholders dated 7 December 2006, an extraordinary general meeting (“EGM”) wasconvened on 29 December 2006 for shareholders to vote on the proposed investment in the Company by M E Development LLCPursuant to the Subscription Agreement, the following directors resigned on 18 January 2007:Ng Kim KhuanYeo Hoon SengMark Yeo Wee TiongGoh Chong ChiaSitoh Yih PinTan Chong Huat(Executive Director)(Executive Director)(Non-Executive Director)(Independent Director)(Independent Director)(Independent Director)Tor Steven Boswick, who was appointed as a Non-Executive Director on 18 January 2007 pursuant to the Subscription Agreement,resigned on 13 March 2007.2. ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE BENEFITS BY MEANS OF THE ACQUISITION OFSHARES AND DEBENTURESNeither at the end of the financial year nor at any time during the financial year did there subsist any arrangement whose objectis to enable the directors of the Company to acquire benefits by means of the acquisition of shares or debentures of the Companyor any other body corporate except as disclosed in paragraph 5 for the share options.

30Middle East Development Singapore ltdannual report 2007REPORT OF THEDIRECTORS3. DIRECTORS’ INTERESTS IN SHARES AND DEBENTURESThe directors of the Company holding office at the end of the financial year had no interest in the share capital and debentures ofthe Company and related corporations as recorded in the register of directors’ shareholdings kept by the Company under section164 of the Companies Act, Cap. 50 except as follows:Direct InterestDeemed InterestName of directors and At beginning At end of At beginning At end ofcompanies in which interest are held of the year the year of the year the yearMiddle East Development Singapore Ltd(formerly known as Hitchins Group Ltd)Ordinary sharesWong Seong Khuen 27,080,000 34,620,000 – –Ng Tian Huat 27,080,000 28,620,000 – –Kim Leng Choon 12,933,000 14,389,500 – –Except as disclosed above, no other director who held office at the end of the financial year had an interest in any shares ordebentures of the Company or its related corporations either at the beginning of the financial year (or date of appointment, iflater) or the end of the financial year.The directors’ interest as at 21 July 2007 were the same as those at the end of financial year ended 30 June 2007.4. CONTRACTUAL BENEFITS OF DIRECTORSSince the beginning of the financial year, no director of the Company has received or become entitled to receive a benefit (otherthan as disclosed in the financial statements or in this report) which is required to be disclosed under Section 201(8) of theCompanies Act, Cap. 50, by reason of a contract made by the Company or a related corporation with the director or with a firmof which he is a member, or with a company in which he has a substantial financial interest.5. SHARE OPTIONSHitchins Employees’ Share Option SchemeThe Hitchins Employees’ Share Option Scheme (the “Scheme”) of the Company was approved and adopted by its members atan Extraordinary General Meeting held on 13 December 2002. The Scheme provides an opportunity for employees (includingExecutive Directors of the Group) to have a personal stake in the shareholdings of the Company.The reserved size of the Scheme is 15% of the total number of issued ordinary shares in the capital of the Company on therelevant date of grant of options.The Scheme is administered by the Remuneration Committee comprising:• Tee Tua Ba (Chairman and Independent Director)• Hoon Tai Meng (Member and Independent Director)• Tan Song Koon (Member and Independent Director)

Middle East Development Singapore ltdannual report 2007 31REPORT OF THEDIRECTORS5. SHARE OPTIONS (Cont’d)The following persons are eligible to participate in the Scheme:(i)(ii)(iii)Confirmed full-time employees of the Company and/or subsidiaries who have attained the age of 21 years and above andor before the relevant date of offer of an option;Executive Directors of the Company; andPersons who qualify under (i) or (ii) and who are controlling shareholders of the Company and their associates and whoseparticipation and actual number of shares granted under the Scheme and terms of any option granted to them have beenapproved by independent shareholders in general meeting.Non-Executive Directors are not eligible to participate in the Scheme.Under the rules of the Scheme, options will be granted at the prevailing market price of the shares based on the average of the lastdealt price per share as indicated in the daily official list or any other publication published by the SGX-ST for the 5 consecutivedays immediately preceding the date of grant (the “Market Price”). Options will not be granted at a discount to the MarketPrice.Options are exercisable, in whole or in part (provided that an option is exercised in part in respect of 1,000 shares or any multiplethereof) as follows:(i)(ii)(iii)(iv)up to 40% of the option at any time after 12 months of the date of grant;the next 30% of the option at any time after 18 months of the date of grant;the balance 30% of the option at any time after 24 months of the date of grant; andbefore the end of 120 months of the date of grant of the option, subject to such other conditions introduced by theRemuneration Committee from time to time.Details of the options granted to under the scheme to take up unissued ordinary shares of the Company are as follows:BalanceBalanceas at as at ExerciseDate of grant 1.7.2006 Exercised 30.06.2007 price Expiry date$28/04/2004 1,810,000 (1,810,000) − 0.08 28/04/201428/04/2004 1,357,500 (1,357,500) − 0.08 28/04/201428/04/2004 1,357,500 (822,500) 535,000 0.08 28/04/20144,525,000 (3,990,000) 535,000Since the commencement of the scheme, no options have been granted to the Directors of the Company, controlling shareholdersof the Company or their associates and no participant under the scheme has been granted 5% or more of the total optionsavailable under the scheme.

32Middle East Development Singapore ltdannual report 2007REPORT OF THEDIRECTORS5. SHARE OPTIONS (Cont’d)The options granted by the Company do not entitle the holders of the options, by virtue of such holdings, to any right to participatein any share issue of any other Company.Option to subscribe for ordinary shares at $0.05 eachDuring the financial year, the Company granted an option to M E Development LLC (“MED”) under a Subscription Agreementto subscribe for 120,000,000 ordinary shares at $0.05 each. MED subsequently exercised part of the option to subscribe for20,000,000 ordinary shares at $0.05 each. As at 30 June 2007, there are outstanding options to subscribe for 100,000,000 ordinaryshares at $0.05 each.Other than disclosed above, there were no shares issued by virtue of any exercise of option to take up unissued shares of theCompany or any other corporation in the Group.Other than disclosed above, during the financial year, no option to take up unissued shares of the Company or any corporation inthe Group was granted.6. AUDIT COMMITTEEThe members of the Audit Committee at the date of this report are as follows:Tan Song KoonHoon Tai MengTee Tua Ba(Chairman and Independent Director)(Member and Independent Director)(Member and Independent Director)The Audit Committee performs the functions specified by section 201B(5) of the Companies Act. Among others, it performed thefollowing functions:• Reviewed with the independent external auditors the external audit plan;• Reviewed with the independent external auditors their evaluation of the Company’s internal accounting controls, andtheir report on the financial statements and the assistance given by the Company’s officers to them;• Reviewed the financial statements of the Group and the Company prior to their submission to the directors of the Companyfor adoption; and• Reviewed the interested person transactions (as defined in Chapter 9 of the Listing Manual of the Singapore ExchangeSecurities Trading Limited (“SGX-ST”)).Other functions performed by the Audit Committee are described in the report on corporate governance included in the annualreport.

Middle East Development Singapore ltdannual report 2007 33REPORT OF THEDIRECTORS7. SUBSEQUENT DEVELOPMENTSThere are no significant developments subsequent to the release of the Group’s and the Company’s preliminary financialstatements, as announced on 28 August 2007, which would materially affect the Group’s and the Company’s operating andfinancial performance as of the date of this report.8 AUDITORSThe auditors, RSM Chio Lim, do not wish to seek re-appointment.ON BEHALF OF THE DIRECTORS...........................................………....Wong Seong KhuenDirector...........................................………....Ng Tian HuatDirector7 September 2007

34Middle East Development Singapore ltdannual report 2007STATEMENT OFDIRECTORSIn the opinion of the directors, the accompanying financial statements are drawn up so as to give a true and fair view of the state ofaffairs of the Group and the Company as at 30 June 2007, and the results, changes in equity, and cash flows of the Group, and changesin equity of the Company for the year ended on that date and at the date of this statement there are reasonable grounds to believe thatthe Company will be able to pay its debts as and when they fall due.The board of directors authorised the issue of these financial statements.ON BEHALF OF THE DIRECTORS...........................................………....Wong Seong KhuenDirector...........................................………....Ng Tian HuatDirector7 September 2007

Middle East Development Singapore ltdannual report 2007 35We have audited the accompanying financial statements of Middle East Development Singapore Ltd (formerly known as Hitchins GroupLtd) as set out on pages 36 to 75, which comprise the balance sheets of the Group and the Company as at 30 June 2007, and the incomestatement, statement of changes in equity and cash flow statement of the Group, and statement of changes in equity of the Company forthe year ended on that date, and a summary 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 theprovisions 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 and fair presentation of financial statements thatare 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.Independent Auditor’s ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance withSingapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance whether the financial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. Theprocedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financialstatements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to theentity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit alsoincludes evaluating the appropriateness of accounting 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.OpinionIn our opinion,INDEPENDENT AUDITORS’REPORTTO THE MEMBERS OF MIDDLE EAST DEVELOPMENT SINGAPORE LTD(Registration No: 196600189D) (formerly known as Hitchins Group Ltd)(a)(b)the accompanying financial statements are properly drawn up in accordance with the provisions of the Act and Singapore FinancialReporting Standards so as to give a true and fair view of the state of affairs of the Group and Company as at 30 June 2007, andthe results, changes in equity and cash flows of the Group, and changes in equity of the Company for the year ended on that date;andthe accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated inSingapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.RSM Chio LimCertified Public AccountantsSingapore7 September 2007Partner in charge of audit: Goh Swee Hong(Effective from financial year ended 30 June 2006)

36Middle East Development Singapore ltdannual report 2007BALANCESHEETSAs at 30 June 2007GroupCompanyNotes 2007 2006 2007 2006$ $ $ $ASSETSCurrent assets :Cash and cash equivalents 4 13,488,727 1,704,336 12,044,923 313,879Trade and other receivables 5 8,090,882 6,740,356 2,444,963 1,753,615Inventories 6 1,391,671 949,480 – –Total current assets 22,971,280 9,394,172 14,489,886 2,067,494Non-current assets :Investments in associates 7 – – – –Investments in subsidiaries 8 – – 3,021,821 3,021,821Other investments 9 – – – –Property, plant and equipment 10 995,345 1,013,898 176,786 151,035Deferred tax assets 20 11,833 11,540 – –Total non-current assets 1,007,178 1,025,438 3,198,607 3,172,856Total assets 23,978,458 10,419,610 17,688,493 5,240,350LIABILITIES AND EQUITYCurrent liabilities :Short-term borrowings 11 456,910 903,597 – 678,430Trade and other payables 12 4,568,187 4,216,564 1,696,113 1,486,740Current tax payable 126,000 129,834 25,181 45,100Current portion of finance leases 13 83,628 99,056 45,752 42,241Total current liabilities 5,234,725 5,349,051 1,767,046 2,252,511Non-current liabilities :Deferred tax liabilities 20 106,388 46,656 – –Finance leases 13 91,427 177,467 65,236 110,988Total non-current liabilities 197,815 224,123 65,236 110,988Total liabilities 5,432,540 5,573,174 1,832,282 2,363,499Equity:Share capital 14 18,296,125 4,311,012 18,296,125 4,311,012Other reserves (185,415) (257,787) 9,514 80,470Retained earnings/(accumulated losses) 435,208 793,211 (2,449,428) (1,514,631)Total equity 18,545,918 4,846,436 15,856,211 2,876,851Total liabilities and equity 23,978,458 10,419,610 17,688,493 5,240,350See accompanying notes to financial statements.

Middle East Development Singapore ltdannual report 2007 37CONSOLIDATED INCOMESTATEMENTYear ended 30 June 2007GroupNotes 2007 2006$ $Revenue 17 11,808,164 11,708,761Cost of sales (7,824,514) (7,853,325)Gross profit 3,983,650 3,855,436Other operating income 56,607 24,859Financial income 18 361,745 78,417Financial expense 18 (113,811) (289,058)Distribution costs (1,590,142) (1,513,840)Administrative expenses (2,869,438) (2,409,236)Other credits/ (charges) 19 30,295 (32,068)Loss before income tax (141,094) (285,490)Income tax (expense)/ credits 20 (175,557) 91,795Loss for the year (316,651) (193,695)Loss per share for loss attributable to the equity holders of the Company(expressed in cents per share)– Basic 21 (0.16) (0.18)– Diluted 21 (0.11) (0.18)See accompanying notes to financial statements.

38Middle East Development Singapore ltdannual report 2007STATEMENTS OF CHANGES INEQUITYYear ended 30 June 2007GroupForeignShare currencyShare Statutory option translation Retainedcapital reserves reserve reserves Earnings Total$ $ $ $ $ $Balance at 1 July 2005 4,311,012 262,778 80,470 (510,018) 1,009,007 5,153,249Exchange differences on translating – – – (113,118) – (113,118)foreign operationsTransfer to statutory reserves – 22,101 – – (22,101) –Net income/ (loss) recognised directly – 22,101 – (113,118) (22,101) (113,118)in equityNet loss for the year – – – – (193,695) (193,695)Total recognised income/ (loss) for the year – 22,101 – (113,118) (215,796) (306,813)Balance at 30 June 2006 4,311,012 284,879 80,470 (623,136) 793,211 4,846,436Balance at 1 July 2006 4,311,012 284,879 80,470 (623,136) 793,211 4,846,436Exchange differences on translating – – – 101,976 – 101,976foreign operationsTransfer to share capital upon exercise 70,956 – (70,956) – – –of share option (Note 15)Transfer to statutory reserves – 41,352 – – (41,352) –Net income/ (loss) recognised directly 70,956 41,352 (70,956) 101,976 (41,352) 101,976in equityIssuance of share capital (Note 14) 14,254,375 – – – – 14,254,375Share issue expenses (Note 14) (659,418) – – – – (659,418)Exercise of share options (Note 14) 319,200 – – – – 319,200Net loss for the year – – – – (316,651) (316,651)Total recognised income/ (loss) for the year 13,985,113 41,352 (70,956) 101,976 (358,003) 13,699,482Balance at 30 June 2007 18,296,125 326,231 9,514 (521,160) 435,208 18,545,918(a) & (b) (a) (a)(a)(b)Not available for distribution as cash dividendsRefer to Note 16 for details.See accompanying notes to financial statements.

Middle East Development Singapore ltdannual report 2007 39STATEMENTS OF CHANGES INEQUITYYear ended 30 June 2007ShareShare option Accumulatedcapital reserve losses TotalCompany $ $ $ $Balance at 1 July 2005 4,311,012 80,470 (1,461,199) 2,930,283Net loss for the year – – (53,432) (53,432)Balance at 30 June 2006 4,311,012 80,470 (1,514,631) 2,876,851Balance at 1 July 2006 4,311,012 80,470 (1,514,631) 2,876,851Transfer to share capital upon exercise of share option (Note 15) 70,956 (70,956) – –Net income/ (loss) recognised directly in equity 70,956 (70,956) – –Issue of share capital (Note 14) 14,254,375 – – 14,254,375Share issue expenses (Note 14) (659,418) – – (659,418)Exercise of share options (Note 14) 319,200 – – 319,200Net loss for the year – – (934,797) (934,797)Total recognised income/ (loss) for the year 13,985,113 (70,956) (934,797) 12,979,360Balance at 30 June 2007 18,296,125 9,514 (2,449,428) 15,856,211(a)(a)Not available for distribution as cash dividendsSee accompanying notes to financial statements.

40Middle East Development Singapore ltdannual report 2007CONSOLIDATED CASH FLOWSTATEMENTYear ended 30 June 2007Group2007 2006$ $Cash flows from operating activities :Loss for the year (316,651) (193,695)Adjustments for :Income tax expense/(credit) 175,557 (91,795)Depreciation expenses 345,913 365,382Gain on disposal of plant and equipment (31,759) (4,962)Loss on disposal of other investments – 514Interest income (97,525) (20,599)Interest expense 69,410 80,794Operating profit before working capital changes 144,945 135,639Cash restricted in use for more than 3 months (Note 4) (23,592) (6,658)Trade receivables and other receivables (1,173,651) (399,150)Inventories and contract work-in-progress (428,495) 215,163Trade and other payables 337,925 553,435Cash (used in)/ generated from operations (1,142,868) 498,429Income tax paid (296,533) (73,064)Net cash (used in)/ generated from operating activities (1,439,401) 425,365Cash flows from investing activities :Interest received 97,525 20,599Disposal of plant and equipment 63,378 14,251Disposal of other investments – 15,881Purchase of plant and equipment (Note 4) (312,621) (102,869)Net cash used in investing activities (151,718) (52,138)Cash flows from financing activities :Issuance of share capital, net of share issue expenses 13,914,157 –Interest paid (69,410) (80,794)Increase in short-term borrowings 36,077 27,561Decrease in finance leases (136,262) (121,089)Net cash generated from/ (used in) financing activities 13,744,562 (174,322)Net effect of exchange rate changes in consolidating subsidiaries 66,090 (79,546)Net increase in cash 12,219,533 119,359Cash at beginning of year 295,849 196,580Effect of foreign exchange rate adjustments 24,031 (20,090)Cash at end of year (Note 4) 12,539,413 295,849See accompanying notes to financial statements.

Middle East Development Singapore ltdannual report 2007 41NOTES TO FINANCIALSTATEMENTS30 June 20071. GENERALThe Company is incorporated in Singapore with limited liability. The financial statements are presented in Singapore dollars.They are drawn up in accordance with the provisions of the Companies Act, Cap. 50 and the Singapore Financial ReportingStandards (“FRS”) and they cover the parent and the group entities. The Company’s financial statements have been prepared onthe same basis, and as permitted by the Companies Act, Cap. 50, no income statement is presented for the Company. The financialstatements were approved and authorised for issue by the board of directors on 7 September 2007.The Company’s principal activities are those of investment holding and relating to the distribution of specialised building materials.It is listed on the Singapore Exchange Securities Trading Limited.The principal activities of the subsidiaries are disclosed in Note 8 to the financial statements.The registered office is: 30 Toh Guan Road #07-01 ODC DistriCentre Singapore 608840. The Company is domiciled inSingapore.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESACCOUNTING CONVENTION – The financial statements are prepared under the historical cost convention except where an FRSrequire an alternative treatment (such as fair values) as disclosed where appropriate in these financial statements.BASIS OF PRESENTATION – The consolidation accounting method is used for the consolidated financial statements that includethe financial statements made up to the balance sheet date each year of the company and its subsidiaries. Consolidated financialstatements are the financial statements of the group presented as those of a single economic entity. The consolidated financialstatements are prepared using uniform accounting policies for like transactions and other events in similar circumstances. Allsignificant intragroup balances and transactions, including income, expenses and dividends, are eliminated in full on consolidation.The equity accounting method is used for associates in the group financial statements. The results of the investees acquired ordisposed of during the financial year are accounted for from the respective dates of acquisition or up to the dates of disposal. Ondisposal the attributable amount of goodwill if any is included in the determination of the gain or loss on disposal.BASIS OF PREPARATION OF FINANCIAL STATEMENTS – The preparation of financial statements in conformity with generallyaccepted accounting principles requires the management to make estimates and assumptions that affect the reported amountsof assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The estimatesand assumptions are reviewed on an ongoing basis. Apart from those involving estimations, management has made judgementsin the process of applying the entity’s accounting policies. The areas requiring management’s most difficult, subjective or complexjudgements, or areas where assumptions and estimates are significant to the financial statements, are disclosed at the end of thisfootnote, where applicable.CASH AND CASH EQUIVALENTS – Cash and cash equivalents include bank and cash balances and any highly liquid debtinstruments purchased with an original maturity of three months or less. Cash for the cash flow statement includes cash andcash equivalents less bank overdrafts payable on demand that form an integral part of cash management and cash subject torestriction.

42Middle East Development Singapore ltdannual report 2007NOTES TO FINANCIALSTATEMENTS30 June 20072. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)TRADE RECEIVABLES – After initial recognition at fair value, trade receivables are measured at amortised cost using the effectiveinterest method except that short-duration receivables with no stated interest rate are normally measured at original invoiceamount unless the effect of imputing interest would be significant. Trade receivables are stated after provision for impairment.The amount of the provision for impairment is recognised in the income statement. A trade receivable amount is regarded asimpaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognitionand that loss event has an impact on the estimated future cash flows of the financial asset that can be reliably estimated. Thecarrying amounts of trade receivables are assumed to approximate their fair value. Normally no interest is charged on tradereceivables.LOANS AND RECEIVABLES – Loans and receivables are non-derivative financial assets with fixed or determinable paymentsthat are not quoted in an active market, other than: (a) those that the entity intends to sell immediately or in the near term andare classified as held for trading, and those that the entity upon initial recognition designates as at fair value through profit orloss; (b) those that the entity upon initial recognition designates as available for sale; or (c) those for which the holder may notrecover substantially all of its initial investment, other than because of credit deterioration and are classified as available for sale.After initial recognition such financial assets, including derivatives that are assets, are measured at their fair values, without anydeduction for transaction costs that may be incurred on sale or other disposal, except for the non-current financial assets that areloans and receivables which are measured at amortised cost using the effective interest method less provision for impairment.These items are included in the balance sheet in loans and receivables as current assets or as non-current assets where thematurities are greater than 12 months after the balance sheet date.INVENTORIES – Inventories are measured at the lower of cost (first in first out method) and net realisable value. Net realisablevalue is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimatedcosts necessary to make the sale. A write down on cost is made for where the cost is not recoverable or if the selling prices havedeclined. Cost includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to theirpresent location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate shareof overheads based on normal operating capacity.CONTRACTS WORK-IN-PROGRESS – When the outcome of a long-term contract can be estimated reliably, the revenue and costsassociated with the contract are recognised as revenue and expenses respectively by reference to the stage of completion of thecontract activity at the balance sheet date using the proportion that contract costs incurred for work performed to date bear tothe estimated total contract costs method. Contract costs consist of costs that relate directly to the specific project, costs that areattributable to contract activity in general and can be allocated to the project and such other costs as are specifically chargeableto the customer under the terms of the contract. Variations in contract work, claims and incentive payments are included to theextent that they have been agreed with the customer. When it is probable that total contract costs will exceed total contractrevenue, the expected loss is recognised as an expense immediately. The long-term work in progress projects have operatingcycles longer than one year. The company includes in current assets amounts relating to the long-term contracts realisable overa period in excess of one year.SUBSIDIARIES – A subsidiary is an entity including unincorporated and special purpose entity that is controlled by the group.Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities accompanyinga shareholding of more than one half of the voting rights or the ability to appoint or remove the majority of the members of theboard of directors or to cast the majority of votes at meetings of the board of directors. The existence and effect of potential votingrights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. In thecompany’s own separate financial statements, the investments in subsidiaries are stated at cost less any provision for impairment invalue. Impairment loss recognised in profit or loss for a subsidiary is reversed only if there has been a change in the estimates usedto determine the asset’s recoverable amount since the last impairment loss was recognised. The net book values of the subsidiariesare not necessarily indicative of the amounts that would be realised in a current market exchange.

Middle East Development Singapore ltdannual report 2007 43NOTES TO FINANCIALSTATEMENTS30 June 20072. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)ASSOCIATES – An associate is an entity including an unincorporated entity in which the investor has a substantial financialinterest (usually not less than 20% of the voting power), significant influence and that is neither a subsidiary nor a joint ventureof the investor. Significant influence is the power to participate in the financial and operating policy decisions of the investeebut is not control or joint control over those policies. The investments in associates are carried in the group balance sheet at costplus post-acquisition changes in the group’s share of net assets of the associate, less any impairment in value. In the company’sown separate financial statements, the investments in associates are stated at cost less any provision for impairment in value.Impairment loss recognised in profit or loss for an associate is reversed only if there has been a change in the estimates used todetermine the asset’s recoverable amount since the last impairment loss was recognised. The net book values of the associatesare not necessarily indicative of the amounts that would be realised in a current market exchange.CURRENT INVESTMENTS – Investments with a quoted market price in an active market and derivatives that are not designatedas hedges are classified as financial assets held for trading or those designated at fair value through profit or loss at inception.They are initially measured at fair value (transaction costs are expensed). After initial recognition such financial assets aremeasured at their fair values based on current bid prices, without any deduction for transaction costs that may be incurred onsale or other disposal. They are classified as current assets if they are held for trading or are expected to be realised within 12months of the balance sheet date. Those items designated at fair value through profit or loss that are expected to be realisedafter 12 months are included in the balance sheet as non-current assets. A gain or loss on remeasuring trading financial assets tofair value (other than those relating to hedges) is recognised in the income statement. The transactions are recorded at the tradedate method.BUSINESS COMBINATIONS – Business combinations are accounted for by applying the purchase method. The cost of abusiness combination includes the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equityinstruments issued by the acquirer, in exchange for control of the acquiree; plus any costs directly attributable to the businesscombination. Any excess of the cost over the acquirer’s interest in the net fair value of the identifiable assets, liabilities andcontingent liabilities so recognised is accounted for as goodwill. The excess of acquirer’s interest in the net fair value of acquiree’sidentifiable assets, liabilities and contingent liabilities over cost is accounted for as “negative goodwill”. The acquiree’s identifiableassets, liabilities and contingent liabilities that meet the conditions for recognition under FRS 103 are recognised at their fairvalues at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordancewith FRS 105 Non-Current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair valueless costs to sell. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is notamortised but is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it mightbe impaired. An impairment loss in respect of goodwill is not reversed. There was no negative goodwill.MINORITY INTERESTS – Any minority interest in the acquiree (subsidiary) is initially measured at the minority’s proportion ofthe net fair value of the assets, liabilities and contingent liabilities recognised.PROPERTY, PLANT AND EQUIPMENT – Depreciation is provided on a straight-line basis to allocate the gross carrying amountsless their residual values over their estimated useful lives of each part of an item of property, plant and equipment. The annualrates of depreciation are as follows:Leasehold land and building - Over the terms of lease which is 3.6% to 4.5%Leasehold improvements - 10 years or 10%Motor vehicles - 2.5 to 10 years or 10% to 40%Plant and equipment - 1-10 years or 10% to 100%

44Middle East Development Singapore ltdannual report 2007NOTES TO FINANCIALSTATEMENTS30 June 20072. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)An asset is depreciated when it is available for use until it is derecognised even if during that period the item is idle. Fullydepreciated assets still in use are retained in the financial statements.Property, plant and equipment are carried at cost less any accumulated depreciation and any accumulated impairment losses.The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the differencebetween the net disposal proceeds, if any, and the carrying amount of the item and is recognised in the income statement. Theresidual value and the useful life of an asset is reviewed at least at each financial year-end and, if expectations differ from previousestimates, the changes are accounted for as a change in an accounting estimate, and the depreciation charge for the current andfuture periods are adjusted.Cost also includes acquisition cost, any cost directly attributable to bringing the asset to the location and condition necessary forit to be capable of operating in the manner intended by management. Subsequent cost are recognised as an asset only when it isprobable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measuredreliably. All other repairs and maintenance are charged to the income statement when they are incurred.IMPAIRMENT OF NON-FINANCIAL ASSETS – At each reporting date an assessment is made whether there is any indicationthat a depreciable or amortisable asset may be impaired. If any such indication exists, an estimate is made of the recoverableamount of the asset. Irrespective of whether there is any indication of impairment, an annual impairment test is performed atthe same time every year on an intangible asset with an indefinite useful life or an intangible asset not yet available for use. Theimpairment loss is the excess of the carrying amount over the recoverable amount and is recognised in the income statementunless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use.In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate thatreflects current market assessments of the time value of money and the risks specific to the asset. For the purposes of assessingimpairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).At each reporting date non-financial assets other than goodwill with impairment loss recognised in prior periods are assessedfor possible reversal of the impairment. An impairment loss is reversed only to the extent that the asset’s carrying amount doesnot exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss hadbeen recognised.IMPAIRMENT OF FINANCIAL ASSETS – All financial assets except those measured at fair value through profit or loss are subjectto review for impairment. A financial asset or a group of financial assets is impaired and impairment losses are incurred if there isobjective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘lossevent’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financialassets that can be reliably estimated. Losses expected as a result of future events, no matter how likely, are not recognised.FINANCIAL LIABILITIES – Financial liabilities at fair value through profit or loss when recognised initially are measured atfair value. Financial liabilities not at fair value through profit or loss are measured at fair value plus transaction costs that aredirectly attributable to the acquisition or issue of the financial liability. After initial recognition financial liabilities at fair valuethrough profit or loss, including derivatives that are financial liabilities, are measured at fair value. Other financial liabilities notat fair value through profit or loss are measured at amortised cost and any difference between the proceeds (net of transactioncosts) and the redemption value is recognised in the income statement over the period of the borrowings using the effectiveinterest method. Financial liabilities including bank and other borrowings are classified as current liabilities unless there is anunconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. Items classified withintrade and other payables are not usually re-measured, as the obligation is usually known with a high degree of certainty andsettlement is short-term.

Middle East Development Singapore ltdannual report 2007 45NOTES TO FINANCIALSTATEMENTS30 June 20072. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)LIABILITIES AND PROVISIONS – A liability or provision is recognised when there is a present obligation (legal or constructive)as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle theobligation and a reliable estimate can be made of the amount of the obligation. These include trade and other payables and wherethe effect of the time value of money is material, the amount recognised is the present value of the expenditures expected to berequired to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and therisks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.LEASES AS A LESSEE – A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownershipof an asset. At the commencement of the lease term, a finance lease is recognised as an asset and as liability in the balancesheet at amounts equal to the fair value of the leased asset or, if lower, the present value of the minimum lease payments, eachdetermined at the inception of the lease. The discount rate used in calculating the present value of the minimum lease paymentsis the interest rate implicit in the lease, if this is practicable to determine; if not, the lessee’s incremental borrowing rate is used.Any initial direct costs of the lessee are added to the amount recognised as an asset. The excess of the lease payments over therecorded lease liability are treated as finance charges which are allocated to each period during the lease term so as to producea constant periodic rate of interest on the remaining balance of the liability. Contingent rents are charged as expenses in theperiods in which they are incurred. The assets are depreciated as owned depreciable assets. Leases where the lessor effectivelyretains substantially all the risks and benefits of ownership of the leased assets are classified as operating leases. For operatingleases, lease payments are recognised as an expense in the income statement on a straight-line basis over the term of the relevantlease unless another systematic basis is representative of the time pattern of the user’s benefit, even if the payments are not onthat basis. Lease incentives received are recognised in the income statement as an integral part of the total lease expense.SHARE CAPITAL – Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new sharesor options are shown in equity as a deduction from the proceeds. Where the company reacquires its own equity instruments astreasury shares, the consideration paid, including any directly attributable incremental cost is deducted from equity attributableto the company’s equity holders until the shares are cancelled, reissued or disposed of. Where such shares are subsequently soldor reissued, any consideration received, net of any directly attributable incremental transaction costs and the related incometax effects, is included in equity attributable to the company’s equity holders and no gain or loss is recognised in the incomestatement.FAIR VALUE OF FINANCIAL INSTRUMENTS – The carrying values of current financial assets and financial liabilities includingcash, accounts receivable, short-term borrowings, accounts payable approximate their fair values due to the short-term maturityof these instruments. The fair values of non-current financial instruments are not disclosed unless there are significant itemsat the end of the year and in the event the fair values are disclosed in the relevant notes. Disclosures of fair value are not madewhen the carrying amount is a reasonable approximation of fair value. The maximum exposure to credit risk is the fair value ofthe financial instruments at the balance sheet date.FINANCIAL GUARANTEE – A financial guarantee contract requires that the issuer makes specified payments to reimburse theholder for a loss when a specified debtor fails to make payment when due. Financial guarantee contracts are initially recognisedat fair value and are subsequently measured at the greater of (a) the amount determined in accordance with FRS 37 and (b) theamount initially recognised less, where appropriate, cumulative amortisation recognised in accordance with FRS 18.

46Middle East Development Singapore ltdannual report 2007NOTES TO FINANCIALSTATEMENTS30 June 20072. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)REVENUE RECOGNITION – The revenue amount is the fair value of the consideration received or receivable from the grossinflow of economic benefits during the year arising from the course of the ordinary activities of the entity and it is shown net ofrelated tax, estimated returns, discounts and volume rebates. Revenue from sale of goods is recognised when significant risksand rewards of ownership are transferred to the buyer, there is neither continuing managerial involvement to the degree usuallyassociated with ownership nor effective control over the goods sold, and the amount of revenue and the costs incurred or to beincurred in respect of the transaction can be measured reliably. Revenue from rendering of services that are of short durationis recognised when the services are completed. Revenue from rendering of long-term services is recognised by reference to thestage of completion of the transaction at the balance sheet date determined by the proportion of the cost incurred to date bearsto the estimated total cost of the transaction and the amount of revenue, stage of completion, and the costs incurred for thetransaction and the costs to complete the transaction can be measured reliably. Rental revenue is recognised on a time-proportionbasis that takes into account the effective yield on the asset. Interest revenue is recognised on a time-proportion basis that takesinto account the effective yield on the asset. Dividend revenue from investments is recognised when the shareholders’ right toreceive the dividend is legally established.FOREIGN CURRENCY TRANSACTIONS – The functional currency is the Singapore dollar as it reflects the primary economicenvironment in which the entity operates. Transactions in foreign currencies are recorded in the functional currency at therates ruling at the dates of the transactions. At each balance sheet date, recorded monetary balances and balances measuredat fair value that are denominated in foreign currencies are reported at the rates ruling at the balance sheet and fair value datesrespectively. All realised and unrealised exchange adjustment gains and losses are dealt with in the income statement. Thepresentation is in the functional currency.FOREIGN CURRENCY FINANCIAL STATEMENTS – The foreign entities determine the appropriate functional currency as itreflects the primary economic environment in which the entities operate. In translating the financial statements of a foreignentity for incorporation in the combined financial statements the assets and liabilities denominated in currencies other than thefunctional currency of the group are translated at year end rates of exchange and the income and expense items are translated ataverage rates of exchange for the year. The resulting translation adjustments (if any) are accumulated in a separate componentof equity until the disposal of the foreign entity.BORROWING COSTS – All borrowing costs that are interest and other costs incurred in connection with the borrowing of fundsare recognised as an expense in the period in which they are incurred except for borrowing costs that are directly attributable tothe acquisition, construction or production of a qualifying asset that necessarily take a substantial period of time to get ready fortheir intended use or sale are capitalised as part of the cost of that asset until substantially all the activities necessary to preparethe qualifying asset for its intended use or sale are complete. The interest expense is calculated using the effective interest ratemethod.INCOME TAX – The income taxes are accounted using the asset and liability method that requires the recognition of taxespayable or refundable for the current year and deferred tax liabilities and assets for the future tax consequence of events thathave been recognised in the financial statements or tax returns. The measurements of current and deferred tax liabilities andassets are based on provisions of the enacted or substantially enacted tax laws; the effects of future changes in tax laws or ratesare not anticipated. Income tax expense represents the sum of the tax currently payable and deferred tax. Deferred tax assetsand liabilities are offset when they relate to income taxes levied by the same income tax authority. The carrying amount ofdeferred tax assets is reviewed at each balance sheet date and is reduced, if necessary, by the amount of any tax benefits that,based on available evidence, are not expected to be realised. A deferred tax amount is recognised for all temporary differences,unless the deferred tax amount arises from (a) goodwill for which amortisation is not deductible for tax purposes; or (b) the initialrecognition of an asset or liability in a transaction which (i) is not a business combination; and (ii) at the time of the transaction,affects neither accounting profit nor taxable profit (tax loss). A deferred tax liability is not recognised for all taxable temporarydifferences associated with investments in subsidiaries and associates because (a) the company is able to control the timing of thereversal of the temporary difference; and (b) it is probable that the temporary difference will not reverse in the foreseeable future.

Middle East Development Singapore ltdannual report 2007 47NOTES TO FINANCIALSTATEMENTS30 June 20072. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)EMPLOYEE BENEFITS – Certain subsidiaries operate a defined contribution provident fund scheme, in which employees areentitled to join upon fulfilling certain conditions. The assets of the fund are held separately from those of the entity in anindependently administered fund. The entity contributes an amount equal to a fixed percentage of the salary of each participatingemployee. Contributions are charged to the income statement in the period to which they relate. This plan is in addition to thecontributions to government managed retirement benefit plans such as the Central Provident Fund in Singapore which specifiesthe employer’s obligations which are dealt with as defined contribution retirement benefit plans. For employee leave entitlementthe expected cost of short-term employee benefits in the form of compensated absences is recognised in the case of accumulatingcompensated absences, when the employees render service that increases their entitlement to future compensated absences; andin the case of non-accumulating compensated absences, when the absences occur. A liability for bonuses is recognised where theentity is contractually obliged or where there is constructive obligation base on past practice.SHARE-BASED COMPENSATION – For the equity-settled share-based compensation transactions, the fair value of the employeeservices received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed ona straight-line basis over the vesting period is determined by reference to the fair value of the options granted excluding theeffect of non-market conditions such as profitability and sales growth targets. Non-market vesting conditions are included inassumptions about the number of options that are expected to become exercisable. Fair value is measured using the Black-Scholes pricing model. The expected life used in the model has been adjusted, based on management’s best estimate, for theeffects of non-transferability, exercise restrictions and behavioural considerations. At each balance sheet date, the entity revisesits estimates of the number of options that are expected to become exercisable. It recognises the impact of the revision of originalestimates, if any, in the income statement, with a corresponding adjustment to equity. The proceeds received net of any directlyattributable transaction costs are credited to share capital when the options are exercised.SEGMENT REPORTING – A business segment is a distinguishable component of an enterprise that is engaged in providing anindividual product or service or a group of related products or services and that is subject to risks and returns that are differentfrom those of other business segments. A geographical segment is a distinguishable component that is engaged in providingproducts or services within a particular economic environment and that is subject to risks and returns that are different fromthose of components operating in other economic environments.CRITICAL JUDGEMENTS, ASSUMPTIONS AND ESTIMATION UNCERTAINTIESThe critical judgements made in the process of applying the entity’s accounting policies that have the most significant effecton the amounts recognised in the financial statements and the key assumptions concerning the future, and other key sourcesof estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carryingamounts of assets and liabilities within the next financial year are discussed below:Critical accounting judgementsDEFERRED INCOME TAXES –Management judgment is required in determining the provision for income taxes, deferred taxassets and liabilities and the extent to which deferred tax assets can be recognised. A deferred tax asset is recognised if itis probable that sufficient taxable income will be available in the future against which the temporary differences and unusedtax losses can be utilised. Management also considers future taxable income and tax planning strategies in assessing whetherdeferred tax assets should be recognised. The amount at the balance sheet date was $11,833 (2006: $11,540).

50Middle East Development Singapore ltdannual report 2007NOTES TO FINANCIALSTATEMENTS30 June 20072. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)OTHER RISKS ON FINANCIAL INSTRUMENTS – The main risks arising from the entity’s financial instruments are interest risk,liquidity risk and foreign currency risk. The operations are financed through a mixture of retained earnings and borrowings.Borrowings are in the desired currencies at both fixed and floating rates of interest. The policy is to retain flexibility in selectingborrowings at both fixed and floating rates interest. There is exposure to interest rate price risk for financial instruments with afixed interest rate and to interest rate or cash flow risk for financial instruments with a floating interest rate that is reset as marketrates change. Interest rate swaps are not used to generate the desired interest profit and to manage the exposure to interestrate fluctuations. There is also exposure to liquidity. As regards liquidity, the policy has been to ensure continuity of funding andwhere necessary a certain percentage of the borrowings should mature in two to five years. Short-term flexibility is achieved byoverdraft facilities. There is also exposure to changes in foreign exchange rates arising from foreign currency transactions andbalances and changes in fair values. These exposures and changes in fair values from time to time are monitored and any gainsand losses are included in the income statement unless otherwise stated in the notes to the financial statements. There is nopolicy to reduce currency exposures through forward currency contracts, derivatives transactions or other arrangements.3. RELATED PARTY TRANSACTIONSA related party is an entity or person that directly or indirectly through one or more intermediaries controls, is controlled by,or is under common or joint control with, the entity in governing the financial and operating policies, or that has an interest inthe entity that gives it significant influence over the entity in financial and operating decisions. It also includes members of thekey management personnel or close members of the family of any individual referred to herein and others who have the abilityto control, jointly control or significantly influence by or for which significant voting power in such entity resides with, directlyor indirectly, any such individual. This includes parents, subsidiaries, fellow subsidiaries, associates, joint ventures and postemploymentbenefit plans, if any.3.1 Related companies:Related companies in these financial statements refer to members of the Company’s group of companies.There are transactions and arrangements between the Company and members of the Group and the effects of these on thebasis determined between the parties are reflected in these financial statements. The current intercompany balances areunsecured without fixed repayment terms and interest unless stated otherwise. For non-current balances an interest isimputed based on prevailing market interest rate for similar debt less the interest rate if any provided in the agreement forthe balance. The guarantees are provided by the guarantor without charge but for the financial statements from 1 January2006 fair values are imputed and are recognised accordingly where no charge is paid.Intragroup transactions and balances that have been eliminated in the consolidated financial statements are not disclosedas related party transactions and balances.3.2. Other related parties:There are transactions and arrangements between the Company and related parties and the effects of these on thebasis determined between the parties are reflected in these financial statements. The current related party balancesare unsecured without fixed repayment terms and interest unless stated otherwise. For non-current balances interest isimputed based on the prevailing market interest rate for similar debt less the interest rate if any provided in the agreementfor the balance.

52Middle East Development Singapore ltdannual report 2007NOTES TO FINANCIALSTATEMENTS30 June 20073. RELATED PARTY TRANSACTIONS (Cont’d)3.4. Other receivables from/(other payables to) related parties:The trade receivables and payables balances arising from sales and purchases of goods and services are disclosed elsewherein the notes to the financial statements.The movements in other payables to related parties are as follows:Group and CompanyOther receivables:Related party2007 2006$ $Payment on behalf during the year 300,825 –Balance at end of year 300,825 –GroupOther payables:DirectorRelated party2007 2006 2007 2006$ $ $ $Balance at beginning of year (1,555) (1,595) (227,935) (240,406)Amounts paid out during the year – 40 7,222 47,222Amounts received on behalf during the year (39) – (29,921) (34,751)Balance at end of year (1,594) (1,555) (250,634) (227,935)CompanyOther payables:Related party2007 2006$ $Balance at beginning of year (161,397) (166,365)Amounts paid out during the year 4,850 7,610Amounts received on behalf during the year (231) (2,642)Balance at end of year (156,778) (161,397)

Middle East Development Singapore ltdannual report 2007 53NOTES TO FINANCIALSTATEMENTS30 June 20074. CASH AND CASH EQUIVALENTSGroupCompany2007 2006 2007 2006$ $ $ $Not restricted in use 12,831,935 1,071,136 11,727,910 2,291Restricted in use (a) 656,792 633,200 317,013 311,58813,488,727 1,704,336 12,044,923 313,879Analysis of above amount denominated in foreign currencies:Chinese Renminbi 427,202 479,216 – –Malaysian Ringgit 607,464 619,751 – –Interest bearing balances 12,644,959 1,081,859 11,872,015 311,588The rate of interest for the cash on interest earning account are between 0.72% to 3.2% (2006: 0.825% to 1.8%) per year forthe Group and 1.6% to 3.2% (2006: 1.5% to 1.8%) per year for the Company. These approximate the weighted effective interestrate.(a)These are for fixed deposits held by bankers to cover bankers’ guarantees and credit facilities granted.Cash and cash equivalents in the consolidated cash flow statementsGroup2007 2006$ $As shown above 13,488,727 1,704,336Bank overdrafts (Note 11) (292,522) (775,287)Cash restricted in use (656,792) (633,200)Cash and cash equivalents at end of year 12,539,413 295,849NON CASH TRANSACTION – Addition to plant and equipment during the year amounting to $34,794 (2006: $18,000) werefinanced by new finance lease.

54Middle East Development Singapore ltdannual report 2007NOTES TO FINANCIALSTATEMENTS30 June 20075. TRADE AND OTHER RECEIVABLESGroupCompany2007 2006 2007 2006$ $ $ $Trade receivables:Outside parties 7,870,504 7,408,171 682,454 701,460Retention receivable 918,025 884,354 – –Less provision for impairment (1,945,212) (2,182,519) (630,737) (697,267)Subsidiaries (Notes 3 and 8) – – – 17,229Other receivables:Subsidiaries (Notes 3 and 8) – – 1,736,175 1,523,431Provision for impairment – subsidiaries – – (140,006) (138,138)Related parties (Note 3) 300,825 – 300,825 –Tax recoverable 443,959 267,084 267,084 267,084Outside parties 172,944 216,022 7,545 478Deposits 184,384 89,310 146,316 57,537Prepayments 145,453 57,934 75,307 21,801Total trade and other receivables 8,090,882 6,740,356 2,444,963 1,753,615Movements in above provision:-Balance at beginning of year 2,182,519 2,059,239 835,405 752,687Foreign currency translation difference 14,901 (17,892) – –Charged (reversed) for trade receivable to incomestatement included in financial income and (expense) (225,940) 133,565 (61,565) 69,957Change (reversed) for subsidiaries to income statementincluded in financial income and (expense) – – 1,868 12,761Charged for trade receivables against accrued liabilities – 18,795 – –Bad debts written off (10,206) (11,188) (4,965) –Used (16,062) – – –Balance at end of year 1,945,212 2,182,519 770,743 835,405Analysis of above amount denominated in foreign currencies:United States dollars 158,656 – – –Chinese Renminbi 799,916 1,523,956 – –Malaysian Ringgit 1,410,162 1,390,113 – –Trade receivables amounting to $217,948 (2006: $158,653) and $Nil (2006: $27,675) are factored to a financial institution anddiscounted with a bank (Note 11) respectively.

Middle East Development Singapore ltdannual report 2007 55NOTES TO FINANCIALSTATEMENTS30 June 20075. TRADE AND OTHER RECEIVABLES (Cont’d)Concentration of trade receivables customers:GroupCompany2007 2006 2007 2006$ $ $ $Top 1 customer 1,061,675 827,187 – –Top 2 customers 1,888,196 1,393,693 – –Top 3 customers 2,545,322 1,825,629 – –The average credit period generally granted to trade receivable customers of the Group is about 30 to 120 days (2006: 30 to 120days) excluding all items provided for.Current receivables with a short duration are not discounted and the carrying values are assumed to approximate the fair value.6. INVENTORIESGroup2007 2006$ $Finished goods 519,062 438,904Raw materials 412,333 297,618Contract work-in-progress 460,276 212,958Balance at end of year 1,391,671 949,480Contract work-in-progress comprises:Group2007 2006$ $Aggregate amount of costs incurred and recognised profits (less recognised losses)to date on uncompleted contracts 2,891,071 1,304,755Less progress payments received and receivable to date (2,497,722) (1,145,027)Net amount due from contract customers at end of year 393,349 159,728Included in the accompanying balance sheet as follows:As an asset under inventories 460,276 212,958As a liability under trade payables (Note 12) (66,927) (53,230)393,349 159,728Contract retention receivables as an asset under trade receivables 918,025 884,354

56Middle East Development Singapore ltdannual report 2007NOTES TO FINANCIALSTATEMENTS30 June 20077. INVESTMENTS IN ASSOCIATESGroupCompany2007 2006 2007 2006$ $ $ $Unlisted equity shares at cost 239,253 239,253 239,253 239,253Share of post-acquisition losses (239,253) (239,253) – –Less provision for impairment – – (239,253) (239,253)The investment is carried at cost less provision for impairment.– – – –Percentage ofequity heldName of associates, country of incorporation, 2007 2006place of operations and principal activities $ $Held by the CompanyAeroroof Industries Sdn Bhd (a) 43 43MalaysiaManufacture of concrete roof tiles(a)Not audited. This associate does not contribute significantly to the Group’s results as it is dormant.Share of losses of associate exceeding the amount of the investment are not recognised as losses in the income statement. TheGroup has not provided any guarantee or undertaking in favour of the associate.8. INVESTMENTS IN SUBSIDIARIESCompany2007 2006$ $Quasi-equity loan (a) 1,256,247 1,256,247Unquoted shares, at cost 3,362,688 3,362,688Less provision for impairment (1,597,114) (1,597,114)Total at cost 3,021,821 3,021,821Analysis of above amount denominated in foreign currencies:Chinese Renminbi 1,542,247 1,542,247Malaysian Ringgit 97,737 97,737

Middle East Development Singapore ltdannual report 2007 57NOTES TO FINANCIALSTATEMENTS30 June 20078. INVESTMENTS IN SUBSIDIARIES (Cont’d)The investments are carried at cost less provision for impairment.(a)This loan is an interest free quasi-equity loan from the Company to Hitchins-Da Sheng Holdings Pte Ltd (“HDSH”), thewholly-owned subsidiary of Middle East Development Singapore Ltd (formerly known as Hitchins Group Ltd) (“MEDS”),which holds 100% equity interest in Shanghai Hitchins Da Sheng Waterproofing Materials Co., Ltd. The loan from MEDSto HDSH is quasi-equity in nature and MEDS does not expect the repayment of the interest free loan by HDSH in theforeseeable future.The following is a listing of all the subsidiaries held by the Company:Name of subsidiaries, country of incorporation, Percentage Cost of theplace of operations and principal activities of equity held investments2007 2006 2007 2006% % $ $Interest held by CompanyHitchins (F.E.) Marketing Pte Ltd (a) 100 100 736,489 736,489SingaporeDistribution of specialised building materials.Hitchins-Da Sheng Holdings Pte Ltd (a) 100 100 424,060 424,060SingaporeInvestment holding and supply of specialised building materials.CRG Contractors Pte Ltd (a) 100 100 2,059,500 2,059,500SingaporeProvision of waterproofing works and contractors forconstruction works of any kind.Hitchins International Pte Ltd (a) 100 100 10,000 10,000SingaporeInvestment holding.Hitchins Borneo Sendirian Berhad (b) 98 98 9,900 9,900BruneiRoofing and fire protection specialists and supplier ofspecialised building materials.(Audited by Lee and Raman Certified Public Accountants)Renesco Injection (Waterproofing) Pte Ltd (a) 100 100 25,000 25,000SingaporeSupply of specialised building materials and waterproofing services.

58Middle East Development Singapore ltdannual report 2007NOTES TO FINANCIALSTATEMENTS30 June 20078. INVESTMENTS IN SUBSIDIARIES (Cont’d)Name of subsidiaries, country of incorporation, Percentage Cost of theplace of operations and principal activities of equity held investments2007 2006 2007 2006% % $ $Ampero (M) Sdn Bhd (b) 100 100 96,669 96,669MalaysiaSupply of specialised building materials(Audited by Horwath Malaysia)Hitchins (Malaysia) Sendirian Berhad (b) 100 100 1,068 1,068MalaysiaSupply of specialised buildings materials.(Audited by Horwath Malaysia)Hitchins (Laboratory) Pte Ltd (c) 100 100 2 2SingaporeInactiveThe interests held by the subsidiaries are listed below:3,362,688 3,362,688Name of subsidiaries, country of incorporation, Percentage Cost in books ofplace of operations and principal activities of equity subsidiaries2007 2006 2007 2006% % $ $Hitchins (F.E.) Marketing Pte LtdHelms Industries Pte Ltd (a) 100 100 10,000 10,000SingaporeSupply of specialised building materials.Hitchins-Da Sheng Holdings Pte LtdShanghai Hitchins Da Sheng Waterproofing Materials Co., Ltd (b) 100 100 1,542,247 1,542,247People’s Republic of ChinaManufacture and supply of specialised building materials.(Audited by Horwath China Shanghai)Hitchins International Pte LtdDaku Asia Pte Ltd (a) 75 75 60,001 60,001SingaporeSupply of specialised building materials.(a)(b)(c)Audited by RSM Chio Lim.Other auditors. Audited by firms of accountants other than member firms of RSM International of which RSM Chio Lim inSingapore is a member. Their names are indicated above.Not audited as it is inactive and immaterial.

Middle East Development Singapore ltdannual report 2007 59NOTES TO FINANCIALSTATEMENTS30 June 20079. OTHER INVESTMENTSGroupCompany2007 2006 2007 2006$ $ $ $Movements during the year - at fair value:Fair value at beginning of year – 16,395 – 14,625Disposals – (16,395) – (14,625)Fair value at end of year – – – –The investment represents investment in listed equity securities which provide an opportunity for return through dividendincome and trading gains. The fair values of these securities are based on quoted market prices.10. PROPERTY, PLANT AND EQUIPMENTLeaseholdland and Leasehold Motor Plant andGroup building improvements vehicles equipment Total$ $ $ $ $Cost:At beginning of year 1 July 2006 722,839 47,444 1,321,347 960,383 3,052,013Foreign currency translation difference 14,891 1,198 11,208 6,063 33,360Additions 83,437 – 121,865 142,113 347,415Disposals – – (234,688) (22,500) (257,188)At end of year 30 June 2007 821,167 48,642 1,219,732 1,086,059 3,175,600Accumulated depreciation:At beginning of year 1 July 2006 255,191 35,501 943,810 803,613 2,038,115Foreign currency translation difference 6,372 1,008 9,442 4,974 21,796Depreciation for the year 64,070 5,884 192,616 83,343 345,913Disposals – – (204,529) (21,040) (225,569)At end of year 30 June 2007 325,633 42,393 941,339 870,890 2,180,255Net book value:At end of year 30 June 2007 495,534 6,249 278,393 215,169 995,345Cost:At beginning of year 1 July 2005 737,849 48,670 1,327,565 1,334,842 3,448,926Foreign currency translation difference (18,271) (1,226) (12,710) (6,825) (39,032)Additions 3,261 – 55,743 61,865 120,869Disposals – – (49,251) (429,499) (478,750)At end of year 30 June 2006 722,839 47,444 1,321,347 960,383 3,052,013

60Middle East Development Singapore ltdannual report 2007NOTES TO FINANCIALSTATEMENTS30 June 200710. PROPERTY, PLANT AND EQUIPMENT (Cont’d)Leaseholdland and Leasehold Motor Plant andGroup building improvements vehicles equipment Total$ $ $ $ $Accumulated depreciation:At beginning of year 1 July 2005 196,878 30,419 807,645 1,129,359 2,164,301Foreign currency translation difference (6,727) (892) (9,057) (5,431) (22,107)Depreciation for the year 65,040 5,974 194,473 99,895 365,382Disposals – – (49,251) (420,210) (469,461)At end of year 30 June 2006 255,191 35,501 943,810 803,613 2,038,115Net book value:At end of year 30 June 2006 467,648 11,943 377,537 156,770 1,013,898The depreciation expense is charged as follows:Cost Administrativeof sales expenses Total$ $ $2007 – 345,913 345,9132006 32,543 332,839 365,382Motor Plant andCompany vehicles equipment Total$ $ $Cost:At beginning of year 1 July 2006 365,888 522,886 888,774Additions – 115,896 115,896Written off – (20,015) (20,015)At end of year 30 June 2007 365,888 618,767 984,655Accumulated depreciation:At beginning of year 1 July 2006 231,446 506,293 737,739Additions 68,328 21,730 90,058Disposals – (19,928) (19,928)At end of year 30 June 2007 299,774 508,095 807,869Net book value:At end of year 30 June 2007 66,114 110,672 176,786

Middle East Development Singapore ltdannual report 2007 61NOTES TO FINANCIALSTATEMENTS30 June 200710. PROPERTY, PLANT AND EQUIPMENT (Cont’d)Motor Plant andCompany vehicles equipment Total$ $ $Cost:At beginning of year 1 July 2005 365,888 910,777 1,276,665Additions – 721 721Disposals – (388,612) (388,612)At end of year 30 June 2006 365,888 522,886 888,774Accumulated depreciation:At beginning of year 1 July 2005 163,118 843,585 1,006,703Additions 68,328 46,240 114,568Disposals – (383,532) (383,532)At end of year 30 June 2006 231,446 506,293 737,739Net book value:At end of year 30 June 2006 134,442 16,593 151,035Certain plant and equipment are under finance lease agreement (see Note 13).11. SHORT-TERM BORROWINGSGroupCompany2007 2006 2007 2006$ $ $ $Advances against trade receivables factored (Note 5) 164,388 100,635 – –Bills discounted – 27,675 – –Bank overdrafts (secured) 292,522 775,287 – 678,430Total short-term borrowings 456,910 903,597 – 678,430The bank overdrafts of the Group and Company are covered by corporate guarantees by the Company to its subsidiary and fixeddeposits pledged with the banks respectively (Note 4). All the short-term borrowings are interest bearing. The range of floatinginterest rates paid was as follows:2007 2006Advances against trade receivables factored 6.0% to 7.0% 6.0% to 7.0%Bills discounted – 7.0%Bank overdrafts 6.5% to 7.75% 6.0% to 7.55%The above interest rates approximate the weighted effective interest rate.

62Middle East Development Singapore ltdannual report 2007NOTES TO FINANCIALSTATEMENTS30 June 200712. TRADE AND OTHER PAYABLESGroupCompany2007 2006 2007 2006$ $ $ $Trade payables:Outside parties and accrued liabilities 2,680,170 2,852,344 192,896 199,480Subsidiaries (Notes 3 and 8) – – – 187,511Minority shareholder of subsidiary 4,037 4,037 – –Contract work-in-progress (Note 6) 66,927 53,230 – –Provision for warranties 174,402 131,702 – –Other payables:Subsidiaries (Notes 3 and 8) – – 537,093 156,017Director (Note 3) 1,594 1,555 – –Related party (Note 3) 250,634 227,935 156,778 161,397Dividend payable (a) 745,193 745,193 745,193 745,193Other payables 645,230 200,568 64,153 37,142Total trade and other payables 4,568,187 4,216,564 1,696,113 1,486,740Analysis of above amount denominated in foreign currencies:UAE Dirham 21,948 37,020 – –Euro Dollar 37,077 94,195 – –Swiss Franc – 93,648 – –Chinese Renminbi 385,369 322,132 – –Malaysian Ringgit 545,212 469,525 – –(a)This dividend payable to Mr Wong Seong Khuen and Mr Ng Tian Huat, who are also the directors of the Company,was declared and approved by shareholders prior to the Company’s public listing on the Singapore Exchange SecuritiesTrading Limited.The average credit period taken to settle non-trade payables of the Group is about 30 to 90 days (2006: 30 to 90 days). The otherpayables are with short-term durations. The carrying amounts approximate the fair values.Movement in the provision for warranties:Group2007 2006$ $Balance at beginning of year 131,702 117,184Foreign currency translation difference 2,452 (1,399)Provision charged to income statement included in cost of sales 107,416 92,678Used (67,168) (76,761)Balance at end of year 174,402 131,702The provision for warranties refers to provision for product and services sold by the group. A provision is made based on pastexperience and assessment of the probability of an outflow for the obligations as a whole.

Middle East Development Singapore ltdannual report 2007 63NOTES TO FINANCIALSTATEMENTS30 June 200713. FINANCE LEASES LIABILITIESGroupMinimum Finance Present2007 payments charges value$ $ $Minimum lease payments payable:Due within one year 96,187 (12,559) 83,628Due within 2 to 5 years 105,784 (14,357) 91,427201,971 (26,916) 175,055Net book value of plant and equipment under finance leases 99,808Minimum Finance Present2006 payments charges value$ $ $Minimum lease payments payable:Due within one year 115,271 (16,215) 99,056Due within 2 to 5 years 195,584 (29,136) 166,448Due after 5 years 13,731 (2,712) 11,019324,586 (48,063) 276,523Net book value of plant and equipment under finance leases 225,763CompanyMinimum Finance Present2007 payments charges value$ $ $Minimum lease payments payable:Due within one year 53,816 (8,064) 45,752Due within 2 to 5 years 76,882 (11,646) 65,236130,698 (19,710) 110,988Net book value of plant and equipment under finance leases 53,989Minimum Finance Present2006 payments charges value$ $ $Minimum lease payments payable:Due within one year 49,894 (7,653) 42,241Due within 2 to 5 years 130,698 (19,710) 110,988180,592 (27,363) 153,229Net book value of plant and equipment under finance leases 134,441

64Middle East Development Singapore ltdannual report 2007NOTES TO FINANCIALSTATEMENTS30 June 200713. FINANCE LEASES LIABILITIES (Cont’d)It is the Group’s policy to lease certain of its plant and equipment under finance leases. The lease terms range from 3 to 5 years.The rates of interest for finance leases are about 2.4% to 7.2% per year. There is an exposure to fair value interest risk becausethe interest rates are fixed at contract date. All leases are on a fixed repayment basis and no arrangements have been enteredinto for contingent rental payments. All lease obligations are denominated in Singapore dollars except for certain lease obligationsamounting to $42,971 (2006: $33,356) that are denominated in Malaysian Ringgit. The obligations under finance leases aresecured by the lessor’s charge over the leased assets. The carrying amount of the lease liabilities approximates the fair value.14. SHARE CAPITALGroup and CompanyNumber Issuedof shares share capital$Ordinary shares of no par valueBalance at beginning and end of year 30 June 2006 108,600,000 4,311,012Issuance of ordinary shares for cash 285,087,500 14,254,375Share issue expenses – (659,418)Exercise of share options 3,990,000 319,200Transfer from share option reserve (Note 15) – 70,956Balance at end of year 30 June 2007 397,677,500 18,296,125During the year, the company issue: -(a)(b)(c)(d)(e)3,990,000 ordinary shares at $0.08 per share for cash totalling $319,200 under the Hitchins Employee Share OptionScheme;20,000,000 ordinary shares at $0.05 per share for cash totalling $1,000,000 under a placement exercise;120,000,000 ordinary shares at $0.05 per share for cash totalling $6,000,000 pursuant to a subscription agreement withMiddle East Development LLC (“MED”);125,087,500 ordinary shares at $0.05 per share for cash totalling $6,254,375 pursuant to a right issue exercise wherebyeach existing shareholder is entitled to one right issue for every 2 existing shares held by the shareholder; and20,000,000 ordinary shares at $0.05 per share for cash totalling $1,000,000 in relation to the options to subscribe for sharesat $0.05 each granted by the company to MED under the subscription agreement.The holders of ordinary shares are entitled to receive dividends as and when declared by the company. The ordinary shares of nopar value carry no right to fixed income and are fully paid. All ordinary shares carry one vote per share without restriction. Thecompany is not subject to any externally imposed capital requirements. There is no restriction to issue shares.Option to subscribe for ordinary sharesDuring the year, the company granted an option to MED under a subscription agreement to subscribe for 120,000,000 ordinaryshares at $0.05 each. MED had exercised part of this option to subscribe for 20,000,000 ordinary shares during the year. As at 30June 2007, there were outstanding options to subscribe for 100,000,000 ordinary shares at $0.05 each.

Middle East Development Singapore ltdannual report 2007 65NOTES TO FINANCIALSTATEMENTS30 June 200715. SHARE-BASED COMPENSATIONHitchins Share Option Scheme:The Hitchins Share Option Scheme (the “Scheme”) of the Company was approved and adopted by its members at an ExtraordinaryGeneral Meeting held on 13 December 2002.The Scheme is administered by the Remuneration Committee comprising:• Tee Tua Ba (Chairman and Independent Director)• Hoon Tai Meng (Member and Independent Director)• Tan Song Koon (Member and Executive Director)The reserved size of the Scheme is 15% of the issued share capital of the Company on the relevant date of grant of options.The following persons are eligible to participate in the Scheme:(i)(ii)(iii)Confirmed full-time employees of the Company and/or subsidiaries who have attained the age of 21 years and above andor before the relevant date of offer of an option;Executive Directors of the Company; andPersons who qualify under (i) or (ii) and who are controlling shareholders of the Company and their associates and whoseparticipation and actual number of shares granted under the Scheme and terms of any option granted to them have beenapproved by independent shareholders in general meeting.Non-Executive Directors are not eligible to participate in the Scheme.Under the rules of the Scheme, options will be granted at the prevailing market price of the shares based on the average of the lastdealt price per share as indicated in the daily official list or any other publication published by the SGX-ST for the 5 consecutivedays immediately preceding the date of grant (the “Market Price”). Options will not be granted at a discount to the MarketPrice.Options are exercisable, in whole or in part (provided that an option is exercised in part in respect of 1,000 shares or any multiplethereof) as follows:(i)(ii)(iii)(iv)up to 40% of the option at any time after 12 months of the date of grant;the next 30% of the option at any time after 18 months of the date of grant;the balance 30% of the option at any time after 24 months of the date of grant; andbefore the end of 120 months of the date of grant of the option, subject to such other conditions introduced by theRemuneration Committee from time to time.

66Middle East Development Singapore ltdannual report 2007NOTES TO FINANCIALSTATEMENTS30 June 200715. SHARE-BASED COMPENSATION (Cont’d)Details of the options granted to under the scheme to take up unissued ordinary shares of the Company are as follows:BalanceBalanceas at as at ExerciseDate of grant 1.7.2006 Exercised 30.7.2007 price Expiry date$28/04/2004 1,810,000 (1,810,000) − 0.08 28/04/201428/04/2004 1,357,500 (1,357,500) − 0.08 28/04/201428/04/2004 1,357,500 (822,500) 535,000 0.08 28/04/20144,525,000 (3,990,000) 535,000Share option reserve:Group and Company2007 2006$ $Balance at beginning of year 1 July 80,470 80,470Transfer to share capital upon exercise of share option (Note 14) (70,956) –At end of year 30 June 9,514 80,470The fair values of the options are estimated on the date of grant using the Black-Scholes option pricing model with the followingassumption used for grants:Weighted average share price $0.08Weighted average exercise price $0.08Dividend yield expected –Risk-free annual interest rate 3.26%Volatility expected 1.14%Expected option term of years, based on management’s best estimate,for the effects of non-transferability, exercise restrictions and behavioural considerations.10 years16. STATUTORY RESERVEA subsidiary, Shanghai Hitchins Da Sheng Waterproofing Materials Co., Ltd is required by the relevant People’s Republic of China(“PRC”) regulations and its Articles of Association to allocate where applicable certain percentage of profit after taxation afterdeducting accumulated losses as determined in accordance with PRC accounting standards and regulations to the statutoryreserve surplus fund until such reserves reaches 50% of the subsidiary’s registered capital subject to certain restriction set out inthe Company Law of the PRC, and the company’s Articles of Associations. Part of the reserves may be converted to increase itsregistered capital.

Middle East Development Singapore ltdannual report 2007 67NOTES TO FINANCIALSTATEMENTS30 June 200717. REVENUEGroup2007 2006$ $Trading revenue 4,984,461 5,094,517Contract revenue 6,823,703 6,614,24411,808,164 11,708,76118. FINANCIAL INCOME AND (EXPENSE)Group2007 2006$ $Bad debts written off trade receivables – (832)Bad debts written off other receivables – (338)Foreign exchange transaction losses (6,121) (15,197)Interest expense (69,410) (80,794)Interest income 97,525 20,599Loss on disposal of other investments – (514)Provision for impairment on trade receivables (38,280) (191,383)Provision for impairment on trade receivables written back 264,220 57,818247,934 (210,641)Presented in the income statement as:Financial income 361,745 78,417Financial expense (113,811) (289,058)Finance income and (expense) net 247,934 (210,641)19. OTHER CREDITS/(CHARGES)Group2007 2006$ $Gain on disposal of plant and equipment 31,759 4,962Plant and equipment expensed off (1,435) (300)Inventories written off – (30,599)Others (29) (6,131)30,295 (32,068)

68Middle East Development Singapore ltdannual report 2007NOTES TO FINANCIALSTATEMENTS30 June 200720. INCOME TAX EXPENSE/(CREDITS)Group2007 2006$ $Current tax expense/ (credit) 116,118 (40,277)Deferred tax expense/ (credit) 59,439 (51,518)Total income tax expense/ (credit) 175,557 (91,795)The income tax benefit varied from the amount of income tax benefit determined by applying the Singapore income tax rate of18% (2006: 20%) to loss before income tax as a result of the following differences:Group2007 2006$ $Loss before income tax (141,094) (285,490)Income tax expense (benefit) at the statutory rate (25,397) (57,098)Non-allowable items 52,737 67,071Tax exemption (35,887) (5,491)Deferred tax valuation allowance 98,181 (130,442)(Over)/ under provision of tax in prior years (67,618) 13,710Effect of difference in tax rate in different countries 96,846 7,844Effect of reduction in tax rate 10,432 –Other items less than 3% each 46,263 12,611Total income tax expense/ (credit) 175,557 (91,795)The deferred tax amounts are as follows:Net change inconsolidated incomeBalance sheetstatement2007 2006 2007 2006$ $ $ $Group:Deferred tax liabilities:Excess of net book value of plant and equipment (8,207) (14,193) 5,986 (9,150)Taxable temporary differences (106,683) (42,855) (63,828) 52,186Total deferred tax liabilities (114,890) (57,048) (57,842) 43,036Deferred tax assets:Excess of tax written down value of plant equipment 27,690 18,274 9,416 18,274Provision 28,119 5,061 23,058 3,061Tax losses carryforwards 435,935 371,825 64,110 (143,295)Total deferred tax assets 491,744 395,160 96,584 (121,960)Net deferred tax assets 376,854 338,112 38,742 (78,924)Deferred tax assets valuation allowance (471,409) (373,228) (98,181) 130,442Balance (94,555) (35,116) (59,439) 51,518

Middle East Development Singapore ltdannual report 2007 69NOTES TO FINANCIALSTATEMENTS30 June 200720. INCOME TAX EXPENSE/(CREDITS) (Cont’d)Net change inincomeBalance sheetstatement2007 2006 2007 2006$ $ $ $Company:Deferred tax liabilities:Excess of net book value of plant and equipment (4,720) (5,892) 1,172 9,988Total deferred tax liabilities (4,720) (5,892) 1,172 9,988Deferred tax assets:Provision 25,201 – 25,201 –Tax losses carryforwards 73,520 10,331 63,189 34,607Others – 561 ( 561) 561Total deferred tax assets 98,721 10,892 87,829 35,168Net deferred tax assets 94,001 5,000 89,001 45,156Deferred tax assets valuation allowance (94,001) (5,000) (89,001) (45,156)Balance – – – –Included in the accompanying balance sheet as follows:GroupCompany2007 2006 2007 2006$ $ $ $Deferred tax assets (11,833) (11,540) – –Deferred tax liabilities 106,388 46,656 – –Net balance 94,555 35,116 – –The deferred tax (assets)/ liabilities are not expected to be settled/ used within one year.An allowance is made to the extent that it is not probable that taxable profit will be available against which the unused tax losscarryforwards can be utilised. The realisation of the future income tax benefits from tax loss carryforwards and temporarydifferences from capital allowances is available for an unlimited future period subject to the conditions imposed by law includingthe retention of majority shareholders as defined. Where provision for deferred tax arising from temporary differences has beenoffset against the above tax loss carryforwards, such provision for deferred tax will be required to be set up when the tax lossesare utilised in the future.There are no income tax consequences of dividends to shareholders of the Company.Temporary differences arising in connection with interests in subsidiaries are insignificant.

70Middle East Development Singapore ltdannual report 2007NOTES TO FINANCIALSTATEMENTS30 June 200721. LOSS PER SHAREThe loss per share is calculated by dividing the Group’s loss attributable to shareholders by the weighted number of shares inissue during the year.Group2007 2006$ $The calculation of the loss per share is based on the following:Loss attributable to shareholders for the purposes of basic and diluted loss per share (316,651) (193,695)Weighted average number of fully paid ordinary shares each in issue during theyear for the purposes of basic loss per share 203,159,158 108,600,000Effect of dilutive potential ordinary share : Share options 82,031,832 –Weighted average number of ordinary shares for the purposes of diluted loss of share 285,190,990 108,600,000Basic loss per share ratio is based on the weighted average number of common shares outstanding during each period. The dilutedloss per share is based on the weighted average number of ordinary shares and dilutive common share equivalents outstandingduring each period. The common share equivalents included in these calculations are shares of common share issuable uponassumed exercise of share options which would have a dilutive effect.22. EMPLOYEE BENEFITS EXPENSEGroup2007 2006$ $Employee benefits expense including directors 3,225,611 2,989,617Contributions to defined contribution plans 271,385 262,002Total employee benefits expense 3,496,996 3,251,61923. ITEMS IN THE INCOME STATEMENTIn addition to the charges and credits disclosed elsewhere in the notes to the financial statements, the income statement includesthe following charges:2007 2006$ $Non-audit fee paid to auditors included under administrative expenses 10,000 8,300Changes in inventories and work-in-progress 442,191 (215,161)Cost of inventories purchased 5,247,303 4,982,162

Middle East Development Singapore ltdannual report 2007 71NOTES TO FINANCIALSTATEMENTS30 June 200724. CONTINGENT LIABILITIES(a)Contingent liabilities not provided for in the financial statements of the Group and Company at balance sheet date are asfollows:GroupCompany2007 2006 2007 2006$ $ $ $Guarantees in favour of a subsidiary – – – 21,200The guarantees are provided by the guarantor without charge.(b)As at 30 June 2007, the subsidiary, Shanghai Hitchins Da Sheng Waterproofing Materials Co., Ltd has not included turnoverarising from sales of goods of RMB3,133,373 in its Value Added Tax (VAT) and Enterprise Income Tax returns on a timelybasis. Should this come to the attention of the People’s Republic of China’s (PRC) tax authorities, they could consider thisas a breach of certain PRC laws and regulations in respect of VAT and Enterprise Income Tax. It is however not possibleto ascertain with any degree of reasonable certainty the amount of tax penalty which may be imposed by the PRC taxauthorities and any other consequential actions that may be taken by the PRC authorities for the apparent breaches ofcertain PRC laws and regulations in respect of VAT and Enterprise Income Tax.The sales and the corresponding income tax and VAT tax have been accrued in the consolidation financial statements as at30 June 2007. However, no provision for potential tax penalties has been made in the consolidation financial statements.25. OPERATING LEASE PAYMENT COMMITMENTSAt the balance sheet date the total of future minimum lease payments under non-cancellable operating leases are as follows:GroupCompany2007 2006 2007 2006$ $ $ $Not later than one year 777,049 197,900 475,742 176,000Later than one year and not later than five years 622,705 314,306 346,399 274,706Later than five years. 188,005 99,000 – –1,587,759 611,206 822,141 450,706Rental expense for the year 787,111 325,156 273,400 183,932Operating lease payments are for rentals payable by the Group and Company for certain of its office premises and warehouse.The leases are for average of 3 years. The lease rental terms are negotiable for extension of lease period at the prevailing marketrates then.

72Middle East Development Singapore ltdannual report 2007NOTES TO FINANCIALSTATEMENTS30 June 200726. FINANCIAL INFORMATION BY SEGMENTSBusiness segments: For management purposes, the Group is organised into two major operating divisions – manufacturing & salesand installation. The divisions are the basis on which the Group reports its primary segment information.Principal activities as follows:Manufacturing & sales: The manufacturing and sales of waterproofing and concrete protection materials.Installation: The provision of installation services for such waterproofing and concrete protection materials.Manufacturing& Sales Installation Eliminations Consolidated2007 2006 2007 2006 2007 2006 2007 2006$ $ $ $ $ $ $ $REVENUEExternal sales 4,984,461 5,094,517 6,823,703 6,614,244 – – 11,808,164 11,708,761Inter-segment sales 2,391,301 2,629,711 123,290 322,949 (2,514,591) (2,952,660) – –Total revenue 7,375,762 7,724,228 6,946,993 6,937,193 (2,514,591) (2,952,660) 11,808,164 11,708,761RESULTS (269,341) 260,834 573,067 516,663 – – 303,726 777,497Unallocated results (375,410) (982,193)Interest expense (69,410) (80,794)Loss before income tax (141,094) (285,490)Income tax expenses/(credit) (175,557) 91,795Net loss for the year (316,651) (193,695)OTHER INFORMATIONSegment assets 6,000,977 5,368,146 5,910,355 5,039,924 – – 11,911,332 10,408,070Unallocated assets 12,067,126 11,54023,978,458 10,419,610Segment liabilities 3,501,673 3,997,837 1,698,479 1,398,847 – – 5,200,152 5,396,684Unallocated tax liabilities 232,388 176,4905,432,540 5,573,174Capital expenditure 148,701 87,856 84,418 33,013 – – 233,119 120,869Unallocated expenditure 114,296 –347,415 120,869Depreciation 260,743 284,773 75,991 80,609 – – 336,734 365,382Unallocated depreciation 9,179 –345,913 365,382Provision for warranty (4,154) (21,834) 111,570 114,512 – – 107,416 92,678

Middle East Development Singapore ltdannual report 2007 73NOTES TO FINANCIALSTATEMENTS30 June 200726. FINANCIAL INFORMATION BY SEGMENTS (Cont’d)Segment results, assets and liabilities include items directly attributable to segment as well as those that can be allocated ona reasonable basis. Segment assets consist of trade receivables, inventories, contract work-in-progress, property, plant andequipment. Segment liabilities include trade payables and accrued liabilities and contract work-in-progress. Unallocated itemsmainly comprise cash, income tax payable, deferred tax assets and deferred tax liabilities. Segment capital expenditure is thetotal cost incurred during the year to acquire property, plant and equipment directly attributable to each segment.Geographical segments:The Group’s two major divisions operate in three principal geographical areas, namely Singapore and other regions, Malaysia andPeople’s Republic of China (“PRC”).The following table provides an analysis of the Group revenue by geographical market based on the location of the customers:Revenue byGeographical Markets2007 2006$ $Singapore & other regions 8,107,775 8,269,539Malaysia 2,143,939 1,586,397People’s Republic of China 1,556,450 1,852,82511,808,164 11,708,761The following is an analysis of the carrying amount of segment assets, and additions to property, plant and equipment, analysedby geographical area in which the assets are located:Carrying amount of Additions to Property,Segment Assets Plant and Equipment2007 2006 2007 2006$ $ $ $Singapore & other regions 6,215,514 5,208,427 79,646 62,093Malaysia 2,667,108 2,365,588 50,624 17,347People’s Republic of China 3,028,710 2,834,055 102,849 41,429Unallocated assets 12,067,126 11,540 114,296 –23,978,458 10,419,610 347,415 120,869

74Middle East Development Singapore ltdannual report 2007NOTES TO FINANCIALSTATEMENTS30 June 200727. CHANGES AND ADOPTION OF FINANCIAL REPORTING STANDARDSFor the year ended 30 June 2007 the following new or revised Singapore Financial Reporting Standards were adopted for thefirst time. The new or revised standards did not require any modification of the measurement method or the presentation in thefinancial statements.FRS No.TitleFRS 1Presentation of Financial StatementsFRS 16 Property, Plant and EquipmentFRS 19 Employee Benefits - Amendments relating to actuarial gains and losses, group plans and disclosuresFRS 21 The Effects of Changes in Foreign Exchange Rates - Amendments relating to net investment in a foreignoperationFRS 24 Related Party DisclosuresFRS 32 Financial Instruments: Disclosure and PresentationFRS 37 Provisions, Contingent Liabilities and Contingent AssetsFRS 38 Intangible Assets (*)FRS 39 Financial Instruments: Recognition and Measurement - Amendments relating to cash flow hedge accounting offorecast intragroup transactions Amendments relating to financial guarantee contracts (*)FRS 101 First-time Adoption of Financial Reporting Standards - Amendments relating to comparative disclosures forFRS 106 Exploration for and Evaluation of Mineral Resources (*)FRS 101 Implementation Guidance (*)FRS 104 Insurance Contracts (*)FRS 104 Implementation Guidance (*)FRS 106 Exploration for and Evaluation of Mineral Resources (*)INT FRS 104 Determining whether an Arrangement contains a LeaseINT FRS 105 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds (*)INT FRS 107 Applying the Restatement Approach under FRS 29 Financial Reporting in Hyperinflationary Economies (*)INT FRS 108 Scope of FRS 102INT FRS 109 Reassessment of Embedded Derivatives (*)INT FRS 110 Interim Financial Reporting and Impairment(*) Not relevant to the entity.

Middle East Development Singapore ltdannual report 2007 75NOTES TO FINANCIALSTATEMENTS30 June 200728. FUTURE CHANGES IN ACCOUNTING STANDARDSThe following new or revised Singapore Financial Reporting Standards that have been issued will be effective in future. Thetransfer to the new or revised standards from the effective dates is not expected to have a material impact on the financialstatements.Effective date forperiods beginningFRS No. Title on or afterFRS 1 Presentation of Financial Statements - Amendments relating to capital disclosures 1.1.2007FRS 10 Events after the Balance Sheet Date 1.1.2007FRS 12 Income Taxes 1.1.2007FRS 14 Segment Reporting 1.1.2007FRS 17 Leases 1.1.2007FRS 19 Employee Benefits 1.1.2007FRS 32 Financial Instruments: Presentation 1.1.2007FRS 33 Earnings per Share 1.1.2007FRS 39 Financial Instruments: Recognition and Measurement 1.1.2007FRS 39 Implementation Guidance 1.1.2007FRS 40 Investment Property (*) 1.1.2007FRS 101 First-time Adoption of Financial Reporting Standards (*) 1.1.2007FRS 101 Implementation Guidance (*) 1.1.2007FRS 102 Share-based Payment 1.1.2007FRS 103 Business Combinations 1.1.2007FRS 104 Insurance Contracts (*) 1.1.2007FRS 104 Implementation Guidance - Revisions relating to FRS 107 FinancialInstruments: Disclosures (*) 1.1.2007FRS 107 Financial Instruments: Disclosures - Implementation Guidance 1.1.2007FRS 108 Operating Segments 1.1.2009INT FRS 105 Rights to Interests arising from Decommissioning, Restoration andEnvironmental Rehabilitation Funds (*) 1.1.2007INT FRS 111 FRS102 - Group and Treasury Share Transactions 1.3.2007INT FRS 112 Service Concessions Arrangements (*) 1.1.2008(*) Not relevant to the entity.

76Middle East Development Singapore ltdannual report 2007STATISTICS OFSHAREHOLDINGSas at 12 September 2007No. of issued and paid-up shares : 397,977,500Class of shares : Ordinary SharesVoting Rights : 1 vote per shareDISTRIBUTION OF SHAREHOLDINGSNo. ofSize of Shareholdings Shareholders % No. of Shares %1 - 999 137 5.55 4,677 0.001,000 - 10,000 679 27.52 5,140,055 1.2910,001 - 1,000,000 1,628 66.00 105,356,000 26.471,000,001 AND ABOVE 23 0.93 287,476,768 72.24TOTAL : 2,467 100.00 397,977,500 100.00TWENTY LARGEST SHAREHOLDERSNo. Name No. of Shares %1. M E DEVELOPMENT LLC 140,000,000 35.182. WONG SEONG KHUEN @ KWAN SEONG KHUEN 34,620,000 8.703. NG TIAN HUAT 28,620,000 7.194. OCBC SECURITIES PRIVATE LTD 13,299,518 3.345. NG KIM KHUAN 12,929,250 3.256. UOB KAY HIAN PTE LTD 11,906,000 2.997. UNITED OVERSEAS BANK NOMINEES PTE LTD 11,573,660 2.918. KIM ENG SECURITIES PTE. LTD. 6,696,090 1.689. LIM & TAN SECURITIES PTE LTD 3,729,000 0.9410. MAYBAN NOMINEES (S) PTE LTD 3,551,080 0.8911. DMG & PARTNERS SECURITIES PTE LTD 3,000,000 0.7512. DBS VICKERS SECURITIES (S) PTE LTD 2,070,500 0.5213. PHILLIP SECURITIES PTE LTD 2,001,630 0.5014. DBS NOMINEES PTE LTD 1,725,520 0.4315. SABINE KATHARINA HYSS 1,504,000 0.3816. DBSN SERVICES PTE LTD 1,500,000 0.3817. TJIONG BOEN NGIAP @ BUSHAR TOMI OR OEY MI LING @ MERY WIDJAYA 1,430,000 0.3618. YEO HOON SENG 1,300,500 0.3319. LO CHEOK EE 1,300,000 0.3320. SEAH BOON LOCK 1,300,000 0.33TOTAL : 284,056,748 71.38

Middle East Development Singapore ltdannual report 2007 77STATISTICS OFSHAREHOLDINGSas at 12 September 2007(As recorded in the Register of Substantial Shareholders)Direct InterestDeemed InterestName of Substantial Shareholders No. of Shares % No. of Shares %M E DEVELOPMENT LLC (2) 150,000,000 37.69SHEIKH TAREK MOHAMMAD BIN LADEN (1) 150,000,000 37.69WONG SEONG KHUEN 34,620,000 8.70NG TIAN HUAT 28,620,000 7.19Notes:(1) Sheikh Tarek Mohammad Bin Laden is deemed to be interested in the shares held by M E Development LLC.(2) M E Development LLC has an option to subscribe for 100,000,000 shares in the Company at a price of S$0.05 per share.SHAREHOLDING HELD IN THE HANDS OF PUBLICThe percentage of shareholdings in the hands of the public is approximately 41.34% as at 12 September 2007. Accordingly, the Companyis in compliance with Rule 723 of the SGX-ST’s Listing Manual.

78Middle East Development Singapore ltdannual report 2007NOTICE OF ANNUAL GENERALMEETINGNOTICE IS HEREBY GIVEN THAT the Annual General Meeting of the Company will be held at Raffles Hotel, Level 1, East IndiaRoom, 1 Beach Road, Singapore 189673 on the 26 th day of October 2007 at 10.00 a.m. to transact the following business:ORDINARY BUSINESS1. To receive and adopt the Directors’ Report and Audited Accounts for the financial year ended 30 June 2007. Resolution 12. To approve the proposed Directors’ fees of $115,153.85 (2006: $90,000.00). Resolution 23. To re-elect Mr Kim Leng Choon pursuant to Article 107 of the Articles of Association. Resolution 34. To re-elect Dr Oussama Al-Dimashki pursuant to Article 117 of the Articles of Association. Resolution 45. To re-elect Mr Huang Wooi Teik pursuant to Article 117 of the Articles of Association. Resolution 56. To re-elect Mr Toh Wing Yew pursuant to Article 117 of the Articles of Association. Resolution 67. To re-elect Mr Hoon Tai Meng pursuant to Article 117 of the Articles of Association. Resolution 78. To re-elect Mr Tan Song Koon pursuant to Article 117 of the Articles of Association. Resolution 89. To re-elect Mr Tee Tua Ba pursuant to Article 117 of the Articles of Association. Resolution 910. To re-elect Mr Issam Farid Halabi pursuant to Article 117 of the Articles of Association. Resolution 1011. To transact any other business of the Company which may properly be transacted at an Annual General Meeting.SPECIAL BUSINESSTo consider and if thought fit to pass the following as Ordinary Resolutions:12. “That pursuant to Section 161 of the Companies Act, Cap. 50, and the listing rules of the Singapore Exchange Securities TradingLimited, the Directors be and are hereby authorised to issue shares and convertible securities in the Company (whether by wayof bonus issue, rights issue or otherwise) at any time and upon such terms and conditions and for such purposes and to suchpersons as the Directors may, in their absolute discretion, deem fit provided that:(a) the aggregate number of shares and convertible securities to be issued pursuant to this Resolution does not exceed 50%of the issued shares in the capital of the Company, of which the aggregate number of shares and convertible securities tobe issued other than on a pro-rata basis to existing shareholders of the Company does not exceed 20% of the issued sharesin the capital of the Company;(b)for the purpose of determining the aggregate number of shares and convertible securities that may be issued under (a)above, the percentage of issued share shall be based on the number of issued shares in the capital of the Company at thetime this Resolution is passed, after adjusting for:

Middle East Development Singapore ltdannual report 2007 79NOTICE OF ANNUAL GENERALMEETING(i)(ii)new shares arising from the conversion or exercise of any convertible securities or employee share options that areoutstanding when this Resolution is passed, andany subsequent consolidation or subdivision of shares; and(c)unless revoked or varied by the Company in general meeting, such authority conferred by this Resolution shall continuein force until the conclusion of the next Annual General Meeting of the Company or the date by which the next AnnualGeneral Meeting of the Company is required by law to be held, whichever is the earlier.”Resolution 1113. “That pursuant to Section 161 of the Companies Act, Cap. 50, the directors be and are hereby authorised to allot and issue fromtime to time such number of shares as may be required to be issued pursuant to the exercise of the options granted under theHitchins Employees’ Share Option Scheme (the “Scheme”) provided always that the aggregate number of shares to be issuedpursuant to the Scheme shall not exceed 15% of the total number of issued ordinary shares in the capital of the Company fromtime to time.”Resolution 12By Order of the BoardChew Kok LiangCompany SecretaryDate: 3 October 2007Note:1. A member entitled to attend and vote at this meeting is entitled to appoint a proxy to attend and vote in his stead. A proxy neednot be a member of the Company.2. If a proxy is to be appointed, the form must be deposited at the Company’s Share Registrar, Messrs Lim Associates (Pte) Ltd at 3Church Street #08-01 Samsung Hub Singapore 049483 not less than 48 hours before the meeting.3. The form of proxy must be signed by the appointor or his attorney duly authorised in writing.4. In case of joint shareholders, all holders must sign the form of proxy.Explanatory Note:1. The Company will convene an Extraordinary General Meeting to seek shareholders’ approval to appoint new auditors of theCompany. Therefore, there is no resolution at the forthcoming Annual General Meeting for the appointment of auditors.

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MIDDLE EAST DEVELOPMENT SINGAPORE LTD.(Formerly known as HITCHINS GROUP LTD.)(Company Registration Number 196600189D)(Incorporated in the Republic of Singapore)Proxy Form – ANNUAL GENERAL MEETING(Please see notes overleaf before completing this form)IMPORTANT:i. For Investors who have used their CPF monies to buyMiddle East Development Singapore Ltd.’s shares,this Report is forwarded to them at the request ofthe CPF Approved Nominees and is sent solely FORINFORMATION ONLY.ii. This Proxy Form is not valid for use by CPF investorsand shall be ineffective for all intents and purposes ifused or purported to be used by them.I/We,of(Name)(Address)being a member/members of MIDDLE EAST DEVELOPMENT SINGAPORE LTD. (the “Company”), hereby appoint the Chairman of theAnnual General Meeting (Note 2) of the Company or:NameAddressNRIC/PassportNumberShareholdingsNumber (Note 3) (%)and/or (delete as appropriate)as my/our proxy/proxies, to attend and vote for me/us on my/our behalf and, if necessary, to demand a poll, at the Annual GeneralMeeting of the Company to be held at Raffles Hotel, Level 1, East India Room, 1 Beach Road, Singapore 189673 on 26 October 2007 at10.00 a.m. and at any adjournment thereof.I/We direct my/our proxy/proxies to vote in the manner indicated below. If no specific direction as to the manner of voting is given, my/our proxy/proxies may vote or abstain at his discretion.No. Resolution (Note 4) For Against1 Adoption of Directors’ Report and Accounts2 Approval of Directors’ Fees3 Re-election of Mr Kim Leng Choon as a Director4 Re-election of Dr Oussama Al-Dimashki as a Director5 Re-election of Mr Huang Wooi Teik as a Director6 Re-election of Mr Toh Wing Yew as a Director7 Re-election of Mr Hoon Tai Meng as a Director8 Re-election of Mr Tan Song Koon as a Director9 Re-election of Mr Tee Tua Ba as a Director10 Re-election of Mr Issam Farid Halabi as a Director11 Authority to issue additional shares pursuant to Section 16112 Authority to issue shares pursuant to Share Option SchemeDated this day of 2007(Note 6)Signature of Shareholder(s) or, Common Seal (b)(Note 5)Number of Shares Held(a) CDP RegisterRegister of Members

Notes :1. A Shareholder entitled to attend and vote at the Annual General Meeting is entitled to appoint not more than two proxies toattend and vote in his stead. Such proxy need not be a Shareholder.2. If any other proxy/proxies is/are to be appointed, please strike out “Chairman of the Annual General Meeting” and insert thename(s) and particulars of the proxy/proxies to be appointed in the blank space provided.3. Where a Shareholder appoint two proxies, the appointments shall be invalid unless he specifies the number of Shares to berepresented by each proxy.4. IMPORTANT: If you wish to vote “FOR” the Resolution, please indicate an “X” in the box marked “FOR” the Resolution. If youwish to vote “AGAINST” the Resolution, please indicate an “X” in the box marked “AGAINST” the Resolution.5. Please insert the total number of Shares held by you. If you have Shares entered against your name in the Depository Register (asdefined in Section 130A of the Companies Act, Chapter 50 of Singapore), you should insert that number of Shares. If you haveShares registered in your name in the Register of Members, you should insert that number of Shares. If you have Shares enteredagainst your name in the Depository Register and Shares registered in your name in the Register of Members, you should insert theaggregate number of Shares entered against your name in the Depository Register and registered in your name in the Register ofMembers. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the Shares held byyou.6. The instrument appointing a proxy or proxies must be executed under the hand of the appointor or of his attorney duly authorisedin writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under thecommon seal of the corporation or under the hand of any officer or attorney duly authorised.7. The instrument appointing a proxy or proxies must be deposited at the Company’s Share Registrar, Messrs Lim Associates (Pte)Ltd at 3 Church Street #08-01 Samsung Hub Singapore 049483 not later than 48 hours before the time appointed for the AnnualGeneral Meeting.8. Where an instrument appointing a proxy is signed on behalf of the appointor or by an attorney, the power of attorney (or otherauthority) or a duly certified copy thereof must (failing previous registration with the Company) be lodged with the instrument ofproxy, failing which the instrument may be treated as invalid.9. A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks it toact as its representative at the meeting, in accordance with Section 179 of the Companies Act (Cap 50).General:The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegibleor where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrumentappointing a proxy or proxies. In addition, in the case of Shares entered in the Depository Register, the Company may reject anyinstrument appointing a proxy or proxies lodged if the member, being the appointor, is not shown to have Shares entered against hisname in the Depository Register 48 hours before the time appointed for holding the Meeting, as certified by The Central Depository (Pte)Limited to the Company.

80 Raffles Place #22-21 UOB Plaza 2 Singapore 048624Website: http://www.meds.sg