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PROSPECTUS DATED 4 JANUARY 2008 (Registered by the Monetary Authority of Singapore on 4 January 2008) THIS DOCUMENT IS IMPORTANT.

IF YOU ARE IN ANY DOUBT AS TO THE ACTION YOU SHOULD TAKE, YOU SHOULD CONSULT YOUR LEGAL, FINANCIAL, TAX OR OTHER PROFESSIONAL ADVISER. We have made an application to the Singapore Exchange Securities Trading Limited (the SGX-ST) for permission to deal in, and for quotation of, all the ordinary shares (the Shares) in the capital of Old Chang Kee Ltd. (the Company) already issued and the new Shares (the New Shares) which are the subject of this Invitation (as defined herein). Such permission will be granted when we have been admitted to the Official List of the Catalist. The dealing in and quotation of our shares will be in Singapore dollars. Our acceptance of applications for the New Shares will be conditional upon, inter alia, permission being granted by the SGX-ST to deal in, and for quotation of, all of the existing issued Shares and the New Shares. Monies paid in respect of any application accepted will, in the event such permission is not granted, be returned to you at your own risk, without interest or any share of revenue or other benefit arising therefrom, and you will not have any claim whatsoever against us, the Manager (as defined herein), the Underwriter (as defined herein) or the Placement Agent (as defined herein). The SGX-ST assumes no responsibility for the correctness of any of the statements made, opinions expressed or reports contained in this Prospectus. Admission to the Official List of the Catalist is not to be taken as an indication of the merits of the Invitation, the Company, its subsidiaries, the Shares or the New Shares. A copy of this Prospectus has been lodged with and registered by the Monetary Authority of Singapore (the Authority). The Authority assumes no responsibility for the contents of this Prospectus. Registration of this Prospectus by the Authority does not imply that the Securities and Futures Act (Chapter 289) of Singapore, or any other legal or regulatory requirements, have been complied with. The Authority has not, in any way, considered the merits of the Shares or the New Shares, as the case may be, being offered for investment. We have not lodged or registered this Prospectus in any other jurisdiction. No Shares shall be allotted or allocated on the basis of this Prospectus later than six months after the date of registration of this Prospectus by the Authority. Investing in the Shares involves risks which are described in the section entitled Risk Factors of this Prospectus. As part of the transitional arrangement announced by the SGX-ST on 26 November 2007, the Company has been approved to be listed on the Catalist. The Company has submitted its listing application under the listing rules of SGX-SESDAQ and the SGX-ST has reviewed the application based on the SGX-SESDAQ framework and listing rules. The offer will be accompanied by a prospectus registered by the Authority. The SGX-ST will publish a date from which our Company and all existing SGX-SESDAQ listed companies are required to comply with the listing rules of the Catalist (please refer to the section entitled Replacement of SGX-SESDAQ by Catalist and Appendix L of this Prospectus for more information).

OLD CHANG KEE LTD.


(Incorporated in the Republic of Singapore on 16 December 2004) (Company Registration Number: 200416190W) Invitation in respect of 25,000,000 New Shares comprising:(a) (b) 1,000,000 Offer Shares at S$0.20 for each Offer Share by way of public offer; and 24,000,000 Placement Shares by way of placement, comprising:(i) (ii) 22,500,000 Placement Shares at S$0.20 for each Placement Share by way of applications made via Placement Shares Application Forms; and 1,500,000 Reserved Shares at S$0.20 for each Reserved Share reserved for our Non-Executive Directors, management, employees, business associates and others who have contributed to the success of our Group,

payable in full on application.


Manager

Westcomb Capital Pte Ltd


Placement Agent and Underwriter

Westcomb Securities Pte Ltd

SardineO

PepperO

SpringO

CurryO

Breaded Prawn OnStik

Chicken Nuggets OnStik

Pineapple Feelin

Fish Ball OnStik

Sotong Ball OnStik

Sotong OnStik

Sotong Wing OnStik

Yam Feelin

Fish Fillet OnStik

Sotong Nuggets OnStik

Crab Nuggets OnStik

Prawn Nuggets OnStik

Crab Claw OnStik

Pumpkin K8

Carrot K8

Yam K8

Green Bean Feelin

Crab Meat Wrap OnStik

Chicken Wrap OnStik

Sotong Wrap OnStik

delivers
Seafood Gyoza OnStik Gyoza OnStik

CONTENTS
Page CORPORATE INFORMATION ............................................................................................................ DEFINITIONS ...................................................................................................................................... DETAILS OF THE INVITATION Listing on the Catalist ...................................................................................................................... Indicative Timetable for Listing ........................................................................................................ REPLACEMENT OF SGX-SESDAQ BY CATALIST .......................................................................... THE INVITATION.................................................................................................................................. USE OF PROCEEDS FROM THE INVITATION AND EXPENSES INCURRED ................................ MANAGEMENT, UNDERWRITING AND PLACEMENT ARRANGEMENTS...................................... EXCHANGE CONTROLS .................................................................................................................... CLEARANCE AND SETTLEMENT .................................................................................................... PLAN OF DISTRIBUTION .................................................................................................................. CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS ...................................................... SELLING RESTRICTIONS .................................................................................................................. PROSPECTUS SUMMARY ................................................................................................................ INVITATION STATISTICS .................................................................................................................... RISK FACTORS Risks relating to our Business or our Industry ................................................................................ Risks relating to Ownership of our Shares ...................................................................................... MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Combined Profit and Loss Accounts ................................................................................................ Combined Balance Sheet ................................................................................................................ Overview .......................................................................................................................................... Review of Results of Operations ...................................................................................................... Review of Past Financial Position .................................................................................................... Liquidity and Capital Resources ...................................................................................................... Material Capital Expenditure, Divestment and Commitment............................................................ DIVIDEND POLICY .............................................................................................................................. CAPITALISATION AND INDEBTEDNESS .......................................................................................... DILUTION ............................................................................................................................................ 4 6

14 17 18 19 20 21 23 26 27 30 31 32 34

35 41

44 45 46 50 55 57 60 62 63 65

CONTENTS
Page GENERAL INFORMATION ON OUR COMPANY AND OUR GROUP Share Capital.................................................................................................................................... Significant Changes In Percentage of Ownership............................................................................ Changes in Issued and Paid-Up Share Capital of our Company and our Subsidiaries .................. Shareholders .................................................................................................................................... Moratorium ...................................................................................................................................... RESTRUCTURING EXERCISE .......................................................................................................... GROUP STRUCTURE ........................................................................................................................ OUR SUBSIDIARIES AND ASSOCIATED COMPANIES .................................................................. OUR HISTORY .................................................................................................................................... OUR BUSINESS Introduction ...................................................................................................................................... Our Products .................................................................................................................................... Production Facility and Capacity ...................................................................................................... Retail Outlets .................................................................................................................................... Enterprise Resource Planning System ............................................................................................ Quality Control.................................................................................................................................. Marketing and Business Development ............................................................................................ Product Development ...................................................................................................................... Intellectual Property.......................................................................................................................... Properties and Fixed Assets ............................................................................................................ Our Major Customers ...................................................................................................................... Our Major Suppliers ........................................................................................................................ Inventory Management .................................................................................................................... Credit Policy .................................................................................................................................... Government Regulations.................................................................................................................. Insurance.......................................................................................................................................... Competition ...................................................................................................................................... Our Competitive Strengths .............................................................................................................. Awards and Accreditation ................................................................................................................ PROSPECTS AND FUTURE PLANS Prospects.......................................................................................................................................... Trend Information.............................................................................................................................. Future Plans .................................................................................................................................... DIRECTORS, MANAGEMENT AND EMPLOYEES Directors .......................................................................................................................................... Management .................................................................................................................................... Management Reporting Structure .................................................................................................... Directors and Executive Officers Remuneration ............................................................................ Service Agreements ........................................................................................................................ Our Employees ................................................................................................................................ Board Practices ................................................................................................................................ CORPORATE GOVERNANCE ............................................................................................................ 2

66 67 68 69 70 71 73 74 75

78 78 80 80 80 81 83 84 85 94 101 101 102 103 103 107 107 108 109

110 110 111

112 114 115 116 117 118 119 120

CONTENTS
Page INTERESTED PERSON TRANSACTIONS Past Interested Person Transactions ................................................................................................ Present and Ongoing Interested Person Transactions .................................................................... Review Procedures for Future Interested Person Transactions ...................................................... CONFLICTS OF INTEREST ................................................................................................................ GENERAL AND STATUTORY INFORMATION .................................................................................. APPENDIX A Report from the Auditors and the Audited Combined Financial Statements of Old Chang Kee Ltd. and its Subsidiary Companies for the Financial Years Ended 31 December 2004, 2005 and 2006 ................................................................................................ APPENDIX B Report from the Auditors and the Unaudited Combined Financial Statements of Old Chang Kee Ltd. and its Subsidiary Companies for the Financial Period from 1 January 2007 to 30 June 2007 .................................................................................................... APPENDIX C Extracts of our Articles of Association.............................................................................................. APPENDIX D Description of Singapore Company Law relating to Shares ............................................................ APPENDIX E Summary of Relevant Australian Laws and Regulations ................................................................ APPENDIX F Summary of Relevant Malaysian Laws and Regulations ................................................................ APPENDIX G Summary of Relevant PRC Laws and Regulations.......................................................................... APPENDIX H Summary of Relevant Thai Laws and Regulations .......................................................................... APPENDIX I Taxation ............................................................................................................................................ APPENDIX J Terms, Conditions and Procedures for Application and Acceptance .............................................. APPENDIX K Report from the Auditors and the Unaudited Proforma Combined Financial Statements of Old Chang Kee Ltd. and its Subsidiary Companies for the Financial Year Ended 31 December 2006 and the Financial Period from 1 January 2007 to 30 June 2007 .................................................................................................... APPENDIX L Key Changes under Catalist Rules ..................................................................................................

123 124 126 128 129

A-1

B-1

C-1

D-1

E-1

F-1

G-1

H-1

I-1

J-1

K-1

L-1

CORPORATE INFORMATION
BOARD OF DIRECTORS : Han Keen Juan (Executive Chairman) Lim Tao-E William (Chief Executive Officer) Choong Buat Ken (Non-Executive Director) Lim Yen Heng (Non-Executive Director) Ong Chin Lin (Lead Independent Director) Wong Chak Weng (Independent Director) Chew Mei Li, CPA 200416190W

COMPANY SECRETARY COMPANY REGISTRATION NUMBER REGISTERED OFFICE

: :

2 Woodlands Terrace Singapore 738427 Boardroom Corporate & Advisory Services Pte Ltd 3 Church Street #08-01 Samsung Hub Singapore 049483 Westcomb Capital Pte Ltd 5 Shenton Way #09-07 UIC Building Singapore 068808 Westcomb Securities Pte Ltd 5 Shenton Way #09-08 UIC Building Singapore 068808 Shook Lin & Bok LLP 1 Robinson Road #18-00 AIA Tower Singapore 048542 Hardies Lawyers 45 Ventnor Avenue West Perth WA 6005 Australia Skrine Unit No. 50-8-1, 8th Floor Wisma UOA Damansara 50, Jalan Dungun Damansara Heights 50490 Kuala Lumpur Malaysia Royal Advocates International Limited 2/4 Nai Lert Tower Building 5th Floor, Lumpini Patuwan Bangkok 10330 Thailand

SHARE REGISTRAR

MANAGER

UNDERWRITER AND PLACEMENT AGENT

SOLICITORS TO THE INVITATION AND LEGAL ADVISERS TO OUR COMPANY ON SINGAPORE LAW

LEGAL ADVISERS TO OUR COMPANY ON AUSTRALIAN LAW

LEGAL ADVISERS TO OUR COMPANY ON MALAYSIAN LAW

LEGAL ADVISERS TO OUR COMPANY ON THAI LAW

CORPORATE INFORMATION
LEGAL ADVISERS TO OUR COMPANY ON PRC LAW : King & Wood 22/F, The City Tower 86 Section One Renminnanlu Chengdu, Sichuan 610016 PRC Ernst & Young Certified Public Accountants One Raffles Quay North Tower, Level 18 Singapore 048583 Partner-in-charge: Max Loh Khum Whai (a member of the Institute of Certified Public Accountants of Singapore) RECEIVING BANKER : Oversea-Chinese Banking Corporation Limited 65 Chulia Street OCBC Centre Singapore 049513 Oversea-Chinese Banking Corporation Limited 65 Chulia Street OCBC Centre Singapore 049513 United Overseas Bank Limited 80 Raffles Place UOB Plaza 1 Singapore 048624 CORPORATE WEBSITE : http://www.oldchangkee.com (information contained on this Internet website does not constitute a part of this Prospectus)

AUDITORS AND REPORTING ACCOUNTANTS

PRINCIPAL BANKERS

DEFINITIONS
In this Prospectus, the accompanying Application Forms and, in relation to the Electronic Applications, the instructions appearing on the screens of the ATMs of Participating Banks or the IB websites of the relevant Participating Banks, unless the context otherwise requires, the following definitions apply throughout where the context so admits:-

Companies within our Group Company or Old Chang Kee Group Old Chang Kee Australia Old Chang Kee China
: : : : Old Chang Kee Ltd. Our Company and its subsidiaries Old Chang Kee Australia Pty Ltd Ten & Han Food Management (Chengdu) Co., Ltd.

Ten & Han Associated Companies Old Chang Kee Malaysia Old Chang Kee Thailand

Ten & Han Trading Pte Ltd

: :

Old Chang Kee (M) Sdn. Bhd. Old Chang Kee (Thailand) Co., Ltd.

Other Companies, Organisations and Agencies 1901 Singapore Auditors Authority AVA Catalist CDP or Depository FIC
: : : : : : : 1901 Singapore Pte. Ltd. Ernst & Young Monetary Authority of Singapore Agri-Food & Veterinary Authority of Singapore Sponsor-supervised board The Central Depository (Pte) Limited Foreign Investment Committee, under Malaysias Prime Ministers Department, which regulates, inter alia, the acquisition of assets, mergers and takeovers by local and foreign interests Housing and Development Board PT. Old Chang Kee Ina Westcomb Securities Pte Ltd

HDB Indonesian Franchisee Placement Agent or Underwriter Manager MUIS

: : :

: :

Westcomb Capital Pte Ltd Majlis Ugama Islam Singapura (also known as the Islamic Religious Council of Singapore) National Environment Agency

NEA

DEFINITIONS
Participating Banks
: DBS Bank Ltd (including POSB) (DBS Bank), Oversea-Chinese Banking Corporation Limited (OCBC) and United Overseas Bank Limited and its subsidiary, Far Eastern Bank Limited (the UOB Group) OCK Food Chain Philippines, Inc. Pure Options Pte. Ltd. Oversea-Chinese Banking Corporation Limited SGX-ST Dealing and Automated Quotation System Singapore Exchange Securities Trading Limited Boardroom Corporate & Advisory Services Pte Ltd Asian Appraisal Company Pte Ltd

Philippines Franchisee Pure Options Receiving Banker SGX-SESDAQ SGX-ST Share Registrar Valuer General Application Forms

: : : : : : :

The printed application forms to be used for the purpose of the Invitation and which form part of this Prospectus The list of applications for the subscription of the New Shares The articles of association of our Company (a) in relation to an entity, means:(i) in a case where the entity is a Substantial Shareholder, Controlling Shareholder, substantial interest-holder or controlling interest-holder, its related corporation, related entity, associated company or associated entity; or in any other case:(aa) (bb) a director or an equivalent person; where the entity is a corporation, a Controlling Shareholder of the entity; where the entity is not a corporation, a controlling interest-holder of the entity; a subsidiary, a subsidiary entity, an associated company, or an associated entity; or a subsidiary, a subsidiary entity, an associated company, or an associated entity, of the Controlling Shareholder or controlling interestholder, as the case may be,

Application List Articles of Association Associate

: : :

(ii)

(cc)

(dd)

(ee)

of the entity; and

DEFINITIONS
(b) in relation to an individual, means:(i) (ii) his immediate family; a trustee of any trust of which the individual or any member of the individuals immediate family is, (aa) (bb) a beneficiary; or where the trust is a discretionary trust, a discretionary object,

when the trustee acts in that capacity; or (iii) any corporation in which he and his immediate family (whether directly or indirectly) have interests in voting shares of an aggregate of not less than 30% of the total votes attached to all voting shares

Associated Company

in relation to an entity, means:(a) any corporation, other than a subsidiary of the entity, in which:(i) the entity or one or more of its subsidiaries or subsidiary entities has; the entity, one or more of its subsidiaries and one or more of its subsidiary entities together have; the entity and one or more of its subsidiaries together have; the entity and one or more of its subsidiary entities together have; or one or more of the subsidiaries of the entity and one or more of the subsidiary entities of the entity together have,

(ii)

(iii)

(iv)

(v)

a direct interest in voting shares of not less than 20% but not more than 50% of the total votes attached to all voting shares in the corporation; or (b) any corporation, other than a subsidiary of the entity or a corporation which is an associated company of the entity by virtue of paragraph (a), the policies of which:(i) the entity or one or more of its subsidiaries or subsidiary entities; the entity together with one or more of its subsidiaries and one or more of its subsidiary entities; the entity together with one or more of its subsidiaries;

(ii)

(iii)

DEFINITIONS
(iv) the entity together with one or more of its subsidiary entities; or one or more of the subsidiaries of the entity together with one or more of the subsidiary entities of the entity,

(v)

is or are able to control or influence materially

ATM ATM Application

: :

Automated teller machine of a Participating Bank An application for the Offer Shares made through an ATM, subject to and on the terms and conditions of this Prospectus The audit committee of our Company as at the date of this Prospectus The board of Directors of our Company Has the same meaning as in Section 2 of the Business Trusts Act (Chapter 31A) of Singapore, as amended, supplemented or modified from time to time Chief executive officer Companies Act (Chapter 50) of Singapore, as amended, supplemented or modified from time to time In relation to a corporation, means a person who:(a) holds directly or indirectly interest in the voting shares of the corporation and where the total votes attached to such shares are 15% or more of the aggregate of the votes attached to all the voting shares in the corporation; or in fact exercises control over the corporation

Audit Committee

Board business trust

: :

CEO Companies Act

: :

Controlling Shareholder

(b)

CPF Directors Electronic Application EPS ERP

: : : : :

The Central Provident Fund The directors of our Company as at the date of this Prospectus An ATM Application or an IB Application Earnings per Share Enterprise Resource Planning, a type of system which uses multiple components of computer software and hardware, including but not limited to a unified database, to integrate all data and processes of an organisation The executive Directors of our Company The executive officers of our Group as at the date of this Prospectus, who are also key executives as defined under the Securities and Futures Act (Offers of Investment) (Shares and Debentures) Regulations 2005

Executive Directors Executive Officers

: :

DEFINITIONS
F&B FIE FP FY HACCP
: : : : : Food and beverage Foreign Investment Enterprise Financial period from 1 January to 30 June Financial year ended or, as the case may be, ending 31 December Hazard Analysis and Critical Control Point, a scientific, rational and systematic approach to identify, assess and control hazards during production, processing, manufacturing, preparation and use of food to ensure that food is safe for consumption Contains no pork, lard or other elements of impurities as defined under Islamic law Internet banking An application for the Offer Shares made through an IB website of one of the relevant Participating Banks, subject to and on the terms and conditions of this Prospectus The independent Directors of our Company The invitation by our Company to the public to subscribe for the New Shares, subject to and on the terms and conditions of this Prospectus Initial public offering S$0.20 for each New Share 12 November 2007, being the latest practicable date prior to the lodgment of this Prospectus with the Authority Listing manual of the SGX-ST, as amended, supplemented or modified from time to time A day on which the SGX-ST is open for trading in securities Mass rapid transit Net asset value The 25,000,000 new Shares for which our Company invites applications to subscribe pursuant to the Invitation, subject to and on the terms and conditions of this Prospectus The non-executive Directors (including Independent Directors) of our Company The nominating committee of our Company as at the date of this Prospectus The offer by our Company of the Offer Shares to the public in Singapore for subscription at the Issue Price, subject to and on the terms and conditions of this Prospectus

Halal

IB IB Application

: :

Independent Directors Invitation

: :

IPO Issue Price Latest Practicable Date

: : :

Listing Manual

Market Day MRT NAV New Shares

: : : :

Non-Executive Directors

Nominating Committee

Offer

10

DEFINITIONS
Offer Shares period under review Placement or Placement Tranche
: : : The 1,000,000 New Shares which are the subject of the Offer FY2004, FY2005, FY2006 and FP2007 The placement by the Placement Agent of the Placement Shares on behalf of our Company for subscription at the Issue Price, subject to and on the terms and conditions of this Prospectus The 24,000,000 New Shares which are the subject of the Placement (including the Reserved Shares) Peoples Republic of China, excluding Hong Kong Special Administrative Region of PRC (Hong Kong), Macau Special Administrative Region of PRC (Macau) and the Republic of China for the purposes of this Prospectus and for geographical reference only This Prospectus dated 4 January 2008 issued by our Company in respect of the Invitation FY2004, FY2005, FY2006, FP2007 and the period between 1 July 2007 to the Latest Practicable Date The remuneration committee of our Company as at the date of this Prospectus The 1,500,000 Placement Shares reserved for our Non-Executive Directors, management, employees, business associates and those who have contributed to the success of our Group The restructuring exercise undertaken by our Group as described in the section entitled Restructuring Exercise of this Prospectus Retail shops and kiosks set up by our Group Securities account maintained by a Depositor with CDP but does not include a securities sub-account Securities and Futures Act (Chapter 289) of Singapore, as amended, supplemented or modified from time to time The service agreements entered into between our Company and our Executive Directors, as described in the section entitled Service Agreements of this Prospectus Ordinary shares in the capital of our Company Registered holders of Shares, except where the registered holder is CDP, the term Shareholders shall, in relation to such Shares, mean the Depositors whose Securities Accounts are credited with Shares The sub-division of each Share into 12 Shares as described in the section entitled Share Capital of this Prospectus

Placement Shares

PRC

Prospectus

Relevant Period

Remuneration Committee

Reserved Shares

Restructuring Exercise

retail outlets Securities Account

: :

Securities and Futures Act

Service Agreements

Shares Shareholders

: :

Sub-division of Shares

11

DEFINITIONS
Substantial Shareholder
: A person who has an interest in voting shares of a corporation, and where the total votes attached to such shares are not less than 5% of the total votes attached to all the voting shares of the corporation Lim Tao-E William

William Lim Currencies, Units and Others AUD or A$ RM or MYR RMB S$ and cents THB US$ or USD sq ft % or per cent.

: : : : : : : :

Australian dollars Malaysian Ringgit PRC Renminbi Singapore dollars and cents, respectively Thai Baht United States dollars Square feet Per centum or percentage

Any reference to our, ourselves, us, we or other grammatical variations thereof in this Prospectus is a reference to our Company, our Group or any member of our Group as the context requires. The terms Depositor, Depository Agent and Depository Register shall have the meanings ascribed to them respectively in Section 130A of the Companies Act. The term entity shall have the same meaning ascribed to it in Section 2 of the Securities and Futures Act, while the terms associated entity, controlling interest-holder, related corporation, related entity, subsidiary, subsidiary entity and substantial interest-holder shall have the same meanings ascribed to them respectively in Paragraph 1 of the Fourth Schedule of the Securities and Futures Act (Offers of Investments) (Shares and Debentures) Regulations 2005. Words importing the singular shall, where applicable, include the plural and vice versa and words importing the masculine gender shall, where applicable, include the feminine and neuter genders and vice versa. References to persons shall include corporations. Any reference in this Prospectus, the Application Forms or the Electronic Applications to any statute or enactment is a reference to that statute or enactment as for the time being amended or re-enacted. Any word defined in the Companies Act, the Securities and Futures Act or any statutory modification thereof or the Listing Manual and used in this Prospectus, the Application Forms and Electronic Applications shall, where applicable, have the meaning assigned to it under the Companies Act, the Securities and Futures Act or such statutory modification, or the Listing Manual, as the case may be. Any reference in this Prospectus, the Application Forms or the Electronic Applications to Shares being allotted to an applicant includes allotment to CDP for the account of that applicant. Any reference to a time of day or dates in this Prospectus, the Application Forms or the Electronic Applications shall be a reference to Singapore time or dates respectively, unless otherwise stated.

12

DEFINITIONS
Certain names with Chinese characters have been translated into English names. These names can be identified by the Chinese characters indicated beside the English names. Such translations which are provided solely for the convenience of investors, may not have been registered with the relevant PRC authorities and should not be construed as representations that the English names actually represent the Chinese characters. Any discrepancies in the tables included in this Prospectus between the listed amounts and the totals thereof are due to rounding. Accordingly, figures shown in totals in certain tables may not be an arithmetic aggregation of the figures which precede them.

13

DETAILS OF THE INVITATION


LISTING ON THE CATALIST As part of the transitional arrangement announced by the SGX-ST on 26 November 2007, the Company has been approved to be listed on the Catalist. The Company has submitted its listing application under the listing rules of SGX-SESDAQ and the SGX-ST has reviewed the application based on the SGXSESDAQ framework and listing rules. We have made an application to the SGX-ST for permission to deal in, and for quotation of, all our Shares already issued and the New Shares. Such permission will be granted when our Company has been admitted to the Official List of the Catalist. Our acceptance of applications for the New Shares will be conditional upon, inter alia, permission being granted by the SGX-ST to deal in, and for quotation of, all of our existing issued Shares and the New Shares. If such permission is not granted for any reason, monies paid in respect of any application accepted will be returned to you at your own risk, without interest or any share of revenue or other benefit arising therefrom, and you will not have any claim whatsoever against us, the Manager, the Underwriter or the Placement Agent. The SGX-ST assumes no responsibility for the correctness of any of the statements made, opinions expressed or reports contained in this Prospectus. Admission to the Official List of the Catalist is not to be taken as an indication of the merits of the Invitation, the Company, its subsidiaries, the Shares or the New Shares. A copy of this Prospectus has been lodged with and registered by the Authority. The Authority assumes no responsibility for the contents of this Prospectus. Registration of this Prospectus by the Authority does not imply that the Securities and Futures Act, or any other legal or regulatory requirements, have been complied with. The Authority has not, in any way, considered the merits of the Shares or the New Shares, as the case may be, being offered for investment. No Shares shall be allotted or allocated on the basis of this Prospectus later than six months after the date of registration of this Prospectus by the Authority. We are subject to the provisions of the Securities and Futures Act and the Listing Manual regarding corporate disclosure. In particular, if after this Prospectus is registered by the Authority but before the close of the Invitation, we become aware of:(a) (b) a false or misleading statement or matter in this Prospectus; an omission from this Prospectus of any information that should have been included in it under Section 243 of the Securities and Futures Act; or a new circumstance that has arisen since this Prospectus was lodged with the Authority which would have been required by Section 243 of the Securities and Futures Act to be included in this Prospectus, if it had arisen before this Prospectus was lodged,

(c)

that is materially adverse from the point of view of an investor, we may lodge a supplementary or replacement prospectus with the Authority pursuant to Section 241 of the Securities and Futures Act. Where prior to the lodgment of the supplementary or replacement prospectus, applications have been made under this Prospectus to subscribe for the New Shares, and:(a) where the New Shares have not been issued to you, our Company shall either:(i) within seven days from the date of lodgment of the supplementary or replacement prospectus give you the supplementary or replacement prospectus, as the case may be, and provide you with an option to withdraw your application; or

14

DETAILS OF THE INVITATION


(ii) treat the applications as withdrawn and cancelled, in which case your application shall be deemed to have been withdrawn and cancelled and our Company shall, within seven days from the date of lodgment of the supplementary or replacement prospectus, return to you all monies which you have paid on account of your application for the New Shares, without interest or any share of revenue or other benefit arising therefrom and at your own risk; or

(b)

where the New Shares have been issued to you, our Company shall either:(i) within seven days from the date of lodgment of the supplementary or replacement prospectus give you the supplementary or replacement prospectus, as the case may be, and provide you with an option to return to our Company the New Shares which you do not wish to retain title in; or treat the issue of the New Shares as void, in which case the issue shall be deemed void and our Company shall, within seven days from the date of lodgment of the supplementary or replacement prospectus, return to you all monies which you have paid on account of your application for the New Shares, without interest or any share of revenue or other benefit arising therefrom and at your own risk.

(ii)

If you wish to exercise your option under paragraph (a)(i) above to withdraw your application in respect of the New Shares, you shall, within 14 days from the date of lodgment of the supplementary or replacement prospectus, notify our Company of this, whereupon our Company shall, within seven days from the receipt of such notification, pay to you all monies paid by you on account of your application for such New Shares, without interest or any share of revenue or other benefit arising therefrom and at your own risk. If you wish to exercise your option under paragraph (b)(i) above to return the New Shares issued to you, you shall, within 14 days from the date of lodgment of the supplementary or replacement prospectus, notify our Company of this and return all documents, if any, purporting to be evidence of title to those Shares, to our Company, whereupon our Company shall, within seven days from the receipt of such notification and documents, if any, pay to you all monies paid by you for those New Shares, without interest or any share of revenue or other benefit arising therefrom and at your own risk. Under the Securities and Futures Act, the Authority may, in certain circumstances issue a stop order pursuant to Section 242 of the Securities and Futures Act (the Stop Order) to our Company, directing that no New Share or no further Share to which this Prospectus relates, be allotted or issued. Such circumstances will include a situation where this Prospectus (i) contains a statement or matter, which in the opinion of the Authority, is false or misleading; (ii) omits any information that should be included in accordance with the Securities and Futures Act; or (iii) does not, in the opinion of the Authority, comply with the requirements of the Securities and Futures Act. In the event that the Authority issues a Stop Order and applications to subscribe for the New Shares have been made prior to the Stop Order, then:(a) where the New Shares have not been issued to you, your application for the New Shares shall be deemed to have been withdrawn and cancelled, and our Company shall, within 14 days from the date of the Stop Order, pay to you all monies which you have paid on account of your application for the New Shares, without interest or any share of revenue or other benefit arising therefrom and at your own risk; or where the New Shares have been issued to you, the Securities and Futures Act provides that the issue of the New Shares shall be deemed to be void, and our Company is required, within 14 days from the date of the Stop Order, to pay to you all monies which you have paid on account of your application for the New Shares, without interest or any share of revenue or other benefit arising therefrom and at your own risk.

(b)

15

DETAILS OF THE INVITATION


In each of the above instances where monies are refunded to you, it shall be paid to you without interest or any share of revenue or other benefit arising therefrom and at your own risk, and you will not have any claims against our Company, the Manager, the Placement Agent or the Underwriter. This Prospectus has been reviewed and approved by our Directors and they individually and collectively accept full responsibility for the accuracy of the information given in this Prospectus and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, the facts stated and the opinions expressed in this Prospectus are fair and accurate in all material respects as at the date of this Prospectus and that there are no material facts the omission of which would make any statements in this Prospectus misleading, and that this Prospectus constitutes full and true disclosure of all material facts about the Invitation and our Group. Neither our Company, the Manager, the Underwriter, the Placement Agent nor any other party involved in the Invitation is making any representation to any person regarding the legality of an investment in our Shares by such person under any investment or other laws or regulations. No information in this Prospectus should be considered to be business, legal or tax advice regarding an investment in our Shares. You should consult your own legal, financial, tax or other professional adviser regarding an investment in our Shares. No person has been or is authorised to give any information or to make any representation not contained in this Prospectus in connection with the Invitation and, if given or made, such information or representation must not be relied upon as having been authorised by us, the Manager, the Placement Agent or the Underwriter. Neither the delivery of this Prospectus and the Application Forms nor the Invitation shall, under any circumstances, constitute a continuing representation or create any suggestion or implication that there has been no change in the affairs of our Company or our Group or in any statement of fact or information contained in this Prospectus since the date of this Prospectus. Where such changes occur, we may make an announcement of the same to the SGX-ST and the public, and if required, lodge a supplementary document or replacement document pursuant to Section 241 of the Securities and Futures Act and take immediate steps to comply with Section 241 of the Securities and Futures Act. You should take note of any such announcement and/or documents issued by us in compliance with the Securities and Futures Act and, upon release of such announcement and/or documents, shall be deemed to have notice of such changes. Save as expressly stated in this Prospectus, nothing herein is, or may be relied upon as, a promise or representation as to our future performance or policies. This Prospectus has been prepared solely for the purpose of the Invitation and may not be relied upon by any persons other than yourself in connection with your application for the New Shares or for any other purpose. This Prospectus does not constitute an offer or invitation or solicitation to subscribe for the New Shares in any jurisdiction in which such offer, invitation or solicitation is unauthorised or unlawful nor does it constitute an offer or invitation or solicitation to any person to whom it is unlawful to make such an offer or invitation or solicitation. Copies of this Prospectus and the Application Forms may be obtained on request, subject to availability, during office hours from:Westcomb Securities Pte Ltd 5 Shenton Way #09-08 UIC Building Singapore 068808 and from members of the Association of Banks in Singapore, members of the SGX-ST and merchant banks in Singapore. A copy of this Prospectus is also available on the SGX-ST website http://www.sgx.com and the Authoritys OPERA website at http://masnet.mas.gov.sg/opera/sdrprosp.nsf.

16

DETAILS OF THE INVITATION


The Application List will open at 10.00 a.m. on 14 January 2008 and will remain open until 12.00 noon on the same day or such other period or periods as our Company may, in consultation with the Manager, in their absolute discretion decide, subject to any limitations under all applicable laws. In the event a supplementary document or replacement document is lodged with the Authority, the Application List will remain open for at least 14 days after the lodgment of the supplementary document or replacement document. Details of the procedures for application for the New Shares are set out in Appendix J of this Prospectus. INDICATIVE TIMETABLE FOR LISTING The indicative timetable is set out below for your reference:Indicative date/time 5 January 2008, 10.00 a.m. 14 January 2008, 12.00 noon 15 January 2008 Event Opening of Invitation Close of Application List Balloting of applications, if necessary (in the event of an over-subscription for the Offer Shares) Commence trading on a ready basis Settlement date for all trades done on a ready basis.

16 January 2008, 9.00 a.m. 21 January 2008

The above timetable is only indicative as it assumes that the closing of the Application List takes place on 14 January 2008, the date of admission of our Company to the Official List of the Catalist will be 16 January 2008, the SGX-STs shareholding spread requirement will be complied with and the New Shares will be issued and fully paid-up prior to 16 January 2008. The actual date on which our Shares will commence trading on a ready basis will be announced when it is confirmed by the SGX-ST. The above timetable and procedure may be subject to such modifications as the SGX-ST may, in its discretion, decide, including the decision to permit trading on a ready basis and the commencement date of such trading. The commencement of trading on a ready basis will be entirely at the discretion of the SGX-ST. All persons trading in our Shares before their Securities Accounts with CDP are credited with the relevant number of Shares will do so at the risk of selling Shares which neither they nor their nominees, as the case may be, have been allotted or are otherwise beneficially entitled to. In the event of any changes in the closure of the Application List or the time period during which the Invitation is open, we will publicly announce the same:(i) through a SGXNET announcement to be posted on the Internet at the SGX-ST website http://www.sgx.com; and in a local English newspaper.

(ii)

Results of the Invitation including the allotment of the New Shares and balloting (in the event of an oversubscription for the Offer Shares) will be provided through the channels in (i) and (ii) above. Investors should consult the SGX-ST announcement on the ready listing date on the Internet (at the SGX-ST website http://www.sgx.com) or the newspapers, or check with their brokers on the date on which trading on a ready basis will commence.

17

REPLACEMENT OF SGX-SESDAQ BY CATALIST


As announced by the SGX-ST on 26 November 2007, the SGX-SESDAQ will be replaced by a sponsorsupervised board named Catalist on 17 December 2007. As our Company will be listed after 17 December 2007, it will be listed on Catalist. The SGX-ST will publish a date (Transition Date) from which our Company and all existing SGX-SESDAQ issuers are required to comply with the listing rules of Catalist (the Catalist Rules). At least 12 months notice will be given and the SGX-ST may impose conditions. Our Company must meet the following requirements by the Transition Date:(a) (b) (c) submit an undertaking to, inter alia, comply with the Catalist Rules to the SGX-ST; comply with any conditions imposed by the SGX-ST; announce our intention to the market giving no less than one months notice, including the name of our Sponsor (as defined below) and the date from which we will comply with the Catalist Rules as agreed with the SGX-ST; and send a copy of the announcement to each Shareholder on our register at the date of the announcement.

(d)

Until the above requirements have been met, our Company must continue to comply with the SGXSESDAQ rules. Our Company may be delisted if we fail to comply with the above requirements by the Transition Date. A key feature of Catalist is that intermediaries (Sponsors) will be authorised by the SGX-ST to act as either:(a) a full Sponsor, authorised to undertake activities set out in Catalist Rule 225 in preparing a listing applicant for admission or advising an existing issuer in a very substantial acquisition or reverse takeover as well as activities set out in Catalist Rule 226 in advising an existing issuer on compliance with the continuing obligations under the Catalist Rules; or a continuing Sponsor, authorised to undertake activities set out in Catalist Rule 226 in advising an existing issuer on compliance with the continuing obligations under the Catalist Rules.

(b)

With effect from the day from which we shall comply with the Catalist Rules, we must retain a Sponsor at all times or face delisting. The Sponsor will review all documents to be released by us on Catalist to Shareholders or to the market (including announcements, resolutions contained in notices of meetings, circulars and corporate actions) before release, to ensure that our Company complies with the Catalist Rules and makes the appropriate disclosures. In its letter dated 16 November 2007, informing that our Company is conditionally eligible for listing on the SGX-SESDAQ, the SGX-ST has stated that notwithstanding that our Company meets the Mainboard requirements at the time of listing, it will only be considered for a transfer to the Mainboard if it records substantially higher profits for each of the financial years ending 31 December 2007 and 2008. Please refer to the Key Changes Under Catalist Rules in Appendix L of this Prospectus for information on the key changes which will affect our Company upon the Catalist Rules coming into effect.

18

THE INVITATION
Invitation Size : 25,000,000 New Shares which will, upon allotment and issue, rank pari passu in all respects with our existing issued Shares. S$0.20 for each New Share. The purpose of the Invitation is to secure admission of our Company to the Official List of the Catalist. Our Directors consider that the listing of our Company and the quotation of the Shares and the New Shares on the Official List of the Catalist will enhance the public image of our Group locally and overseas and enable us to tap the capital markets to fund the expansion of our operations and enlarge our capital base for the continued expansion of our business. The Invitation will also provide members of the public, the Non-Executive Directors, management, employees and business associates as well as those who have contributed to our success with an opportunity to participate in the equity of our Company. The Offer comprises an invitation by our Company to the public in Singapore to subscribe for 1,000,000 Offer Shares at the Issue Price, subject to and on the terms and conditions of this Prospectus. The Placement comprises a placement of 22,500,000 Placement Shares by way of Placement Shares Application Forms and 1,500,000 Reserved Shares by way of Reserved Shares Application Forms, subject to and on the terms and conditions of this Prospectus. 1,500,000 Reserved Shares (which form part of the Placement Shares) will be reserved for our Non-Executive Directors, management, employees, business associates and others who have contributed to the success of our Group. In the event that any of the Reserved Shares are not taken up, they will be made available to satisfy applications for the Placement Shares, or in the event of an under-subscription for the Placement Shares, to satisfy applications made by members of the public for the Offer Shares. Our Shares will be quoted in Singapore dollars on the Official List of the Catalist, subject to admission of our Company to the Official List of the Catalist and permission for dealing in, and for quotation of, our Shares and the New Shares being granted by the SGX-ST. Investing in our Shares involves risks which are described in the section entitled Risk Factors of this Prospectus.

Issue Price Purpose of the Invitation

: :

The Offer

The Placement

Reserved Shares

Listing Status

Risk Factors

19

USE OF PROCEEDS FROM THE INVITATION AND EXPENSES INCURRED


Net proceeds from the issue of the New Shares The net proceeds attributable to our Company from the issue of the New Shares (after deducting the estimated expenses in relation to the issue of the New Shares of approximately S$1.7 million to be borne by our Company) will be approximately S$3.3 million. The allocation of each principal intended use of proceeds and the major expenses are set out below:Amount allocated for each dollar of the proceeds raised by our Company from the Invitation (as a % of the gross proceeds)

Purpose Use of proceeds (i) (ii) (iii) (iv) Expand our overseas operations Increase and refurbish our Singapore retail outlets Expansion through strategic alliances, acquisitions, joint ventures and franchises Working capital purposes

Estimated amount (S$000)

1,000 1,000 500 830

20.0 20.0 10.0 16.6

Invitation expenses (i) (ii) (iii) (iv) TOTAL Initial listing and processing fees Professional fees Underwriting commission, placement commission and brokerage (1) Miscellaneous expenses 70 1,100 150 350 5,000 1.4 22.0 3.0 7.0 100.0

Note:(1) Please refer to the section entitled Management, Underwriting and Placement Arrangements of this Prospectus for more details.

Please refer to the section entitled Prospects and Future Plans of this Prospectus for more information on our use of proceeds. In the opinion of our Directors, no minimum amount must be raised from the issue of the New Shares. Pending deployment of the net proceeds from the issue of the New Shares as aforesaid, the net proceeds may be added to our Groups working capital, placed as deposits with banks or financial institutions, or used for investment in short-term deposits, money market instruments or debt instruments, as our Directors may deem fit in their absolute discretion.

20

MANAGEMENT, UNDERWRITING AND PLACEMENT ARRANGEMENTS


Pursuant to a management and underwriting agreement dated 4 January 2008 (the Management and Underwriting Agreement), our Company appointed the Manager, and the Manager has agreed, to manage the Invitation. The Manager will receive a management fee from our Company for its services rendered in connection with the Invitation as the Manager. Pursuant to the Management and Underwriting Agreement, the Underwriter agreed to underwrite the subscription of the Offer Shares on the terms and conditions therein, and our Company agreed to pay the Underwriter an underwriting commission of 2.75% of the aggregate Issue Price for the total number of Offer Shares successfully subscribed and the total number of Placement Shares successfully applied to satisfy excess applications for Offer Shares. Payment of the underwriting commission shall be made whether or not any allotment of the Offer Shares is made to the Underwriter or its nominees, including any portion of the Placement Shares which have been applied to satisfy excess applications for Offer Shares. Pursuant to the placement agreement dated 4 January 2008 (the Placement Agreement), the Placement Agent agreed to subscribe for and/or procure subscribers for the Placement Shares at the Issue Price. In consideration of the agreement of the Placement Agent to subscribe for and/or procure subscribers for the Placement Shares, our Company agreed to pay to the Placement Agent a placement commission of 3.0% of the aggregate Issue Price for the total number of Placement Shares successfully subscribed and the total number of Offer Shares successfully applied to satisfy excess applications for Placement Shares. Payment of the placement commission shall be made whether or not any allotment of the Placement Shares is made to the Placement Agent or its nominees, including any portion of the Offer Shares which have been applied to satisfy excess applications for Placement Shares. Brokerage will be paid by our Company to the Underwriter, members of the SGX-ST, banks and merchant banks in Singapore in respect of accepted applications made on Application Forms bearing their respective stamps, or to Participating Banks in respect of successful applications made through ATM Applications or IB Applications, at the rate of 0.25% of the Issue Price for each Offer Share. In addition, DBS Bank levies a minimum brokerage fee of S$5,000 that will be paid by our Company. Subscribers of the Placement Shares (excluding the Reserved Shares) may be required to pay a brokerage of up to 1.0% of the Issue Price as well as applicable stamp duties and goods and services tax to the Placement Agent. If there shall have been, since the date of the Management and Underwriting Agreement and prior to or on the close of the Application List:(a) (b) any breach of the warranties or undertakings in the Management and Underwriting Agreement; or any occurrence of certain specified events which comes to the knowledge of the Manager or the Underwriter; or any adverse change, or any development involving a prospective adverse change, in the condition (financial or otherwise) of our Company or of our Group as a whole; or any introduction or prospective introduction of or any change or prospective change in any legislation, regulation, order, notice, policy, rule, guideline or directive (whether or not having the force of law and including, without limitation, any directive, notice or request issued by the Authority, the Securities Industry Council of Singapore, the SGX-ST or any other authority in Singapore) or in the interpretation or application thereof by any court, government body, regulatory authority or other competent authority in Singapore; or any change, or any development involving a prospective change or any crisis in local, national or international financial (including stock market, foreign exchange market, inter-bank market or interest rates or money market), political, industrial, economic, legal or monetary conditions, taxation or exchange controls; or

(c)

(d)

(e)

21

MANAGEMENT, UNDERWRITING AND PLACEMENT ARRANGEMENTS


(f) any occurrence or any local, national or international outbreak or escalation of hostilities, insurrection or armed conflict (whether or not involving financial markets and including but not limited to any act of terrorism); or any regional or local outbreak of disease that may have an adverse effect on the financial markets; or any other occurrence of any nature whatsoever,

(g) (h)

which has resulted or is in the reasonable opinion of the Manager likely to result in a material adverse fluctuation or adverse conditions in the stock market and/or stock markets overseas or in Singapore; or the success of the Invitation being materially prejudiced; or it becoming impracticable, inadvisable, inexpedient or not commercially viable or otherwise contrary to or outside the usual commercial customs or practices in Singapore for the Manager or the Underwriter to observe or perform or be obliged to observe or perform the terms of the Management and Underwriting Agreement or the Invitation; or the business, trading position, operations or prospects of our Group being materially and adversely affected, the Manager (for itself and for and on behalf of the Underwriter) may at any time prior to the close of the Application List by notice in writing to our Company rescind or terminate the Management and Underwriting Agreement. The Manager or the Underwriter may by notice in writing to our Company terminate the Management and Underwriting Agreement if:(a) at any time up to the commencement of trading of our Shares on the Catalist, a stop order shall have been issued by the Authority in accordance with Section 242 of the Securities and Futures Act; or at any time after the registration of this Prospectus by the Authority but before the close of the Application List, our Company fails and/or neglects to lodge a supplementary or replacement prospectus (as the case may be) if it becomes aware of:(i) (ii) (iii) a false or misleading statement or matter in this Prospectus; an omission from this Prospectus of any information that should have been included in it under Section 243 of the Securities and Futures Act; or a new circumstance that has arisen since this Prospectus was lodged with the Authority and would have been required by Section 243 of the Securities and Future Act to be included in the Prospectus if it had arisen before this Prospectus was lodged,

(b)

that is materially adverse from the point of view of an investor; or (c) the Shares have not been admitted to the Official List of the Catalist on or before 16 January 2008 (or such other date as our Company and the Manager may agree).

In the event, the Placement Agent fails to receive valid subscriptions and payments for at least 90.0% of the Placement Shares by 6.00 p.m. on 9 January 2008 (or such other date as may be decided by the Manager), the Placement Agent shall be entitled to terminate the Placement Agreement. The obligations under the Placement Agreement are conditional upon the Management and Underwriting Agreement not being determined or rescinded pursuant to the provisions of the Management and Underwriting Agreement. In case of the non-fulfilment of any of the conditions in the Management and Underwriting Agreement or the release or discharge of the Manager and/or Underwriter (as the case may be) from their obligations under or pursuant to the Management and Underwriting Agreement, the Placement Agreement shall be terminated and the parties shall be released from their respective obligations under the Placement Agreement. Save as disclosed herein, there is no material relationship between our Company, the Manager, the Placement Agent or the Underwriter. 22

EXCHANGE CONTROLS
Singapore There are no Singapore governmental laws, decrees, regulations or other legislation in force that may affect:(a) the import or export of capital, including the availability of cash and cash equivalents for use by our Group; and the remittance of dividends, interest or other payments to non-resident holders of our Companys securities.

(b)

Australia With regards to the remittance of cash, Section 15 of the Australian Financial Transaction Reports Act 1998 (Cth) provides that it is an offence not to report to the Australian Transaction Reports Analysis Centre (AUSTRAC) or a customs officer a transfer of Australian or foreign currency (coin and paper money), in the amount of A$10,000 or more, into or out of Australia. The remittance of funds is governed by the Australian Banking (Foreign Exchange) Regulations 1959, which are made under the power conferred in Section 39 of the Australian Banking Act 1959 (Cth). Regulation 6 provides that a person shall not take or send out of Australia any Australian or foreign currency without the authority of the Reserve Bank of Australia (except for foreign currency obtained by purchase of a money order issued at any post office). Regulation 8 provides that a person shall not make any payment in Australia to a person who is not a resident or place any sum in Australia to the credit of such a person without the authority of the Reserve Bank of Australia. However under Regulation 38, the Reserve Bank of Australia may exempt any person, transaction, security or goods from the whole or any of the provisions of the Australian Banking (Foreign Exchange) Regulations 1959 (subject to directions from the Treasurer of the Commonwealth of Australia). Regulation 38A also provides that the Reserve Bank of Australia may issue a general authority authorising a person or all persons to do an act or thing specified in the authority, which would normally be prohibited by the Australian Banking (Foreign Exchange) Regulations 1959. A general authority was issued on 29 June 1990 (replacing the previous authority issued on 18 December 1984) which provided that any person in Australia may send Australian currency out of Australia and place currency to the credit of a non-resident. As noted in the Australian Commonwealth Gazette GN 27 dated 11 July 1990, all persons were exempted from the application of Regulations 6 and 8 of the Australian Banking (Foreign Exchange) Regulations 1959. Therefore, there is no barrier to funds transfers into or out of Australia, provided the reporting requirements of the Australian Financial Transaction Reports Act 1998 (Cth) are complied with. Malaysia There are no restrictions on the repatriation of capital, profits, dividends, interest, fees or rental by foreign direct investors or portfolio investors. PRC Major reforms have been introduced to the foreign exchange control system of PRC since 1993. On 1 October 1993, the State Council of PRC issued the Notice on Further Reform of the Foreign Exchange Control System and on 28 December 1993, the Peoples Bank of China (PBOC), issued the Notice of the PBOC on Further Reform of the Foreign Exchange Control System which came into effect on 1 January 1994. Other new regulations and implementation measures include the Regulations on the

23

EXCHANGE CONTROLS
Foreign Exchange Settlement, Sale and Payments which took effect on 1 July 1996 and which contain detailed provisions regulating the settlement, sale and payment of foreign exchange by enterprises, individuals, foreign organisations and visitors in PRC and the Regulations of PRC on Foreign Exchange Control which took effect on 1 April 1996 and which contain detailed provisions in relation to foreign exchange control. On 21 July 2005, the PBOC issued the Public Announcement of the PBOC on Improving the Reform of the RMB Exchange Rate Regime, which states that from 21 July 2005, PRC will reform the exchange rate regime by moving into a managed floating exchange rate regime based on market supply and demand with reference to a basket of currencies. RMB will no longer be pegged to the US$ and the RMB exchange rate regime will be improved with greater flexibility. Under these new regulations which contained detailed provisions regulating the holding, sale and purchase of foreign exchange by individuals, enterprises, economic bodies and social organizations in PRC, the previous dual exchange rate system for RMB was abolished and a unified floating exchange rate system based largely on supply and demand was introduced. The PBOC publishes the RMB exchange rate against the US$ and other major foreign currencies daily. The medial price of one foreign currency against RMB is to be set by reference to the US$/RMB and other major foreign currencies trading price on the inter-bank foreign exchange market announced by PBOC upon closing of business on the previous working day. In general, unless otherwise approved by the State Council, all organisations within PRC, including FIEs, are required to repatriate their foreign exchange earnings to PRC. In relation to FIEs (including sinoforeign equity joint ventures and sino-foreign co-operative enterprises as well as wholly foreign owned enterprises (WFOE)), they may maintain their recurrent foreign exchange earnings within the highest sum determined by the State Administration of Foreign Exchange (SAFE) or its local branch and the part beyond the sum abovementioned shall be sold to the designated foreign exchange banks or be sold through the foreign exchange swap transaction center. At present, the enterprises within PRC which require foreign exchange for their ordinary trading and nontrading activities (such as payment of staff remuneration), import activities and repayment of foreign debts may purchase foreign exchange from designated banks if the application is supported by the relevant documents and governmental approvals/registrations as the case may be. FIEs may (subject to due payment of tax on such dividends) distribute profits to their foreign investors with funds in their foreign exchange bank accounts kept with designated banks. Should the amount of funds in such foreign exchange bank accounts be insufficient, the enterprises may purchase additional foreign exchange from designated foreign exchange banks upon the presentation of the resolutions of the directors on the profit distribution plan of that particular enterprise and other documents as required by the said banks in accordance with applicable PRC laws. On 14 January 1997, the Regulations of the Peoples Republic of China on Foreign Exchange Control (Regulations) was amended such that the payment in and transfer of foreign exchange for current international transactions will no longer be subject to PRC government control or restrictions. Under the Regulations, FIEs may buy, sell and/or remit foreign currencies at those banks authorized to conduct foreign exchange business only upon providing valid commercial documents and, in the case of capital account item transactions, obtaining approval from the SAFE. Capital investments by FIEs outside of PRC are also subject to limitations, which include approvals by the Ministry of Commerce, the SAFE, the National Development and Reform Commission and their respective branches. Despite the aforementioned relaxation of foreign exchange control over current account transactions, the approval of the SAFE or its local branch is still required before a PRC enterprise may provide any foreign exchange guarantee or make any investment outside of PRC or enter into any other capital account transaction involving the purchase of foreign exchange, except as otherwise provided by PRC regulations. As to a foreign exchange loan, FIEs are required to effect and complete the foreign exchange loan registration with the SAFE or its local branch and to put the foreign loan concerned on

24

EXCHANGE CONTROLS
record. In addition, under certain notices promulgated by the PBOC and the SAFE in 1998, all PRC borrowers of foreign exchange loans are not permitted to purchase foreign currencies with RMB to prepay such borrowings. However, according to a notice published by the PBOC and the SAFE on 19 September 2001, in certain situations, a PRC borrower is allowed to purchase foreign currencies with RMB to prepay onshore foreign exchange loans subject to the approval of the SAFE. According to the Law of PRC on Sino-Foreign Equity Joint Ventures, the net profit that the foreign investors obtain from the FIEs may be remitted abroad in accordance with the foreign exchange regulations and in the currency or currencies specified in the contracts concerning the ventures or deposit in the Bank of China part of the foreign exchange which the foreign investors are entitled to remit abroad. Thailand Thailands exchange controls are established by the Exchange Control Act B.E. 2485, 1942 of Thailand. The Bank of Thailand oversees all foreign exchange transactions. Commercial banks established in Thailand designated by the Bank of Thailand as its Authorised Agents handle and authorise outward remittances of currencies. Currency transactions by non-listed companies that fall within prescribed categories of transactions, such as outward remittances of foreign currencies for the purpose of making overseas investments in shareholding of less than 10% or loans extended to overseas business establishments or paying securities in overseas markets, are required to be approved by the Bank of Thailand before the remittances of funds can take place. Approval is not required for listed companies remitting foreign currencies if the total amount of remittance does not exceed US$100,000,000 per year. Nor is the approval required for non-listed companies remitting foreign currencies as investments or loans to subsidiaries (in which the companies sending funds hold at least 10%) for the amount not exceeding US$50,000,000 per year. In the event that our Thai associated company, Old Chang Kee Thailand, is required to make outward remittances of currency which do not fall within the prescribed categories of transactions, such as the remittance of dividends, investment funds, profits, loan repayment and interest payment thereon, such remittance shall, subject to the payment of all applicable taxes in Thailand, have to be approved by the Bank of Thailand through its Authorised Agents, provided that the requisite documentary evidence shall be furnished to the satisfaction of the remitting commercial bank prior to remittance.

25

CLEARANCE AND SETTLEMENT


Upon listing and quotation on the Catalist, our Shares will be traded under the book-entry settlement system of the CDP, and all dealings in and transactions of our Shares through the Catalist will be effected in accordance with the terms and conditions for the operation of Securities Accounts with the CDP, as amended from time to time. Our Shares will be registered in the name of CDP or its nominee and held by CDP for and on behalf of persons who maintain, either directly or through Depository Agents, Securities Accounts with CDP. Persons named as direct securities account holders and Depository Agents in the Depository Register maintained by the CDP, rather than CDP itself, will be treated, under our Articles of Association and the Companies Act, as members of our Company in respect of the number of Shares credited to their respective Securities Accounts. Persons holding our Shares in Securities Accounts with CDP may withdraw the number of Shares they own from the book-entry settlement system in the form of physical share certificates. Such share certificates will, however, not be valid for delivery pursuant to trades transacted on the Catalist, although they will be prima facie evidence of title and may be transferred in accordance with our Articles of Association. A fee of S$10.00 for each withdrawal of 1,000 Shares or less and a fee of S$25.00 for each withdrawal of more than 1,000 Shares is payable upon withdrawing our Shares from the book-entry settlement system and obtaining physical share certificates. In addition, a fee of S$2.00 or such other amount as our Directors may decide, is payable to the Share Registrar for each share certificate issued and a stamp duty of S$10.00 is also payable where our Shares are withdrawn in the name of the person withdrawing our Shares or S$0.20 per S$100.00 or part thereof of the last-transacted price where it is withdrawn in the name of a third party. Persons holding physical share certificates who wish to trade on the Catalist must deposit with CDP their share certificates together with the duly executed and stamped instruments of transfer in favour of CDP, and have their respective Securities Accounts credited with the number of Shares deposited before they can effect the desired trades. A fee of S$10.00 and stamp duty of S$20.00 is payable upon the deposit of each instrument of transfer with CDP. The above fees may be subject to such changes as may be in accordance with CDPs prevailing policies or the current tax policies that may be in force in Singapore from time to time. Transactions in our Shares under the book-entry settlement system will be reflected by the sellers Securities Account being debited with the number of Shares sold and the buyers Securities Account being credited with the number of Shares acquired. No transfer of stamp duty is currently payable for the Shares that are settled on a book-entry basis. A Singapore clearing fee for trades in our Shares on the Catalist is payable at the rate of 0.05% of the transaction value subject to a maximum of S$200.00 per transaction. The clearing fee, instrument of transfer deposit fee and share withdrawal fee may be subject to Singapore goods and services tax of 7.0%. Dealings of our Shares will be carried out in Singapore dollars and will be effected for settlement on CDP on a scripless basis. Settlement of trades on a normal ready basis on the Catalist generally takes place on the third Market Day following the transaction date, and payment for the securities is generally settled on the following business day. CDP holds securities on behalf of investors in Securities Accounts. An investor may open a direct account with CDP or a subaccount with a CDP agent. The CDP agent may be a member company of the SGX-ST, bank, merchant bank or trust company.

26

PLAN OF DISTRIBUTION
This section should be read in conjunction with, and is qualified in its entirety by reference to Appendix J of this Prospectus. The Issue Price was determined by us in consultation with the Manager, the Placement Agent and the Underwriter, after taking into consideration, inter alia, prevailing market conditions and the estimated market demand for our Shares through a book-building process. The Issue Price is the same for all New Shares and is payable in full on application. Applications for the New Shares You may apply to subscribe for any number of New Shares in integral multiples of 1,000 Shares. In order to ensure a reasonable spread of Shareholders, we have the absolute discretion to prescribe a limit to the number of New Shares to be allotted to any single applicant and/or to allot New Shares above or under such prescribed limit as we shall deem fit. Applications for the New Shares may be made using the following methods:(1) Application for Offer Shares The Offer Shares are made available to the members of the public in Singapore for subscription at the Issue Price. The terms and conditions and procedures for application are described in Appendix J of this Prospectus. In the event of an under-subscription for the Offer Shares at the close of the Application List, the number of Offer Shares not subscribed for shall be made available to satisfy applications for the Placement Shares to the extent there is an over-subscription for the Placement Shares as at the close of the Application List. In the event of an over-subscription for the Offer Shares at the close of the Application List and the Placement Shares are fully subscribed or over-subscribed as at the close of the Application List, the successful applications for Offer Shares will be determined by ballot or otherwise as determined by our Directors and approved by the SGX-ST. Pursuant to the terms and conditions contained in the Management and Underwriting Agreement, the Underwriter has agreed to underwrite the Offer Shares. The Underwriter may, at its absolute discretion, appoint one or more sub-underwriters for the Offer Shares. (2) Application for Placement Shares (excluding Reserved Shares) Pursuant to the terms and conditions in the Placement Agreement, the Placement Agent agreed to subscribe for and/or procure subscribers for the Placement Shares. The Placement Agent may, at its absolute discretion, appoint one or more sub-placement agents for the Placement Shares. Subscribers of the Placement Shares (excluding the Reserved Shares) may be required to pay a brokerage (and if so required, such brokerage will be up to 1.0% of the Issue Price) as well as applicable stamp duties and goods and services tax of 7.0% to the Placement Agent. In the event of an under-subscription for the Placement Shares as at the close of the Application List, that number of Placement Shares not subscribed for shall be made available to satisfy excess applications for the Offer Shares to the extent that there is an over-subscription for the Offer Shares as at the close of the Application List. In the event, the Placement Agent fails to receive valid subscriptions and payments for at least 90.0% of the Placement Shares by 6.00 p.m. on 9 January 2008 (or such other date as may be decided by the Manager), the Placement Agent shall be entitled to terminate the Placement Agreement.

27

PLAN OF DISTRIBUTION
Application for Placement Shares (other than Reserved Shares) The Placement Shares (other than Reserved Shares) are reserved for placement to members of the public and institutional investors in Singapore. Application for the Placement Shares (other than Reserved Shares) under the Placement Tranche may only be made by way of Placement Shares Application Forms. An applicant who applies for the Placement Shares (other than Reserved Shares) must complete a Placement Shares Application Form, and shall not make any separate application for the Placement Shares using another Placement Shares Application Form or for the Offer Shares (either using an Offer Shares Application Form or by way of an ATM Application or IB Application). Such separate applications will be deemed to be multiple applications and all applications shall be rejected. (3) Reserved Shares To recognise their contributions to our Group, we have reserved 1,500,000 Placement Shares for subscription by our Non-Executive Directors, management, employees, business associates and others who have contributed to the success of our Group at the Issue Price. These Reserved Shares (other than those subscribed for by our Non-Executive Directors) are not subject to any moratorium and may be disposed of after the admission of our Company to the Official List of the Catalist. In the event that any of the Reserved Shares are not subscribed for, they will be made available to satisfy applications for the Placement Shares to the extent that there is an oversubscription for the Placement Shares as at the close of the Application List, or in the event of an under-subscription of the Placement Shares as at the close of the Application List, to satisfy applications made by members of the public for the Offer Shares to the extent that there is an over-subscription for the Offer Shares as at the close of the Application List. You (not being an approved nominee company in this paragraph) are allowed to submit ONLY ONE application in your own name for:(a) the Offer Shares by any one of the following:(i) (ii) (iii) OR (b) the Placement Shares (other than Reserved Shares) by Placement Shares Application Form. Offer Shares Application Form; or ATM Application; or IB Application,

If you submit or procure submissions of multiple share applications for Offer Shares, Placement Shares (other than Reserved Shares) or both Offer Shares and Placement Shares (other than Reserved Shares), ALL YOUR APPLICATIONS SHALL BE DEEMED TO BE MULTIPLE APPLICATIONS AND SHALL BE REJECTED. If you have made an application for Reserved Shares, you may submit ONE application for Offer Shares OR ONE application for Placement Shares (other than Reserved Shares) provided that you adhere to the terms and conditions of this Prospectus. Such applications shall not be treated as multiple applications.

28

PLAN OF DISTRIBUTION
Subscription of the New Shares None of our Directors (other than our Non-Executive Directors) or Substantial Shareholders or their Associates intends to subscribe for the New Shares. In the event that any of our Directors or Substantial Shareholders or their Associates subscribes for any New Shares, we will announce the details of such subscription. To the best of our knowledge, we are not aware of any person who intends to subscribe for more than 5.0% of the New Shares. However, through a book-building process to assess market demand for our Shares, there may be person(s) indicating interest to subscribe for more than 5.0% of the New Shares. The final allotment of the New Shares will be in accordance with the shareholding spread and distribution guidelines as set out in Rule 210 of the Listing Manual. No Shares shall be allotted or allocated on the basis of this Prospectus later than six months after the date of registration of this Prospectus by the Authority.

29

CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS


All statements contained in this Prospectus, statements made in the press releases and oral statements that may be made by our Company or our officers, Directors or employees acting on our behalf, that are not statements of historical fact, constitute forward-looking statements. Some of these statements can be identified by words that have a bias towards, or are forward-looking such as anticipate, believe, could, estimate, expect, if, intend, may, plan, possible, probable, project, should, will and would or similar words. However, these words are not the exclusive means of identifying forwardlooking statements. All statements regarding our Groups expected financial position, business strategy, plans and prospects and future prospects of our Groups industry are forward-looking statements. These forward-looking statements, including but not limited to statements as to our Groups revenue and profitability, prospects, future plans, other expected industry trends and other matters discussed in this Prospectus regarding matters that are not historic facts, are only predictions. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our Groups actual future results, performance or achievements to be materially different from any future results, performance or achievements expected, expressed or implied by such forward-looking statements. These factors include, amongst others, changes in the political, social and economic conditions and regulatory environment in Singapore, Malaysia, Thailand, Australia, PRC and other countries where we may conduct our business, changes in competitive conditions, and other factors beyond our control. Some of these risk factors are discussed in more detail in the section entitled Risk Factors of this Prospectus. All forward-looking statements made by or attributable to us, or persons acting on our behalf, contained in this Prospectus are expressly qualified in their entirety by such factors. Given the risks and uncertainties that may cause our Groups actual future results, performance or achievements to be materially different from that expected, expressed or implied by the forward-looking statements in this Prospectus, undue reliance must not be placed on these statements. Our actual results may differ materially from those anticipated in these forward-looking statements. Neither our Company, the Manager, the Underwriter, the Placement Agent, their respective advisers nor any other person represents or warrants that our Groups actual future results, performance or achievements will be as discussed in those statements. Further, our Company, the Manager, the Underwriter and the Placement Agent disclaim any responsibility to update any of those forward-looking statements or publicly announce any revisions to those forward-looking statements to reflect future developments, events or circumstances, even if new information becomes available or other events occur in the future. We are, however, subject to the provisions of the Securities and Futures Act and the Listing Manual regarding corporate disclosure. In particular, pursuant to Section 241 of the Securities and Futures Act, if after this Prospectus is registered by the Authority but before the close of this Invitation, our Company becomes aware of: (a) a false or misleading statement or matter in this Prospectus; (b) an omission from this Prospectus of any information that should have been included in it under Section 243 of the Securities and Futures Act; or (c) a new circumstance that has arisen since this Prospectus was lodged with the Authority and would have been required by Section 243 of the Securities and Futures Act to be included in this Prospectus, if it has arisen before this Prospectus was lodged and that is materially adverse from the point of view of an investor, we may lodge a supplementary or replacement prospectus with the Authority.

30

SELLING RESTRICTIONS
This Prospectus does not constitute an offer, solicitation or invitation to subscribe for our Shares in any jurisdiction in which such offer, solicitation or invitation is unlawful or is not authorised or to any person to whom it is unlawful to make such offer, solicitation or invitation. No action has been or will be taken under the requirements of the legislation or regulations of, or of the legal or regulatory authorities of, any jurisdiction, except for the lodgment and/or registration of this Prospectus in Singapore in order to permit a public offering of our Shares and the public distribution of this Prospectus in Singapore. The distribution of this Prospectus and the offering of our Shares in certain jurisdictions may be restricted by the relevant laws in such jurisdictions. Persons who may come into possession of this Prospectus are required by our Company, the Manager, the Underwriter and the Placement Agent to inform themselves about, and to observe and comply with, any such restrictions.

31

PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and is subject to, the more detailed information and financial statements (including the notes thereto) appearing elsewhere in this Prospectus. Terms defined elsewhere in this Prospectus have the same meanings when used herein. You should carefully consider all the information presented in this Prospectus, particularly the matters set out in the section entitled Risk Factors of this Prospectus before making an investment decision.
OVERVIEW OF OUR GROUP Our Company was incorporated in Singapore under the Companies Act on 16 December 2004 as a private limited company under the name Old Chang Kee Singapore Pte. Ltd.. Pursuant to the Restructuring Exercise described in the section entitled Restructuring Exercise of this Prospectus, we became the holding company of our Group. We are principally engaged in the manufacture and sale of affordable food products of consistent quality under the brand name Old Chang Kee. Our signature product is the well-known Old Chang Kee curry puff, now complemented by a suite of more than 40 other food products such as fish balls, spring rolls and chicken wings. Most of our sales are on a takeaway basis. We sell our food products through our retail outlets to cater to a wide range of consumers. We also have dine-in operations at our Old Chang Kee Take 5 retail outlets located at Icon Village, Square 2, Ogilvy Centre, Golden Shoe Car Park, Eastpoint Mall and West Mall, which offer a suite of local delights such as curry chicken or beef stew in loaf/rice, sambal fish rice, curry noodles and nasi lemak as well as our food products. We also offer delivery services to the central business district and other selected areas in Singapore. As at the Latest Practicable Date, we had 54 retail outlets in Singapore and two retail outlets in Kuala Lumpur, Malaysia (through our 40.0%-owned Associated Company, Old Chang Kee Malaysia). As at the Latest Practicable Date, we had three retail outlets in Chengdu, PRC (through Old Chang Kee China). We have also established brand presence in Indonesia, by way of a franchise agreement entered into between Ten & Han, our subsidiary, and our Indonesian Franchisee. As at the Latest Practicable Date, our Indonesian Franchisee operates four retail outlets in Jakarta, Indonesia. In June 2007, we also established our brand presence in the Philippines, by way of a franchise agreement entered into between Ten & Han, our subsidiary, and our Philippines Franchisee. As at the Latest Practicable Date, our Philippines Franchisee has opened two retail outlets in Manila, the Philippines. The food products prepared and served by our Group in Singapore have been certified as Halal by MUIS since January 2005. In the last few years, we have received multiple awards in recognition of our brand name, including the prestigious Singapore Promising Brand Award Distinctive Brand Award in 2005 and the Lifelong Learner Award, Corporate Category in 2007. A detailed discussion of our business is set out in the sections entitled Our History and Our Business of this Prospectus. OUR COMPETITIVE STRENGTHS We believe that our competitive strengths are as follows:We have an established household brand name with a distinctive Singaporean flavour. We operate an extensive network of retail outlets at strategic locations. We have a diversified customer base. We have dedicated key management personnel with extensive experience in the local food industry. We are committed to high quality standards.

32

PROSPECTUS SUMMARY
A detailed discussion of our competitive strengths is set out in the section entitled Our Competitive Strengths of this Prospectus. OUR BUSINESS STRATEGIES AND FUTURE PLANS Our business strategies and future plans are as follows:Expand our overseas operations. Increase and refurbish our Singapore retail outlets. Expansion through strategic alliances, acquisitions, joint ventures and franchises. For more details, please refer to the section entitled Prospects and Future Plans of this Prospectus. OUR CONTACT DETAILS Our registered office and principal place of business is 2 Woodlands Terrace, Singapore 738427. Our telephone and facsimile numbers are (65) 6303 2400 and (65) 6303 2415 respectively. Our website address is http://www.oldchangkee.com. Information contained on our website does not constitute a part of this Prospectus.

33

INVITATION STATISTICS
ISSUE PRICE PER NEW SHARE NAV per Share NAV per Share, based on the audited balance sheet of our Group as at 31 December 2006: Before adjusting for the estimated net proceeds from the Invitation and based on the pre-Invitation share capital of 68,400,000 Shares After adjusting for the estimated net proceeds from the Invitation and based on the post-Invitation share capital of 93,400,000 Shares : 11.17 cents : S$0.20

11.74 cents

Premium of Issue Price over NAV per Share: Before adjusting for the estimated net proceeds from the Invitation and based on the pre-Invitation share capital of 68,400,000 Shares After adjusting for the estimated net proceeds from the Invitation and based on the post-Invitation share capital of 93,400,000 Shares : 79.1%

70.4%

EPS Historical EPS for FY2006 based on our profit after taxation for FY2006 and the pre-Invitation share capital of 68,400,000 Shares PRICE EARNINGS RATIO Price earnings ratio based on our EPS for FY2006 NET CASH GENERATED FROM OPERATING ACTIVITIES PER SHARE Historical net cash generated from operating activities per Share for FY2006 based on the pre-Invitation share capital of 68,400,000 Shares PRICE TO NET CASH GENERATED FROM OPERATING ACTIVITIES RATIO Price to net cash generated from operating activities based on the net cash generated from operating activities per Share for FY2006 MARKET CAPITALISATION Our market capitalisation based on our post-Invitation share capital of 93,400,000 Shares and the Issue Price : S$18.7 million : 2.3 times : 8.62 cents : 4.5 times : 4.44 cents

34

RISK FACTORS
You should evaluate carefully each of the following considerations and all other information set forth in this Prospectus before deciding to invest in our Shares. Some of the following considerations relate principally to the industry in which we operate and our business in general. Other considerations relate principally to general social, economic, political and regulatory conditions, the securities market and ownership of our Shares, including possible future dilution in the value of our Shares. If any of the following considerations and uncertainties develops into actual events, our business, financial condition or results of operations could be materially and adversely affected. In such a case, the trading price of our Shares could decline due to any of these considerations, and you may lose all or part of your investment. This Prospectus also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks faced by us as described below and elsewhere in this Prospectus.
RISKS RELATING TO OUR BUSINESS OR OUR INDUSTRY We may be affected by any outbreak of food-related diseases and severe changes in climatic conditions Any outbreak of diseases associated with livestock, crops and other food scares in the region and around the world, such as avian influenza, may lead to a reduction in the consumption of the affected livestock or crop or food products. We are unable to predict the next occurrence of such food-related diseases. In the event of the occurrence of food-related diseases affecting ingredients used in our products, the demand for our products is likely to decline, thereby adversely affecting our business and financial performance. Further, sources of supply for the affected types of livestock or crops may also be reduced, or the Singapore government may ban the import of the affected livestock or crop. In such an event, we may not be able to offer the relevant products and our business and financial performance may be adversely affected. Alternatively, we may have to eliminate the use of the affected livestock or crop in our products. Such elimination could affect the taste of the relevant products and thereby adversely affect the demand for such products. The prices of our raw materials are also subject to fluctuations due to severe changes in climatic conditions and outbreak of food-related diseases, all of which may reduce supply and lead to increase in the cost of raw materials. In the event we are unable to pass on any increase in the cost of raw materials to our customers, our business and financial performance may be materially and adversely affected. For example, during the outbreak of the avian influenza in 2004, the supplies of eggs and chicken meat (which are the ingredients of some of our food products) were drastically reduced. This resulted in a sharp increase in the cost of such raw materials in FY2004. As we had not been able to pass the increase in cost to our customers, our financial performance for FY2004 was affected. In addition, in August and September 2004, as the outbreak of the avian influenza worsened, the Singapore government banned the import of chickens and eggs from Malaysia. As a result, we had to serve our food products without eggs and replace fresh chicken meat with frozen chicken meat during the period of the import ban. This had also affected our sales, and hence our revenue for FY2004. We may be affected by the spread or an outbreak of any contagious or virulent disease The spread or outbreak of any contagious or virulent disease in the countries in which we operate could have a material adverse effect on our operations as well as the operations of our suppliers. In the event that any of our employees in our production facilities or the facilities of our suppliers are infected with such diseases, we and/or our suppliers may be required to temporarily shut down the affected facility to prevent the spread of the disease. An outbreak of any contagious or virulent disease in Singapore may negatively affect consumer sentiments, leading to a reduced willingness by the general consumer in Singapore to socialise, hence reducing patronage to our retail outlets which are located at easily accessible locations with high human traffic flow. This will have a negative impact on our business and financial performance.

35

RISK FACTORS
We may be affected by changes in governmental regulations We are subject to the laws and regulations governing the F&B industry, including but not limited to laws and regulations relating to food safety, handling and storage, hygiene standards, and the sale of F&B. We are required to obtain and maintain for our operations, certain licences, permits, approvals and certificates from relevant authorities. Please refer to the section entitled Government Regulations for a list of the licences, permits, approvals and certificates required for our business. The failure to obtain or renew such licences, permits, approvals and certificates or any changes to relevant laws and regulations may have a negative impact on our business. In the event that we are unable at any time to comply with the existing regulations, such as obtaining, maintaining or renewing the relevant licences, permits, approvals and certificates required for our business, or any changes in such laws and regulations, or any new regulations introduced by the relevant authorities, we may not be allowed to continue our business operations. In addition, any change in or introduction of new regulations that require our compliance may increase our cost of operations. All these will have an adverse effect on our business and financial performance. Our business will be adversely affected by the revocation of Halal certification issued to our production facility and retail outlets MUIS, which is constituted under the Administration of Muslim Law Act (Chapter 3) of Singapore, may issue a Halal certificate in relation to the operation of a retail food establishment and regulate the holder of such certificate to ensure that the requirements of the Islamic law are complied with in the operation of the establishment. As at the Latest Practicable Date, Halal certifications had been issued to our production facility located in Singapore at 2 Woodlands Terrace and 50 of our retail outlets in Singapore. Such Halal certification has enabled us to expand our customer base to include Muslim consumers. To maintain such Halal certification, we have implemented a system under which all the processes involved in the production of our food products are monitored closely to ensure that our food products are manufactured, packed, transported, stored and sold in compliance with the requirements of Islamic law. Specific corrective actions will be prescribed and implemented to rectify any aberration detected by the system. There can be no assurance that the Halal certification issued to our production facility or retail outlets will not be revoked or will be renewed. In the event such Halal certification is revoked or not renewed, our customer base will be reduced thus resulting in an adverse effect on our business and financial performance. Our business and financial performance will be affected by any increase in rental charges or the failure to procure the renewal of existing leases All our retail outlets are housed in leased premises. Rental expenses of our retail outlets accounted for 38.1%, 37.4%, 36.1% and 36.6% of our selling and distribution expenses for FY2004, FY2005, FY2006 and FP2007 respectively. Majority of our leases are entered for periods of between one and three years. We generally commence negotiations for new leases about six months prior to the expiry of the existing leases. The new lease agreements are usually signed within one month of the expiry of the existing leases. Upon the expiry of such leases, the lessors have the right to review and alter the terms and conditions of the leases. We face the risk of increases in rental charges or the inability to renew the leases on terms and conditions which are favourable to us. Any increase in the rental charges or changes in terms and conditions that are unfavourable to us would inevitably increase our operating expenses, thus affecting our profitability. In addition, failure to procure the renewal of leases at strategic locations may result in losses and disruptions to our business, and our financial performance will be adversely affected.

36

RISK FACTORS
We may not be able to secure new strategic locations to expand our business Our growth is dependent on our extensive network of retail outlets at strategic locations which allows us to reach out to a wide base of customers. As described in the section entitled Our Competitive Strengths of this Prospectus, our retail outlets are located at easily accessible locations with high human traffic flow, thus facilitating high volume sales of our food products. To maintain our competitiveness in the F&B industry, our business development team constantly seeks new strategic locations to expand our business. However, there can be no assurance that we will continue to secure strategic locations for our new retail outlets. Any failure to secure strategic locations for new retail outlets may result in a loss of business and will present opportunities to competitors to increase their market share by opening their retail outlets at such strategic locations, thereby affecting our business and financial performance. Our business and financial performance will be affected if we are unable to compete with our competitors effectively Our industry is highly competitive and our competitors include individual operators as well as larger groups of chain outlet food operators. There is no assurance that we will be able to continue to compete effectively with our competitors. In the event that we are unable to compete with our competitors effectively, our business and financial performance will be adversely affected. We are susceptible to fluctuations in foreign exchange rates that could result in us incurring foreign exchange losses Our revenue is denominated in S$ while part of our purchases, including equipment, is denominated in THB and US$. Some of our equipment purchases are denominated in US$ and the amount was less than S$300,000 in each of the financial period under review. On the other hand, 46.8%, 48.2%, 45.8% and 44.2% of our total purchases in FY2004, FY2005, FY2006 and FP2007 respectively are denominated in THB. Hence, we are exposed to foreign exchange risks if there are significant fluctuations in currency exchange rates between the time of our purchases and payment in foreign currencies, especially the THB. We are also subject to translation risks as our consolidated financial statements are denominated in S$ while the financial statements of our foreign subsidiaries and Associated Companies are prepared in AUD, RM, RMB and THB. For the purposes of consolidating the results of our foreign subsidiaries and Associated Companies, the respective balance sheets of our foreign subsidiaries and Associated Companies are translated from AUD, RM, RMB and THB in which their financial statements are prepared, based on the prevailing exchange rates on the balance sheet date. The profit and loss accounts of our foreign subsidiaries and Associated Companies are translated using the average exchange rates for the relevant financial year or period. Any significant appreciation of the S$ against AUD, RM, RMB or THB may adversely affect our Groups results from operations as it will result in our Group having lower profits from our foreign subsidiaries and Associated Companies. We do not presently have any formal policy for hedging against foreign exchange exposure. Our business will be adversely affected by complaints from customers and negative publicity Like any operator in the F&B industry, we may be adversely affected by negative publicity concerning food quality, illness, injury, publication of government or industry findings concerning food products served by us, or other health concerns or operational issues of our retail outlets or production facility. At any instance, our retail outlets and production facility may be subject to negative allegations from our customers, complaints of illnesses due to lapses in food quality, injuries sustained on our premises and operational inefficiencies. These negative allegations, especially complaints of illnesses arising from the consumption of our food products, may result in the closure of our retail outlets and/or production facility. There have been instances of complaints from our customers in the past. They relate mainly to the quality of our food products, the quality of the service provided by our employees at the retail outlets, non-punctual delivery of customers orders and delivery of food products not in accordance with customers orders or requests. In the event any of these complaints escalate into legal proceedings against our Group, we will have to expend resources defending and/or counter-claiming against such claims. There can be no assurance that we will be able to defend ourselves successfully and our Group may suffer monetary losses as a result. In addition, such complaints may result in negative publicity or the closure of our retail outlets and/or our production facility which would materially and adversely affect our businesses and financial performance. 37

RISK FACTORS
In addition, we may be the subject of malicious and groundless rumours which may be quickly transmitted and spread over the Internet and short message service (SMS) text messages. Such negative publicity will materially affect our business regardless of whether these allegations are genuine. Publicised instances of poor food or general hygiene may damage our image, reduce customers confidence in our products and result in reduced patronage of our retail outlets and thus have an adverse impact on our business, profitability and financial performance. Our business is reliant on our brand name The Old Chang Kee brand name has become an established and household brand name in Singapore, and is widely known by local consumers. The strong brand name of Old Chang Kee in Singapore serves as a suitable platform for us to launch our food products in other countries. We have set up retail outlets in Kuala Lumpur, Malaysia (through our 40.0%-owned Associated Company, Old Chang Kee Malaysia) and retail outlets in Chengdu, PRC (through Old Chang Kee China). We also have franchise operations in Jakarta, Indonesia (through our Indonesian Franchisee) and Manila, the Philippines (through our Philippines Franchisee). It is also intended that our business would be franchised to other overseas operators in future. Our brand name and reputation may be adversely affected by the manner in which our franchisees conduct their businesses overseas. This would indirectly affect our business, which is reliant on our brand name. Our business is labour intensive Our business is labour intensive and there is a shortage of manpower in Singapores F&B industry. Employee benefits expense (excluding directors remuneration) expressed as a percentage of total revenue for FY2004, FY2005, FY2006 and FP2007 were approximately 20.6%, 19.7%, 20.8% and 21.3% respectively. Please refer to the section entitled Managements Discussion and Analysis of Financial Condition and Results of Operations of this Prospectus for further details. In the event of any substantial increase in employee benefits expense (excluding directors remuneration) at a higher percentage as compared to our revenue, our business and financial performance may be adversely affected. We are dependent on our management Our Groups performance and success have been largely due to the collective efforts of our Executive Directors and Executive Officers who have built the business of our Group under the guidance and leadership of our Executive Chairman, Han Keen Juan, and our CEO, William Lim. Our Executive Chairman, Han Keen Juan, and our CEO, William Lim, have more than 20 and 10 years of experience in the F&B industry, respectively. The continued success and growth of our Group is therefore dependent on our ability to retain the services of our Executive Directors and Executive Officers. Consequently, the loss of certain key personnel and the failure to attract qualified and timely replacements will have an adverse effect on our Group. We are dependent on our major suppliers and contract manufacturers 65.2% of our purchases in FY2006 was from our major suppliers. In particular, more than 30% of our annual purchases relate to certain food products from Siamchai International Food Co. Ltd., our contract manufacturer in Thailand. Please refer to the section entitled Major Suppliers of this Prospectus for further details. The involuntary or unexpected loss of any of our major suppliers or our contract manufacturers will disrupt our supplies and will adversely affect our business and financial performance. Furthermore, there can be no assurance that our major suppliers or contract manufacturers will be able to continue to fulfil our needs and expectations in terms of costs and/or product quality. In the event that our major suppliers or contract manufacturers are unable to fulfil our requirements or cease to supply raw materials and/or food products to us, we may have to incur time and monetary costs seeking alternative suppliers and/or contract manufacturers, or accept higher prices from our existing suppliers and contract manufacturers, which could result in disruptions to our business and may adversely affect our financial performance.

38

RISK FACTORS
We may be adversely affected if our intellectual property rights are not protected We believe that our trademarks are an integral aspect of our Groups strategy on branding, and play a significant role in creating brand recognition for our food products. As such, we have registered or are in the process of registering our principal Old Chang Kee trademark and our other trademarks, both in Singapore and overseas. Please refer to the section entitled Intellectual Property of this Prospectus for further information on our registered trademarks and trademarks pending registration. There can be no assurance that our registered trademarks will not be infringed upon. There can also be no assurance that our trademarks pending registration will be registered by the respective authorities. Unauthorised use of our trademarks or variants of our trademarks may harm our reputation and consequently our business and financial performance. In addition, we may take action (including litigation) to stop infringement of our intellectual property rights or obtain adequate compensation or remedy. There is no assurance that we will be successful in protecting our intellectual property rights and we may incur substantial costs in the process. In addition, in the event that any third party alleges proprietary rights over such trademarks, we may be exposed to legal proceedings brought against us by such third party in respect of our use of the trademarks. These legal proceedings may result in monetary losses and may prevent us from further using our trademarks. Our business and financial performance will be adversely affected in such an event. We may be adversely affected if our contract manufacturers breach their confidentiality obligation owed to us We manufacture our curry puffs and prepare other various food products in-house. The recipes for our other food products are developed in-house and are produced by selected contract manufacturers approved by us according to our specifications. We have exclusive arrangements with our contract manufacturers for the manufacture of some of our food products. As we are materially dependent on the recipes of these food products, we have provided in the agreements with our contract manufacturers that the recipes we provide to them cannot be used for the manufacture of similar food products for third parties and our contract manufacturers are contractually obliged to keep all technical and commercial information provided by us to them for the manufacture of our food products confidential and to use them only for the manufacture of our food products (Confidential Information). We currently have two major contract manufacturers, namely Leong Hin Foods Pte. Ltd. in Singapore and Siamchai International Food Co. Ltd. in Thailand. In the event our contract manufacturers breach their confidentiality obligation owed to us and disclose the Confidential Information to our competitors or use the Confidential Information for the purpose of manufacturing food products for our competitors, the value of the Old Chang Kee brand may be diminished and our market share may decrease. If this event occurs, our business may be adversely affected. We may be affected by pilferage, theft and vandalism Our employees handle the cash sales and our food items on a daily basis. Lapses in internal controls may occur, resulting in pilferage. During the Relevant Period, we have not encountered any instances of cash pilferage. Further, as some of our retail outlets are situated in outdoor locations or locations that are accessible by the public on a 24-hour basis; theft and vandalism may occur. One of our retail outlets encountered a case of break-in theft in July 2007 but the amount lost was insignificant. Even though safes and close circuit cameras are installed in all our retail outlets, there is no assurance that cases of pilferage, theft and vandalism will not occur. Pilferage, theft and vandalism may not only adversely affect our financial performance, but also our reputation and branding. We face uncertainties associated with our overseas expansion plans We intend to broaden our business presence in overseas markets such as Australia, Malaysia, the Philippines, Indonesia, Thailand and PRC. Please refer to the section entitled Prospects and Future Plans of this Prospectus for further details on our overseas expansion plans. Our overseas expansion plans involve various risks, including the costs associated with setting up the overseas business, obtaining suitable plant and machinery, and renovation costs. We may also experience difficulty in securing strategic locations for our retail outlets. As we have limited experience in overseas operations, there is no certainty that we will be able to manage our overseas expansion plans effectively and successfully. If we are unable to do so, our business and financial performance will be materially and adversely affected. 39

RISK FACTORS
Our business and financial performance may be affected by any change of tenant mix, revamp or closure of the shopping malls or complexes in which our retail outlets are located As at the Latest Practicable Date, 39 out of our 54 retail outlets in Singapore are based in shopping malls or complexes. Any change in the tenant mix of a shopping mall or complex in which our retail outlets are located may result in fewer customers visiting the shopping mall or complex and hence a reduction in the human traffic flow to our retail outlets. There is also no assurance that the shopping malls or complexes in which our retail outlets are located will not be revamped to create a larger number of retail outlets, resulting in greater competition from other food operators. Further, there is also no assurance that the shopping malls or complexes in which our retail outlets are located will not be closed or demolished. The closure or demolition of a shopping mall or complex in which our retail outlet is located may cause us to write off certain fixed assets located in such retail outlet. We may also not be able to source for and obtain other suitable alternative locations in time which may result in a loss and disruption to our business. Poor maintenance of the shopping malls or complexes may also result in less patronage at our retail outlets. All the above events will have a material adverse effect on our business and financial performance. We face the risk of food contamination and tampering Food contamination and tampering is a risk inherent to all F&B industry participants. There is always the possibility of contamination given the numerous processes involved in the production of our food products. Further, food products sold may be subject to tampering. Our business may be adversely affected by negative publicity resulting from such food contamination and tampering of our food products. In such event, the demand for our food products may decrease and our business and financial performance will be adversely affected. We are subject to changes in consumers tastes and preferences Our customers are the general consumers. Our continued growth and success is dependent on the popularity of our signature curry puffs which is complemented by a suite of more than 40 other food products such as fish balls, spring rolls and chicken wings. Any shift in consumers tastes and preferences away from our offered food products may affect our business and consequently our financial performance. Our production facility may be subject to disruptions Our production facility is located at 2 Woodlands Terrace. In the event of disruptions such as fire hazards, power failures or floods at our production facility, the supply of food products, especially our signature curry puff, to our retail outlets would be affected. This will have an adverse impact on our revenue and profitability. We are subject to foreign investment guidelines in Malaysia The FIC regulates and prescribes guidelines (the FIC Guidelines) for the acquisition of assets or interests, mergers and take-overs of companies and businesses in Malaysia. Where the FIC Guidelines are applicable, FIC approval is required. The FIC is a committee of the Economic Planning Unit of the Malaysias Prime Ministers Department. Strictly speaking, the FIC Guidelines do not have the force of law (in the sense that they have not been enacted as legislation or promulgated as regulations under any existing laws). However, non-compliance has practical consequences as the FIC liaises closely with other regulatory agencies in Malaysia, and compliance with conditions imposed by the FIC, if any, may be required before other approvals from the other regulatory authorities are given. For example, if a foreign investor needs to apply for a government licence, permit or approval or if a foreign investor wishes to participate in government contracts or attempts to register any land purchases at the relevant land office or registry in Malaysia, FIC approval and compliance with the FIC Guidelines may be required. The FIC Guidelines include requirements as to the shareholding spread of Malaysian and foreign interests in companies incorporated in Malaysia. The only equity condition imposed currently is that Bumiputera equity in a Malaysian company must amount in aggregate to at least 30%. The remaining 70% equity can be held either by a foreigner, a Malaysian or jointly by a foreigner and Malaysian.

40

RISK FACTORS
Our Malaysian Associated Company, Old Chang Kee Malaysia has not obtained FIC approval in relation to our Companys shareholding in Old Chang Kee Malaysia. Our Company holds 40% of the issued and paid-up share capital of Old Chang Kee Malaysia. The remaining 60% of the issued and paid-up share capital of Old Chang Kee Malaysia is held by San Mun Choong, a Malaysian Chinese. Under the FIC Guidelines, any proposed acquisition or acquisition of 15% or more of the voting rights in a Malaysian company by any one foreign interest requires FIC approval, which is granted at the discretion of the FIC. In the event that we are required to comply with the FIC Guidelines, we and the other shareholder of Old Chang Kee Malaysia may have to, inter alia, procure the divestment of at least 30% of Old Chang Kee Malaysias total issued and paid-up share capital to Bumiputera interest(s) within such time as may be stipulated by the FIC. In such an event, any profit contribution of Old Chang Kee Malaysia to our Company may be reduced and our operations and financial performance may be adversely affected. We may be affected by any changes in the general economic, regulatory, political and social conditions in the countries in which we operate We currently have operations in Singapore, Malaysia and PRC and our franchisees have commenced their operations in Indonesia and the Philippines. We also have plans to expand our operations into Australia. As a result, our businesses and future growth are dependent on the economic, regulatory, political, and social conditions of these countries. Any unfavourable changes in the political, economic, regulatory and social conditions in these countries or in the government policies of these countries may have a negative impact on our operations which could materially and adversely affect our results of operations, financial performance and future growth. Terrorist attacks and other acts of violence or wars may adversely affect the markets in which we operate and our profitability Following the occurrence of certain terrorist attacks and other acts of violence or wars, there has been an escalation of a general fear of increased terrorist activities around the world, which may have an adverse effect on the world economy. Given the general fear of economic fall-out around the world, the economic outlook of our markets may become uncertain and there is no assurance that such markets will not be affected by a worldwide economic downturn, or that recovery will happen in the near future. As this could have a negative impact on the demand for our food products and services, our sales, our business, future growth and profitability may be adversely affected. RISKS RELATING TO OWNERSHIP OF OUR SHARES There has been no prior public market for the Shares; liquidity may be low and the market price may be volatile The Issue Price was determined by us in consultation with the Manager, the Placement Agent and the Underwriter, after taking into consideration, inter alia, prevailing market conditions and the estimated market demand for our Shares through a book-building process. The Issue Price may therefore not be indicative of the market price for our Shares after the completion of the Invitation. Prior to the Invitation, there was no public market for our Shares. We have applied to the SGX-ST for the listing and quotation of our Shares on the Official List of the SGX-SESDAQ. As part of the transitional arrangement announced by the SGX-ST on 26 November 2007, the Company has been approved to be listed on the Catalist. The Company has submitted its listing application under the listing rules of SGX-SESDAQ and the SGX-ST has reviewed the application based on the SGX-SESDAQ framework and listing rules. There is no assurance that an active trading market for our Shares will develop or, if a market develops, that it will be sustained after the Invitation. There is also no assurance that the market price of our Shares will not decline below the Issue Price after the Invitation. The market price of our Shares may fluctuate significantly as a result of various factors, some of which are beyond our control. These factors include:variations in our operating results; new products offered by us or our competitors; 41

RISK FACTORS
liquidity of our Shares in the market; changes in securities analysts estimates of our financial performance; announcements by us of significant contracts, acquisitions, partnerships, joint ventures, franchises or capital commitments; additions or departures of key personnel; fluctuations in stock market prices and volume; changes in market valuations of similar companies; involvement in litigation; and general economic and market conditions. Control by our Executive Directors and their Associates could influence the outcome of actions which require the approval of Shareholders Upon the completion of the Invitation, our Executive Directors and their Associates, will own an aggregate of approximately 73.2% of our post-Invitation share capital. Should these parties act together, they will be able to exercise significant influence over all matters requiring the Shareholders approval, including the appointment of directors and the approval of significant corporate transactions. They will also have veto power with respect to any shareholder action or approval requiring a majority vote. Such concentration of ownership could have the effect of delaying or preventing a change in control of our Company or otherwise discouraging a potential acquirer from attempting to obtain control of our Company through corporate actions such as merger or takeover attempts notwithstanding that the same may be synergistic or beneficial to our Group in a manner that may be in conflict with the interests of our public Shareholders. New investors will incur immediate dilution and may experience further dilution The Issue Price of the New Shares is higher than our Groups NAV as at 30 June 2007 based on the post-Invitation issued share capital. If our Company were to be liquidated immediately following this Invitation, you, being an investor subscribing for the New Shares in this Invitation would receive less than the price you paid for your Shares. Details of the immediate dilution incurred by new investors are described under the section entitled Dilution of this Prospectus. We may not be able to obtain sufficient future funding for future expansion The actual amount of our future financing requirements will depend on factors such as our future performance and market conditions, many of which are beyond our control and cannot be predicted with absolute certainty. We may be required to raise additional funds to finance our expansion, meet unanticipated operating cash requirements, develop new or enhanced products or services, respond to competition, or invest in or acquire businesses. If additional funds are raised through additional issue(s) of Shares in the future, the existing Shareholders interests may be diluted. However, in the event that our Company is unable to raise such additional funds, we may not be able to further expand our operations or introduce new lines of food products. In such an event, our operations and financial performance may be adversely affected. Future sales of Shares could adversely affect the share price Except as described in the section entitled Moratorium of this Prospectus, there are no restrictions on the ability of our Shareholders to sell their Shares. Any future sales or availability of a significant amount Shares may exert downward pressure on our share price. The sale of a significant amount of Shares in the public market after the Invitation, or the perception that such sales may occur, could materially affect the market price of our Shares. These factors may also affect our ability to attract subscription of additional equity securities in the future.

42

RISK FACTORS
Negative publicity may adversely affect the share price Any negative publicity or announcements relating to our Group and/or any of our Directors, Executive Officers and/or Substantial Shareholders may adversely affect the market perception or the stock performance of our Company, regardless of whether the allegations are justified or true. Examples include involvement in legal and/or insolvency proceedings, and reports of unsuccessful attempts at joint ventures or acquisitions.

43

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The following information should be read in conjunction with the full text of this Prospectus, in particular, Appendices A and B of this Prospectus. COMBINED PROFIT AND LOSS ACCOUNTS
Audited S$000 Revenue Cost of sales Gross profit Other operating income Selling and distribution expenses Administrative expenses Other operating expenses Finance costs Share of results of associated companies Profit before taxation Taxation Net profit attributable to shareholders EPS (cents)(3) EPS (as adjusted for the Invitation) (cents)(4)
Notes:(1) It is likely that our profit for FY2007 will be lower than our profit for FY2006 due to increasing costs and the disposal of 1901 Singapore at a loss. Please refer to the section entitled Trend Information of this Prospectus for more details. These comprise results of Old Chang Kee Malaysia (40%) and Pure Options (40%) which were acquired in July 2006 and August 2006 respectively. EPS is computed based on the net profit attributable to shareholders divided by the pre-Invitation share capital of 68,400,000 Shares. EPS (as adjusted for the Invitation) is computed based on the net profit attributable to shareholders divided by the postInvitation share capital of 93,400,000 Shares.
(2)

Unaudited FY2006 33,784 (13,827) 19,957 299 (11,061) (4,128) (848) (42) (27) 4,150 (1,111) 3,039 4.44 3.25 FP2006 16,074 (6,493) 9,581 82 (5,106) (1,680) (454) (19) 2,404 (673) 1,731 2.53 1.85 FP2007 19,039 (7,918) 11,121 285 (6,657) (2,201) (512) (22) 2,014 (394) 1,620 2.37 1.73

FY2004 20,893 (8,366) 12,527 13 (7,135) (2,510) (285) (13) 2,597 (515) 2,082 3.04 2.23

FY2005 29,045 (11,276) 17,769 39 (8,881) (4,171) (494) (27) 4,235 (1,028) 3,207 4.69 3.43

(2)

(3)

(4)

44

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


COMBINED BALANCE SHEET
Audited as at 31 December 2006 Unaudited as at 30 June 2007

S$000 Non-Current Assets Property, plant and equipment Intangible assets Investment in associated companies Amounts due from associated companies

5,881 339 16 57 6,293

9,441 304 17 86 9,848

Current Assets Inventories Trade and other receivables Deposits Prepayments Amounts due from associated companies Cash and cash equivalents

446 1,354 1,393 149 15 6,565 9,922

526 171 1,553 665 22 4,092 7,029 16,877

Total Assets Current Liabilities Trade and other payables Other liabilities Bank overdrafts Amount due to a related party Finance lease liabilities Club membership payable current Provision for taxation

16,215

5,881 180 173 2 344 15 900 7,495

5,167 203 140 323 15 818 6,666 363

Net Current Assets Non-Current Liabilities Financial lease liabilities Club membership payable long term Deferred tax liabilities

2,427

485 20 576 1,081

401 13 657 1,071

Total Liabilities

8,576

7,737

Net Assets

7,639

9,140

Equity attributable to equity holders of the Company Share capital Share application money Reserves Total Equity

700 100 6,839 7,639

800 8,340 9,140

45

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


This information should be read in conjunction with the full text of this Prospectus, including Appendices A and B of this Prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause future results to differ significantly from those projected in the forward-looking statements include, but are not limited to, those discussed below and elsewhere in the Prospectus, particularly in the section entitled Risk Factors of this Prospectus.
OVERVIEW We are principally engaged in the manufacture and sale of Halal-certified food products of consistent quality under the brand name Old Chang Kee. Our signature product is the well-known Old Chang Kee curry puff which was launched in 1956. We currently have more than 40 food products. Our food products are sold through our retail outlets in Singapore on a takeaway basis. In April 2004, we started delivery services to the central business district area. We also introduced the sale of breakfast items (such as braised bee hoon and nasi lemak) in December 2004 at selected retail outlets. In April 2005, we launched our Take 5 meals (which is a suite of local delights such as curry chicken or beef stew in loaf/rice, sambal fish rice and nasi lemak) and commenced provision of dine-in services at selected retail outlets. In August 2005, we commenced the operation of 1901 retail outlets in Singapore which sell takeaway hotdogs. The contribution from 1901 retail outlets during the said period is insignificant. On 15 November 2007, we entered into a sale and purchase agreement with Nineteen O One Sdn. Bhd. pursuant to which the entire issued and paid-up share capital of 1901 Singapore would be transferred to Nineteen O One Sdn. Bhd. for a consideration of S$180,000 (the Disposal). Completion of the Disposal took place on 15 November 2007. Revenue We derive our revenue from the sale of F&B items through our chain of retail outlets in Singapore. As at the Latest Practicable Date, we had 54 retail outlets in Singapore and two retail outlets in Kuala Lumpur, Malaysia (through our 40.0%-owned Associated Company, Old Chang Kee Malaysia). As at Latest Practicable Date, we also had three retail outlets in Chengdu, PRC (through Old Chang Kee China). We have also established brand presence in Indonesia, by way of a franchise agreement entered into between Ten & Han, our subsidiary, and our Indonesian Franchisee. As at the Latest Practicable Date, our Indonesian Franchisee operates four retail outlets in Jakarta, Indonesia. In June 2007, we also established our brand presence in the Philippines, by way of a franchise agreement entered into between Ten & Han, our subsidiary, and our Philippines Franchisee. As at the Latest Practicable Date, our Philippines Franchisee has opened two retail outlets in Manila, the Philippines. Our customers are mainly the general public in Singapore. In January 2005, following the Halal certification for all our food products in Singapore, our customer base expanded to include Muslim consumers. We offer a wide range of food products to our customers. Please refer to the section entitled Our Products of this Prospectus for a list of our food products. Our revenues for FY2004, FY2005, FY2006 and FP2007 (the period under review) was derived mainly from the sale of our food products, in particular, our signature curry puffs. Sales of our signature curry puffs, on average, accounted for about 30% of our revenue in each of the period under review. Sales of our other food products varied with changes in consumers tastes and preferences. Sales of Take 5 meals and 1901 F&B items, both commenced in FY2005, constituted 1.0% and 0.6% of our revenue in FY2005, 2.0% and 2.9% of our revenue in FY2006 and 3.0% and 3.3% of our revenue in FP2007 respectively. Save for our sales of certain raw materials to our overseas Associated Companies and franchisees, most of our sales are conducted on a cash basis and revenue is recognised upon the sale in the period under review.

46

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Our revenue may be affected by, inter alia, the following key factors:(a) (b) our ability to secure good locations for our retail outlets; our ability to compete successfully with our competitors in terms of product range, pricing, including price adjustments on our part, quality and services; changes in consumers tastes and preferences; and changes in economic conditions and governmental regulations in Singapore, which may affect consumer sentiments, their disposable income and discretionary spending.

(c) (d)

Please refer to the section entitled Risk Factors of this Prospectus for more information on other factors which may affect our business operations, sales and overall financial performance. Seasonality For the period under review, we registered higher sales in the last quarter of each financial year, in particular, in the month of December. We believe that this was mainly due to the festive celebrations of general consumers at year-end. Cost of sales Our cost of sales constituted 40.0%, 38.8%, 40.9% and 41.6% of our revenue for FY2004, FY2005, FY2006 and FP2007 respectively. Our cost of sales comprised mainly raw materials, such as flour, eggs, potatoes, margarine, chicken meat, spices and vegetables for the preparation of our food products. To reduce our production cost, we outsourced the manufacturing of certain food products to a contract manufacturer in Thailand from June 1997. For each of the period under review, purchases from Siamchai International Food Co. Ltd., our contract manufacturer in Thailand, accounted for more than 38% of our purchases. Please refer to the section entitled Major Suppliers of this Prospectus for further details. Cost of raw materials (including contract manufacturing costs) accounted for 84.2%, 85.3%, 83.9% and 84.3% of our cost of sales for FY2004, FY2005, FY2006 and FP2007 respectively. Most of our raw materials can be easily sourced from various suppliers in Singapore and Thailand, and accordingly, we do not generally experience significant price fluctuations in these raw materials. However, we registered higher costs for chicken meat and eggs in FY2004 due to the occurrence of avian influenza and have experienced slow but gradual increase in the prices of vegetable oil and flour in recent years. We did not encounter any significant fluctuation in the cost of contract manufacturing during the period under review. The other major contributor to our cost of sales is the direct labour cost of our production workers. Direct labour costs accounted for 11.6%, 10.4%, 10.7% and 10.5% of our cost of sales for FY2004, FY2005, FY2006 and FP2007 respectively. The balance of our cost of sales relates to overheads incurred in operating our production facilities, comprising mainly utilities charges, depreciation on our kitchen-related fixed assets (including our leasehold production facility at 2 Woodlands Terrace) and rental charges for coldroom facility. Overheads accounted for 4.2%, 4.3%, 5.4% and 5.2% of our cost of sales for FY2004, FY2005, FY2006 and FP2007 respectively. The increases in overheads in FY2006 and FP2007 was due to increases in electricity bill and depreciation. Our cost of sales may be affected by, inter alia, the following key factors:(a) fluctuations in the cost of contract manufacturing and supplies which may be influenced by fluctuations in THB and RM;

47

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


(b) our ability to capitalise on volume to obtain favourable pricing from contract manufacturers and suppliers; increase in the cost of fuel and resultant increase in utilities charges; gradual increase in raw materials prices; rising raw material prices which may be influenced by an outbreak of disease in livestock and food scares regionally and around the world, such as avian influenza. Such an outbreak may affect the supply and consequently the price of such raw materials; our ability to control our costs by reducing material wastage through cost control measures implemented by our management; and changes in governmental regulations that may affect the prices of our raw materials and contract manufactured food items.

(c) (d) (e)

(f)

(g)

Other operating income Other operating income represented 0.1%, 0.1%, 0.9% and 1.5% of our revenue for FY2004, FY2005, FY2006 and FP2007 respectively. It comprised mainly income from sale of used oil, short-term deposits, insurance compensation, grants received, gains on fair value adjustment of quoted investment and gains on disposal(s) of quoted investment and property, plant and equipment. Operating expenses Our operating expenses comprised selling and distribution expenses, administrative expenses and other operating expenses. Selling and distribution expenses Our selling and distribution expenses accounted for 71.8%, 65.6%, 69.0% and 71.0% of our total operating expenses for FY2004, FY2005, FY2006 and FP2007 respectively. These are expenses incurred for operating our retail outlets which is mainly constituted by employee benefits expense and rental expenses. Employee benefits expense, which comprised salary, incentive, welfare and other employeerelated expenses, accounted for 36.1%, 42.9%, 42.6% and 41.7% of our selling and distribution expenses for FY2004, FY2005, FY2006 and FP2007 respectively. Rental expenses for our retail outlets accounted for 38.1%, 37.4%, 36.1% and 36.6% of our selling and distribution expenses for FY2004, FY2005, FY2006 and FP2007 respectively. The other contributors of selling and distribution expenses are depreciation of retail outlet equipment, advertising and promotional expenses, packing material expenses, water and electricity expenses, and cleaning expenses which, in aggregate, accounted for 25.8%, 19.7%, 21.3% and 21.7% of our selling and distribution expenses for FY2004, FY2005, FY2006 and FP2007 respectively. Administrative expenses Our administrative expenses accounted for 25.3%, 30.8%, 25.7% and 23.5% of our total operating expenses for FY2004, FY2005, FY2006 and FP2007 respectively. These relate mainly to expenses incurred at our head office such as employee benefits expense, entertainment and travelling expenses, and office supplies and general maintenance expenses.

48

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Employee benefits expense comprised salary, welfare and other employee-related expenses of office personnel and directors remuneration. Employee benefits expense, excluding directors remuneration, accounted for 23.8%, 23.3%, 27.0% and 23.2% of our administrative expenses for FY2004, FY2005, FY2006 and FP2007 respectively. Directors remuneration and fees accounted for 33.9%, 39.9%, 29.7% and 17.8% of our administrative expenses for FY2004, FY2005, FY2006 and FP2007 respectively. The lower percentage of directors remuneration in FP2007 was mainly because directors fees were only determined at the end of the financial year. Entertainment and travelling expenses comprised mainly entertainment claims, travel related costs and transport claims by our sales and office personnel and accounted for 19.5%, 12.3%, 12.9% and 10.9% of our administrative expenses for FY2004, FY2005, FY2006 and FP2007 respectively. The balance of our administrative expenses comprised office supplies and general maintenance expenses which accounted for 22.8%, 24.5%, 30.4% and 48.1% of our administrative expenses for FY2004, FY2005, FY2006 and FP2007 respectively. Other operating expenses Other operating expenses, which comprised mainly depreciation of office equipment, and amortisation on our intangible assets (which include computer software licences acquired for our ERP system in FY2005 and franchise rights for 1901), accounted for 2.9%, 3.6%, 5.3% and 5.5% of our total operating expenses for FY2004, FY2005, FY2006 and FP2007 respectively. The higher percentage of other operating expenses in FY2006 was because it included costs for setting up Old Chang Kee Chengdu Co., Ltd. , previously incorporated to be an Associated Company in PRC but currently in the process of being liquidated. These costs comprised S$77,000 bad debt written off of a loan due from a related party (an employee of the other shareholder), a provision of S$76,000 in relation to the reimbursement of start-up costs made by the other shareholder and the writing-off of our initial investment of S$66,000. The higher percentage in other operating expenses in FP2007 was mainly due to exchange loss due to appreciation of THB against S$. Please refer to the section entitled Foreign exchange exposure of this Prospectus for further details of our exchange gains/losses in the period under review. Finance costs Our finance costs were attributed to hire purchase charges for computer equipment and motor vehicles. We incurred finance costs of S$13,000, S$27,000, S$42,000 and S$22,000 in FY2004, FY2005, FY2006 and FP2007 respectively. The increase in finance costs was due to the purchase of new vehicles in both FY2004 and FY2005. In addition, in FY2005 and FY2006, we purchased approximately S$0.6 million of computer equipment under finance lease arrangements each payable by 36-month instalments, to set up our ERP system. Taxation All our operations are in Singapore during the period under review. Our statutory corporate tax rates and effective tax rates for FY2004, FY2005, FY2006 and FP2007 were as follows:FY2004 Statutory corporate tax rate Effective tax rate 20.0% 19.8% FY2005 20.0% 24.3% FY2006 20.0% 26.8% FP2007 18.0% 19.6%

Our effective tax rates for FY2005, FY2006 and FP2007 were higher than the statutory corporate rate due mainly to non-deductible expenses. Our effective tax rate for FY2004 was slightly lower than the statutory corporate tax rate due mainly to partial tax exemption on exempt income. Inflation Our operation and performance was not materially affected by inflation during the period under review.

49

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Foreign exchange exposure Our revenue is denominated in S$. As a cost-control measure, we outsourced the production of certain food products to a contract manufacturer in Thailand. We also source for other raw materials from suppliers in Thailand and Malaysia. Our foreign currency purchases in the period under review are as follows:FY2004 Purchases denominated in foreign currency (S$000) As a percentage of our cost of sales 3,303 FY2005 4,648 FY2006 5,209 FP2007 2,985

39.5

41.2

37.7

37.7

Prior to 1 January 2006, we recorded our purchases from the contract manufacturer and suppliers in Thailand and Malaysia based on the actual Singapore dollar amount paid. Accordingly, we did not have any foreign exchange gain or loss in FY2004 and FY2005. With effect from 1 January 2006, we changed our policy to book in the purchases at transaction rate and record any exchange gain or loss which arises when we make payments. For FY2006, we registered a total exchange loss of S$27,000, including S$3,000 incurred by re-translation of amounts due by Old Chang Kee Malaysia. For FP2007, we registered a total exchange loss of S$184,000, due mainly to realised loss on purchases from the contract manufacturer and suppliers in Thailand and Malaysia. This was due mainly to the appreciation of the THB against S$ in FP2007. In addition, we are exposed to foreign currency fluctuations due to purchases of some of our production equipment, which may be denominated in US$. We currently do not have any policy with respect to our foreign exchange transactions. We have not undertaken any hedging activities since inception. We will continue to monitor our foreign exchange exposure and where appropriate, will consider using financial instruments to hedge our exposure. We will seek the approval of our Board on the policy for entering into any foreign exchange hedging transaction and we will put in place adequate procedures for such transactions which must be reviewed and approved by our Audit Committee. REVIEW OF RESULTS OF OPERATIONS FY2005 vs FY2004 Revenue Our revenue increased by approximately S$8.1 million (or 39.0%) from S$20.9 million in FY2004 to S$29.0 million in FY2005. The increase in our revenue was mainly attributed to additional sales derived from the wider marketability and appeal of our food products after obtaining Halal certification in January 2005. The other factors which contributed to the increase in our revenue include firstly, the addition of four retail outlets between 31 December 2004 and 31 December 2005, bringing the total number of retail outlets to 40. In FY2005, we opened six new retail outlets and closed two retail outlets. The six new retail outlets (including two new retail outlets for 1901) accounted for 9.4% of our revenue in FY2005. Secondly, we also received revenue from the full year sales registered by the seven retail outlets opened in FY2004. And lastly, our Take 5 meals, which was launched in April 2005, also contributed positively to our revenue. Further, we had lower revenue in FY2004 as our sales were affected by the ban of import of chickens and eggs from Malaysia in August 2004 and September 2004 respectively due to the occurrence of the avian influenza. Our signature curry puff remained the major contributor to our revenue and accounted for 31.1% of our revenue in FY2005.

50

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Cost of sales and gross profit margin Our cost of sales increased by approximately S$2.9 million (or 34.8%) from S$8.4 million in FY2004 to S$11.3 million in FY2005. The increase can be attributed to an increase in cost of raw materials (including contract manufacturing costs) to meet the increase in sales. However, the overall rate of increase in our cost of sales was 4.2 percentage points lower than the rate of increase in our revenue. This lower rate of increase in our cost of sales can be attributed to economies of scale with optimum planning of our production workers in FY2005 and also because we had higher costs for chicken meat and eggs in FY2004 due to the occurrence of the avian influenza. Consequently, our gross profit increased by approximately S$5.3 million (or 41.8%) from S$12.5 million in FY2004 to S$17.8 million in FY2005, and our gross profit margin improved by 1.2 percentage points from 60.0% in FY2004 to 61.2% in FY2005. Other operating income Other operating income increased by approximately S$26,000 (or 200.0%) from S$13,000 in FY2004 to S$39,000 in FY2005. This was mainly attributable to the gain on fair value adjustment of quoted investment of S$23,000 in FY2005, compared to S$9,000 in FY2004. We also earned interest income of S$16,000 in FY2005. Operating expenses Our total operating expenses increased by approximately S$3.6 million (or 36.4%) from S$9.9 million in FY2004 to S$13.5 million in FY2005. Increased selling and distribution expenses accounted for 48.3% of the increase in our total operating expenses for FY2005. Selling and distribution expenses increased by approximately S$1.8 million (or 24.5%) from S$7.1 million in FY2004 to S$8.9 million in FY2005. The increase was mainly due to the increase in rental expenses for our retail outlets (for the six additional retail outlets in FY2005 and the full year rental of the seven retail outlets opened in FY2004) of approximately S$0.6 million and employee benefits expense of approximately S$1.2 million from S$2.6 million in FY2004 to S$3.8 million in FY2005 due to an increase in the number of employees. Increased administrative expenses accounted for 45.9% of the increase in our total operating expenses for FY2005. Administrative expenses increased by approximately S$1.7 million (or 66.2%) from S$2.5 million in FY2004 to S$4.2 million in FY2005. The increase was attributed to an increase in employee benefits expense amounting to S$1.2 million due to increases in directors remuneration and fees, in line with the improvement in results from FY2004 to FY2005, as well as salaries and related costs of administrative personnel resulting from an increase in the number of employees. We also saw a S$297,000 increase in professional fees as we engaged consultants to improve our financial, operating and administrative systems. Other operating expenses increased by approximately S$209,000 (or 73.3%) from S$285,000 in FY2004 to S$494,000 in FY2005, which accounted for 5.8% of the increase in our total operating expenses. The increase was due mainly to an increase in depreciation arising from the addition of office equipment in FY2005. In addition, we also had amortisation expenses of S$40,000 on computer software licences acquired for our ERP system in FY2005. We also wrote off an advance of S$61,000 due from Gain Up (M) Sdn Bhd in FY2005. Please refer to the section entitled Past Interested Person Transactions of this Prospectus for further details on the advance. Finance costs Finance costs increased by approximately S$14,000 (or 107.7%) from S$13,000 in FY2004 to S$27,000 in FY2005. The increase was mainly due to interest paid on five new finance leases taken up in FY2005 to finance the purchase of motor vehicles and computer equipment.

51

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Profit before taxation Our profit before taxation increased by approximately S$1.6 million (or 63.1%) from S$2.6 million in FY2004 to S$4.2 million in FY2005. The increase in profit before taxation can be attributed to the substantial increase in our gross profit caused by the increase in revenue. In addition, we were also able to better manage our operating expenses which resulted in a lower rate of increase in our operating expenses as compared to the rate of increase of our gross profit. Consequently, profit before taxation margin improved by 2.2 percentage points from 12.4% in FY2004 to 14.6% in FY2005. FY2006 vs FY2005 Revenue Our revenue increased by approximately S$4.8 million (or 16.3%) from S$29.0 million in FY2005 to S$33.8 million in FY2006. The increase in revenue was mainly attributed to the increase of 11 new retail outlets from 40 as at 31 December 2005 to 51 as at 31 December 2006. Included in the 11 new retail outlets were three new retail outlets for 1901 whose business accounted for 2.9% of our revenue in FY2006. We also had revenue from the full year sales registered by the six retail outlets opened in FY2005. There was also an increase in revenue from delivery sales partly due to the island wide football fever during the World Cup month in June 2006. Our signature curry puff remained the major contributor to our revenue and accounted for 33.2% of our revenue in FY2006. Cost of sales and gross profit margin Our cost of sales increased by approximately S$2.5 million (or 22.6%) from S$11.3 million in FY2005 to S$13.8 million in FY2006. Cost of sales, as a percentage of our revenue, increased from 38.8% in FY2005 to 40.9% in FY2006. The 2.1 percentage point increase was mainly attributable to higher costs of raw materials (in particular, vegetable oil, margarine, sugar, curry spice, frozen seafood, flour and chicken). Consequently, our gross profit increased by S$2.2 million (or 12.3%) from S$17.8 million in FY2005 to S$20.0 million in FY2006, and our gross profit margin decreased from 61.2% in FY2005 to 59.1% in FY2006. Other operating income Other operating income increased by approximately S$260,000 from S$39,000 in FY2005 to S$299,000 in FY2006. This was mainly attributed to interest income earned on short-term deposits of S$139,000 placed with financial institutions in FY2006 as compared to S$16,000 registered in FY2005. We also had government grants from the Standards, Productivity and Innovation Board (SPRING Singapore) and the Singapore Workforce Development Agency amounting to S$135,000 in FY2006. Operating expenses Our total operating expenses increased by approximately S$2.5 million (or 18.4%) from S$13.5 million in FY2005 to S$16.0 million in FY2006. Increased selling and distribution expenses accounted for 87.5% of the increase in our total operating expenses for FY2006. Selling and distribution expenses increased by approximately S$2.2 million (or 24.5%) from S$8.9 million in FY2005 to S$11.1 million in FY2006. The increase was mainly due to the increase in rental expenses for our retail outlets (for the 11 additional retail outlets in FY2006 and the full year rental of the six retail outlets opened in FY2005) of approximately S$0.7 million and employee benefits expense of approximately S$0.9 million from FY2005 to FY2006. Administrative expenses decreased by approximately S$43,000 (or 1.0%) from S$4.17 million to S$4.13 million, which offset the increase in total operating expenses for FY2006 by 1.7%. The decrease was attributable to decrease in certain expenses such as directors remuneration and fees and professional fees. The decrease in the total directors remuneration and fees of S$440,000 from FY2005 to FY2006 is due to the lower directors fees declared from S$500,000 in FY2005 to S$200,000 in FY2006 and lower bonus paid in FY2006 as compared to FY2005, which is in line with the lower profits accounted for in

52

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


FY2006, as the directors bonus are pegged to the performance of our Group. The decrease in professional fees of S$266,000 from FY2005 to FY2006 was mainly due to some IPO expenses and consultancy fees (for the IPO and the implementation of the ERP system) incurred in FY2005. The decrease was partially offset by increase in repairs and maintenance and telephone costs for maintaining the ERP system which enable us to capture sales information on-line. Other operating expenses increased by approximately S$354,000 (or 71.7%) from S$494,000 in FY2005 to S$848,000 in FY2006, which accounted for 14.2% of the increase in our total operating expenses for FY2006. The increase was mainly attributed to increased depreciation expenses due to additional property, plant and equipment acquired and the expenses related to the setting up of a previous Associated Company in Chengdu, PRC, Old Chang Kee Chengdu Co., Ltd. , which include a loan due from a related party (an employee of the other shareholder) of S$77,000 which was written off, being a bad debt, and S$76,000 provision for reimbursement of start-up costs for the said Associated Company. Finance costs Finance costs increased by approximately S$15,000 (or 55.6%) from S$27,000 in FY2005 to S$42,000 in FY2006. The increase was mainly due to interest paid on four new finance leases taken up in the second half of FY2005 and one new finance lease taken up in FY2006 to finance the purchase of motor vehicles and computer equipment. Profit before taxation Our profit before taxation decreased by approximately S$85,000 (or 2.0%) from S$4.24 million in FY2005 to S$4.15 million in FY2006. Our profit before taxation margin was reduced by 2.3 percentage points from 14.6% in FY2005 to 12.3% in FY2006. This was mainly attributable to higher costs of raw materials and operating expenses such as rental expenses and repairs and maintenance costs, as mentioned above. FP2007 vs FP2006 Revenue Our revenue increased by approximately S$2.9 million (or 18.4%) from S$16.1 million in FP2006 to S$19.0 million in FP2007. The increase in revenue was mainly attributed to the addition of eight Old Chang Kee retail outlets in Singapore from 41 as at 30 June 2006 to 49 as at 30 June 2007. Our signature curry puffs remained the major contributor to our revenue and accounted for 33.3% of our revenue in FP2007. We also had increased contribution from 1901 which accounted for 3.3% of our total revenue in FP2007. Cost of sales and gross profit margin Our cost of sales increased by approximately S$1.4 million (or 21.9%) from S$6.5 million in FP2006 to S$7.9 million in FP2007. The increase can be attributed to an increase in cost of raw materials (including contract manufacturing costs) to meet the increase in sales. However, the overall rate of increase in our cost of sales was 3.5 percentage points higher as compared to the rate of increase in our revenue. This was mainly due to increasing costs of raw materials. Consequently, although our gross profit increased by approximately S$1.5 million (or 16.1%) from S$9.6 million in FP2006 to S$11.1 million in FP2007, our gross profit margin decreased by 1.2 percentage points from 59.6% in FP2006 to 58.4% in FP2007. Other operating income Other operating income increased by approximately S$203,000 (or 247.6%) from S$82,000 in FP2006 to S$285,000 in FP2007. This was mainly due to a gain of S$150,000 from the disposal of two motor vehicles in FP2007. In addition, we commenced the selling of our used oil as scrap in FP2007. Income from sale of used oil amounted to S$89,000 in FP2007. We also had lower interest income of S$35,000 in FP2007 as compared to S$62,000 in FP2006.

53

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Operating expenses Our total operating expenses increased by approximately S$2.2 million (or 29.4%) from S$7.2 million in FP2006 to S$9.4 million in FP2007. Increase in selling and distribution expenses accounted for 72.8% of the increase in our total operating expenses for FP2007. Selling and distribution expenses increased by approximately S$1.6 million (or 30.4%) from S$5.1 million in FP2006 to S$6.7 million in FP2007. The increase was mainly due to the increase in rental expenses for our retail outlets (for some existing retail outlets and the full six months rental of the eight additional retail outlets opened in FY2006) of approximately S$547,000 and employee benefits expense of approximately S$505,000. Increase in other selling and distribution expenses such as electricity, depreciation, packing materials, cleaning expenses and marketing expenses accounted for approximately S$499,000 in FP2007 due to higher sales, in line with the increase in the number of retail outlets. Increase in administrative expenses accounted for 24.5% of the increase in our total operating expenses for FP2007. Administrative expenses increased by approximately S$521,000 (or 31.0%) from S$1.7 million in FP2006 to S$2.2 million in FP2007. The increase was attributable to an approximately S$174,000 increase in professional fees as we engaged consultants for services to improve our financial, operating and administrative systems and for trademark registrations. There was also an increase in repairs and maintenance costs of approximately S$143,000 which includes computer maintenance costs for the eight additional retail outlets opened in FY2006 and other general maintenance of machinery and equipment. There was also an increase in administration employee benefits expense by approximately S$111,000 from S$350,000 in FP2006 to S$461,000 in FP2007. Other operating expenses increased by approximately S$58,000 (or 12.8%) from S$454,000 in FP2006 to S$512,000 in FP2007 which accounted for 2.7% of the increase in our total operating expenses. The increase was due mainly to exchange losses of approximately S$184,000 arising as a result of increased cost of buying THB (as THB appreciated against S$) and increased depreciation of approximately S$29,000 due to additions of office equipment in FP2007. This was offset by a provision for reimbursement of start-up costs for an Associated Company to be set up in Chengdu, PRC, and a bad debt written off relating to a loan due from a related party (an employee of the other shareholder) in FP2006 of S$155,000. Please refer to the section entitled Overview Other operating expenses of this Prospectus for further details. Finance costs Finance costs increased by approximately S$3,000 (or 15.8%) from S$19,000 in FP2006 to S$22,000 in FP2007. The increase was mainly due to higher interest expenses as we utilised more bank overdrafts in FP2007 as compared to FP2006 and had taken up additional finance lease in FY2006 to finance the purchase of computer equipment. Profit before taxation Our profit before taxation decreased by approximately S$390,000 (or 16.2%) from S$2.4 million in FP2006 to S$2.0 million in FP2007. Profit before taxation margin decreased by 4.4 percentage points from 15.0% in FP2006 to 10.6% in FP2007. The decrease was mainly due to higher raw material costs and higher selling and distribution expenses in FP2007.

54

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


REVIEW OF PAST FINANCIAL POSITION Non-current assets Non-current assets comprised mainly property, plant and equipment, intangible assets and quoted investment. Our non-current assets had a net book value of S$6.3 million and S$9.8 million, accounting for 38.8% and 58.4% of our total assets, as at 31 December 2006 and 30 June 2007 respectively. Our property, plant and equipment had a net book value of S$5.9 million and S$9.4 million, accounting for 93.5% and 95.9% of our total non-current assets as at 31 December 2006 and 30 June 2007 respectively. Our property, plant and equipment comprised mainly our leasehold building, machinery and equipment, computer equipment for our ERP system, motor vehicles and electrical fittings. The net book value of our leasehold building at 2 Woodlands Terrace amounted to S$2.2 million as at 31 December 2006 and 30 June 2007. Machinery and equipment which relates to kitchen equipment for our production facility and retail outlets amounted to S$1.1 million and S$1.7 million as at 31 December 2006 and 30 June 2007 respectively. We had motor vehicles (comprising cars for our Executive Directors and managers and vans for delivery), capitalised renovation costs, electrical fittings, furniture and computer equipment of S$529,000, S$348,000, S$636,000, S$211,000 and S$905,000 respectively as at 31 December 2006 and S$600,000, S$1.6 million, S$1.3 million, S$1.2 million and S$818,000 respectively as at 30 June 2007. The significant increase in the capitalised renovation costs, electrical fittings, furniture and computer equipment is due mainly to the renovation and upgrading of our production facility at 2 Woodlands Terrace to include a full mezzanine floor to extend the built-in area of the building as well as the setting up of new retail outlets. Please also refer to the section entitled Material Capital Expenditure, Divestment and Commitment of this Prospectus for further details. Intangible assets comprised computer software licences, club memberships and franchise rights, and had a net book value of S$339,000 and S$304,000 as at 31 December 2006 and 30 June 2007 respectively. Computer software licences for our ERP system amounted to S$217,000 and S$189,000 as at 31 December 2006 and 30 June 2007 respectively. Club memberships, purchased for networking purposes, had a net book value of S$88,000 and S$85,000 as at 31 December 2006 and 30 June 2007 respectively. Franchise rights for 1901 were capitalised and amortised over a five-year period, with net book value of S$34,000 and S$30,000 as at 31 December 2006 and 30 June 2007 respectively. Our investment in associated companies amounted to S$16,000 as at 31 December 2006 and S$17,000 as at 30 June 2007. This was mainly because of the appreciation of THB against S$ which increased our investment in Old Chang Kee Thailand when expressed in S$ as at the balance sheet dates. This includes our investment in our 40.0%-owned Old Chang Kee Malaysia, our 40.0%-owned Old Chang Kee Thailand (which is currently dormant and with which we intend to engage in the trading of seafood products) and our 33.3%-owned Pure Options (which is currently in the process of being struck-off). We have recognised our share of losses in Old Chang Kee Malaysia and Pure Options up to a maximum of the investment costs in these Associated Companies. We also made advances to our Associated Companies and as at 31 December 2006 and 30 June 2007, the total outstanding amounts due from our Associated Companies were S$57,000 and S$86,000 respectively. As at the Latest Practicable Date, with the striking off of Pure Options, we have waived the outstanding amount of S$10,000 due from Pure Options. The balance, amounting to S$85,000, relate to amounts due from Old Chang Kee Malaysia which remained outstanding as at the Latest Practicable Date.

55

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Current assets Current assets comprised cash and cash equivalents, deposits, trade and other receivables and inventories. We had current assets of S$9.9 million and S$7.0 million, accounting for 61.2% and 41.6% of our total assets as at 31 December 2006 and 30 June 2007 respectively. The largest component of our current assets was cash and cash equivalents. Cash and cash equivalents stood at S$6.6 million and S$4.1 million, representing 66.2% and 58.2% of our current assets as at 31 December 2006 and 30 June 2007 respectively. Deposits refer to security deposits made in the course of leasing our retail outlets. Deposits for our retail outlets amounted to S$1.4 million and S$1.6 million as at 31 December 2006 and 30 June 2007 respectively. Trade and other receivables amounted to S$1.4 million and S$171,000 as at 31 December 2006 and 30 June 2007 respectively. While majority of our sales are conducted on cash basis only, we had trade and other receivables arising mainly from export sales to our overseas franchisees (which amounted to S$41,000 and S$124,000 as at 31 December 2006 and 30 June 2007 respectively) and revenue collected on our behalf by the landlord of a retail outlet (which amounted to S$30,000 and S$27,000 as at 31 December 2006 and 30 June 2007 respectively). In addition, trade and other receivables as at 31 December 2006 also include advance payments made for factory and office improvement works of S$1.3 million which was capitalised in FP2007. Prepayments, which include insurance expenses and expenses incurred for this listing exercise, increased from S$149,000 as at 31 December 2006 to S$665,000 as at 30 June 2007. Inventories comprising mainly raw materials amounted to S$446,000 and S$526,000 as at 31 December 2006 and 30 June 2007 respectively. Please refer to the section entitled Inventory Management of this Prospectus for further details. Current liabilities Current liabilities comprised trade and other payables, other liabilities, bank overdrafts, provision for taxation, finance lease liabilities and club membership payable within one year. We had current liabilities of S$7.5 million and S$6.7 million, accounting for 87.4% and 86.2% of our total liabilities as at 31 December 2006 and 30 June 2007 respectively. The largest component of our current liabilities was trade and other payables, which stood at S$5.9 million and S$5.2 million at 31 December 2006 and 30 June 2007 respectively. Trade and other payables consisted of mainly trade payables arising from the purchase of raw materials and contract manufacturing costs which amounted to S$2.2 million and S$2.1 million as at 31 December 2006 and 30 June 2007 respectively. Also included were other payables and accrued expenses of about S$1.1 million and S$1.5 million as at 31 December 2006 and 30 June 2007 respectively as well as a provision of S$77,000 for reimbursement of start-up costs for an Associated Company set up in Chengdu, PRC, as at 31 December 2006. As at 31 December 2006, monies due to Directors (being advances granted to our Group by our Directors) amounted to S$2.5 million. Please refer to the section entitled Past Interested Person Transactions of this Prospectus for further details of the advances from our Directors. Other liabilities which relate to foreign staff deposits and provision for leave not taken by employees accounted for S$180,000 and S$203,000 as at 31 December 2006 and 30 June 2007 respectively. We also had bank overdrafts of S$173,000 and S$140,000 as at 31 December 2006 and 30 June 2007 respectively. Provision for income tax amounted to S$900,000 and S$818,000 as at 31 December 2006 and 30 June 2007 respectively. Finance lease liabilities due within one year for the purchase of computer equipment and motor vehicles amounted to S$344,000 and S$323,000 as at 31 December 2006 and 30 June 2007 respectively. Club membership due within one year amounted to S$15,000 as at 31 December 2006 and 30 June 2007. As at 31 December 2006, a sum of S$2,000 was due to a related party, namely Han Jong Kwong Roland, in relation to the setting up of Old Chang Kee Australia. This amount has been settled in June 2007.

56

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Non-current liabilities Non-current liabilities comprised finance lease liabilities, deferred tax liabilities and club membership payable after one year. Non-current liabilities stood at S$1.1 million, accounting for 12.6% and 13.8% of our total liabilities as at 31 December 2006 and 30 June 2007 respectively. Finance lease liabilities for the purchase of computer equipment and motor vehicles amounted to S$485,000 and S$401,000 as at 31 December 2006 and 30 June 2007 respectively. Deferred tax liabilities amounted to S$576,000 and S$657,000 as at 31 December 2006 and 30 June 2007 respectively. Club membership payable after one year amounted to S$20,000 and S$13,000 as at 31 December 2006 and 30 June 2007 respectively. Shareholders equity As at 31 December 2006, our shareholders equity amounted to S$7.6 million. This comprised issued capital of S$700,000, share application money of S$100,000 and reserves of S$6.8 million. As at 30 June 2007, our shareholders equity increased to S$9.1 million, comprising issued capital of S$800,000 and reserves of S$8.3 million. The share application money was converted to ordinary shares in our Company on 3 April 2007. Please refer to the section entitled Share Capital of this Prospectus for further details. LIQUIDITY AND CAPITAL RESOURCES Our internal sources of cash comprised mainly cash generated from sales at our various retail outlets while our external source of financing is primarily from finance leases and credit extended to us by our suppliers. Our principal usage of cash is the purchase of raw materials, capital expenditure and operating expenses. As at 31 December 2006, we had a healthy working capital of S$2.4 million and our cash and cash equivalents (net of bank overdrafts) stood at S$6.4 million. As at 31 December 2006, we had total bank and finance lease facilities of S$5.0 million of which S$1.8 million were utilised and the balance of S$3.2 million remained unutilised. The interest rates for the S$173,000 bank overdrafts ranged from 6.0% to 6.5% per annum. These bank overdrafts are repayable on demand. The finance lease liabilities bear effective interest rates of 4.15% to 8.73% per annum, with a repayment period of between 11 and 69 months from 31 December 2006. As at 30 June 2007, we had a net working capital of S$363,000 and our cash and cash equivalents (net of bank overdrafts) stood at S$4.0 million. As at 30 June 2007, we had total bank and finance lease facilities of S$5.0 million of which S$1.8 million were utilised and the balance of S$3.2 million remained unutilised. The interest rates for the S$140,000 bank overdrafts ranged from 6.0% to 6.25% per annum. These bank overdrafts are repayable on demand and were fully settled in August 2007. The finance lease liabilities incurred effective interest rates of 4.15% to 6.68% per annum, with a repayment period of between five and 82 months from 30 June 2007. As at the Latest Practicable Date, we had a net working capital of S$1.5 million and our cash and cash equivalents stood at S$4.4 million. As at the Latest Practicable Date, we had total bank and finance lease facilities of S$8.4 million of which S$2.6 million were utilised and the balance of S$5.8 million remained unutilised. The finance lease liabilities incurred effective interest rates of 4.15% to 6.68% per annum, with a repayment period of between one and 80 months from the Latest Practicable Date. To the best of our Directors knowledge, our Group is not in breach of any of the terms or conditions or covenants associated with any credit arrangement or bank loan which could materially affect our financial position, results, business operations, or the investments by our Shareholders in our Company. In the reasonable opinion of our Directors, as at the date of lodgement of this Prospectus, the working capital available to our Group is sufficient for our present requirements.

57

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The following table sets out a summary of the combined cash flow statements of our Group for the period under review:Audited S$000 Net cash generated from operating activities Net cash used in investing activities Net cash used in financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year/period Cash and cash equivalents at the end of the financial year/period FY2004 3,197 (1,056) (662) 1,479 1,589 FY2005 5,295 (2,480) (1,283) 1,532 3,068 FY2006 5,899 (1,232) (2,875) 1,792 4,600 Unaudited FP2007 1,979 (4,099) (320) (2,440) 6,392

3,068

4,600

6,392

3,952

FY2004 In FY2004, we generated an operating profit before working capital changes of approximately S$3.4 million. We had cash outflow of S$123,000 from increases in trade and other receivables as well as inventories and cash inflow of S$340,000 from an increase in trade and other payables. These increases are mainly attributable to the increases in raw material purchases and contract manufacturing costs as our sales increased with the opening of seven new retail outlets in FY2004. During the year, we also made an advance of S$61,000 to Gain Up (M) Sdn Bhd (further details set out in the section entitled Past Interested Person Transactions of this Prospectus) and paid tax of S$401,000. Consequently, our net cash from operating activities amounted to S$3.2 million in FY2004. In FY2004, net cash used in investment activities amounted to S$1.1 million, of which S$1.0 million was attributable to additions to plant and equipment, including machinery and equipment as well as motor vehicles. We also had cash outflow of S$38,000 for the payment of club membership. Net cash used in financing activities amounted to S$662,000 in FY2004. This comprised repayment of finance lease liabilities of S$89,000, interest paid of S$13,000 and interim dividends paid in respect of FY2004 of S$560,000. FY2005 In FY2005, we generated an operating profit before working capital changes of approximately S$5.2 million. With the opening of six new retail outlets in FY2005, our raw material purchases increased and accordingly, our trade payables increased and we registered cash inflow of S$625,000 from the increase. We also registered cash inflow of S$738,000 from an increase in other payables and accruals due mainly to provisions for bonus and an increase in finance lease liabilities. These were offset by cash outflows from increases in inventories, deposits, as well as trade and other receivables of S$106,000, S$242,000 and S$242,000 respectively. The increase in inventories was a result of the increase in raw materials corresponding to the increase in the number of retail outlets. The increase in deposits was similarly attributable to the additional retail outlets opened in FY2005. The increase in trade and other receivables was due to amount owing by landlords for sales takings collected on our behalf. With income tax payments of S$700,000, our net cash from operating activities amounted to S$5.3 million in FY2005. In FY2005, net cash used in investment activities amounted to S$2.5 million, of which S$2.2 million was utilised to expand and upgrade our leasehold premises at 2 Woodlands Terrace and to implement our ERP system to automate our operations. We used S$290,000 to acquire computer software licences for our ERP system. We also received S$51,000 in proceeds from disposal of property, plant and equipment.

58

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Net cash used in financing activities amounted to S$1.3 million in FY2005. This comprised repayment of finance lease liabilities of S$248,000, payment of interest on finance leases of S$27,000 and interim dividends paid in respect of FY2005 of S$1.0 million. FY2006 In FY2006, we generated an operating profit before working capital changes of approximately S$5.6 million. Together with net cash inflow of S$1.2 million from working capital changes and tax paid of S$903,000, we registered net cash generated from operating activities of S$5.9 million in FY2006. The net cash inflow from working capital changes related mainly to cash inflows from an increase in trade and other payables of S$555,000. The increase in trade payables and accruals of operating expenses was due to more retail outlets in FY2006. We also had cash inflow from an increase in advances from Directors of S$2.5 million in FY2006, which were repaid in January 2007. Please refer to the section entitled Past Interested Person Transactions of this Prospectus for further details. These cash inflows were offset by cash outflows due to an increase of S$1.8 million in trade and other receivables which were mainly attributable to advance payments made by us for factory and office improvement works as well as an increase in inventories of S$96,000 with the increase in number of retail outlets. In FY2006, net cash used in investing activities amounted to S$1.2 million. This was mainly attributed to a cash outflow of S$1.3 million relating to the acquisition of property, plant and equipment for our new retail outlets, purchase of computer software and payment for club membership. There was also a cash outflow of S$110,000 for investments in food related businesses in Singapore, Thailand, Malaysia and Chengdu, PRC. As a result of these investments, we have a 40.0% interest in Old Chang Kee Malaysia, a 40.0% interest in Old Chang Kee Thailand (which is currently dormant and with which we intend to engage in the trading of seafood products) and a 33.3% interest in Pure Options (which is currently in the process of being struck-off). We made advances of S$47,000 and S$10,000 to Old Chang Kee Malaysia and Pure Options respectively. Please refer to the section entitled Past Interested Person Transactions of this Prospectus for further details. These were offset by a cash inflow of S$119,000 from the disposal of property, plant and equipment and quoted investment as well as S$137,000 interest income from interest-bearing deposits. Share application money of S$99,998 were received during the year to partially finance the investments in the abovementioned associated companies. The share application money was converted to ordinary shares in our Company on 3 April 2007. Please refer to the section entitled Share Capital of this Prospectus for further details. Net cash used in financing activities amounted to S$2.9 million in FY2006. This comprised repayment of finance lease liabilities of S$338,000, interest payments of S$42,000 and final dividends paid in respect of FY2006 of S$2.5 million. FP2007 In FP2007, we generated an operating profit before working capital changes of approximately S$2.6 million. Together with net cash outflow of S$274,000 from working capital changes and tax paid of S$395,000, we registered net cash generated from operating activities of S$2.0 million in FP2007. The net cash outflow of S$274,000 from working capital changes arose mainly from cash outflow from a decrease of S$691,000 in trade payables and accruals of operating expenses. The decrease was mainly because we repaid advances of S$2.5 million due to our Directors in FP2007, offset by an increase of S$1.8 million in trade payables and accruals in FP2007. The cash outflow was offset by cash inflow from a decrease of S$506,000 in trade and other receivables, deposits and prepayments. This comprised mainly a decrease in trade and other receivables as we capitalised advance payments made for factory and office improvement works of S$1.3 million in FP2007 and offset by an increase in deposits of S$160,000 and prepayments of S$516,000. In FP2007, net cash used in investing activities amounted to S$4.1 million. This was mainly attributed to a cash outflow of S$4.3 million relating to the acquisition of property, plant and equipment for our new retail outlets and for improvement made to our production facilities and office. We also made advances of S$29,000 to an Associated Company. These were offset by cash inflow of sales proceeds of S$204,000 from the disposal of motor vehicles and computers as well as interest income of S$36,000 from interestbearing deposits. 59

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Net cash used in financing activities amounted to S$320,000 in FP2007. This comprised repayment of finance lease liabilities of S$298,000 and interest paid of S$22,000. MATERIAL CAPITAL EXPENDITURE, DIVESTMENT AND COMMITMENT Our material capital expenditure and divestment in FY2004, FY2005, FY2006, FP2007 and for the period from 1 July 2007 up to the Latest Practicable Date are as follows:Audited Unaudited 1 July 2007 to the Latest Practicable Date

S$000 Additions
(1)

FY2004

FY2005

FY2006

FP2007

Leasehold building (due to improvements at our production facility at 2 Woodlands Terrace) Machinery and equipment Motor vehicles Renovation (for our retail outlets and production facility at 2 Woodlands Terrace) Electrical fittings Furniture Computers
(3) (3)

419 496 200 146 18 1,279

739 501 228 11 550 44 947 290 3,310

498 81 247 142 180 269 16 41 1,474

375 838 261 1,433(2) 530 40 3 4,496


(2) (2)

71 341 381 109 149 13 1,064

1,016(2)

Computer software licences Franchise rights

Disposals

(4)

Machinery and equipment Motor vehicles Renovation Electrical fittings Furniture Computers

53 4 2 1 60

1 2 3

53 3 56

73 73

Notes:(1) This relates to the cost of property, plant and equipment and intangible assets acquired during the respective financial years/periods. The significant increase in the additions of machinery and equipment, renovation, electrical fittings and furniture in FP2007 was due to the final billing for all the work done for the renovation and upgrading of our production facility at 2 Woodlands Terrace to include a full mezzanine floor to extend the built-in area of the building and the opening of three new retail outlets. This relates to the implementation of our ERP system. This relates to the net book value of property, plant and equipment and intangible assets disposed of during the respective financial years/periods.

(2)

(3) (4)

60

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


We had a quoted investment through a unit trust fund. Our gain on fair value adjustment of quoted investment for the period under review was as follows:Audited S$000 FY2004 FY2005 FY2006

Gain on fair value adjustment of quoted investment

23

We disposed our quoted investment for S$107,000 in FY2006 with a gain of S$7,000. In May 2007, after the completion of the renovation works, we conducted a valuation and registered a loss on fair value adjustment on our leasehold building at 2 Woodlands Terrace of S$119,000 which were offset against our asset revaluation reserve. On 15 November 2007, we entered into a sale and purchase agreement with Nineteen O One Sdn. Bhd. pursuant to which the entire issued and paid-up share capital of 1901 Singapore would be transferred to Nineteen O One Sdn. Bhd. for a consideration of S$180,000 (the Disposal). Completion of the Disposal took place on 15 November 2007. Save as disclosed above and in the section entitled Restructuring Exercise of this Prospectus, our Group has no other material capital expenditure or divestment for the period from 1 July 2007 to the Latest Practicable Date. As at the Latest Practicable Date, we had capital commitments of S$82,000 to upgrade the production line with auto-stacker machine and auto-indexing machine, which will be paid by cash. The upgrade will be completed by end January 2008. As at the Latest Practicable Date, we had non-cancellable operating lease commitments in respect of lease of factory land and retail outlets as follows:S$000 Within one year After one year but not more than five years After five years 4,037 3,890 1,994

61

DIVIDEND POLICY
Our Company has not declared or paid any dividend since its incorporation. Save as disclosed below, none of our subsidiaries have declared or paid any dividends since 1 January 2004:1 July 2007 to the Latest Practicable Date S$700,000

Subsidiary Ten & Han

Dividends Interim

FY2004 S$560,000

FY2005 S$1,008,000

FY2006 S$2,495,071

FP2007

We currently do not have a fixed dividend policy. The form, frequency and amount of future dividends on our Shares will depend on our earnings, general financial condition, results of operations, capital requirements, cash flow, general business condition and other factors as our Directors may deem appropriate. We may, by ordinary resolution of our Shareholders, declare dividends at a general meeting, but we may not pay dividends in excess of the amount recommended by our Directors. The declaration and payment of dividends will be determined at the sole discretion of our Directors, subject to the approval of our Shareholders. Our Directors may also declare an interim dividend without the approval of our Shareholders. In making their recommendations, our Directors will consider, inter alia, our retained earnings and expected future earnings, operations, cash flow, capital requirements and general financing condition, as well as general business conditions and other factors which our Directors may deem appropriate. Future dividends will be paid by us as and when approved by our Shareholders, where necessary, and Directors. All dividends are paid pro-rata among the Shareholders in proportion to the amount paid up on each Shareholders ordinary shares, unless the rights attaching to an issue of any ordinary share provide otherwise. Unless otherwise directed, dividends are paid by cheque(s) or by warrant(s) sent through the post to each Shareholder at his registered address. Notwithstanding the foregoing, the payment by our Company to CDP of any dividend payable to a Shareholder whose name is entered in the Depository Register shall, to the extent of payment made to CDP, discharge our Company from any liability to that Shareholder in respect of that payment. For information relating to taxes payable on dividends, please refer to Appendix I of this Prospectus. The amount of dividends declared and paid by us should not be taken as an indication of the dividends payable in the future. No inference should or can be made from any of the foregoing statements as to our actual future profitability or our ability to pay dividends in any of the periods discussed.

62

CAPITALISATION AND INDEBTEDNESS


The following table summarises the cash and bank balances as well as capitalisation and indebtedness:(a) (b) (c) based on our unaudited combined balance sheet as at 30 June 2007; based on our unaudited management combined balance sheet as at 31 October 2007; and as adjusted to give effect to the issue of New Shares pursuant to the Invitation and the application of the net proceeds from the Invitation.

You should read this table in conjunction with:our consolidated financial statements and the related notes included in this Prospectus; and the section entitled Managements Discussion and Analysis of Financial Condition and Result of Operations of this Prospectus.
As adjusted for the net proceeds from the issue of the New Shares 7,695

S$000 Cash and cash equivalents

As at 30 June 2007 4,092

As at 31 October 2007 4,365

Indebtedness Bank overdrafts Unsecured and guaranteed by Ten & Han Finance lease liabilities (current) Secured and guaranteed
(1) (2)

140 153
(2)

104 163 58 467 792

104 163 58 467 792

Finance lease liabilities (current) Secured and non-guaranteed Finance lease liabilities (non-current) Secured and guaranteed

170 100
(2)

(1) (2)

Finance lease liabilities (non-current) Secured and non-guaranteed Total indebtedness

301 864

Capitalisation Shareholders equity Total capitalisation and indebtedness 9,140 10,004 9,549 10,341 12,879 13,671

Notes:(1) Guaranteed by our Executive Chairman, Han Keen Juan and/or our CEO, William Lim. Please refer to the section entitled Present and Ongoing Interested Person Transactions of this Prospectus for further details. The finance lease liabilities were taken up to finance the purchase of vehicles and computer equipment and were secured by such assets.

(2)

Please also refer to the section entitled Liquidity and Capital Resources of this Prospectus for further discussion on our indebtedness. As at 31 October 2007, we had contingent liabilities of S$160,000 in relation to letters of guarantee issued to landlords of certain retail outlets.

63

CAPITALISATION AND INDEBTEDNESS


Save as disclosed above, our Group had no other borrowings or indebtedness (direct or indirect) or liabilities under acceptances or acceptance credits, mortgages, charges, obligations under finance leases, guarantees or other material contingent liabilities. Save as disclosed above, since 31 December 2006 to 31 October 2007, there were no material changes in our total capitalisation and indebtedness. The increase in cash and cash equivalents of approximately S$3.3 million after the Invitation is due to the net proceeds from the issue of the New Shares pursuant to the Invitation.

64

DILUTION
Dilution arises because the Issue Price per New Share is higher than our NAV per Share attributable to the existing holders of our issued Shares. Our NAV (which is the amount of our total assets, minus the amount of our total liabilities and minority interests) as at 30 June 2007 was S$9.1 million, or 13.36 cents per Share (based on the pre-Invitation share capital of 68,400,000 Shares). Our NAV, as adjusted for the effects of the Invitation as well as any disposal or acquisition which occurred between 30 June 2007 and the date of the registration of this Prospectus by the Authority, will be S$12.5 million or 13.35 cents per Share (based on the post-Invitation share capital of 93,400,000 Shares). This represents an immediate increase in NAV of 0.01 cents per Share to our existing Shareholders and an immediate dilution to you, as a new investor subscribing for the New Shares in the Invitation. The following table illustrates this per Share dilution:Cents Issue Price per New Share NAV per Share as adjusted for any disposal or acquisition which occurred between 30 June 2007 and the date of the registration of this Prospectus by the Authority based on the pre-Invitation share capital of 68,400,000 Shares Decrease in NAV per Share attributable to existing Shareholders pursuant to the Invitation NAV per Share as adjusted for the effects of the Invitation as well as any disposal or acquisition which occurred between 30 June 2007 and the date of the registration of this Prospectus by the Authority based on the post-Invitation share capital of 93,400,000 Shares Dilution to you, as a new investor subscribing for the New Shares in the Invitation Dilution to you, as a new investor subscribing for the New Shares in the Invitation (as a percentage of the Issue Price) 20.0 13.36

(0.01) 13.35

6.65 33.3%

The following table compares the effective cash cost per Share (after adjusting for the Restructuring Exercise and the Sub-division of Shares) paid by our Directors and our Substantial Shareholders at any time during the period of three years before the date of lodgment of this Prospectus and the Issue Price per Share to be paid by you, as a new investor subscribing the New Shares in the Invitation:Effective cash cost per Share/ Issue Price per New Share (cents)

Number of Shares Directors Han Keen Juan William Lim


(1) (1)

Consideration

68,399,892 6,840,000

S$5,699,991 S$763,896

8.33 11.17

Substantial Shareholder Ng Choi Hong


(1)

6,840,000 25,000,000

S$763,900 S$5,000,000

11.17 20.00

New investors
Note:(1)

Our CEO, William Lim, is a nephew of our Executive Chairman, Han Keen Juan. Ng Choi Hong is the spouse of our Executive Chairman, Han Keen Juan.

65

GENERAL INFORMATION ON OUR COMPANY AND OUR GROUP


SHARE CAPITAL Our Company was incorporated in Singapore on 16 December 2004 under the Companies Act as a private company limited by shares under the name of Old Chang Kee Singapore Pte. Ltd.. On 22 November 2007, our Company changed its name to Old Chang Kee Ltd. in connection with its conversion into a public company limited by shares. At the extraordinary general meetings held on 12 November 2007, 13 November 2007 and 21 November 2007, the Shareholders of our Company approved, inter alia, the following:(a) the allotment and issue of an aggregate of 5,600,000 new ordinary shares in our Company to our Executive Chairman, Han Keen Juan and our CEO, William Lim, pursuant to the Restructuring Exercise; the sub-division of each Share in the existing issued and paid-up share capital of our Company into 12 Shares (the Sub-division of Shares); the conversion of our Company into a public limited company and the change of our name to Old Chang Kee Ltd.; the adoption of a new set of Articles of Association of our Company; the allotment and issue of the New Shares pursuant to the Invitation, which when issued and fully paid-up, will rank pari passu in all respects with the existing issued Shares; and that authority be given to our Directors, pursuant to Section 161 of the Companies Act, to (i) allot and issue Shares in our Company; and (ii) issue convertible securities and any Shares in our Company pursuant to the convertible securities, (whether by way of rights, bonus or otherwise) at any time and upon such terms and conditions and for such purposes and to such persons as our Directors shall in their absolute discretion deem fit, provided that the aggregate number of Shares to be issued pursuant to such authority shall not exceed 50 per cent. of the post-Invitation issued share capital of our Company and that the aggregate number of Shares to be issued other than on a pro-rata basis to the then existing Shareholders of our Company shall not exceed 20 per cent. of the post-Invitation issued share capital of our Company. Unless revoked or varied by our Company in a general meeting, such authority shall continue in full force until the conclusion of the next annual general meeting of our Company or the date by which the next annual general meeting is required by law or by our Articles of Association to be held, whichever is earlier, except that the Directors shall be authorised to allot and issue new Shares pursuant to the convertible securities notwithstanding that such authority has ceased. For the purposes of this resolution and pursuant to Rules 806(3) and 806(4) of the Listing Manual, post-Invitation issued share capital shall mean the enlarged issued and paid-up share capital of our Company after the Invitation after adjusting for any (i) new Shares arising from the conversion or exercise of any convertible securities; (ii) new Shares arising from exercising share options or vesting of share awards outstanding or subsisting at the time such authority is given, provided that the options or awards were granted in compliance with the Listing Manual; and/or (iii) subsequent consolidation or sub-division of shares. As at the Latest Practicable Date, our Company has only one class of shares, being our Shares which are in registered form. The rights and privileges of our Shares are stated in the Articles of Association of our Company, an extract of which is set out in Appendix C of this Prospectus entitled Extracts of our Articles of Association. There are no founder, management, deferred or unissued shares reserved for issuance for any purpose. The New Shares shall have the same interest and voting rights as our existing Shares which were issued prior to the Invitation and there are no restrictions on the free transferability of our Shares.

(b)

(c)

(d) (e)

(f)

66

GENERAL INFORMATION ON OUR COMPANY AND OUR GROUP


No person has, or has the right to be given, an option to subscribe for or purchase any securities of our Company or any of our subsidiaries. No option to subscribe for or purchase Shares in our Company has been granted to, or was exercised by, any of our Directors or Executive Officers. No person has been granted or is entitled to be granted an option to subscribe for and/or purchase shares in, or debentures of, our Company or any of our subsidiaries. As at the date of incorporation, our Companys issued and paid-up capital was S$2.00, comprising two ordinary shares of S$1.00 each. The Companies (Amendment) Act 2005 came into effect on 30 January 2006. Among other things, the Companies Act was amended to abolish the concepts of par value, authorised share capital, share premium, capital redemption reserve and issuing shares at a discount to par value. As at the Latest Practicable Date and pursuant to the Restructuring Exercise, the share capital of our Company was S$5,700,000 comprising 5,700,000 issued and fully-paid Shares. Pursuant to the Sub-division of Shares, the share capital of our Company is S$5,700,000 comprising 68,400,000 Shares. Upon the allotment and issue of the New Shares pursuant to the Invitation, the resultant share capital of our Company will be increased to S$9,030,000 comprising 93,400,000 Shares. A summary of the changes in the issued and paid-up share capital of our Company since 16 December 2004, being the date of incorporation, and the resultant issued and paid-up share capital of our Company immediately after the Invitation is set out below:Resultant number of issued Shares Resultant issued and paid-up share capital (S$) 2

Issued and paid-up share capital as at 16 December 2004, being the date of incorporation Issue of 99,998 new Shares pursuant to the conversion of share application money of S$99,998 Issue of 5,600,000 new Shares pursuant to the acquisition of Ten & Han, as further described in the section entitled Restructuring Exercise of this Prospectus Sub-division of one Share into 12 Shares pursuant to the Sub-division of Shares New Shares to be issued pursuant to the Invitation

100,000

100,000

5,700,000

5,700,000

68,400,000

5,700,000

93,400,000

9,030,000

SIGNIFICANT CHANGES IN PERCENTAGE OF OWNERSHIP Pursuant to share transfer agreements dated 15 November 2007 between Han Keen Juan and (i) William Lim; and (ii) Ng Choi Hong, Han Keen Juan made the following share transfers:Number of Shares transferred 6,839,892 6,840,000 Consideration payable to Han Keen Juan S$763,888 S$763,900

Name of transferees William Lim Ng Choi Hong

67

GENERAL INFORMATION ON OUR COMPANY AND OUR GROUP


The changes in the percentage of ownership of Shares in our Company from the date of our incorporation up to the Latest Practicable Date are as follows:Percentage of ownership of our Shares As at 3 April 2007 (allotment and issue of 99,998 new Shares) 100.0% not meaningful After the acquisition of Ten & Han as further described in the section entitled Restructuring Exercise of this Prospectus 100.0% not meaningful

Name of shareholder Han Keen Juan William Lim Ng Choi Hong

As at incorporation 50.0% 50.0%

After the transfer of Shares as described above 80.0% 10.0% 10.0%

Save as disclosed above, there were no changes in the ownership of Shares in our Company from the date of incorporation up to the Latest Practicable Date. The Shares held by our Directors and Substantial Shareholders do not carry different voting rights from the New Shares which are the subject of the Invitation. CHANGES IN ISSUED AND PAID-UP SHARE CAPITAL OF OUR COMPANY AND OUR SUBSIDIARIES Save as disclosed in the section entitled Share Capital of this Prospectus and in the table below, there were no changes in the issued and paid-up share capital of our Company and our subsidiaries within the three years preceding the Latest Practicable Date:-

Ten & Han


Number of ordinary shares issued 4,900,000 Issue price per ordinary share S$1.00 Resultant number of ordinary shares 5,600,000 Resultant issued and paid-up share capital S$5,600,000.00

Date 17 September 2007

Event Capitalisation of retained earnings

Old Chang Kee Australia


Number of ordinary shares issued 3 Issue price per ordinary share AUD1.00 Resultant number of ordinary shares 3 Resultant issued and paid-up share capital AUD3.00

Date 5 August 2005

Event Incorporation

Save as disclosed above, no shares in or debentures of our Company or any of its subsidiaries have been issued, or are proposed to be issued, as fully or partly paid-up for cash, or for a consideration other than cash, within the two years preceding the date of this Prospectus. Save for the acquisition of Ten & Han as described in the section entitled Restructuring Exercise of this Prospectus, there have not been any situations where more than ten per cent. of our Companys capital was paid for with assets other than cash, within the period of three years preceding the date of lodgment of this Prospectus with the Authority.

68

GENERAL INFORMATION ON OUR COMPANY AND OUR GROUP


SHAREHOLDERS Our Shareholders as well as their respective direct and indirect shareholdings, immediately before the Invitation (as at the date of lodgement of this Prospectus with the Authority), and immediately after the Invitation, are set out below:Before the Invitation Direct interest Deemed interest Number Number of of Shares % Shares % Directors Han Keen Juan William Lim
(1) (2) (1)

After the Invitation Direct interest Deemed interest Number Number of of Shares % Shares %

54,720,000 6,840,000

80.0 10.0

6,840,000

10.0

54,720,000 6,840,000

58.6 7.3

6,840,000

7.3

Choong Buat Ken Lim Yen Heng Ong Chin Lin


(2) (2)

Wong Chak Weng Substantial Shareholder Ng Choi Hong


(1)

6,840,000

10.0

54,720,000

80.0

6,840,000 25,000,000

7.3 26.8

54,720,000

58.6

Public (including Reserved Shares) Total

68,400,000 100.0

93,400,000 100.0

Notes:(1) Our CEO, William Lim, is a nephew of our Executive Chairman, Han Keen Juan. Ng Choi Hong is the spouse of our Executive Chairman, Han Keen Juan. Our Non-Executive Directors, Choong Buat Ken, Lim Yen Heng and Ong Chin Lin will be offered 100,000, 100,000 and 50,000 Reserved Shares respectively at the Issue Price. In the event that they accept any or all of the Reserved Shares offered to them, they have each voluntarily agreed not to dispose of or transfer any or all their respective Shares until at least one month has elapsed from the date of the admission of our Company to the Official List of the Catalist.

(2)

Save as disclosed above, there are no other relationships among our Directors and our Substantial Shareholders. The Shares held by our Directors and Substantial Shareholders do not carry different voting rights from the New Shares which are the subject of the Invitation. As at the Latest Practicable Date, to the best of our Directors knowledge, there is no known arrangement the operation of which may, at a subsequent date, result in a change in control of our Company. There are no Shares that are held by or on behalf of our Company or by our subsidiaries or Associated Companies. Save as disclosed above, our Company is not directly or indirectly owned or controlled, whether severally or jointly, by any person or government.

69

GENERAL INFORMATION ON OUR COMPANY AND OUR GROUP


MORATORIUM To demonstrate their commitment to our Group, our Executive Directors and their Associates, who will in aggregate hold 68,400,000 Shares, representing approximately 73.2% of our Companys enlarged issued share capital immediately after the Invitation, have each undertaken to the Manager not to sell, transfer, assign, realise or otherwise dispose of any part of their interests in our Company immediately after the Invitation for a period of six months from the date of our Companys admission to the Official List of the Catalist, and for a period of six months thereafter not to sell, transfer, assign, realise or otherwise dispose more than 50% of their respective shareholdings or interests (adjusted for any bonus issue or sub-division) in our Company. Each of our Non-Executive Directors, Choong Buat Ken, Lim Yen Heng and Ong Chin Lin will be offered 100,000, 100,000 and 50,000 Reserved Shares respectively at the Issue Price. In the event that such Non-Executive Directors accept any or all of the Reserved Shares offered to them, each of them has voluntarily agreed not to sell, transfer, realise, assign or otherwise dispose any part of their respective Shares until at least one month has lapsed from the date of our Companys admission to the Official List of Catalist.

70

RESTRUCTURING EXERCISE
In preparation for the Invitation, we undertook a restructuring exercise (the Restructuring Exercise) to rationalise the corporate structure of our Group, resulting in our Company becoming the holding company of our Group. The Restructuring Exercise involved the incorporation of our Company in Singapore on 16 December 2004 as the listing vehicle and holding company of our Group and the following:1. Incorporation of our Company On 16 December 2004, our Company was incorporated in Singapore as a private limited company. At incorporation, the shareholders of our Company were our Executive Chairman, Han Keen Juan, and our CEO, William Lim, who each held one ordinary share in our Company. 2. Acquisition of Old Chang Kee Australia Old Chang Kee Australia was incorporated in Australia as a proprietary company on 5 August 2005. At incorporation, the shareholders of Old Chang Kee Australia were our Executive Chairman, Han Keen Juan, our CEO, William Lim, and Han Jong Kwong Roland, who is a nephew of our Executive Chairman, Han Keen Juan. Each of the shareholders held one share in Old Chang Kee Australia. On 18 April 2006, our Company acquired one share each from our Executive Chairman, Han Keen Juan and our CEO, William Lim, for an aggregate purchase consideration of AUD2.00 (based on the issued and paid-up share capital of Old Chang Kee Australia as at 17 April 2006) payable in cash. Subsequently, on 30 May 2006, our Company acquired one share from Han Jong Kwong Roland for a purchase consideration of AUD1.00 (based on the issued and paid-up share capital of Old Chang Kee Australia as at 29 May 2006) payable in cash. Following the said acquisitions, Old Chang Kee Australia became our wholly-owned subsidiary. 3. Striking off Pure Options As at 13 November 2007, our Company owned 33.3% of the issued and paid-up share capital of Pure Options, which has been dormant since its incorporation. On 13 November 2007, an application to strike-off Pure Options was filed with the Accounting and Corporate Regulatory Authority of Singapore. 4. Disposal of equity interest in 1901 Singapore On 15 November 2007, we entered into a sale and purchase agreement with Nineteen O One Sdn. Bhd. pursuant to which the entire issued and paid-up share capital of 1901 Singapore would be transferred to Nineteen O One Sdn. Bhd. for a consideration of S$180,000 (the Disposal). The shareholders of Nineteen O One Sdn. Bhd. are Ahmad Zakir Bin Jaafar, Malaysia International Franchise Sdn. Bhd. and Tengku Rozidar Binti Tengku Zainol Abidin. Completion of the Disposal took place on 15 November 2007. 5. Acquisition of Ten & Han Ten & Han was incorporated in Singapore as a private limited company on 7 January 1988. Prior to 9 November 2007, the shareholders of Ten & Han were our Executive Chairman, Han Keen Juan, and our CEO, William Lim, holding 5,599,992 shares and eight shares in Ten & Han respectively.

71

RESTRUCTURING EXERCISE
Pursuant to a share transfer agreement dated 9 November 2007 between our Company, our Executive Chairman, Han Keen Juan, and our CEO, William Lim, our Company acquired 100% of the issued and paid-up share capital of Ten & Han, comprising 5,600,000 ordinary shares, from Han Keen Juan and William Lim, in the following proportions for an aggregate purchase consideration of S$5,600,000 based on the issued and paidup share capital of Ten & Han as at 9 November 2007:Number of shares in Ten & Han transferred by the vendor 5,599,992 8 Purchase consideration payable to the vendor S$5,599,992 S$8

Name of vendor Han Keen Juan William Lim

The purchase consideration was satisfied by the allotment and issuance of 5,599,992 and eight new Shares credited as fully paid to Han Keen Juan and William Lim respectively. Following the said acquisition, Ten & Han became our wholly-owned subsidiary.

72

GROUP STRUCTURE
Our Groups structure following the Restructuring Exercise is as follows:-

Old Chang Kee Ltd.

100%

100%

100%

40% (1)

40% (2) (3)

Ten & Han

Old Chang Kee Australia

Old Chang Kee China

Old Chang Kee Malaysia

Old Chang Kee Thailand

Notes:(1) 60.0% of the issued and paid-up share capital of Old Chang Kee Malaysia is held by San Mun Choong, who is not related to any of our Directors or Substantial Shareholders. 60.0% of the issued and paid-up share capital of Old Chang Kee Thailand is held in aggregate by the following persons (none of whom are related to any of our Directors or Substantial Shareholders):Name of shareholder Salim Tanacheevit Tanarat Tanacheevit Urai Sadhajit Monthip Rakratanapaisarn Tanarat Tanacheevit is a son of Salim Tanacheevit. Salim Tanacheevit and Tanarat Tanacheevit hold 94.0% and 1.5% direct interest in Siamchai International Food Co. Ltd. respectively. Salim Tanacheevit also holds 2.74% indirect interest in Siamchai International Food Co. Ltd. through Siamchaipokaphan Co., Ltd by virtue of her 76.0% shareholding in Siamchaipokaphan Co., Ltd. Siamchai International Food Co. Ltd. is one of our major suppliers set out in the section entitled Our Major Suppliers of this Prospectus. (3) Our Executive Chairman, Han Keen Juan, and our CEO, William Lim, each holds 100 shares (representing 1.0% interest in Old Chang Kee Thailand) on behalf of our Company. Percentage interest in Old Chang Kee Thailand 48.0% 10.0% 1.0% 1.0%

(2)

73

OUR SUBSIDIARIES AND ASSOCIATED COMPANIES


The details of our subsidiaries and Associated Companies as at the date of registration of this Prospectus by the Authority, none of which are listed on any stock exchange, are as follows:Registered capital / Issued and paid-up capital Effective equity Proportion interest held of voting by our Group power

Name of company

Date / Country of incorporation

Principal activities / Principal place of business

Our subsidiaries
Ten & Han 7 January 1988 Singapore Manufacturing of food and franchising / Singapore Dormant / Australia S$5,600,000 100% 100%

Old Chang Kee Australia Old Chang Kee China

5 August 2005 Australia 23 May 2007 PRC

AUD3

100%

100%

F&B management and consultancy, manufacture and sale of snacks (operation by branches only) / PRC

S$100,000/Nil

100%

100%

Our Associated Companies


Old Chang Kee Malaysia Old Chang Kee Thailand 1 October 2004 Malaysia 7 April 2006 Thailand Dealer in foodstuff / Malaysia Dormant / Thailand RM100,000 40% 40%

THB1,000,000

40%

40%

74

OUR HISTORY
Our Company was incorporated in Singapore under the Companies Act on 16 December 2004 as a private limited company under the name of Old Chang Kee Singapore Pte. Ltd.. Our history can be traced back to 1956 when a tiny stall in the then Koek Road (presently the Centrepoint area) was set up by a Mr Chang, selling only one food item chicken curry puffs. Later, the business was moved to a roadside stall along Albert Street. In 1986, our Executive Chairman, Han Keen Juan, acquired the curry puff business from Mr Chang. Recognising the great opportunity for growth, Han Keen Juan withdrew his personal savings and invested the money in two sole-proprietorships, Old Chang Kee Trading and Ten & Han Trading, for the purpose of re-engineering the business. In the same year, in an effort to modernise the image of our business, we re-designed the brand name Old Chang Kee and created the slogan Its a better puff. In 1987, we leased factory premises in Ubi Avenue 2 as our then principal production facility with a floor area of approximately 1,400 sq ft. At that time, the production facility served five retail outlets. We also began selling complementary food products such as spring rolls and fish balls. In January 1988, Ten & Han Trading Pte Ltd was incorporated as a private limited company in Singapore to take over the manufacturing function of our business from Ten & Han Trading, which was a sole proprietorship. Ten & Han Trading Pte Ltd had two shareholders at the time of its incorporation. In December 1988, Ten & Han Trading Pte Ltd acquired the entire business of Ten & Han Trading. The sales function of our business was then undertaken by Old Chang Kee Trading, which was also a sole proprietorship. In September 1993, Ten & Han Trading Pte Ltd acquired the entire business of Old Chang Kee Trading. From the late 1980s to the early 1990s, we invested in machinery and embarked on an initiative to develop modern methods to standardise our manufacturing processes in order to ensure that the curry puffs we produced were of a consistent high quality. In 1992, Han Keen Juan was awarded the Small Scale Entrepreneur Award by Association of Small and Medium Enterprises in conjunction with the Rotary Club of Singapore in recognition of the success of our business. In 1994, we moved into our existing production facility at 2 Woodlands Terrace with an aggregate built-in floor area of approximately 16,092 sq ft which allowed us to increase our production volume. In the same year, we began to engage contract manufacturers to manufacture related food products according to our specifications, to complement our Old Chang Kee curry puffs. We were thus able to quickly expand the range of products sold at our retail outlets to include other food products such as nuggets, pies, carrot cake and breaded prawns. In 1995, our CEO, William Lim, joined us as a General Manager, to spearhead and implement future growth strategies. Prior to 1995, almost all of our retail outlets were stalls in coffee shops. We set up our first shopping mallbased retail outlet in Jurong Point Shopping Centre in 1995. With the success of this retail outlet, we gradually shifted almost all our retail outlets to shopping malls and complexes, and have since expanded our reach to include individual kiosks, petrol kiosks, retail spaces located in MRT stations and nearby bus interchanges. At the end of 2000, we had 20 retail outlets. In 2002, our Executive Chairman, Han Keen Juan became the sole shareholder of Ten & Han when he bought over the shares of the other shareholder.

75

OUR HISTORY
In 2003, although the economy was affected by Severe Acute Respiratory Syndrome, we embarked on an intensive exercise to expand our retail network to include more retail outlets in shopping malls and complexes. In 2003, we opened six new retail outlets. In addition, we embarked on a branding exercise in 2003 to promote Old Chang Kee as a household name, synonymous with high quality curry puffs and related food products. In connection with this branding exercise, we developed a modernised Old Chang Kee logo. In 2004, we were awarded the Singapore Promising Brand Award (SPBA) by the Association of Small and Medium Enterprises and Lianhe Zaobao. In April 2004, we began our delivery services to the central business district area. In October 2004, our Associated Company, Old Chang Kee Malaysia, was incorporated. We hold 40% of the issued and paidup share capital of Old Chang Kee Malaysia. Old Chang Kee Malaysia commenced operations in October 2004 and has since undertaken the business of manufacturing and selling Old Chang Kee curry puffs and other food products in Malaysia. In December 2004, we commenced a new business to provide breakfast items at our retail outlets, such as braised bee hoon and nasi lemak. The purpose of this new business is to maximise the utilisation rate of our production facility and generate more revenue for our business. Capitalising on our strong brand name and established reputation for quality products, we expanded our network by setting up retail outlets in various strategic locations across Singapore. By the end of 2004, we had 36 retail outlets at several venues in Singapores heartland to reach out to a broader spectrum of consumers in Singapore. In early 2005, all our food products obtained the Halal certification from MUIS. This certification gave our food products wider marketability and appeal and our business expanded thereafter. To cope with the increased demand, we extended our production facility at 2 Woodlands Terrace to include a full mezzanine floor. In August 2005, we commenced the operation of 1901 retail outlets in Singapore which sell takeaway hotdogs. On 15 November 2007, we entered into a sale and purchase agreement with Nineteen O One Sdn. Bhd. pursuant to which the entire issued and paid-up share capital of 1901 Singapore would be transferred to Nineteen O One Sdn. Bhd. for a consideration of S$180,000 (the Disposal). Completion of the Disposal took place on 15 November 2007. In 2005, we were also awarded the SPBA-Heritage Brand Award and the SPBA-Distinctive Brand Award by the Association of Small and Medium Enterprises and Lianhe Zaobao. For the purpose of expanding our business overseas, we incorporated a subsidiary in Australia and an Associated Company in Thailand. Currently, the subsidiary in Australia and the Associated Company in Thailand are dormant. We also incorporated Old Chang Kee China, our wholly-owned subsidiary in PRC, in May 2007. As at the Latest Practicable Date, we had three retail outlets in Chengdu, PRC (through Old Chang Kee China). Riding on the success of our food products business, we commenced our food dine-in/takeaway business with the Old Chang Kee Take 5 retail outlets in 2005. The Old Chang Kee Take 5 retail outlets at Ogilvy Centre and HDB Hub at Toa Payoh were opened in 2005. Subsequently, we opened three other Old Chang Kee Take 5 retail outlets in Eastpoint Mall, West Mall and Golden Shoe Car Park in 2006. In February 2007, a new Old Chang Kee Take 5 retail outlet was opened in Square 2 and in July 2007, a new Old Chang Kee Take 5 retail outlet was opened in Icon Village. Our Old Chang Kee Take 5 retail outlets offer a suite of local delights such as curry chicken or beef stew in loaf/rice, sambal fish rice, curry noodles and nasi lemak as well as our food products.

76

OUR HISTORY
In April 2007, we have extended our delivery services to selected areas in the northern, eastern and central parts of Singapore. Under the leadership of our Executive Chairman, Han Keen Juan, and our CEO, William Lim, we undertook new initiatives such as staff training, branding, retail management and quality control, resulting in improved growth for our Group. We continue to invest in research and development to align ourselves with constantly shifting consumers tastes and preferences. As at the Latest Practicable Date, we had 54 retail outlets and more than 40 types of food products. In preparation for our listing, we undertook a Restructuring Exercise. Subsequently, we were converted into a public company limited by shares on 22 November 2007 and changed our name to Old Chang Kee Ltd..

77

OUR BUSINESS
INTRODUCTION The principal business of our Group is the manufacture and sale of affordable food products of consistent quality, under the brand name Old Chang Kee. Our signature product is the well-known Old Chang Kee curry puff, now complemented by a suite of more than 40 other food products such as fish balls, spring rolls and chicken wings. Most of our sales are on a takeaway basis. We sell our products through retail outlets to cater to a wide range of consumers. Our dine-in services at Old Chang Kee Take 5 retail outlets located at Icon Village, Square 2, Ogilvy Centre, Golden Shoe Car Park, Eastpoint Mall and West Mall sell local delights such as curry chicken or beef stew in loaf/rice, curry noodles, nasi lemak and sambal fish rice, as well as our food products. We also offer delivery services to the central business district and other selected areas in Singapore. Currently, we have business operations in Malaysia and PRC through our Associated Company in Malaysia and our wholly-owned subsidiary in PRC. As at the Latest Practicable Date, we had 54 retail outlets in Singapore, two retail outlets in Kuala Lumpur, Malaysia and three retail outlets in Chengdu, PRC. Our Indonesian Franchisee has also set up four retail outlets in Jakarta, Indonesia and our Philippines Franchisee has set up two retail outlets in Manila, the Philippines. All the food products we sell in Singapore are certified Halal by MUIS. OUR PRODUCTS We are engaged in the manufacture and sale of food products. We currently have more than 40 food products that are sold under our Old Chang Kee brand. These food products are in turn, sold under their individual sub-brand names. Our food products may be categorised according to their sub-brand categories and names as follows:Sub-Brand Category O Sub-Brand Name CurryO SardineO PepperO SpringO Fish Ball OnStik Sotong Ball OnStik Sotong OnStik Sotong Wing OnStik Crab Claw OnStik Breaded Prawn OnStik Gyoza OnStik Seafood Gyoza OnStik Chicken Nuggets OnStik Sotong Nuggets OnStik Crab Nuggets OnStik Prawn Nuggets OnStik Fish Fillet OnStik Chicken Wrap OnStik Crab Meat Wrap OnStik Sotong Wrap OnStik Yam K8 Carrot K8 Pumpkin K8 Description Curry puff Sardine puff Pepper puff Spring roll Fish balls on a stick Squid balls on a stick Squid head fritters on a stick Squid wing on a stick Crab claw fritters on a stick Breaded prawn fritters on a stick Gyoza fritters on a stick Seafood gyoza on a stick Chicken nuggets on a stick Squid nuggets on a stick Crab nuggets on a stick Prawn nuggets on a stick Fish fillet on a stick Chicken wrap on a stick Crab meat wrap on a stick Squid wrap on a stick Yam cake Carrot cake Pumpkin cake

OnStik

K8

78

OUR BUSINESS
Sub-Brand Category Feelin Sub-Brand Name Yam Feelin Pineapple Feelin Green Bean Feelin Curry Chicken Loaf/Rice Beef Stew Loaf/Rice Chicken Stew Loaf/Rice (1) Sambal Fish Rice Curry Noodle Nasi Lemak Description Yam pie Pineapple pie Green bean sesame ball Curry chicken served with bread or rice Beef stew served with bread or rice Chicken stew served with bread or rice Fish served with sambal chilli and rice Noodles cooked with curry and served with egg, chicken and tau pok Rice cooked with coconut milk and served with ikan bilis, fried chicken wing, fish, egg and sambal sotong Fried chicken cutlet served with rice Rice noodles cooked in laksa gravy with egg, prawn, fish cake and tau pok Rice noodles fried with laksa paste and served with prawn, egg and fish cake Chicken cooked with sesame oil and black soy sauce served with rice Fried dory fish served with wasabi sauce and rice Bee hoon served with chilli, tau pok, prawn and egg Fried chicken wing Fried beancurd served with sweet sauce and grated peanuts garnished with carrots, cucumber and salted egg yolk Dessert cooked using white fungus and lotus seed Dessert cooked using yam and sago Dessert cooked using longan and various nuts

Take 5

Chicken Chop Rice Laksa Laksa Spaghetti


(1)

Sesame Chicken with rice Wasabi fish with rice Mee Siam Chicken Wing Tauhu Goreng
(1)

(1)

White Fungus Lotus Seed Yam Sago Cheng Tung

Note:(1) These are special items which are only served on certain days of the month.

We also provide breakfast items at selected retail outlets. Our breakfast items include braised bee hoon and nasi lemak. We manufacture our curry puffs and prepare other various food products in-house. The recipes for our other food products are developed in-house and are produced by selected contract manufacturers approved by us according to our specifications. We have exclusive arrangements with our contract manufacturers for the manufacture of some of our food products. As we are materially dependent on the recipes of these food products, we have provided in the agreements with our contract manufacturers that the recipes we provide to them cannot be used for the manufacture of similar food products for third parties and our contract manufacturers are contractually obliged to keep all technical and commercial information provided by us to them for the manufacture of our food products confidential and to use them only for the manufacture of our food products. We currently have two major contract manufacturers, namely Leong Hin Foods Pte. Ltd. in Singapore and Siamchai International Food Co. Ltd. in Thailand.

79

OUR BUSINESS
PRODUCTION FACILITY AND CAPACITY We currently have one production facility located in Singapore at 2 Woodlands Terrace, which has obtained HACCP certification and is certified Halal. Our production facility at 2 Woodlands Terrace produces mainly our curry puffs and prepares breakfast items. This facility has an aggregate built-in floor area of approximately 16,092 sq ft. The approximate floor area utilised for production and storage is 8,176 sq ft and 4,574 sq ft is utilised as office and for administrative purposes. Our average annual productive capacity and annual utilisation rate for the production of our curry puffs for the period under review were as follows:Productive capacity (million) (1) FY2004 FY2005 FY2006 FP2007 12.4 14.4 15.8 9.0 Utilisation rate (%) FY2005 FY2006 96.0 88.6

Products Curry puffs


Note:(1)

FY2004 57.0

FP2007 85.7

Our capacity is calculated based on the average number of production workers in the respective year/period working on 10.5 hours production time per day.

RETAIL OUTLETS Our retail outlets are located at easily accessible locations with high human traffic flow, such as in shopping malls, individual kiosks, petrol kiosks, retail spaces located in MRT stations and nearby bus interchanges. Our business development team, led by our General Manager, Chow Hui Shien, constantly seeks new strategic locations for our retail outlets. Each retail outlet is functionally designed, incorporating our main corporate colours of black, white and yellow, to appeal to customers of all ages. The size of our retail outlets ranges from 97 sq ft to 1,194 sq ft. Our Old Chang Kee Take 5 retail outlets have seating areas for dine-in customers. We station at least two employees at each retail outlet. The employees prepare the food products according to cooking procedures specified in our in-house operations manual, display the food products at the counter and transact sales with customers. Our service employees are trained in customer service, product knowledge and inventory control. All the retail outlets are managed by our General Manager, Chow Hui Shien, who is assisted by a team of 10 staff consisting of one manager, executives and supervisors. The retail outlets in Singapore are divided into five area groups based on their locations. Each area group is overseen by an area supervisor. A maintenance team, which consists of four members, performs regular maintenance work (simple repairs and hygiene maintenance) for the retail outlets. Each retail outlet has a team leader to oversee the operations. The number of employees at each retail outlet ranges from two to eight employees who work either one or two shifts, depending on the size and sales volume of the retail outlet. ENTERPRISE RESOURCE PLANNING SYSTEM We are currently in the process of implementing a comprehensive ERP system, which puts in place controls in our retail outlets and transmits real-time transaction data to our head office. We expect to complete the full implementation of the ERP system by June 2008. With the ERP system, each batch of food products can be traced from our production facility to the respective points of sale. Information pertaining to the stock levels at each retail outlet is immediately accessible by our head office, thus ensuring that stocks are efficiently replenished. Such real-time transmission of transaction data to our head office also ensures that the right amount of stock is kept at each retail outlet, thus maintaining the freshness and quality of our food products.

80

OUR BUSINESS
QUALITY CONTROL We are committed to maintaining a high level of quality control and high standards in our products. Good Manufacturing Practices at our Production Facility We have on 16 May 2007 obtained HACCP certification for the manufacturing of curry puffs, starting from the receipt of raw materials, to the processing, storage and delivery of our curry puffs. We also implemented a quality assurance programme in accordance with HACCP methods, with effect from 16 May 2007. We have also instituted quality control procedures in our manufacturing processes for our other food products in order to ensure high standards of quality of all our food products. At our production facility, we have implemented quality control procedures relating to cleaning and sanitation, hygiene control, maintenance of equipment, raw material control and product quality control. (i) Cleaning and sanitation We ensure that our production facility is clean and our equipment adequately sanitised in order to reduce microbial, physical and chemical impurities in our food products. All equipment and preparation surfaces are cleaned and sanitised. At the end of the day, all floors and equipment in our production facility are also cleaned and sanitised. Our production executive conducts checks of the cleaning and sanitation procedures at our production facility on a daily basis. (ii) Hygiene control Our production facility employees are required to practice good personal hygiene. They must be properly attired in uniforms and footwear provided by us, wash and sanitise their hands upon entering the processing areas and wear disposable gloves when handling our food products. (iii) Maintenance of equipment The equipment at our production facility is checked and serviced on a regular basis as part of our preventive maintenance programme. Our production facility employees inspect the equipment daily, during the clean-up process. Any damaged seals, joints and valves are immediately reported to the supervisor for repair or replacements, where necessary. (iv) Raw material control The quality of raw materials is important to the final quality and safety of the manufactured food products. Purchase, receipt and storage of raw materials are therefore crucial steps in the manufacturing process. We check and assess all raw materials received to ensure they are in good condition. Items that do not meet our requirements are rejected. The raw materials accepted will then be stored at an optimum temperature prior to use in our manufacturing processes, to ensure their freshness. (v) Product quality control We ensure that the quality and safety of our food products are maintained by implementing quality control procedures from our point of production to all points of sale. At our 2 Woodlands Terrace production facility, food products that have been prepared for sale at our retail outlets are stored at optimum temperatures in the chiller or freezer rooms. When transported to our retail outlets, each batch of food products is transported in trucks with chilled storage space in order to maintain their freshness. Each retail outlet is also furnished with at least one chiller and one freezer to ensure that our food products stay fresh until they are cooked and sold to customers. Quality Control at our Retail Outlets We implement specific quality control procedures at our retail outlets to ensure that our food products sold are of consistent quality and freshness. Each of our employees at the retail outlets is required to undergo on-the-job training, to equip them with the skills of food handling, cooking and hygiene control. For further details on the training provided to our employees, please refer to the section entitled Staff Training of this Prospectus. Our in-house operations manual sets out strict procedures concerning food handling and management at our retail outlets. All food products at the retail outlets are required to be prepared according to the cooking procedures set out in our operations manual. 81

OUR BUSINESS
We adopt strict oil management system at our retail outlets to maintain the quality of the oil in order to ensure the consistent high quality in the taste of our food products. The oil management procedures are supervised by our team of area supervisors. Used oil is required to be brought to our head office and disposed of subsequently. Food products that do not meet our requisite quality standards must first be returned to our head office for assessment before being discarded. Food products prepared on any particular day have to be sold on the same day they are prepared. Any products that are not sold on the day they are prepared will be returned to our head office and discarded. Based on our records, the wastage arising from unsold products accounted for less than 0.5% of our total revenue during the Relevant Period. Most of our retail outlets have received either an A or B grade from NEA for their food hygiene and food safety standards. Quality Control for our Halal Certification To maintain the Halal certification issued to our production facility and retail outlets, we have implemented a system under which all the processes involved in the production of our food products are monitored closely to ensure that our food products are manufactured, packed, transported, stored and sold in compliance with the requirements of Islamic law. Specific corrective actions will be prescribed and implemented to rectify any aberration detected by the system. Quality Control of our Contract Manufacturers The recipes for some of our food products are developed in-house and are produced by approved selected contract manufacturers according to our specifications. Our Operations Manager, Ng Lee Huang, will carry out quality control checks on our contract manufacturers on a quarterly basis to ensure that the food products are manufactured in compliance with our standards and specifications. In addition, every batch of food products manufactured and delivered to us by our Thai contract manufacturer, Siamchai International Food Co. Ltd., is verified by our Thai contract manufacturer to be safe for consumption and the laboratory report issued in connection with such verification will be provided to us by our Thai contract manufacturer upon our request. Further, our contract manufacturers are obliged to manufacture the food products in compliance with the HACCP methods in accordance with the contract manufacturing agreements. Quality Control of our Franchisees Our overseas franchisees are required to send their key staff to Singapore for training which includes training in retail, production and logistic procedures to ensure that they can execute such procedures in accordance with our operating manuals. Prior to the opening of the pilot outlet and the central kitchen, we will send our local staff to the country where the foreign franchisee is located to train, guide and prepare the franchisees team for their business operations. Some of our staff may stay on to coach the franchisees team until it is able to conduct the business operations independently. The foreign franchisees are required to report to our Singapore head office when they encounter any issues in its business operations and corrective measures and/or solutions will be offered to them after consultation with the relevant departments. To ensure regular contact with the foreign franchisees, we conduct online meeting sessions with them on a monthly basis to better understand the quality control issues which the foreign franchisees may be facing and to offer them solutions to such issues. The foreign franchisees are also required to report and seek our prior approval for any proposed deviation from our standard operating procedure arising from their local situation or their legal requirements. We will send our local staff to the foreign franchisees operations at least twice a year to monitor and ensure that their operation processes are in compliance with our requirements. Our local staff will conduct any re-training or refresher training if required.

82

OUR BUSINESS
MARKETING AND BUSINESS DEVELOPMENT Our food products are sold mainly in Singapore. As at the Latest Practicable Date, we had 54 retail outlets strategically located in shopping malls, individual kiosks, petrol kiosks, retail spaces located in MRT stations and nearby bus interchanges throughout Singapore. We set up our overseas retail outlets through direct investment, joint ventures or franchise arrangements. As at the Latest Practicable Date, we had three retail outlets in PRC, our Associated Company (Old Chang Kee Malaysia) had two retail outlets in Kuala Lumpur, Malaysia, our Indonesian Franchisee in Indonesia had four retail outlets in Jakarta, Indonesia and our Philippines Franchisee had two retail outlets in Manila, the Philippines. Our food products are sold directly to customers on a cash basis. Advertising and Promotion and Public Relations Our marketing activities are overseen by our CEO, William Lim. Our Groups marketing strategy mainly focuses on capitalising on our strong brand name, Old Chang Kee, and enhancing awareness of the brand. Our marketing team meets on a regular basis to develop advertising and promotional strategies to be undertaken by our Group. Our marketing team includes our CEO, William Lim, General Manager, Chow Hui Shien and several other executives. In addition, we appoint professional marketing and communication firms on an ad hoc basis to assist us in our marketing efforts. In order to continuously improve our product quality and service standard, our marketing team proactively reaches out to our customers by making regular visits to our retail outlets to obtain market feedback. We participate in joint promotions with shopping malls to showcase our food products. As a food sponsor, we are also joint participants in activities such as annual walk-a-jogs with the Handicapped Welfare Association. In 2004, our Group also sponsored school bags for the Yayasan Mendaki (Mendaki) and special food products such as Halal mooncakes to needy families under the care of Yayasan Mendaki (Mendaki). We are also active in promoting the performance arts. In 2006, we sponsored the Jinsha culture show from Chengdu, PRC. In 2007, we sponsored the Drama Box in staging the childrens play, Mo Mo . In the same year, we act as main sponsor for the local play, If Therere Seasons . In addition, we conduct marketing campaigns to promote our new food products through print advertisements in magazines and newspapers. Business Development Our General Manager, Chow Hui Shien, is responsible for overseeing our Groups business development activities. A primary business development strategy is to identify and procure strategic locations for new retail outlets in order to reach a wider spectrum of customers. Our Executive Directors and our General Manager also work to foster and maintain healthy relationships with various landlords to ensure smooth operations at our existing retail outlets and to improve our chances of securing strategic locations for our new retail outlets. Another business development strategy involves sourcing for new distribution channels. We currently provide a delivery service called Old Chang Kee Delivers to consumers in the central business district and other selected areas of Singapore. Old Chang Kee Delivers seeks to provide existing and potential customers with added convenience and offers a quick and easy way to cater finger food for office meetings and home parties. We constantly seek to develop new business concepts to complement our existing businesses, such as the takeaway cum dine-in meals business of Old Chang Kee Take 5. Our General Manager, Chow Hui Shien is responsible for conceptualising such new business concepts and integrating them into our Group operations. Branding is an integral part of our business development. Apart from capitalising on Old Chang Kees status as a household name, we have sought to create sub-brands for different categories of our food products in order to generate greater appeal for our products. Please refer to the section entitled Our Products of this Prospectus for further information on our sub-brands. 83

OUR BUSINESS
Franchises In an attempt to expand our business into the overseas market, we have franchised our businesses to overseas partners. We have entered into a franchise agreement with our Philippines Franchisee (the Philippines Franchise Agreement) on 20 December 2007. We have also entered into a franchise agreement and a supplemental franchise agreement (collectively referred to as the Indonesian Franchise Agreement) with the Indonesian Franchisee on 5 October 2007 and 26 December 2007 respectively. Legal advisers to our Company on the Philippines law, Villaraza & Angangco, had on 10 September 2007 submitted, on Ten & Hans behalf, a draft of the Philippines Franchise Agreement to the Documentation Information and Technology Transfer Bureau of the Intellectual Property Office of the Philippines for review. The Intellectual Property Office of the Philippines has confirmed in its letter to Villaraza & Angangco on 28 November 2007 that the draft Philippines Franchise Agreement complies with the Intellectual Property Code of the Philippines. Based on the above, Villaraza & Angangco had on 28 December 2007 advised our Company that the Philippines Franchise Agreement is valid and enforceable under the laws of the Philippines. This statement was prepared by Villaraza & Angangco for the purpose of incorporation in this Prospectus. Our Company has also been advised by its legal advisers on Indonesian law, Soebagjo, Jatim, Djarot, on 2 January 2008 that under the Government Regulation No. 42 of 2007 regarding franchises (GR No.42), Ten & Han (the Franchisor) is obliged to register a prospectus on the franchise to be granted by Ten & Han to the Indonesian Franchisee (the Indonesian Franchise) prior to the signing of the Indonesian Franchise Agreement and the Indonesian Franchisee is obliged to register the Indonesian Franchise Agreement, both with the Ministry of Trade of Indonesia (MOT). Further, under Permendag 12/2006, the Indonesian Franchisee is required to register the Indonesian Franchise Agreement with the MOT within 30 days from the date of the commencement of the Indonesian Franchise Agreement in order for it to be valid and enforceable. In the course of preparing the application to MOT for the registration of the prospectus on the Indonesian Franchise and the Indonesian Franchise Agreement, MOT informed Soebagjo, Jatim, Djarot that following the issuance of GR No. 42, MOT will be promulgating new implementing regulations (New Regulations) with respect to such registrations and therefore MOT is unable to process any new applications to register prospectuses on franchises and franchise agreements until the New Regulations are passed. As at 2 January 2008, the New Regulations have not been passed. In view of the above, our Company has also been advised on 2 January 2008 by Soebagjo, Jatim, Djarot that the Indonesian Franchise Agreement is still valid and enforceable under the laws of Indonesia as between Ten & Han and the Indonesian Franchisee. This statement was prepared by Soebagjo, Jatim, Djarot for the purpose of incorporation in this Prospectus. Under these franchise agreements, we are entitled to an initial franchise fee and royalties based on a percentage of the turnover. We have plans to source for other suitable franchisees to set up retail outlets in other countries. Potential franchisees are carefully evaluated by our management, taking into account their financial standing, integrity and the ability to secure strategic locations for the purpose of setting up retail outlets. As franchisor, we assist our franchisees in selecting the appropriate store locations and providing the initial training support for such franchisees staff. We sell certain raw materials to our franchisee to ensure consistency in the quality of our food products. We also advise on the interior design plans for the renovation of the retail outlets, the materials to be used that are unique to our design and the concept for outfitting the franchisees retail outlets. We will also monitor the performance of the respective franchisees on an on-going basis. As at the Latest Practicable Date, our Indonesian Franchisee operates four retail outlets in Jakarta, Indonesia and our Philippines Franchisee has opened two retail outlets in Manila, the Philippines. These franchise operations have not contributed significantly to our revenue since they commenced operations. PRODUCT DEVELOPMENT We place great emphasis on product development. In order to meet consumers demand for new and high quality food products, we seek to constantly introduce new food products into the market. On average, we introduce about four new products annually. Our Group has evolved from selling a single product to offering a wide variety of food products including fish balls, spring rolls and chicken wings.

84

OUR BUSINESS
In order to establish a loyal customer base, we have invested in technology to ensure the food products we produce are of a consistent high quality. We concentrate on production factors such as the temperature at which our food products are stored, cooked and delivered, and oil management techniques all of which contribute to the freshness and taste of our food products. We have formulated standard production procedures for each food product, to which our employees strictly adhere. In respect of products manufactured by our contract manufacturers, we typically collaborate with our contract manufacturers to formulate the recipes of these products in-house before producing them. Specific tests are conducted in-house in order to obtain the right taste and texture for our food products. After the initial batch of food products produced by our contract manufacturers, we conduct further tests to ensure the products are manufactured to our exact specifications before retailing the products. INTELLECTUAL PROPERTY Trademarks We believe that our trademarks are an integral part of our Groups focus on branding, and play a significant role in creating brand recognition for our products. As such, we have registered or are in the process of registering our principal Old Chang Kee trademark and our other trademarks, both in Singapore and overseas. As at the Latest Practicable Date, our Group owns the following trademarks:Place of application Singapore

Description of trademark

Trademark No. T9505133H

Class No. 30

Period of validity Expiry date is on 8 June 2015

T0422578H

Singapore

43

Expiry date is on 22 December 2014 Expiry date is on 4 April 2015

T0504698D

Singapore

29

T0504700Z

Singapore

30

Expiry date is on 4 April 2015

T0504706I

Singapore

30

Expiry date is on 4 April 2015

T0422579F

Singapore

43

Expiry date is on 22 December 2014

T0504695Z

Singapore

30

Expiry date is on 4 April 2015

85

OUR BUSINESS
Place of application Singapore

Description of trademark

Trademark No. T0504696H

Class No. 30

Period of validity Expiry date is on 4 April 2015

T0504699B

Singapore

30

Expiry date is on 4 April 2015

T0504702F

Singapore

30

Expiry date is on 4 April 2015

T0504703D

Singapore

30

Expiry date is on 4 April 2015

T0504704B

Singapore

30

Expiry date is on 4 April 2015

T0504705J

Singapore

30

Expiry date is on 4 April 2015

T0504697F

Singapore

29

Expiry date is on 4 April 2015

T0504701H

Singapore

30

Expiry date is on 4 April 2015

OLD CHANG KEE

T0616584G

Singapore

43

Expiry date is on 16 November 2016

86

OUR BUSINESS
Place of application Singapore

Description of trademark

Trademark No. T0616572C

Class No. 29

Period of validity Expiry date is on 11 August 2016

T0616575H

Singapore

43

Expiry date is on 11 August 2016

T0616579J

Singapore

43

Expiry date is on 11 August 2016

T0700680G

Singapore

30

Expiry date is on 9 January 2017

T0700688B

Singapore

29

Expiry date is on 9 January 2017

T0700682C

Singapore

29

Expiry date is on 9 January 2017

T0700685H

Singapore

29

Expiry date is on 9 January 2017

T0700681E

Singapore

29

Expiry date is on 9 January 2017

87

OUR BUSINESS
Place of application Singapore

Description of trademark

Trademark No. T0716099G

Class No. 43

Period of validity Expiry date is on 24 July 2017

T0716098I

Singapore

30

Expiry date is on 24 July 2017

The

T0716093H
Shop

Singapore

43

Expiry date is on 24 July 2017

The

Shop

The

T0716095D
Shop

Singapore

30

Expiry date is on 24 July 2017

The

OLD CHANG KEE


OLD CHANG KEE

Shop

T0616582J

Singapore

30

Expiry date is on 11 August 2016 Expiry date is on 11 August 2016 Expiry date is on 11 August 2016 Expiry date is on 11 August 2016

T0616580D T0616576F

Singapore Singapore

29 29

T0616585E

Singapore

29

T0616587A

Singapore

30

Expiry date is on 11 August 2016

T0616588Z

Singapore

43

Expiry date is on 11 August 2016

942016

Australia

30 and 43

Expiry date is on 31 January 2013

88

OUR BUSINESS
Place of application Australia

Description of trademark

Trademark No. 942018

Class No. 30 and 43

Period of validity Expiry date is on 31 January 2013

1165463

Republic of China

30

Expiry date is on 15 July 2015

93047046

Republic of China

43

Expiry date is on 15 July 2015

IDM000007939

Indonesia

30

Expiry date is on 17 July 2013

IDM000007940

Indonesia

43

Expiry date is on 17 July 2013

93-01697

Malaysia

30

Expiry date is on 18 March 2010

04010989

Malaysia

43

Expiry date is on 30 July 2014

1995/00445

Republic of South Africa

30

Expiry date is on 17 January 2015

789010

PRC

30

Expiry date is on 6 November 2015

89

OUR BUSINESS
Place of application Hong Kong

Description of trademark

Trademark No. 300532368

Class No. 30 and 43

Period of validity Expiry date is on 16 November 2015

3323713

Japan

30

Expiry date is on 20 June 2017

004750089

CTM Countries

30 and 43
(1)

Expiry date is on 29 November 2015

N/20295

Macau

42

Expiry date is on 8 May 2013

N/20294

Macau

30

Expiry date is on 8 May 2013

579457 Kor 243462

Thailand

30

Expiry date is on 20 January 2015

579458 Bor 29726

Thailand

43

Expiry date is on 20 January 2015

4-1999-002422

The Philippines

30

Expiry date is on 1 July 2014

Note:(1) CTM Countries means Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxemburg, Malta, The Netherlands, Poland, Portugal, Romania, Slovakia, Spain, Sweden and United Kingdom.

90

OUR BUSINESS
As at the Latest Practicable Date, our Group has applied for the following trademarks:Place of application Singapore Status / Application date Pending / 11 August 2006

Description of trademark

Trademark No. T0616573A

Class No. 30

T0616577D

Singapore

30

Pending / 11 August 2006 Pending / 9 January 2007

T0700684Z

Singapore

30

5033464

PRC

30

Pending / 30 November 2005

5033463

PRC

43

Pending / 30 November 2005

5880182

PRC

29

Pending / 31 January 2007

5880183

PRC

30

Pending / 31 January 2007

5880184

PRC

43

Pending / 31 January 2007

4-2005-000727

The Philippines

43

Pending / 24 January 2005

91

OUR BUSINESS
Place of application The Philippines Status / Application date Pending / 5 February 2007

Description of trademark

Trademark No. 4-2007-001176

Class No. 29, 30 and 43

07002033

Malaysia

29

Pending / 5 January 2007

07002031

Malaysia

30

Pending / 5 January 2007

07002032

Malaysia

43

Pending / 5 January 2007

OLD CHANG KEE

2004-10809

Malaysia

30

Pending / 28 July 2004 Pending / 23 August 2006

84606

United Arab Emirates

30

84607

United Arab Emirates

43

Pending / 23 August 2006

78924,990

United States of America

30 and 43

Pending / 7 July 2006

OLD CHANG KEE

77/322,728

United States of America Indonesia

29, 30 and 43 30

Pending / 6 November 2007 Pending / 15 August 2006

J00 2006 026525

D00 2006 026527

Indonesia

43

Pending / 15 August 2006

92

OUR BUSINESS
Place of application Indonesia Status / Application date Pending / 1 February 2007

Description of trademark

Trademark No. D00 2007 003158

Class No. 29

D00 2007 003157

Indonesia

30

Pending / 1 February 2007

J00 2007 003159

Indonesia

43

Pending / 1 February 2007

45-2007-0000669

Korea

29, 30 and 43

Pending / 15 January 2007

OLD CHANG KEE ONSTIK

667175

Thailand

29

Pending / 13 July 2007 Pending / 13 July 2007 Pending / 13 July 2007 Pending / 13 July 2007 Pending / 13 July 2007 Pending / 20 July 2007

OLD CHANG KEE ONSTIK

667176

Thailand

30

OLD CHANG KEE ONSTIK

667177

Thailand

43

ONSTIK

667178

Thailand

30

SPRINGO

667179

Thailand

30

4-2007-13809

Vietnam

29, 30 and 43

OLD CHANG KEE


Notes:(1)

6382253

CTM Countries

(1)

29,30 and 43

Pending / 22 October 2007

CTM Countries means Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxemburg, Malta, The Netherlands, Poland, Portugal, Romania, Slovakia, Spain, Sweden and United Kingdom. Under the International Classification of Goods System, the trademark classes may be described as follows:Class 29: Meat, fish, poultry and game; meat extracts; preserved, frozen, dried and cooked fruits and vegetables; jellies, jams; compotes; eggs, milk and milk products; edible oils and fats

(2)

93

OUR BUSINESS
Class 30: Coffee, tea, cocoa, sugar, rice, tapioca, sago, artificial coffee; flour and preparations made from cereals, bread, pastry and confectionery, ices; honey, treacle; yeast, baking-powder; salt, mustard; vinegar, sauces (condiments); spices; ice Class 42: Scientific and technological services and research and design relating thereto; industrial analysis and research services; design and development of computer hardware and software Class 43: Services for providing food and drink; temporary accommodation

Save as disclosed above, our business or profitability is not materially dependent on any registered trademark or patent or any other intellectual property rights. PROPERTIES AND FIXED ASSETS As at the Latest Practicable Date, we own the following leasehold property:Location Lessor/Licensor Tenure Floor area (sq ft) 23,685 Use of property

2 Woodlands Terrace Singapore 738427

Jurong Town Corporation

16 February 1994 to 15 February 2054

Production facility / Office

As at the Latest Practicable Date, we also lease or rent or occupy the following properties under leases or licences:Commencement of Tenancy

Location

Lessor/Licensor

Floor area (sq ft) 1,194

Use of property

Block 3020, Ubi Avenue 2, #01-125, Singapore 408896 23 Woodlands Sector 1, #01-52, Singapore 738250 25 Woodlands Sector 1, #01-63, Singapore 738251 23 Woodlands Sector 1, #01-36, Singapore 738250 Block 22 Woodlands Link, #03-40, Singapore 738034 Parkway Parade, 80 Marine Parade Road, #01-33E, Singapore 449269 The Amara, 165 Tanjong Pagar Road, #01-07, Singapore 088539

HDB

1 February 2006

Retail outlet

Avery Strategic Investments Pte Ltd Avery Strategic Investments Pte Ltd Avery Strategic Investments Pte Ltd Keen Holdings Pte. Ltd. (1)

16 September 2007

699

Dormitory housing

1 January 2007

699

Dormitory housing

1 August 2007

699

Dormitory housing

1 September 2007

1,938

Servicing and maintenance of kitchen equipment Storage space

Prime Asset Holdings Limited

7 November 2006

75

Amara Hotel Properties Pte Ltd

24 October 2006

441

Retail outlet

94

OUR BUSINESS
Commencement of Tenancy

Location

Lessor/Licensor

Floor area (sq ft) 431

Use of property

AMK Hub, 53 Ang Mo Kio, Avenue 3, #01-38, Singapore 569933

NTUC Income Insurance Co-operative Ltd

2 March 2007

Retail outlet

NTUC Fairprice Co-operative Limited SLF AMK Pte Ltd Bugis Junction, 230 Victoria Street, #B1-13, Singapore 188024 HSBC Institutional Trust Services (Singapore) Limited as Trustee of CapitaMall Trust NTUC Fairprice Co-operative Limited 15 October 2006 470 Retail outlet

Blk 166 Bukit Merah Central, #01-3527, Singapore 150166 Bukit Panjang Plaza, 1 Jelebu Rd, #01-16, Singapore 677743

19 May 2006

116

Retail outlet

HSBC Institutional Trust Services (Singapore) Limited as Trustee of CapitaRetail BPP Trust HSBC Institutional Trust Services (Singapore) Limited as trustee of Frasers Centrepoint Trust Century Square Holdings Pte Ltd

22 March 2007

237

Retail outlet

Causeway Point, 1 Woodlands Square, #01-41, Singapore 738099

1 November 2005

217

Retail outlet

Century Square, 2 Tampines Central 5, #01-38A, Singapore 529509 Shop 36, 10 Choa Chu Kang Avenue 4, Choa Chu Kang MRT Station, Singapore 689810(2) Ngee Ann City, Civic Plaza, 391 Orchard Road #01-K1, Singapore 238872 Compass Point, 1 Sengkang Square, #01-38, Singapore 545078

6 December 2007

173

Retail outlet

SMRT Trains Ltd

36 months from expiry of the rent-free fitting-out period

192

Retail outlet

Management Corporation Strata Title No. 2929

1 May 2007

161

Retail outlet

North I Pte. Ltd

1 August 2005

237

Retail outlet

95

OUR BUSINESS
Commencement of Tenancy

Location

Lessor/Licensor

Floor area (sq ft) 259

Use of property

Downtown East, e!Hub, No. #E02-11, 1 Pasir Ris Close, Singapore 519599(2) SPC Dunearn Service Station, 260 Dunearn Road, Singapore 299542 Eastpoint Mall, 3 Simei Street 6, #01-23, Singapore 528833 Kiosk No. 3 Far East Plaza, 14D Scotts Road, Singapore 228213 Forum The Shopping Mall, 583 Orchard Road, #01-K3, Singapore 238884 Golden Shoe Car Park, 50 Market Street, #01-27, Singapore 048940

Resorts Concept Pte Ltd

Three years from the handing over of unit

Retail outlet

Singapore Petroleum Company Limited

1 May 2007

194

Retail outlet

NTUC Income Insurance Cooperative Limited

1 July 2006

258

Retail outlet

Management Corporation Strata Title Plan No. 1259 Hermill Investments Pte Ltd

1 April 2007

97

Retail outlet

30 October 2006

120

Retail outlet

HSBC Institutional Trust Services (Singapore) Limited as trustee of CapitaCommercial Trust Lucky Pinnacle Pte Ltd

12 November 2006

570

Retail outlet

Icon Village, 12 Gopeng Street, #01-19/20, Singapore 078877 Great World City 1 Kim Seng Promenade, #B1-18/19, Singapore 237994 Heartland Mall, Block 205 Hougang St 21, #01-133/135, Singapore 530205 Hougang Mall, 90 Hougang Ave 10, #01-39, Singapore 538766 Hougang Point, No. 1 Hougang St 91, #01-K09, Singapore 538692

10 June 2007

506

Retail outlet

Cold Storage Singapore (1983) Pte. Ltd.

1 October 2006

180

Retail outlet

Heartland Retail Holdings Pte Ltd

5 September 2006

205

Retail outlet

ARMF (Hougang Mall) Private Limited

3 September 2005

220

Retail outlet

NTUC Fairprice Co-operative Limited

16 October 2006

115

Retail outlet

96

OUR BUSINESS
Commencement of Tenancy

Location

Lessor/Licensor

Floor area (sq ft) 200

Use of property

Hotel Meridien and Shopping Centre, 100 Orchard Rd, #01-03B, Singapore 238840 IMM Building, 2 Jurong East Street 21, #01-39, Singapore 609601

Catalla Investments Pte Ltd

1 July 2006

Retail outlet

HSBC Institutional Trust Services (Singapore) Limited as trustee of CapitaMall Trust Lim Ban Leong and Ong Ah Moy

1 May 2007

182

Retail outlet

International Plaza, 10 Anson Road, #01-11, Singapore 079903 Junction 8 Shopping Centre, 9 Bishan Place, #B1-12, Singapore 579837 Jurong Point Shopping Centre, 1 Jurong West Central 2, #01-26G, Singapore 648886 Jurong Point Shopping Centre, 1 Jurong West Central 2, #01-39, Singapore 648886(2) to replace the above outlet when renovation of the new extension of Jurong Point Shopping Centre is completed Shop 5, Kallang MRT Station, 5 Sims Avenue, Singapore 387405(2) Shop 1, Kembangan MRT Station, 55 Sims Avenue East, Singapore 416551(2) Caltex Lorong Chuan, 277 Lorong Chuan Road, Singapore 556771 Caltex Bukit Batok, 50 Bukit Batok Avenue 3, Singapore 659879

15 December 2006

247

Retail outlet

HSBC Institutional Trust Services (Singapore) Limited as trustee of CapitaMall Trust Jurong Point Realty Limited

16 October 2006

170

Retail outlet

15 July 2007

409

Retail outlet

Prime Point Realty Development Pte Ltd

Three years with an option to renew for another three years

443

Retail outlet

SMRT Trains Ltd

36 months from the expiry of the rent-free fitting-out period

259

Retail outlet

SMRT Trains Ltd

36 months from the expiry of the rent-free fitting-out period

300

Retail outlet

Chevron Singapore Pte. Ltd.

21 December 2006

202

Retail outlet

Chevron Singapore Pte. Ltd.

31 December 2007

100

Retail outlet

97

OUR BUSINESS
Commencement of Tenancy

Location

Lessor/Licensor

Floor area (sq ft) 100

Use of property

Caltex Tampines, 1 Tampines Avenue 8, Singapore 529594 Caltex East Coast, 355 East Coast Road, Singapore 428972 Caltex Dunearn, 130 Dunearn Road, Singapore 309436 Caltex Holland, 297 Holland Road, Singapore 278629 Caltex Ang Mo Kio Avenue 3, 3551 Ang Mo Kio Avenue 3, Singapore 569927 Lot 1 Shoppers Mall, 21 Choa Chu Kang Avenue 4, #B1-K3, Singapore 689812

Chevron Singapore Pte. Ltd.

31 December 2007

Retail outlet

Chevron Singapore Pte. Ltd.

31 December 2007

100

Retail outlet

Chevron Singapore Pte. Ltd.

31 December 2007

100

Retail outlet

Chevron Singapore Pte. Ltd.

31 December 2007

100

Retail outlet

Chevron Singapore Pte. Ltd.

31 December 2007

100

Retail outlet

HSBC Institutional Trust Services (Singapore) Limited as Trustee of CapitaRetail Lot One Trust Singapore Land Authority

26 April 2007

152

Retail outlet

2 Mackenzie Road, #01-01, Singapore 228673 Northpoint Shopping Centre Extension, 930 Yishun Avenue 2, #01-15, Singapore 769098

13 January 2007

194

Retail outlet

HSBC Institutional Trust Services (Singapore) Limited as trustee of Frasers Centrepoint Trust Novena Square Development Ltd

20 October 2005

151

Retail outlet

Novena Square, 238 Thomson Road, #01-70, Singapore 307683 268 Orchard Road, #01-K2, Singapore 238856 New Administration Office and Canteen Building, Nanyang Technological University(2) The Ogilvy Centre, 35 Robinson Road, #01-08, Singapore 068876

25 November 2006

205

Retail outlet

RE Properties Pte Ltd

Renewed on a monthly basis

140

Retail outlet

Nanyang Technological University

Three years with an option for a further three years

1,000

Retail outlet

Castle Robinson Pte Ltd

15 February 2007

688

Retail outlet

98

OUR BUSINESS
Commencement of Tenancy

Location

Lessor/Licensor

Floor area (sq ft) 220

Use of property

Paragon, 290 Orchard Road, #B1-10, Singapore 238859 Parkway Parade, 80 Marine Parade Road, #01-K12, Singapore 449269 Pasir Ris MRT Station, 10 Pasir Ris Central, #01-17, Singapore 519634 Peninsula Plaza, 111 North Bridge Road, #01-35 (Partial), Singapore 179098 SPC Punggol Service Station, 100 Punggol Central, Singapore 828839 Raffles City Shopping Centre, 252 North Bridge Road, #B1-59, Singapore 179103

Orchard 290 Ltd

3 October 2005

Retail outlet

Prime Asset Holdings Limited

7 November 2006

614

Retail outlet

SMRT Trains Ltd

1 May 2006

188

Retail outlet

Cold Storage Singapore (1983) Pte Ltd

1 January 2007

398

Retail outlet

Singapore Petroleum Company Limited

1 October 2007

135

Retail outlet

HSBC Institutional Trust Services (Singapore) Limited as TrusteeManager of RCS Trust HSBC Institutional Trust Services (Singapore) Limited as Trustee of Capital Retail Rivervale Trust SMRT Trains Ltd

4 October 2007

258

Retail outlet

Rivervale Mall, 11 Rivervale Crescent, #01-K4, Singapore 545082

6 May 2007

142

Retail outlet

Simei MRT Station, 30 Simei Street 3, #01-02, Singapore 529888 Square 2, 10 Sinaran Drive, #01-04/05, Singapore 307506 Sun Plaza, 30 Sembawang Drive, #01-38, Singapore 757713 Suntec City Mall, 3 Temasek Boulevard, #01-189/ 189A, Singapore 038983

1 May 2006

165

Retail outlet

Novena Point Pte. Ltd.

21 March 2007

777

Retail outlet

Canberra Development Pte Ltd

28 November 2005

368

Retail outlet

HSBC Institutional Trust Services (Singapore) Limited as trustees for Suntec REIT

1 June 2006

193

Retail outlet

99

OUR BUSINESS
Commencement of Tenancy

Location

Lessor/Licensor

Floor area (sq ft) 288

Use of property

Tampines MRT Station, 20 Tampines Central 1, #01-03, Singapore 529538 Tekka Mall, 2 Serangoon Road, #01-01, Singapore 218227 Thomson Plaza, 301 Upper Thomson Road, #01-113B, Singapore 574408 Tiong Bahru Plaza, 302 Tiong Bahru Road, #01-03A, Singapore 168732 Block 500 Lorong 6 Toa Payoh, #01-34, Singapore 310500 United Square, 101 Thomson Road, #B1-03, Singapore 307591 VivoCity, 1 Harbourfront Walk, #B2-K12, Singapore 098585 West Mall, 1 Bukit Batok Central Link #B1-05, Singapore 658713 White Sands, 1 Pasir Ris Central Street 3, #01-41, Singapore 518457 White Sands, 1 Pasir Ris Central Street 3, Singapore 518457

SMRT Trains Ltd

1 April 2006

Retail outlet

Corwin Holding Pte Ltd

27 September 2007

325

Retail outlet

NTUC Fairprice Co-operative Limited

5 September 2007

129

Retail outlet

ARMF (TBP) Private Limited

1 December 2005

200

Retail outlet

HDB

15 March 2005

339

Retail outlet

UOL Property Investments Pte Ltd

1 June 2005

396

Retail outlet

VivoCity Pte Ltd as Trustee of VivoCity Trust

2 November 2006

104

Retail outlet

Alprop Pte Ltd

31 August 2006

369

Retail outlet

ARMF (Whitesands) Pte. Ltd.

11 June 2007

145

Retail outlet

ARMF (Whitesands) Pte. Ltd.

11 June 2007

60

Outdoor seating area for the retail outlet at White Sands, #01-41, 1 Pasir Ris Central Street 3, Singapore 518457 Retail outlet

Yusof Ishak House, 31 Lower Kent Ridge Road, #01-05, Kent Ridge Campus, Singapore 119078

National University of Singapore

1 January 2008

178

100

OUR BUSINESS
Commencement of Tenancy

Location

Lessor/Licensor

Floor area (sq ft) 437

Use of property

Shop 4, Aljunied MRT Station, 81, Lorong 25, Geylang, Singapore 388310(2)
Notes:(1)

SMRT Trains Ltd

36 months from expiry of the rent-free fitting-out period

Retail outlet

Keen Holdings Pte. Ltd. is a property investment company wholly-owned by our Executive Chairman, Han Keen Juan, and his wife. Please refer to the section entitled Present and Ongoing Interested Person Transactions of this Prospectus for further information on our lease with Keen Holdings Pte. Ltd.. The retail outlet is being constructed at the moment. As such, only a letter of offer has been signed and the tenure and floor area of the retail outlet has yet to be finalised.

(2)

The abovementioned leases for the retail outlets are for the terms of between one to three years. For the retail outlets with leases expiring within the next 12 months, except for retail outlets in Far East Plaza, Bukit Merah, Eastpoint Mall, United Square and SPC Dunearn which had in aggregate contributed to less than 5.0% of our revenue for FP2007, our Company has either secured the relevant renewals for terms of one to three years or has the option to renew, at their own discretion, their leases for the terms of one to three years at the prevailing market rate. Further details on our production facility are set out in the section entitled Production Facility and Capacity of this Prospectus. There are no regulatory requirements or environmental issues that may materially affect our utilisation of our fixed assets. OUR MAJOR CUSTOMERS None of our customers individually contributes 5% or more of our revenue in the period under review. Our customers are principally takeaway customers, whose individual annual expenditure at our various retail outlets does not constitute a substantial percentage of our annual revenue. Almost all our sales are transacted on a cash basis. Less than 0.5% of our revenue in the period under review was generated on credit terms. Credit terms of between seven and 30 days are granted to some customers, including governmental agencies, our Associated Company and our franchisees. As such, we have not been dependent on any single customer for the period under review. OUR MAJOR SUPPLIERS Our major purchases for our operations are raw materials such as vegetable oil and margarine, and food products manufactured by our contract manufacturers. These raw materials are sourced within Singapore while our contract manufacturers are located in Singapore and Thailand. The suppliers accounting for 5% or more of our purchases for FY2004, FY2005, FY2006 and FP2007 are set out below:Percentage of purchases (%) FY2004 FY2005 FY2006 FP2007 41.7 42.1 38.6 39.6

Supplier Siamchai International Food Co. Ltd. (1) Leong Hin Foods Pte. Ltd.

Products supplied Frozen seafood

Cuttlefish balls and fish balls

21.4

(2)

17.6

17.9

17.1

101

OUR BUSINESS
Percentage of purchases (%) FY2004 FY2005 FY2006 FP2007 8.4 8.2 8.6 8.3

Supplier Fuji Sunny Foods Corp. Pte. Ltd.


Notes:(1)

Products supplied Vegetable oil and margarine

Some of the shareholders of Siamchai International Food Co. Ltd. are our joint venture partners in Old Chang Kee Thailand. Please refer to the section entitled Group Structure of this Prospectus for more details. The lower percentage of purchases from Siamchai International Food Co. Ltd. in FY2006 was due to the increase in our total purchases in FY2006 as a result of increased purchases of items such as such as flour and margarine from other suppliers. The higher percentage of purchases from Leong Hin Foods Pte. Ltd. in FY2004 was due to a reduction in order from Leong Hin Foods Pte. Ltd some time in FY2005 as it reduced its production capacity when it relocated to a smaller factory.

(2)

We assess our supply sources from time to time. We place more orders with suppliers who consistently provide favourable value in terms of price, quality and exhibit/provide the ability to meet our delivery schedules. Supplies of raw materials are readily available within Singapore. Our Directors also believe that there are many suitable alternative suppliers in the market. In the event that our major suppliers are unable to meet our demand for raw materials, we will source for alternative suppliers. Our Directors believe that we will not encounter significant difficulty in procuring alternative suppliers. Our Group is therefore not materially dependent on the abovementioned major suppliers. None of our Directors or Substantial Shareholders has any interest (direct or indirect) in any of the abovementioned suppliers. INVENTORY MANAGEMENT As at 31 December 2006, our inventory amounted to S$446,000 and consisted of mainly raw materials (flour, eggs, potatoes, margarine, chicken meat, spices, vegetables and frozen food products manufactured by our contract manufacturers). As at 30 June 2007, our inventory amounted to S$526,000. We do not keep a large inventory of raw materials as such materials are readily available. Most of the raw materials used for production are perishable, and as such have short shelf lives. Our inventory is managed on a first-in-first-out basis, where supplies received first are used first in the production process. We conduct daily stock counts at our production facility. We do not have any specific policy for provision and write-off of inventories. For the period under review, we have not experienced any significant damage or loss of inventory and have not written off any obsolete inventory. Our average inventory turnover (in days) for the period under review are as follows:FY2004 Number of days
Note:(1) Average inventory turnover = (Average inventory/purchases) x 365 days. Pro-rated 181 days for FP2007.
(1)

FY2005 11

FY2006 13

FP2007 13

12

102

OUR BUSINESS
CREDIT POLICY We do not extend credit to our customers as we operate on a cash basis. However, we have trade receivables arising from export sales to Old Chang Kee Malaysia and our overseas franchisees, revenue collected on our behalf by the landlord of a retail outlet as well as other miscellaneous sales such as sale of vouchers to corporate customers. We have not experienced any material bad trade debts during the periods under review. Similarly, we did not provide for doubtful trade debts as we have not experienced significant difficulties in collecting our trade receivables. Our average trade receivables turnover (in days) for the period under review are as follows:FY2004 Number of days
Notes:(1) (2) Average trade receivables turnover = (Average trade receivables/revenue) x 365 days. Pro-rated 181 days for FP2007. While our sales are conducted on cash basis only, we had trade and other receivables arising from export sales to the Indonesian Franchisee and revenue collected on our behalf by the landlord of a retail outlet.
(1) (2)

FY2005 1

FY2006 1

FP2007 1

Less than a day

Payment terms granted by our suppliers vary depending on, inter alia, our relationship with our suppliers and the size of the transactions. Typical credit terms range from seven days to 60 days. Our average trade payables turnover (in days) for the period under review are as follows:FY2004 Number of days
Notes:(1) (2) Average trade payables turnover = (Average trade payables/purchases) x 365 days. Pro-rated 181 days for FP2007. The increasing average trade payables turnover from 52 days in FY2004 to 64 days in FY2006 was due in part to our suppliers granting us more favourable credit terms, and in part to economies of scale, as the volume of our purchases increased with our extended network of retail outlets.
(1)

FY2005 55

FY2006 64
(2)

FP2007 58

52

GOVERNMENT REGULATIONS The following are the main licences, permits, approvals and certificates that are essential for our business operations in Singapore:Licences, permits approvals and certificates Registration of factories

Administrative body Ministry of Manpower

Type of business operation Production facility

Location / Entity 2 Woodlands Terrace Singapore 738427 2 Woodlands Terrace Singapore 738427

Duration Expiry date is on 30 September 2008 Expiry date is on 31 October 2008

Licence to operate a AVA food processing establishment (excluding meat and fish) Licence for import of meat products and fish products Food shop licence AVA

Production facility

Production facility

Ten & Han

Expiry date is on 31 January 2008

NEA

Retail outlets

52 retail outlets in Singapore(2)

See note 1

103

OUR BUSINESS
Licences, permits approvals and certificates Temporary occupation licence

Administrative body Singapore Land Authority

Type of business operation Retail outlets

Location / Entity 2 Mackenzie Road #01-01 Singapore 228673 36 retail outlets in Singapore

Duration 13 January 2007 to 31 March 2009

Grading scheme for food processing establishments

Ministry of the Environment and Water Resources

Retail outlets

As at the Latest Practicable Date, these retail outlets have received either an A or B grade Expiry date is on 31 March 2008 See note 1

Halal certification

MUIS

Production facility

2 Woodlands Terrace Singapore 738427 50 retail outlets in Singapore(3) 4 retail outlets in Singapore and 2 Woodlands Terrace Singapore 738427

Retail outlets

Signboard licence

Building and Construction Authority

Retail outlets and production facility

See note 1

Notes:(1) The food shop licences, Halal certificates and signboard licences issued to our Group are usually granted for a period from one to two years and are renewable at the discretion of the relevant authorities subject to compliance with the relevant terms and conditions applicable. We have not experienced any difficulties in obtaining and maintaining all our licences, permits, approvals or certificates. Two retail outlets are currently awaiting the issuance of their food shop licence. Four retail outlets are currently awaiting the issuance of its Halal certificate.

(2) (3)

Registration of factories Under the Workplace Safety and Health (Registration of Factories) Regulations 2006 (WRFR), any person who desires to occupy or use any premises as a factory shall apply to the Commissioner for Workplace Safety and Health (CWSH) to register the premises as a factory. A factory has been defined under the Workplace Safety and Health Act 2006 to include premises within which persons are employed in any process for the making of any article. A certificate of registration shall be valid for a period of one year or for such other period as the CWSH may determine, unless it is earlier revoked in accordance with the WRFR. A certificate of registration may, on payment of a renewal fee, be renewed by the CWSH for such period as he may determine. The CWSH may, instead of registering any premises as a factory, issue a factory permit, with or without conditions, authorising the applicant to occupy the premises as a factory. A factory permit shall be valid for such period not exceeding six (6) months as the CWSH may specify in the permit, unless it is earlier revoked in accordance with the WRFR. A factory permit may, on payment of an extension fee, be extended for such period not exceeding six (6) months as the CWSH may determine. Licence to operate a food processing establishment (excluding meat and fish) Pursuant to the Sale of Food Act (Chapter 283), a person who operates, uses or knowingly permits a food establishment to be used for the manufacturing, processing, preparation or packaging of food (excluding meat and fish) for the purpose of distribution to retailers is required to apply for a licence to operate a food processing establishment from the Director-General, Agri-Food and Veterinary Authority (the Director-General). Pursuant to the Sale of Food (Food Establishments) Regulations (SFER), the licence has to be exhibited in a conspicuous position in the food establishment in respect of which the licence has been granted. The SFER also requires the licensee to store, pack and transport food (excluding fish and meat) in a manner such that it is protected from the likelihood of contamination and the safety, wholesomeness and suitability of the food (excluding fish and meat) is not affected.

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Licence to operate a meat or fish processing establishment or cold store A person who uses any premises or permits any premises to be used as a processing establishment or a cold store for meat products or fish products is required under the Wholesome Meat and Fish Act (Chapter 349A) (WMFA) to apply for a licence to do so from the Director-General. In determining whether to grant or refuse to grant the licence, the Director-General shall have regard to the financial standing of the applicant and his ability to operate and maintain a processing establishment or cold store and the suitability of the premises to be licensed for use as a processing establishment or cold store. A licence granted by the Director-General shall be valid for the period stated therein unless it is revoked before the expiry of that period. Upon expiry of the licence, it may be renewed. Under the Wholesome Meat and Fish (Processing Establishments and Cold Stores) Rules (WPCR), the licensee has to exhibit his licence in a conspicuous position in the processing establishment or cold store in respect of which the licence has been granted. The WPCR also requires the licensee to take measures to, inter alia, cause every person employed in his licensed processing establishment or cold store to be examined by a medical practitioner at the time of this appointment and obtain from the medical practitioner a certificate of fitness in respect of every such person who is found fit by the medical practitioner to be employed at the processing establishment or cold store and to ensure that every person who is employed in the licensed processing establishment or cold store handles any meat product, fish product or processing ingredient in a hygienic manner. Licence for import of meat products and fish products Pursuant to the WMFA, a person who imports any meat product or fish product is required to apply for a licence from the Director-General. Further, no licensee shall import any meat product or fish product for sale, supply or distribution in Singapore unless the licensee has obtained a permit from the DirectorGeneral in respect of each consignment of meat products or fish products to be imported by him and the import of each such consignment is carried out in accordance with the conditions of the permit, the whole consignment conforms to the description as contained in the permit, the whole consignment meets with the prescribed standards and the meat products or fish products constituting the consignment are packaged and labelled in the prescribed manner. Any person who has imported any meat product or fish product into Singapore has to forthwith arrange for the meat product or fish product to be inspected, examined and certified by an examiner, authorised by the Director-General, before it is sold. Where any meat product or fish product which has been inspected or examined by an authorised examiner is found by the authorised examiner to be diseased, adulterated or otherwise unfit for human consumption, the authorised examiner shall issue to the person who imported the meat product or fish product a certificate stating his finding and the person who imported the meat product or fish product shall remove the meat product or fish product from Singapore or destroy or otherwise dispose of the meat product or fish product in the prescribed manner. A licence which is granted by the Director-General shall be valid for the period stated therein unless it is revoked before the expiry of that period. Upon expiry of the licence, it may be renewed. Food shop licence A person who operates or uses or knowingly permits a food establishment to be used as a retail food establishment where food is sold wholly by retail, whether or not the food sold is also prepared, stored or packed for sale or consumed at such premises, is required to obtain a licence from the Director-General of Public Health (DGPH). A licence which is granted shall be in the form as the DGPH may determine. The Environmental Public Health (Food Hygiene) Regulations (EFHR) stipulates that a licensee shall cause his licence to be exhibited at all times in a conspicuous and accessible position within the licensed premises. The EFHR also sets out the rules regarding, inter alia, the storage and refrigeration of food, packaging of food, transportation of food, the sale and preparation of food, cleanliness of equipment used in the licensed premises, the upkeep of the licensed premises and the personal cleanliness of the persons who are engaged in the sale or preparation for sale of food, which a licensee must abide by. These rules are to ensure that the food sold at the licensed premises is free from contamination and safe for human consumption.

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Temporary occupation licence Pursuant to Section 3 of the State Land Rules (Chapter 314) of Singapore, any person who operates a food retail outlet at an outdoor kiosk occupying State land is required to obtain a temporary occupation licence (TOL) from the Collector of Land Revenue, who is either any officer of the Singapore Land Authority or any public officer or officer of any other public authority constituted under any written law for a public purpose, appointed to be a Collector of Land Revenue. Every TOL shall be subject to such terms and conditions as the Collector of Land Revenue considers fit to impose. Each TOL shall be issued for a period not exceeding three years and may, at the discretion of the Collector of Land Revenue, be renewed upon its expiry for a period not exceeding three years upon any one renewal. No TOL issued pursuant to the State Land Rules (Chapter 314) of Singapore shall create or be deemed to create a tenancy in favour of the licensee or give the licensee as against the Government of Singapore the exclusive right to the occupation of the land described in the TOL. The TOL may be cancelled or revoked at any time and neither the licensee nor any other person shall be entitled to any compensation or damages. Grading scheme for food processing establishments All food processing establishments in Singapore are classified into four graded categories: A, B, C and D, based on food hygiene and food safety standards. Each establishment is graded prior to the expiry of its licence and is reassessed annually. Food processing establishments are graded with the aim of enabling food manufacturers to be aware of hygiene and food safety standards and the need for improvements. It creates an environment which encourages food manufacturers to upgrade their hygiene and food and safety standards in the process of striving for higher grades. Food processing establishments are graded based on a set of criteria covering all aspects of hygiene and food safety standards. The criteria include:General cleanliness and housekeeping Food storage Food processing equipment and facilities Food handling and facilities Product identification and transportation Food safety system Food hygiene training Documentation Violation history Food manufacturers strive for higher grades in order to remain competitive. Food processing establishments with higher grades may use their grades as testimonies to show their customers that they have achieved high food hygiene and food safety standards. Halal certification MUIS, which is constituted under the Administration of Muslim Law Act (Chapter 3), may issue a Halal certificate in relation to the operation of a retail food establishment and regulate the holder of such certificate to ensure that the requirements of the Islamic law are complied with in the operation of the establishment. An application for a Halal certificate shall be in such form as MUIS may require and MUIS may, in issuing the Halal certificate, impose such conditions as it thinks fit and may at any time, vary, remove or add to such condition.

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Signboard licence Under the Building Control (Outdoor Advertising) Regulations, a person who displays, causes or permits to be displayed outdoors, whether on the exterior surface of any building or on any part of the premises, or on any free-standing advertising structure, any advertisement or any single signboard that has an area exceeding 5 square metres or a series of related signboards that together have an aggregate area that exceeds 5 square metres, is required to obtain a licence from the Commissioner of Building Control (CBC). In considering whether to grant or renew a licence, the CBC will take into account the amenities of the premises, the aesthetics of the streetscape and the amenities of any historic or public building or monument or of any place frequented by the public solely or mainly on account of its beauty or historic interest. A licence may be granted or renewed subject to such conditions and restrictions as the CBC may think fit. Based on our Directors belief and knowledge, we have obtained all necessary licences, permits, approvals and certificates for our business operations in Singapore and have complied with all relevant laws and regulations that would materially affect our business operations. INSURANCE We have taken out insurance policies for our production facility and office at 2 Woodlands Terrace covering losses due to robbery and burglary, public liability occurrences, consequential losses, material damages caused to our computer equipment, building and/or improvement cost of furniture, fixtures, fittings, office and business equipment and coldrooms. For each of our retail outlets, we have taken out insurance policies covering losses due to damage caused to the landlords fixtures and fittings, stocks, furniture and fittings, office business equipment and other contents as well as public liability insurance. Insurance policies covering losses due to damage to our vehicles have also been taken out. We have also insured our staff for workmens compensation insurance. Further, we have taken out an insurance policy covering losses caused by accidental death and permanent disablement, accident medical reimbursement, temporary total disablement and temporary partial disablement for our management staff. In addition to the above, we have also taken out a comprehensive general liability insurance covering losses due to property damage and bodily injuries caused by consumption of our food products in Singapore, Malaysia, Indonesia, Republic of China, PRC and Perth, Australia as well. Based on the above, our Directors believe that these insurance policies are adequate for the current operations of our Group. COMPETITION The F&B industry is intensely competitive. There are many other stores and retail outlets around Singapore serving competing, alternative or substitute food products. Our Directors believe our Groups competitiveness depends on various factors including pricing, location, taste, presentation, branding, reputation, variety of food products and hygiene standards. Of the players in the industry, we have identified the following as our closest competitors:Bengawan Solo BreadTalk Group Limited Polar Puffs & Cakes Pte Ltd Prima Deli Bakeries and food retail outlets close to our retail outlets

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OUR COMPETITIVE STRENGTHS Our Directors believe that our competitive strengths are as follows:(i)

We are an established and distinctive household brand name in Singapore


Our Old Chang Kee curry puffs have been sold in Singapore since 1956 and have garnered many accolades from customers. With our long history, consistent high quality and distinctive taste of our food products, the Old Chang Kee brand name has become an established and iconic brand name in Singapore, and is widely known by local consumers. The strong brand name of Old Chang Kee in Singapore serves as a suitable platform for us to launch our Old Chang Kee products in other countries. Old Chang Kee is well-positioned as a traditional Singapore brand, and will appeal to customers who want a slice of Singapore.

(ii)

We operate an extensive network of retail outlets at strategic locations


We make it a point to source for strategic locations for our retail outlets. Our retail outlets are located at easily accessible locations with high human traffic flow thus facilitating high volume sales of our food products. We also offer a delivery service called Old Chang Kee Delivers which operates in the central business district and other selected areas of Singapore. For further details on our retail outlets, please refer to the section entitled Marketing and Business Development of this Prospectus.

(iii)

We have a diversified customer base


Our food products have widespread appeal and are well received by a broad spectrum of customers. The variety and range of our food products appeal to customers of all ages.

(iv)

We have dedicated key management personnel with extensive experience in the local food industry
We have a dedicated management team spearheading our business operations and driving our future growth plans. The teams experience and knowledge of the industry in which we operate enables our Group to successfully introduce new food products into the market and identify new business opportunities. Our Group is led by our Executive Chairman, Han Keen Juan, and our CEO, William Lim, who have more than 20 and 10 years of experience in the F&B industry, respectively. Under their leadership, our business has experienced significant growth over the years and the Old Chang Kee brand is now a well-known household brand name. Further details of our management teams working experience are set out under the section entitled Directors, Management and Employees of this Prospectus.

(v)

We are committed to high quality standards


We are committed to bringing quality food products to our customers. We have implemented strict quality controls in our manufacturing processes to ensure that our products are consistently of a high quality. Our production facility operates according to pre-set specifications. We are committed to upholding quality standards throughout the processes of production, delivery, and up to sale of the food products to our customers. For further details on our quality control measures, please refer to the section entitled Quality Control of this Prospectus.

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AWARDS AND ACCREDITATION We have obtained the following awards and accreditation:Award/Accreditation Singapore Promising Brand Award (SPBA) Year of issue 2004 Issued by Association of Small and Medium Enterprises and Lianhe Zaobao Association of Small and Medium Enterprises and Lianhe Zaobao Association of Small and Medium Enterprises and Lianhe Zaobao MediaCorp Radio, Singapore Workforce Development Agency, National Trade and Unions Congress and Spring Singapore

SPBA Heritage Brand Award

2005

SPBA Distinctive Brand Award (SPBA)

2005

Lifelong Learner Award, Corporate Category

2007

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PROSPECTS AND FUTURE PLANS


PROSPECTS Outlook for the F&B industry and our products The F&B industry in Singapore is highly competitive with many market players and a relatively small market with a population of over 4 million. Barriers of entry into this industry are also low. Our Directors believe that the overall outlook for the F&B industry and demand for our food products is positive based on the following factors:(i)

Changing lifestyle and tastes of consumers


With advances in telecommunications technology, the lifestyles of working Singaporeans have become busier and more hectic. This trend has resulted in an increased demand for takeaway and convenience foods. At the same time, our Directors are of the view that there is an increasing demand for local food products of high quality and authentic taste in Singapore. The combination of these factors augurs well for our Group as we continue to develop and offer high quality takeaway food products including local favourites like curry puffs that are easily identifiable by Singaporeans.

(ii)

Opportunities for regional expansion


We have received encouraging feedback on our food products from our non-Singaporean customers. Some have requested that our retail outlets be set up in their home countries and/or that franchising rights be granted to them. For example, we had increased our retail outlets in Chengdu, PRC from one to three as at the Latest Practicable Date. Our Directors are of the opinion that the regional prospects for our food products are favourable, as our food products are of widespread appeal and are popular with both Singaporean and foreign consumers.

TREND INFORMATION We have been and will be making minor price adjustments to the selling price of a few of our food products in the current financial year due to the increasing cost of sales and operations brought about by the appreciation of THB against the S$ as well as the increasing raw material prices (such as vegetable oil and flour), rental and utilities charges. On 15 November 2007, we entered into a sale and purchase agreement with Nineteen O One Sdn. Bhd. pursuant to which the entire issued and paid-up share capital of 1901 Singapore would be transferred to Nineteen O One Sdn. Bhd. for a consideration of S$180,000, based on the net tangible assets of 1901 Singapore as at 15 November 2007 (the Disposal). Completion of the Disposal took place on 15 November 2007. The Disposal is expected to result in a loss of about S$100,000 to be recognised in full in FY2007. As a result of the increasing cost of sales and operations as well as the loss arising from the Disposal, it is likely that our profit for FY2007 will be lower than our profit for FY2006. In the period from 1 January 2007 up to the Latest Practicable Date, we had opened eight new retail outlets and closed one retail outlet in Singapore. We expect to open 11 new retail outlets in Singapore between the Latest Practicable Date and 31 December 2008. These 11 retail outlets will comprise five new retail outlets at various petrol stations, four new retail outlets at MRT stations and two retail outlets at other locations, which are to be determined. Barring any unforeseen circumstances, we expect the new retail outlets to generate new revenue for our Group with corresponding increases in our cost of sales and operating expenses. There is no assurance that the new retail outlets will have any material impact on the profitability of our Group in the current financial year. In May 2006, we entered into negotiations with a Taiwanese party to set up a company in PRC. Pursuant to these negotiations, Old Chang Kee Chengdu Co., Ltd. was incorporated in Chengdu, PRC. Subsequently, the Taiwanese party decided not to continue its participation in the investment. As a consequence, we are in the process of liquidating Old Chang Kee

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Chengdu Co., Ltd. and have, in May 2007, incorporated a new wholly foreign owned enterprise, Old Chang Kee China, to carry on our operations in Chengdu, PRC. As at the Latest Practicable Date, we had three retail outlets in Chengdu, PRC (through Old Chang Kee China). Save as disclosed above and in the section entitled Risk Factors of this Prospectus, and barring any unforeseen circumstances, our Directors are not aware of any other known trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our net sales or revenues, profitability, liquidity or capital resources, or that would cause financial information disclosed in this Prospectus to be not necessarily indicative of our future operating results or financial condition. Order book We do not maintain any order books due to the nature of our business. FUTURE PLANS Our future plans are as follows:(i)

Expand our overseas operations


Our Directors believe that there is overseas demand for our Old Chang Kee brand and its range of products. To expand our business overseas, we have established brand presence in Jakarta, Indonesia, through our Indonesian Franchisee and in Manila, the Philippines through our Philippines Franchisee. We have also incorporated subsidiaries in Australia and PRC. As at the Latest Practicable Date, we had three retail outlets in Chengdu, PRC (through Old Chang Kee China). We intend to increase the number of our retail outlets in Chengdu, PRC and to expand to other parts of PRC, such as Chongqing. We expect to open at least three retail outlets in the PRC within the next 24 months. Old Chang Kee Australia is currently dormant. We are in the process of selecting appropriate sites for production facilities and retail outlets for Old Chang Kee Australia. We expect to open at least two retail outlets in Australia within the next 24 months. We also set up Old Chang Kee Malaysia, our 40.0% Associated Company, in Malaysia. Old Chang Kee Malaysia currently operates two retail outlets in Kuala Lumpur, Malaysia, selling our Old Chang Kee curry puffs and food products in Malaysia. We have set aside S$1.0 million from the net proceeds raised from the Invitation for such purposes.

(ii)

Increase and refurbish our Singapore retail outlets


We intend to intensify our search for strategic locations in Singapore at which to set up new retail outlets, which will include our Take 5 retail outlets as well as retail outlets with drive-through facilities. We expect the number of our new retail outlets in Singapore to increase by at least five outlets within the next two financial years. The continued growth in the number of retail outlets at strategic locations will contribute significantly to the growth of our Group. We also intend to relocate some of our existing retail outlets to more strategic locations and refurbish some of our existing retail outlets to adopt the same concept and image at all our retail outlets in Singapore. We have set aside S$1.0 million from the net proceeds raised from the Invitation for such purposes.

(iii)

Expansion through strategic alliances, acquisitions, joint ventures and franchises


Due to the popularity of our food products, we have received encouraging feedback from our nonSingaporean consumers. Some have requested that retail outlets be set up in their home countries and/or that franchising rights be granted to them. We may acquire other food related businesses in Singapore or overseas or enter into joint venture agreements with them. Other consumers have approached us to discuss joint venture arrangements. Other than direct investment and setting up our own retail outlets in overseas countries as mentioned above, we plan to take the Old Chang Kee brand abroad through strategic alliances, acquisitions, joint ventures and franchises. We have set aside S$500,000 from the net proceeds raised from the Invitation for such purposes. Presently, our Group does not have any specific initiatives or plans with regard to any investments through strategic alliances, acquisitions, joint ventures and franchises.

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DIRECTORS, MANAGEMENT AND EMPLOYEES


DIRECTORS The Board of Directors is responsible for the overall management of our Group. The names, ages, addresses and principal occupations of our Directors are listed below:Name Han Keen Juan Age 56 Residential Address 17 Novena Terrace Singapore 307911 67A Kings Road Singapore 268133 18 Stratton Drive Singapore 806877 Principal Occupation Executive Chairman of our Company CEO of our Company

William Lim

47

Choong Buat Ken

59

Managing Director of Mast Management Consultants Pte Ltd and Mast Computer Pte Ltd Sole Proprietor of Y.H. Lim & Co. Certified Public Accountants Singapore Business adviser

Lim Yen Heng

58

Block 856E Tampines Street 82 #09-202 Singapore 525856 Block 498G Tampines Street 45 #10-432 Singapore 525498 Block 172 Bedok South Road #07-425 Singapore 460172

Ong Chin Lin

59

Wong Chak Weng

53

Consultant at Soh Wong & Yap, Advocates and Solicitors

Information on the areas of responsibility and working experience of our Directors are set out below:Han Keen Juan is our Executive Chairman and one of the founders of our Group. He is involved in the overall management of our Group and is responsible for leading the management in setting our Groups mission and objectives and developing the overall business strategies of our Group. He has more than 30 years of sales experience and was instrumental in the establishment, development and expansion of our Groups business. He began his career in 1972 as a salesman in Guthrie Waugh Singapore selling electronic equipment. In 1975, he joined Duncan Robert Sdn Bhd as an electronic equipment salesman and was later promoted to sales supervisor during his employment with them. In 1978, he held the position of sales supervisor of Chubb Singapore Private Limited and was subsequently promoted to sales manager. In 1986, he left Chubb Singapore Private Limited and established our business. He graduated from Upper Serangoon Technical School. William Lim is our CEO. He joined our Group in 1995, and has accumulated more than 20 years of sales experience. Prior to joining our Group, he was a sales representative with Canon Marketing Services Pte Ltd from 1981 to 1983. From 1984 to 1990, he was the general manager and director of Font Office Automation Pte Ltd, a company involved in the sales of office equipment. From 1991 to 1994, he was a part-time sales representative with CDM Australia Pty Ltd. He is instrumental in the development of new food products and expansion into overseas markets. Under his leadership, we had established 54 retail outlets in Singapore as at the Latest Practicable Date. He is responsible for the development of new food products, expansion of our business into overseas markets and overseeing the business and sales development strategies of our business. He is currently a member on the board of the Intellectual Property Office of Singapore (IPOS) and the IPOS Investment Committee. He obtained a Bachelor of Commerce from the Curtin University of Technology in 1995.

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DIRECTORS, MANAGEMENT AND EMPLOYEES


Choong Buat Ken, appointed as our Non-Executive Director on 16 November 2007, is currently the Managing Director of Mast Management Consultants Pte Ltd and Mast Computer Pte Ltd, and renders services in areas such as corporate strategies, organization and methods, accounting and financial management system design and implementation, personnel policies and corporate secretarial services. He also holds a non-executive directorship in ViewSonic Singapore Pte Ltd. Beginning his career in February 1970 as an audit assistant in Coopers & Lybrand, he has accumulated more than 36 years of working experience to date, holding various positions such as financial officer of Jurong Town Corporation, group chief accountant of Metro Holdings Ltd, control officer of Asian Development Bank in Manila, the Philippines, and finance director of Galeries Lafayette, Singapore. He graduated with a Bachelor of Commerce (Accountancy) from the then Nanyang University in 1970 and obtained a Master of Business Administration from the Ateneo Graduate School of Business, the Philippines, in 1981. He is a non-practising member of the Institute of Certified Public Accountants of Singapore. Lim Yen Heng, appointed our Non-Executive Director on 16 November 2007, is currently the sole proprietor of Y.H. Lim & Co. Certified Public Accountants Singapore, where he is responsible for the overall operation of the firm. Beginning his career in April 1972 as an audit assistant in Lim, Tan, Tiew & Co. Public Accountants Singapore, he has accumulated more than 30 years of working experience to date in the fields of accounting and auditing. From October 1977 to April 1978, he was an accountant with L & M Prestressing Pte Ltd, where he was responsible for the preparation of financial statements, budgeting and cash flow management. In April 1978, he joined K.S. Liaw & Co. Public Accountants Singapore as an audit manager and was subsequently promoted to the position of partner in October 1978. In January 1987, he established Y.H. Lim & Co. Certified Public Accountants Singapore as a sole proprietorship. He graduated with a Bachelor of Commerce (Accountancy) from the then Nanyang University in 1972. He is a practising member of the Institute of Certified Public Accountants of Singapore as well as a non-practising fellow of the Certified Public Accountants of Australia. Ong Chin Lin, appointed our Lead Independent Director on 16 November 2007, is currently the independent director of Linair Technologies Ltd and Yi-Lai Berhad. In carrying out his duties as an independent director of these companies, he, inter alia, ensures that adequate risk management processes are established, reviews internal and external audit reports on the companies, monitors the director selection and other board processes, reviews and approves the remuneration package of executive directors, validates and approves corporate strategies, reviews business results, monitors budgetary control and authorises major investment and strategic commitments. Beginning his career in April 1971 as an articled clerk in Leigh, Sorene & Lawson, he has more than 35 years of working experience to date. He had previously held positions such as group accountant of Prima Flour Ltd, finance and operation director of Malaysia-Beijing Travel Sdn Bhd, leasing manager of Far East Organisation Pte Ltd and financial controller of Nylect Technology Limited. He graduated with a Bachelor of Commerce (Accountancy) from the then Nanyang University in 1970. He is an associated member and a fellow of the Institute of Chartered Accountants in England and Wales. He is also a member of the Malaysia Institute of Accountants. Wong Chak Weng, appointed our Independent Director on 16 November 2007, is a practising lawyer with more than 20 years of experience. His areas of practice include corporate work and advising on compliance with licensing and business conduct regulations of financial service providers. During the period between 1984 and 1994, he held various positions with the Monetary Authority of Singapore including legal officer in the Managing Directors Office, assistant director in the Management Accounting and Custody Division, Finance Department, staff assistant to the managing director and senior review officer in the Securities Industry Department, Banking and Financial Institutions Group. He was appointed as an independent director of CDW Holding Limited since it was listed on the SGX-ST Mainboard on 26 January 2005. Mr Wong is currently a member of the audit committee and remuneration committee of CDW Holding Limited. In addition, he is the chairman of CDW Holding Limiteds nominating committee. He is currently a consultant at Soh Wong & Yap, Advocates and Solicitors and a joint company secretary to Lutheran Community Care Services Limited, a charitable organisation. He is also the honorary legal adviser to ACI Singapore, The Financial Markets Association and a member of the audit committee of the Law Society of Singapore. He holds an LLB (Hons) from the National University of Singapore.

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Han Keen Juan and William Lim are also our Substantial Shareholders. Our CEO, William Lim, is a nephew of our Executive Chairman, Han Keen Juan. Save as disclosed above, none of our Directors is related by blood or marriage to one another or to our Substantial Shareholders. MANAGEMENT Our day-to-day operations are entrusted to our Executive Directors who are assisted by a management team of experienced key Executive Officers. The names, ages, addresses and positions of the Executive Officers are set out below:Name Chew Mei Li Age 39 Residential Address Block 77 Indus Road #09-525 Singapore 160077 Block 795 Yishun Ring Road #13-3406 Singapore 760795 Block 10 Joo Seng Road #08-106 Singapore 360010 Block 121 Ang Mo Kio Avenue 3 #06-1705 Singapore 560121 Position Chief Financial Officer

Chow Hui Shien

34

General Manager

Ng Lee Huang

48

Operations Manager

Ngoh Kin Wee

49

Logistics Manager

Information on the areas of responsibility and working experience of our Executive Officers are set out below:Chew Mei Li, our Chief Financial Officer, joined our Group in March 2006. She is responsible for the full spectrum of financial and taxation functions in our Group, including financial accounting, management accounting, budgeting and forecasting, statutory reporting to relevant authorities in all jurisdictions that our Group operates in as well as internal controls and compliance with corporate, legal, tax, accounting and operational requirements. She has over 12 years of experience in accounting and finance. From 1986 to 1993, she held the position of audit assistant with Y H Lim & Co, where she was responsible for evaluating clients internal controls and taxation matters. From 1994 to 1996, she was an accounts executive with Cathay Organisation Pte Ltd. Prior to joining our Group, she held the position of assistant manager with a company listed on the SGX-ST Mainboard, L.C. Development Ltd, where she was responsible for the financial and accounting functions of the company. Ms Chew is a non-practising member of Institute of Certified Public Accountants of Singapore and a fellow member of the Association of Chartered Certified Accountants. Chow Hui Shien, our General Manager, is responsible for overseeing the retail operations of our Group. She also participates actively in formulating various branding exercises, business development and sourcing for strategic locations at which to set up new retail outlets for our Group. She also ensures the smooth implementation of the ERP system. She joined our Group in 2004 and has, to date, more than seven years of experience in general management. From 1999 to 2002, she was appointed as a manager of Good Morning Breakfast (a sole-proprietorship involved in the retailing of local breakfast items). Her duties included overseeing the retail and production operations, the sales and marketing aspects and the research and development activities of the business. Between 2002 and 2004, she assisted in the incorporation of Hainan Treats Pte. Ltd. and was subsequently appointed as its manager. Her duties included overseeing the retail and production operations and the sales and marketing activities of the company. She graduated with a Bachelor of Business from the Monash University, Melbourne in 2003.

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Ng Lee Huang, our Operations Manager, is responsible for supervising the production processes of our Group and ensuring that they comply with the stringent standards and procedures established by our Group. Her duties also include overseeing the procurement activities of raw materials and production machinery and supervising the machinery maintenance program. She graduated from Chung Hwa Girls High School in 1975 and was employed as a clerk in Globe Service Co. from 1976 to 1987. She joined our Group in 1987. Ngoh Kin Wee, our Logistics Manager, is responsible for coordinating with our sales department to plan the future production capacity of the factories to ensure sufficient supply of food products to our retail outlets. He also determines delivery truck routes to ensure punctual delivery of food products to the retail outlets and the quantity of food products to be delivered to each retail outlet. He graduated from Ahmad Ibrahim Secondary School in 1976 and assisted in running his parents food stall between 1977 and 1986. He joined our Group in 1987. Chow Hui Shien is a niece of our Executive Chairman, Han Keen Juan and a cousin of our CEO, William Lim. Save as disclosed above, none of our Executive Officers is related by blood or marriage to one another, our Directors or our Substantial Shareholders. MANAGEMENT REPORTING STRUCTURE Our management reporting structure is as follows:-

BOARD OF DIRECTORS

HAN KEEN JUAN Executive Chairman

WILLIAM LIM CEO

CHEW MEI LI Chief Financial Officer

CHOW HUI SHIEN General Manager

NG LEE HUANG Operations Manager

NGOH KIN WEE Logistics Manager

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DIRECTORS, MANAGEMENT AND EMPLOYEES


DIRECTORS AND EXECUTIVE OFFICERS REMUNERATION The compensation (which includes salary, bonus, benefits-in-kind, CPF contributions and directors fees) paid or payable to our Directors and Executive Officers for services rendered to us in all capacities for FY2005, FY2006 and FY2007 (estimated), in bands of S$250,000 per annum, were or are as follows:Estimated amount for FY2007 (1) Band II Band II Band I Band I Band I Band I

Directors Han Keen Juan William Lim Choong Buat Ken Lim Yen Heng Ong Chin Lin Wong Chak Weng Executive Officers Chew Mei Li Chow Hui Shien Ng Lee Huang Ngoh Kin Wee
Legend:Band I Band II Band III Band IV Note:(1)

FY2005 Band IV Band IV

FY2006 Band III Band III

Band I Band I Band I

Band I Band I Band I Band I

Band I Band I Band I Band I

: : : :

Compensation Compensation Compensation Compensation

of of of of

between between between between

S$0 to S$250,000 per annum S$250,001 to S$500,000 per annum S$500,001 to S$750,000 per annum S$750,001 to S$1,000,000 per annum

The compensation for FY2007 is estimated and does not include performance bonuses payable.

We have not set aside or accrued any amounts for our Directors, Executive Officers and our employees to provide for pension, retirement or similar benefits. Remuneration of employees who are related to our Directors and Substantial Shareholders As at the date of this Prospectus, two of our employees, Chow Hui Shien and Chow Phee Liat Philip, are related to our Directors and Substantial Shareholders. Chow Hui Shien, our General Manager, is a niece of our Executive Chairman, Han Keen Juan and a cousin of our CEO, William Lim. Chow Phee Liat Philip, who is our Franchise Manager, is a nephew of our Executive Chairman, Han Keen Juan, a cousin of our CEO, William Lim, and the brother of our General Manager, Chow Hui Shien. His scope of responsibility includes handling our franchise enquiries and participating in the selection of suitable business partners for our Group. Ng Choi Hong, the wife of our Executive Chairman, Han Keen Juan, was our marketing manager until her resignation which takes effect from 31 May 2007. Chiow Phee Bian, who was our Business Development Executive for 1901 Singapore, is a distant relative of our Executive Chairman and a first cousin of Chow Hui Shien. He has resigned with effect from 15 July 2007.

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DIRECTORS, MANAGEMENT AND EMPLOYEES


For the last two financial years, the aggregate remuneration (including CPF contributions and benefits-inkind) of Chow Hui Shien, Chow Phee Liat Philip, Chiow Phee Bian and Ng Choi Hong, who are related to our Directors and Substantial Shareholders, are set out below:FY2005 Remuneration paid As a percentage of our profit before taxation S$241,000 5.7% FY2006 S$300,000 7.2%

The basis of determining the remuneration of these related employees is the same as the basis for determining the remuneration of other unrelated employees. The total remuneration of employees who are related to our Directors and Substantial Shareholders shall be subject to the review and approval of the Remuneration Committee to ensure that their remuneration packages are in line with our Groups staff remuneration guidelines, and are commensurate with their respective job scopes and levels of responsibility. The total remuneration paid to our Directors, Substantial Shareholders and our employees who are related to our Directors will be disclosed in our annual reports. Save as disclosed above and in the section entitled Shareholders of this Prospectus, none of the Executive Officers or other employees mentioned above is related to each other or to any Director or Substantial Shareholder. SERVICE AGREEMENTS On 16 November 2007, our Company entered into separate service agreements (the Service Agreements) with our Executive Chairman, Han Keen Juan, and our CEO, William Lim (the Executives), which will take effect on the date of admission of the Company to the Official List of the Catalist or such other date as may be mutually agreed between our Company and the respective Executive. The terms of the appointment of Han Keen Juan and William Lim are for three years each, unless otherwise terminated by either party giving not less than six months written notice or salary in lieu of notice. We may also terminate their respective Service Agreements if, inter alia, any of them are convicted or otherwise found guilty of any offence involving fraud or dishonesty or serious misdemeanour, becomes bankrupt or otherwise acts to the prejudice of our Companys interests. In the event of such summary termination of employment, such Executive shall not be entitled to any compensation or liability in respect of such termination. The Service Agreements cover the terms of employment, specifically salaries, bonuses and benefits. Pursuant to the terms of the respective Service Agreements, Han Keen Juan and William Lim are entitled to a monthly salary of S$30,000 and S$25,000, respectively. The Executives are each entitled to a fixed bonus of an amount equivalent to two month(s) of their basic salary. They are each also entitled to an annual incentive bonus which shall be computed based on our audited consolidated profit (excluding extraordinary items and before paying the incentive bonus) before taxation of the Group (Group PBT) for that financial year. The incentive bonus will be based on a percentage of our Group PBT as set out in the table below and will be payable after the consolidated financial statements of our Group for each financial year have been audited:Name Han Keen Juan William Lim Incentive bonus payable 6% of the Group PBT 4.5% of the Group PBT

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DIRECTORS, MANAGEMENT AND EMPLOYEES


Our Executive Chairman, Han Keen Juan and our CEO, William Lim, are also entitled to the exclusive use of a motor car and a country club membership and to be reimbursed for expenses such as petrol, car park charges, electronic road pricing, road tax and car insurance. All reasonable travel, hotel and other out-of-pocket expenses incurred by our Executives in the discharge of their duties pursuant to the Service Agreements will be borne by our Company. The Executives have agreed, inter alia, that for the duration of the appointments under the respective Service Agreements, the Executives shall not directly or indirectly be engaged or interested in any other business, trade or occupation, without the consent of our Company. Furthermore, for a period of six (6) months after the respective appointments are terminated under the Service Agreements, the Executives shall not (a) be connected in any manner directly or indirectly in any business which is in competition with that conducted by our Group; (b) cause any of our customers to cease dealing with us; (c) solicit for himself or any person other than us the business of any of our suppliers or customers; or (d) persuade any of our employees to leave our employment. The Executives are also bound under the Service Agreements not to disclose any confidential information or trade secrets of our Group. Save for the above, there are no existing or proposed service contracts entered into or to be entered into by our Directors and our Company. Had the Service Agreements been in effect from 1 January 2006, the aggregate remuneration for the Executives in FY2006 would have been approximately S$1,480,000 and our profit before taxation for FY2006 would have been approximately S$3,941,000. OUR EMPLOYEES As at 30 June 2007, we had a workforce of approximately 421 full-time and 80 part-time employees. Our employees are not unionised. The relationship and co-operation between the management and employees has been good and is expected to continue in the future. Our operations have not been affected by any work stoppage or labour disputes. The breakdown of our staff strength, all of whom are based in Singapore, by activity as at the end of each of the period under review is as follows:FY2004 Function Management Finance Marketing and Administration Production and Logistics Operations Total
(1)

FY2005

FY2006

FP2007

5 2 8 73 187 275

5 4 15 84 267 375

6 4 15 129 315 469

6 5 17 122 351 501

Note:(1) There has been no replacement of management staff (comprising our Executive Directors and Executive Officers) in the period set out above.

We do not experience any significant seasonal fluctuations in our number of employees. We do not employ a significant number of temporary employees.

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DIRECTORS, MANAGEMENT AND EMPLOYEES


Staff Training We place emphasis on staff training to enhance the quality of our service and to keep staff abreast of new developments in our business. We conduct training for our staff both when they first join us, as well as over the course of their employment to constantly upgrade their skills. All our new staff stationed at the retail outlets are required to undergo on-the-job training (OJT), where they are provided with hands-on experience in the tasks they will perform at retail outlets under the supervision of team leaders. OJT at the retail outlets familiarises new staff with job responsibilities such as food handling, cooking and customer service. New production staff are also required to undergo OJT at our production facility under the supervision of our production executive. OJT at the production facility focuses on equipping our production staff with specific food manufacturing skills according to their individual job responsibilities. In connection with our focus on food quality and hygiene, we send our key production personnel to attend HACCP compliance training sessions conducted mainly by Singapore Polytechnic. We also engage external food technologists to provide comprehensive in-house training to all our production staff to familiarise them with HACCP requirements such as hygiene standards, food safety and Halal assurance system. From time to time, we send our office staff for IT system training and upgrading courses. We also engage external consultants to conduct annual training workshops for all our staff. At such annual training workshops, we update our staff on key areas of our Groups business such as our branding strategies and the vision of our Group for the upcoming year. BOARD PRACTICES Term of office Each of our Directors has served in office in our Company since the following dates:Name Han Keen Juan William Lim Choong Buat Ken Lim Yen Heng Ong Chin Lin Wong Chak Weng Date 16 December 2004 16 December 2004 16 November 2007 16 November 2007 16 November 2007 16 November 2007

Our Directors do not currently have a fixed term of office. At each annual general meeting, one-third of the Directors for the time being (or, if their number is not a multiple of three, the number nearest to but not less than one-third) shall retire from office by rotation. A retiring Director shall be eligible for reelection. The Directors to retire in every year shall be those who have been longest in office since their last re-election or appointment. All Directors (other than a Director holding office as Managing Director) shall retire from office at least once every three years.

119

CORPORATE GOVERNANCE
OVERVIEW Corporate governance refers to the processes and structure by which the business and affairs of a company are directed and managed, in order to enhance long term shareholder value through enhancing corporate performance and accountability. Good corporate governance therefore embodies both enterprise (performance) and accountability (conformance). With a view towards good corporate governance, our Company has implemented the corporate governance model set out below:-

Board of Directors

Nominating Committee Chairman Wong Chak Weng Members Ong Chin Lin Choong Buat Ken

Audit Committee Chairman Ong Chin Lin Members Wong Chak Weng Lim Yen Heng

Remuneration Committee Chairman Ong Chin Lin Members Wong Chak Weng Choong Buat Ken Lim Yen Heng

Ong Chin Lin and Wong Chak Weng have been appointed as our Independent Directors. Our Directors consider Ong Chin Lin and Wong Chak Weng to be independent as they do not have any past or ongoing business relationship with our Group and/or our Directors or Substantial Shareholders. Ong Chin Lin and Wong Chak Weng are neither related to each other nor to any of our Executive Directors or Substantial Shareholders. In view of the family relationship between our Executive Chairman, Han Keen Juan and our CEO, William Lim, and of the fact that they are both part of the executive management team, we have appointed Ong Chin Lin as our Lead Independent Director, pursuant to the recommendations in Commentary 3.3 of the Code of Corporate Governance 2005. In accordance with the recommendations in the said Commentary 3.3, Shareholders will be able to consult the Lead Independent Director where they have concerns for which contact through the normal channels of our Executive Chairman, CEO or Chief Financial Officer has failed to resolve or for which such contact is inappropriate. NOMINATING COMMITTEE Our Nominating Committee comprises Wong Chak Weng, Ong Chin Lin and Choong Buat Ken. Our Nominating Committee is chaired by Wong Chak Weng. The Nominating Committee is responsible for the following:(a) to make recommendations to the Board on all board appointments, including re-nominations, having regard to the Directors contribution and performance (for example, attendance, preparedness, participation and candour) including, if applicable, as an Independent Director; All Directors should be required to submit themselves for re-nomination and re-election at regular intervals and at least every three years; (b) to determine annually whether or not a Director is independent;

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CORPORATE GOVERNANCE
(c) in respect of a Director who has multiple board representations on various companies, to decide whether or not such Director is able to and has been adequately carrying out his duties as Director, having regard to the competing time commitments he faces when serving on multiple boards; and to decide how the Boards performance may be evaluated and propose objective performance benchmarks, as approved by the Board, that allows comparison with its industry peers, and to address how the Board has enhanced long term shareholder value.

(d)

AUDIT COMMITTEE Our business and operations are presently under the management and close supervision of our Executive Directors who are assisted by a team of key Executive Officers. The overall management is overseen by our CEO, William Lim. After the listing, our Executive Directors and Executive Officers will manage the business and operations of our Group. The Audit Committee will assist our Board with regards to discharging its responsibility to safeguard our Companys assets, maintain adequate accounting records, and develop and maintain effective systems of internal controls with the overall objective of ensuring that our management has created and maintained an effective control environment in our Company, and that our management demonstrates and stimulates the necessary aspect of our Groups internal control structure among all parties. Our Audit Committee comprises Ong Chin Lin, Wong Chak Weng and Lim Yen Heng. Our Audit Committee will be chaired by Ong Chin Lin. Our Audit Committee will meet at least quarterly to discuss and review the following where applicable:(a) review our audit plans with the external auditors and, where applicable, our internal auditors, including the evaluation of our internal control system, the audit report, the management letter and our managements response; review the quarterly and annual consolidated financial statements and the external auditors reports on those financial statements, before submission to the Board for approval, focusing in particular on changes in accounting policies and practices, major risk areas, significant adjustments resulting from the audit, the going concern statement, compliance with accounting standards as well as compliance with any stock exchange and statutory/regulatory requirements; review the internal controls and procedures and ensure co-ordination between the external auditors and our management, reviewing the assistance given by our management to the auditors, and discuss problems and concerns, if any, arising from the interim and final audits, and any matters which the auditors may wish to discuss (in the absence of our management where necessary); review and discuss with auditors any suspected fraud, irregularity or infringement of any relevant laws, rules or regulations, which has or is likely to have a material impact on our Groups operating results or financial position and our managements response; consider the appointment or re-appointment of the external auditors and matters relating to resignation or dismissal of the auditors; review transactions falling within the scope of Chapter 9 and Rule 1010 of the Listing Manual; review any potential conflicts of interest;

(b)

(c)

(d)

(e)

(f) (g)

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CORPORATE GOVERNANCE
(h) undertake such other reviews and projects as may be requested by the Board and report to the Board its findings from time to time on matters arising and requiring the attention of our Audit Committee; and generally undertake such other functions and duties as may be required by law or the Listing Manual, and by such amendments made thereto from time to time.

(i)

In addition, all future transactions with related parties shall comply with the requirements of the Listing Manual. As required by paragraph 1(9)(e) of Appendix 2.2 of the Listing Manual, any one of our Directors shall abstain from voting on any contract or arrangement or proposed contract or arrangement in which he has a personal material interest. Apart from the duties listed above, our Audit Committee shall commission and review the findings of internal investigations into matters where there is any suspected fraud or irregularity, or failure of internal controls or infringement of any Singapore and other applicable law, rule or regulation which has or is likely to have a material impact upon our Companys operating results and/or financial position. Upon our admission to the Official accountant to conduct a full review two years and to report its findings the Audit Committee to consider on with such an engagement. REMUNERATION COMMITTEE Our Remuneration Committee comprises Ong Chin Lin, Wong Chak Weng, Choong Buat Ken and Lim Yen Heng. Our Remuneration Committee is chaired by Ong Chin Lin. Our Remuneration Committee will recommend to the Board a framework of remuneration for the Directors and key executives, and determine specific remuneration packages for each Executive Director. The recommendations of our Remuneration Committee should be submitted for endorsement by the entire Board. All aspects of remuneration, including but not limited to Directors fees, salaries, allowances, bonuses, options and benefits-in-kind shall be overseen by our Remuneration Committee. Each member of the Remuneration Committee shall abstain from voting on any resolutions and making any recommendations and/or participating in any deliberations of the Remuneration Committee in respect of his remuneration package. List of the Catalist, we intend to engage an independent qualified of our Groups internal control and accounting systems annually for to the SGX-ST. Subsequently to the reviews, the Board will request a regular basis whether it is necessary for our Company to continue

122

INTERESTED PERSON TRANSACTIONS


In general, transactions between our Group and any of its interested persons (namely, the Directors, Executive Officers or Controlling Shareholders of our Company or the Associates of such Directors, Executive Officers or Controlling Shareholders) are known as interested person transactions. Save as disclosed under this section and under the section entitled Restructuring Exercise of this Prospectus, there are no material interested person transactions during the Relevant Period. PAST INTERESTED PERSON TRANSACTIONS

Sale of business assets of Hainan Treats Pte. Ltd. to Ten & Han
Hainan Treats Pte. Ltd. was a company incorporated in Singapore. The spouse of our Executive Chairman, Han Keen Juan held the majority stake in Hainan Treats Pte Ltd. In December 2004, Ten & Han acquired certain business assets from Hainan Treats Pte. Ltd., comprising mainly kitchen equipment for the manufacture of food products and appliances, for an aggregate consideration of S$67,000 based on the net book value of Hainan Treats Pte. Ltd. Accordingly, the transaction was deemed to have been carried out on an arms length basis. Hainan Treats Pte. Ltd. was struck-off the register of companies on 24 February 2006.

Provision of audit, tax services and other services by Y.H. Lim & Co.
Lim Yen Heng (our Non-Executive Director) is a sole-proprietor of Y.H. Lim & Co., which was the statutory auditor of our subsidiary, Ten & Han between 1988 and 2002. In FY2005, Ten & Han engaged Y.H. Lim & Co. to perform a sales audit to certify the gross turnover of certain retail outlets pursuant to the lease agreements of those retail outlets. The total fees paid to Y.H. Lim & Co. for this service in FY2005 was S$1,500. The above transactions were conducted on an arms length basis and on normal commercial terms. Y.H. Lim & Co. ceased to provide such services to us since the end of FY2005. We do not intend to engage the services of Y.H. Lim & Co. after the admission of our Company to the Official List of the Catalist.

Transactions with Director-related companies


(i) Gain Up (M) Sdn Bhd (Gain Up) In December 2004, our Executive Chairman, Han Keen Juan, and two unrelated third parties set up Gain Up, a joint venture company in Malaysia, with the intention to expand our food business to Malaysia. Mr Han was a director of Gain Up and held a 33% interest in the capital of Gain Up. To facilitate the investment, we paid expenses amounting to S$61,000 on behalf of Gain Up. Subsequently, the two unrelated parties decided to terminate the joint venture. Gain Up was wound up in February 2006 and the amount due from Gain Up was written-off. (ii) Pure Options Pte. Ltd. (Pure Options) In September 2005, our Executive Chairman, Han Keen Juan and two unrelated third parties set up Pure Options for the import into and retailing of coconut oil products in Singapore. Mr Han is a director of Pure Options and held a 33.3% interest in the capital of Pure Options. To facilitate the investment, we made an advance of S$10,000 to Pure Options in FY2005. On 14 August 2006, as part of the Restructuring Exercise, Mr Han transferred his interest in Pure Options to our Company for a consideration of S$10,000. Accordingly, Pure Options is no longer an interested person in relation to our Group. Pure Options is in the process of being struck-off. Please refer to the section entitled Restructuring Exercise of this Prospectus for further details.

123

INTERESTED PERSON TRANSACTIONS


Advances extended by Executive Directors
In December 2006, our Executive Chairman, Han Keen Juan, and our CEO, William Lim, extended an interest-free loan of S$2.5 million to Ten & Han. We repaid the amount in January 2007. The loan was interest-free, unsecured, and had no fixed term of repayment and therefore would not ordinarily be considered a transaction conducted at an arms length basis and on normal commercial terms. We do not expect to enter into similar transactions following our admission to the Official List of the Catalist. In August 2005, our CEO, William Lim, paid on behalf of 1901 Singapore an amount of S$2,556 for the initial purchase instalment for a motor vehicle. The loan was interest-free, unsecured, and had no fixed term of repayment and therefore would not ordinarily be considered as a transaction that has been conducted on arms length basis and on normal commercial terms. We repaid the amount in June 2007. We do not expect to enter into similar transactions following our admission to the Official List of the Catalist. PRESENT AND ONGOING INTERESTED PERSON TRANSACTIONS

Lease of space from Keen Holdings Pte. Ltd.


Keen Holdings Pte. Ltd. (Keen Holdings) is a property investment company, which is wholly-owned by our Executive Chairman, Han Keen Juan, and his wife. In September 2007, Keen Holdings entered into a lease agreement with Ten & Han under which the space of 1,937 sq ft at Block 22 Woodlands Link #0340 was leased by Keen Holdings to Ten & Han for a period of three years at a rent of S$3,000 per month. The leased area is currently used as our servicing and maintenance centre for our kitchen equipment. The transaction is conducted on an arms length basis and on normal commercial terms based on an independent valuation by the Valuer.

Provision of corporate secretarial and advisory services by Mast Management Consultants Pte Ltd
Choong Buat Ken, our Non-Executive Director, and Fang Siew Boon (the spouse of Lim Yen Heng, our Non-Executive Director), each hold a 50% interest in Mast Management Consultants Pte Ltd (a corporate secretarial and advisory firm). Choong Buat Ken and Fang Siew Boon are also directors of Mast Management Consultants Pte Ltd. Mast Management Consultants Pte Ltd has been providing corporate secretarial and advisory services to our Group since 1988. The total fees paid to Mast Management Consultants Pte Ltd for services rendered during the Relevant Period were as follows:1 July 2007 to the Latest Practicable Date 3

S$000 Fees paid to Mast Management Consultants Pte Ltd


Notes:(1)

FY2004 2

FY2005 63
(1)

FY2006 2

FP2007 n.m
(2)

The increase in the fees paid to Mast Management Consultants Pte Ltd in FY2005 was due to the management consultancy services provided in relation to our Groups restructuring exercise and the implementation of the ERP system. Not meaningful. Amount less than S$1,000.

(2)

The above transactions were conducted on an arms length basis and on normal commercial terms. We will ensure that future transactions will comply with Chapter 9 of the Listing Manual.

Provision of accounting processing and computer software maintenance services by Mast Computer Pte Ltd
Choong Buat Ken and Fang Siew Boon hold 33.3% and 33.3% interests respectively in Mast Computer Pte Ltd (an accounting processing and computer software maintenance firm). Choong Buat Ken is also a director of Mast Computer Pte Ltd.

124

INTERESTED PERSON TRANSACTIONS


To the best knowledge of the Executive Directors, Mast Computer Pte Ltd has been providing accounting processing and computer software maintenance services to Ten & Han since 1995. The total fees paid to Mast Computer Pte Ltd for services rendered during the Relevant Period were as follows:1 July 2007 to the Latest Practicable Date

S$000 Fees paid to Mast Computer Pte Ltd


Note:(1)

FY2004 5

FY2005 21

FY2006 24

FP2007 n.m
(1)

Not meaningful. Amount less than S$1,000.

The above transactions were conducted on an arms length basis and on normal commercial terms. We will ensure that future transactions will comply with Chapter 9 of the Listing Manual.

Guarantees provided by our Executive Directors


The guarantees provided by our Executive Directors to secure bank and credit facilities granted to and leases secured by our Group during the Relevant Period were as follows:Largest amount guaranteed/secured during the Relevant Period, based on month-end balances S$1.2 million Outstanding amount guaranteed as at the Latest Practicable Date S$1.07 million

Description S$5.58 million credit facilities from OCBC at 6.25% per annum S$1.87 million line of credit facilities from UOB Group at 6.0% per annum Hire purchase for motor vehicle from Hong Leong Finance Limited at 4.15% per annum Hire purchase for motor vehicle from GE Money at 6.30% per annum Hire purchase for motor vehicle from UMF (Singapore) Limited at 6.26% per annum Lease agreements for computer equipment from IBM Singapore Pte. Ltd. at 4.17% per annum Lease of Far East Plaza retail outlet

Guarantee Personal guarantee by Han Keen Juan Personal guarantee by Han Keen Juan

S$200,000

S$31,000

S$85,000

S$34,000

Personal guarantee by William Lim

S$30,000

S$11,000

Personal guarantee by William Lim

S$66,000

S$37,000

Personal guarantee by William Lim

S$383,000

S$70,000

Joint guarantee by Han Keen Juan and William Lim

All monies owing by Ten & Han

Joint guarantee by Han Keen Juan and William Lim Joint guarantee by Han Keen Juan and William Lim

Lease of United Square retail outlet

All monies owing by Ten & Han

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INTERESTED PERSON TRANSACTIONS


Largest amount guaranteed/secured during the Relevant Period, based on month-end balances All monies owing by Ten & Han

Description Lease of Novena Square retail outlet

Outstanding amount guaranteed as at the Latest Practicable Date

Guarantee Joint guarantee by Han Keen Juan and William Lim Personal guarantee by William Lim

Lease of Ubi Avenue 2 retail outlet

All monies owing by Ten & Han

As no fee was paid to Han Keen Juan or William Lim for the provision of the abovementioned guarantees, the transactions are not deemed to have been entered into on an arms length basis. The nature of the above transactions are described under the sections entitled Liquidity and Capital Resources and Capitalisation and Indebtedness of this Prospectus. Subsequent to the Invitation, we intend to procure the release and discharge of the above guarantees from the relevant banks, financiers and landlords by providing substitute securities acceptable to the banks, financiers or landlords. Should the terms and conditions of our existing facilities be affected by the withdrawal of the above guarantees, our Directors are confident that with our listed status and strengthened financial position, we should be able to secure alternative bank facilities on terms similar to those applicable to the existing facilities. In the event that the banks, financiers and landlords do not agree to release our Executive Directors from the above guarantees, our Executive Directors will continue to provide the relevant guarantees and security. REVIEW PROCEDURES FOR FUTURE INTERESTED PERSON TRANSACTIONS All future transactions with interested persons shall comply with the requirements of the Listing Manual. As stated in the Listing Manual, our Articles require a Director to abstain from voting in any contract or arrangement in which he has a personal material interest. Our internal control procedures will ensure that all interested person transactions, including the aforementioned interested person transactions involving companies related to our Group, are conducted at arms length and on normal commercial terms. Such internal controls include the following:(a) when purchasing from interested persons, our Directors shall take into account the prices and terms of at least two other comparative offers from non-interested persons. The purchase price shall not be higher than the most competitive price of the two comparative offers from noninterested persons. In determining the most competitive purchase price, our Directors shall also take into consideration the quality, delivery time and track record of the suppliers; except for sale of our food products on a de minimis basis, when selling to interested persons, our Directors shall take into account the prices and terms of at least two other successful sales of similar nature and size to non-interested persons. The sale price shall not be lower than the lowest sale price of the other two successful sales to non-interested persons; and when renting from and to interested persons, our Directors shall take appropriate steps to ensure that such rent is commensurate with the prevailing market rates, including adopting measures such as making relevant enquiries with landlords of similar location and size, or obtaining necessary reports or reviews published by property agents (including an independent valuation report by a property valuer, where appropriate). The rent payable shall be based on the most competitive market rental rate of similar properties in terms of size and location, based on the results of the relevant enquiries.

(b)

(c)

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INTERESTED PERSON TRANSACTIONS


Each such interested person transaction will be properly documented and submitted half-yearly to our Audit Committee for its review to ensure that all interested person transactions are conducted at arms length and on normal commercial terms. In the event that a member of our Audit Committee is involved in any interested person transaction, he will abstain from reviewing that particular transaction. Our Audit Committee will include the review of all such interested person transactions as part of the standard procedures while examining the adequacy of internal controls of our Group. Our Audit Committee will ensure that all provisions and disclosure requirements on all such interested person transactions, including those required by prevailing legislation, the Listing Manual and accounting standards, as the case may be, are complied with. Our Board of Directors will ensure that all interested person transactions will be subject to the disclosure requirements of the Listing Manual, and will be subject to Shareholders approval if deemed necessary under the provisions of the Listing Manual. We will disclose in our annual report the aggregate value of interested person transactions conducted during the financial year.

127

CONFLICTS OF INTEREST
Save as disclosed in the section entitled Interested Person Transactions of this Prospectus, none of our Directors, Controlling Shareholders and Executive Officers or their Associates have any material interest, directly or indirectly, in:(i) (ii) (iii) any company carrying out the same business or a similar trade as our Group, directly or indirectly; any enterprise or company that is our Groups customer or supplier of goods or services; and any transaction to which we are a party.

None of our Controlling Shareholders, nor any of their Associates, has any interest, direct or indirect, in any company carrying out the same business or deals in similar products as our Company or any of our subsidiaries.

128

GENERAL AND STATUTORY INFORMATION


1. INFORMATION ON DIRECTORS AND EXECUTIVE OFFICERS (a) The names, addresses, ages, principal occupations, business and working experience of all the Directors and Executive Officers of our Group are set out in the section entitled Directors, Management and Employees of this Prospectus. The list of present and past directorships of each Director (other than for our Company) as at the date of this Prospectus and over the five years preceding the date of this Prospectus is set out as follows:Name Han Keen Juan Present Directorships Group Companies 1901 Singapore Old Chang Kee Australia Old Chang Kee China Old Chang Kee Malaysia Old Chang Kee Thailand Pure Options Ten & Han Other Companies Keen Holdings Pte. Ltd. Past Directorships Group Companies Nil

(b)

Other Companies Harbinger Resources Pte Ltd (struck-off) Millennium Food Services Pte Ltd Group Companies Nil

William Lim

Group Companies 1901 Singapore Old Chang Kee Australia Old Chang Kee China Old Chang Kee Malaysia Old Chang Kee Thailand Ten & Han Other Companies Intellectual Property Office of Singapore

Other Companies Nil

Choong Buat Ken

Group Companies Nil Other Companies Mast Computer Pte Ltd Mast Management Consultants Pte Ltd Mast Technology Pte Ltd Singapore Chinese High School ViewSonic Singapore Pte Ltd

Group Companies Nil Other Companies Harbinger Resources Pte Ltd (struck-off) Hwa Chong International School Lao Zeng Ji Investment Pte Ltd (struck-off) New Rise Global Private Limited (gazetted to be struck-off) Singapore Chinese High School Tian-Huo Pte Ltd (struck-off) Group Companies Nil Other Companies Nil

Lim Yen Heng

Group Companies Nil Other Companies Nil

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GENERAL AND STATUTORY INFORMATION


Name Ong Chin Lin Present Directorships Group Companies Nil Other Companies Linair Technologies Limited Yi-Lai Berhad Wong Chak Weng Group Companies Nil Other Companies CDW Holdings Limited JNC Corporate Services Pte Ltd TMF Singapore Pte. Ltd. Past Directorships Group Companies Nil Other Companies EBS Consulting Sdn Bhd

Group Companies Nil Other Companies Nil

(c)

Save as disclosed below, none of our Executive Officers hold any directorships (past or present) in the five years preceding the date of this Prospectus:Name Chow Hui Shien Present Directorships Group Companies Ten & Han Food Management (Chengdu) Co., Ltd. Past Directorships Group Companies Nil

Other Companies Nil

Other Companies Hainan Treats Pte. Ltd. (struck-off)

(d)

Save as disclosed in the section entitled Directors, Management and Employees of this Prospectus, none of our Directors, Executive Officers or Substantial Shareholders are related by blood or marriage to one another. There is no shareholding qualification for Directors in the Articles of our Company. Save as disclosed below, none of our Directors, Executive Officers or Controlling Shareholders:(i) has, at any time during the last ten (10) years, had an application or a petition under any bankruptcy laws of any jurisdiction filed against him or against a partnership of which he was a partner at the time when he was a partner or at any time within 2 years from the date he ceased to be a partner; has, at any time during the last ten (10) years, had an application or a petition under any law of any jurisdiction filed against an entity (not being a partnership) of which he was a director or an equivalent person or a key executive, at the time when he was a director or an equivalent person or a key executive of that entity or at any time within two (2) years from the date he ceased to be a director or an equivalent person or a key executive of that entity, for the winding-up or dissolution of that entity or, where that entity is the trustee of a business trust, that business trust, on the ground of insolvency; has any unsatisfied judgment against him;

(e) (f)

(ii)

(iii)

130

GENERAL AND STATUTORY INFORMATION


(iv) has ever been convicted of any offence, in Singapore or elsewhere, involving fraud or dishonesty which is punishable with imprisonment, or has been the subject of any criminal proceedings (including any pending criminal proceedings of which he is aware) for such purpose; has ever been convicted of any offence, in Singapore or elsewhere, involving a breach of any law or regulatory requirement that relates to the securities or futures industry in Singapore or elsewhere, or has been the subject of any criminal proceedings (including any pending criminal proceedings of which he is aware) for such breach; has at any time during the last ten (10) years, had judgment entered against him in any civil proceedings in Singapore or elsewhere involving a breach of any law or regulatory requirement that relates to the securities or futures industry in Singapore or elsewhere, or a finding of fraud, misrepresentation or dishonesty on his part, nor has he been the subject of any civil proceedings (including any pending civil proceedings of which he is aware) involving an allegation of fraud, misrepresentation or dishonesty on his part; has ever been convicted in Singapore or elsewhere of any offence in connection with the formation or management of any entity or business trust; has ever been disqualified from acting as a director or an equivalent person of any entity (including the trustee of a business trust), or from taking part directly or indirectly in the management of any entity or business trust; has ever been the subject of any order, judgment or ruling of any court, tribunal or governmental body permanently or temporarily enjoining him from engaging in any type of business practice or activity; has ever, to his knowledge, been concerned with the management or conduct, in Singapore or elsewhere, of the affairs of:(aa) any corporation which has been investigated for a breach of any law or regulatory requirement governing corporations in Singapore or elsewhere; any entity (not being a corporation) which has been investigated for a breach of any law or regulatory requirement governing such entities in Singapore or elsewhere; any business trust which has been investigated for a breach of any law or regulatory requirement governing business trusts in Singapore or elsewhere; or any entity or business trust which has been investigated for a breach of any law or regulatory requirement that relates to the securities or futures industry in Singapore or elsewhere,

(v)

(vi)

(vii)

(viii)

(ix)

(x)

(bb)

(cc)

(dd)

in connection with any matter occurring or arising during the period when he was so concerned with the entity or business trust; and (xi) has been the subject of any current or past investigation or disciplinary proceedings, or has been reprimanded or issued a warning, by the Authority or any other regulatory authority, exchange, professional body or government agency, whether in Singapore or elsewhere.

131

GENERAL AND STATUTORY INFORMATION


Notes:(i) Disclosure relating to Ten & Han In 1992, the then Ministry of Environment imposed a fine of S$120 on Ten & Han for obstructing a public corridor with a few cartons of goods. In 2005, Ten & Han informed the Comptroller of Income Tax (CIT) of its inadvertent omissions of car benefits and bereavement and condolence cash payments provided to employees in the Forms IR8A for the years of assessment 1999 to 2005. The matter was settled and compounded by Ten & Han for S$9,000 in 2006. In June 2007, Ten & Han was requested to attend a meeting at the Ministry of Manpower to resolve a dispute involving an ex-employee with respect to claims involving medical expense reimbursement, overtime pay and payment in lieu of leave entitlement. The claims on medical expense reimbursement and payment in lieu of leave entitlement proved to be groundless and the claim for overtime pay was settled by a payment of S$2,170.91 by Ten & Han to the ex-employee. In July 2007, a customer (the Customer) lodged a complaint against Ten & Han with the NEA relating to an incident which took place on 11 July 2007. The Customer alleged that a foreign object was found in a curry puff which he had purchased from our retail outlet at Far East Plaza. Ten & Han was served with a summons by NEA and the offence was compounded for a sum of S$100, which was paid by Ten & Han to NEA on 10 September 2007. (ii) Disclosure relating to Han Keen Juan To the best of his recollection, in 1998, Han Keen Juan was interviewed by the Corrupt Practices Investigation Bureau (CPIB) in connection with their investigations relating to a supplier of Ten & Han then. Han Keen Juan was not the subject of the CPIB investigation and he has not been contacted thereafter by the CPIB to assist in any further investigation. In 2005, the CIT enquired as to certain inadvertent omissions made by Han Keen Juan in relation to his prior income tax returns. The matter was satisfactorily resolved in 2006 when Han Keen Juan paid the CIT a sum of S$150,000 to compound the inadvertent breach. (iii) Disclosure relating to William Lim To the best of his recollection, in 1985, William Lim was fined an amount of S$50 for the late filing of his personal income tax return for the year of assessment 1984. (iv) Disclosure relating to Ong Chin Lin Ray Summers Pte Ltd (Ray) was liquidated on 16 August 1999 pursuant to creditors winding up. Ong Chin Lin was a director of Ray from 21 November 1996 to 19 May 1998. 2. MEMORANDUM AND ARTICLES (a) Memorandum of Association The Memorandum of Association of our Company states, inter alia, that the liability of members of our Company is limited.

132

GENERAL AND STATUTORY INFORMATION


(b) Articles An extract of the relevant provisions of the Articles of our Company, providing, inter alia, for (a) a Directors power to vote on a proposal, arrangement or contract in which the Director is interested; (b) the Directors power to vote on remuneration for himself or for any other Director; (c) borrowing powers exercisable by the Directors and variation thereof; (d) retirement or non-retirement of Directors under an age limit requirement; (e) number of shares, if any, required for Directors qualification; (f) the rights, preferences and restrictions attaching to each class of shares; (g) any change in capital; (h) any change in the respective rights of the various classes of shares; (i) any time limit after which a dividend entitlement will lapse; and (j) any limitation on the right to own Shares, are set out in Appendix C of this Prospectus. The complete Articles of our Company are available for inspection by Shareholders at the registered office of our Company. 3. MATERIAL CONTRACTS The following contracts, not being contracts entered into in the ordinary course of business, have been entered into by our Group within the two years preceding the date of lodgment of this Prospectus and are or may be material:(a) Shareholders Agreement dated 19 August 2005 between Hazta Dynamics (S) Pte Ltd (Hazta) and Ten & Han under which Hatza will subscribe for 23% of the issued and paidup share capital of 1901 Singapore and Ten & Han will subscribe for 77% of the issued and paid-up share capital of 1901 Singapore (the 1901 Shareholders Agreement); Joint Venture Agreement dated 5 December 2005 between Franciscus Lugito, Steven Japutra, Wilson Gunawan, Tan Tjoen Eng and Karto Wiwil Sana and Ten & Han to establish PT. Old Chang Kee Ina in Indonesia with Ten & Han holding 20% of the issued share capital (the Indonesian JVA); Termination Agreement dated 1 April 2007 between Franciscus Lugito, Steven Japutra, Wilson Gunawan, Tan Tjoen Eng and Karto Wiwil Sana and Ten & Han to terminate the Indonesian JVA; Trust Deed dated 28 June 2007 between our Company and our Executive Chairman Mr Han Keen Juan and our CEO, Mr Willam Lim, pursuant to which Mr Han Keen Juan and Mr William Lim declare that they hold the 100 shares in Old Chang Kee Thailand issued to each of them on trust for our Company; Sale and Purchase Agreement dated 9 November 2007 between our Company, Han Keen Juan and William Lim, pursuant to which our Company acquired 100% of the fully paid and issued share capital of Ten & Han at a consideration of S$5.7 million as part of the Restructuring Exercise, details of which are set out under the section entitled Restructuring Exercise of this Prospectus; Sale and Purchase Agreement dated 15 November 2007 between Ten & Han and Nineteen O One Sdn. Bhd. pursuant to which Nineteen O One Sdn. Bhd. acquired 100% of the issued and paid-up share capital of 1901 Singapore; Termination Agreement dated 15 November 2007 between Hazta and Ten & Han to terminate the 1901 Shareholders Agreement; Service Agreement dated 16 November 2007 between our Company and our Executive Chairman, Mr Han Keen Juan, details of which are set out under the section entitled Service Agreements of this Prospectus; and

(b)

(c)

(d)

(e)

(f)

(g)

(h)

133

GENERAL AND STATUTORY INFORMATION


(i) Service Agreement dated 16 November 2007 between our Company and our Chief Executive Officer, Mr William Lim, details of which are set out under the section entitled Service Agreements of this Prospectus.

4.

LITIGATION AND ARBITRATION PROCEEDINGS Save as disclosed in the following, to the best of our knowledge and belief and having made all reasonable enquiries, neither our Company nor any of our subsidiaries is engaged in any litigation or arbitration proceedings either as plaintiff or defendant including those which are pending or known to be contemplated, which may have or have had in the last 12 months preceding the date of lodgement of this Prospectus, a material effect on our Groups profitability or financial position:(a) In July 2005, an employee of Ten & Han was involved in an accident while driving one of the companys motor vehicles along Woodlands Loop. On 6 June 2006, the third party (Plaintiff A) commenced legal action against, inter alia, Ten & Han. The motor vehicle was insured by Ten & Han with American Home Assurance Company Singapore (AHACS). This suit has since been settled and concluded. In September 2005, an employee of Ten & Han was involved in an accident while driving one of the companys motor vehicles along the Pan Island Expressway towards Jurong before the Kallang Exit. On 9 June 2006, the third party (Plaintiff B) commenced legal action against, inter alia, Ten & Han. The motor vehicle was insured by Ten & Han with AHACS. AHACS settled the claim by paying a sum of S$23,527.50 to Plaintiff B. In November 2007, legal proceedings was commenced by a plaintiff (Plaintiff C) against Ten & Han for, inter alia, damages resulting from a motor accident involving one of Ten & Hans employee. American Home Assurance Company Singapore, who is the insurer of Ten & Han, is currently negotiating with Plaintiff C to reach an amicable settlement of the matter.

(b)

(c)

5.

MISCELLANEOUS (a) Application monies received by our Company in respect of successful applications (including successful applications which are subsequently rejected) will be placed in a separate noninterest bearing account with the Receiving Banker. In the ordinary course of business, the Receiving Banker will deploy these monies in the interbank monies market. All profits derived from the deployment of such monies will accrue to the Receiving Banker. Any refund of all or part of the application monies to unsuccessful or partially successful applicants will be made without interest or any share of revenue or any other benefit arising therefrom. We intend to continue with the engagement of Ernst & Young as our auditors after our listing on the Official List of the Catalist. No expert named in this Prospectus:(i) (ii) is employed on a contingent basis by our Company or our subsidiaries; has a material interest, whether direct or indirect, in our Shares or in the shares of our subsidiaries; or has a material economic interest, whether direct or indirect, in our Company, including an interest in the success of the offer.

(b)

(c)

(iii)

(d)

As at the Latest Practicable Date, our Directors are not aware of any event which has occurred since 30 June 2007 which may have a material effect on the financial position and results of our Group that is not already disclosed in the sections entitled Managements Discussion and Analysis of Financial Condition and Results of Operations, Capitalisation and Indebtedness and Trend Information of this Prospectus.

134

GENERAL AND STATUTORY INFORMATION


6. CONSENTS (a) Ernst & Young has given and has not withdrawn its written consent to the issue of this Prospectus with the inclusion herein of the Report from the Auditors and the Audited Combined Financial Statements of Old Chang Kee Ltd. and its Subsidiary Companies for the Financial Years Ended 31 December 2004, 2005 and 2006, the Report from the Auditors and the Unaudited Combined Financial Statements of Old Chang Kee Ltd. and its Subsidiary Companies for the Financial Period from 1 January 2007 to 30 June 2007 and the Report from the Auditors and the Unaudited Proforma Combined Financial Statements of Old Chang Kee Ltd. and its Subsidiary Companies for the Financial Year Ended 31 December 2006 and the Financial Period from 1 January 2007 to 30 June 2007, in the form and context in which they are included in this Prospectus and references to its name in the form and context in which it appears in this Prospectus and to act in such capacity in relation to this Prospectus. The Manager, the Underwriter, the Placement Agent, the Solicitors to the Invitation, the legal advisers to our Company on Australian Law, the legal advisers to our Company on Malaysian Law, the legal advisers to our Company on Thai Law, the legal advisers to our Company on PRC law, the Share Registrar, the Receiving Banker, the Principal Bankers and the Valuer have each given and have not withdrawn their respective written consents to the issue of this Prospectus with the inclusion herein of their respective names and references to their respective names in the form and context in which they respectively appear in this Prospectus and to act in such respective capacities in relation to this Prospectus. The legal advisers to our Company on Indonesian law, has given and has not withdrawn its written consent to the issue of this Prospectus with the inclusion herein of:(i) (ii) its name and all reference to its name; and the statement prepared by them set out under Franchises in the section entitled Marketing and Business Development of this Prospectus,

(b)

(c)

in the form and context in which they appear in this Prospectus, and to act in such capacity in relation to this Prospectus. (d) The legal advisers to our Company on the Philippines law, has given and has not withdrawn its written consent to the issue of this Prospectus with the inclusion herein of:(i) (ii) its name and all reference to its name; and the statement prepared by them set out under Franchises in the section entitled Marketing and Business Development of this Prospectus,

in the form and context in which they appear in this Prospectus, and to act in such capacity in relation to this Prospectus. (e) Each of the Placement Agent, the Solicitors to the Invitation, the legal advisers to our Company on Australian Law, the legal advisers to our Company on Malaysian Law, the legal advisers to our Company on Thai Law, the legal advisers to our Company on PRC law, the Share Registrar, the Receiving Banker, the Principal Bankers and the Valuer does not make or purport to make any statement in this Prospectus and is not aware of any statement in this Prospectus which purports to be based on a statement made by it and each of them makes no representation regarding any statement in this Prospectus and, to the extent permitted by law, takes no responsibility for any statement in or omission from this Prospectus.

135

GENERAL AND STATUTORY INFORMATION


7. RESPONSIBILITY STATEMENT BY OUR DIRECTORS This Prospectus has been reviewed and approved by our Directors and they individually and collectively accept full responsibility for the accuracy of the information given in this Prospectus and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, the facts stated and the opinions expressed in this Prospectus are fair and accurate in all material respects as at the date of this Prospectus and that there are no material facts the omission of which would make any statements in this Prospectus misleading, and that this Prospectus constitutes full and true disclosure of all material facts about the Invitation and our Group. 8. RESPONSIBILITY STATEMENT BY THE MANAGER The Manager acknowledges that, having made due and careful enquiries and to the best of its knowledge and belief, based on information furnished to it by our Group, this Prospectus constitutes a full and true disclosure of all material facts about the Invitation and our Group and it is not aware of any other facts the omission of which would make statements herein misleading. 9. DOCUMENTS FOR INSPECTION The following documents may be inspected at the registered office of our Company during normal business hours for a period of six months from the date of this Prospectus:(a) (b) the Memorandum and Articles of our Company; Report from the Auditors in relation to the Audited Combined Financial Statements of Old Chang Kee Ltd. and its Subsidiary Companies for the Financial Years Ended 31 December 2004, 2005 and 2006, as set out in Appendix A of this Prospectus; Report from the Auditors and the Unaudited Combined Financial Statements of Old Chang Kee Ltd. and its Subsidiary Companies for the Financial Period from 1 January 2007 to 30 June 2007 as set out in Appendix B of this Prospectus; Report from the Auditors and the Unaudited Proforma Combined Financial Statements of Old Chang Kee Ltd. and its Subsidiary Companies for the Financial Year Ended 31 December 2006 and the Financial Period from 1 January 2007 to 30 June 2007, as set out in Appendix K of this Prospectus; the material contracts referred to in paragraph 3 of the section entitled General and Statutory Information of this Prospectus; and the letters of consent referred to in paragraph 6 of the section entitled General and Statutory Information of this Prospectus.

(c)

(d)

(e)

(f)

136

APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006

Report on Audited Combined Financial Statements

OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES


For the financial years ended 31 December 2004, 2005 and 2006

A-1

APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Statement by Directors

We, Han Keen Juan and Lim Tao-E William, being the Directors of Old Chang Kee Ltd. (the Company), do hereby state that, in the opinion of the Directors, (a) the accompanying combined financial statements together with notes thereto, are drawn up so as to present fairly, the state of affairs of the Group as at 31 December 2004, 2005 and 2006 and of the results, changes in equity and cash flows of the Group for the financial years ended on those date; and at the date of this statement there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

(b)

On behalf of the Board of Directors:

Han Keen Juan Director

Lim Tao-E William Director

Singapore 4 January 2008

A-2

APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Report from the Auditors in relation to the Audited Combined Financial Statements of Old Chang Kee Ltd. and its Subsidiary Companies for the financial years ended 31 December 2004, 2005 and 2006

4 January 2008 The Board of Directors Old Chang Kee Ltd. 2 Woodlands Terrace Singapore 738427 Dear Sirs: We have audited the accompanying combined financial statements of Old Chang Kee Ltd. (the Company) and its subsidiary companies (collectively, the Group) set out on pages A-5 to A-43, which comprise the combined balance sheets of the Group as at 31 December 2004, 2005 and 2006, the combined profit and loss accounts, combined statements of changes in equity and combined cash flow statements of the Group for each of the financial years ended 31 December 2004, 2005 and 2006, and a summary of significant accounting policies and other explanatory notes.

Directors Responsibility for the Financial Statements


The Companys Directors are responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of the Singapore Companies Act, Cap 50 (the Act) and Singapore Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors Responsibility
Our responsibility is to express an opinion on these combined financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain 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. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes 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.

A-3

APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Report from the Auditors in relation to the Audited Combined Financial Statements of Old Chang Kee Ltd. and its Subsidiary Companies for the financial years ended 31 December 2004, 2005 and 2006 (contd)

Opinion
In our opinion, the combined financial statements of the Group presents fairly, in all material respects, the state of affairs of the Group as at 31 December 2004, 2005 and 2006 and the results, changes in equity and cash flows of the Group for each of the financial years ended 31 December 2004, 2005 and 2006 in accordance with the provisions of the Act and Singapore Financial Reporting Standards. This report has been prepared for inclusion in the Prospectus in connection with the Invitation by the Company in respect of the issue of 25,000,000 new ordinary shares in the share capital of the Company.

Yours faithfully,

ERNST & YOUNG Certified Public Accountants Singapore Max Loh Khum Whai Partner-in-Charge

A-4

APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Combined Profit and Loss Accounts for the financial years ended 31 December 2004, 2005 and 2006

Note

2004 S$000 20,893 (8,366) 12,527

2005 S$000 29,045 (11,276) 17,769 39 (8,881) (4,171) (494) (27) 4,235 (1,028) 3,207 4.69

2006 S$000 33,784 (13,827) 19,957 299 (11,061) (4,128) (848) (42) (27) 4,150 (1,111) 3,039 4.44

Revenue Cost of sales Gross profit Other operating income Selling and distribution expenses Administrative expenses Other operating expenses Finance costs Share of results of associated companies Profit before taxation Taxation Net profit attributable to shareholders Basic and fully diluted earnings per share (cents)

13 (7,135) (2,510) (285)

(13)

7 8

2,597 (515) 2,082

3.04

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
A-5

APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Combined Balance Sheets as at 31 December 2004, 2005 and 2006

Note

2004 S$000

2005 S$000

2006 S$000

Non-Current Assets Property, plant and equipment Intangible assets Investment in associated companies Amounts due from associated companies Quoted investment

10 11 12 13 14

3,679 105 77 3,861

5,740 355 100 6,195

5,881 339 16 57 6,293

Current Assets Inventories Trade and other receivables Deposits Prepayments Amounts due from associated companies Cash and cash equivalents

15 16

17 18

244 1 691 17 61 3,068 4,082

350 142 933 118 10 4,654 6,207

446 1,354 1,393 149 15 6,565 9,922

Current Liabilities Trade and other payables Other liabilities Bank overdrafts Amount due to a related party Finance lease liabilities Club membership payable current Provision for taxation

19 20 18 21 22

1,517 56 108 15 804 2,500

2,848 88 54 323 15 942 4,270 1,937

5,881 180 173 2 344 15 900 7,495 2,427

Net Current Assets Non-Current Liabilities Finance lease liabilities Club membership payable long term Deferred tax liabilities

1,582

22 23

459 52 136 647

775 36 326 1,137 6,995

485 20 576 1,081 7,639

Net Assets Equity attributable to equity holders of the Company Share capital Share application money Reserves Total Equity

4,796

24 25 26

700 4,096 4,796

700 6,295 6,995

700 100 6,839 7,639

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
A-6

APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Combined Statements of Changes in Equity for the financial years ended 31 December 2004, 2005 and 2006

Attributable to equity holders of the Company Share application money S$000 Asset revaluation Accumulated Total reserve profits reserves S$000 S$000 S$000 263 2,311 2,574

Note

Share capital S$000 700

Total equity S$000 3,274

At 1 January 2004 Profit for the year, representing total recognised income for the year Dividends on ordinary shares At 31 December 2004 and 1 January 2005 Profit for the year, representing total recognised income for the year Dividends on ordinary shares At 31 December 2005 and 1 January 2006 Profit for the year, representing total recognised income for the year Application for increase of ordinary shares Dividends on ordinary shares At 31 December 2006

2,082

2,082

2,082

27

(560)

(560)

(560)

700

263

3,833

4,096

4,796

3,207

3,207

3,207

27

(1,008)

(1,008)

(1,008)

700

263

6,032

6,295

6,995

3,039

3,039

3,039

25

100

100

27

700

100

263

(2,495) 6,576

(2,495) 6,839

(2,495) 7,639

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
A-7

APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Combined Cash Flow Statements for the financial years ended 31 December 2004, 2005 and 2006

Note Cash flows from operating activities: Profit before taxation Adjustments for: Amortisation of intangible assets Bad debt written off loan to a Director-related party loan to a related party Currency realignment Depreciation of property, plant and equipment Gain on disposal of quoted investment Gain on fair value adjustment of quoted investment Impairment loss on investment in associated company Interest expense Interest income Loss/(gain) on disposal of property, plant and equipment Property, plant and equipment written off Provision for reimbursement of start-up costs for an associated company in Chengdu Share of results of associated companies Operating profit before working capital changes Increase in trade and other receivables Increase in inventories Increase in trade and other payables (Increase)/decrease in amount due from a Director-related company Increase in amount due from associated companies Increase in amount due to a related party

2004 S$000

2005 S$000

2006 S$000

2,597

4,235

4,150

841 (9) 13 3,442 (111) (12) 340 (61)

40 61 899 (23) 27 (16) 1 8 5,232 (484) (106) 1,363 (10)

73 77 1 1,273 (7) 66 42 (139) (9) 76 27 5,630 (1,778) (96) 3,049 10 (15) 2

A-8

APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Combined Cash Flow Statements for the financial years ended 31 December 2004, 2005 and 2006 (contd)

Note Cash generated from operations Tax paid Net cash generated from operating activities Cash flows from investing activities: Advances to associated companies Purchase of property, plant and equipment Purchase of intangible asset Proceeds from disposal of property, plant and equipment Interest received Payment for club membership Investment in associated companies Proceeds from disposal of quoted investment Increase in share application money Net cash used in investing activities Cash flows from financing activities: Repayment of finance lease liabilities Interest paid Dividends paid on ordinary shares Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the financial year

2004 S$000 3,598 (401) 3,197

2005 S$000 5,995 (700) 5,295

2006 S$000 6,802 (903) 5,899

(1,018) (38) (1,056)

(2,241) (290) 51 16 (16) (2,480)

(57) (1,348) (57) 12 137 (16) (110) 107 100 (1,232)

27

(89) (13) (560) (662) 1,479 1,589

(248) (27) (1,008) (1,283) 1,532 3,068

(338) (42) (2,495) (2,875) 1,792 4,600

18

3,068

4,600

6,392

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
A-9

APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

1.

Corporate Information The Company was incorporated in Singapore on 16 December 2004 under the Singapore Companies Act as a private company limited by shares under the name of Old Chang Kee Singapore Pte. Ltd. and changed its name to Old Chang Kee Pte. Ltd. on 13 September 2007. On 22 November 2007, the Company changed its name to Old Chang Kee Ltd. in connection with its conversion into a public company limited by shares. The Company was incorporated for the purpose of acquiring the existing companies of the Group pursuant to the Group Restructuring Exercise. The registered office and principal place of business of the Company is located at 2 Woodlands Terrace, Singapore 738427. The principal activities of the Company are those relating to investment holding. The principal activities of the subsidiary companies are set out in Note 2.

2.

Restructuring Exercise Pursuant to an agreement dated 9 November 2007, the Company acquired the entire issued and paid-up capital of Ten & Han Trading Pte Ltd, comprising 5,600,000 ordinary shares with effect from 12 November 2007. The purchase consideration was satisfied by the issue of 5,600,000 ordinary shares credited as fully paid in the capital of the Company to Mr Han Keen Juan and Mr Lim Tao-E William. Pursuant to the agreement, Ten & Han Trading Pte Ltd became a wholly-owned subsidiary company of the Company. At the date of this report, the Group structure is as shown below:
Country and date of incorporation/ acquisition

Name

Principal activities

Proportion of ownership interest %

Subsidiary Companies Ten & Han Trading Pte Ltd (Ten & Han) Old Chang Kee Australia Pty Ltd (OCKA) Ten & Han Food Management (Chengdu) Co., Ltd. Associated Companies Old Chang Kee (Thailand) Co Ltd (OCKT) Thailand 19 June 2006 Dormant 40 Singapore 7 January 1988 Australia 30 May 2006 Peoples Republic of China 23 May 2007 Manufacture and distribution of food products and general trading Dormant F & B management and consultancy, manufacture and sale of snacks 100

100 100

A-10

APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

2.

Restructuring Exercise (contd) Country and date of incorporation/ acquisition Proportion of ownership interest % Associated Companies Old Chang Kee (M) Sdn Bhd (OCKM) Malaysia 21 July 2006 Operating retail food outlets and general trading 40

Name

Principal activities

3.

Summary of significant accounting policies 3.1 Basis of preparation The combined financial statements of the Group have been prepared in accordance with Singapore Financial Reporting Standards (FRS). The combined financial statements have been prepared on a historical cost basis except for leasehold building and held for trading financial assets that have been measured at their fair values. The combined financial statements are presented in Singapore Dollars (SGD or S$). 3.2 Changes in accounting policies The accounting policies have been consistently applied by the Group and the Company and are consistent with those used in the previous financial year, except for the changes in accounting policies discussed below. (a) Adoption of new FRS On 1 January 2005, the Group and the Company adopted FRS 39, Financial Instruments: Recognition and Measurement, mandatory for annual financial periods beginning on or after 1 January 2005. FRS 39, Financial Instruments: Recognition and Measurement The Group and the Company adopted FRS 39 prospectively on 1 January 2005. At that date, financial assets within the scope of FRS 39 were classified as either financial assets at fair value through profit or loss, loans and receivables, held-tomaturity investments or available-for-sale financial assets, as appropriate. Financial assets that were classified as financial assets at fair value through profit or loss and available-for-sale financial assets were measured at fair value while loans and receivables and held-to-maturity investments were measured at amortised cost using the effective interest rate method. At 1 January 2005, differences between the carrying values and fair values of financial assets at fair value through profit or loss were recognised in accumulated profits while the differences between carrying values and fair values of available-for-sale financial assets were recognised in the fair value adjustment reserve. For investments carried at amortised cost, any differences between the carrying values and amortised costs as at 1 January 2005 were recognised in accumulated profits.

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APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

3.

Summary of significant accounting policies (contd) 3.2 Changes in accounting policies (contd) (a) Adoption of new FRS (contd) FRS 39, Financial Instruments: Recognition and Measurement (contd) At 1 January 2005, financial liabilities (other than derivative financial instruments) within the scope of FRS 39 were measured at amortised cost using the effective interest rate method. Any difference between the carrying values and amortised costs as at 1 January 2005 were recognised in accumulated profits. (b) Adoption of revised FRS The Group adopted the following revised standards mandatory for annual financial periods beginning on or after 1 January 2005 which did not result in any significant change in accounting policies: FRS 1 (revised) FRS 2 (revised) FRS 8 (revised) FRS 10 (revised) FRS 16 (revised) FRS 17 (revised) FRS 19 (revised) FRS 21 (revised) FRS 24 (revised) FRS 27 (revised) FRS 32 (revised) FRS 33 (revised) FRS 36 (revised) FRS 38 (revised) INT FRS 104 INT FRS 105 INT FRS 106 INT FRS 106 Presentation of Financial Statements Inventories Accounting Policies, Changes in Accounting Estimates and Errors Events after the Balance Sheet Date Property, Plant and Equipment Leases Employee Benefits The Effects of Changes in Foreign Exchange Rates Related Party Disclosures Consolidated and Separate Financial Statements Financial Instruments: Disclosure and Presentation Earnings Per Share Impairment of Assets Intangible Assets Determining Whether an Agreement Contains a Lease Rights to Interests Arising from Decommissioning Restoration and Environmental Rehabilitation Funds Liabilities Arising from Participating in a Specific Market-Waste Electrical and Electronic Equipment Explorations for and Evaluation of Mineral Resources

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APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

3.

Summary of significant accounting policies (contd) 3.3 FRS and INT FRS not yet effective The Group and the Company has not applied the following FRS and INT FRS that have been issued but not yet effective: Effective date (Annual periods beginning on or after) FRS 1 FRS 40 FRS 107 FRS 108 INT FRS 107 : : : : : Amendment to FRS 1 (revised), Presentation of financial statements (Capital Disclosures) Investment Property Financial Instruments : Disclosures Operating Segments Applying the Restatement Approach under FRS 29, Financial Reporting in Hyperinflationary Economies Scope of FRS 102, Share-based Payment Reassessment of Embedded Derivatives Interim Financial Reporting & Impairment Group and Treasury Share Transactions Service Concession Arrangements 1 January 2007 1 1 1 1 January 2007 January 2007 January 2009 March 2006

INT INT INT INT INT

FRS FRS FRS FRS FRS

108 109 110 111 112

: : : : :

1 1 1 1 1

May 2006 June 2006 November 2006 March 2007 January 2008

The Directors expect that the adoption of the above pronouncements will have no material impact to the financial statements in the period of initial application, except for FRS 107 and the amendment to FRS 1 as indicated below. FRS 107, Financial Instruments: Disclosures and amendment to FRS 1 (revised), Presentation of financial statements (Capital Disclosures) FRS 107 introduces new disclosures to improve the information about financial instruments. It requires the disclosure of qualitative and quantitative information about exposure to risks arising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk, including sensitivity analysis to market risk. The amendment to FRS 1 requires the Group to make new disclosures to enable users of the financial statements to evaluate the Groups objectives, policies and processes for managing capital. The Group will apply FRS 107 and the amendment to FRS 1 from annual periods beginning 1 January 2007.

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APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

3.

Summary of significant accounting policies (contd) 3.4 Significant accounting estimates and judgements Estimates, assumptions concerning the future and judgements are made in the preparation of the financial statements. They affect the application of the Groups accounting policies, reported amounts of assets, liabilities, income and expenses, and disclosures made. They are assessed on an on-going basis and are based on experience and relevant factors, including expectations of future events that are believed to be reasonable under the circumstances. Key sources of estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. (a) Depreciation of property, plant and equipment The cost of property, plant and equipment is depreciated on a straight-line basis over the plant and equipments useful lives. Management estimates the useful lives of these property, plant and equipment to be within 5 to 50 years. The carrying amount of the Groups property, plant and equipment at 31 December 2006 was approximately S$5,881,000 (2005: S$5,740,000 and 2004: S$3,679,000). Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised. (b) Income taxes Significant judgement is involved in determining the Group-wide provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The carrying amount of the Groups tax payables and deferred tax liabilities at 31 December 2006 was approximately S$900,000 (2005: S$942,000 and 2004: S$804,000) and S$576,000 (2005: S$326,000 and 2004: S$136,000) respectively.

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APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

3.

Summary of significant accounting policies (contd) 3.5 Functional and foreign currency (a) Functional currency The management has determined the currency of the primary economic environment in which the Company operates i.e. functional currency, to be SGD. Sales prices and major costs of providing goods and services including major operating expenses are primarily influenced by fluctuations in SGD. (b) Foreign currency transactions Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiary companies and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the closing rate of exchange ruling at the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Exchange differences arising on the settlement of monetary items or on translating monetary items at the balance sheet date are recognised in the profit and loss account. (c) Foreign currency translations The results and financial position of foreign operations are translated into SGD using the following procedures: Assets and liabilities for each balance sheet presented are translated at the closing exchange rate ruling at that balance sheet date; and Income and expenses for each profit and loss account are translated at average exchange rates for the year, which approximates the exchange rates at the dates of the transactions. All resulting exchange differences are recognised in a separate component of equity as foreign currency translation reserve. On disposal of a foreign operation, the cumulative amount of exchange differences deferred in equity relating to that foreign operation is recognised in the profit and loss account as a component of the gain or loss on disposal.

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APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

3.

Summary of significant accounting policies (contd) 3.6 Subsidiary company and principles of consolidation (a) Subsidiary company A subsidiary company is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities. The Group generally has such power when it directly or indirectly, holds more than 50% of the issued share capital, or controls more than half of the voting power, or controls the composition of the board of directors. In the Companys separate financial statements, investment in subsidiary company is accounted for at cost less any impairment losses. (b) Principles of consolidation The combined financial statements comprise the financial statements of the Company and its subsidiary companies as at the balance sheet date. The financial statements of the subsidiary companies are prepared for the same reporting date as the parent company. Consistent accounting policies are applied for like transactions and events in similar circumstances. All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions that are recognised in assets, are eliminated in full. Subsidiary companies are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. Acquisition of subsidiary company is accounted for using the purchase method. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. Pursuant to an agreement dated 9 November 2007, the Company acquired the entire issued and paid-up capital of Ten & Han at par comprising 5,600,000 ordinary shares. As this arrangement constitutes a reorganisation of companies under common control, the pooling of interest method of accounting was adopted in the preparation of the combined financial statements of the Group. Under this method of accounting, the results and cash flows of the Company and Ten & Han are combined from the beginning of the financial period in which the reorganisation occurred and their assets and liabilities combined at the amounts at which they were previously recorded as if they had been part of the Group for the whole of the current and preceding periods.

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APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

3.

Summary of significant accounting policies (contd) 3.7 Associated company An associated company is an entity, not being a subsidiary or a joint venture, in which the Group has significant influence. This generally coincides with the Group having 20% or more of the voting power, or has representation on the board of directors. The Groups investment in associated companies is accounted for using the equity method. Under the equity method, the investment in associated companies is carried in the balance sheet at cost plus post-acquisition changes in the Groups share of net assets of the associated companies. The Groups share of the profit or loss of the associated companies is recognised in the consolidated profit and loss account. Where there has been a change recognised directly in the equity of the associated companies, the Group recognises its share of such changes. After application of the equity method, the Group determines whether it is necessary to recognise any additional impairment loss with respect to the Groups net investment in the associated companies. The associated companies are equity accounted for from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associate. When the Groups share of losses in an associated companies equals or exceeds its interest in the associated companies, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associated companies. The most recent available audited financial statements of the associated companies are used by the Group in applying the equity method. In the Companys separate financial statements, investment in associated companies is accounted for at cost less impairment losses. 3.8 Property, plant and equipment All items of property, plant and equipment are initially recorded at cost. Subsequent to recognition, property, plant and equipment are stated at cost or valuation less accumulated depreciation and any accumulated impairment losses. Leasehold buildings are subsequently revalued on an asset-by-asset basis, to their fair values. Fair value is determined from market-based evidence by appraisal that is undertaken by professionally qualified valuers. Revaluations are made annually to ensure that their carrying amount does not differ materially from their fair value at the balance sheet date. When an asset is revalued, any increase in the carrying amount is credited directly to the asset revaluation reserve. However, the increase is recognised in the profit and loss account to the extent that it reverses a revaluation decrease of the same asset previously recognised in the profit and loss account. When an assets carrying amount is decreased as a result of a revaluation, the decrease is recognised in the profit and loss account. However, the decrease is debited directly to the asset revaluation reserve to the extent of any credit balance existing in the reserve in respect of that asset.

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APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

3.

Summary of significant accounting policies (contd) 3.8 Property, plant and equipment (contd) Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. The revaluation surplus included in the asset revaluation reserve in respect of an asset, is transferred directly to accumulated profits on retirement or disposal of the asset. Depreciation of an asset begins when it is available for use and is computed on a straight-line basis over the estimated useful life of the asset as follows: Leasehold building Machinery and equipment Motor vehicles Renovation Electrical fittings Furniture Computers 50 years 5 years 5 years 5 years 5 years 5 years 5 years

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. The residual values, useful life and depreciation method are reviewed at each financial year-end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in the profit and loss account in the year the asset is derecognised. 3.9 Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised on a straight-line basis over the estimated economic useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year-end. The amortisation expense on intangible assets with finite lives is recognised in the profit and loss account through the other operating expenses line item.

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APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

3.

Summary of significant accounting policies (contd) 3.9 Intangible assets (contd)

Computer software licences, club membership and franchise rights


Computer software licences, club membership and franchise rights are stated at cost less accumulated amortisation and any impairment in value. They are amortised on a straight-line basis over the following estimated useful lives: Computer software licences Club membership Franchise rights 3.10 Impairment of non-financial assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset (i.e. an intangible asset with an indefinite useful life, an intangible asset not yet available for use, or goodwill acquired in a business combination) is required, the Group makes an estimate of the assets recoverable amount. An assets recoverable amount is the higher of an assets or cash-generating units fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses of continuing operations are recognised in the profit and loss account as impairment losses or treated as a revaluation decrease for assets carried at revalued amount to the extent that the impairment loss does not exceed the amount held in the asset revaluation reserve for that same asset. An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses recognised for an asset other than goodwill may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the assets recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Reversal of an impairment loss is recognised in the profit and loss account unless the asset is carried at revalued amount, in which case the reversal in excess of impairment loss previously recognised through the profit and loss account is treated as a revaluation increase. After such a reversal, the depreciation charge is adjusted in future periods to allocate the assets revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. 5 years 20 years 5 years

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APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

3.

Summary of significant accounting policies (contd) 3.11 Financial assets Financial assets within the scope of FRS 39 are classified as either financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale financial assets, as appropriate. Financial assets are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. The Group determines the classification of its financial assets after initial recognition and, where allowed and appropriate, re-evaluates this designation at each financial year-end. (a) Financial assets at fair value through profit or loss Financial assets classified as held for trading are included in the category financial assets at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Gains or losses on investments held for trading are recognised in the profit and loss account. The Group does not designate any financial assets not held for trading as financial assets at fair value through profit and loss. (b) Loans and receivables Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in the profit and loss account when the loans and receivables are derecognised or impaired, as well as through the amortisation process. 3.12 Quoted investment Quoted investment is classified as financial assets at fair value through profit or loss. The accounting policy for the aforementioned category of financial assets is stated in Note 3.11.

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APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

3.

Summary of significant accounting policies (contd) 3.13 Cash and cash equivalents Cash and cash equivalents comprise cash on hand and at bank, demand deposits, and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the purposes of the cash flow statement, cash and cash equivalents are shown net of outstanding bank overdrafts which are repayable on demand and which form an integral part of the Groups cash management. Cash and short term deposits carried in the balance sheets are classified and accounted for as loans and receivables under FRS 39. The accounting policy for this category of financial assets is stated in Note 3.11. 3.14 Trade and other receivables Trade and other receivables, including amounts due from associated companies are classified and accounted for as loans and receivables under FRS 39. The accounting policy for this category of financial assets is stated in Note 3.11. An allowance is made for uncollectible amounts when there is objective evidence that the Group will not be able to collect the debt. Bad debts are written off when identified. Further details on the accounting policy for impairment of financial assets are stated in Note 3.15 below. 3.15 Impairment of financial assets The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset or group of financial assets is impaired.

Assets carried at amortised cost


If there is objective evidence that an impairment loss on loans and receivables or heldto-maturity investments carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows discounted at the financial assets original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. The amount of the loss is recognised in the profit and loss account. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the profit and loss account, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

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APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

3.

Summary of significant accounting policies (contd) 3.16 Inventories Inventories are valued at the lower of cost and net realisable value. In general, cost of raw materials and sundry consumables is determined on a first-in, first-out basis and includes all costs in bringing the inventories to their present location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. 3.17 Financial liabilities Financial liabilities include trade payables, which are normally settled on 30 90 day terms, other amounts payable and payables to related parties. Financial liabilities are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. Financial liabilities are initially recognised at fair value of the consideration received less directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in the profit and loss account when the liabilities are derecognised as well as through the amortisation process. 3.18 Derecognition of financial assets and liabilities (a) Financial assets A financial asset is derecognised where the contractual rights to receive cash flows from the asset have expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of (a) the consideration received and (b) any cumulative gain or loss that has been recognised directly in equity is recognised in the profit and loss account. (b) Financial liabilities A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired. 3.19 Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) where, as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

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APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

3.

Summary of significant accounting policies (contd) 3.20 Employee benefits (a) Defined contribution plans The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. In particular, the Singapore companies in the Group make contributions to the Central Provident Fund (CPF) scheme in Singapore, a defined contribution pension scheme. Contributions to national pension schemes are recognised as an expense in the period in which the related service is performed. (b) Employee leave entitlement Employee entitlements to annual leave are recognised as a liability when they accrue to employees. The estimated liability for leave is recognised for services rendered by employees up to balance sheet date. 3.21 Leases Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to the profit and loss account. Contingent rents, if any, are charged as expenses in the periods in which they are incurred. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term. Operating lease payments are recognised as an expense in the profit and loss account on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis. 3.22 Revenue Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: (a) Outlet sales Revenue from the sale of goods is recognised net of goods and services tax and discounts upon the passing of title to the customer which generally coincides with delivery and acceptance of the goods sold.

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APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

3.

Summary of significant accounting policies (contd) 3.22 Revenue (contd) (b) Franchise income Initial franchise income is recognised upon the grant of rights, completion of the designated phases of the franchise set-up and transfer of know-how to the franchisee in accordance with the terms stated in the franchise agreement. Recurring franchise income is recognised on a periodic basis as a percentage of the franchisees turnover in accordance with terms as stated in the franchise agreement. (c) Interest income Interest income is recognised as interest accrues (using the effective interest method) unless collectibility is in doubt. 3.23 Government grants Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognised in profit and loss account over the period necessary to match them on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset, the fair value is recognised as deferred capital grant on the balance sheet and is amortised to the profit and loss account over the expected useful life of the relevant asset by equal annual instalments. 3.24 Income taxes (a) Current tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date. (b) Deferred tax Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences, except: Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable profit or loss; and

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APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

3.

Summary of significant accounting policies (contd) 3.24 Income taxes (contd) (b) Deferred tax (contd) In respect of taxable temporary differences associated with investments in subsidiary companies and associated companies, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilised. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Income tax relating to items recognised directly in equity is recognised in equity. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. (c) Sales tax Revenues, expenses and assets are recognised net of the amount of sales tax except: Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and Receivables and payables that are stated with the amount of sales tax included. The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

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APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

4.

Revenue
2004 S$000 Outlet sales Export sales 20,893 20,893 2005 S$000 29,045 29,045 2006 S$000 33,625 159 33,784

5.

Other operating income


2004 S$000 Gain on fair value adjustment of quoted investment Gain on disposal of property, plant and equipment Gain on disposal of quoted investment Government grants Insurance compensation Short-term deposit interest income 9 4 13 2005 S$000 23 16 39 2006 S$000 9 7 135 9 139 299

6.

Finance costs
2004 S$000 Interest expense: Finance lease Bank overdrafts 2005 S$000 2006 S$000

13 13

27 27

35 7 42

A-26

APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

7.

Profit before taxation Profit before taxation is arrived at after charging/(crediting) the following:
2004 S$000 Amortisation of intangible assets Bad debts written off loan to a Director-related company loan to a related party Depreciation of property, plant and equipment Directors fee Directors remuneration Employee benefits expense (excluding Directors) salaries & bonuses central Provident Fund Loss/(gain) on disposal of property, plant and equipment Operating lease expenses Property, plant and equipment written off Provision for reimbursement of start-up costs for an associated company in Chengdu Staff training and benefits 841 400 450 3,883 430 2,755 240 2005 S$000 40 61 899 500 1,165 5,122 608 1 3,382 8 195 2006 S$000 73 77 1,273 200 1,025 6,408 621 (9) 4,059 76 238

8.

Taxation (a) Major components of income tax expense The major components of income tax expense for the years ended 31 December are:
2004 S$000 Current income tax: Current income taxation Under provision in respect of prior years Deferred income tax: Movement in temporary differences Income tax expense recognised in the profit and loss account 2005 S$000 2006 S$000

590 10 (85)

830 8 190

859 3 249

515

1,028

1,111

A-27

APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

8.

Taxation (contd) (b) Relationship between tax expense and accounting profit A reconciliation between tax expense and the product of accounting profit multiplied by the applicable corporate tax rate for the years ended 31 December as follows:
2004 S$000 Profit before taxation Tax expense at 20% (2005: 20%, 2004: 20%) Adjustments: Tax effect of (income)/expense not (chargeable)/ deductible for tax Deferred tax assets not recognised Share of tax of associates Effect of recognised partial tax exemption Under provision in respect of prior years Others Income tax expense recognised in the profit and loss account 2,597 2005 S$000 4,235 2006 S$000 4,150

519

847

830

(4) (10) 10

159 14 (10) 8 10

283 5 (10) 3

515

1,028

1,111

9.

Earnings per share Basic earnings per share is calculated by dividing profit for the year that is attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year. The following tables reflect the profit and loss account and share data used in the computation of basic earnings per share for the years ended 31 December:
2004 S$000 Profit for the year attributable to ordinary equity holders of the Company 2005 S$000 2006 S$000

2,082 000

3,207 000 68,400

3,039 000 68,400

Weighted average number of ordinary shares (1)

68,400

(1)

For comparative purposes, earnings per share for the periods reported on have been computed based on the profit after tax attributable to equity holders of the Proforma Group divided by the pre-invitation share capital of 68,400,000 shares.

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APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

10.

Property, plant and equipment


Machinery Leasehold and Motor Electrical building equipment vehicles Renovation fittings Furniture Computers Total S$000 S$000 S$000 S$000 S$000 S$000 S$000 S$000 At Valuation At Cost At Cost At Cost At Cost At Cost At Cost Cost or valuation At 1 January 2004 Additions At 31 December 2004 and 1 January 2005 Additions Disposals At 31 December 2005 and 1 January 2006 Additions Disposals At 31 December 2006 Accumulated depreciation At 1 January 2004 Charge for the year At 31 December 2004 and 1 January 2005 Charge for the year Disposals At 31 December 2005 and 1 January 2006 Charge for the year Disposals At 31 December 2006 Net carrying amount At 31 December 2004 At 31 December 2005 At 31 December 2006 1,504 2,210 2,163 741 955 1,089 813 721 529 317 224 348 243 692 636 61 78 211 860 905 3,679 5,740 5,881 64 32 1,836 318 417 256 704 105 304 94 333 36 3,658 841 1,600 2,476 419 990 496 926 200 495 146 412 18 6,899 1,279

1,600 739

2,895 501

1,486 228 (223)

1,126 11 (62)

641 550 (43)

430 44 (2)

947

8,178 3,020 (330)

2,339 2,339

3,396 498 (4) 3,890

1,491 81 (51) 1,521

1,075 247 1,322

1,148 142 1,290

472 180 652

947 269 (2) 1,214

10,868 1,417 (57) 12,228

96 33

2,154 287

673 267 (170)

809 100 (58)

398 99 (41)

369 26 (1)

87

4,499 899 (270)

129 47 176

2,441 363 (3) 2,801

770 273 (51) 992

851 123 974

456 198 654

394 47 441

87 222 309

5,128 1,273 (54) 6,347

A-29

APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

10.

Property, plant and equipment (contd)

Assets held under finance leases


During the year, the Group acquired fixed assets with an aggregate cost of S$1,417,000 (2005: S$3,020,000 and 2004: S$1,279,000), of which S$69,000 (2005: S$779,000 and 2004: S$261,000) was acquired by means of hire purchase and the balance of S$1,348,000 (2005: S$2,241,000 and 2004: S$1,018,000) was made in cash. Net book value of motor vehicles and computers for the Group under finance leases as at 31 December 2006 amounted to S$860,000 (2005: S$1,154,000 and 2004: S$665,000).

Revaluation of leasehold building


The valuation of the leasehold building was performed by Messrs Asian Appraisal Company Pte Ltd, independent valuers on 7 January 2003 on the basis of open market valuation. Had the leasehold building been measured using the cost model, its carrying amount as at 31 December 2006 would have been S$1,963,000 (2005: S$2,011,000 and 2004: S$1,307,000). The leasehold building is mortgaged to a bank for banking facilities granted to the Company. 11. Intangible assets
Computer software Club licences membership (i) (ii) S$000 S$000 Cost At 1 January 2004, 31 December 2004 and 1 January 2005 Additions At 31 December 2005 and 1 January 2006 Additions At 31 December 2006 Accumulated amortisation Charge for the year At 31 December 2004 and 1 January 2005 Charge for the year At 31 December 2005 and 1 January 2006 Charge for the year At 31 December 2006 Franchise Rights (iii) S$000

Total S$000

290 290 16 306

105 105 105

41 41

105 290 395 57 452

29 29 60 89

11 11 6 17

7 7

40 40 73 113

A-30

APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

11.

Intangible assets (contd)


Computer software Club licences membership (i) (ii) S$000 S$000 Net carrying amount At 31 December 2004 At 31 December 2005 At 31 December 2006 Average remaining amortisation years - 2004 - 2005 - 2006

Franchise Rights (iii) S$000

Total S$000

261 217

105 94 88

34

105 355 339

4 4 4

18 17 16

(i)

Computer software licences


Computer software licences are stated at cost less accumulated amortisation and any impairment in value. Amortisation is calculated on a straight-line basis to write off the cost of software licences over a period of 5 years. Impairment testing will be performed annually and more frequently when an indication of impairment exists. Amortisation period and method will be reviewed annually.

(ii)

Club membership
This relates to transferable membership in a golf club in Singapore which is stated at cost less accumulated amortisation and any impairment in value. Market value of the transferable membership as at 31 December 2006 is S$180,000 (2005: S$115,000 and 2004: S$115,000).

(iii)

Franchise rights
Franchise rights are stated at cost less accumulated amortisation and any impairment in value. Amortisation is calculated on a straight-line basis to write off the cost of franchise rights over a period of 5 years. Impairment testing will be performed annually and more frequently when an indication of impairment exists. Amortisation period and method will be reviewed annually.

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APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

12.

Investment in associated companies


2006 S$000 Unquoted equity shares, at cost Impairment losses Share of post-acquisition reserves Exchange differences Carrying amount of investment 110 (66) (27) (1) 16

Details of the associated companies are as follows:


Name of associated companies Country of incorporation Principal activities Proportion (%) of ownership interest 2006 40

Old Chang Kee (Thailand) Co Ltd Old Chang Kee (M) Sdn Bhd (2)

Thailand
(1)

Dormant

Malaysia

Operating retail food outlets and general trading Dormant Operating retail food outlets and general trading

40

Pure Options Pte Ltd Old Chang Kee (Chengdu) Co., Ltd. (4)
(1) (2) (3) (4)

(3)

Singapore Peoples Republic of China

33 35

Audited by U. B. Audit Office Audited by Poo, Lee & Co. Audited by S.L. Chua & Co. Not audited as the Company is in the process of being liquidated.

The summarised financial information of the associated companies are as follows:


2006 S$000 Assets and liabilities: Current assets Non-current assets Other assets Total assets Current liabilities Long-term liabilities Total liabilities Results: Revenue Loss for the period

87 54 9 150 40 122 162

271 (73)

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APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

13.

Amounts due from associated companies Amounts due from associated companies are non-trade in nature, unsecured, interest-free and not expected to be repaid within 12 months from the balance sheet date.

14.

Quoted investment
2004 S$000 2005 S$000 2006 S$000

Held for trading investment - Shares (quoted)

77

100

15.

Inventories
2004 S$000 Raw materials Sundry consumables Total inventories at lower of cost and net realisable value 239 5 244 2005 S$000 341 9 350 2006 S$000 346 100 446

16.

Trade and other receivables


2004 S$000 Trade receivables Other receivables Advances for purchase of fixed assets 1 1 2005 S$000 140 2 142 2006 S$000 80 3 1,271 1,354

17.

Amounts due from associated companies These amounts are non-trade in nature, unsecured, interest-free and repayable on demand.

18.

Cash and cash equivalents


2004 S$000 2005 S$000 2006 S$000

Cash in hand Cash at bank Short term deposits

298 2,770 3,068

119 1,531 3,004 4,654

287 1,700 4,578 6,565

A-33

APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

18.

Cash and cash equivalents (contd) Cash at banks earns interest at floating rates based on daily bank deposit rates ranging from 0.25% to 0.475% (2005: 0.21% to 0.31% and 2004: 0.18% to 0.22%) per annum. Short-term deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. The weighted average effective interest rate of short term deposits is 3.1% (2005: 2.9% and 2004: Nil) per annum. A short-term deposit of S$1 million (2005: S$1 million and 2004: Nil) of the Group has been pledged as security for bank facilities granted by a financial institution. For the purpose of the combined cash flow statements, cash and cash equivalents comprise the following at 31 December:
2004 S$000 Cash and short-term deposit Bank overdrafts 3,068 3,068 2005 S$000 4,654 (54) 4,600 2006 S$000 6,565 (173) 6,392

Bank overdrafts are included in the determination of cash and cash equivalents because they form an integral part of the Groups cash management. Bank overdrafts utilised by the subsidiary company are secured by a guarantee from another subsidiary company. They are repayable on demand and have a weighted average effective interest rate of 6.2% (2005: 6.0% and 2004: Nil) per annum. Interest rates of bank overdrafts are repriced at an interval of 1 month. 19. Trade and other payables
2004 S$000 Trade payables Accruals Amount due to Directors Provision for reimbursement of start-up costs for an associated company in Chengdu Sundry creditors 1,141 376 1,517 2005 S$000 1,766 1,062 4 16 2,848 2006 S$000 2,241 1,063 2,498 76 3 5,881

Amount due to Directors is unsecured, interest-free and repayable on demand.

A-34

APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

19.

Trade and other payables (contd) Trade payables are denominated in the following currencies:
2004 S$000 Singapore Dollars (SGD) Thai Baht (THB) Malaysia Ringgit (RM) 849 292 1,141 2005 S$000 1,276 464 26 1,766 2006 S$000 1,595 639 7 2,241

20.

Other liabilities
2004 S$000 Foreign staff deposits Provision for unconsumed leave 6 50 56 2005 S$000 22 66 88 2006 S$000 34 146 180

21.

Amount due to a related party This amount is non-trade in nature, unsecured, interest-free and repayable on demand.

22.

Finance lease liabilities The Group has finance leases for certain motor vehicles and computers. The lease terms range from 3 to 7 years with options to purchase at the end of the lease term. The lease terms do not contain restrictions concerning dividends, additional debt or further leasing. The average discount rate implicit in the leases range from 4.15% to 8.73% (2005: 4.15% to 8.73% and 2004: 4.15% to 8.13%) per annum.

A-35

APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

22.

Finance lease liabilities (contd) Future minimum lease payments under finance leases together with the present value of the net minimum lease payments are as follows:
2004 Minimum payments S$000 Within one year After one year but not more than five years After five years Total minimum lease payments Less : Amounts representing finance charges Present value of minimum lease payments 125 477 54 Present value of payments S$000 108 385 74 2005 Minimum payments S$000 356 811 62 Present value of payments S$000 323 722 53 2006 Present Minimum value of payments payments S$000 S$000 380 540 13 344 474 11

656 (89)

567

1,229 (131)

1,098

933 (104)

829

567

567

1,098

1,098

829

829

23.

Deferred tax liabilities


2004 S$000 Balance at beginning of year Movements in temporary difference Balance at end of year 221 (85) 136 2005 S$000 136 190 326 2006 S$000 326 250 576

Deferred taxation comprises: Differences in depreciation Asset revaluation reserve 69 67 136 259 67 326 509 67 576

A-36

APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

24.

Share capital
2004 No. of shares 000 Ordinary shares issued and fully paid At 1 January and 31 December 700 700 700 700 700 700 No. of shares 000 2005 No. of shares 000 2006

S$000

S$000

S$000

The holders of ordinary shares are entitled to receive dividends as and when declared by the Group. All ordinary shares carry one vote per share without restriction. In accordance with the Companies (Amendment) Act 2005, on 30 January 2006, the shares of the Group ceased to have a par value. 25. Share application money The share application money relates to funds received from the shareholders as additional capital injection to the Group. As at 31 December 2006, new shares have not been allotted to the shareholders. 26. Reserves
2004 S$000 2005 S$000 2006 S$000

Accumulated profits Asset revaluation reserve

3,833 263 4,096

6,032 263 6,295

6,576 263 6,839

The asset revaluation reserve is used to record increases in the fair value of leasehold building and decreases to the extent that such decrease relates to the same asset previously recognised in equity.

A-37

APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

27.

Dividends
2004 S$000 Dividends on ordinary shares: Interim dividend for 2006: Nil (2005: $1.80 and 2004: $1.00) per share, paid net of tax at 20% (2005: 20% and 2004: 20%) Interim dividend for 2006: $3.08 (2005: Nil and 2004: Nil) per share, paid net of tax at 20% (2005: 20% and 2004: 20%) Interim exempt (one-tier) dividend for 2006: $1.10 (2005: Nil and 2004: Nil) per share 2005 S$000 2006 S$000

560

1,008

1,725

560

1,008

770 2,495

28.

Commitments and contingencies (a) Capital commitments Capital expenditure contracted for as at the balance sheet date but not recognised in the financial statements is as follows:
2004 S$000 Capital commitments in respect of property, plant and equipment 2005 S$000 2006 S$000

2,306

(b)

Operating lease commitments The Group has non-cancellable operating lease agreements in respect of office, production and storage premises and retail outlets. These non-cancellable leases have remaining non-cancellable terms of between 2 to 60 years. Some of the leases include a clause to enable upward revision of the rental charges on an annual basis based on prevailing conditions. Some of the rental outlets include clauses whereby rental is charged using a base rental plus a percentage of the outlets sales turnover. Future minimum rental under non-cancellable leases as at the end of the financial years are as follows:
2004 S$000 Not later than one year Later than one year but not later than five years Later than five years 2,331 1,624 2,132 6,087 2005 S$000 2,899 2,275 2,083 7,257 2006 S$000 3,827 4,668 2,035 10,530

A-38

APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

28.

Commitments and contingencies (contd) (c) Financial guarantees, unsecured As at 31 December 2006, a subsidiary of the Group, Ten & Han Trading Pte Ltd, has given financial guarantees of S$970,000 (2005: S$420,000 and 2004: Nil) to banks for facilities granted to another subsidiary of the Group, 1901 Singapore Pte. Ltd.. (d) Letters of guarantees, secured As at 31 December 2006, the bank issued letters of guarantees on behalf of its wholly owned subsidiary, Ten & Han Trading Pte Ltd to lessors of premises amounting to approximately S$110,000 (2005: S$109,000 and 2004: S$63,000). These letters of guarantees are secured by fixed deposits.

29.

Related parties disclosures (a) Sale and purchase of goods and services In addition to those related party information disclosed elsewhere in the financial statements, the following significant transactions between the Group and its related parties took place during the year on terms agreed between the parties:
2004 S$000 Purchase of fixed assets from a Director-related company Sales of goods to an associated company 2005 S$000 2006 S$000

(67)

13

(b)

Compensation of key management personnel


2004 S$000 Short-term employee benefits Central Provident Fund contributions Total compensation paid to key management personnel Comprise amounts paid to: Directors of the Company 856 38 2005 S$000 1,689 21 2006 S$000 1,254 15

894

1,710

1,269

894

1,710

1,269

A-39

APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

30.

Financial risk management objectives and policies The Groups principal financial instruments, comprise overdraft, finance leases and cash and short term deposits. The main purpose of these financial instruments is to raise finance for the Groups operations. The Group has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations. The main risks arising from the Groups financial instruments are interest rate risk, credit risk and liquidity risk. The Board reviews and agrees policies for managing these risks and they are summarised below. (a) Interest rate risk The Groups exposure to market risk for changes in interest rates relates primarily to the Groups bank overdraft and finance lease liabilities. (b) Credit risk The Group trades mainly in cash. Receivable balances are monitored on an ongoing basis with the result that the Groups exposure to bad debts is not significant. With respect to credit risk arising from other financial assets of the Group, which comprise cash and cash equivalents and other receivables, the Groups exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments. There are no significant concentrations of credit risk within the Group. (c) Liquidity risk The Groups objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts and finance leases.

31.

Financial instruments (a) Fair values The fair value of a financial instrument is the amount at which the instrument could be exchanged or settled between knowledgeable and willing parties in an arms length transaction, other than in a forced or liquidation sale.

Financial instruments whose carrying amount approximate fair value


Management has determined that the carrying amounts of cash and cash equivalents, current trade and other receivables, current trade and other payables and current finance lease liabilities, based on their notional amounts, reasonably approximate their fair values because these are mostly short term in nature or are repriced frequently.

A-40

APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

31.

Financial instruments (contd) (a) Fair values (contd)

Financial instruments carried at other than fair value


Set out below is a comparison by category of carrying amounts and fair values of all of the Groups financial instruments that are carried in the financial statements at other than fair values as at the end of the financial years.
2004 The Group Carrying amount S$000 Fair value S$000 2005 Carrying amount S$000 Fair value S$000 2006 Carrying amount S$000 Fair value S$000

Financial liabilities: Finance lease liabilities Club membership payable

567

520

1,098

1,038

829

790

67

64

51

50

35

35

Amount due from associated companies has no repayment terms and is repayable only when the cash flows of the borrowers permits. Accordingly, the fair value of the amount due from associated companies is not determinable as the timing of the future cash flows cannot be estimated reliably.

Methods and assumptions used to determine fair values


Fair value of financial liabilities and club membership payable has been determined using discounted estimated cash flows. Where repayment terms are not fixed, future cash flows are projected based on managements best estimates. The discount rates used are the current market incremental lending rates for similar types of lending, borrowing and leasing arrangements. No amount has been recognised in the profit and loss account in relation to the change in fair value of financial assets or financial liabilities estimated using a valuation technique for the financial years ended 31 December 2006, 2005 and 2004.

A-41

APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

31.

Financial instruments (contd) (b) Interest rate risk The following tables sets out the carrying amount, by maturity, of the Groups financial instruments that are exposed to interest rate risk:
Within 1 year S$000 1-2 years S$000 2-3 years S$000 3-4 years S$000 4-5 More than years 5 years Total S$000 S$000 S$000

Note 2006 Fixed rate Short-term deposits Obligations under finance leases Floating rate Cash at bank Bank overdrafts 2005 Fixed rate Short-term deposits Obligations under finance leases Floating rate Cash at bank Bank overdrafts 2004 Fixed rate Obligations under finance leases Floating rate Cash at bank

18 22

4,578 (344)

(230)

(117)

(85)

(42)

(11)

4,578 (829)

18 18

1,700 (173)

1,700 (173)

18 22

3,004 (323)

(321)

(207)

(109)

(85)

(53)

3,004 (1,098)

18 18

1,531 (54)

1,531 (54)

22

(108)

(108)

(106)

(87)

(84)

(74)

(567)

18

2,770

2,770

Interest on financial instruments subject to floating interest rates is contractually repriced at intervals of less than 6 months. Interest on financial instruments at fixed rates are fixed until the maturity of the instrument. The other financial instruments of the Group that are not included in the above tables are not subject to interest rate risks.

A-42

APPENDIX A REPORT FROM THE AUDITORS AND THE AUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2004, 2005 AND 2006
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 31 December 2004, 2005 and 2006

32.

Segment information The Group is principally engaged in the manufacture and distribution of food products. As such, the Group has not presented a breakdown of segment information by business segments. The Groups operations and customers are mainly located in Singapore. As such, the Group has not presented a breakdown of segment information by geographical segments.

33.

Events occurring after the balance sheet date On 25 July 2007, the Company declared and paid an interim exempt (one-tier) dividend on ordinary shares amounting to S$700,000 (S$1.00 per ordinary share). On 15 November 2007, the Company entered into a sale and purchase agreement with Nineteen O One Sdn. Bhd. pursuant to which the entire issued and paid up share capital of 1901 Singapore Pte. Ltd. would be transferred to Nineteen O One Sdn. Bhd. for a consideration of S$180,000 (the Disposal). Completion of the Disposal took place on 15 November 2007.

34.

Authorisation of combined financial statements for issue The combined financial statements for the financial years ended 31 December 2006, 2005 and 2004 were authorised for issue in accordance with a resolution of the Directors on 4 January 2008.

A-43

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007

Report on Unaudited Combined Financial Statements

OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES


For the financial period from 1 January 2007 to 30 June 2007

B-1

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Statement by Directors

We, Han Keen Juan and Lim Tao-E William, being the Directors of Old Chang Kee Ltd. (the Company), do hereby state that, in the opinion of the Directors, (a) the accompanying combined financial statements together with notes thereto are drawn up so as to present fairly the state of affairs of the Group as at 30 June 2007 and of the results of the business, changes in equity and cash flows of the Group for the financial period from 1 January 2007 to 30 June 2007; and at the date of this statement there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

(b)

On behalf of the Board of Directors:

Han Keen Juan Director

Lim Tao-E William Director

Singapore 4 January 2008

B-2

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Report from the Auditors in relation to the Review of the Unaudited Combined Financial Statements of Old Chang Kee Ltd. and its Subsidiary Companies for the financial period from 1 January 2007 to 30 June 2007

4 January 2008 The Board of Directors Old Chang Kee Ltd. 2 Woodlands Terrace Singapore 738427 Dear Sirs: We have reviewed the accompanying combined financial statements of Old Chang Kee Ltd. (the Company) and its subsidiary companies (collectively, the Group) set out on pages B-4 to B-39 which comprise the combined balance sheet of the Group as at 30 June 2007, the combined profit and loss account, combined statement of changes in equity and combined cash flow statement of the Group for the period from 1 January 2007 to 30 June 2007, and a summary of significant accounting policies and other explanatory notes. Management is responsible for the preparation and fair presentation of these combined financial statements in accordance with Singapore Financial Reporting Standard 34, Interim Financial Reporting (FRS 34). Our responsibility is to express a conclusion on these financial statements based on our review.

Scope of Review
We conducted our review in accordance with Singapore Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Singapore Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying combined financial statements do not present fairly, in all material respects, the financial position of the Group as at 30 June 2007 and of its results, changes in equity and cash flows for the six month period then ended in accordance with FRS 34. This report has been prepared for inclusion in the Prospectus in connection with the Invitation by the Company in respect of the issue of 25,000,000 new ordinary shares in the share capital of the Company. Yours faithfully,

ERNST & YOUNG Certified Public Accountants Singapore Max Loh Khum Whai Partner-in-Charge B-3

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Combined Profit and Loss Accounts for the financial period from 1 January 2007 to 30 June 2007

Note

Unaudited 1 January 2007 to 30 June 2007 S$000 19,039 (7,918) 11,121

Unaudited 1 January 2006 to 30 June 2006 S$000 16,074 (6,493) 9,581 82 (5,106) (1,680) (454) (19) 2,404 (673) 1,731 2.53

Revenue Cost of sales Gross profit Other operating income Selling and distribution expenses Administrative expenses Other operating expenses Finance costs Profit before taxation Taxation Profit for the period Basic and fully diluted earnings per share (cents)

285 (6,657) (2,201) (512)

6 7 8

(22) 2,014 (394) 1,620

2.37

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
B-4

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Combined Balance Sheet as at 30 June 2007

Note

Unaudited 30 June 2007 S$000

Audited 31 December 2006 S$000

Non-Current Assets Property, plant and equipment Intangible assets Investment in associated companies Amounts due from associated companies

10 11 12 13

9,441 304 17 86 9,848

5,881 339 16 57 6,293

Current Assets Inventories Trade and other receivables Deposits Prepayments Amounts due from associated companies Cash and cash equivalents

14 15

16 17

526 171 1,553 665 22 4,092 7,029

446 1,354 1,393 149 15 6,565 9,922

Current Liabilities Trade and other payables Other liabilities Bank overdrafts Amount due to a related party Finance lease liabilities Club membership payable current Provision for taxation

18 19 17 20 21

5,167 203 140 323 15 818 6,666

5,881 180 173 2 344 15 900 7,495 2,427

Net Current Assets Non-Current Liabilities Finance lease liabilities Club membership payable long term Deferred tax liabilities

363

21 22

401 13 657 1,071

485 20 576 1,081 7,639

Net Assets

9,140

Equity attributable to equity holders of the Company Share capital Share application money Reserves Total Equity

23 24 25

800 8,340 9,140

700 100 6,839 7,639

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
B-5

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Combined Statements of Changes in Equity for the financial period from 1 January 2007 to 30 June 2007

Attributable to equity holders of the Company

Share capital S$000 Unaudited period ended 30 June 2006 At 1 January 2006 Profit for the period, representing total recognised income for the period At 30 June 2006 700

Share application money (Note 24) S$000

Asset revaluation reserve S$000

Accumulated profits S$000

Total reserves S$000

Total equity S$000

263

6,032

6,295

6,995

700

263

1,731 7,763

1,731 8,026

1,731 8,726

Unaudited period ended 30 June 2007 1 January 2007 Issue of ordinary shares for cash Revaluation difference Profit for the period, representing total recognised income for the period At 30 June 2007 700 100 100 (100) 263 (119) 6,576 6,839 (119) 7,639 (119)

800

144

1,620 8,196

1,620 8,340

1,620 9,140

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
B-6

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Combined Cash Flow Statements for the financial period from 1 January 2007 to 30 June 2007

Unaudited 1 January 2007 to 30 June 2007 S$000 Cash flows from operating activities: Profit before taxation Adjustments for: Amortisation of intangible assets Bad debt written off loan to a related party Currency realignment Depreciation of property, plant and equipment Gain on disposal of property, plant and equipment Gain on disposal of quoted investment Interest expense Interest income Provision for reimbursement of start-up costs for an associated company in Chengdu 2,014

Unaudited 1 January 2006 to 30 June 2006 S$000

2,404

38 (1) 758 (148) 22 (35)

36 79 596 (11) (7) 19 (62) 76

Operating profit before working capital changes Decrease/(increase) in trade and other receivables (Increase)/decrease in inventories (Decrease)/increase in trade and other payables (Increase)/decrease in amount due from associated companies Decrease in amount due to a related party

2,648 506 (80) (691) (7) (2)

3,130 (1,033) 39 320 1 (13)

Cash generated from operations Tax paid Net cash generated from operating activities

2,374 (395) 1,979

2,444 (405) 2,039

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
B-7

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Combined Cash Flow Statements for the financial period from 1 January 2007 to 30 June 2007 (contd)

Unaudited 1 January 2007 to 30 June 2007 S$000 Cash flows from investing activities: Purchase of property, plant and equipment Purchase of intangible asset Proceeds from disposal of property, plant and equipment Interest received Payment for club membership Proceeds from disposal of quoted investment Investment in associated companies Advance to associated companies Net cash used in investing activities (4,300) (3) 204 36 (7) (29) (4,099)

Unaudited 1 January 2006 to 30 June 2006 S$000

(657) (55) 11 56 (8) 107 (16) (562)

Cash flows from financing activities: Repayment of finance lease liabilities Interest paid Net cash used in financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial period Cash and cash equivalents at the end of the financial period (Note 17) (298) (22) (320) (2,440) 6,392 (165) (20) (185) 1,292 4,600

3,952

5,892

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
B-8

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

1.

Corporate Information The Company was incorporated in Singapore on 16 December 2004 under the Singapore Companies Act as a private company limited by shares under the name of Old Chang Kee Singapore Pte. Ltd. and changed its name to Old Chang Kee Pte. Ltd. on 13 September 2007. On 22 November 2007, the Company changed its name to Old Chang Kee Ltd. in connection with its conversion into a public company limited by shares. The Company was incorporated for the purpose of acquiring the existing companies of the Group pursuant to the Group Restructuring Exercise. The registered office and principal place of business of the Company is located at 2 Woodlands Terrace, Singapore 738427. The principal activity of the Company is that relating to investment holding. The principal activities of the subsidiary companies are set out in Note 2.

2.

Restructuring Exercise Pursuant to an agreement dated 9 November 2007, the Company acquired the entire issued and paid-up capital of Ten & Han Trading Pte Ltd, comprising 5,600,000 ordinary shares with effect from 12 November 2007. The purchase consideration was satisfied by the issue of 5,600,000 ordinary shares credited as fully paid in the capital of the Company to Mr Han Keen Juan and Mr Lim Tao-E William. Pursuant to the agreement, Ten & Han Trading Pte Ltd became a wholly-owned subsidiary company of the Company. At the date of this report, the Group structure is as shown below:
Country and date of incorporation/ acquisition Proportion of ownership interest % Subsidiary Companies Ten & Han Trading Pte Ltd (Ten & Han) Singapore 7 January 1988 Manufacture and distribution of food products and general trading Dormant 100

Name

Principal activities

Old Chang Kee Australia Pty Ltd (OCKA) Ten & Han Food Management (Chengdu) Co., Ltd.

Australia 30 May 2006 Peoples Republic of China 23 May 2007

100

F & B management and consultancy, manufacture and sale of snacks

100

B-9

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

2.

Restructuring Exercise (contd)


Country and date of incorporation/ acquisition Proportion of ownership interest % Associated Companies Old Chang Kee (Thailand) Co Ltd (OCKT) Old Chang Kee (M) Sdn Bhd (OCKM) Thailand 19 June 2006 Malaysia 21 July 2006 Dormant 40

Name

Principal activities

Operating retail food outlets and general trading

40

3. 3.1

Summary of significant accounting policies

Basis of preparation
The combined financial statements of the Group have been prepared in accordance with Singapore Financial Reporting Standards (FRS). The combined financial statements have been prepared on a historical cost basis except for leasehold building that has been measured at its fair value. The combined financial statements are presented in Singapore Dollars (SGD or S$). The accounting policies have been consistently applied by the Group and the Company throughout the financial year.

3.2

Changes in accounting policies


The accounting policies have been consistently applied by the Group and the Company throughout the financial period, except for the change in accounting policies discussed below.

Adoption of new and revised FRS


On 1 January 2007, the Group adopted all new and revised FRS mandatory for annual financial periods beginning on or after 1 January 2007. The adoption of these new and revised FRS has no material impact on the Combined Financial Statements. Disclosures arising from the adoption of FRS 107, Financial Instruments: Disclosures and amendments to FRS 1 (revised), Presentation of financial statements (Capital Disclosures) will be made in the financial statements for the year ending 31 December 2007.

B-10

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

3. 3.3

Summary of significant accounting policies (contd)

FRS and INT FRS issued but not yet effective


The Group and the Company have not adopted the following FRS and INT FRS that have been issued but not yet effective:
Effective date (Annual periods beginning on or after) FRS 108 INT FRS 111 INT FRS 112 : : : Operating Segments Group and Treasury Share Transactions Service Concession Arrangements 1 January 2009 1 March 2007 1 January 2008

The Directors expect that the adoption of the above pronouncements will have no material impact to the financial statements in the period of initial application. 3.4

Significant accounting estimates and judgements


Estimates and assumptions concerning the future and judgements are made in the preparation of the financial statements. They affect the application of the Groups accounting policies, reported amounts of assets, liabilities, income and expenses, and disclosures made. They are assessed on an on-going basis and are based on experience and relevant factors, including expectations of future events that are believed to be reasonable under the circumstances. Key sources of estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. (a) Depreciation of property, plant and equipment The cost of property, plant and equipment is depreciated on a straight-line basis over their useful lives. Management estimates the useful lives of these property, plant and equipment to be within 5 to 50 years. The carrying amount of the Groups property, plant and equipment at 30 June 2007 was approximately S$9,441,000 (31 December 2006: S$5,881,000). Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised. (b) Income taxes Significant judgement is involved in determining the Group-wide provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The carrying amount of the Groups tax payables and deferred tax liabilities at 30 June 2007 was approximately S$818,000 (31 December 2006: S$900,000) and S$657,000 (31 December 2006: S$576,000) respectively. B-11

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

3. 3.5

Summary of significant accounting policies (contd)

Functional and foreign currency


(a) Functional currency The management has determined the currency of the primary economic environment in which the Company operates i.e. functional currency, to be SGD. Sales prices and major costs of providing goods and services including major operating expenses are primarily influenced by fluctuations in SGD. (b) Foreign currency transactions Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiary companies and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the closing rate of exchange ruling at the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Exchange differences arising on the settlement of monetary items or on translating monetary items at the balance sheet date are recognised in the profit and loss account. (c) Foreign currency translations The results and financial position of foreign operations are translated into SGD using the following procedures: Assets and liabilities for each balance sheet presented are translated at the closing exchange rate ruling at that balance sheet date; and Income and expenses for each profit and loss account are translated at average exchange rates for the year, which approximates the exchange rates at the dates of the transactions. All resulting exchange differences are recognised in a separate component of equity as foreign currency translation reserve. On disposal of a foreign operation, the cumulative amount of exchange differences deferred in equity relating to that foreign operation is recognised in the profit and loss account as a component of the gain or loss on disposal.

B-12

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

3. 3.6

Summary of significant accounting policies (contd)

Subsidiary company and principles of consolidation


(a) Subsidiary company A subsidiary company is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities. The Group generally has such power when it directly or indirectly, holds more than 50% of the issued share capital, or controls more than half of the voting power, or controls the composition of the board of directors. In the Companys separate financial statements, investments in subsidiary companies are accounted for at cost less any impairment losses. (b) Principles of consolidation The combined financial statements comprise the financial statements of the Company and its subsidiary companies as at the balance sheet date. The financial statements of the subsidiary companies are prepared for the same reporting date as the parent company. Consistent accounting policies are applied for like transactions and events in similar circumstances. All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions that are recognised in assets, are eliminated in full. Subsidiary companies are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. Acquisition of subsidiary company is accounted for using the purchase method. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. Pursuant to an agreement dated 9 November 2007, the Company acquired the entire issued and paid-up capital of Ten & Han at par comprising 5,600,000 ordinary shares. As this arrangement constitutes a reorganisation of companies under common control, the pooling of interest method of accounting was adopted in the preparation of the combined financial statements of the Group. Under this method of accounting, the results and cash flows of the Company and Ten & Han are combined from the beginning of the financial period in which the reorganisation occurred and their assets and liabilities combined at the amounts at which they were previously recorded as if they had been part of the Group for the whole of the current and preceding periods.

B-13

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

3. 3.7

Summary of significant accounting policies (contd)

Associated company
An associated company is an entity, not being a subsidiary or a joint venture, in which the Group has significant influence. This generally coincides with the Group having 20% or more of the voting power, or has representation on the board of directors. The Groups investment in associated companies is accounted for using the equity method. Under the equity method, investment in associated companies is carried in the balance sheet at cost plus post-acquisition changes in the Groups share of net assets of the associated companies. The Groups share of the profit or loss of the associated companies is recognised in the consolidated profit and loss account. Where there has been a change recognised directly in the equity of the associated companies, the Group recognises its share of such changes. After application of the equity method, the Group determines whether it is necessary to recognise any additional impairment loss with respect to the Groups net investment in the associated companies. The associated companies are equity accounted for from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associate. When the Groups share of losses in associated companies equals or exceeds its interest in the associated companies, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associated companies. The most recent available audited financial statements of the associated companies are used by the Group in applying the equity method. In the Companys separate financial statements, investment in associated companies is accounted for at cost less impairment losses.

3.8

Property, plant and equipment


All items of property, plant and equipment are initially recorded at cost. Subsequent to recognition, property, plant and equipment are stated at cost or valuation less accumulated depreciation and any accumulated impairment losses. Leasehold buildings are subsequently revalued on an asset-by-asset basis, to their fair values. Fair value is determined from marketbased evidence by appraisal that is undertaken by professionally qualified valuers. Revaluations are made annually to ensure that their carrying amount does not differ materially from their fair value at the balance sheet date. When an asset is revalued, any increase in the carrying amount is credited directly to the asset revaluation reserve. However, the increase is recognised in the profit and loss account to the extent that it reverses a revaluation decrease of the same asset previously recognised in the profit and loss account. When an assets carrying amount is decreased as a result of a revaluation, the decrease is recognised in the profit and loss account. However, the decrease is debited directly to the asset revaluation reserve to the extent of any credit balance existing in the reserve in respect of that asset.

B-14

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

3. 3.8

Summary of significant accounting policies (contd)

Property, plant and equipment (contd)


Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. The revaluation surplus included in the asset revaluation reserve in respect of an asset, is transferred directly to accumulated profits on retirement or disposal of the asset. Depreciation of an asset begins when it is available for use and is computed on a straight-line basis over the estimated useful life of the asset as follows: Leasehold building Machinery and equipment Motor vehicles Renovation Electrical fittings Furniture Computers 50 years 5 years 5 years 5 years 5 years 5 years 5 years

10 years 10 years 10 years 10 years

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. The residual values, useful life and depreciation method are reviewed at each financial yearend to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in the profit and loss account in the year the asset is derecognised. 3.9

Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised on a straight-line basis over the estimated economic useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year-end. The amortisation expense on intangible assets with finite lives is recognised in the profit and loss account through the other operating expenses line item.

B-15

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

3. 3.9

Summary of significant accounting policies (contd)

Intangible assets (contd) Computer software licences, club membership and franchise rights
Computer software licences, club membership and franchise rights are stated at cost less accumulated amortisation and any impairment in value. They are amortised on a straight-line basis over the following estimated useful lives: Computer software licences Club membership Franchise rights 5 years 20 years 5 years

3.10 Impairment of non-financial assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset (i.e. an intangible asset with an indefinite useful life, an intangible asset not yet available for use, or goodwill acquired in a business combination) is required, the Group makes an estimate of the assets recoverable amount. An assets recoverable amount is the higher of an assets or cash-generating units fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses of continuing operations are recognised in the profit and loss account as impairment losses or treated as a revaluation decrease for assets carried at revalued amount to the extent that the impairment loss does not exceed the amount held in the asset revaluation reserve for that same asset. An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses recognised for an asset other than goodwill may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the assets recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Reversal of an impairment loss is recognised in the profit and loss account unless the asset is carried at revalued amount, in which case the reversal in excess of impairment loss previously recognised through the profit and loss account is treated as a revaluation increase. After such a reversal, the depreciation charge is adjusted in future periods to allocate the assets revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

B-16

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

3.

Summary of significant accounting policies (contd)

3.11 Financial assets Financial assets within the scope of FRS 39 are classified as either financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or availablefor-sale financial assets, as appropriate. Financial assets are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. The Group determines the classification of its financial assets after initial recognition and, where allowed and appropriate, re-evaluates this designation at each financial year-end. (a) Financial assets at fair value through profit or loss Financial assets classified as held for trading are included in the category financial assets at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Gains or losses on investments held for trading are recognised in the profit and loss account. The Group does not designate any financial assets not held for trading as financial assets at fair value through profit and loss. (b) Loans and receivables Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in the profit and loss account when the loans and receivables are derecognised or impaired, as well as through the amortisation process. The Group classified the following financial assets as loans and receivables: Cash and cash equivalents Trade and other receivables including amounts due from associated companies. 3.12 Cash and cash equivalents Cash and cash equivalents comprise cash on hand and at bank, demand deposits, and shortterm, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the purposes of the cash flow statement, cash and cash equivalents are shown net of outstanding bank overdrafts which are repayable on demand and which form an integral part of the Groups cash management. Cash and short term deposits carried in the balance sheets are classified and accounted for as loans and receivables under FRS 39. The accounting policy for this category of financial assets is stated in Note 3.11.

B-17

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

3.

Summary of significant accounting policies (contd)

3.13 Impairment of financial assets The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset or group of financial assets is impaired.

Assets carried at amortised cost


If there is objective evidence that an impairment loss on loans and receivables or held-tomaturity investments carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows discounted at the financial assets original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. The amount of the loss is recognised in the profit and loss account. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the profit and loss account, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. 3.14 Inventories Inventories are valued at the lower of cost and net realisable value. In general, the cost of raw materials and sundry consumables is determined on a first-in, firstout basis and includes all costs in bringing the inventories to their present location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. 3.15 Financial liabilities Financial liabilities include trade payables, which are normally settled on 30 90 day terms, other amounts payable and payables to related parties. Financial liabilities are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. Financial liabilities are initially recognised at fair value of the consideration received less directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in the profit and loss account when the liabilities are derecognised as well as through the amortisation process.

B-18

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

3.

Summary of significant accounting policies (contd)

3.16 Derecognition of financial assets and liabilities (a) Financial assets A financial asset is derecognised where the contractual rights to receive cash flows from the asset have expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of (a) the consideration received and (b) any cumulative gain or loss that has been recognised directly in equity is recognised in the profit and loss account. (b) Financial liabilities A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired. 3.17 Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) where, as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. 3.18 Employee benefits (a) Defined contribution plans The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. In particular, the Singapore companies in the Group make contributions to the Central Provident Fund (CPF) scheme in Singapore, a defined contribution pension scheme. Contributions to national pension schemes are recognised as an expense in the period in which the related service is performed. (b) Employee leave entitlement Employee entitlements to annual leave are recognised as a liability when they accrue to employees. The estimated liability for leave is recognised for services rendered by employees up to balance sheet date. 3.19 Leases Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to the profit and loss account. Contingent rents, if any, are charged as expenses in the periods in which they are incurred.

B-19

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

3.

Summary of significant accounting policies (contd)

3.19 Leases (contd) Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term. Operating lease payments are recognised as an expense in the profit and loss account on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis. 3.20 Revenue Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: (a) Outlet sales Revenue from the sale of goods is recognised net of goods and services tax and discounts upon the passing of title to the customer which generally coincides with delivery and acceptance of the goods sold. (b) Interest income Interest income is recognised as interest accrues (using the effective interest method) unless collectibility is in doubt. 3.21 Government grants Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognised in the profit and loss account over the period necessary to match them on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset, the fair value is recognised as deferred capital grant on the balance sheet and is amortised to the profit and loss account over the expected useful life of the relevant asset by equal annual instalments. 3.22 Income taxes (a) Current tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

B-20

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

3.

Summary of significant accounting policies (contd)

3.22 Income taxes (contd) (b) Deferred tax Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences, except: Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable profit or loss; and In respect of taxable temporary differences associated with investments in subsidiary companies and associated companies, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilised. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Income tax relating to items recognised directly in equity is recognised in equity. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

B-21

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

3.

Summary of significant accounting policies (contd)

3.22 Income taxes (contd) (c) Sales tax Revenues, expenses and assets are recognised net of the amount of sales tax except: Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and Receivables and payables that are stated with the amount of sales tax included. The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet. 4. Revenue
Unaudited 1 January 2007 to 30 June 2007 S$000 Outlet sales Export sales 18,938 101 19,039 Unaudited 1 January 2006 to 30 June 2006 S$000 16,028 46 16,074

5.

Other operating income


Unaudited 1 January 2007 to 30 June 2007 S$000 Gain on disposal of property, plant and equipment Gain on disposal of quoted investment Insurance compensation Short-term deposit interest income Sundry income 148 5 35 97 285 Unaudited 1 January 2006 to 30 June 2006 S$000 11 7 2 62 82

B-22

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

6.

Finance costs
Unaudited 1 January 2007 to 30 June 2007 S$000 Interest expense: Finance lease Bank overdrafts Unaudited 1 January 2006 to 30 June 2006 S$000

18 4 22

17 2 19

7.

Profit before taxation Profit before taxation is arrived at after charging/(crediting) the following:
Unaudited 1 January 2007 to 30 June 2007 S$000 Amortisation of intangible assets Bad debts written off loan to a related party Depreciation of property, plant and equipment Directors remuneration Employee benefits expense (excluding Directors) salaries & bonuses central Provident Fund Gain on disposal of property, plant and equipment Operating lease expenses Provision for reimbursement of start-up costs for an associated company in Chengdu Staff training and benefits 38 758 391 3,736 326 (148) 2,469 58 Unaudited 1 January 2006 to 30 June 2006 S$000 36 79 596 404 3,091 269 (11) 1,894 76

B-23

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

8.

Taxation (a) Major components of income tax expense The major components of income tax expense for the periods ended 30 June are:
Unaudited 1 January 2007 to 30 June 2007 S$000 Current income tax: Current income taxation Under provision in respect of prior years Deferred income tax: Movement in temporary differences Over provision in respect of prior years Change in tax rate Income tax expense recognised in the profit and loss account Unaudited 1 January 2006 to 30 June 2006 S$000

313

430 4

179 (41) (57)

239

394

673

(b)

Relationship between tax expense and accounting profit A reconciliation between tax expense and the product of accounting profit multiplied by the applicable corporate tax rate for the periods ended 30 June is as follows:
Unaudited 1 January 2007 to 30 June 2007 S$000 Profit before taxation Tax expense at 18% (2006: 20%) Adjustments: Tax effect of expenses not deductible for tax purposes Effect of recognised partial tax exemption (Over)/under provision in respect of prior years Deferred tax adjustments due to change in tax rate Others Income tax expense recognised in the profit and loss account 2,014 362 136 (13) (41) (57) 7 Unaudited 1 January 2006 to 30 June 2006 S$000 2,404 481 202 (10) 4 (4)

394

673

B-24

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

9.

Earnings per share Basic earnings per share is calculated by dividing profit for the year that is attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year. The following tables reflect the profit and loss account and share data used in the computation of basic earnings per share for the periods ended 30 June:
Unaudited 1 January 2007 to 30 June 2007 S$000 Profit for the period attributable to ordinary equity holders of the Company Unaudited 1 January 2006 to 30 June 2006 S$000

1,620 000

1,731 000 68,400

Weighted average number of ordinary shares


(1)

(1)

68,400

For comparative purposes, earnings per share for the periods reported on have been computed based on the profit after tax attributable to equity holders of the Proforma Group divided by the pre-invitation share capital of 68,400,000 shares.

10.

Property, plant and equipment


Machinery Leasehold and Motor Electrical building equipment vehicles Renovation fittings Furniture Computers Total S$000 S$000 S$000 S$000 S$000 S$000 S$000 S$000 At Valuation At Cost At Cost At Cost At Cost At Cost At Cost Audited 31 December 2006 Valuation/cost At 1 January 2006 Additions Disposals At 31 December 2006 Accumulated depreciation At 1 January 2006 Charge for the year Disposals At 31 December 2006 Net carrying amount At 31 December 2006

2,339 2,339

3,396 498 (4) 3,890

1,491 81 (51) 1,521

1,075 247 1,322

1,148 142 1,290

472 180 652

947 269 (2) 1,214

10,868 1,417 (57) 12,228

129 47 176

2,441 363 (3) 2,801

770 273 (51) 992

851 123 974

456 198 654

394 47 441

87 222 309

5,128 1,273 (54) 6,347

2,163

1,089

529

348

636

211

905

5,881

B-25

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

10.

Property, plant and equipment (contd)


Machinery Leasehold and Motor Electrical building equipment vehicles Renovation fittings Furniture Computers Total S$000 S$000 S$000 S$000 S$000 S$000 S$000 S$000 At Valuation At Cost At Cost At Cost At Cost At Cost At Cost Unaudited 30 June 2007 Valuation/cost At 1 January 2007 Additions Revaluation Disposals Reclassification At 30 June 2007 Unaudited 30 June 2007 Accumulated depreciation At 1 January 2007 Charge for the period Revaluation Disposals Reclassification At 30 June 2007 Net carrying amount At 30 June 2007

2,339 375 (313) (151) 2,250

3,890 838 (59) 4,669

1,521 261 (418) 1,364

1,322 1,433 2,755

1,290 530 210 2,030

652 1,016 1,668

1,214 40 (4) 1,250

12,228 4,493 (313) (422) 15,986

176 14 (194) 8 4

2,801 180 (12) 2,969

992 137 (365) 764

974 143 1,117

654 85 4 743

441 75 516

309 124 (1) 432

6,347 758 (194) (366) 6,545

2,246

1,700

600

1,638

1,287

1,152

818

9,441

Assets held under finance leases


During the period, the Group acquired fixed assets with an aggregate cost of S$4,493,000 (31 December 2006 : S$1,417,000) of which S$193,000 (31 December 2006: S$69,000) was acquired by means of hire purchase and the balance of S$4,300,000 (31 December 2006: S$1,348,000) was made in cash. Net book value of motor vehicles and computers for the Group under finance leases as at 30 June 2007 amounted to $836,000 (31 December 2006 : S$860,000).

Revaluation of leasehold building


The valuation of the leasehold building was performed by Colliers International Consultancy & Valuation (Singapore) Pte Ltd, independent valuers on 18 April 2007 on the basis of open market valuation. Had the leasehold building been measured using the cost model, its carrying amount as at 30 June 2007 would have been S$2,164,000 (31 December 2006: S$1,963,000). The leasehold building is mortgaged to a bank for banking facilities granted to the Company.

B-26

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

11.

Intangible assets
Computer software licences (i) S$000 Audited 31 December 2006 Cost At 1 January 2006 Additions At 31 December 2006 Accumulated amortisation At 1 January 2006 Charge for the year At 31 December 2006 Net carrying amount At 31 December 2006 Unaudited 30 June 2007 Cost At 1 January 2007 Additions At 30 June 2007 Accumulated amortisation At 1 January 2007 Charge for the period At 30 June 2007 Net carrying amount At 30 June 2007 Average remaining amortisation years - 31 December 2006 - 30 June 2007 Club membership (ii) S$000 Franchise rights (iii) S$000

Total S$000

290 16 306

105 105

41 41

395 57 452

29 60 89

11 6 17

7 7

40 73 113

217

88

34

339

306 3 309

105 105

41 41

452 3 455

89 31 120

17 3 20

7 4 11

113 38 151

189

85

30

304

4 3

16 15

4 4

B-27

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

11.

Intangible assets (contd)

(i)

Computer software licences


Computer software licences are stated at cost less accumulated amortisation and any impairment in value. Amortisation is calculated on a straight-line basis to write off the cost of software licences over a period of 5 years. Impairment testing will be performed annually and more frequently when an indication of impairment exists. Amortisation period and method will be reviewed annually.

(ii)

Club membership
This relates to transferable membership in a golf club in Singapore which is stated at cost less accumulated amortisation and any impairment in value. The market value of the transferable membership as at 30 June 2007 is S$230,000 (31 December 2006: S$180,000).

(iii)

Franchise rights
Franchise rights are stated at cost less accumulated amortisation and any impairment in value. Amortisation is calculated on a straight-line basis to write off the cost of franchise rights over a period of 5 years. Impairment testing will be performed annually and more frequently when an indication of impairment exists. Amortisation period and method will be reviewed annually.

12.

Investment in associated companies


Unaudited 30 June 2007 S$000 Unquoted equity shares, at cost Impairment losses Share of post-acquisition reserves Exchange differences Carrying amount of investment 44 (27) 17 Audited 31 December 2006 S$000 110 (66) (27) (1) 16

B-28

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

12.

Investment in associated companies (contd) Details of the associated companies are as follows:
Name of associated companies Country of incorporation Proportion (%) of ownership interest 30.6.2007 Old Chang Kee (Thailand) Co Ltd (1) Old Chang Kee (M) Sdn Bhd (2) Thailand Dormant 40 31.12.2006 40

Principal activities

Malaysia

Operating retail food outlets and general trading Dormant Operating retail food outlets and general trading

40

40

Pure Options Pte Ltd Old Chang Kee (Chengdu) Co., Ltd.(4)
(1) (2) (3) (4)

(3)

Singapore Peoples Republic of China

33 35

33 35

Audited by U.B. Audit Office Audited by Poo, Lee & Co. Audited by S.L. Chua & Co. Not audited as the Company is in the process of being liquidated.

Impairment loss
The management carried out a review of the recoverable amount of its investment in associated companies during 2006 as there are plans to liquidate Old Chang Kee (Chengdu) Co., Ltd. Impairment losses amounting to $Nil (31 December 2006: $66,066) have been recognised in other operating expenses. The summarised financial information of the associated companies are as follows:
Unaudited 30 June 2007 S$000 Assets and liabilities: Current assets Non-current assets Other assets Total assets Current liabilities Long-term liabilities Total liabilities Audited 31 December 2006 S$000

101 52 9 162 57 182 239

87 54 9 150 40 122 162

B-29

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

12.

Investment in associated companies (contd)


Unaudited 1 January 2007 to 30 June 2007 S$000 Results: Revenue Loss for the period Unaudited 1 January 2006 to 30 June 2006 S$000

104 (28)

13.

Amounts due from associated companies Amounts due from associated companies are non-trade in nature, unsecured, interest-free and not expected to be repaid within 12 months from the balance sheet date.

14.

Inventories
Unaudited 30 June 2007 S$000 Raw materials Sundry consumables Total inventories at lower of cost and net realisable value 519 7 526 Audited 31 December 2006 S$000 346 100 446

15.

Trade and other receivables


Unaudited 30 June 2007 S$000 Trade receivables Other receivables Advances for purchase of fixed assets 171 171 Audited 31 December 2006 S$000 80 3 1,271 1,354

16.

Amounts due from associated companies These amounts are non-trade in nature, unsecured, interest-free and repayable on demand.

B-30

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

17.

Cash and cash equivalents


Unaudited 30 June 2007 S$000 Cash in hand Cash at bank Short term deposits 203 2,342 1,547 4,092 Audited 31 December 2006 S$000 287 1,700 4,578 6,565

Cash at banks earns interest at floating rates based on daily bank deposit rates ranging from 0.25% to 0.475% (31 December 2006: 0.25% to 0.475%) per annum. Short-term deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. The weighted average effective interest rate of short term deposits is 2.2% (31 December 2006: 3.1%) per annum. A short-term deposit of S$1 million (31 December 2006: S$1 million) of the Group has been pledged as security for bank facilities granted by a financial institution. For the purpose of the combined cash flow statements, cash and cash equivalents comprise the following:
Unaudited 30 June 2007 S$000 Cash and short-term deposits Bank overdrafts 4,092 (140) 3,952 Audited 31 December 2006 S$000 6,565 (173) 6,392

Bank overdrafts are included in the determination of cash and cash equivalents because they form an integral part of the Groups cash management. Bank overdrafts utilised by the subsidiary company are secured by a guarantee from another subsidiary company. They are repayable on demand and have a weighted average effective interest rate of 6.1% (31 December 2006: 6.2%) per annum. Interest rates of bank overdrafts are repriced at an interval of 1 month.

B-31

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

18.

Trade and other payables


Unaudited 30 June 2007 S$000 Trade payables Accruals Amount due to Directors Provision for reimbursement of start-up costs for an associated company in Chengdu Sundry creditors 2,052 1,549 1,566 5,167 Audited 31 December 2006 S$000 2,241 1,063 2,498 76 3 5,881

Amount due to Directors is unsecured, interest-free and repayable on demand. Trade payables are denominated in the following currencies:
Unaudited 30 June 2007 S$000 Singapore Dollars (SGD) Thai Baht (THB) Malaysia Ringgit (RM) 1,601 443 8 2,052 Audited 31 December 2006 S$000 1,595 639 7 2,241

19.

Other liabilities
Unaudited 30 June 2007 S$000 Foreign staff deposits Provision for unconsumed leave 37 166 203 Audited 31 December 2006 S$000 34 146 180

20.

Amount due to a related party This amount is non-trade in nature, unsecured, interest-free and repayable on demand.

B-32

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

21.

Finance lease liabilities The Group has finance leases for certain motor vehicles and computers. The lease terms range from 3 to 7 years with options to purchase at the end of the lease term. The lease terms do not contain restrictions concerning dividends, additional debt or further leasing. The average discount rate implicit in the leases range from 4.15% to 6.68% (31 December 2006 : 4.15% to 8.73%) per annum. Future minimum lease payments under finance leases together with the present value of the minimum lease payments are as follows:
Unaudited 30 June 2007 Present Minimum value of payments payments S$000 S$000 Within one year After one year but not more than five years After five years Total minimum lease payments Less : Amounts representing finance charges Present value of minimum lease payments 357 418 63 838 (114) 724 323 349 52 724 724 Audited 31 December 2006 Present Minimum value of payments payments S$000 S$000 380 540 13 933 (104) 829 344 474 11 829 829

22.

Deferred tax liabilities


Unaudited 30 June 2007 S$000 Balance at beginning of year Movements in temporary difference Balance at end of year Deferred taxation comprises: Differences in depreciation Asset revaluation reserve 576 81 657 Audited 31 December 2006 S$000 326 250 576

590 67 657

509 67 576

B-33

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

23.

Share capital
Unaudited 30 June 2007 No. of shares 000 S$000 Ordinary shares issued and fully paid At 1 January and 30 June/31 December Audited 31 December 2006 No. of shares 000 S$000

800

800

700

700

The holders of ordinary shares are entitled to receive dividends as and when declared by the Group. All ordinary shares carry one vote per share without restriction. 24. Share application money The share application money relates to funds received from the shareholders as additional capital injection to the Group. As at 30 June 2007, new shares have been allotted to the shareholders. 25. Reserves
Unaudited 30 June 2007 S$000 Accumulated profits Asset revaluation reserve 8,196 144 8,340 Audited 31 December 2006 S$000 6,576 263 6,839

Asset revaluation reserve


The asset revaluation reserve is used to record increases in the fair value of leasehold building and decreases to the extent that such decrease relates to the same asset previously recognised in equity.
Unaudited 30 June 2007 S$000 At 1 January Revaluation of leasehold building At 30 June/31 December 263 (119) 144 Audited 31 December 2006 S$000 263 263

B-34

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

26.

Commitments and contingencies (a) Capital commitments Capital expenditure contracted for as at the balance sheet date but not recognised in the financial statements is as follows:
Unaudited 30 June 2007 S$000 Capital commitments in respect of property, plant and equipment Audited 31 December 2006 S$000

82

2,306

(b)

Operating lease commitments The Group has non-cancellable operating lease agreements in respect of office, production and storage premises and retail outlets. These non-cancellable leases have remaining non-cancellable terms of between 2 to 60 years. Some of the leases include a clause to enable upward revision of the rental charges on an annual basis based on prevailing conditions. Some of the rental outlets include clauses whereby rental is charged using a base rental plus a percentage of the outlets sales turnover. Future minimum rental under non-cancellable leases as at the end of the financial periods are as follows:
Unaudited 30 June 2007 S$000 Not later than one year Later than one year but not later than five years Later than five years 4,338 5,043 2,010 11,391 Audited 31 December 2006 S$000 3,827 4,668 2,035 10,530

(c)

Financial guarantees, unsecured As at 30 June 2007, a subsidiary of the Group, Ten & Han Trading Pte Ltd, has given financial guarantees of S$970,000 (31 December 2006: S$970,000) to banks for facilities granted to another subsidiary of the Group, 1901 Singapore Pte. Ltd..

(d)

Letters of guarantees, secured As at 30 June 2007, the bank issued letters of guarantees on behalf of its wholly owned subsidiary, Ten & Han Trading Pte Ltd to lessors of premises amounting to approximately S$170,000 (31 December 2006: S$110,000). These letters of guarantees are secured by fixed deposits.

B-35

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

27.

Related parties disclosures Compensation of key management personnel


Unaudited 1 January 2007 to 30 June 2007 S$000 Short-term employee benefits Central Provident Fund contributions Total compensation paid to key management personnel Comprise amounts paid to: Directors of the Company 407 5 412 Unaudited 1 January 2006 to 30 June 2006 S$000 420 6 426

412

426

28.

Financial risk management objectives and policies The Groups principal financial instruments comprise bank overdrafts, finance leases and cash and short term deposits. The main purpose of these financial instruments is to raise finance for the Groups operations. The Group has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations. The main risks arising from the Groups financial instruments are interest rate risk, credit risk and liquidity risk. The Board reviews and agrees policies for managing these risks and they are summarised below. (a) Interest rate risk The Groups exposure to market risk for changes in interest rates relates primarily to the Groups bank overdraft and finance lease liabilities. (b) Credit risk The Group trades mainly in cash. Receivable balances are monitored on an ongoing basis with the result that the Groups exposure to bad debts is not significant. With respect to credit risk arising from other financial assets of the Group, which comprise cash and cash equivalents and other receivables, the Groups exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments. There are no significant concentrations of credit risk within the Group. (c) Liquidity risk The Groups objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts and finance leases.

B-36

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

29.

Financial instruments (a) Fair values The fair value of a financial instrument is the amount at which the instrument could be exchanged or settled between knowledgeable and willing parties in an arms length transaction, other than in a forced or liquidation sale.

Financial instruments whose carrying amount approximate fair value


Management has determined that the carrying amounts of cash and cash equivalents, current trade and other receivables, current trade and other payables and current finance lease liabilities, based on their notional amounts, reasonably approximate their fair values because these are mostly short term in nature or are repriced frequently.

Financial Instruments carried at other than fair value


Set out below is a comparison by category of the carrying amounts and fair values of all of the Groups financial instruments that are carried in the financial statements at other than fair values as at the end of the financial periods.
Unaudited 30 June 2007 Carrying Fair amount value S$000 S$000 Audited 31 December 2006 Carrying Fair amount value S$000 S$000

The Group

Financial liabilities: Finance lease liabilities Club membership payable

724 28

664 28

829 35

790 35

Amount due from associated companies has no repayment terms and is repayable only when the cash flows of the borrowers permits. Accordingly, the fair value of the amount due from associated companies is not reliably determinable.

Methods and assumptions used to determine fair values


Fair value of financial liabilities and club membership payable has been determined using discounted estimated cash flows. Where repayment terms are not fixed, future cash flows are projected based on managements best estimates. The discount rates used are the current market incremental lending rates for similar types of lending, borrowing and leasing arrangements. No amount has been recognised in the profit and loss account in relation to the change in fair value of financial assets or financial liabilities estimated using a valuation technique for the six month periods ended 30 June 2007 and 30 June 2006.

B-37

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

29.

Financial instruments (contd) (b) Interest rate risk The following tables sets out the carrying amount, by maturity, of the Groups financial instruments that are exposed to interest rate risk:
Within 1 year S$000 Unaudited 30 June 2007 Fixed rate Short-term deposits Obligation under finance leases Floating rate Cash at bank Bank overdrafts 1-2 years S$000 2-3 years S$000 3-4 years S$000 4-5 More than years 5 years Total S$000 S$000 S$000

1,547 (323)

(121)

(93)

(82)

(53)

(52)

1,547 (724)

2,342 (140)

2,342 (140)

Audited 31 December 2006 Fixed rate Short-term deposits 4,578 Obligations under finance leases (344) Floating rate Cash at bank Bank overdrafts

(230)

(117)

(85)

(42)

(11)

4,578 (829)

1,700 (173)

1,700 (173)

Interest on financial instruments subject to floating interest rates is contractually repriced at intervals of less than 6 months. Interest on financial instruments at fixed rates are fixed until the maturity of the instrument. The other financial instruments of the Group that are not included in the above tables are not subject to interest rate risks. 30. Segment information The Group is principally engaged in the manufacture and distribution of food products. As such, the Group has not presented a breakdown of segment information by business segments. The Groups operations and customers are mainly located in Singapore. As such, the Group has not presented a breakdown of segment information by geographical segments. 31. Events occurring after the balance sheet date On 25 July 2007, the Company declared and paid an interim exempt (one-tier) dividend on ordinary shares amounting to S$700,000 (S$1.00 per ordinary share). On 15 November 2007, the Company entered into a sale and purchase agreement with Nineteen O One Sdn. Bhd. pursuant to which the entire issued and paid up share capital of 1901 Singapore Pte. Ltd. would be transferred to Nineteen O One Sdn. Bhd. for a consideration of S$180,000 (the Disposal). Completion of the Disposal took place on 15 November 2007.

B-38

APPENDIX B REPORT FROM THE AUDITORS AND THE UNAUDITED COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Combined Financial Statements 30 June 2007

32.

Authorisation of combined financial statements for issue The combined financial statements for the financial period from 1 January 2007 to 30 June 2007 was authorised for issue in accordance with a resolution of the Directors on 4 January 2008.

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APPENDIX C EXTRACTS OF OUR ARTICLES OF ASSOCIATION


The discussion below provides information about certain provisions of our Memorandum and Articles and the laws of Singapore. This description is only a summary and is qualified by reference to Singapore law and our Articles. The instruments that constitute and define our Company are the Memorandum and Articles of our Company. Memorandum of Association The registration number of the Company is 200416190W. Our Memorandum of Association states that the liability of our Shareholders is limited to the amount, if any, for the time being unpaid on the shares respectively held by them. Articles The provisions in the Articles of our Company relating to:-

(a)

a Directors power to vote on a proposal, arrangement or contract in which the Director is interested

Article 100
A Director shall not vote in respect of any contract or arrangement or any other proposal whatsoever in which he has any personal material interest, directly or indirectly. A Director shall not be counted in the quorum at a meeting in relation to any resolution on which he is debarred from voting.

(b)

the Directors power to vote on remuneration (including pension or other benefits) for himself or for any other director, and whether the quorum at meeting of the board of Directors to vote on Directors remuneration may include the director whose remuneration is the subject of the vote

Article 77
The ordinary remuneration of the Directors, which shall from time to time be determined by an Ordinary Resolution of the Company, shall not be increased except pursuant to an Ordinary Resolution passed at a General Meeting where notice of the proposed increase shall have been given in the notice convening the General Meeting and shall (unless such resolution otherwise provides) be divisible among the Directors as they may agree, or failing agreement, equally, except that any Director who shall hold office for part only of the period in respect of which such remuneration is payable shall be entitled only to rank in such division for a proportion of remuneration related to the period during which he has held office. The ordinary remuneration of an executive Director may not include a commission on or a percentage of turnover and the ordinary remuneration of a non-executive Director shall be a fixed sum, and not by a commission on or a percentage of profits or turnover.

Article 78
Any Director who holds any executive office, or who serves on any committee of the Directors, or who otherwise performs services which in the opinion of the Directors are outside the scope of the ordinary duties of a Director, may be paid such extra remuneration by way of salary, commission or otherwise as the Directors may determine, other than by a commission on or percentage of commission or turnover, Provided that such extra remuneration (in case of an executive Director) shall not be by way of commission on or a percentage of turnover.

Article 79
The Directors may repay to any Director all such reasonable expenses as he may incur in attending and returning from meetings of the Directors or of any committee of the Directors or General Meetings or otherwise in or about the business of the Company.

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APPENDIX C EXTRACTS OF OUR ARTICLES OF ASSOCIATION


Article 80
The Directors shall have power to pay and agree to pay pensions or other retirement, superannuation, death or disability benefits to (or to any person in respect of) any Director for the time being holding any executive office and for the purpose of providing any such pensions or other benefits to contribute to any scheme or fund or to pay premiums.

Article 81
A Director may be party to or be in any way interested in any contract or arrangement or transaction to which the Company is a party or in which the Company is in any way interested and he may hold and be remunerated in respect of any office or place of profit (other than the office of Auditor of the Company or any subsidiary thereof) under the Company or any other company in which the Company is in any way interested and he (or any firm of which he is a member) may act in a professional capacity for the Company or any such other company and be remunerated therefor and in any such case as aforesaid (save as otherwise agreed) he may retain for his own absolute use and benefit all profits and advantages accruing to him thereunder or in consequence thereof.

Article 86
The remuneration of a Managing Director shall from time to time be fixed by the Directors and may subject to these Articles be by way of salary or commission or participation in profits or by any or all these modes but he shall not under any circumstances be remunerated by a commission on or a percentage of turnover.

(c)

borrowing powers exercisable by the Directors and how such borrowing powers can be varied

Article 108
Subject as hereinafter provided and to the provisions of the Statutes, the Directors may exercise all the powers of the Company to borrow money, to mortgage or charge its undertaking, property and uncalled capital and to issue debentures and other securities, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party.

(d)

retirement or non-retirement of Directors under an age limit requirement

Article 89
At each Annual General Meeting, one-third of the Directors for the time being (or, if their number is not a multiple of three, the number nearest to but not less than one-third) shall retire from office by rotation, Provided that no Director holding office as Managing Director shall be subject to retirement by rotation or be taken into account in determining the number of Directors to retire. For the avoidance of doubt, each Director (other than a Director holding office as Managing Director) shall retire at least once every three years.

Article 90
The Directors to retire by rotation shall include (so far as necessary to obtain the number required) any Director who is due to retire at a General Meeting by reason of age or who wishes to retire and not to offer himself for re-election. Any further Directors so to retire shall be those of the other Directors subject to retirement by rotation who have been longest in office since their last re-election or appointment and so that as between persons who became or were last re-elected Directors on the same day, those to retire shall (unless they otherwise agree among themselves) be determined by ballot. A retiring Director shall be eligible for re-election.

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APPENDIX C EXTRACTS OF OUR ARTICLES OF ASSOCIATION


Article 91
The Company at a General Meeting at which a Director retires under any provision of these Articles may by Ordinary Resolution fill the office being vacated by electing thereto the retiring Director or some other person eligible for appointment. In default, the retiring Director shall be deemed to have been re-elected except in any of the following cases:(a) where at such meeting it is expressly resolved not to fill such office or a resolution for the reelection of such Director is put to the meeting and lost; or where such Director has given notice in writing to the Company that he is unwilling to be reelected; or where the default is due to the moving of a resolution in contravention of the next following Article; or where such Director has attained any retiring age applicable to him as Director.

(b)

(c)

(d)

The retirement shall not have effect until the conclusion of the meeting except where a resolution is passed to elect some other person in the place of the retiring Director or a resolution for his re-election is put to the meeting and lost and accordingly a retiring Director who is re-elected or deemed to have been re-elected will continue in office without a break.

Article 94
The office of a Director shall be vacated in any of the following events, namely:(a) if he shall become prohibited or disqualified by the Statutes or any other law from acting as a Director; or if (not being a Director holding any executive office for a fixed term) he shall resign by writing under his hand left at the Office or if he shall in writing offer to resign and the Directors shall resolve to accept such offer; or if he shall become bankrupt or have a receiving order made against him or shall make arrangement or composition with his creditors generally; or if he becomes of unsound mind, or if in Singapore or elsewhere an order shall be made by any court claiming jurisdiction in that behalf on the ground (however formulated) of mental disorder for his detention or for the appointment of a guardian or for the appointment of a receiver or other person (by whatever name called) to exercise powers with respect to his property or affairs; or is absent, for more than six months and without leave of the Directors, from meetings of the Directors held during that period; or if he is removed by the Company in General Meeting pursuant to these Articles.

(b)

(c)

(d)

(e)

(f)

(e)

the number of shares, if any, required for Directors qualification

Article 76
A Director shall not be required to hold any shares of the Company by way of qualification. A Director who is not a Member of the Company shall nevertheless be entitled to receive notice of and to attend and speak at General Meetings.

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APPENDIX C EXTRACTS OF OUR ARTICLES OF ASSOCIATION


(f) rights, preferences and restrictions attaching to each class of shares

Article 3
(A) Subject to the Act and to these Articles, no shares may be issued by the Directors without the prior approval of the Company in General Meeting pursuant to Section 161 of the Act, but subject thereto and the terms of such approval, and to Article 5, and to any special rights attached to any shares for the time being issued, the Directors may allot and issue shares or grant options over or otherwise dispose of the same to such persons on such terms and conditions and for such consideration and at such time and whether or not subject to the payment of any part of the amount thereof in cash or otherwise as the Directors may think fit, and any shares may, subject to compliance with Sections 70 and 75 of the Act, be issued with such preferential, deferred, qualified or special rights, privileges, conditions or restrictions, whether as regards Dividend, return of capital, participation in surplus assets and profits, voting, conversion or otherwise, as the Directors may think fit, and preference shares may be issued which are or at the option of the Company are liable to be redeemed, the terms and manner of redemption being determined by the Directors in accordance with the Act, Provided Always that no options shall be granted over unissued shares except in accordance with the Act and the Designated Stock Exchanges listing rules. The Directors may, at any time after the allotment of any share but before any person has been entered in the Register of Members as the holder, recognize a renunciation thereof by the allottee in favour of some other person and may accord to any allottee of a share a right to effect such renunciation upon and subject to such terms and conditions as the Directors may think fit to impose. Except so far as otherwise provided by the conditions of issue or by these Articles, all new shares shall be issued subject to the provisions of the Statutes and of these Articles with reference to allotment, payment of calls, lien, transfer, transmission, forfeiture or otherwise.

(B)

(C)

Article 8
(A) Preference shares may be issued subject to such limitation thereof as may be prescribed by the Designated Stock Exchange. Preference Shareholders shall have the same rights as ordinary Shareholders as regards receiving of notices, reports and balance-sheets and attending General Meetings of the Company, and preference Shareholders shall also have the right to vote at any General Meeting convened for the purpose of reducing capital or winding-up or sanctioning a sale of the undertaking of the Company or where the proposal to be submitted to the General Meeting directly affects their rights and privileges or when the Dividend on the preference shares is more than six months in arrear. The Company has power to issue further preference capital ranking equally with, or in priority to, preference shares already issued.

(B)

Article 9
(A) Whenever the share capital of the Company is divided into different classes of shares, the variation or abrogation of the special rights attached to any class may, subject to the provisions of the Act, be made either with the consent in writing of the holders of three-quarters of the total number of issued shares of the class or with the sanction of a Special Resolution passed at a separate General Meeting of the holders of the shares of the class (but not otherwise) and may be so made either whilst the Company is a going concern or during or in contemplation of a windingup. To every such separate General Meeting all the provisions of these Articles relating to General Meetings of the Company and to the proceedings thereat shall mutatis mutandis apply, except that the necessary quorum shall be two or more persons holding at least one-third of the total number of the issued shares of the class present in person or by proxy or attorney and that any holder of shares of the class present in person or by proxy or attorney may demand a poll and that every such holder shall on a poll have one vote for every share of the class held by him where the class is a class of equity shares within the meaning of Section 64(1) of the Companies Act or at least

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APPENDIX C EXTRACTS OF OUR ARTICLES OF ASSOCIATION


one vote for every share of the class where the class is a class of preference shares within the meaning of Section 180(2) of the Act, Provided Always that where the necessary majority for such a Special Resolution is not obtained at such General Meeting, the consent in writing, if obtained from the holders of three-quarters of the total number of the issued shares of the class concerned within two months of such General Meeting, shall be as valid and effectual as a Special Resolution carried at such General Meeting. (B) The provisions in Article 9(A) shall mutatis mutandis apply to any repayment of preference capital (other than redeemable preference capital) and any variation or abrogation of the rights attached to preference shares or any class thereof. The special rights attached to any class of shares having preferential rights shall not unless otherwise expressly provided by the terms of issue thereof be deemed to be varied by the creation or issue of further shares ranking as regards participation in the profits or assets of the Company in some or all respects pari passu therewith but in no respect in priority thereto.

(C)

Article 14
Every person whose name is entered as a Member in the Register of Members shall be entitled, within ten market days (or such period as the Directors may determine having regard to any limitation thereof as may be prescribed by the Designated Stock Exchange from time to time) after the closing date of any application for shares or (as the case may be) the date of lodgement of a registrable transfer, to one certificate for all his shares of any one class or to several certificates in reasonable denominations each for a part of the shares so allotted or transferred.

Article 34
(A) There shall be no restriction on the transfer of fully paid up shares (except where required by law or by the rules, bye-laws or listing rules of the Designated Stock Exchange) but the Directors may in their discretion decline to register any transfer of shares upon which the Company has a lien, and in the case of shares not fully paid up, may refuse to register a transfer to a transferee of whom they do not approve, Provided Always that in the event of the Directors refusing to register a transfer of shares, the Company shall within ten market days (or such period as the Directors may determine having regard to any limitation thereof as may be prescribed by the Designated Stock Exchange from time to time) after the date on which the application for a transfer of shares was made, serve a notice in writing to the applicant stating the facts which are considered to justify the refusal as required by the Statutes. The Directors may decline to register any instrument of transfer unless:(a) such fee not exceeding S$2.00 (or such other fee as the Directors may determine having regard to any limitation thereof as may be prescribed by the Designated Stock Exchange from time to time) as the Directors may from time to time require is paid to the Company in respect thereof; the amount of proper duty (if any) with which each instrument of transfer is chargeable under any law for the time being in force relating to stamps is paid; the instrument of transfer is deposited at the Office or at such other place (if any) as the Directors may appoint accompanied by a certificate of payment of stamp duty (if stamp duty is payable on such instrument of transfer in accordance with any law for the time being in force relating to stamp duty), the certificates of the shares to which it relates, and such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer and, if the instrument of transfer is executed by some other person on his behalf, the authority of the person so to do; and the instrument of transfer is in respect of only one class of shares.

(B)

(b)

(c)

(d)

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APPENDIX C EXTRACTS OF OUR ARTICLES OF ASSOCIATION


Article 41
A reference to a member shall be a reference to a registered holder of shares in the Company, or where such registered holder is CDP, the Depositors on behalf of whom CDP holds the shares, Provided that:(a) a Depositor shall only be entitled to attend any General Meeting and to speak and vote thereat if his name appears on the Depository Register maintained by CDP forty eight (48) hours before the General Meeting as a Depositor on whose behalf CDP holds shares in the Company, the Company being entitled to deem each such Depositor, or each proxy of a Depositor who is to represent the entire balance standing to the Securities Account of the Depositor, to represent such number of shares as is actually credited to the Securities Account of the Depositor as at such time, according to the records of CDP as supplied by CDP to the Company, and where a Depositor has apportioned the balance standing to his Securities Account between two proxies, to apportion the said number of shares between the two proxies in the same proportion as previously specified by the Depositor in appointing the proxies; and accordingly no instrument appointing a proxy of a Depositor shall be rendered invalid merely by reason of any discrepancy between the proportion of Depositors shareholding specified in the instrument of proxy, or where the balance standing to a Depositors Securities Account has been apportioned between two proxies the aggregate of the proportions of the Depositors shareholding they are specified to represent, and the true balance standing to the Securities Account of a Depositor as at the time of the General Meeting, if the instrument is dealt with in such manner as is provided above; the payment by the Company to CDP of any Dividend payable to a Depositor shall to the extent of the payment discharge the Company from any further liability in respect of the payment; the delivery by the Company to CDP of provisional allotments or share certificates in respect of the aggregate entitlements of Depositors to new shares offered by way of rights issue or other preferential offering or bonus issue shall to the extent of the delivery discharge the Company from any further liability to each such Depositor in respect of his individual entitlement; and the provisions in these Articles relating to the transfers, transmissions or certification of shares shall not apply to the transfer of book-entry securities (as defined in the Statutes).

(b)

(c)

(d)

Article 42
Except as required by the Statutes or law, no person shall be recognised by the Company as holding any share upon any trust, and the Company shall not be bound by or compelled in any way to recognize (even when having notice thereof) any equitable, contingent, future or partial interest in any share, or any interest in any fractional part of a share, or (except only as by these Articles or by the Statutes or law otherwise provided) any other right in respect of any share, except an absolute right to the entirety thereof in the registered holder and nothing in these presents contained relating to CDP or to Depositors or in any depository agreement made by the Company with any common depository for shares shall in any circumstances be deemed to limit, restrict or qualify the above.

Article 63
In the case of joint holders of a share, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders and for this purpose seniority shall be determined by the order in which the names stand in the Register of Members or, as the case may be, the order in which the names appear in the Depository Register in respect of the joint holding.

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APPENDIX C EXTRACTS OF OUR ARTICLES OF ASSOCIATION


Article 64
Where in Singapore or elsewhere a receiver or other person (by whatever name called) has been appointed by any court claiming jurisdiction in that behalf to exercise powers with respect to the property or affairs of any Member on the ground (however formulated) of mental disorder, the Directors may in their absolute discretion, upon or subject to production of such evidence of the appointment as the Directors may require, permit such receiver or other person on behalf of such member, to vote in person or by proxy at any General Meeting, or to exercise any other right conferred by membership in relation to General Meetings.

Article 65
No member shall be entitled in respect of shares held by him to vote at a General Meeting either personally or by proxy or to exercise any other right conferred by membership in relation to General Meetings if any call or other sum payable by him to the Company in respect of such shares remains unpaid.

(g)

any change in capital

Article 3
(A) Subject to the Act and to these Articles, no shares may be issued by the Directors without the prior approval of the Company in General Meeting pursuant to Section 161 of the Act, but subject thereto and the terms of such approval, and to Article 5, and to any special rights attached to any shares for the time being issued, the Directors may allot and issue shares or grant options over or otherwise dispose of the same to such persons on such terms and conditions and for such consideration and at such time and whether or not subject to the payment of any part of the amount thereof in cash or otherwise as the Directors may think fit, and any shares may, subject to compliance with Sections 70 and 75 of the Act, be issued with such preferential, deferred, qualified or special rights, privileges, conditions or restrictions, whether as regards Dividend, return of capital, participation in surplus assets and profits, voting, conversion or otherwise, as the Directors may think fit, and preference shares may be issued which are or at the option of the Company are liable to be redeemed, the terms and manner of redemption being determined by the Directors in accordance with the Act, Provided Always that no options shall be granted over unissued shares except in accordance with the Act and the Designated Stock Exchanges listing rules. The Directors may, at any time after the allotment of any share but before any person has been entered in the Register of Members as the holder, recognize a renunciation thereof by the allottee in favour of some other person and may accord to any allottee of a share a right to effect such renunciation upon and subject to such terms and conditions as the Directors may think fit to impose. Except so far as otherwise provided by the conditions of issue or by these Articles, all new shares shall be issued subject to the provisions of the Statutes and of these Articles with reference to allotment, payment of calls, lien, transfer, transmission, forfeiture or otherwise.

(B)

(C)

Article 10
The Company may by Ordinary Resolution:(a) (b) consolidate and divide all or any of its share capital; sub-divide its shares, or any of them, provided always that in such subdivision the proportion between the amount paid and the amount (if any) unpaid on each reduced share shall be same as it was in the case of the share from which the reduced share is derived; convert or exchange any class of shares into or for any other class of shares; and/or

(c)

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APPENDIX C EXTRACTS OF OUR ARTICLES OF ASSOCIATION


(d) cancel the number of shares which at the date of the passing of the resolution in that behalf have not been taken or agreed to be taken by any person or which have been forfeited and diminish the amount of its share capital by the number of the shares so cancelled.

Article 11
(A) The Company may reduce its share capital or any other undistributable reserve in any manner permitted, and with, and subject to, any incident authorized, and consent or confirmation required, by law. The Company may purchase or otherwise acquire its issued shares subject to and in accordance with the provisions of the Statutes and any applicable rules of the Designated Stock Exchange (hereafter, the Relevant Laws), on such terms and subject to such conditions as our Company may in General Meeting prescribe in accordance with the Relevant Laws. Any shares purchased or acquired by the Company as aforesaid shall, unless held in treasury in accordance with the Act, be deemed to be cancelled immediately on purchase or acquisition by the Company. On the cancellation of any share as aforesaid, the rights and privileges attached to that share shall expire. In any other instance, the Company may hold or deal with any such share which is so purchased or acquired by it in such manner as may be permitted by, and in accordance with the Relevant Laws. Without prejudice to the generality of the foregoing, upon cancellation of any share purchased or otherwise acquired by the Company pursuant to these Articles and the Statutes, the number of issued shares of the Company shall be diminished by the number of shares so cancelled, and, where any such cancelled share was purchased or acquired out of the capital of the Company, the amount of share capital of the Company shall be reduced accordingly.

(B)

(h)

any change in the respective rights of the various classes of shares including the action necessary to change the rights

Article 9
(A) Whenever the share capital of the Company is divided into different classes of shares, the variation or abrogation of the special rights attached to any class may, subject to the provisions of the Act, be made either with the consent in writing of the holders of three-quarters of the total number of the issued shares of the class or with the sanction of a Special Resolution passed at a separate General Meeting of the holders of the shares of the class (but not otherwise) and may be so made either whilst the Company is a going concern or during or in contemplation of a windingup. To every such separate General Meeting all the provisions of these Articles relating to General Meetings of the Company and to the proceedings thereat shall mutatis mutandis apply, except that the necessary quorum shall be two or more persons holding at least one-third of the total number of the issued shares of the class present in person or by proxy or attorney and that any holder of shares of the class present in person or by proxy or attorney may demand a poll and that every such holder shall on a poll have one vote for every share of the class held by him where the class is a class of equity shares within the meaning of Section 64(1) of the Act or at least one vote for every share of the class where the class is a class of preference shares within the meaning of Section 180(2) of the Act, Provided Always that where the necessary majority for such a Special Resolution is not obtained at such General Meeting, the consent in writing, if obtained from the holders of three-quarters of the total number of the issued shares of the class concerned within two months of such General Meeting, shall be as valid and effectual as a Special Resolution carried at such General Meeting. The provisions in Article 9(A) shall mutatis mutandis apply to any repayment of preference capital (other than redeemable preference capital) and any variation or abrogation of the rights attached to preference shares or any class thereof.

(B)

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APPENDIX C EXTRACTS OF OUR ARTICLES OF ASSOCIATION


(C) The special rights attached to any class of shares having preferential rights shall not unless otherwise expressly provided by the terms of issue thereof be deemed to be varied by the creation or issue of further shares ranking as regards participation in the profits or assets of the Company in some or all respects pari passu therewith but in no respect in priority thereto.

(i)

any time limit after which a dividend entitlement will lapse and an indication of the party in whose favour this entitlement then operates

Article 126
(A) No Dividend shall be paid otherwise than out of profits available for distribution under the provisions of the Statutes. The payment by the Directors of any unclaimed dividends or other moneys payable on or in respect of a share into a separate account shall not constitute the Company a trustee in respect thereof. All Dividends remaining unclaimed after one year from having been first payable may be invested or otherwise made use of by the Directors for the benefit of the Company, and any Dividend or any such moneys unclaimed after six years from having been first payable shall be forfeited and shall revert to the Company provided always that the Directors may at any time thereafter at their absolute discretion annul any such forfeiture and pay the Dividend so forfeited to the person entitled thereto prior to the forfeiture. If CDP returns any such Dividend or moneys to the Company, the relevant Depositor shall not have any right or claim in respect of such Dividend or moneys against the Company if a period of six years has elapsed from the date of the declaration of such Dividend or the date on which such other moneys are first payable. A payment by the Company to CDP of any Dividend or other moneys payable to a Depositor shall, to the extent of the payment made, discharge the Company from any liability to the Depositor in respect of that payment.

(B)

(j)

any limitation on the right to own Shares, including limitations on the right of non-resident or foreign Shareholders to hold or exercise voting rights on their Shares

There are no limitations on the rights of the Shareholders who are regarded as non-residents of Singapore to hold or vote on their Shares. However, the Singapore Code on Take-overs and Mergers (the Take-over Code) issued by the Authority pursuant to Sections 137 and 321 of the Securities and Futures Act prescribes certain situations whereby a person who, either on his own or together with persons acting in concert (as defined in the Take-over Code) with him, must make a mandatory take-over offer for the Shares.

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APPENDIX D DESCRIPTION OF SINGAPORE COMPANY LAW RELATING TO SHARES


The following statements are brief summaries of the rights and privileges of Shareholders conferred by the laws of Singapore and the Articles (the Articles) of our Company. These statements summarise the material provisions of the Articles but are qualified in entirety by reference to the Articles.
Ordinary Shares There are no founder, management, deferred or unissued shares reserved for issue for any purpose. We have only one class of shares, namely, our ordinary shares which have identical rights in all respects and rank equally with one another. All of the ordinary shares are in registered form. Our Company may, subject to the provisions of the Companies Act and the rules of the SGX-ST, purchase its own ordinary shares. However, it may not, except in circumstances permitted by the Companies Act, grant any financial assistance for the acquisition or proposed acquisition of its own ordinary shares. New Ordinary Shares New ordinary shares may only be issued with the prior approval in a general meeting of the Shareholders of our Company. The aggregate number of shares to be issued pursuant to such approval may not exceed 50% (or such other limit as may be prescribed by the SGX-ST) of our issued share capital for the time being, of which the aggregate number of shares to be issued other than on a pro-rata basis to our Shareholders may not exceed 20% (or such other limit as may be prescribed by the SGXST) of our issued share capital for the time being (the percentage of issued share capital being based on our issued shares at the time such authority is given after adjusting for new shares arising from the conversion of convertible securities or employee share options on issue at the time such authority is given and any subsequent consolidation or sub-division of its shares). The approval, if granted, will lapse at the conclusion of the annual general meeting following the date on which the approval was granted or the date by which the annual general meeting is required by law to be held, whichever is the earlier but any approval may be previously revoked or varied by our Company in general meeting. Subject to the foregoing, the provisions of the Companies Act and any special rights attached to any class of shares currently issued, all new ordinary shares are under the control of the board of Directors of our Company (the Board of Directors) who may allot and issue the same with such rights and restrictions as it may think fit. Shareholders Only persons who are registered in the register of Shareholders of our Company and, in cases in which the person so registered is CDP, the persons named as the depositors in the depository register maintained by CDP for the ordinary shares, are recognised as Shareholders of our Company. Our Company will not, except as required by law, recognise any equitable, contingent, future or partial interest in any ordinary share or other rights for any ordinary share other than the absolute right thereto of the registered holder of that ordinary share or of the person whose name is entered in the depository register for that ordinary share. The Company may close the register of Shareholders for any time or times if it provides the Accounting and Corporate Regulatory Authority of Singapore at least 14 days notice and the SGX-ST at least 10 clear market days notice. However, the register may not be closed for more than 30 days in aggregate in any calendar year. Our Company typically closes the register to determine Shareholders entitlement to receive dividends and other distributions. Transfer of Ordinary Shares There is no restriction on the transfer of fully paid ordinary shares except where required by law or the listing rules or the rules or by-laws of any stock exchange on which our Company is listed. The Board of Directors may decline to register any transfer of ordinary shares which are not fully paid shares, or ordinary shares on which our Company has a lien. Ordinary shares may be transferred by a duly signed instrument of transfer in a form approved by any stock exchange on which our Company is listed. The

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APPENDIX D DESCRIPTION OF SINGAPORE COMPANY LAW RELATING TO SHARES


Board of Directors may also decline to register any instrument of transfer unless, among other things, it has been duly stamped and is presented for registration together with the share certificate and such other evidence of title as they may require. Our Company will replace lost or destroyed certificates for ordinary shares if it is properly notified and if the applicant pays a fee which will not exceed S$2 and furnishes any evidence and indemnity that the Board of Directors may require. General Meetings of Shareholders Our Company is required to hold an annual general meeting every year. Our Board of Directors may convene an Extraordinary General Meeting whenever it thinks fit and must do so if Shareholders representing not less than 10% of the total voting rights of all Shareholders request in writing that such a meeting be held. In addition, two or more Shareholders holding not less than 10% of the issued share capital of our Company (excluding treasury shares) may call a meeting. Unless otherwise required by law or by the Articles, voting at general meetings is by ordinary resolution, requiring an affirmative vote of a simple majority of the votes cast at that meeting. An ordinary resolution suffices, for example, for the appointment of directors. A special resolution, requiring the affirmative vote of at least 75% of the votes cast at the meeting, is necessary for certain matters under Singapore law, including voluntary winding up, amendments to the Memorandum of Association and the Articles, a change of the corporate name and a reduction in the share capital. Our Company must give at least 21 days notice in writing for every general meeting convened for the purpose of passing a special resolution. Ordinary resolutions generally require at least 14 days notice in writing. The notice must be given to every Shareholder who has supplied our Company with an address in Singapore for the giving of notices and must set forth the place, the day and the hour of the meeting and, in the case of special business, the general nature of that business. Voting Rights A Shareholder is entitled to attend, speak and vote at any general meeting, in person or by proxy. Proxies need not be a Shareholder. A person who holds ordinary shares through the SGX-ST book-entry settlement system will only be entitled to vote at a general meeting as a Shareholder if his name appears on the depository register maintained by CDP 48 hours before the general meeting. Except as otherwise provided in the Articles, two or more Shareholders must be present in person or by proxy to constitute a quorum at any general meeting. Under the Articles, on a show of hands, every Shareholder present in person and by proxy shall have one vote (provided that in the case of a Shareholder who is represented by two proxies, only one of the two proxies as determined by that Shareholder or, failing such determination, by the Chairman of the meeting in his sole discretion shall be entitled to vote on a show of hands), and on a poll, every Shareholder present in person or by proxy shall have one vote for each ordinary share which he holds or represents. A poll may be demanded in certain circumstances, including by the chairman of the meeting or by any Shareholder present in person or by proxy and representing not less than 10% of the total voting rights of all Shareholders having the right to attend and vote at the meeting or by any two Shareholders present in person or by proxy and entitled to vote. In the case of a tie vote, whether on a show of hands or a poll, the chairman of the meeting shall be entitled to a casting vote. Dividends Our Company may, by ordinary resolution of our Shareholders, declare dividends at a general meeting, but it may not pay dividends in excess of the amount recommended by the Board of Directors. Our Company must pay all dividends out of its profits. Our Board of Directors may also declare an interim dividend without the approval of our Shareholders. All dividends are paid pro rata among the Shareholders in proportion to the amount paid up on each Shareholders ordinary shares, unless the rights attaching to an issue of any ordinary share provides otherwise. Unless otherwise directed, dividends are paid by cheque or warrant sent through the post to each Shareholder at his registered address. Notwithstanding the foregoing, the payment by our Company to CDP of any dividend payable to a Shareholder whose name is entered in the depository register shall, to the extent of payment made to CDP, discharge our Company from any liability to that Shareholder in respect of that payment.

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APPENDIX D DESCRIPTION OF SINGAPORE COMPANY LAW RELATING TO SHARES


Bonus and Rights Issues Our Board of Directors may, with approval by our Shareholders at a general meeting, capitalise any reserves or profits (including profit or moneys carried and standing to any reserve or other undistributable reserve) and distribute the same as bonus shares credited as paid-up to our Shareholders in proportion to their shareholdings. Our Board of Directors may also issue rights to take up additional ordinary shares to Shareholders in proportion to their shareholdings. Such rights are subject to any conditions attached to such issue and the regulations of any stock exchange on which our Company is listed. Takeovers The Companies Act, the Securities and Futures Act and the Singapore Code on Take-overs and Mergers regulate the acquisition of ordinary shares of public companies and contain certain provisions that may delay, deter or prevent a future takeover or change in control of our Company. Any person acquiring an interest, either on his own or together with parties acting in concert with him, in 30% or more of the voting shares in our Company must extend a takeover offer for the remaining voting shares in accordance with the provisions of the Singapore Code on Take-overs and Mergers. Parties acting in concert include a company and its related and associated companies, a company and its directors (including their close relatives), a company and its pension funds and employee share schemes, a person and any investment company, unit trust or other fund whose investment such person manages on a discretionary basis, and a financial advisor and its client in respect of shares held by the financial advisor and shares in the client held by funds managed by the financial advisor on a discretionary basis. An offer for consideration other than cash must be subject to certain exceptions, be accompanied by a cash alternative at not less than the highest price paid by the offeror or parties acting in concert with the offeror within the six months preceding the acquisition of shares that triggered the mandatory offer obligation. A mandatory takeover offer is also required to be made if a person holding, either on his own or together with parties acting in concert with him, between 30% and 50% of the voting rights acquires additional voting shares representing more than 1% of the voting shares in any six month period. Liquidation or Other Return of Capital If our Company is liquidated or in the event of any other return of capital, holders of ordinary shares will be entitled to participate in any surplus assets in proportion to their shareholdings, subject to any special rights attaching to any other class of shares. Indemnity As permitted by Singapore law, the Articles provide that, subject to the Companies Act, our Board of Directors and officers shall be entitled to be indemnified by our Company against any liability incurred in defending any proceedings, whether civil or criminal, which relate to anything done or omitted to have been done as an officer, director or employee and in which judgment is given in their favour or in which they are acquitted or in connection with any application under any statute for relief from liability in respect thereof in which relief is granted by the court. Our Company may not indemnify directors and officers against any liability which by law would otherwise attach to them in respect of any negligence, default, breach of duty or breach of trust of which they may be guilty in relation to our Company. Limitations on Rights to Hold or Vote Shares Except as described in Voting Rights and Take-overs above, there are no limitations imposed by Singapore law or by the Articles on the rights of non-resident Shareholders to hold or vote on ordinary shares.

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APPENDIX D DESCRIPTION OF SINGAPORE COMPANY LAW RELATING TO SHARES


Minority Rights The rights of minority Shareholders of Singapore-incorporated companies are protected under Section 216 of the Companies Act, which gives the Singapore courts a general power to make any order, upon application by any Shareholder of our Company, as they think fit to remedy any of the following situations:(a) the affairs of the Company are being conducted or the powers of the Board of Directors are being exercised in a manner oppressive to, or in disregard of the interests of, one or more of the Shareholders; or the Company takes an action, or threatens to take an action, or the Shareholders pass a resolution, or propose to pass a resolution, which unfairly discriminates against, or is otherwise prejudicial to, one or more of the Shareholders, including the applicant.

(b)

Singapore courts have wide discretion as to the reliefs they may grant and those reliefs are in no way limited to those listed in the Companies Act itself. Without prejudice to the foregoing, Singapore courts may:(a) (b) (c) direct or prohibit any act or cancel or vary any transaction or resolution; regulate the conduct of the affairs of our Company in the future; authorise civil proceedings to be brought in the name of, or on behalf of, our Company by a person or persons and on such terms as the court may direct; provide for the purchase of a minority Shareholders shares by the other Shareholders or by our Company and, in the case of a purchase of shares by our Company, a corresponding reduction of its share capital; provide that the Memorandum of Association or the Articles be amended; or provide that our Company be wound up.

(d)

(e) (f)

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APPENDIX E SUMMARY OF RELEVANT AUSTRALIAN LAWS AND REGULATIONS


THE LEGAL SYSTEM Australia has a federal system of government that is based on the Westminster parliamentary model. There are three tiers of government: Federal, State (or Territory) and Local. Australia is divided by a written Constitution into a federation of six States (New South Wales, Victoria, Queensland, Western Australian, South Australia and Tasmania) and two Territories (Australian Capital Territory and Northern Territory). The Australian Constitution confers jurisdiction on the Federal Parliament to make laws with respect to certain matters, such as foreign affairs, immigration, social security, communications, taxation, defence, trade practices, bankruptcy, copyright, trade marks and patents. The jurisdiction of the Federal Parliament on these subjects is concurrent with State and Territory jurisdiction but in the event of inconsistency Federal law prevails. Australian law is derived not only from legislation passed by the three tiers of government but also from common law derived from the English common law and developed by the Australian courts. The Australian court system is also tiered into Federal and State levels. The Federal court system is headed by the High Court of Australia, which has jurisdiction to decide constitutional matters and is the countrys highest court of appeal. The State court systems are headed by State supreme courts, which generally have jurisdiction to hear matters on State law. BUSINESS STRUCTURES CORPORATIONS The Corporations Act and the ASIC All corporations in Australia must comply with the provisions of the Corporations Act. The Government body primarily responsible for the administration and enforcement of the Corporations Act is the Australian Securities and Investments Commission (ASIC). The ASIC regulates the registration of companies and foreign companies in Australia and maintains a publicly available database on every registered entity. Compliance and Reporting Requirements ACN/ARBN Both Australian companies and registered foreign companies are required to display their name and Australian Company Number (ACN) or Australian Registered Body Number (ABRN) on all public documents and negotiable instruments. Registered foreign companies are also required to specify their jurisdiction of registration on these documents. Registered Office Every public company must have a registered office in Australia, which must be open to the public for not less than three hours a day during normal business hours (i.e. 9 a.m. to 5 p.m. on weekdays). A proprietary company must have a registered office for service of documents but need not keep that office open at specified times. A proprietary company must, however, provide access to its minute book and registers upon request. Annual Returns All companies must lodge an annual return for each calendar year with the ASIC before 31 January the following year. The annual return is available for inspection by the public, as are all forms lodged with the ASIC.

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APPENDIX E SUMMARY OF RELEVANT AUSTRALIAN LAWS AND REGULATIONS


Financing Reporting and Audit The reporting requirements for companies differ between public companies and small and large proprietary companies. A small proprietary company is a company that satisfies at least two of the following tests: the consolidated gross operating revenue for the financial year of the company and the entities it controls (if any) is less than A$10 million; the value of the consolidated gross assets at the end of the financial year of the company and the entities it controls (if any) is less than A$5 million; and/or the company and the entities it controls (if any) have fewer than 50 employees at the end of the financial year. Large proprietary companies and public companies must prepare and lodge audited financial statements with the ASIC. Small proprietary companies do not have to prepare an annual financial report or have it audited unless: it is requested to do so by shareholders holding at least 5% of voting shares in the company; it is requested to do so by the ASIC; or it is controlled by a foreign company (except where the foreign company lodges a financial report covering the Australian subsidiaries). All companies that are required to prepare and lodge financial statements must prepare those statements in accordance with Australian Accounting Standards. Internal Governance Rules relating to the internal governance of a company (such as the procedure for convening directors meetings, voting rights, appointment of company officers, rules relating to dividends and rules relating to the transfer of shares) will be set out in: the companys constitution (if the company has adopted or retained one); or the replaceable rules set out in the Corporations Act; or a combination of the replaceable rules and a constitution. Public companies must lodge a copy of their constitution and any amendments to that constitution with the ASIC. Meetings Public companies must hold annual general meetings at lease once every calendar year and within 5 months of the end of the financial year. A proprietary company is not required to hold annual general meetings unless required by its company constitution. Records All companies must maintain registers of members, office holders, option holders, debenture holders and charges. The ASIC must be notified of any changes to the company name, officers, registered office, and share capital of a company, as well as of certain other matters concerning the business of the company.

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APPENDIX E SUMMARY OF RELEVANT AUSTRALIAN LAWS AND REGULATIONS


TAXATION General Both Australian Federal and State Governments levy direct and indirect taxes, the main taxes being as follows: Federal taxes: income tax (including capital gains tax) fringe benefits tax superannuation guarantee charge withholding taxes goods and services tax customs and excise duties resource rent tax State taxes: stamp duty payroll tax land tax Income Tax The principal tax in Australia is income tax which is governed by the Australian Income Tax Assessment Acts. The income tax regime imposes liability to pay tax on: (a) the assessable income of all Australian residents derived from all sources, whether within or outside Australia; and the assessable income of non-residents of Australia derived from Australian sources and on capital gains made in respect of assets having a connection with Australia.

(b)

Australia has a number of Double Taxation Agreements (DTA) with other countries that in principle adopt the form of the 1977 Organisation for Economic Co-operation and Development (OECD) model treaty. If a non-resident subject to Australian income tax is resident of a country having a DTA with Australia, relief from double taxation may be available. The rates of income tax vary depending upon the structure of the Australian operations. The Australian Taxation Office is the authority responsible for administering Australias income tax system. Companies An Australian resident company is liable to pay Australian income tax on income and capital gains derived from all sources, within or outside Australia. The payment of tax on income and gains derived from non-Australian sources is subject to certain accruals, taxation and foreign tax credit provisions. The rate of company tax on income is 30% and there is an imputation system for dividends paid from taxed profits. In addition to tax on income, companies are required to pay tax on fringe benefits paid to employees. The fringe benefits tax rate is 48.5%.

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APPENDIX E SUMMARY OF RELEVANT AUSTRALIAN LAWS AND REGULATIONS


Tax losses incurred after the 1989/90-tax year can be carried forward indefinitely provided that certain tests requiring continuity of ownership of the business or continuation of the same business are satisfied. An income tax consolidation regime has been introduced that allows a group of Australian entities with a common parent holding 100% of the beneficial interest in each of the entities to form a consolidated group. Where a consolidated group is formed, only the parent company will be subject to tax as each of the subsidiary companies are treated as part of the parent company, rather than as separate income tax entities. Trusts Trusts are not treated as separate legal entities under the Australian income tax system. Accordingly, a trust is not liable to pay tax, although the trustee of a trust must lodge an income tax return on behalf of the trust. The beneficiaries of a trust will be assessed for tax on their share of the net income of the trust if they are presently entitled to the income of the trust. Tax losses incurred in any year can be carried forward and offset against the future income of the trust but cannot be distributed to or otherwise made available to beneficiaries in their personal capacity. Capital Gains Tax Capital gains arising from the disposal of assets acquired after 19 September 1985 are treated as income and are taxable. Any capital losses that are realised on disposal of an asset can be offset against capital gains. Net capital losses can be applied against future capital gains. Certain capital gains tax relief is available where capital assets are transferred between commonly owned corporations. Goods and Services Tax A goods and services tax (Australian GST) has been in operation in Australia since 1 July 2000. Australian GST is charged at a flat rate of 10% and is levied on the supply of goods and services, and on dealings in real property and other property rights, by business entities. An entity is required to pay Australian GST when it is registered or required to be registered for Australian GST purposes. An entity is required to be registered for Australian GST if its annual turnover is A$50,000 or more. A recipient of goods or services that is a registered business entity will be able to claim an input tax credit for the amount of Australian GST that it has paid. The input tax credit is offset against any Australian GST on goods or services that the recipient pays on supplies to its own customers. Stamp Duty Stamp duty is a State / Territory tax levied on a wide range of transactions, such as transfers of property, dealings in certain shares and unit trusts, and financing transactions, either at a fixed rate or in proportion to the value of the transaction. Obligations in relation to stamping and the rates of stamp duty vary from jurisdiction to jurisdiction. TRADE PRACTICES The Australian Trade Practice Act (TPA) is Federal legislation which encourages competition and the performance of a free market. The government regulatory body responsible for administering and enforcing the TPA is the Australian Competition and Consumer Commission (ACCC). The TPA prohibits or restricts: certain types of exclusive dealing arrangements (such as arrangements that restrict the free trade of goods or services);

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APPENDIX E SUMMARY OF RELEVANT AUSTRALIAN LAWS AND REGULATIONS


various restrictive or anti-competitive trade practices (for example, collusive tenders or contracts in restraint of trade); agreements between competitors to fix or control prices; agreements between competitors in relation to the division of markets between them; resale price maintenance (i.e. supplying goods or services on the condition that any resupply will not be below a specified price); abuse of a position of market power; and mergers or acquisitions that result in a substantial lessening of competition in Australian markets (including takeovers and the merger or acquisition of assets affected outside Australia which have an effect on competition in Australia). The ACCC may authorise some types of restrictive trade practices and mergers or acquisitions when the public benefit to result from the practice outweighs any resulting lessening of competition in the market. The TPA also contains prohibitions aimed at protecting consumers against misleading and deceptive conduct, misrepresentation and unconscionable or unfair business dealings. In addition, the TPA provides for a product liability and product recall regime. INTELLECTUAL PROPERTY General The principal forms of intellectual property protection available in Australia are trademarks, patents, copyright and designs. All these forms of protection are governed by Federal legislation. Domain names and business/trade names are also used to protect intellectual property and are governed by a legislative regime. Trade Marks Trade Marks are registrable with IP Australia pursuant to the Australian Trade Marks Act and can be registered for an initial term of 10 years, renewable for successive 10-year terms. IP Australia is the Australian government agency responsible for granting rights in patents, trade marks and designs. The Australian Trade Marks Act affords greater protection and available remedies to the holders of registered trade marks than would be available to unregistered trade mark owners under the common law and Australias consumer protection laws. Domain Names Domains available in Australia include .com.au, .asn.au, .net.au and .org.au. The most relevant domain name available to businesses in Australia is the .com.au domain name which is only allocated to commercial entities with a close and substantial connection to the domain name. Domain names are managed by, and issued by accredited registrars of .au Domain Administration Ltd (auDA). auDA is the Australian Government endorsed policy authority and industry self-regulatory body for the .au domain space. Registrants of .au domain names do not own the domain name, but acquire a licence to use the domain name for a specified period of time, subject to the licence terms and conditions of the applicable registrar of the domain name.

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APPENDIX E SUMMARY OF RELEVANT AUSTRALIAN LAWS AND REGULATIONS


Business Names Any company or entity carrying on business under a name other than the companys or individuals own name must register that name as a business name in the Australian State or Territory in which the business trades. Although the Australian State and Territory bodies responsible for registration of business names implement a policy of rejecting applications for registration of business names that are identical or similar to already registered business names or company names, thereby affording some protection for registered business names. Registration itself does not afford any specific protection or remedies to the proprietors of registered business names in the way that registration of a trademark does. EMPLOYMENT AND INDUSTRIAL RELATIONS Awards Australian Federal, State and Territory legislation regulate the terms of employment of workers in Australia. For certain classes of workers, Australian Federal or State Industrial Awards apply. Most non-management employees in Australia are covered by Awards established by industrial relations tribunals to set down minimum conditions of employment for categories of workers. Trade unions usually represent employees in negotiating Awards. Subject to the requirements of any applicable Awards, employers can negotiate employment contracts with their employees. Enterprise Level and Individual Agreements Legislation also accommodates agreements between employers and unions at an enterprise level. These enterprise agreements are generally specific to a particular group of employees at a particular workplace and are enforceable as if they were Awards. Provision is also made for agreements, known as Australian Workplace Agreements, made with individual employees whose work would otherwise be governed by an Award. Statutory Obligations In addition to the various Awards, there is a diversity of Australian Federal and State legislation dealing with employment matters, including: leave entitlements; compulsory superannuation contributions by employers; workers compensation; workplace discrimination; occupational health and safety; redundancies; unfair contracts; and unfair dismissals.

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APPENDIX F SUMMARY OF RELEVANT MALAYSIAN LAWS AND REGULATIONS


Set out below is a summary of certain material provisions of Malaysian law in effect as of the date hereof that may apply to Old Chang Kee Malaysia. This summary does not purport to be a complete review of all laws in Malaysia that are applicable to Old Chang Kee Malaysia. 1. Foreign Investment Committee The Foreign Investment Committee (FIC) is part of the Economic Planning Unit of the Malaysias Prime Ministers Department. The FIC was set up to regulate the acquisition of interests, mergers and take-overs by local and foreign interests. The FIC issues guidelines periodically and the latest guidelines were issued on 1 August 2004 effective on 21 May 2003 (the FIC Guidelines). Certain government bodies such as the Securities Commission (established under section 3 of the Securities Commission Act 1993), Bank Negara Malaysia and the land offices take a very strict view of the FIC Guidelines and failure to comply will usually mean that approvals will be withheld or are made conditional upon compliance with the relevant FIC Guidelines. The FIC Guidelines require that, approval of the FIC be obtained in respect of the following transactions:(i) Any proposed acquisition of interest in a local company or business in Malaysia which is RM10 million or more in value, by local or foreign interests; Any proposed acquisition of interest in a local company or business in Malaysia by any means, which results in the transfer of ownership or control to foreign interests; Any proposed acquisition of interest by:(a) any foreign interest of 15% or more of the voting right of any local company or business in Malaysia; or any associated or non-associated group of foreign interests, of an aggregate of 30% or more of the voting rights of any local company or business in Malaysia;

(ii)

(iii)

(b)

regardless of whether the value is less than RM10 million with the exception of open market acquisitions on Bursa Malaysia meant for short term holdings; (iv) Any proposed acquisition of interest as in paragraph (iii) by:(a) foreign interest, which will result in an increase in the voting rights to 15% or more, in any local company or business in Malaysia; or associated or non-associated group of foreign interests, which in aggregate will result in an increase in the voting rights to 30% or more, in any local company or business in Malaysia;

(b)

regardless of whether the value is less than RM10 million with the exception of open market acquisitions on Bursa Malaysia meant for short term holdings; (v) Any proposed acquisition of interest and control of more than 50% of the voting rights in any local company or business in Malaysia by local interest, regardless of whether the value is less than RM10 million; Any proposed merger or take-over of any local company or business in Malaysia by local or foreign interests;

(vi)

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APPENDIX F SUMMARY OF RELEVANT MALAYSIAN LAWS AND REGULATIONS


(vii) (viii) Any proposed joint venture involving two or more parties in a local company; Any control of a local company or business in Malaysia through any form of management agreement, technical assistance agreement or other arrangements; Any transaction by statutory bodies, companies and their subsidiaries owned by the Federal or State Governments; and Any charging of shares in a local company to any foreign interest where the value of loan or the market value of the shares is RM10 million or more. Charging of such shares is allowed if all of the loan taken would be utilised for the operation of its business in Malaysia only.

(ix)

(x)

However, under the FIC Guidelines, there are exemptions for acquisition of interests, mergers and take-overs by local and foreign interests, and these include but are not limited to the acquisition of interests in Multimedia Super Corridor (MSC) status companies, any acquisition of interests in manufacturing companies licensed by the Ministry of International Trade and Industry, and any acquisition of interests in companies granted the status of operational headquarters.

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APPENDIX G SUMMARY OF RELEVANT PRC LAWS AND REGULATIONS


Set out below is a summary of certain material provisions of PRC law in effect as of the date hereof that may apply to Old Chang Kee China. This summary does not purport to be a complete review of all laws in PRC that are applicable to Old Chang Kee China. PRC legal system PRC legal system is based on PRC Constitution and is made up of written laws, regulations and other regulatory documents. Court decisions do not constitute binding precedents. The National Peoples Congress of PRC (NPC) and the Standing Committee of the NPC are empowered by PRC Constitution to exercise the legislative power of the state. The NPC has the power to amend PRC Constitution and to enact and amend primary laws governing the state organs, civil affairs, criminal offences and other matters. The Standing Committee of the NPC is empowered to interpret, enact and amend laws other than those required to be enacted by the NPC. The State Council of PRC is the highest organ of state administration and has the power to enact administrative rules and regulations. Ministries and commissions under the State Council of PRC are also vested with the power to issue orders, regulations and directives within the jurisdiction of their respective departments. Administrative rules, regulations, directives and orders promulgated by the State Council and its ministries and commissions must not be in conflict with PRC Constitution or the national laws and, in the event that any conflict arises, the Standing Committee of the NPC has the power to annul such administrative rules and regulations enacted by the State Council and the State Council has the power to annul such directives, orders and regulations issued by its ministries and commissions. At the regional level, the peoples congresses of provinces, municipalities and autonomous regions and their standing committees may enact local rules and regulation and the peoples government may promulgate administrative rules and directives applicable to their own administrative area. These local rules and regulations may not be in conflict with PRC Constitution, any national laws or any administrative rules and regulations promulgated by the State Council except as otherwise provided by the Constitution or laws. Rules, regulations or directives may be enacted or issued at the provincial or municipal level or by the State Council of PRC or its ministries and commissions in the first instance for experimental purposes. After sufficient experience has been gained, the State Council may submit legislative proposals to be considered by the NPC or the Standing Committee of the NPC for enactment at the national level. The power to interpret laws is vested by PRC Constitution in the Standing Committee of the NPC. According to the Decision of the Standing Committee of the NPC Regarding the Strengthening of Interpretation of Laws passed on 10 June 1981, the Supreme Peoples Court has the power to give general interpretation on application of laws in judicial proceedings apart from its power to issue specific interpretation in specific cases. The State Council and its ministries and commissions are also vested with the power to give interpretation on the rules and regulations which they promulgated. At the regional level, the power to give interpretation of regional regulations is vested in the regional legislative and administration organs which promulgate such regional regulations. All such interpretations carry legal effect. Judicial system The Peoples Courts are the judicial organs of PRC. Under PRC Constitution and the Law of the Organisation of the Peoples Courts of the Peoples Republic of China , the Peoples Courts comprise the Supreme Peoples Court, the local peoples courts, military courts and other special courts. The local peoples courts are divided into three levels, namely, the basic peoples courts, intermediate peoples courts and higher peoples courts. The basic peoples courts are divided into civil, criminal and administrative divisions. The intermediate peoples courts have divisions similar to those of the basic peoples courts and, where the circumstances so warrant, may have other special

G-1

APPENDIX G SUMMARY OF RELEVANT PRC LAWS AND REGULATIONS


divisions (such as intellectual property divisions). The judicial functions of the peoples courts at lower levels are subject to supervision of peoples courts at higher levels. The peoples procuratorates also have the right to exercise legal supervision over the proceedings of peoples courts of the same and lower levels. The Supreme Peoples Court is the highest judicial organ of PRC. It supervises the administration of justice by the peoples courts of all levels. The peoples courts adopt a system of two instances. A party may before the taking effect of a judgment or order appeal against the judgment or order of the first instance of a local peoples court to the peoples court at the next higher level. Judgments or orders of the second instance at the next higher level are final and binding. Judgments or orders of the first instance of the Supreme Peoples Court are also final and binding. If, however, the Supreme Peoples Court or a peoples court at a higher level finds any error in a final and binding judgment which has taken effect in any peoples court at a lower level, it may decide to retry the case, or if the president of a peoples court at any level finds definite error in a legally effective judgment or written order of his court, and deems it necessary to have the case retried, he shall refer it to the judicial committee of the said court for discussion and decision of the retrial. PRC civil procedures are governed by the Civil Procedure Law of PRC (the Civil Procedure Law) adopted on 9 April 1991. The Civil Procedure Law contains regulations on the institution of a civil action, the jurisdiction of the peoples courts, the procedures in conducting a civil action, trial procedures and procedures for the enforcement of a civil judgment or order. All parties to a civil action conducted within the territory of PRC must comply with the Civil Procedure Law. A civil case is generally heard by a court located in the defendants place of domicile. The jurisdiction may also be selected by express agreement by the parties to a contract provided that the jurisdiction of the peoples court selected has some actual connection with the dispute, that is to say, the plaintiff or the defendant is located or domiciled, or the contract was executed or implemented in the jurisdiction selected, or the subject-matter of the proceedings is located in the jurisdiction selected. A foreign national or foreign enterprise is accorded the same litigation rights and obligations as a citizen or legal person of PRC. If any party to a civil action refuses to comply with a judgment or order made by a peoples court or an award made by an arbitration body in PRC, the aggrieved party may apply to the peoples court to enforce the judgment, order or award. There are time limits on the right to apply for such enforcement. Where at least one of the parties to the dispute is an individual, the time limit is one year. If both parties to the dispute are legal persons or other entities, the time limit is six months. A party seeking to enforce a judgment or order of a peoples court against a party who or whose property is not within PRC may apply to a foreign court with jurisdiction over the case for recognition and enforcement on such judgment or order. A foreign judgment or ruling may also be recognised and enforced according to PRC enforcement procedures by the peoples courts in accordance with the principle of reciprocity or if there exists an international or bilateral treaty with or acceded to by the foreign country that provides for such recognition and enforcement, unless the peoples court considers that the recognition or enforcement of the judgment or ruling will violate fundamental legal principles of PRC or its sovereignty, security or social or public interest. Arbitration and enforcement of arbitral awards The Arbitration Law of PRC (the Arbitration Law) was promulgated by the Standing Committee of the NPC on 31 August 1994 and came into effect on 1 September 1995. It is applicable to, among other matters, trade dispute involving foreign parties where the parties have entered into a written agreement to refer the matter to arbitration before an arbitration committee constituted in accordance with the Arbitration Law. Under the Arbitration Law, an arbitration committee may, before the promulgation by PRC Arbitration Association of arbitration regulations, formulate interim arbitration rules in accordance with the Arbitration Law and PRC Civil Procedure Law. Where the parties have by a written agreement provided arbitration as a method for dispute resolution, the parties are not permitted to institute legal proceedings in a peoples court.

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APPENDIX G SUMMARY OF RELEVANT PRC LAWS AND REGULATIONS


Under the Arbitration Law, an arbitral award is final and binding on the parties and if a party fails to comply with an award, the other party to the award may apply to the peoples court for enforcement. A peoples court may refuse to enforce an arbitral award made by an arbitration committee if there were mistakes in the applicable law, an absence of material evidence or irregularities over the arbitration proceedings or the jurisdiction or constitution of the arbitration committee and in other circumstances as provided in the Civil Procedure Law. A party seeking to enforce an arbitral award of a foreign affairs arbitration body of PRC against a party who or whose property is not within PRC may apply to a foreign court with jurisdiction over the case for enforcement. Similarly, an arbitral award made by a foreign arbitration body may be recognised and enforced by PRC courts in accordance with the principles of reciprocity or any international treaty concluded or acceded to by PRC. In respect of contractual and non-contractual commercial law-related disputes which are recognised as such for the purposes of PRC law, PRC has acceded to the Convention on the Recognition and Enforcement of Foreign Arbitral Award (New York Convention) adopted on 10 June 1958 pursuant to a resolution of the Standing Committee of the NPC passed on 2 December 1986. The New York Convention provides that all arbitral awards made by a state which is a party to the New York Convention shall be recognised and enforced by other parties to the New York Convention subject to their right to refuse enforcement under certain circumstances including where the enforcement of the arbitral award is against the public policy of the state to which the application for enforcement of the arbitral award is made. It was declared by the Standing Committee of the NPC at the time of accession of PRC that (i) PRC would only recognise and enforce foreign arbitral awards on the principle of reciprocity and (ii) PRC would only apply the New York Convention in disputes considered under PRC laws to be arising from contractual and non-contractual mercantile legal relations. Taxation The existing applicable income tax laws, regulations, notices and decisions related to foreign investment enterprises and their investors (collectively referred to as Applicable Foreign Enterprises Tax Law) include the following:(1) Income Tax Law of PRC on Foreign Investment Enterprises and Foreign Enterprises adopted by the NPC on 9 April 1991, which came into effect on 1 July 1991; Implementing Rules of the Income Tax Law of PRC on Foreign Investment Enterprises and Foreign Enterprises promulgated by the State Council, which came into effect on 1 July 1991; Notice Relating to Taxes Applicable to Foreign Investment Enterprises and Foreign Enterprises and Foreign Nationals in Dividends and Gains obtained from Holding and Transferring of Shares promulgated by State Administration of Taxation on 21 July 1993; Income Tax Law Applicable to Individuals of PRC (amended in 2005) adopted by the NPC on 10 September1980 and amended twice by the Standing Committee of the NPC; Implementing Rules of the Income Tax Law Applicable to Individuals of PRC(amended in 2005) promulgated by the State Council, which took effect on 1 January 2006; and Notice on Relevant Policies Concerning Individual Income Tax issued by Ministry of Finance and State Administration of Taxation on 13 May 1994.

(2)

(3)

(4)

(5)

(6)

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APPENDIX G SUMMARY OF RELEVANT PRC LAWS AND REGULATIONS


Based on the foregoing,

(a)

Income tax on foreign investment enterprises


According to the Applicable Foreign Enterprises Tax Law, foreign investment enterprises (including sino-foreign equity joint ventures, sino-foreign co-operative joint ventures and wholly foreign-owned enterprises established in the territory of PRC) is required to pay a national income tax at a rate of 30% of their taxable income and a local income tax at a rate of 3% of their taxable income. A foreign investment enterprise engaged in production having a period of operation of not less than ten years shall be exempted from income tax for the first two profit-making years and a 50% reduction in the income tax payable for the next three years. Foreign investment enterprises established in Special Economic Zones, foreign enterprises having an establishment or a place in Special Economic Zones engaged in production or business operations and the foreign investment enterprises engaged in production established in Economic and Technological Zones may pay income tax at a reduced rate of 15%. Foreign investment enterprises engaged in production established in coastal economic open zones or in the old urban districts of cities where the Special Economic Zones or the Economic and Technological Development Zones are located may pay income taxes at a reduced rate of 24%. Losses incurred in a tax year by any enterprise with foreign investment and by an establishment or a place set up in PRC by a foreign enterprise engaged in production or business operations may be made up by the income of the following tax year and this may be carried forward for not more than five years. The peoples governments of the provinces, autonomous regions and municipalities directly under the central government may grant exemptions from or reduce local income tax for a foreign investment enterprise engaged in an industry or a project encouraged by the State.

(b)

Tax on dividends from PRC enterprises with foreign investment


According to the Applicable Foreign Enterprises Tax Law, income such as dividends, profits, rental, royalty and other income from sources in PRC derived from a foreign enterprise which has no establishment in PRC is subject to a 20% withholding tax, subject to reduction as provided by any applicable double taxation treaty, unless the relevant income is specifically exempted from tax under the Applicable Foreign Enterprises Tax Law. The profit derived by a foreign investor from a PRC enterprise with foreign investment is exempted from PRC income tax according to the Applicable Foreign Enterprises Tax Law.

Notwithstanding the abovementioned description, the Income Tax Law of PRC on Foreign Investment Enterprises and Foreign Enterprises and the Implementing Rules of the Income Tax Law of PRC on Foreign Investment Enterprises and Foreign Enterprises shall be annulled as of 1 January 2008. Two new laws, which are named (i) Enterprises Income Tax Law of PRC adopted by the Standing Committee of the NPC on 16 March 2007, and (ii) Implementation Rules of Enterprises Income Tax Law of PRC promulgated by the State Council on 6 December 2007 (collectively referred to as New Enterprises Income Tax Law) will come into effect as of 1 January 2008. According to the New Enterprises Income Tax Law, the enterprises established within the territory of China in accordance with Chinese laws and regulations (referred to as PRC Enterprises), including the foreign investment enterprises, shall be subject to a unified applicable enterprises income tax rate 25%. The industries and projects with key support and under encouraged development by the State may be given preferential enterprise income tax treatment.

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APPENDIX G SUMMARY OF RELEVANT PRC LAWS AND REGULATIONS


Small-scale PRC Enterprises, including the foreign investment enterprises, with minimal profits which are qualified are subject to the applicable enterprise income tax rate with a reduction of 20%. High and new technology PRC Enterprises that require key state support are subject to the applicable enterprise income tax rate with a reduction of 15%. PRC Enterprises, including the foreign investment enterprises, set up with approval prior to the promulgation of the New Enterprises Income Tax Law that enjoy low preferential tax rate in accordance with the tax laws and administrative regulations at the current period may, pursuant to the provisions of the State Council, gradually transit to the tax rate provided in the New Enterprises Income Tax Law within five years. Where such enterprises enjoy regular tax exemption and reduction, the treatment continues to apply until expiry after the implementation of the New Enterprises Income Tax Law. However, those that fail to be entitled to this treatment by reason of not making any profits, the preferential period shall be calculated from the year the New Enterprises Income Tax Law is implemented.

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APPENDIX H SUMMARY OF RELEVANT THAI LAWS AND REGULATIONS


Set out below is a summary of certain material provisions of Thai law, i.e. the Civil and Commercial Code (CCC) in effect as of the date hereof that may apply to Old Chang Kee Thailand. This summary does not purport to be a complete review of all laws in Thai that are applicable to Old Chang Kee Thailand. Minority Oppression Rights (1) Any shareholder, unless prescribed otherwise in the articles of association, may bring an action to the court to claim compensation from a director (on behalf of the company) in the case where a director performs an act or does not perform any act which constitutes non-compliance with the law, the objectives and articles of association of the company, including the shareholders resolution in good faith and with care to preserve the interest of the company, provided that: such act or omission to act causes damage to the company; and the company does not claim compensation from such director even though a shareholder has notified the company to do so. In addition, if such act or omission to act by a director is likely to cause damage to the company, any shareholder may make a request for the court to order that such act be stopped. In any event, a shareholder who will undertake the above actions must hold shares in the company at the time such directors performs or does not perform the act which causes or is likely to result in damage to the company. (2) Unless a general meeting of Shareholders has given a prior consent, a director may not operate any business which has the same nature as and is in competition with the business of the company nor become a partner in an ordinary partnership or a partner with unlimited liability in a limited partnership or a director of a private company or any other company operating business which has the same nature as and is in competition with the business of the company, either for his own benefit or for the benefit of other person(s). In the event a director has caused damage to the company and the company does not make a compensation claim against such director (the prescription period being one year from the date on which the company has knowledge of the breach and the person committing the breach or ten years from the date of such breach), then, a shareholder may make such a claim.

(3)

Shareholder Action by Written Consent Thai law does not make provision for shareholders of a private company to pass any resolution by written means. All shareholders meetings must take place by way of physical meetings. Shareholder Proposals Pursuant to the CCC, the board of directors may call an extraordinary general meeting of the shareholders at any time the board considers it expedient to do so. In addition, shareholders holding shares in aggregate amounting to not less than one-fifth of the total number of shares sold may submit their names in request directing the board of directors to call an extraordinary general meeting at any time, but the reasons for calling such meeting shall be clearly stated in such request. If the board of directors fails to call a shareholders meeting to be held within one month of the date of receipt of such request the said shareholders may call the meeting by themselves.

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APPENDIX H SUMMARY OF RELEVANT THAI LAWS AND REGULATIONS


Dissolution; Winding Up (1) Dissolution Where any one of the following grounds exists, a company shall be dissolved: (i) (ii) (iii) (iv) (v) in the cases, if any, provided by its articles of association; if incorporated for a period of time, by the lapse of such period; if incorporated for a single undertaking, by the termination of such undertaking; by a statutory special resolution to dissolve; or when the company becomes bankrupt.

A statutory special resolution is defined as a resolution passed and confirmed at two consecutive shareholders meetings held after an interval of at least 14 days but not more than 6 weeks and after due notices have been given to all the shareholders. Passage requires an affirmative threefourths majority vote cast at the first meeting and a two-thirds majority vote cast at the second meeting. Furthermore, a company may also be dissolved by a court order on the following grounds: (i) default is made in filing the minutes of the statutory meeting or in holding the statutory meeting; the company has not commenced its business within a year from the date of registration or suspends its business for a whole year; the business of a company, if operated further, will bring only losses, and recovery is hopeless; or the number of shareholders decreases to fewer than seven.

(ii)

(iii)

(iv)

However, in the case of default in filing the minutes of the statutory meeting or in holding the statutory meeting, the court may, instead of dissolving the company, direct that the minutes of the statutory meeting be filed or the statutory meeting be held as it may deem fit. Variation of rights of shares Under the CCC, preferential rights accruing to shares already issued shall not be changed. A preferred share may have less than one vote if clearly specified in the articles of association of the company. Alteration of memorandum of association and articles of association A company may amend its memorandum of association or articles only when a shareholders special resolution is passed. A company shall apply to register the amendment within 14 days of the date on which the resolution was passed at the meeting.

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APPENDIX I TAXATION
TAXATION The following is a discussion of certain tax matters arising under the current tax laws in Singapore and is not intended to be and does not constitute legal or tax advice. While this discussion is considered to be a correct interpretation of existing laws in force, no assurance can be given that courts or fiscal authorities responsible for the administration of such laws will agree with this interpretation or that changes in such laws will not occur. The discussion is limited to a general description of certain tax consequences in Singapore with respect to ownership of the Shares by Singapore investors, and does not purport to be a comprehensive nor exhaustive description of all the tax considerations that may be relevant to a decision to purchase the Shares. Prospective investors should consult their tax advisors regarding Singapore tax and other tax consequences of owning and disposing of the Shares. It is emphasised that neither the Company, the Directors nor any other persons involved in the Invitation accepts responsibility for any tax effects or liabilities resulting from the subscription for, purchase, holding or disposal of the Shares. SINGAPORE INCOME TAX General Singapore tax residents are subject to Singapore income tax on income that is accrued in or derived from Singapore and on foreign income received in Singapore, subject to certain exceptions. Non-resident corporate taxpayers are subject to income tax on income that is accrued in or derived from Singapore, and on foreign income received in Singapore, subject to certain exceptions. All individuals resident and non-resident, subject to certain exceptions, are subject to income tax on the income accrued in or derived from Singapore. With effect from year of assessment 2005 (i.e. for financial /calendar year ending in 2004), all foreign-source income received in Singapore by all individuals will be exempt from Singapore tax. The latter exemption will not apply to such income received from a partnership in Singapore. A company is tax resident in Singapore if the control and management of its business is exercised in Singapore. An individual is tax resident in Singapore in a year of assessment if, in the preceding year, he was physically present in Singapore or exercised an employment in Singapore (other than as a director of a company) for 183 days or more, or if he resides in Singapore. The corporate tax rate in Singapore is 20% up to the year of assessment 2007 i.e. the financial year ended in 2006. With effect from the year of assessment 2008 (i.e. financial year ended 2007), the corporate tax rate will be reduced to 18%. In addition, 75% of the first S$10,000 of the companys chargeable income, and 50% of the next S$300,000 will be exempt from corporate tax. The above tax exemption will not apply to Singapore dividends with franking credits. For a Singapore tax resident individual, the rate of tax will vary according to the individuals circumstances but is subject to a current maximum rate of 20%. Dividend Distributions Singapore moved to the one-tier corporate tax system with effect from 1 January 2003. Under this system, the tax collected from corporate profits is final and all Singapore dividends paid by Singapore tax resident companies to their shareholders are exempt from tax (referred hereinafter as one-tier tax exempt dividends). We are in the one-tier corporate tax system. Under this system, when we distribute dividends, we will pay one-tier tax exempt dividends to our shareholders. One-tier tax exempt dividends on our Shares are tax exempt in the hands of our shareholders. Gains on Disposal of our Shares Singapore does not impose tax on capital gains. However, there are no specific laws or regulations which deal with the characterisation of capital gains, and hence, gains may be construed to be of an income nature and subject to tax especially if they arise from activities which the Inland Revenue Authority of Singapore (IRAS) regards as the carrying on of a trade in Singapore. I-1

APPENDIX I TAXATION
Any profits from the disposal of our Shares are not taxable in Singapore unless the seller is regarded as having derived gains of an income nature, in which case, the disposal profit would be taxable. Stamp Duty There is no stamp duty payable on the subscription of our Shares. Stamp duty is payable on the instrument of transfer of our Shares at the rate of $2.00 for every $1,000 market value of our Shares registered in Singapore. The purchaser is liable for stamp duty, unless there is an agreement to the contrary. No stamp duty is payable if no instrument of transfer is executed or the instrument of transfer is executed outside Singapore. However, stamp duty may be payable if the instrument of transfer which is executed outside Singapore is received in Singapore. The above stamp duty is not applicable to electronic transfers of our shares through the CDP. Estate Duty Singapore estate duty is imposed on the value of immovable property situated in Singapore owned by individuals who are not domiciled in Singapore, subject to specific exemption limits. Movable assets of non-domiciles will be exempt from estate duty with respect to deaths occurring on or after 1 January 2002. Singapore estate duty is imposed on the value of most immovable property situated in Singapore and on most movable property, wherever it may be, owned by individuals who are domiciled in Singapore, subject to specific exemption limits. Our Shares are considered to be movable property situated in Singapore as we are a company incorporated in Singapore. Accordingly, our Shares held by an individual domiciled in Singapore are subject to Singapore estate duty upon such individuals death. Singapore estate duty is payable to the extent that the value of our Shares aggregated with any other assets subject to Singapore estate duty exceeds $600,000. Unless other exemptions apply to the other assets, for example, the separate exemption limit for residential properties, any excess beyond $600,000 will be taxed at 5% of the first $12,000,000 of the individuals Singapore chargeable assets and thereafter at 10%. For death from 1 January 2006, the government will allow the estate duty paid on the earlier death to be deducted from the estate duty payable on the same assets assessed in the beneficiaries subsequent deaths. The relief will start at 100% if the deaths occur within 6 months of each other, graduating to the full estate duty payable if the deaths are more than 2 years apart. Individuals should consult their own tax advisors regarding the Singapore estate duty consequences of their ownership of our Shares. Goods and Services Tax (GST) The sale of our Shares by an investor belonging in Singapore to another person belonging in Singapore is an exempt supply not subject to GST. Any GST directly or indirectly incurred by the investor in respect of this exempt supply is a cost to the investor. Where our Shares are sold by a GST-registered investor to a person belonging outside Singapore, the sale is a taxable sale subject to GST at zero-rate. Any GST incurred by the investor in the making of this sale, if the same is a supply in the course of furtherance of a business, is claimable as a refund from the Comptroller of GST. Services such as brokerage, handling and clearing services rendered by a GST-registered person to an investor belonging in Singapore in connection with the investors purchase, sale or holding of our Shares will be subject to GST at the current rate of 7%. Similar services rendered to an investor belonging outside Singapore are subject to GST at zero-rate.

I-2

APPENDIX J TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION AND ACCEPTANCE


You are invited to apply and subscribe for the 25,000,000 New Shares at the Issue Price for each New Share subject to the following terms and conditions:1. YOUR APPLICATION MUST BE MADE IN LOTS OF 1,000 NEW SHARES AND HIGHER INTEGRAL MULTIPLES THEREOF. YOUR APPLICATION FOR ANY OTHER NUMBER OF NEW SHARES WILL BE REJECTED. Your application for Offer Shares may be made by way of printed Offer Shares Application Forms or by way of ATM Application or IB Applications. Your application for the Placement Shares (other than Reserved Shares) may only be made by way of Placement Shares Application Forms. Your application for Reserved Shares may only be made by way of Reserved Shares Application Forms. YOU MAY NOT USE CPF FUNDS TO APPLY FOR THE NEW SHARES. 3. You (not being an approved nominee company in this paragraph) are allowed to submit ONLY ONE application in your own name for:(a) the Offer Shares by any one of the following:(i) (ii) (iii) OR (b) the Placement Shares (other than Reserved Shares) by Placement Shares Application Form. Offer Shares Application Form; or ATM Application; or IB Application,

2.

If you have made an application for Reserved Shares, you may submit ONE application for Offer Shares OR ONE application for Placement Shares (other than Reserved Shares) provided that you adhere to the terms and conditions of this Prospectus. Such applications shall not be treated as multiple applications. If you submit or procure submissions of multiple share applications for Offer Shares, Placement Shares (other than Reserved Shares) or both Offer Shares and Placement Shares (other than Reserved Shares), all your applications shall be deemed to be multiple applications and shall be rejected. JOINT OR MULTIPLE APPLICATIONS SHALL BE REJECTED. If you submit or procure submissions of multiple share applications for Offer Shares, Placement Shares (other than Reserved Shares) or both Offer Shares and Placement Shares (other than Reserved Shares), you may be deemed to have committed an offence under the Penal Code (Chapter 224) of Singapore and the Securities and Futures Act (Chapter 289) of Singapore, and your applications may be referred to the relevant authorities for investigation. Multiple applications or those appearing to be or suspected of being multiple applications will be liable to be rejected at our discretion.

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APPENDIX J TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION AND ACCEPTANCE


4. Our Company will not accept applications from any person under the age of 21 years, undischarged bankrupts, sole proprietorships, partnerships, non-corporate bodies, joint Securities Account holders of CDP and from applicants whose addresses (furnished in their Application Forms or, in the case of Electronic Applications, contained in the records of the relevant Participating Banks, as the case may be) bear post office box numbers. Our Company will not recognise the existence of a trust. Any application by a trustee or trustees must be made in his/their own name(s) and without qualification or, where the application is made by way of an Application Form, in the name(s) of an approved nominee company or approved nominee companies after complying with paragraph 6 below. OUR COMPANY WILL NOT ACCEPT APPLICATIONS FROM NOMINEES EXCEPT THOSE MADE BY APPROVED NOMINEE COMPANIES ONLY. Approved nominee companies are defined as banks, merchant banks, finance companies, insurance companies, licensed securities dealers in Singapore and nominee companies controlled by them. Applications made by persons acting as nominees other than approved nominee companies shall be rejected. IF YOU ARE NOT AN APPROVED NOMINEE COMPANY, YOU MUST MAINTAIN A SECURITIES ACCOUNT WITH CDP IN YOUR OWN NAME AT THE TIME OF YOUR APPLICATION. If you do not have an existing Securities Account with CDP in your own name at the time of your application, your application will be rejected (if you apply by way of an Application form), or you will not be able to complete your Electronic Application (if you apply by way of an Electronic Application). If you have an existing Securities Account but fail to provide your Securities Account number or provide an incorrect Securities Account number in Section B of the Application Form or in your Electronic Application, as the case may be, your application is liable to be rejected. Subject to paragraph 8 below, your application shall be rejected if your particulars, such as name, NRIC/passport number, nationality and permanent residence status provided in your Application Form or in the records of the relevant Participating Bank at the time of your Electronic Application, as the case may be, differ from those particulars in your Securities Account as maintained with CDP. If you possess more than one individual direct Securities Account with CDP, your application shall be rejected. If your address as stated in the Application Form or, in the case of an Electronic Application, contained in the records of the relevant Participating Bank, as the case may be, is different from the address registered with CDP, you must inform CDP of your updated address promptly, failing which the notification letter on successful allotment will be sent to your address last registered with CDP. Our Company reserves the right to reject any application which does not conform strictly to the instructions set out in the Application Form and in this Prospectus or with the terms and conditions of this Prospectus, which is illegible, incomplete, incorrectly completed or which is accompanied by an improperly drawn up or improper form of remittance. Our Company further reserves the right to treat as valid any applications not completed or submitted or effected in all respects in accordance with the instructions set out in the Application Forms or the instructions for Electronic Applications or the terms and conditions of this Prospectus, and also to present for payment or other processes all remittances at any time after receipt and to have full access to all information relating to, or deriving from, such remittances or the processing thereof. Our Company reserves the right to reject or to accept, in whole or in part, or to scale down or to ballot any application, without assigning any reason therefore, and our Company will not entertain any enquiry and/or correspondence on our decision. This right applies to applications made by way of Application Forms and by way of Electronic Applications. In deciding the basis of allotment, our Company will give due consideration to the desirability of allotting the New Shares to a reasonable number of applicants with a view to establishing an adequate market for the Shares.

5.

6.

7.

8.

9.

10.

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APPENDIX J TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION AND ACCEPTANCE


11. Share certificates will be registered in the name of CDP and will be forwarded only to CDP. It is expected that CDP will send to you, at your own risk, within 15 Market Days after the close of the Application List, a statement of account stating that your Securities Account has been credited with the number of New Shares allotted to you. This will be the only acknowledgement of application monies received and is not an acknowledgement by us. You irrevocably authorise CDP to complete and sign on your behalf as transferee or renouncee any instrument of transfer and/or other documents required for the issue of the New Shares allotted to you. This authorisation applies to applications made by way of Application Forms and by way of Electronic Applications. In the event of an over-subscription for Offer Shares as at the close of the Application List and/or Placement Shares (including Reserved Shares) are fully subscribed or over-subscribed as at the close of the Application List, the successful applications for Offer Shares will be determined by ballot or otherwise as determined by our Directors and approved by the SGX-ST. You irrevocably authorise CDP to disclose the outcome of your application, including the number of New Shares allotted to you pursuant to your application, to our Company, the Manager, the Underwriter, the Placement Agent and any other parties so authorised as the foregoing persons. Any reference to the you in this section shall include an individual, a corporation, an approved nominee and trustee applying for the Offer Shares by way of an Offer Shares Application Form or by way of an ATM Application or IB Application; an individual, a corporation, an approved nominee and trustee applying for the Placement Shares (other than Reserved Shares) through the Placement Agent by way of a Placement Shares Application Form; and an individual, a corporation, an approved nominee and trustee applying for the Reserved Shares by way of a Reserved Shares Application Form. By completing and delivering an Application Form or by making and completing an Electronic Application by (in the case of an ATM Application) pressing the Enter or OK or Confirm or Yes key on the ATM (as the case may be) or by (in the case of an Internet Electronic Application) clicking Submit or Continue or Yes or Confirm on the IB website screen (as the case may be) in accordance with the provisions of this Prospectus, you:(a) irrevocably offer to subscribe for the number of New Shares specified in your application (or such smaller number for which the application is accepted) at the Issue Price and agree that you will accept such New Shares as may be allotted to you, in each case on the terms and conditions set out in this Prospectus and the Memorandum of Association and Articles of our Company as well as those set out in the IB websites or ATMs of the Participating Banks; agree that in the event of any inconsistency between the terms and conditions for application set out in this Prospectus and those set out in the IB websites or ATMs of the Participating Banks, the terms and conditions set out in this Prospectus shall prevail; agree that the aggregate Issue Price for the New Shares applied for is due and payable to our Company forthwith; warrant the truth and accuracy of the information contained, and representations and declarations made, in your application, and acknowledge and agree that such information, representations and declarations will be relied on by our Company in determining whether to accept your application and/or whether to allot any New Shares to you; and agree and warrant that if the laws of any jurisdictions outside Singapore are applicable to your application, you have complied with all such laws and none of our Company, the Manager, the Underwriter and/or the Placement Agent will infringe any such laws as a result of the acceptance of your application.

12.

13.

14.

15.

(b)

(c)

(d)

(e)

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APPENDIX J TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION AND ACCEPTANCE


16. Our acceptance of applications will be conditional upon, inter alia, our Company being satisfied that:(a) permission has been granted by the SGX-ST to deal in and for quotation for all our existing Shares and the New Shares on a when issued basis on the Catalist; the Management and Underwriting Agreement and the Placement Agreement referred to in the section entitled Management, Underwriting and Placement Arrangements of this Prospectus have become unconditional and have not been terminated or cancelled prior to such date as our Company may determine; and the Authority has not served a stop order which directs that no further shares to which this Prospectus relates be allotted.

(b)

(c)

17. 18.

Our Company will not hold any applications in reserve. Our Company will not allot Shares on the basis of this Prospectus later than six months after the date of this Prospectus. Additional terms and conditions for applications by way of Application Forms are set out on pages J-5 to J-8 of this Prospectus. Additional terms and conditions for applications by way of Electronic Applications are set out on pages J-8 to J-15 of this Prospectus.

19.

20.

ADDITIONAL TERMS AND CONDITIONS FOR APPLICATIONS USING PRINTED APPLICATION FORMS Your application by way of Application Forms shall be made on the terms and subject to the conditions of this Prospectus including but not limited to the terms and conditions appearing below and those set out on pages J-1 to J-4 of this Prospectus, as well as the Memorandum of Association and Articles of our Company. 1. Your application must be made using the WHITE Application Forms for Offer Shares and the BLUE Application Forms for Placement Shares (other than Reserved Shares) or PINK Reserved Shares Application Forms accompanying and forming part of this Prospectus. Our Company draws your attention to the detailed instructions contained in the respective Application Forms and this Prospectus for the completion of the Application Forms which must be carefully followed. Our Company reserves the right to reject applications which do not conform strictly to the instructions set out in the Application Forms and this Prospectus or to the terms and conditions of this Prospectus or which are illegible, incomplete, incorrectly completed or which are accompanied by improperly drawn remittances or improper form of remittances. Your Application Forms must be completed in English. Please type or write clearly in ink using BLOCK LETTERS. All spaces in the Application Forms except those under the heading FOR OFFICIAL USE ONLY must be completed and the words NOT APPLICABLE or N.A. should be written in any space that is not applicable.

2.

3.

J-4

APPENDIX J TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION AND ACCEPTANCE


4. Individuals, corporations, approved nominee companies and trustees must give their names in full. You must make your application, in the case of individuals, in your full names appearing in your identity cards (if applicants have such identification documents) or in your passports and, in the case of corporations, in your full names as registered with a competent authority. If you are a nonindividual completing the Application Form under the hand of an official, you must state the name and capacity in which that official signs. If you are a corporation completing the Application Form, you are required to affix your Common Seal (if any) in accordance with your Memorandum and Articles of Association or equivalent constitutive documents. If you are a corporate applicant and your application is successful, a copy of your Memorandum and Articles of Association or equivalent constitutive documents must be lodged with the Share Registrar. Our Company reserves the right to require you to produce documentary proof of identification for verification purposes. (a) (b) You must complete Sections A and B and sign page 1 of the Application Form. You are required to delete either paragraph 7(a) or 7(b) on page 1 of the Application Form. Where paragraph 7(a) is deleted, you must also complete Section C of the Application Form with particulars of the beneficial owner(s). If you fail to make the required declaration in paragraph 7(a) or 7(b), as the case may be, on page 1 of the Application Form, your application is liable to be rejected.

5.

(c)

6.

You (whether you are an individual and corporate applicant, whether incorporated or unincorporated and wherever incorporated or constituted), will be required to declare whether you are a citizen or permanent resident of Singapore or a corporation in which citizens or permanent residents of Singapore or any body corporate constituted under any statute of Singapore have an interest in the aggregate of more than 50 per cent. of the issued share capital of or interests in such corporations. If you are an approved nominee company, you are required to declare whether the beneficial owner of the New Shares is a citizen or permanent resident of Singapore or a corporation, whether incorporated or unincorporated and wherever incorporated or constituted, in which citizens or permanent residents of Singapore or any body corporate whether incorporated or unincorporated and wherever incorporated or constituted under any statute of Singapore have an interest in the aggregate of more than 50 per cent. of the issued share capital of or interests in such corporation. Your application must be accompanied by a remittance in Singapore currency for the full amount payable, in respect of the number of New Shares applied for, in the form of a BANKERS DRAFT or CASHIERS ORDER drawn on a bank in Singapore, made out in favour of OLD CHANG KEE SHARE ISSUE ACCOUNT crossed A/C PAYEE ONLY, with your name and address written clearly on the reverse side. Our Company will not accept applications accompanied by ANY OTHER FORM OF PAYMENT. Our Company will reject remittances bearing NOT TRANSFERABLE or NON TRANSFERABLE crossings. No acknowledgement or receipt will be issued for any application or remittance received. Unsuccessful applications are expected to be returned (without interest or any share of revenue or other benefit arising therefrom) to you by ordinary post within 24 hours of the balloting after the close of the Application List at your own risk. Where your application is accepted in part only, the balance of the application monies will be refunded (without interest or any share of revenue or other benefit arising therefrom) to you by ordinary post at your own risk in the shortest possible time. Capitalised terms used in the Application Forms and defined in this Prospectus shall bear the meanings assigned to them in this Prospectus.

7.

8.

9.

J-5

APPENDIX J TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION AND ACCEPTANCE


10. By completing and delivering the Application Form in accordance with the provisions of this Prospectus, you agree that:(a) in consideration of us having distributed the Application Form to you and agreeing to close the Application List at 12.00 noon on 14 January 2008 or such other time or date as our Company may, in consultation with the Manager, in their absolute discretion decide, subject to any limitations under all applicable laws and by completing and delivering the Application Form, you agree that:(i) (ii) your application is irrevocable; and your remittance will be honoured on first presentation and that any monies returnable may be held pending clearance of your payment without interest or any share of revenue or other benefit arising therefrom;

(b)

all applications, acceptances and contracts resulting therefrom under the Invitation shall be governed by and construed in accordance with the laws of Singapore and that you irrevocably submit to the non-exclusive jurisdiction of the Singapore courts; in respect of the New Shares for which your application has been received and not rejected, acceptance of your application shall be constituted by written notification and not otherwise, notwithstanding any remittance being presented for payment by or on our behalf; you will not be entitled to exercise any remedy of rescission for misrepresentation at any time after acceptance of your application; and in making your application, reliance is placed solely on the information contained in this Prospectus and none of our Company, the Manager, the Underwriter, the Placement Agent or any other person involved in the Invitation shall have any liability for any information not so contained.

(c)

(d)

(e)

Applications for Offer Shares 1. Your applications for Offer Shares MUST be made using the WHITE Offer Shares Application Forms and WHITE official envelopes A and B. ONLY ONE APPLICATION should be enclosed in each envelope. You must:(a) enclose the WHITE Offer Shares Application Form, duly completed and signed, together with your remittance in the WHITE envelope A provided; in the appropriate spaces on WHITE envelope A:(i) (ii) (iii) (c) write your name and address; state the number of Offer Shares applied for; and affix adequate Singapore postage;

2.

(b)

seal WHITE envelope A; and

J-6

APPENDIX J TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION AND ACCEPTANCE


(d) write, in the appropriate box provided on the larger WHITE envelope B, the number of Offer Shares you have applied for; and insert WHITE envelope A into WHITE envelope B, seal WHITE envelope B and thereafter DESPATCH BY ORDINARY POST OR DELIVER BY HAND at your own risk to Boardroom Corporate & Advisory Services Pte Ltd, 3 Church Street, #08-01 Samsung Hub, Singapore 049483, so as to arrive by 12.00 noon on 14 January 2008 or such other time as our Company may, in consultation with the Manager, in their absolute discretion decide, subject to any limitations under all applicable laws. Local Urgent Mail or Registered Post must NOT be used. No acknowledgement or receipt will be issued for any application or remittance received.

3.

Applications that are illegible, incomplete or incorrectly completed or accompanied by improperly drawn remittances are liable to be rejected.

Applications for Placement Shares (other than Reserved Shares) 1. Your application for Placement Shares (other than Reserved Shares) MUST be made using the BLUE Placement Shares Application Forms. ONLY ONE APPLICATION should be enclosed in each envelope. The completed and signed BLUE Placement Shares Application Form and your remittance, in accordance with the terms and conditions of this Prospectus, for the full amount payable in respect of the number of Placement Shares applied for, with your name and address written clearly on the reverse side, must be enclosed and sealed in an envelope to be provided by you. You must affix adequate Singapore postage on the envelope (if despatching by ordinary post) and thereafter the sealed envelope must be DESPATCHED BY ORDINARY POST OR DELIVERED BY HAND at your own risk to Boardroom Corporate & Advisory Services Pte Ltd, 3 Church Street, #08-01 Samsung Hub, Singapore 049483, to arrive by 12.00 noon on 14 January 2008 or such other time as our Company may, in consultation with the Manager, in their absolute discretion decide, subject to any limitations under all applicable laws. Local Urgent Mail or Registered Post must NOT be used. No acknowledgement or receipt will be issued for any application or remittance received. Alternatively, you may remit your application monies by electronic transfer to the account of Oversea-Chinese Banking Corporation Limited, account number 581-385440-001, in favour of OLD CHANG KEE SHARE ISSUE ACCOUNT for the number of Placement Shares applied for by 12.00 noon on 14 January 2008 or such other time as our Company may, in consultation with the Manager, in their absolute discretion decide, subject to any limitations under all applicable laws. If you remit your application monies via electronic transfer, you should fax and send a copy of the remittance advice to Westcomb Securities Pte Ltd at fax number 6220 6632 to arrive by 12.00 noon on 14 January 2008 or such other time as our Company may, in consultation with the Manager, in their absolute discretion decide, subject to any limitations under all applicable laws.

2.

3.

Applications For Reserved Shares 1. Your application for Reserved Shares MUST be made using the PINK Reserved Shares Application Forms. ONLY ONE APPLICATION should be enclosed in each envelope. The completed PINK Reserved Shares Application Form and the correct remittance (in accordance with the terms and conditions of this Prospectus) with your name and address written clearly on the reverse side, must be enclosed and sealed in an envelope to be provided by you. The sealed envelope must be DESPATCHED BY ORDINARY POST OR DELIVERED BY HAND at your own risk to Boardroom Corporate & Advisory Services Pte Ltd, 3 Church Street, #08-

2.

J-7

APPENDIX J TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION AND ACCEPTANCE


01 Samsung Hub, Singapore 049483, to arrive by 12.00 noon on 14 January 2008 or such other time as our Company may, in consultation with the Manager, in their absolute discretion decide, subject to any limitations under all applicable laws. Local Urgent Mail or Registered Post must NOT be used. No acknowledgement or receipt will be issued for any application or remittance received. 3. Applications that are illegible, incomplete or incorrectly completed or accompanied by improperly drawn remittances or improper form of remittances which are not honoured upon their first presentation are liable to be rejected

ADDITIONAL TERMS AND CONDITIONS FOR ELECTRONIC APPLICATIONS The procedures for Electronic Applications at ATMs are set out on the ATM screens (in the case of ATM Applications) and the IB website screens (in the case of IB Applications) of the relevant Participating Banks. Currently, DBS Bank and the UOB Group are the only Participating Banks through which an IB Application can be made on the respective IB websites of DBS Bank and the UOB Group. For illustration purposes, the procedures for Electronic Applications through ATMs and the IB website of DBS Bank are set out respectively in the Steps for ATM Applications through ATMs of DBS Bank and the Steps for IB Applications through the IB website of DBS Bank (the Steps) of this Prospectus. The Steps set out the actions that you must take at an ATM or the IB website of DBS Bank to complete an Electronic Application. Please read carefully the terms of this Prospectus, the Steps and the terms and conditions for Electronic Applications set out below before making an Electronic Application. Any reference to you in the additional terms and conditions for Electronic Applications and the Steps shall refer to you making an application for Offer Shares through an ATM or the IB website of a relevant Participating Bank. To make an ATM Application:(a) You must have an existing bank account with and be an ATM cardholder of one of the Participating Banks before you can make an Electronic Application at the ATMs. An ATM card issued by one Participating Bank cannot be used to apply for Offer Shares at an ATM belonging to other Participating Banks. Upon the completion of your ATM Application transaction, you will receive an ATM transaction slip (Transaction Record), confirming the details of your ATM Application. The Transaction Record is for your retention and should not be submitted with any Application Form. You must ensure that you enter your own Securities Account number when using the ATM card issued to you in your own name. If you operate a joint bank account with any of the Participating Banks, you must ensure that you enter your own Securities Account number when using the ATM card issued to you in your own name. Using your own Securities Account number with an ATM card which is not issued to you in your own name will render your Electronic Application liable to be rejected.

(b)

To make an IB Application, you must have an existing bank account with and an IB User Identification (User ID) and a Personal Identification Number/Password given by the relevant Participating Bank. Upon completion of your IB Application, there will be an on-screen confirmation (Confirmation Screen) of the application which you can print out for your record. This printed record of the Confirmation Screen is for your retention and should not be submitted with any Application Form.

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APPENDIX J TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION AND ACCEPTANCE


Further, you must ensure, when making an IB Application that:(a) (b) (c) you are currently in Singapore at the time of making of such application; your mailing address for IB with the relevant Participating Bank is in Singapore; you are not a US person(1) (as such term is defined in Regulation S under the United States Securities Act of 1933, as amended from time to time),

and you will be asked to declare the above accordingly. Otherwise, your application is liable to be rejected.
Note:(1) For details, please refer to definition of US person on the IB websites

Your Electronic Application shall be made on the terms and subject to the conditions of this Prospectus including but not limited to the terms and conditions appearing below and those set out on pages J-1 to J-8 of this Prospectus as well as the Memorandum of Association and Articles of our Company. 1. In connection with your Electronic Application for New Shares, you may be required to confirm statements to the following effect in the course of activating the Electronic Application:(a) that you have received a copy of this Prospectus and have read, understood and agreed to all the terms and conditions of application for New Shares and this Prospectus prior to effecting the Electronic Application and agreed to be bound by the same; that you consent to the disclosure of your name, NRIC/passport number, address, nationality, permanent resident status, CDP Securities Account number, and share application amount (the Relevant Particulars) from your account with that Participating Bank to the Share Registrar, CDP, SCCS, our Company, the Manager, the Underwriter and the Placement Agent (the Relevant Parties); and that this is your only application and it is made in your own name and at your own risk.

(b)

(c)

Your application will not be successfully completed and cannot be recorded as a completed transaction in the ATM unless you press the Enter or OK or Confirm or Yes key. By doing so, you shall be treated as signifying your confirmation of each of the above three statements. In respect of statement 1(b) above, your confirmation, by pressing the Enter or OK or Confirm or Yes key, shall signify and shall be treated as your written permission, given in accordance with the relevant laws of Singapore including Section 47(2) of the Banking Act, Chapter 19 of Singapore to the disclosure by that Participating Bank of your Relevant Particulars to the Relevant Parties. 2. BY MAKING AN ELECTRONIC APPLICATION, YOU CONFIRM THAT YOU ARE NOT APPLYING FOR NEW SHARES AS NOMINEE OF ANY OTHER PERSON AND THAT ANY ELECTRONIC APPLICATION THAT YOU MAKE IS THE ONLY APPLICATION MADE BY YOU AS BENEFICIAL OWNER. YOU SHOULD MAKE ONLY ONE ELECTRONIC APPLICATION FOR NEW SHARES AND SHOULD NOT MAKE ANY OTHER APPLICATION FOR OFFER SHARES OR PLACEMENT SHARES WHETHER AT THE ATM OR THE IB WEBSITES OF ANY PARTICIPATING BANK OR ON THE APPLICATION FORMS. IF YOU HAVE MADE AN APPLICATION FOR NEW SHARES ON AN APPLICATION FORM, YOU SHALL NOT MAKE AN ELECTRONIC APPLICATION FOR NEW SHARES AND VICE VERSA.

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APPENDIX J TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION AND ACCEPTANCE


3. For an ATM Application or IB Application, you must have sufficient funds in your bank account with your Participating Bank at the time you make your ATM Application or IB Application, failing which your ATM Application or IB Application will not be completed. Any ATM Application or IB Application which does not conform strictly to the instructions set out on the screens of the ATM or IB website through which your ATM Application or IB Application is being made shall be rejected. You irrevocably agree and undertake to subscribe for and to accept the number of New Shares applied for as stated on the Transaction Record or Confirmation Screen. You also irrevocably agree and undertake to subscribe for and to accept any lesser number of New Shares that may be allotted to you in respect of your Electronic Application. In the event that our Company decide to allot any lesser number of such New Shares or not to allot any New Shares to you, you agree to accept such decision as final. If your Electronic Application is successful, your confirmation (by your action of pressing the Enter or OK or Confirm or Yes key on the ATM, clicking Confirm or OK on the IB website screen of the number of New Shares applied for shall signify and shall be treated as your acceptance of the number of New Shares that may be allotted to you and your agreement to be bound by the Memorandum of Association and Articles of our Company. 5. Our Company will not keep any applications in reserve. Where your Electronic Application is unsuccessful, the full amount of the application monies will be refunded (without interest or any share of revenue or other benefit arising therefrom) to you by being automatically credited to your account with your Participating Bank within 24 hours after the close of the Application List. Trading on a WHEN ISSUED basis, if applicable, is expected to commence after such refund has been made. Where your Electronic Application is rejected or accepted in part only, the full amount or the balance of the application monies, as the case may be, will be refunded (without interest or any share of revenue or other benefit arising therefrom) to you by being automatically credited to your account with your Participating Bank, at your own risk, within 14 Market Days after the close of the Application List provided that the remittance in respect of such application which has been presented for payment or other processes has been honoured and the application monies received in the designated share issue account. Responsibility for timely refund of application monies arising from unsuccessful or partially successful Electronic Applications lies solely with the respective Participating Banks as the case may be. Therefore, you are strongly advised to consult your Participating Bank as to the status of your Electronic Application and/or the refund of any monies to you from unsuccessful or partially successful Electronic Application, to determine the exact number of New Shares allotted to you before trading the New Shares on the Catalist. Neither the SGX-ST, the CDP, the SCCS, the Participating Banks, our Company, the Manager, the Underwriter or the Placement Agent assume any responsibility for any loss that may be incurred as a result of you having to cover any net sell positions or from buy-in procedures activated by the SGX-ST.

4.

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APPENDIX J TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION AND ACCEPTANCE


6. If your ATM Application or IB Application is unsuccessful, no notification will be sent by such Participating Bank. You may check the results of your ATM Applications as follows:Phone banking at telephone number 1800 339 6666 (for POSB account holders) 1800 111 1111 (for DBS account holders) OCBC OCBC Phone Banking at 1800 363 3333 UOB Phone Banking at 1800 222 2121 OCBC ATM / Internet Banking 24 hours a day Evening of the balloting day

Bank DBS Bank

Also available at DBS Bank Internet Banking at www.dbs.com

Operating hours 24 hours a day

Service expected from Evening of the balloting day

UOB Group

UOB Group ATM (Other Transactions IPO Enquiry) UOB Personal Internet Banking at www.uobgroup.com

24 hours a day

Evening of the balloting day

If you make your IB Applications through the IB website of DBS Bank or the UOB Group, you may check the result through the same channels listed in the table above in relation to ATM Applications made at ATMs of DBS Bank or the UOB Group. 7. Electronic Applications shall close at 12.00 noon on 14 January 2008 or such other time as our Company may, in consultation with the Manager, in their absolute discretion decide, subject to any limitations under all applicable laws. You are deemed to have requested and authorised us to:(a) register the Offer Shares or Placement Shares, as the case may be, allotted to you in the name of CDP for deposit into your Securities Account; send the relevant Share certificate(s) to CDP; (for ATM Applications or IB Applications) return or refund (without interest or any share of revenue or other benefit arising therefrom) the application monies, should your Electronic Application be rejected, by automatically crediting your bank account with your Participating Bank with the relevant amount within twenty-four hours after the close of the Application List; and (for ATM Applications or IB Applications) return or refund (without interest or any share of revenue or other benefit arising therefrom) the balance of the application monies, should your Electronic Application be accepted in part only, by automatically crediting your bank account with your Participating Bank with the relevant amount within the shortest possible time after the close of the Application List

8.

(b) (c)

(d)

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APPENDIX J TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION AND ACCEPTANCE


9. You irrevocably agree and acknowledge that your Electronic Application is subject to risks of electrical, electronic, technical and computer-related faults and breakdowns, fires, acts of God and other events beyond the control of the Participating Banks and if, in any such event, our Company, the Manager, the Underwriter, the Placement Agent, the relevant Participating Bank do not receive your Electronic Application, or data relating to your Electronic Application is lost, corrupted or not otherwise accessible, whether wholly or partially for whatever reason, you shall be deemed not to have made an Electronic Application and you shall have no claim whatsoever against our Company, the Manager, the relevant Participating Bank for New Shares applied for or for any compensation, loss or damage. Our Company does not recognise the existence of a trust. Any Electronic Application by a trustee must be made in your own name and without qualification. Our Company will reject any application by any person acting as nominee. All your particulars in the records of your Participating Bank at the time you make your Electronic Application shall be deemed to be true and correct and your Participating Bank and the Relevant Parties shall be entitled to rely on the accuracy thereof. If there has been any change in your particulars after making your Electronic Application, you shall promptly notify your Participating Bank, as the case may be. You should ensure that your personal particulars as recorded by both CDP, the relevant Participating Bank are correct and identical, otherwise, your Electronic Application is liable to be rejected. You should promptly inform CDP of any change in address, failing which the notification letter on successful allotment will be sent to your address last registered with CDP. By making and completing an Electronic Application, you are deemed to have agreed that:(a) in consideration of our Company making available the Electronic Application facility, through the Participating Banks acting as agents of our Company, at the ATMs and the IB websites:(i) (ii) your Electronic Application is irrevocable; and your Electronic Application, the acceptance of our Company and the contract resulting therefrom under the Invitation shall be governed by and construed in accordance with the laws of Singapore and you irrevocably submit to the non-exclusive jurisdiction of the Singapore courts;

10.

11.

12.

13.

(b)

none of our Company, the Manager, the Underwriter, the Placement Agent or the Participating Banks shall be liable for any delays, failures or inaccuracies in the recording, storage or in the transmission or delivery of data relating to your Electronic Application to us or CDP due to breakdowns or failure of transmission, delivery or communication facilities or any risks referred to in paragraph 9 above or to any cause beyond their respective controls; in respect of Offer Shares for which your Electronic Application has been successfully completed and not rejected, acceptance of your Electronic Application shall be constituted by written notification by or on behalf of our Company and not otherwise, notwithstanding any payment received by or on behalf of our Company; you will not be entitled to exercise any remedy of rescission for misrepresentation at any time after acceptance of your application; and reliance is placed solely on information contained in this Prospectus and that none of our Company, the Manager, the Placement Agent and the Underwriter for the Public Offer nor any other person involved in the Invitation shall have any liability for any information not so contained.

(c)

(d)

(e)

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APPENDIX J TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION AND ACCEPTANCE


Steps for ATM Applications through ATMs of DBS Bank Instructions for ATM Applications will appear on the ATM screens of the Participating Banks. For illustration purposes, the steps for making an ATM Application through an ATM of DBS Bank are shown below. Certain words appearing on the screen are in abbreviated form (A/c, amt, appln, &, I/C, SGX, No. and Max refer to Account, amount, application, and, NRIC, SGX-ST, Number and Maximum, respectively. Instructions for ATM Applications on the ATM screens of Participating Banks (other than DBS Bank) may differ slightly from those represented below. Step 1 2 3 4 5 6 7 : : : : : : : Insert your personal DBS Bank ATM Card. Enter your Personal Identification Number. Select CASHCARD & MORE SERVICES. Select language (for customer using multi-language card). Select ESA-IPO SHARE/INVESTMENTS. Select ELECTRONIC SECURITY APPLICATION (IPOS/BONDS/ST-NOTES). Read and understand the following statements which will appear on the screen:THE OFFER OF SECURITIES (OR UNITS OF SECURITIES) WILL BE MADE IN, OR ACCOMPANIED BY, A COPY OF THE PROSPECTUS/DOCUMENT OR PROFILE STATEMENT (AND IF APPLICABLE, A COPY OF THE REPLACEMENT OR SUPPLEMENTARY PROSPECTUS/DOCUMENT OR PROFILE STATEMENT) WHICH CAN BE OBTAINED FROM ANY DBS/POSB BRANCH IN SINGAPORE AND, WHERE APPLICABLE, THE VARIOUS PARTICIPATING BANKS DURING BANKING HOURS, SUBJECT TO AVAILABILITY. IN THE CASE OF SECURITIES OFFERING THAT IS SUBJECT TO A PROSPECTUS / OFFER INFORMATION STATEMENT / DOCUMENT REGISTERED WITH THE AUTHORITY, ANYONE WISHING TO ACQUIRE THESE SECURITIES (OR UNITS OF SECURITIES) SHOULD READ THE PROSPECTUS/DOCUMENT OR PROFILE STATEMENT (AS SUPPLEMENTED OR REPLACED, IF APPLICABLE) BEFORE SUBMITTING HIS APPLICATION WHICH WILL NEED TO BE MADE IN THE MANNER SET OUT IN THE PROSPECTUS/DOCUMENT OR PROFILE STATEMENT (AS SUPPLEMENTED OR REPLACED, IF APPLICABLE). A COPY OF THE PROSPECTUS/DOCUMENT OR PROFILE STATEMENT, AND IF APPLICABLE, A COPY OF THE REPLACEMENT OR SUPPLEMENTARY PROSPECTUS/DOCUMENT OR PROFILE STATEMENT HAS BEEN LODGED WITH AND REGISTERED BY THE MONETARY AUTHORITY OF SINGAPORE WHO ASSUMES NO RESPONSIBILITY FOR ITS OR THEIR CONTENTS. Press the Enter key to confirm that you have read and understood. 8 9 : : Select OCK to display details. Press the ENTER key to acknowledge:YOU HAVE READ, UNDERSTOOD AND AGREED TO ALL TERMS OF THE APPLICATION AND PROSPECTUS/DOCUMENT OR PROFILE STATEMENT, AND IF APPLICABLE, THE REPLACEMENT OR SUPPLEMENTARY PROSPECTUS/DOCUMENT OR PROFILE STATEMENT.

J-13

APPENDIX J TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION AND ACCEPTANCE


YOU CONSENT TO DISCLOSE YOUR NAME, NRIC/PASSPORT NO., ADDRESS, NATIONALITY, CDP SECURITIES A/C NO., CPF INVESTMENT A/C NO. AND SECURITY APPLICATION AMOUNT FROM YOUR BANK ACCOUNT(S) TO SHARE REGISTRARS, SGX, SCCS, CDP, CPF AND THE ISSUER/VENDOR(S). FOR FIXED AND MAX PRICE SECURITY APPLICATION, THIS IS YOUR ONLY APPLICATION AND IT IS MADE IN YOUR OWN NAME AND AT YOUR OWN RISK. THE MAXIMUM PRICE FOR EACH SHARE IS PAYABLE IN FULL ON APPLICATION AND SUBJECT TO REFUND IF THE FINAL PRICE IS LOWER. FOR TENDER SECURITY APPLICATIONS, THIS IS YOUR ONLY APPLICATION AT THE SELECTED TENDER PRICE AND IT IS MADE IN YOUR OWN NAME AND AT YOUR OWN RISK. YOU ARE NOT A US PERSON AS REFERRED TO IN THE PROSPECTUS/DOCUMENT OR PROFILE STATEMENT AND IF APPLICABLE, THE REPLACEMENT OR SUPPLEMENTARY PROSPECTUS/DOCUMENT OR PROFILE STATEMENT. 10 11 : : Select your nationality. Select the DBS Bank account (Autosave/Current/Savings/Savings Plus) or the POSB account (current/savings) from which to debit your application monies. Enter the number of securities you wish to apply for using cash. Enter your own 12-digit CDP Securities Account number. (Note:- This step will be omitted automatically if your CDP Securities Account number has already been stored in DBS Banks records). Check the details of your securities application, your NRIC or passport number and CDP Securities Account number and number of securities on the screen and press the ENTER key to confirm your application. Remove the Transaction Record for your reference and retention only.

12 13

: :

14

15

Steps for IB Applications through the IB website of DBS Bank For illustrative purposes, the steps for making an IB Application through the DBS Bank IB website are shown below. Certain words appearing on the screen are in abbreviated form (A/c, amt, &, I/C, SGX and No. refer to Account, Amount, and, NRIC, SGX-ST, and Number respectively). Step 1 2 3 4 5 : : : : : Click on to DBS Bank website (www.dbs.com). Login to Internet Banking. Enter your User ID and PIN. Select Electronic Security Application (ESA). Click Yes to proceed and to warrant that you have observed and complied with all applicable laws and regulations. Select your country of residence and click confirm.

J-14

APPENDIX J TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION AND ACCEPTANCE


7 8 : : Click on OCK and click the Submit button. Click Confirm to confirm:YOU HAVE READ, UNDERSTOOD AND AGREED TO ALL TERMS OF APPLICATION AND THE PROSPECTUS OR PROFILE STATEMENT AND IF APPLICABLE, THE SUPPLEMENTARY OR REPLACEMENT PROSPECTUS/DOCUMENT OR PROFILE STATEMENT. YOU CONSENT TO DISCLOSE YOUR NAME, I/C OR PASSPORT NO., ADDRESS, NATIONALITY, CDP SECURITIES ACCOUNT NUMBER, CPF INVESTMENT ACCOUNT NUMBER (IF APPLICABLE) AND SECURITIES APPLICATION AMOUNT FROM YOUR DBS/POSB ACCOUNT(S) TO REGISTRARS OF SECURITIES, SGX, SCCS, CDP, CPF BOARD AND ISSUER/VENDOR(S). YOU ARE NOT A US PERSON (AS SUCH TERM IS DEFINED IN REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED). YOU UNDERSTAND THAT THE SECURITIES MENTIONED HEREIN HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE US SECURITIES ACT OF 1933 AS AMENDED (THE US SECURITIES ACT) OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF ANY US PERSON (AS DEFINED IN REGULATION S UNDER THE US SECURITIES ACT) EXCEPT PURSUANT TO AN EXEMPTION FROM OR IN A TRANSACTION SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE US SECURITIES ACT AND APPLICABLE STATE SECURITY LAWS. THERE WILL BE NO PUBLIC OFFER OF THE SECURITIES MENTIONED HEREIN IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF THE UNITED STATES SECURITIES LAWS. THIS APPLICATION IS MADE IN YOUR NAME AND AT YOUR OWN RISK. FOR FIXED/MAX PRICE SECURITY APPLICATION, THIS IS YOUR ONLY APPLICATION. FOR TENDER PRICE SECURITY APPLICATION, THIS IS YOUR ONLY APPLICATION AT THE SELECTED TENDER PRICE. 9 10 : : Fill in details for security application and click Submit. Check the details of your share application, your NRIC or passport number and click OK to confirm your application. Print Confirmation Screen (optional) for your reference & retention only.

11

J-15

APPENDIX K REPORT FROM THE AUDITORS AND THE UNAUDITED PROFORMA COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006 AND THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007

Report on Unaudited Proforma Combined Financial Statements

OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES


For the financial year ended 31 December 2006 and the six month period ended 30 June 2007

K-1

APPENDIX K REPORT FROM THE AUDITORS AND THE UNAUDITED PROFORMA COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006 AND THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Report on Unaudited Proforma Combined Financial Statements for the financial year ended 31 December 2006 and the six month period ended 30 June 2007

4 January 2008 The Board of Directors Old Chang Kee Ltd. 2 Woodlands Terrace Singapore 738427

Dear Sirs: We report on the unaudited proforma combined financial statements of Old Chang Kee Ltd. (the Company) and its subsidiary companies (collectively, the Group) set out on pages K-4 to K-11, which have been prepared for illustrative purposes only and based on certain assumptions and after making certain adjustments to show what: (a) the financial results, changes in equity and cash flows of the Group for the financial year ended 31 December 2006 and the six month period ended 30 June 2007 would have been if the significant event as stated in Note 2 to the unaudited proforma financial information had occurred since 1 January 2006. the financial positions of the Group as of the balance sheets as at 31 December 2006 and 30 June 2007 would have been if the significant event had occurred on those dates.

(b)

The unaudited proforma combined financial statements, because of their nature, may not give a true picture of the Groups actual financial positions, financial results, changes in equity and cash flows. The unaudited proforma combined financial statements are the responsibility of the Directors of the Company. Our responsibility is to express an opinion on the unaudited proforma combined financial statements based on our work. We carried out our procedures in accordance with Singapore Statement of Auditing Practice: SAP 24 Auditors and Public Offering Documents. Our work, which involved no independent examination of the underlying financial statements, consisted primarily of comparing the unaudited proforma combined financial statements to the audited/reviewed combined financial statements of the Group, considering the evidence supporting the adjustments and discussing the unaudited proforma combined financial statements with the Directors of the Company.

K-2

APPENDIX K REPORT FROM THE AUDITORS AND THE UNAUDITED PROFORMA COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006 AND THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Report on Unaudited Proforma Combined Financial Statements for the financial year ended 31 December 2006 and the six month period ended 30 June 2007 (contd)

In our opinion: (a) the unaudited proforma combined financial statements have been properly prepared: (i) in a manner consistent with the format of the combined financial statements and the accounting policies of the Group which are prepared in accordance with Singapore Financial Reporting Standards; and on the bases as set out in Note 3, to the unaudited proforma combined financial statements.

(ii) (b)

each material adjustment made to the information used in the preparation of the unaudited proforma combined financial statements is appropriate for the purpose of preparing such financial statements.

Yours faithfully,

ERNST & YOUNG Certified Public Accountants Singapore Max Loh Khum Whai Partner-in-Charge

K-3

APPENDIX K REPORT FROM THE AUDITORS AND THE UNAUDITED PROFORMA COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006 AND THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Unaudited Proforma Combined Profit and Loss Accounts For the financial year ended 31 December 2006 and the six month period ended 30 June 2007

Year ended 31 December 2006 S$000 Revenue Cost of sales Gross profit Other operating income Selling and distribution expenses Administrative expenses Other operating expenses Finance costs Share of results of associated companies Profit before taxation Taxation Net profit attributable to shareholders Basic and fully diluted earnings per share
(2)

Six month period ended 30 June 2007 S$000 19,039 (7,919) 11,120 285 (6,802) (2,201) (492) (24) 1,886 (394) 1,492 2.18

33,784 (14,076) 19,708 299 (11,475) (4,128) (788) (60) (27) 3,529 (1,111) 2,418 (cents) 3.54

Note (1) The financial results of the Proforma Group have been prepared on the basis that the Proforma Group has been in existence throughout the year/period. For comparative purposes, earnings per share (EPS) have been computed based on the profit attributable to equity holders of the Proforma Group divided by the pre-invitation share capital of 68,400,000 shares for the financial year ended 31 December 2006 and the six month period ended 30 June 2007.

(2)

The accompanying accounting policies and explanatory notes form an integral part of the unaudited proforma combined financial statements.

K-4

APPENDIX K REPORT FROM THE AUDITORS AND THE UNAUDITED PROFORMA COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006 AND THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Unaudited Proforma Combined Balance Sheets As at 31 December 2006 and 30 June 2007

As at 31 December 2006 S$000 Non-current assets Property, plant and equipment Intangible assets Investment in associated companies Amount due from associated companies 11,530 352 16 57 11,955 Current assets Inventories Trade and other receivables Deposits Prepayments Amount due from associated companies Cash and cash equivalents 446 83 1,393 149 15 3,134 5,220 Current liabilities Trade and other payables Other liabilities Bank overdrafts Amount due to a related party Finance lease liabilities Club membership payable current Provision for taxation 5,881 180 173 2 372 15 900 7,523 Net Current Liabilities Non-Current Liabilities Finance lease liabilities Other liabilities Club membership payable long term Deferred tax liabilities 962 20 576 1,558 Net Assets Proforma shareholders equity 8,094 8,094 (2,303)

As at 30 June 2007 S$000

10,772 304 17 86 11,179

526 171 1,553 665 22 3,362 6,299

5,167 203 140 351 15 818 6,694 (395)

685 22 13 657 1,377 9,407 9,407

The accompanying accounting policies and explanatory notes form an integral part of the unaudited proforma combined financial statements.

K-5

APPENDIX K REPORT FROM THE AUDITORS AND THE UNAUDITED PROFORMA COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006 AND THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Proforma Combined Cash Flow Statements
Year ended 31 December 2006 S$000 Cash flows from operating activities Profit before taxation Adjustments for: Amortisation of intangible assets Bad debts written off Loan to a related party Currency realignment Depreciation of property, plant and equipment Gain on disposal of property, plant and equipment Gain on disposal of quoted investment Impairment on loss on investment in associated company Interest expense Interest income Provision for reimbursement of start-up costs for an associated company in Chengdu Share of results of associated companies Operating profit before changes in working capital (Increase)/decrease in trade and other receivables Increase in inventories Increase/(decrease) in trade and other payables Decrease in amount due from a Director-related company Increase in amount due from associated company Increase/(decrease) in amount due to a related party Cash generated from operations Tax paid Net cash generated from operating activities Cash flows from investing activities Increase in share application money Interest received Investment in associated companies Purchase of property, plant and equipment Purchase of intangible asset Proceeds from disposal of property, plant and equipment Payment for club membership Proceeds from disposal of quoted investment Advance to associated companies Net cash flows used in investing activities Cash flows from financing activities Interest paid Increase in other liabilities Repayment of finance lease liabilities Dividends paid on ordinary shares Net cash flows used in financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year/period Cash and cash equivalents at end of year/period 3,529 112 77 1 1,999 (171) (7) 66 60 (139) 76 27 5,630 (430) (96) 2,972 10 (15) 2 8,073 (903) 7,170 100 137 (110) (6,400) (60) 365 (16) 107 (57) (5,934) (42) (338) (2,495) (2,875) (1,639) 4,600 2,961 Six month period ended 30 June 2007 S$000 1,886 38 (1) 884 (148) 24 (35) 2,648 506 (80) (691) (7) (2) 2,374 (395) 1,979 36 (5,052) (3) 204 (7) (29) (4,851) (22) 22 (298) (298) (3,170) 6,392 3,222

The accompanying accounting policies and explanatory notes form an integral part of the unaudited proforma combined financial statements.

K-6

APPENDIX K REPORT FROM THE AUDITORS AND THE UNAUDITED PROFORMA COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006 AND THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Statement of Adjustments for the Unaudited Proforma Combined Financial Statements of the Group

Proforma Combined Profit and Loss Account


Unaudited Proforma Combined Financial Statements Year ended 31 December 2006 S$000 33,784 (249) (14,076) 19,708 299 (414) (11,475) (4,128) 60 (18) (788) (60) (27) 3,529 (1,111) 2,418

Audited Combined Financial Statements Year ended 31 December 2006 S$000 Revenue Cost of sales Gross profit Other operating income Selling and distribution expenses Administrative expenses Other operating expenses Finance costs Share of results of associated company Profit before taxation Taxation Net profit attributable to shareholders 33,784 (13,827) 19,957 299 (11,061) (4,128) (848) (42) (27) 4,150 (1,111) 3,039

Proforma adjustments S$000

K-7

APPENDIX K REPORT FROM THE AUDITORS AND THE UNAUDITED PROFORMA COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006 AND THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Statement of Adjustments for the Unaudited Proforma Combined Financial Statements of the Group

Proforma Combined Profit and Loss Account


Unaudited Proforma Combined Financial Statements Six month period ended 30 June 2007 S$000 19,039 (1) (7,919) 11,120 285 (145) (6,802) (2,201) 20 (2) (492) (24) 1,886 (394) 1,492

Unaudited Combined Financial Statements Six month period ended 30 June 2007 S$000 Revenue Cost of sales Gross profit Other operating income Selling and distribution expenses Administrative expenses Other operating expenses Finance costs Profit before taxation Taxation Net profit attributable to shareholders 19,039 (7,918) 11,121 285 (6,657) (2,201) (512) (22) 2,014 (394) 1,620

Proforma adjustments S$000

K-8

APPENDIX K REPORT FROM THE AUDITORS AND THE UNAUDITED PROFORMA COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006 AND THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Statement of Adjustments for the Unaudited Proforma Combined Financial Statements of the Group

Proforma Combined Balance Sheet


Audited Combined Financial Statements As at 31 December 2006 S$000 Non-current assets Property, plant and equipment Intangible assets Investment in associated companies Amount due from associated companies Unaudited Proforma Combined Financial Statements As at 31 December 2006 S$000

Proforma adjustments S$000

5,881 339 16 57 6,293

5,649 13

11,530 352 16 57 11,955

Current assets Inventories Trade and other receivables Deposits Prepayments Amount due from associated companies Cash and cash equivalents

446 1,354 1,393 149 15 6,565 9,922

(1,271)

(3,431)

446 83 1,393 149 15 3,134 5,220

Current liabilities Trade and other payables Other liabilities Bank overdrafts Amount due to a related party Finance lease liabilities Club membership payable current Provision for taxation

5,881 180 173 2 344 15 900 7,495

28

5,881 180 173 2 372 15 900 7,523 (2,303)

Net Current Assets/(Liabilities) Non-Current Liabilities Finance lease liabilities Club membership payable long term Deferred tax liabilities

2,427

485 20 576 1,081

477

962 20 576 1,558 8,094 8,094

Net Assets Proforma shareholders equity

7,639 7,639

K-9

APPENDIX K REPORT FROM THE AUDITORS AND THE UNAUDITED PROFORMA COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006 AND THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Statement of Adjustments for the Unaudited Proforma Combined Financial Statements of the Group

Proforma Combined Balance Sheet


Unaudited Combined Financial Statements As at 30 June 2007 S$000 Non-current assets Property, plant and equipment Intangible assets Investment in associated companies Amount due from associated companies 9,441 304 17 86 9,848 Current assets Inventories Trade and other receivables Deposits Prepayment Amount due from associated companies Cash and cash equivalents 526 171 1,553 665 22 4,092 7,029 Current liabilities Trade and other payables Other liabilities Bank overdrafts Finance lease liabilities Club membership payable current Provision for taxation 5,167 203 140 323 15 818 6,666 Net Current Assets/(Liabilities) Non-Current Liabilities Finance lease liabilities Other liabilities Club membership payable long term Deferred tax liabilities 401 13 657 1,071 Net Assets Proforma shareholders equity 9,140 9,140 284 22 685 22 13 657 1,377 9,407 9,407 363 5,167 203 140 351 15 818 6,694 (395) 526 171 1,553 665 22 3,362 6,299 1,331 10,772 304 17 86 11,179 Unaudited Proforma Combined Financial Statements As at 30 June 2007 S$000

Proforma adjustments S$000

(730)

28

K-10

APPENDIX K REPORT FROM THE AUDITORS AND THE UNAUDITED PROFORMA COMBINED FINANCIAL STATEMENTS OF OLD CHANG KEE LTD. AND ITS SUBSIDIARY COMPANIES FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006 AND THE FINANCIAL PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Old Chang Kee Ltd. and its Subsidiary Companies Notes to the Proforma Combined Financial Statements

1.

Significant accounting policies The proforma combined financial statements have been prepared in accordance with the accounting policies of the Proforma Group set out in Note 3 to the combined financial statements of the Group for the years ended 31 December 2004, 2005 and 2006, and Note 3 to the combined financial statements of the Group for the six month period ended 30 June 2007.

2.

Significant event Save for the following significant event relating to the acquisition of assets (the Significant Event), the Directors, as at the date of this report, are not aware of any significant acquisitions/disposals of assets, which have occurred since 31 December 2006 and any significant changes made to the capital structure of the Company subsequent to 30 June 2007. The Proforma Group acquired plant and equipment of approximately S$5.60 million since 31 December 2006 to the latest practicable date and approximately S$1.10 million since 30 June 2007 to the latest practicable date.

3.

Basis of preparation of the proforma combined financial statements The proforma combined financial statements have been prepared for illustrative purposes only. They have been prepared based on certain assumptions and after making certain adjustments to show: (i) what the financial results, changes in equity and cash flows of the Proforma Group for the financial year ended 31 December 2006 and the six month period ended 30 June 2007 would have been had the Significant Event occurred on 1 January 2006; and what the financial positions of the Proforma Group as at 31 December 2006 and 30 June 2007 would have been had the Significant Event occurred on 31 December 2006.

(ii)

Based on the assumptions discussed above, the following adjustments have been made to the combined financial statements of Old Chang Kee Ltd. and its subsidiaries in arriving at the unaudited proforma combined financial statements included herein: (i) being adjustments to effect the acquisition of plant and equipment as described in Note 2 above, taking into account the cash consideration of the acquisition and assuming that the acquisition had occurred since 1 January 2006. In the opinion of the Directors, no adjustments for additional revenue were required to be made in respect of the acquisition of the plant and equipment, as they were not available for use in the manner intended by the management during the periods presented.

The proforma combined financial statements, because of its nature, may not give a true picture of the Proforma Groups actual financial position, financial results, changes in equity and cash flows. They are not necessarily indicative of the results of the operations or the related effects on the financial positions that would have been attained had the abovementioned Significant Event occurred at the respective dates as assumed.

K-11

APPENDIX L KEY CHANGES UNDER CATALIST RULES


As announced by the SGX-ST on 26 November 2007, the SGX-SESDAQ will be replaced by a sponsorsupervised board named Catalist on 17 December 2007. As our Company will be listed after 17 December 2007, it will be listed on Catalist. The SGX-ST will publish a date (Transition Date) from which our Company and all existing SGX-SESDAQ issuers are required to comply with the listing rules of Catalist (the Catalist Rules). At least 12 months notice will be given and the SGX-ST may impose conditions. Our Company must meet the following requirements by the Transition Date:(a) (b) (c) submit an undertaking to, inter alia, comply with the Catalist Rules to the SGX-ST; comply with any conditions imposed by the SGX-ST; announce our intention to the market giving no less than one months notice, including the name of our Sponsor (as defined below) and the date from which we will comply with the Catalist Rules as agreed with the SGX-ST; and send a copy of the announcement to each Shareholder on our register at the date of the announcement.

(d)

Until the above requirements have been met, our Company must continue to comply with the SGXSESDAQ rules. Our Company may be delisted if we fail to comply with the above requirements by the Transition Date. The following key changes which affect our Company will take place with effect from the day from which we shall comply with the Catalist Rules:Existing Requirements under SGX-SESDAQ Rules 1. For two years after the listing of a company on the Official List of the SGX-SESDAQ, the company must prominently include a statement that its initial public offering was sponsored by its issue manager in all announcements made by it (on SGXNET or otherwise) and in all its information documents. A company listed on the Official List of the SGX-SESDAQ may obtain a mandate from its shareholders to enable it to issue up to 50% of its issued share capital (of which the aggregate number of shares and convertible securities issued other than on a pro-rata basis must not exceed 20% of its issued share capital). New Requirements under Catalist Rules

The SGX-ST will authorise intermediaries (Sponsors) through certain requirements. After the listing of a company on Catalist, the company must retain a Sponsor at all times. A company may be delisted if it does not have a Sponsor for more than three continuous months.

2.

A company listed on Catalist may obtain a mandate from its shareholders to enable it to issue up to 100% of its issued share capital (of which the aggregate number of shares and convertible securities issued other than on a prorata basis must not exceed 50% of its issued share capital). In the event where shareholders approval is obtained via special resolution on or after the first shareholders meeting, the aggregate number of shares and convertible securities issued other than on a pro-rata basis may be up to 100%.

L-1

APPENDIX L KEY CHANGES UNDER CATALIST RULES


3. Subject to the provisions of the Listing Manual, shareholders approval will be needed by a company listed on the Official List of the SGX-SESDAQ whenever it acquires or disposes of assets, in the event that any of the relative figures computed on the following bases (the Relative Bases) exceed 20%: (a) the net asset value of the assets to be disposed of, compared with the net asset value of the company and its subsidiaries; the net profits attributable to the assets acquired or disposed of, compared to the net profits of the company and its subsidiaries; the aggregate value of the consideration given or received by the company, compared with its market capitalisation; or the number of equity securities issued by the company as consideration for an acquisition, compared with the number of equity securities of the company previously in issue. The Sponsor will review all documents to be released by companies listed on Catalist to shareholders or to the market (including announcements, resolutions contained in notices of meetings, circulars and corporate actions) before release, to ensure that the company is in compliance with the Catalist Rules and makes proper disclosure. Subject to the provisions of the Catalist Rules, shareholders approval will be needed by a company listed on Catalist when the following takes place: (a) when the company acquires assets, in the event that any of the relative figures computed on the Relative Bases exceed 75% or where the transaction will result in a fundamental change in the companys business; or when the company disposes of assets, in the event that any of the relative figures computed on the Relative Bases exceed 50% or where the transaction will result in a fundamental change in the companys business.

(b)

(b)

(c)

(d)

4.

The SGX-ST will review circulars of companies listed on the Official List of the SGX-SESDAQ.

The Sponsor retained by us shall be responsible for advising us on all matters relating to the Catalist Rules, and shall, inter alia:(i) monitor the trading of our Shares and seek and review reasons for any unusual fluctuations in the price and volume of our Shares; advise us on the suitability of Directors arising from proposed changes to our Board; advise us on the appointment of a suitable accounting firm to meet our audit obligations; and advise us if the trading of our Shares should be halted or suspended.

(ii) (iii) (iv)

L-2

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Old Chang Kee Ltd., 2 Woodlands Terrace, Singapore 738427 Tel: (65) 6303 2400 Fax: (65) 6303 2415 Website: www.oldchangkee.com

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