Annual Report 2005 - Leeden Limited

2ACE DYNAMICS LIMITED1 Mission, Vision & Corporate Profile2 Message from Chairman & CEO4 Review of Operations8 Board of Directors & Directors’ Profile9 Key Management Profile10 Corporate Information11 Corporate Governance Report17 Report of the Directors21 Statement by Directors22 Auditors’ Report23 Consolidated Profit and Loss Account24 Balance Sheets25 Statements of Changes in Equity26 Consolidated Statement of Cash FlowsANNUAL REPORT 200528 Notes to the Financial Statements67 Shareholding Statistics69 Notice of Annual General MeetingProxy Form

1ACE DYNAMICS LIMITEDOur MissionOur main core business is to provide welding application solutions & related services to our customers.This includes the supply of welding, safety products and industrial gases.Our VisionWe aim to be the preferred Partner for welding and gas applications in the region.Corporate ProfileAce Dynamics Limited (the Group) was incorporated in 1964. Over the years the Group operates generally as a distributor of welding andsafety products and the manufacture and distribution of industrial gases through an associated company, National Industrial Gases PteLtd (NIG). NIG is a joint venture company between the Group and National Oxygen Pte Ltd, which is a subsidiary of Taiyo Nippon SansoCorporation - the largest gas company in Japan.The businesses of the Group are diversifi ed and comprise the distribution of welding and safety products including supply of industrialgases, property development and multi-media. However, since 2004 when management gained control of the Group, emphasis wasplaced on strengthening and expanding the industrial division which has been the major contributor of sales and profi ts to the Group. Thestrategic move enabled the Group to capitalize on the buoyant oil and gas and marine sectors to establish a sustainable growth path.The Group’s industrial business lies in the area of providing welding application solutions and related services to customers. This includesthe supply of welding and safety products and industrial gases. Although the Group already handles a wide range of products underestablished brands in the market place, it will continue to introduce new and innovative products to customers to strengthen its positionas a leader in the welding, safety and gas businesses.The Group’s customers include major oil and gas, construction and manufacturing companies, shipbuilding and ship repair yards, steeland industrial pipeline fabricators, renowned medical and educational institutions from across the Asean region.Today, the Group is in a leading position to assist customers with complete solutions from planning to fruition of welding works includingselection of equipments, industrial safety (personal and workplace) and environmental protection programs complete with supply andinstallation of industrial gas systems.ANNUAL REPORT 2005

2ACE DYNAMICS LIMITEDMessage fromChairman & CEODear Shareholders,On behalf of the Board of Directors, I am pleased to present this Annual Report of AceDynamics Limited for the year ended 31 December 2005. The year has been a remarkableone for the Group as it turned around to profi tability. Group’s turnover increased 84%from $39.9 million to $73.3 million and at the bottom line, profi t before tax registered$1.8 million compared to a loss of $3.6 million last year.The good performance was attributed to management’s efforts to expand the operations of the industrialdivision. The division benefi ted from management’s efforts to reposition itself in the markets where itoperates and introducing a wider range of products as well as increasing sales activities to gain marketshare. The credible performance was aided by the buoyant oil and gas and marine markets.ANNUAL REPORT 2005The Group’s industrial gas business is operated by its associated companies. As such sales are notincluded in the Group’s accounts. Contribution is refl ected in the Group’s share of profi t in associatedcompanies. The expansion into the Malaysian market has progressed smoothly and we have opened anew plant and new offi ce premises on a 2.6 acre site located in Shah Alam to house our operations inWest Malaysia. This will give the Malaysian operations a strong foundation to contribute profi ts in theyears ahead.

4ACE DYNAMICS LIMITEDReview ofOperationsOverall PerformanceDuring the year under review,the strong performance of theGroup’s industrial division helpedthe Group to make a strong turnaround to register profi t before tax of $1.8million compared to a loss of $3.7 millionin year 2004. Management’s emphasis onstrengthening and expanding the operationsof the industrial division played a key rolein the credible performance. The industrialdivision also benefi ted from management’sefforts to reposition itself in the markets andactively introduced a wider range of productsto gain market share. In addition, the divisionhas been continuously re-engineering itsprocesses to achieve better effi ciency afterthe Group’s subsidiary, American DynamicsPte Ltd received the coveted NationalModel Company award endorsed by SPRINGSingapore for work redesign.Sales TurnoverOverall, group turnover surged 84% to$73.3 million from $39.9 million in FY2004.Industrial division accounted for $47.5million or 65% of the turnover while otheroperating divisions (property and multimedia)contributed $25.8 million due mainly torecognition of revenue from the Group’stwo property projects. Gas turnover is notincluded as operations are carried out underassociated companies.ProfitabilityGross profi t increased to $15.0 millionlargely on account of higher sales by theindustrial division. Margins were dilutedwith the inclusion of property sales wheremargins are lower. However, proper controlof costs enabled profi t from operations toimprove substantially from a loss of $3.3million in FY2004 to a profi t of $3.2 million.After taking into account fi nance costs andshare of profi t in associated companies,profi t before tax amounted to $1.8 million.8073.36047.5Sales Turnover($’ in millions)4034.925.839.92020.420.4ANNUAL REPORT 200550 02003 2004 2005 2003 2004 2005 2003 2004 2005INDUSTRIAL OTHERS TOTAL

5ACE DYNAMICS LIMITEDFinance cost was higher due to higher bankborrowings to fi nance its robust industrialdivision. An impairment of $1.6 million forgoodwill was incurred following adoptionof FRS 103. Share of profi t in associatedcompanies amounted to $1.1 million.The higher provision for taxation is mainlycaused by impairment loss on goodwill whichis not tax deductible.INDUSTRIAL DIVISIONWelding SolutionsThe Group has been distributing weldingproducts to its customers for more than30 years. Since 2004, the Group has beenstrengthening and expanding its industrialdivision to provide welding applicationsolutions (including supply of welding andsafety products and industrial gases) andrelated services to its customers. Its widecustomers base include major oil and gas,construction and manufacturing companies,shipbuilding and ship repair yards, steel andindustrial pipeline fabricators, renownedmedical and educational institutions fromacross the Asean region. The provision ofvalue added services in a professional mannerhas earned the Group a high reputation in themarket place. Introduction of new productsand expansion of markets have the effect ofincreasing the Group’s market share.The Group has been the authorized agents forseveral international well-known brands such asMiller and OTC for welding equipments; Hobartfor filler metals; Flexovit for abrasives; etc.During the year, the Group successfullyintroduced fi ller metal for high strength steel;fi ller metal for submerged arc and exoticfi ller metals to its customers in Singapore,Malaysia and Batam. The sales of fi ller metalproducts contributed signifi cantly to theincrease in sales of the industrial division.Sales of abrasives including grinding wheelsand mounted point have doubled. In orderto further improve market share and toincrease its range of products, the Groupalso markets its own brands such as BluePower. In this connection, it is also investingin a manufacturing plant in Jiangyan, Chinato manufacture some of its products so asto ensure a constant source of supply atcompetitive prices.The welding products are handled byAmerican Dynamics Pte Ltd, Blue PowerCorporation Pte Ltd and Dynamic ADIndustries Sdn Bhd. They provide integratedservices to the oil & gas, shipbuilding &repair yards, and other major manufacturingindustries. Its performance has beenencouraging, contributing an estimated totalof $31.0 million in sales compared to $23.8million last year, an increase of 30%.ANNUAL REPORT 2005

6ACE DYNAMICS LIMITEDReview ofOperationsANNUAL REPORT 2005Blue Power Corporation Pte Ltd has alsoachieved signifi cant growth. Its presence inthe region has enabled it to form alliance andcollaboration with suppliers and partners tosupport customers in the mid-range industry.It will continue to explore opportunities togrow in the region.Dynamic AD Industries Sdn Bhd, our Malaysiasubsidiary, has attained its goal to establishitself as a one-stop shop to supply a fullrangeof industrial products such as weldingequipment and consumables to major sectorsof the market. The company also serves asan extension arm for American Dynamics PteLtd to tap on the potential in Malaysia as wellas to provide support to regional customers.This will bring our operation base closer toour customers so as to serve them moreeffi ciently and effectively.Safety ProductsTo provide total welding solutions, the Groupoffers a range of safety products to meetcustomers’ personal and environmental safetyneeds. Distribution of safety products used tobe part of the welding equipment operations.Recognising the good growth potential inthis area, the Group has incorporated ADSafety Pte Ltd as a separate entity. TheGroup has been the agents for Red Wingshoes for the last 25 years. Red Wing isthe leading brand in industrial shoes in theworld. The Group has also been appointedthe sole distributor for DBI-SALA, a leader inthe provision of high quality harness in July2005. It is also developing its own brand ofAces safety eyewear and face protection.As environmental safety is gaining importancein more countries, it offers a great opportunityfor rapid growth. AD Safety is the sole agentfor Nederman products in the region whichprovides environmental control solution fordust, fume, smell and noise problems atthe workplace. Another environment safetyarea is in water treatment and wastewater treatment systems and equipments.The Group recently signed a joint ventureagreement with Ion Exchange Asia Pacifi c PteLtd to cater to this section of the market.The turnover of the safety division increased

7ACE DYNAMICS LIMITEDby 11% to $9.3 million in 2005. The Groupexpects this division to continue to growrapidly with more products being added.Gas ProductsThe Group’s associated company, NationalIndustrial Gases Pte Ltd, has beenconsistently profi table. Management hasembarked on an expansion course especiallyin Malaysia. During the year, NIG IndustrialGases Sdn Bhd’s new Kuala Lumpur offi ceand factory complex at Shah Alam, Selangorwas completed to serve the customers inthe Kuala Lumpur / Klang valley region. TheGroup’s equipment and safety divisions alsomoved into the same premises for bettercontrol and easier cross-selling of productsamong the three divisions.In Batam, a new acetylene gas plant has beenconstructed and has started operations inFebruary 2006. In the past, acetylene gasare refi lled in Singapore and sent over toBatam. With the newly constructed plant,PT National Industrial Gases Indonesia willbe able to manufacture, refi ll and distributeacetylene in Batam, thereby reducingtransportation time and cost, which willresult in faster respond time to customers’needs.OTHER OPERATING DIVISIONSProperty DevelopmentDuring the year activities concentratedon the construction of La Belle, a clusterhousing project at Recreation Lane, whichwas fully sold. Construction is progressingsmoothly and is expected to obtain TOPsoon. As for the Calarasi project whichwas completed in late 2004, twenty unitsremained unsold. As sentiments in theproperty market is getting better, we hopethe unsold units can be disposed off atbetter prices. As the remaining Calarasiunits are sold progressively and the La Belleproject reaches completion, the Group shallbe able to redeem the bank loans and recoupour investments in these projects.MultimediaThe replication business was affected byhigh raw material cost due to rising oilprices. In order to reduce operating costand to tighten control, the entire multimediaoperation was moved to the Group’s ShipyardRoad premises. This will enable the divisionto better control the operation and also toservice the customers more effi ciently asits facilities and management offi ce arenow located under one roof. In addition,management has taken steps to changethe business model from pure replication toinclude content distribution so as to increaseprofi t margin.ANNUAL REPORT 2005

8Board of DirectorsACE DYNAMICS LIMITED8ACE DYNAMICS LIMITEDleft to right:Mr Hendra Harjadi, Mr Leslie Struys, Mr Loh Weng Whye, Mr Kelvin Lee, Mr Steven Tham, Mr Lim How Boon, Dr Ong Nai Pew, Mr Tony ChanDirectors’ ProfileMr Steven Tham, appointed on the Board on 30 June 2000, is the Group’s CEO and has been the Group’s Executive Chairman since27 March 2001. He was last re-elected onto the ADL Board on 23 May 2001. Mr Tham has over 28 years of working experiencein the industrial, banking, trading, retail and property industries. He holds a BBA (Hons) and M. Sc (Real Estate) degree from theUniversity of Singapore. He is also a member of the Chartered Institute of Management Accountants and the Singapore Institute ofDirectors (MSID).ANNUAL REPORT 2005Mr Lim How Boon is our Executive Director and has joined the Board since 1 February 1999. He was last re-elected onto the ADLBoard on 29 April 2005. Mr Lim is an accountant by profession and is a Fellow (FCPA) of the Institute of Certifi ed Public Accountantsof Singapore (ICPAS). He has accumulated more than 40 years of working experience covering the insurance, hotel, leisure, retail,property, building and construction industries. Mr Lim is also an active community leader and has been commended twice by theSingapore Government, having being awarded the Public Service Medal (PBM) and Public Service Star (BBM) in 1980 and 1990respectively. He is currently a member of the Singapore Institute of Directors (MSID).Mr Kelvin Lee was appointed Executive Director of the Company on 12 August 2004. He was last re-elected onto the ADL Boardon 29 April 2005. Mr Lee has more than 29 years of experience in the chemical, metallurgy, welding and industrial gases industries.He is currently appointed as a council member of the board of the Singapore Welding Society and a committee member of the AsianIndustrial Gases Association and the Industrial Gases Association of Singapore. He is also a member of the Singapore Institute ofDirectors (MSID). Mr Lee holds a Bachelor of Science degree from University of London.

9Mr Tony Chan was appointed as a Non-Executive and Independent Director on the ADL Board since 1 March 1997. He was last reelectedonto the ADL Board on 30 May 2003. He serves as the Chairman of the Audit Committee and is a member of the RemunerationCommittee and Nominating Committee. Mr Chan has over 30 years of experience in the construction and property industries both inSingapore and Malaysia. Mr Chan is a civil engineer having graduated from the Royal Melbourne Institute of Technology.Mr Leslie Struys has served on the ADL Board as a Non-Executive and Independent Director since 30 June 1993. Mr Struys wasappointed as ADL’s lead independent director on 1 January 2006. He was last re-elected onto the ADL Board on 30 April 2004. Heis currently the Chairman of both the Remuneration Committee and Nominating Committee and a member of the Audit Committee.Mr Struys graduated from the University of Malaya in 1960 with a Bachelor of Arts Degree in Economics. He also sits on the Boardof Fraser & Neave Holdings Bhd, a Malaysian company listed on the Bursa Malaysia Securities Berhad, as the Senior Independent andNon-Executive Director.Dr Ong Nai Pew was appointed on the ADL Board as a Non-Executive and Independent Director on 3 May 2004. Dr. Ong is alsoa member of the Audit Committee. He was last re-elected onto the ADL Board on 29 April 2005. Dr. Ong has over 20 years ofexperience in the area of corporate investment, served a few years at the Monetary Authority of Singapore and was the former CEO/Chairman of Asiatravel.com Holdings Ltd. Currently Dr Ong is a General Partner of Aegis, a fund management company, managingfunds invested in equity investments in the Asia Pacifi c region. Dr. Ong has several scholarly publications to his name and holds aDoctorate in Economics from Yale University (1979) and a Bachelor of Arts (magna cum laude) from Princeton University (1973). Heis a Certifi ed Financial Analyst.ANNUAL REPORT 2005Mr Hendra Harjadi was appointed on the ADL Board as a Non-Executive Director on 3 May 2004. He was last re-elected ontothe ADL Board on 29 April 2005. Mr Harjadi is the Managing Director of various companies in Indonesia and has over 20 yearsof experience managing companies in the oil and gas and retail industries. Mr Harjadi holds a Bachelor of Arts degree from theUniversitas Methodist Indonesia.Mr Loh Weng Whye joined the ADL Board on 7 February 2005 as an Independent Director and was last re-elected onto the Boardon 29 April 2005. Mr Loh possesses extensive knowledge on the investment, development and management of energy, utilities andinfrastructure projects and businesses in the region. He has more than 35 years of experience in senior positions in the civil service,government-linked companies as well as the private sector, 25 years of which were in the Public Utilities Board, Singapore. Currently heis Advisor to Green Dot Capital Pte Ltd, an investment and holding company under Temasek Holdings. Prior to this, he was Presidentof ST Energy Pte Ltd and President of SembCorp Energy Pte Ltd. He also holds appointments in various external councils and sits onthe boards of several companies incorporated in Singapore and overseas including SGX mainboard listed companies, United EnvirotechLtd and BH Global Marine Ltd. A registered Professional Engineer (Er.) since 1976, Mr Loh graduated with a Bachelor of Engineering(Mechanical) degree in 1970 and a Master of Science in Industrial Engineering in 1979, both from the University of Singapore. He isa Member of the Singapore Institute of Directors (MSID), and was elected a Fellow (FIES) of the Institution of Engineers, Singaporein 1995.Key Management ProfileMr Victor Khaw is the General Manager of American Dynamics Pte Ltd, Blue Power Corporation Pte Ltd and Dynamic AD IndustriesSdn Bhd. He has been with the Group since 1990. Mr Khaw holds a Master of Business Administration degree from the Universityof South Australia. His main areas of responsibility include increasing sales and profi tability of the Group’s Equipment Division inSingapore as well as in the Asia region.Mr Robert Goh is the General Manager heading the Group’s Gas Division in Singapore, Batam and Myanmar and has been with theGroup for more than 20 years. Mr Goh has over 25 years of sales and marketing experience in the oil and gas related industries.Mr Anthony Goh joined the Group in 1986 and is currently assisting in the operations of ADL’s Gas Division in Malaysia and Batam.He also covers business development for the Group. Mr Goh has extensive sales exposure over the past 25 years and has acquiredskill and qualities that will enable him to contribute to the future growth of the Group.Mr Philip Chan is the Assistant General Manager of AD Safety Pte Ltd. He has been with the Group since 1990. Mr Chan holdsa Master of Business Administration degree from the University of Birmingham. His main areas of responsibility include increasingsales and profi tability of the Group’s Safety Division in Singapore as well as in the Asia region.ANNUAL REPORT 2005

10Corporate InformationACE DYNAMICS LIMITEDANNUAL REPORT 2005BOARD OF DIRECTORSSteven Tham Weng CheongChairman/ Chief Executive Offi cerLim How BoonExecutive DirectorKelvin Lee Chee FattExecutive DirectorLeslie StruysLead Independent DirectorTony Chan Wing KheiIndependent DirectorOng Nai PewIndependent DirectorHendra HarjadiNon-Executive DirectorLoh Weng WhyeIndependent DirectorAUDIT COMMITTEETony Chan Wing Khei (Chairman)Leslie StruysOng Nai PewREMUNERATION COMMITTEELeslie Struys (Chairman)Tony Chan Wing KheiSteven Tham Weng CheongNOMINATING COMMITTEELeslie Struys (Chairman)Tony Chan Wing KheiSteven Tham Weng CheongCOMPANY SECRETARIESTan Cher LiangSusie Low Geok EngAUDITORSErnst & YoungCertifi ed Public AccountantsPartner : Yen Heng Fook(Appointed since fi nancial year 2002)SHARE REGISTRARLim Associates (Pte) Ltd10 Collyer Quay #19-08Ocean BuildingSingapore 049315REGISTERED OFFICE1 Shipyard RoadSingapore 628128Telephone : (65) 6266 4868Facsimile : (65) 6266 2026Email : adl@acedynamics.com.sgWebsite : www.acedynamics.com.sg

Corporate Governance Report11Ace Dynamics Limited (the “Company” or “ADL”) is committed to observing high standards of corporate governance to create value for ourstakeholders.This Report outlines the Company’s corporate governance practices embodying the principles in the Code of Corporate Governance (the“Code”). Where there are deviations from the Code, appropriate explanations are provided.BOARD OF DIRECTORSPrinciple 1: Board’s Conduct of its AffairsThe Board of Directors (the “Board”) holds at least two scheduled meetings a year with ad-hoc meetings being convened as and whennecessary. During the year, the Board met four times.ACE DYNAMICS LIMITEDThe principal roles of our Board are as follows:• Formulating and approving the Group’s policies, strategies and fi nancial objectives;• Approving major funding proposals, investment and divestment proposals;• Overseeing the processes for evaluating the adequacy of risk management, internal controls, fi nancial reporting and compliance;• Review and approve any interested person transactions;• Approve the nomination of board directors and appointments to the various Board committees and key managerial personnel;• Reviews and endorses the recommended framework of remuneration for the Board and key executives; and• Assumes responsibilities for compliance with Corporate GovernanceThe Board adopted a set of internal controls and guidelines which sets out approval limits for various levels of Management and also at Boardlevel.To assist the Board in executing its responsibilities, the Board is supported by the Audit Committee, Nominating Committee and theRemuneration Committee. These Committees function within clear defi ned terms of reference, which are reviewed on a regular basis, toensure effectiveness of each Committee.Newly appointed directors are given an orientation on the business activities and directions of the Group. The Company will considerappropriate training for the directors, from time to time.The attendances of the Directors at the meetings of the Board and the Board Committees, as well as the frequency of such meetings forFY 2005 are as follow:Board Audit Committee Nominating RemunerationCommitteeCommitteeName of Directors Meetings Meetings Meetings Meetings Meetings Meetings Meetings Meetingsheld attended held attended held attended held attendedSteven Tham 4 4 - - 3 3 4 4Lim How Boon 4 4 - - - - - -Kelvin Lee 4 4 - - - - - -Tony Chan 4 4 3 3 3 3 4 4Leslie Struys 4 3 3 3 3 3 4 4#Ong Nai Pew 4 3 3 2 - - - -Hendra Harjadi 4 2 - - - - - -+Loh Weng Whye 4 4 - - - - - -# Dr. Ong Nai Pew was appointed as a member of the Audit Committee on 16 February 2005.+Mr Loh Weng Whye was appointed to the Board on 7 February 2005.ANNUAL REPORT 2005

12Corporate Governance ReportACE DYNAMICS LIMITEDPrinciple 2: Board Composition and BalancePresently, the Board comprises eight directors, four of whom are independent and non-executive directors and one non-independent andnon-executive director. The Board is of the view that the current board size is appropriate, taking into account the nature and scope of theCompany’s operations.Currently, the Board members are:Steven Tham Weng Cheong (CEO/Chairman)Lim How Boon (Executive Director)Kelvin Lee Chee Fatt (Executive Director)Tony Chan Wing Khei (Independent Non-Executive Director)Leslie Struys (Independent Non-Executive Director)Ong Nai Pew (Independent Non-Executive Director)Hendra Harjadi (Non-Independent Non-Executive Director)Loh Weng Whye (Independent Non-Executive Director)The Nominating Committee has reviewed the independence of the Directors for the fi nancial year ended 31 December 2005 in accordancewith the Code’s defi nition of independence and is of the view that four of the Directors are independent directors within the meaning of theCode.The Nominating Committee is also of the view that the current Board comprises of directors with a wide range of skills, experience andexpertise in operational, management, fi nancial, banking, engineering, economics and real estate, whose collective and vast experienceensure that the Board is equipped to deal with a wide range of issues to meet the Company’s objectives. Also no individual or a group ofindividuals dominate the Board.Principle 3: Role of Chairman and Chief Executive Officer (“CEO”)Mr Steven Tham continues to be the Executive Chairman and CEO of the Group. As the Chairman, Mr Tham is responsible for the workingsof the Board and ensuring compliance with the Group’s guidelines on corporate governance. As the CEO, Mr Tham plays a pivotal role in thedevelopment and execution of policies and strategies and the day-to-day management of the Group.The Company had on 1 January 2006 appointed Mr Leslie Struys as the Company’s lead independent director. This appointment is part ofthe on-going effort undertaken by the Company to improve its corporate governance practices in line with the Code of Corporate Governance2005.With the appointment of Mr Leslie Struys as the Company’s lead independent director, shareholders will have an alternative avenue toraise their concerns, especially when contacts through the normal channels of the Chairman/CEO have failed or when such contact isinappropriate.Principle 6: Access to InformationPrinciple 10: Accountability and AuditANNUAL REPORT 2005Board members are provided with quarterly fi nancial reports and are furnished with relevant information from time to time on materialtransactions to enable them to make informed decision. Board papers are circulated for meetings of the Board and Committees in advance,to enable the Directors to review the information and obtain further explanations, where necessary.Directors have the discretion, whether as a group or individually, to obtain independent professional advice on any matter in furtherance oftheir duties as directors, at the Company’s expenses.The Directors have separate and independent access to the Company Secretary and senior management of the Company at all times. TheCompany Secretary attends the board meetings and assists the Board in ensuring that established Board procedures are followed and allrelevant statutes and regulations that are applicable to the Company are complied with.The Board is accountable to the shareholders and oversees the management of the business and affairs of the Group.

Corporate Governance Report13BOARD COMMITTEESPrinciple 4: Board MembershipNominating Committee (NC)The NC comprises three Directors, two of whom are independent and non-executive. The current members of the NC are:Leslie Struys Chairman (Independent Non-Executive)Tony Chan(Independent Non-Executive)Steven ThamACE DYNAMICS LIMITEDThe NC met three times during the fi nancial year to evaluate Board’s performance as well as to review the nomination of new Directors asguided by the Terms of Reference adopted by the NC on 22 March 2002.The principal duties and responsibilities include:• Making recommendations to the Board on the appointment of new executive and non-executive Directors;• Determining annually whether or not a Director is independent as well as put in place plans for succession, in particular for theChairman and Chief Executive Offi cer;• Recommending Directors who are retiring by rotation to be put forward for re-election;• Deciding whether or not a Director is able to and has been adequately carrying out his duties as a Director of the Company; and• Evaluating the performance and effectiveness of the Board as a whole.New Directors are appointed by the Board after the NC recommends their appointment. All newly appointed Directors have to retire at thenext Annual General Meeting following their appointment. The retiring Directors are eligible to offer themselves for re-election. In accordancewith the Company’s Articles of Association, one-third of the Board, excluding Managing Director, is subject to re-election annually. The NC hasrecommended the re-election of Mr Tony Chan Wing Khei and Mr Leslie Struys who will retire by rotation at the forthcoming Annual GeneralMeeting. The Board accepted the NC’s recommendation and accordingly, Mr Tony Chan Wing Khei and Mr Leslie Struys will be offeringthemselves for re-election at the forthcoming Annual General Meeting.Principle 5 : Board PerformanceThe NC, in considering the re-appointment of any Director, evaluates the performance of the Director. Subsequent to fi nancial year-end, theBoard initiated an evaluation to assess the effectiveness of the Board as a whole in FY 2005 which requires the completion of a questionnaire.The assessment parameters include attendance record at meetings of the Board and Board Committees, participation at meetings andcontributions. Board performance criteria will not change from year to year unless circumstances deem it necessary. The Board wouldcontinue the evaluation into this fi nancial year and address the fi ndings accordingly.Principle 7 : Procedures for Developing Remuneration PoliciesPrinciple 8 : Level of Mix of RemunerationPrinciple 9 : Disclosure on RemunerationRemuneration Committee (RC)The RC comprises 2 non-executive and independent directors (including the chairman of the RC) and 1 executive director. The currentmembers of the RC are as follows:Leslie Struys Chairman (Independent Non-Executive)Tony Chan(Independent Non-Executive)Steven ThamANNUAL REPORT 2005

14Corporate Governance ReportACE DYNAMICS LIMITEDThe RC met four times during the year. The RC’s role is to review and approve recommendations on remuneration including but not limited todirectors’ fees, salaries, allowances, bonuses, options and benefi ts-in-kind. The RC members abstain from deciding on any matter relatingto their own remuneration.The RC’s principal functions are to:• Review and recommend to the Board in consultation with the CEO/Chairman of the Board, a framework for remuneration and todetermine the specifi c remuneration package and terms of employment of each of the executive directors and key managementexecutives of the Group;• Recommend to the Board in consultation with the CEO/Chairman of the Board, the Share Option Scheme or long term incentiveschemes to be set up from time to time. Currently, the Committee is administering the Ace Dynamics’ Share Option Scheme;• Ensure that all aspects of remuneration including directors’ fees, salaries, allowances, bonuses, share options and benefi ts-in-kindshould be covered; and• Compare the remuneration packages of directors within the industry and comparable companies and shall include a performancerelatedelement coupled with appropriate and meaningful measures of assessing individual executive director’s performance.The RC has access to expert advice from in-house human resource personnel as well as external professionals.Only Non-Executive Directors are paid directors’ fee subject to shareholders’ approval at the Company’s Annual General Meeting.The remuneration packages for the Executive Chairman and Executive Directors include a performance bonus element based on the Group’sprofi tability. The RC is of the view that the remuneration packages of the Executive Directors are not excessive and their service contractsdo not have onerous removal clauses.Disclosures of the remuneration of the directors in bands are set out below:No. of directors in remuneration bands:2005 2004$500,000 and above - -$250,000 to below $499,999 1 1Below $250,000 7 8Total 8 9A breakdown showing the band and mix of each individual director’s remuneration for FY 2005 is as follows:Name ofRemunerationDirectors Band Salary Bonus Benefits Fees Total% % % % %ANNUAL REPORT 2005Steven Tham Below $500,000 86 12 2 0 100Lim How Boon Below $250,000 88 8 4 0 100Kelvin Lee Below $250,000 89 11 0 0 100Tony Chan Below $250,000 - - - 100 100Leslie Struys Below $250,000 - - - 100 100Ong Nai Pew Below $250,000 - - - 100 100Hendra Harjadi Below $250,000 - - - 100 100Loh Weng Whye Below $250,000 - - - 100 100In the interest of the Group to maintain confi dentially and good morale amongst staff, the Company will not disclose individual details ofremuneration relating to key management executives of the Group.No employee of the Group was an immediate family member (as defi ned in the Listing Manual of the SGX-ST) of a director or Chief ExecutiveOffi cer and whose remuneration exceeded S$150,000 during the fi nancial year ended 31 December 2005.

Corporate Governance Report15Principle 11 : Audit CommitteePrinciple 12 : Internal ControlsAudit Committee (AC)The AC comprises three board members:Tony Chan Chairman (Independent Non-Executive)Leslie Struys(Independent Non-Executive)Ong Nai Pew(Independent Non-Executive)The AC members have had many years of experience in senior management positions in both the fi nancial and industrial sectors. All membersare fi nancially literate and have accounting or related fi nancial management expertise or experience. The AC members are all non-executiveand independent Directors.ACE DYNAMICS LIMITEDThe role of the AC is regulated in its Terms of Reference which has been approved by the Board. The Terms of Reference defi nes the purpose,authority and responsibilities of the AC. The AC is authorized to investigate any matters specifi ed in the Terms of Reference.During the fi nancial year, the AC met three times and performed the following key functions:• reviews with the internal auditors, the scope and the results of internal audit procedures and their evaluation of the internal controlsystems and any signifi cant fi nding;• reviews with the external auditors, their audit plan, evaluation of the accounting controls, audit reports, risk assessment and any otherrelevant matters;• reviews the interim and annual fi nancial statements before submission to the Board for release to SGX-ST;• reviews and makes recommendations to the Board on the appointment of external auditors;• reviews interested person transactions, if any, as set out in the Listing Rules of SGX-ST; and• reviews all non-audit services provided by the fi rm of external auditors, if any, to determine if the provision of such services wouldaffect the independence of the external auditors.The AC has the express power to conduct or authorize investigations into any matters within its Terms of Reference, has full access to andco-operation by the Management and full discretion to invite any Director or executive offi cer to attend its meetings. All major fi ndings andrecommendations are brought to the attention of the Board of Directors.In performing its functions, the AC may also meet with internal and external auditors without the presence of the Company’s management atleast once annually. Such meetings allows for a more open discussion on any issues of concerns.During the year, AC has reviewed the effectiveness of the Group’s material internal controls, including fi nancial and operational compliancecontrols, and risk management. The processes used by the AC to review the effectiveness of the system of internal control and riskmanagement include discussions with management and auditors on the risks identifi ed and the review of signifi cant issues arising therefrom.The AC, having reviewed all non-audit services provided by the external auditors to the Group, is satisfi ed that the nature and extent of suchservices would not affect the independences of the external auditors.The Directors are of the opinion that, in the absence of any evidence to the contrary, the system of internal controls provides reasonable, butnot absolute assurance that the Group will not be adversely affected by any event that could reasonably be foreseen, as it strives to achieveits business objectives.The Company has, to the best of its knowledge, complied with the Best Practices Guide in relation to the role and responsibilities of the AuditCommittee issued by the SGX-ST.ANNUAL REPORT 2005

16Corporate Governance ReportACE DYNAMICS LIMITEDPrinciple 13 : Internal AuditThe internal auditors’ primary line of reporting is directly to the AC.The Standards for Professional Practice of Internal Auditing (Standards) as set out by The Institute of Internal Auditors have been adoptedand continuous adherence to the Standards will be ensured.The AC ensures that the internal audit functions are adequately resourced to carry out its duties effectively and has the appropriate standingwithin the Company.COMMUNICATION WITH SHAREHOLDERSPrinciple 10 : Accountability and AuditPrinciple 14 : Communication with ShareholdersPrinciple 15 : Promoting Greater Participation by ShareholdersIn complying with the Code:• All information as required under the Singapore Exchange’s disclosure policy is disseminated to shareholders through the SGXNET ona timely basis and the Company does not practice selective disclosure.• Price sensitive announcement including interim and full-year results are released through SGXNET within the mandatory period.• The Annual Report are sent to all shareholders of the Company at least 14 days before the meeting and the Notice of Annual GeneralMeeting (“AGM”) is made available on SGX-ST’s website.• Members of the Company are encouraged to attend the AGM and in the event that the member cannot attend the AGM, the Articlesof Association of the Company allow a member to appoint one or two proxies to attend and vote on behalf of the member. At the AGM,shareholders are given the opportunity to voice their constructive views and direct questions regarding the Group to the Managementor the Directors, including the chairmen of the Audit Committee, Remuneration Committee and Nominating Committee. The externalauditors are also present at the AGM to assist the Directors to address shareholders’ queries, if any.DEALINGS WITH SECURITIES[SGX-ST Listing Rule 710 (2)]The Company has adopted a Code of Best Practices on Securities Transactions that is in line with the Best Practices Guide issued by theSingapore Exchange Securities Trading Limited.Securities trading guidelines have been issued to all Directors and senior offi cers of the Group. The guideline sets out window periods wheretrading in the Company’s securities are not allowed. Directors and senior offi cers are also expected to observe insider trading laws at alltimes even when dealing in securities outside the window periods.MATERIAL CONTRACTS[SGX-ST Listing Rule 1207 (8)]No material contracts were entered into between the Company or any of its subsidiaries involving the interest of the CEO or any Director orcontrolling shareholder of the Company or their associates, either still subsisting by end of the fi nancial year or if not then subsisting, enteredinto since the end of the previous fi nancial year.ANNUAL REPORT 2005INTERESTED PERSON TRANSACTIONSThe Company has adopted an internal policy governing procedures for the identifi cation, approval and monitoring of transactions withinterested persons. All interested person transaction is subject to review by the Audit Committee.During the fi nancial year, there was no interested person transactions entered into by the Group.

17Report of the DirectorsThe Directors present their report to the members together with the consolidated audited fi nancial statements of Ace Dynamics Limited (the“Company”) and its subsidiary companies (the “Group”) for the fi nancial year ended 31 December 2005 and the balance sheet and statementof changes in equity of the Company as at 31 December 2005.DirectorsThe Directors of the Company in offi ce at the date of this report are :Steven Tham Weng CheongLim How BoonKelvin Lee Chee FattLeslie StruysTony Chan Wing KheiOng Nai PewHendra HarjadiLoh Weng WhyeACE DYNAMICS LIMITEDArrangements to enable Directors to acquire shares and debenturesOther than Ace Dynamics Share Option Scheme, neither at the end of nor at any time during the fi nancial year, was the Company a partyto any arrangement whose objects are, or one of object is, to enable the Directors of the Company to acquire benefi ts by means of theacquisition of shares or debentures of the Company or any other body corporate.Directors’ interests in shares or debenturesThe following Directors, who held offi ce at the end of the fi nancial year, had, according to the register of directors’ shareholdings required tobe kept under Section 164 of the Singapore Companies Act, Cap. 50, an interest in shares and share options of the Company and relatedcorporations (other than wholly-owned subsidiary companies) as stated below :Held in the name of the DirectorsDeemed interestName of Director At beginning At end of At beginning At end ofof the year the year of the year the yearThe CompanyNumber of ordinary shares of $0.20 eachSteven Tham Weng Cheong 1,300,000 – 15,600,000 20,945,000Lim How Boon 2,700,142 3,350,142 1,000,000 4,200,000Kelvin Lee Chee Fatt 2,240,000 1,490,000 – 5,632,000Leslie Struys – – 1,000,000 1,500,000Hendra Harjadi – 195,000 5,490,000 5,490,000Ong Nai Pew – 112,000 5,036,000 5,086,000Loh Weng Whye – 173,000 – –Option to subscribe for ordinary shares of $0.20 eachSteven Tham Weng Cheong 1,860,000 1,860,000 – –Lim How Boon 1,335,000 1,335,000 – –Kelvin Lee Chee Fatt 944,000 944,000 – –Leslie Struys 920,000 760,000 – –Tony Chan Wing Khei 950,000 780,000 – –Hendra Harjadi 250,000 250,000 – –Ong Nai Pew 250,000 250,000 – –There was no change in any of the above-mentioned interest between the end of the fi nancial year and 21 January 2006.ANNUAL REPORT 2005

18Report of the DirectorsACE DYNAMICS LIMITEDShare options(a)At the Extraordinary General Meeting held on 19 February 2000, shareholders approved the adoption of the Ace Dynamics ShareOption Scheme (the “Scheme”). Under the Scheme, options may be granted to selected employees of the Group including employeesof its associated companies and non-executive Directors. Controlling shareholders and their associates are not eligible to participatein the Scheme. Further details of the Scheme are set out in the circular to shareholders dated 28 January 2000 (the “Circular”).The committee administering the Scheme comprise three Directors, Leslie Struys, Tony Chan Wing Khei and Steven Tham WengCheong.Under the rules of the Scheme as set out in the Circular, the duration of the Scheme is subject to a maximum of 5 fi nancial yearscommencing with the fi nancial year in which the fi rst option was granted under the Scheme. As the fi rst option was granted duringthe fi nancial year 2000, the Scheme has ceased operation in the fi nancial year ended 31 December 2004. However, all outstandingoptions under the Scheme shall continue to be valid subject to the Rules of the Scheme.(b) Details of share options to Directors to subscribe for shares of $0.20 each under the Scheme are as follows :AggregateAggregateoptionsoptions lapsed/Options granted since exercised since Aggregategranted commencement commencement optionsduring the of Scheme to of Scheme to outstandingfinancial the end of the end of as at end ofName of Director year financial year financial year financial yearSteven Tham Weng Cheong – 4,326,000 2,466,000 1,860,000Lim How Boon – 2,377,000 1,042,000 1,335,000Kelvin Lee Chee Fatt – 1,589,000 645,000 944,000Leslie Struys – 920,000 160,000 760,000Tony Chan Wing Khei – 950,000 170,000 780,000Hendra Harjadi – 250,000 Nil 250,000Ong Nai Pew – 250,000 Nil 250,000(c) Details of share options to employees to subscribe for shares of $0.20 each under the Scheme :Name of participantGranted 5% or more of thetotal options under the SchemeJohn Lee Sok Khian – 1,708,000 500,000 1,208,000Others below 5% individually – 11,262,000 4,942,000 6,320,000(d) During the fi nancial year, options that lapsed upon the expiry of the option period under the Scheme are as follows :Options granted inNumber ofoptions lapsed2000 608,0002001 194,0002003 300,000(e) At the end of the fi nancial year, unissued shares under option comprise the following :ANNUAL REPORT 2005Options granted in Price per share Number ofconnection with the payable in full Date of ordinary sharesScheme in upon application expiration of $0.20 each2000 $0.38 21.02.2003 to 21.02.2007 1,614,0002000 $0.26 23.07.2002 to 23.07.2007 160,0002001 $0.20 15.01.2003 to 15.01.2008 1,538,0002002 $0.20 14.01.2004 to 14.01.2009 640,0002003 $0.24 22.10.2005 to 22.10.2010 2,700,0002004 $0.20 23.08.2006 to 23.08.2011 7,055,000

19Report of the DirectorsDirectors’ contractual benefitsExcept as disclosed in the fi nancial statements, since the end of the previous fi nancial year, no Director of the Company has received orbecome entitled to receive a benefi t by reason of a contract made by the Company or a related corporation with the Director, or with a fi rmof which the Director is a member, or with a company in which the Director has a substantial fi nancial interest.Audit CommitteeThe Audit Committee of the Board of Directors at the date of report comprises the following three members, are independent Directors:Tony Chan Wing KheiLeslie StruysOng Nai Pew(Chairman)ACE DYNAMICS LIMITEDThe audit committee (“AC”) carried out its functions in accordance with Section 201B(5) of the Singapore Companies Act, Cap. 50, includingthe following:• Reviews the audit plans of the internal and external auditors of the Company and ensures the adequacy of the Company’s system ofaccounting controls and the co-operation given by the Company’s management to the external and internal auditors;• Reviews the interim and annual fi nancial statements and the auditors’ report on the annual fi nancial statements of the Company beforetheir submission to the board of directors;• Reviews effectiveness of the Company’s material internal controls, including fi nancial, operational and compliance controls and riskmanagement via reviews carried out by the internal auditors;• Meets with the external auditors, other committees, and management in separate executive sessions to discuss any matters thatthese groups believe should be discussed privately with the AC;• Reviews legal and regulatory matters that may have a material impact on the fi nancial statements, related compliance policies andprogrammes and any reports received from regulators;• Reviews the cost effectiveness and the independence and objectivity of the external auditors;• Reviews the nature and extent of non-audit services provided by the external auditors;• Recommends to the board of directors the external auditors to be nominated, approves the compensation of the external auditors,and reviews the scope and results of the audit;• Reports actions and minutes of the AC to the board of directors with such recommendations as the AC considers appropriate; and• Reviews interested person transactions in accordance with the requirements of the Singapore Exchange Securities Trading Limited(“SGX-ST”)’s Listing Manual.The AC, having reviewed all non-audit services provided by the external auditors to the Group, is satisfi ed that the nature and extent of suchservices would not affect the independence of the external auditors. The AC has also conducted a review of interested person transactions.The AC convened meetings during the year with full attendance from all members except for one where Ong Nai Pew was absent. The AC hasalso met with internal and external auditors, without the presence of the Company’s management, at least once a year.Further details regarding the audit committee are disclosed in the Report on Corporate Governance.ANNUAL REPORT 2005

20Report of the DirectorsACE DYNAMICS LIMITEDAuditorsErnst & Young have expressed their willingness to accept re-appointment as auditors.On behalf of the Board,Steven Tham Weng CheongDirectorLim How BoonDirectorSingapore31 March 2006ANNUAL REPORT 2005

Statement by Directors Pursuant to Section 201(15)21We, Steven Tham Weng Cheong and Lim How Boon, being two of the Directors of Ace Dynamics Limited, do hereby state that, in the opinionof the Directors :(a)(b)the accompanying balance sheets, consolidated profi t and loss account, statements of changes in equity and consolidated cash fl owsstatement together with the notes thereto are drawn up so as to give a true and fair view of the state of affairs of the Company andof the Group as at 31 December 2005, and the results, changes in equity and cash fl ows of the Group and the changes in equity ofthe Company for the year then ended, andat the date of this statement there are reasonable grounds to believe that the Company will be able to pay its debts as and when theyfall due.ACE DYNAMICS LIMITEDThe Board of Directors authorised these fi nancial statements for issue on 31 March 2006.On behalf of the Board,Steven Tham Weng CheongDirectorLim How BoonDirectorSingapore31 March 2006ANNUAL REPORT 2005

22Auditors’ Report to the Members ofAce Dynamics LimitedACE DYNAMICS LIMITEDWe have audited the accompanying fi nancial statements of Ace Dynamics Limited (the “Company”) and its subsidiary companies (the “Group”)set out on pages 23 to 66 for the year ended 31 December 2005. These fi nancial statements are the responsibility of the Company’sDirectors. Our responsibility is to express an opinion on these fi nancial statements based on our audit.We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we plan and perform the auditto obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining, ona test basis, evidence supporting the amounts and disclosures in the fi nancial statements. An audit also includes assessing the accountingprinciples used and signifi cant estimates made by the Directors, as well as evaluating the overall fi nancial statement presentation. Webelieve that our audit provides a reasonable basis for our opinion.In our opinion,(a)(b)the consolidated fi nancial statements of the Group and the balance sheet and statement of changes in equity of the Company areproperly drawn up in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the “Act”) and Singapore FinancialReporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December2005, and the results, changes in equity and cash fl ows of the Group and the changes in equity of the Company for the fi nancial yearended on that date; andthe accounting and other records required by the Act to be kept by the Company and by those subsidiary companies incorporated inSingapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.ERNST & YOUNGCertifi ed Public AccountantsSingapore31 March 2006ANNUAL REPORT 2005

Consolidated Profit and Loss Accountfor the financial year ended 31 December 200523GroupNote 2005 2004$’000 $’000(Restated)Turnover 3 73,307 39,935Cost of sales (58,339) (26,957)Gross profit 14,968 12,978Other income 4 1,389 209Distribution costs (8,839) (7,300)Administrative costs (4,349) (9,175)ACE DYNAMICS LIMITEDProfit/(loss) from operating activities 4 3,169 (3,288)Finance costs 5 (947) (430)Amortisation of goodwill arising on consolidation – (400)Impairment loss on goodwill arising on consolidation (1,600) –Share of profi t in associated companies 1,132 413Profit/(loss) before taxation 1,754 (3,705)Taxation 6 (1,133) (681)Profit/(loss) after taxation 621 (4,386)Attributable to :Equity holders of the Company 622 (4,493)Minority interest (1) 107621 (4,386)Basic earnings/(loss) per share (in cents) 7 0.44 (3.52)Diluted earnings/(loss) per share (in cents) 7 0.44 (3.50)The accompanying accounting policies and explanatory notes form an integral part of the financial statements.ANNUAL REPORT 2005

24Balance Sheetsas at 31 December 2005ACE DYNAMICS LIMITEDGroupCompanyNote 2005 2004 2005 2004$’000 $’000 $’000 $’000(Restated)(Restated)Non-current assetsProperty, plant and equipment 8 15,181 16,086 – –Subsidiary companies 10 – – 25,325 38,013Associated companies 11 6,099 14,933 – 9Other investments 12 94 406 – –Intangible assets 14 287 1,600 – –Investment property 13 838 875 – –22,499 33,900 25,325 38,022Current assetsDevelopment property 9 8,376 9,124 – –Development property completed for sale 15 13,781 – – –Stocks 16 13,691 6,572 – –Trade debtors 15,555 11,848 – –Other debtors 17 1,775 1,145 12,990 139Prepayments 171 277 3 127Fixed deposits 25 1,300 – – –Cash and bank balances 25 4,924 3,132 1 3Tax recoverable 87 51 34 5159,660 32,149 13,028 320Current liabilitiesAmounts due to bankers 18 25,618 5,723 2,654 2,350Trade creditors 9,744 7,530 15 15Other creditors 19 4,897 4,129 202 182Hire purchase creditors 20 453 772 – –Provision for taxation 920 701 – –41,632 18,855 2,871 2,547Net current assets/(liabilities) 18,028 13,294 10,157 (2,227)Non-current liabilitiesLong-term loans 21 2,323 9,600 1,649 1,339Hire purchase creditors 20 679 959 – –Deferred tax liabilities 22 876 1,025 – –(3,878) (11,584) (1,649) (1,339)Net assets 36,649 35,610 33,833 34,456ANNUAL REPORT 2005EquityShare capital 23 28,002 28,002 28,002 28,002Share premium 24 15,740 15,740 15,740 15,740Asset revaluation reserve 24 2,070 2,070 – –Capital reserve 24 593 433 – –Employee share option reserve 24 303 101 74 25Accumulated losses (8,858) (9,480) (9,983) (9,311)Foreign currency translation reserve 24 (1,201) (1,256) – –Total equity 36,649 35,610 33,833 34,456The accompanying accounting policies and explanatory notes form an integral part of the financial statements.

Statements of Changes in Equityfor the financial year ended 31 December 200525Attributable to equity holders of the CompanyForeign EmployeeAsset currency shareShare Share revaluation Capital translation option Accumulatedcapital premium reserve reserve reserve reserve losses Total$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000GroupBalance at 1 January 2004 22,820 15,335 2,022 433 (1,108) – (4,987) 34,515Reversal of deferred tax liability – – 48 – – – – 48Translation adjustment for the year – – – – (148) – – (148)Total gains and losses recognised directly in equity – – 48 – (148) – – (100)Net loss for the year – – – – – – (4,493) (4,493)Total recognised gains and losses for the year – – 48 – (148) – (4,493) (4,593)Issuance of ordinary shares 5,182 405 – – – – – 5,587Expense of share-based payments – – – – – 101 – 101Balance at 31 December 2004 28,002 15,740 2,070 433 (1,256) 101 (9,480) 35,610ACE DYNAMICS LIMITEDBalance at 1 January 2005- as previously reported 28,002 15,740 2,070 433 (1,256) – (9,379) 35,610- effect of adopting FRS 102 – – – – – 101 (101) –- as restated 28,002 15,740 2,070 433 (1,256) 101 (9,480) 35,610Disposal of a subsidiary company – – – (24) – – – (24)Negative goodwill arising on acquisitionof additional interests in a subsidiary company – – – 184 – – – 184Translation adjustment for the year – – – – 55 – – 55Total gains recognised directly in equity – – – 160 55 – – 215Net profi t for the year – – – – – – 622 622Total recognised gains for the year – – – 160 55 – 622 837Expense of share-based payments – – – – – 202 – 202Balance at 31 December 2005 28,002 15,740 2,070 593 (1,201) 303 (8,858) 36,649EmployeeShare Share share option Accumulatedcapital premium reserve losses Total$’000 $’000 $’000 $’000 $’000CompanyBalance at 1 January 2004 22,820 15,335 – (2,234) 35,921Issuance of ordinary shares 5,182 405 – – 5,587Net loss for the year – – – (7,077) (7,077)Total recognised losses for the year – – – (7,077) (7,077)Expense of share-based payments – – 25 – 25Balance at 31 December 2004 28,002 15,740 25 (9,311) 34,456Balance at 1 January 2005- as previously reported 28,002 15,740 – (9,286) 34,456- effect of adopting FRS 102 – – 25 (25) –- as restated 28,002 15,740 25 (9,311) 34,456Net loss for the year – – – (672) (672)Total recognised losses for the year – – – (672) (672)Expense of share-based payments – – 49 – 49Balance at 31 December 2005 28,002 15,740 74 (9,983) 33,833The accompanying accounting policies and explanatory notes form an integral part of the financial statements.ANNUAL REPORT 2005

26Consolidated Statement of Cash Flowsfor the financial year ended 31 December 2005ACE DYNAMICS LIMITEDANNUAL REPORT 20052005 2004$’000 $’000(Restated)Cash flow from operating activities :Profi t/(loss) before taxation 1,754 (3,705)Adjustments for :Share of profi t in associated companies (1,132) (413)Depreciation of property, plant and equipment 2,104 1,267Minority interest – (107)Amortisation of goodwill arising on consolidation – 400(Gain)/loss on sale of property, plant and equipment (40) 94Interest income (19) (91)Interest expense 947 430Provision for foreseeable losses of development property – 1,592Impairment loss of other investments – 151Fair value changes of assets held at fair value through profi t and loss 62 –Allowance for doubtful debts of an associated company – 3,113Allowance for other debtor – 554Impairment loss on goodwill arising on consolidation 1,600 –Loss/(gain) on disposal of an associated company 20 (574)Gain on disposal of a subsidiary company (Note B) (47) –Loss on return of investment arising from reduction of share capital of an associated company – 882Allowance for loss on development property completed for sale 512 –Expense of share based payments 202 101Impairment loss in investment property 80 –Amortisation of club membership 35 –Translation adjustments arising on consolidation 47 (138)6,125 3,556Changes in working capital :Increase in debtors (4,219) (3,509)Decrease in amount placed with a business partner – 250Increase in stocks (7,119) (157)(Decrease)/increase in creditors (5,743) 2,843Increase in amounts due from associated companies (net) (1,059) (581)Decrease in development property completed for sale 18,019 –Cash generated from operations 6,004 2,402Interest received 19 91Interest paid (947) (430)Income tax paid (933) (496)Net cash provided by operating activities 4,143 1,567Cash flow from investing activities :Investment in an associated company (Note 11) (103) –Proceeds from disposal of associated companies (Note 11) 603 44Progress billings received from development property 5,534 2,601Purchase of property, plant and equipment (1,060) (919)Proceeds from sale of property, plant and equipment 64 380Net cash arising from consolidation/disposal of subsidiary companies (Note A and Note B) 447 (139)Proceeds from sale of other investments 15 –Purchase of investment property (43) –Investment in an associated company (450) –Increase in costs of development property (4,786) (1,670)Dividend received from associated companies 149 140Deposit and downpayment for the proposed sale of shares in an associated company – 275Additional investment in a subsidiary company (Note A) * –Net cash provided by investing activities 370 712* Denote amounts less than $1,000. A consideration of $1 was paid to acquire the remaining 50% of the minority interest.

Consolidated Statement of Cash Flowsfor the financial year ended 31 December 20052005 2004$’000 $’000Cash flow from financing activities :Proceed from issuance of ordinary shares – 1,133Payments of loans and amounts due to bankers (excluding bank overdrafts) (940) (418)Net decrease in hire purchase creditors (760) (459)Net cash (used in)/provided by financing activities (1,700) 256Net increase in cash and cash equivalents 2,813 2,535Cash and cash equivalents at beginning of year 1,849 (686)Cash and cash equivalents at end of year (Note 25) 4,662 1,849Note AOn 1 May 2005, the fair values of net assets assumed of a subsidiary company that was previously an associated company arising from thecontrol over the board of directors and management control, and the cash fl ow effect was as follows :$’000Development property completed for safe 32,861Debtors 203Cash and bank balances 448Amount due to corporate shareholders (9,927)Amount due to bankers (13,279)Creditors (8,841)1,46550% minority interests 733Add : Contribution to the Group’s NTA (732)–Cash and bank balances acquired 448Net cash infl ow on acquisition 44827ACE DYNAMICS LIMITEDOn 22 July 2005, the Group paid $1 to acquire the remaining 50% of the minority interest. Arising from the acquisition, managementassessed that a further $1,098,000 was required to be provided as foreseeable losses on the development property completed for sale.Consequently, the negative goodwill of $184,000 is taken directly to capital reserve based on the entity concept.The effect of the consolidation of a subsidiary company on the fi nancial position of the Group at31 December 2005 and its results for the year is shown below:Total assets at 31 December 2005 9,211Total liabilities at 31 December 2005 8,845Contribution to the Group for the year :- turnover 5,549- profi t before tax (1,098)If the consolidation had occurred on 1 January 2005, the contribution to the Group’s turnover and profi t before tax would have been$9.5 million and ($1.1) million respectively.Note BThe disposal of a subsidiary company has been shown in the statement as a single item. The effect on the individual assets and liabilities isset out below :Disposal$’000Debtors 68Cash and bank balances 6Creditors (9)Amount due to related companies (107)(42)Gain on disposal of subsidiary company 47Sales consideration settled by cash 5Less : Cash disposed (6)Net cash outfl ow on disposal (1)The accompanying accounting policies and explanatory notes form an integral part of the financial statements.ANNUAL REPORT 2005

28Notes to the Financial Statements- 31 December 2005ACE DYNAMICS LIMITED1. Corporate informationThe fi nancial statements and consolidated fi nancial statements of Ace Dynamics Limited (the “Company”) for the year ended 31December 2005 were authorised for issue in accordance with a resolution of the Directors on 31 March 2006. The Company is alimited liability company, which is domiciled and incorporated in the Republic of Singapore. The registered offi ce of Ace DynamicsLimited is located at 1 Shipyard Road, Singapore 628128.The principal activities of the Company are those of an investment holding company and the provision of management and administrativeservices to the Group. The principal activities of the subsidiary companies include :(a) distribution of industrial equipment, hardware and safety products;(b) property investment/development; and(c) manufacturing of compact discs.There have been no signifi cant changes in the nature of these activities during the fi nancial year.The subsidiary and associated companies as at 31 December 2005 are :Name of company(Country of Principal activities Percentage of equityincorporation) (place of business) Cost held by the Group2005 2004 2005 2004$’000 $’000 % %Subsidiary companies :Held by the Company^ Uniweld Holdings Pte Ltd Investment holding and 9,4011 4,554 100 100(Singapore)leasing of property(Singapore)^ American Dynamics Provision of management 6,290 6,290 100 100Holdings Pte Ltdservices (Singapore)(Singapore)^ Green Aces Development Pte Ltd Investment holding and 2,219 2,219 100 100(Singapore)property development(Singapore)^ AceD Development Pte Ltd Provision of management services 100 100 100 100(Singapore)(Singapore)^ Omnidisc Manufacturing Pte Ltd Manufacturers of compact disc 6,772 6,772 100 100(Singapore)(Singapore)24,782 19,935ANNUAL REPORT 2005

Notes to the Financial Statements- 31 December 2005291. Corporate information (cont’d)Name of company(Country of Principal activities Percentage of equityincorporation) (place of business) held by the Group2005 2004% %Held through subsidiary companiesSubsidiary companies ofAmerican DynamicsHoldings Pte LtdACE DYNAMICS LIMITED^ American Dynamics Pte Ltd Distribution of industrial 100 100(Singapore)equipment and hardware(Singapore)^ AD Safety Pte Ltd Distribution of safety products 100 100(Singapore)(Singapore)^ Blue Power Corporation Pte Ltd Distribution of industrial products 100 100(Singapore)(Singapore)* Uniweld Malaysia Sdn Bhd Distribution of industrial equipment, 100 100(Malaysia)hardware and safety products(Malaysia)** Red Wing Shoe Shop Sdn Bhd Distribution of safety shoes and 100 100(Malaysia)related products(Malaysia)** Dynamic AD Industries Sdn Bhd Distribution of industrial products 100 100(Malaysia)(Malaysia)*** Supermizer (Hong Kong) Ltd Distribution of safety products and – 2 100(Hong Kong)provision of management services(Hong Kong)< Blue Power Products, Inc. Dormant 100 100(United States of America)(United States of America)@ PT Mako Jaya Dormant 100 100(Indonesia)(Indonesia)Subsidiary company ofUniweld Holdings Pte Ltd^ Latene International Pte Ltd Distribution of industrial products 100 100(previously known as Greenline(Singapore)Enterprise Pte Ltd)(Singapore)Subsidiary company ofGreen Aces Development Pte Ltd^ Calarasi Pte Ltd Property investment and development 1003 50(Singapore)(Singapore)ANNUAL REPORT 2005

30Notes to the Financial Statements- 31 December 2005ACE DYNAMICS LIMITED1. Corporate information (cont’d)Name of company(Country of Principal activities Percentage of equityincorporation) (place of business) Cost held by the Group2005 2004 2005 2004$’000 $’000 % %Associated companies :Held through subsidiary companiesAssociated company ofGreen Aces Development Pte Ltd^ Calarasi Pte Ltd Property investment and – 3 500 – 50(Singapore)development(Singapore)Associated company ofAceD Development Pte Ltd^ OMD Holdings Pte Ltd Leasing of property – 3 500 – 50(Singapore)(Singapore)Associated companies ofAmerican Dynamics Holdings Pte Ltd^^ National Industrial Gases Pte Ltd Sale of gases and related 1,401 1,401 35 35(Singapore)products(Singapore)^^^ NIG Industrial Gases Sdn Bhd Sale of gases and related 666 666 50 50(Malaysia)products(Malaysia)^^ Bondfl ex Private Limited Trading in grinding disc 450 4 – 50 –(Singapore)(Singapore)2,517 3,067Name of company(Country of Principal activities Percentage of equityincorporation) (place of business) held by the Group2005 2004% %Subsidiary companies ofNIG Industrial Gases Sdn Bhd^^^ NIG Utara Sdn Bhd Sale of gases and related products 33 33(Malaysia)(Malaysia)ANNUAL REPORT 2005^^^ Majestic Oxygen Industries Sdn Bhd Manufacturers, distributors and 28 28(Malaysia)agents of industrial gases(Malaysia)

Notes to the Financial Statements- 31 December 2005311. Corporate information (cont’d)Name of company(Country of Principal activities Percentage of equityincorporation) (place of business) held by the Group2005 2004% %Associated companies ofNIG Industrial Gases Sdn Bhd^^ National Industrial Gases Pte Ltd Sale of gases and related products 15 15(Singapore)(Singapore)ACE DYNAMICS LIMITED**** Mega Mount Industrial Gases Sdn Bhd Sale of gases and related products 14 14(Malaysia)(Malaysia)^^^ NIG Timur Sdn Bhd Sale of gases and related products 18 4 –(Malaysia)(Malaysia)(Incorporated during the year)Subsidiary company ofMagestic Oxygen Industries Sdn Bhd^^^ Filler Alloy Sdn Bhd Distribution of industrial hardware, 21 25(Malaysia)machinery and gases(Malaysia)Associated company ofMajestic Oxygen Industries Sdn Bhd^^^ NIG Timur Sdn Bhd Sale of gases and related products 8 4 –(Malaysia)(Malaysia)(Incorporated during the year)Subsidiary companies ofNational IndustrialGases Pte Ltd# Myanmar National Industrial Gases Ltd Sale of gases and related products 35 35(Myanmar)(Myanmar)@ PT National Industrial Gases Indonesia Manufacture and sale of gases 35 35(Indonesia)(Indonesia)Subsidiary company ofBondflex Pte Ltd## Bondfl ex Abrasives (Jiangyan) Co Manufacturing of grinding disc 50 4 –(China)(China)ANNUAL REPORT 2005

32Notes to the Financial Statements- 31 December 2005ACE DYNAMICS LIMITED1. Corporate information (cont’d)^ Audited by Ernst & Young, Certifi ed Public Accountants, Singapore.* Audited by Ernst & Young, Chartered Accountants, Malaysia.** Audited by Christopher Chooi & Co., Chartered Accountants, Malaysia.*** Audited by Baker Tilly Hong Kong Limited, Certifi ed Public Accountants, Hong Kong.**** Audited by Huang Yan Teo & Co, Chartered Accountants, Malaysia.# Audited by U Tin Win Group, Myanmar.@ Audited by Riyanto, SE, AK.^^ Audited by B L Ong & Co., Certifi ed Public Accountants, Singapore.^^^ Audited by Ong & Wong, Chartered Accountants, Malaysia.< Not required to be audited under the law of country of incorporation.## Not audited as it was incorporated during the year.1 Additional shares acquired during the year.2 Disposed off during the year.3 Additional interests acquired during the year.4 Associated company acquired during the year.2. Summary of significant accounting policies2.1 Basis of preparationThe consolidated fi nancial statements of the Group and the balance sheet and statement of changes in equity of the Company havebeen prepared in accordance with Singapore Financial Reporting Standards (“FRS”).The fi nancial statements have been prepared on a historical cost basis except for certain property, plant and equipment, investmentproperties and held for trading fi nancial assets that have been measured at their fair values.The fi nancial statements are presented in Singapore Dollars (SGD or $) and all values are rounded to the nearest thousand ($’000)except when otherwise indicated.2.2 Changes in accounting policiesThe accounting policies have been consistently applied by the Group and the Company and are consistent with those used in theprevious fi nancial year, except for the changes in accounting policies discussed below:Adoption of new FRSOn 1 January 2005, the Group and the Company adopted the following standards mandatory for annual fi nancial periods beginning onor after 1 January 2005:ANNUAL REPORT 2005• FRS 39 – Financial Instruments: Recognition and Measurement• FRS 102 – Share-based Payment• FRS 103 – Business Combinations, including amendments to FRS 36 (revised), Impairment of Assets and FRS 38(revised), Intangible Assets• FRS 105 – Non-Current Assets Held for Sale and Discontinued Operations

Notes to the Financial Statements- 31 December 2005332.2 Changes in accounting policies (cont’d)(i)FRS 39 – Financial Instruments: Recognition and MeasurementThe Group and the Company had adopted FRS 39 prospectively on 1 January 2005. At that date, fi nancial assets within the scopeof FRS 39 were classifi ed as either fi nancial assets at fair value through profi t or loss, loans and receivables, held-to-maturityinvestments or available-for-sale fi nancial assets, as appropriate. Financial assets that were classifi ed as fi nancial assets at fairvalue through profi t or loss and available-for-sale fi nancial assets were measured at fair value while loans and receivables andheld-to-maturity investments were measured at amortised cost using the effective interest rate method.Under the transitional provisoins of FRS 39, the change in accounting policy on 1 January 2005 did not result in any adjustmentsto the Group and the Company’s accumulated profi ts.ACE DYNAMICS LIMITED(ii) FRS 102 – Share-based PaymentThe main impact of FRS 102 on the Group and the Company is the recognition of an expense and a corresponding entry to equityfor share options granted to senior executives and general employees, and the recognition of an expense and a correspondingliability for cash-settled share appreciation rights.The Group and the Company have applied FRS 102 retrospectively and have applied the transitional provisions of FRS 102 inrespect of equity-settled awards. As a result, the Group and the Company have applied FRS 102 only to equity-settled awardsgranted after 22 November 2002 that had not vested on 1 January 2005.Under the transitional provisions of FRS 102, the change in accounting policy has resulted in the following:• At 1 January 2005, increases in the Group’s and the Company’s:- Employee share option reserve by $101,000 and $25,000 respectively- Accumulated losses by $101,000 and $25,000 respectively.• For the year ended 31 December 2005, decreases in the Group’s:- Profi t for the year by $202,000 (2004 : $101,000) due to an increase in the employee benefi ts expense;- Basic earnings per share by 0.14 cents (2004: 0.08 cents); and- Diluted earnings per share by 0.14 cents (2004: 0.08 cents).(iii) FRS 103 – Business Combinations,FRS 36 (revised) – Impairment of Assets andFRS 38 (revised) – Intangible AssetsFRS 103 has been applied for business combinations on or after 1 January 2005.The adoption of FRS 103 and revised FRS 36 has resulted in the Group ceasing annual goodwill amortisation and commencingtesting for impairment at the cash-generating unit level annually (unless an event occurs during the year which requires thegoodwill to be tested more frequently) from 1 January 2005.ANNUAL REPORT 2005

34Notes to the Financial Statements- 31 December 2005ACE DYNAMICS LIMITED2.2 Changes in accounting policies (cont’d)Moreover, the useful lives of intangible assets are now assessed at the individual asset level as having either a fi nite or indefi nitelife. Until 31 December 2004, intangible assets were considered to have a fi nite useful life with a rebuttable presumption thatthat life would not exceed twenty years from the date when the asset was available for use. In accordance with the revised FRS38, some of the intangible assets are regarded to have an indefi nite useful life when, based on an analysis of all of the relevantfactors, there is no foreseeable limit to the period over which the asset is expected to generate net cash infl ows for the Group.The adoption of FRS 103, FRS 36 (revised) and FRS 38 (revised) does not have a fi nancial impact on the fi nancial statements ofthe Group and the Company at 1 January 2005.(iv) FRS 105 – Non-Current Assets Held for Sale and Discontinued OperationsThe Group has applied FRS 105 prospectively in accordance with the transitional provisions of FRS 105. Under the supersededFRS 35, the Group would have recognised a discontinued operation at the earlier of :• The date the Group enters into a binding sale agreement; and• The date the board of directors have approved and announced a formal disposal plan.A discontinued operation is a major line of business or geographical unit held for sale or has been disposed of. The effect of thischange in accounting policy is that a discontinued operation is recognised by the Group at a later point than under FRS 35 due tothe stricter criteria in FRS 105.The adoption of FRS 105 does not have a fi nancial impact on the fi nancial statements of the Group and the Company at 1 January2005.Adoption of revised FRSThe Group adopted the following revised standards mandatory for annual fi nancial periods beginning on or after 1 January2005.FRS 1 (revised) – Presentation of Financial StatementsFRS 2 (revised) – InventoriesFRS 8 (revised) – Accounting Policies, Changes in Accounting Estimates and ErrorsFRS 10 (revised) – Events after the Balance Sheet DateFRS 16 (revised) – Property, Plant and EquipmentFRS 17 (revised) – LeasesFRS 19 (revised) – Employee Benefi tsFRS 21 (revised) – The Effects of Changes in Foreign Exchange RatesFRS 24 (revised) – Related Party DisclosuresFRS 27 (revised) – Consolidated and Separate Financial StatementsFRS 28 (revised) – Investments in Associated CompaniesFRS 32 (revised) – Financial Instruments: Disclosure and PresentationFRS 33 (revised) – Earnings Per ShareANNUAL REPORT 2005The adoption of the above revised standards did not have a fi nancial impact on the fi nancial statements of the Group and theCompany at 1 January 2005.FRS and Interpretation of Financial Reporting Standard (“INT FRS”) not yet effectiveThe Group has not applied the following FRS and INT FRS that have been issued but are only effective for annual fi nancial periodsbeginning on or after 1 January 2006:(i) FRS 40 – Investment Property (effective for annual fi nancial periods beginning on or after 1 January 2007)This standard requires the Group to measure its investment properties at fair value and gains or losses arising from changesin the fair value of investment properties are included in the profi t and loss account in the year in which they arise.

Notes to the Financial Statements- 31 December 2005352.2 Changes in accounting policies (cont’d)(ii) FRS 106 – Exploration for and Evaluation of Mineral ResourcesThis standard does not apply to the activities of the Group.(iii) INT FRS 104 – Determining Whether an Arrangement Contains a LeaseThis interpretation requires the determination of whether an arrangement is, or contains a lease to be based on the substanceof the arrangement and requires an assessment of whether the arrangement is dependent on the use of a specifi c asset orassets and the arrangement conveys a right to use the asset.ACE DYNAMICS LIMITED(iv) INT FRS 105 – Rights to Interests Arising from Decommissioning, Restoration and Environmental Rehabilitation FundsThis interpretation is not expected to be relevant to the activities of the Group.The Group expects that the adoption of the pronouncements listed above will have no signifi cant impact on the fi nancialstatements in the period of initial application.(v) FRS 107, Financial Instruments: DisclosureThis standard, effective for annual fi nancial periods beginning on or after 1 January 2007, requires quantitative disclosures ofnature and extent of risks arising from fi nancial instruments in addition to the disclosures currently required under FRS 32.Adoption of this standard will result in additional disclosures in the fi nancial statements.(vi) INT FRS 106, Liabilities Arising from Participating in a Specifi c Market - Waste Electrical and Electronic EquipmentThis interpretation, effective for annual fi nancial periods beginning on or after 1 December 2005, does not apply to theactivities of the Group.(vii) INT FRS 107, Applying the Restatement Approach under FRS 29, Financial Reporting in Hyperinfl ationary EconomiesThis interpretation, effective for annual fi nancial periods beginning on or after 1 March 2006, does not apply to the activitiesof the Group.2.3 Significant accounting estimates and judgementsEstimates, assumptions concerning the future and judgements are made in the preparation of the fi nancial statements. They affectthe application of the Group’s 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 thatare believed to be reasonable under the circumstances.Key sources of estimation uncertaintyThe key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have asignifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year arediscussed below:(i)Impairment of goodwillThe Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use ofthe cash-generating units to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimateof the expected future cash fl ows from the cash-generating unit and also to choose a suitable discount rate in order to calculatethe present value of those cash fl ows. The carrying amount of the Group’s goodwill at 31 December 2005 was $nil (2004:$1,600,000).ANNUAL REPORT 2005

36Notes to the Financial Statements- 31 December 2005ACE DYNAMICS LIMITED2.3 Significant accounting estimates and judgements (cont’d)(ii) Depreciation of plant and machineryThe cost of plant and machinery for the manufacture of optical disc and welding and other industrial applications is depreciatedon a straight-line basis over the machineries’ useful lives. Management estimates the useful lives of these plant and machineryto be within 6 months to 15 years. These are common life expectancies applied in the relevant industry. The carrying amount ofthe Group’s plant and machinery at 31 December 2005 was $4,420,000 (2004: $5,203,000). Changes in the expected level ofusage and technological developments could impact the economic useful lives and the residual values of these assets, thereforefuture depreciation charges could be revised.(iii) Income taxesThe Group has exposure to income taxes in numerous jurisdictions. Signifi cant judgement is involved in determining the groupwideprovision for income taxes. There are certain transactions and computations for which the ultimate tax determination isuncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates ofwhether additional taxes will be due. Where the fi nal tax outcome of these matters is different from the amounts that were initiallyrecognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination ismade. The carrying amount of the Group’s tax payables at 31 December 2005 was $920,000 (2004: $701,000).(iv) Provision for foreseeable losses of development propertiesIn estimating the foreseeable losses, management makes reference to information such as (i) current quotes from sub-contractorsand suppliers, (ii) recent quotes agreed with sub-contractors and suppliers, and (iii) estimates of construction and material costsand (iv) stages of completion of the contracts.Critical judgements made in applying accounting policiesJudgements made by management in the application of FRS that has a signifi cant effect on the fi nancial statements and in arriving atestimates with a signifi cant risk of material adjustment in the next year is discussed below:• Revenue recognitionThe Group estimates the percentage of completion of its development property by reference to the proportion that contract costsincurred for work performed to date bear to the estimated total contract costs. When the fi nal cost incurred by the Group isdifferent from the amounts that were initially estimated, such differences will impact the revenue recognised in the period in whichsuch determination is made.2.4 Principles of consolidationThe consolidated fi nancial statements comprise the fi nancial statements of the Company and its subsidiary companies as at thebalance sheet date. The fi nancial statements of the subsidiary companies are prepared for the same reporting date as the parentcompany. Consistent accounting policies are applied for like transactions and events in similar circumstances.All intra-group balances, transactions, income and expenses and profi ts and losses resulting from intra-group transactions that arerecognised in assets, are eliminated in full.ANNUAL REPORT 2005Subsidiary companies are fully consolidated from the date of acquisition, being the date on which the Group obtains control, andcontinue to be consolidated until the date that such control ceases.Acquisitions of subsidiary companies are accounted for using the purchase method. The cost of an acquisition is measured as the fairvalue of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directlyattributable to the acquisition. Identifi able assets acquired and liabilities and contingent liabilities assumed in a business combinationare measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest.Any excess of the cost of the business combination over the Group’s interest in the net fair value of the identifi able assets, liabilitiesand contingent liabilities represents goodwill. The goodwill is accounted for in accordance with the accounting policy for goodwill statedin Note 2.28 below.

Notes to the Financial Statements- 31 December 2005372.4 Principles of consolidation (cont’d)Any excess of the Group’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities over the cost ofbusiness combination is recognised in the profi t and loss account on the date of acquisition.Minority interests represent the portion of profi t or loss and net assets in subsidiary companies not held by the Group. They arepresented in the consolidated balance sheet within equity, separately from the parent shareholders’ equity, and are separatelydisclosed in the consolidated profi t and loss account.2.5 Subsidiary companiesA subsidiary is an entity over which the Group has the power to govern the fi nancial and operating policies so as to obtain benefi ts fromits activities. The Group generally has such power when it directly or indirectly, holds more than 50% of the issued share capital, orcontrols more than half of the voting power, or controls the composition of the board of directors.ACE DYNAMICS LIMITEDIn the Company’s separate fi nancial statements, investments in subsidiary companies are accounted for at cost less any impairmentlosses.2.6 Associated companiesAn associate is an entity, not being a subsidiary or a joint venture, in which the Group has signifi cant infl uence. This generally coincideswith the Group having 20% or more of the voting power, or has representation on the board of directors.The Group’s investments in associates are accounted for using the equity method. Under the equity method, the investment inassociate is carried in the consolidated balance sheet at cost plus post-acquisition changes in the Group’s share of net assets ofthe associate. The Group’s share of the profi t or loss of the associate is recognised in the consolidated profi t and loss account.Where there has been a change recognised directly in the equity of the associate, 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 losswith respect to the Group’s net investment in the associate. The associate is equity accounted for from the date the Group obtainssignifi cant infl uence until the date the Group ceases to have signifi cant infl uence over the associate.Goodwill relating to an associate is included in the carrying amount of the investment.Any excess of the Group’s share of the net fair value of the associate’s identifi able assets, liabilities and contingent liabilities over thecost of the investment is excluded from the carrying amount of the investment and is instead included as income in the determinationof the Group’s share of the associate’s profi t or loss in the period in which the investment is acquired.When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecuredreceivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of theassociate.The most recent available audited fi nancial statements of the associates are used by the Group in applying the equity method. Wherethe dates of the audited fi nancial statements used are not co-terminous with those of the Group, the share of results is arrived at fromthe last audited fi nancial statements available and un-audited management fi nancial statements to the end of the accounting period.Consistent accounting policies are applied for like transactions and events in similar circumstances.In the Company’s separate fi nancial statements, investments in associates are accounted for at cost less impairment losses.ANNUAL REPORT 2005

38Notes to the Financial Statements- 31 December 2005ACE DYNAMICS LIMITED2.7 Revenue recognitionRevenue is recognised to the extent that it is probable that the economic benefi ts will fl ow to the Group and the revenue can be reliablymeasured. The following specifi c recognition criteria must also be met before revenue is recognised :• Revenue from the sale of manufactured products and equipment is recognised upon the passage of title to the customer whichgenerally coincides with their delivery and acceptance.• Revenue from the provision of management services is recognised when the services are rendered unless collectibility is indoubt.• Dividend income is recognised when the shareholders’ right to receive the payment is established.• Interest income is recognised as the interest accrues (taking into account the effective yield on the asset) unless collectibility isin doubt.• For development properties, these are recognised on a percentage of completion method as stated in Note 2.9.• For development properties completed for sale, these are recognised upon the passage of title to the customer which generallycoincides with the signing of the sales and purchase agreement.2.8 Functional and foreign currencies(a)Functional currencyThe management has determined the currency of the primary economic environment in which the Company operates i.e. functionalcurrency, to be SGD. Sales prices and major costs of providing goods and services including major operating expenses areprimarily infl uenced by fl uctuations in SGD.(i)Foreign currency transactionsTransactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiarycompanies, and are recorded on initial recognition in the functional currencies at exchange rates approximating thoseruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at theclosing rate of exchange ruling at the balance sheet date. Non-monetary items that are measured in terms of historicalcost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Nonmonetaryitems measured at fair value in a foreign currency are translated using the exchange rates at the date whenthe fair value was determined.Exchange differences arising on the settlement of monetary items or on translating monetary items at the balance sheetdate are recognised in the profi t and loss account except for exchange differences arising on monetary items that formpart of the Group’s net investment in foreign subsidiary companies, which are recognised initially in a separate componentof equity as foreign currency translation reserve in the consolidated balance sheet and recognised in the consolidatedprofi t and loss account on disposal of the subsidiary. In the Company’s separate fi nancial statements, such exchangedifferences are recognised in the profi t and loss account.(ii) Foreign currency translationThe results and fi nancial position of foreign operations are translated into SGD using the following procedures:ANNUAL REPORT 2005• Assets and liabilities for each balance sheet presented are translated at the closing rate ruling at that balance sheetdate; and• Income and expenses for each income statement are translated at average exchange rates for the year, whichapproximates the exchange rates at the dates of the transactions.All resulting exchange differences are recognised in a separate component of equity as foreign currency translationreserve.Goodwill and fair value adjustments arising on the acquisition of foreign operations on or after 1 January 2005 aretreated as assets and liabilities of the foreign operation and are recorded in the functional currency of the foreignoperations and translated at the closing rate at the balance sheet date.

Notes to the Financial Statements- 31 December 2005392.8 Functional and foreign currencies (cont’d)Goodwill and fair value adjustments which arose on acquisition of foreign subsidiaries before 1 January 2005 are deemed to beassets and liabilities of the parent company and are recorded in SGD at the rates prevailing at the date of acquisition.On disposal of a foreign entity, accumulated exchange differences are recognised in the profi t and loss account as a componentof the gain or loss on disposal.2.9 Development propertyDevelopment property consists of property which is held with the intention of development and sale in the ordinary course ofbusiness.ACE DYNAMICS LIMITEDIt is stated at the lower of cost plus attributable profi t less progress billings, and estimated net realisable value. Net realisable valuerepresents the estimated selling price less cost to be incurred in selling the property.Cost of properties under development include land acquisition costs, development expenditure, borrowing costs and other relatedexpenditure. Borrowing costs payable on loans funding a development property are capitalised as a cost of the development propertyuntil the date of its practical completion, which is taken to be the date of issue of the Temporary Occupation Permit (“TOP”).Revenue and costs associated with the development property are recognised as revenue and expenses respectively, by reference tothe stage of completion of the development property at the balance sheet date, when the outcome of the project can be estimatedreliably. The stage of completion is measured by reference to actual contract costs incurred to date as a percentage of total estimatedcontract costs, costs in both cases exclude land and interest costs.When it is probable that total development costs will exceed total revenue of the project, provision for expected loss is recognised asan expense immediately.The development property will be transferred to development property completed for sale when it has been completed, the TOP hasbeen obtained and it is available for sale.2.10 Development property completed for saleDevelopment property completed for sale is stated at the lower of cost (Note 2.9) and estimated net realisable value. Net realisablevalue represents the estimated selling price less costs to be incurred in selling the property.2.11 Property, plant and equipmentAll items of property, plant and equipment are initially recorded at cost. Subsequent to recognition, property, plant and equipmentare stated at cost or valuation less accumulated depreciation and any accumulated impairment losses. Land and buildings aresubsequently revalued on an asset-by-asset basis, to their fair values. Fair value is determined from market-based evidence byappraisal that is undertaken by professionally qualifi ed valuers.When an asset is revalued, any increase in the carrying amount is credited directly to the asset revaluation reserve. However, theincrease is recognised in the profi t and loss account to the extent that it reverses a revaluation decrease of the same asset previouslyrecognised in the profi t and loss account. When an asset’s carrying amount is decreased as a result of a revaluation, the decreaseis recognised in the profi t and loss account. However, the decrease is debited directly to the asset revaluation reserve to the extentof any credit balance existing in the reserve in respect of that asset.Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the netamount is restated to the revalued amount of the asset. The revaluation surplus included in the asset revaluation reserve in respectof an asset, is transferred directly to accumulated profi ts on retirement or disposal of the asset.The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicatethat the carrying value may not be recoverable.ANNUAL REPORT 2005

40Notes to the Financial Statements- 31 December 2005ACE DYNAMICS LIMITED2.11 Property, plant and equipment (cont’d)The residual values, useful life and depreciation method are reviewed at each fi nancial year-end to ensure that the amount, methodand period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economicbenefi ts 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 benefi ts are expected from itsuse or disposal. Any gain or loss arising on derecognition of the asset is included in the profi t and loss account in the year the assetis derecognised.2.12 DepreciationDepreciation is computed on a straight-line basis to write off the cost or revalued amount over the estimated useful lives of theproperty, plant and equipment as follows :Leasehold properties - over the term of the lease of 30 yearsPlant and machinery - 6 months to 10 yearsOffi ce equipment, furniture and fi ttings - 3 to 10 yearsMotor vehicles - 5 yearsFully depreciated property, plant and equipment are retained in the fi nancial statements until they are no longer in use and no furthercharge for depreciation is made in respect of them.The useful life and depreciation method are reviewed annually to ensure that the method and period of depreciation are consistent withthe expected pattern of economic benefi ts from items of property, plant and equipment.2.13 StocksStocks are valued at the lower of cost (determined primarily on the weighted average method) and net realisable value. Net realisablevalue is the estimated selling price in the ordinary course of business less estimated costs necessary to make the sale.2.14 Quoted InvestmentsQuoted Investments are classifi ed as fi nancial assets at fair value through profi t or loss.The accounting policy for this category of fi nancial assets is stated in Note 2.16.2.15 Impairment of non-financial assetsThe Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indicationexists, or when annual impairment testing for an asset (i.e. an intangible asset with an indefi nite useful life, an intangible asset not yetavailable for use, or goodwill acquired in a business combination) is required, the Group makes an estimate of the asset’s recoverableamount.ANNUAL REPORT 2005An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in useand is determined for an individual asset, unless the asset does not generate cash infl ows that are largely independent of those fromother assets or group of assets. In assessing value in use, the estimated future cash fl ows are discounted to their present valueusing a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset.Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to itsrecoverable amount. Impairment losses of continuing operations are recognised in the profi t 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 exceedthe amount held in the asset revaluation reserve for that same asset.

Notes to the Financial Statements- 31 December 2005412.15 Impairment of non-financial assets (cont’d)An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment lossesrecognised for an asset other than goodwill may no longer exist or may have decreased. If such indication exists, the recoverableamount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used todetermine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount ofthe asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have beendetermined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Reversal of an impairment lossis recognised in the profi t and loss account unless the asset is carried at revalued amount, in which case the reversal in excess ofimpairment loss previously recognised through the profi t and loss account is treated as a revaluation increase. After such a reversal,the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on asystematic basis over its remaining useful life.ACE DYNAMICS LIMITEDThe Group does not reverse in a subsequent period, any impairment loss recognised for goodwill.2.16 Financial assets and financial liabilities(i)Recognition and derecognitionFinancial assets and fi nancial liabilities are recognised on the balance sheet when, and only when, the Group becomes a party tothe contractual provisions of the fi nancial instrument. All regular way purchases and sales of fi nancial assets that require deliveryof the assets within the period generally established by regulation or market convention, are recognised on the settlement date.A fi nancial asset, or, where applicable, a part of a fi nancial asset or group of similar fi nancial assets is derecognised where :• the contractual rights to the cash fl ows from the asset have expired;• the Group retains the contractual rights to receive cash fl ows from the asset, but has assumed an obligation to pay them infull without material delay to a third-party under a “pass-through” arrangement; or• the Group has transferred its rights to receive cash fl ows from the asset and either (a) has transferred substantially all therisks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset,but has transferred control of the asset.Where the Group has transferred its rights to receive cash fl ows and has neither transferred nor retained substantially all therisks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuinginvolvement in the asset.On the derecognition of a fi nancial asset in its entirety, the difference between the carrying amount and the sum of (a) theconsideration received (including any new asset obtained less any new liability assumed) and (b) any cumulative gain or loss thathas been recognised in equity is recognised in the profi t and loss account.A fi nancial liability is derecognised when the obligation under the liability is discharged, cancelled or expired. Where an existingfi nancial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liabilityare substantially modifi ed, such an exchange or modifi cation is treated as a derecognition of original liability and the recognitionof a new liability, and the difference in the carrying amounts of the new and original liabilities is recognised in the profi t and lossaccount.(ii) Classification and measurementFinancial assets and liabilities within the scope of FRS 39 are classifi ed and accordingly measured as follows :• Designated as fair value through profi t and lossThese are fi nancial assets and fi nancial liabilities designated at inception to be measured at fair value through profi t and lossaccount. Such designation, once made, is irrevocable.Financial assets and fi nancial liabilities at fair value through profi t and loss are recognised initially at fair value with transactioncosts taken directly to the profi t and loss account, and are subsequently remeasured at fair value.ANNUAL REPORT 2005

42Notes to the Financial Statements- 31 December 2005ACE DYNAMICS LIMITED2.16 Financial assets and financial liabilities (cont’d)• Loans and receivablesNon-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market are classifi ed asloans and receivables. Such assets are initially recognised at fair value plus directly attributable transaction costs, and aresubsequently carried at amortised cost using the effective interest method. Gains and losses are recognised in the profi t andloss account when the loans and receivables are derecognised or impaired, as well as through the amortisation process.The Group does not have any held-to-maturity or available-for-sale fi nancial assets.• Non-trading liabilitiesNon-derivative fi nancial liabilities not held for active trading or designated as fair value through profi t and loss are initiallyrecognised at fair value plus directly attributable transaction costs and are subsequently carried at amortised cost usingthe effective interest method. Gains and losses are recognised in the profi t and loss account when the liabilities arederecognised, as well as through the amortisation process.2.17 Investment propertiesInvestment properties are properties held either to earn rental income or for capital appreciation or both. Investment propertiesare measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existinginvestment property at the time that cost is incurred if the recognition criteria are met and excludes the costs of day-to-day servicingof an investment property. Subsequent to initial recognition, investment properties are stated at fair value, which refl ects marketconditions at the balance sheet date. Gains or losses arising from changes in the fair values of investment properties are included inthe profi t and loss account in the year in which they arise.Investment properties are derecognised when either they have been disposed of or when the investment property is permanentlywithdrawn from use and no future economic benefi t is expected from its disposal. Any gains or losses on the retirement or disposalof an investment property are recognised in the consolidated profi t and loss account in the year of retirement or disposal.2.18 Trade and other receivablesTrade receivables which are classifi ed as loans and receivables under FRS 39, generally have 30-180 days credit terms. An allowanceis made for uncollectible amounts when there is objective evidence that the Group will not be able to collect the debt. Bad debts arewritten-off when identifi ed. Further details on the accounting policy for impairment of fi nancial assets are stated in Note 2.19 below.2.19 Impairment of financial assetsThe Group assesses at each balance sheet date whether there is any objective evidence that a fi nancial asset or group of fi nancialassets is impaired.ANNUAL REPORT 2005If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments carried at amortisedcost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the presentvalue of estimated future cash fl ows (excluding future credit losses that have not been incurred) discounted at the fi nancial asset’soriginal effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset isreduced through the use of an allowance account. The amount of the loss is recognised in the profi t and loss account.If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an eventoccurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal ofan impairment loss is recognised in the profi t and loss account, to the extent that the carrying value of the asset does not exceed itsamortised cost at the reversal date.

Notes to the Financial Statements- 31 December 2005432.20 Trade and other payablesLiabilities for trade and other amounts payable, which are normally settled on 30-90 day terms, and payables to related parties areinitially recognised at fair value and subsequently measured at amortised cost using the effective interest method.Gains and losses are recognised in the profi t and loss account when the liabilities are derecognised as well as through the amortisationprocess.2.21 ProvisionsProvisions are recognised when the Group has a present obligation (legal or constructive) where, as a result of a past event, it isprobable that an outfl ow of resources embodying economic benefi ts will be required to settle the obligation and a reliable estimate canbe made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, the reimbursementis recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision ispresented in the profi t and loss account net of any reimbursement.ACE DYNAMICS LIMITEDIf the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that refl ects, whereappropriate, the risks specifi c to the liability. Where discounting is used, the increase in the provision due to the passage of time isrecognised as fi nance costs.Provisions are reviewed at each balance sheet date and adjusted to refl ect the current best estimate. If it is no longer probable thatan outfl ow of resources embodying economic benefi ts will be required to settle the obligation, the provision is reversed.2.22 Employee benefitsDefined contribution planThe Group participates in the national pension schemes as defi ned by the laws of the countries in which it operates. In particular,the Singapore companies in the Group make contributions to the Central Provident Fund scheme in Singapore, a defi ned contributionpension scheme. Contributions to national pension schemes are recognised as an expense in the period in which the related serviceis performed.Employee equity compensation benefits optionThe Group has an employee share option plan for the granting of non-transferable share options.The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which the shareoptions are granted. In valuing the share options, no account is taken of any performance conditions, other than conditions linked tothe price of the shares of the Company (‘market conditions’), if applicable.The cost of equity-settled transactions is recognised, together with a corresponding increase in the employee share option reserve,over the period in which the performance and/or service conditions are fulfi lled, ending on the date on which the relevant employeesbecome fully entitled to the award (‘the vesting date’). The cumulative expense recognised for equity-settled transactions at eachreporting date until the vesting date refl ects the extent to which the vesting period has expired and the Group’s best estimate of thenumber of equity instruments that will ultimately vest. The profi t or loss charge or credit for a period represents the movement incumulative expense recognised as at the beginning and end of that period.No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a marketcondition, which are treated as vested irrespective of whether or not the market condition is satisfi ed, provided that all otherperformance conditions are satisfi ed.Where the terms of an equity-settled award are modifi ed, as a minimum an expense is recognised as if the terms had not beenmodifi ed. In addition, an expense is recognised for any modifi cation, which increases the total fair value of the share-based paymentarrangement, or is otherwise benefi cial to the employee as measured at the date of modifi cation.ANNUAL REPORT 2005

44Notes to the Financial Statements- 31 December 2005ACE DYNAMICS LIMITED2.22 Employee benefits (cont’d)Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yetrecognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designatedas a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modifi cation of theoriginal award, as described in the previous paragraph.The Group has applied the transitional provisions of FRS 102 in respect of equity-settled awards and has applied FRS 102 only toequity-settled awards granted after 22 November 2002 that had not vested on or before 1 January 2005.Employee leave entitlementEmployee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liabilityfor leave as a result of services rendered by employees up to balance sheet date.2.23 LeasesFinance leases which effectively transfer to the Group substantially all the risks and rewards incidental to ownership of the leaseditem, 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 minimumlease payments at the inception of the lease term. Lease payments are apportioned between the fi nance charges and reduction of thelease liability so as to achieve a constant rate of interest on the remaining balance of the liability for each period. Finance charges arecharged directly to the profi t and loss account. Capitalised leased assets are depreciated over the shorter of the estimated usefullife of the asset or the lease term.Leases where the lessor effectively retains substantially all the risks and rewards of ownership of the leased term, are classifi ed asoperating leases. Operating lease payments are recognised as an expense in the profi t and loss account on a straight-line basis overthe lease term.2.24 Interest bearing loans and borrowingsAll loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transactioncosts.After initial recognition, interest-bearing loans and borrwings are subsequently measured at amortised cost using the effectiveinterest method.Gains and losses are recognised in the consolidated profi t and loss account when the liabilities are derecognised as well as throughthe amortisation process.2.25 Borrowing costsBorrowing costs are generally expensed as incurred. Borrowing costs are capitalised if they are directly attributable to the acquisition,construction or production of a qualifying asset. Capitalisation of borrowing costs commences when the activities to prepare theasset for its intended use or sale are in progress and the expenditure and borrowing costs are being incurred. Borrowing costs arecapitalised until the assets are ready for their intended use. If the resulting carrying amount of the asset exceeds its recoverableamount, an impairment loss is recorded.ANNUAL REPORT 20052.26 Income taxes(a) Current taxCurrent tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered fromor paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted orsubstantively enacted by the balance sheet date.

Notes to the Financial Statements- 31 December 2005452.26 Income taxes (cont’d)(b) Deferred taxDeferred income tax is provided using the liability method on temporary differences at the balance sheet date between the taxbases of assets and liabilities and their carrying amounts for fi nancial 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 isnot a business combination and, at the time of the transaction, affects neither the accounting profi t nor taxable profi t or loss;andACE DYNAMICS LIMITED• In respect of taxable temporary differences associated with investments in subsidiary companies, associates and interestsin joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that thetemporary 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 andunused tax losses, to the extent that it is probable that taxable profi t will be available against which the deductible temporarydifferences, and the carry-forward of unused tax credits and unused tax losses can be utilised except:• Where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of anasset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither theaccounting profi t nor taxable profi t or loss; and• In respect of deductible temporary differences associated with investments in subsidiary companies, associates and interestsin joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences willreverse in the foreseeable future and taxable profi t will be available against which the temporary differences 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 nolonger probable that suffi cient taxable profi t 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 hasbecome probable that future taxable profi t 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 isrealised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balancesheet 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 againstcurrent tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.(c) Sales taxRevenues, 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 casethe 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 payablesin the balance sheet.ANNUAL REPORT 2005

46Notes to the Financial Statements- 31 December 2005ACE DYNAMICS LIMITED2.27 Cash and cash equivalentsCash and cash equivalents comprise cash on hand and in banks and short-term deposits. Short-term deposits which are held tomaturity, are carried at cost. For the purpose of the statement of cash fl ows, cash and cash equivalents are shown net of outstandingbank overdrafts, which are repayable on demand and which form an integral part of the Group’s cash management.Cash and short term deposits carried in the balance sheets are classifi ed and accounted for as loans and receivables under FRS 39.The accounting policy for this category of fi nancial assets is stated in Note 2.16.2.28 Intangible assetsGoodwillGoodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combinationover the Group’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities. Following initial recognition,goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment, annually or more frequentlyif events or changes in circumstances indicate that the carrying value may be impaired.For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to eachof the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefi t from the synergies of thecombination, irrespective of whether other assets or liabilities of the group are assigned to those units or groups of units. Each unitor group of units to which the goodwill is so allocated:• Represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and• Is not larger than a segment based on either the Group’s primary or the Group’s secondary reporting format.A cash-generating unit (or group of cash-generating units) to which goodwill has been allocated are tested for impairment annually andwhenever there is an indication that the unit may be impaired, by comparing the carrying amount of the unit, including the goodwill,with the recoverable amount of the unit. Where the recoverable amount of the cash-generating unit (or group of cash-generating units)is less than the carrying amount, an impairment loss is recognised.Where goodwill forms part of a cash-generating unit (or group of cash-generating units) and part of the operation within that unitis disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation whendetermining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relativevalues of the operation disposed of and the portion of the cash-generating unit retained.Other intangible assetsIntangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a businesscombination is their fair values as at the date of acquisition. Following initial recognition, intangible assets are carried at cost lessany accumulated amortisation and any accumulated impairment losses. The useful lives of intangible assets are assessed to be eitherfi nite or indefi nite. Intangible assets with fi nite lives are amortised on a straight-line basis over the estimated economic useful lives andassessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and theamortisation method for an intangible asset with a fi nite useful life are reviewed at least at each fi nancial year-end. The amortisationexpense on intangible assets with fi nite lives is recognised in the consolidated profi t and loss account.ANNUAL REPORT 2005Intangible assets with indefi nite useful lives are tested for impairment annually or more frequently if the events or changes incircumstances indicate that the carrying value may be impaired either individually or at the cash-generating unit level. Such intangiblesare not amortised. The useful life of an intangible asset with an indefi nite life is reviewed annually to determine whether the useful lifeassessment continues to be supportable.Distribution rightsDistribution rights acquired separately are measure on initial recognition at cost. Following initial recognition, these assets are carriedat cost less any accumulated amortisation and any accumulated imparment losses. The useful lives of intangible assets are assessedto be 3 years and are amortised on a straight-line basis. The amortisation period and the amortisation method for these assets witha fi nite useful life are reviewed at least at each fi nancial year-end.

47Notes to the Financial Statements- 31 December 20053. TurnoverGroup2005 2004$’000 $’000Sale of goods 51,409 38,918Sale of services 45 84Revenue recognised from development property 15,415 -Revenue from development property completed for sale 5,549 -Others 889 93373,307 39,935ACE DYNAMICS LIMITED4. Other income, profit /(loss) from operating activities and finance costsOther income, profi t/(loss) from operating activities and fi nance costs included the following :Other incomeInterest income 19 91Gain/(loss) on sale of property, plant and equipment 40 (94)Transport billing 61 104Rental of machineries 964 –Profit/(loss) from operating activities is stated after charging / (crediting) the following:Depreciation of property, plant and equipment 2,104 1,267Salaries and related costs 6,223 4,858Defi ned contributions schemes 801 560Allowance for stock obsolescence 54 412Allowance for doubtful debts (trade) 130 675Foreign currency exchange gains- realised (786) (454)- unrealised (64) (202)Expense of share-based payments 202 101Allowance for doubtful debts of an associated company – 3,113Provision for foreseeable losses of development property – 1,592Impairment loss of :- other investments (quoted) – 140- club membership – 11- investment property 80 –Allowance for other debtor – 554Compensation paid to a director for loss of offi ce for the Group – 59Loss / (gain) on disposal of an associated company 20 (574)Loss on return of investment arising from reduction of share capitalof an associated company – 882Gain on disposal of a subsidiary company (47) –Fair value change of assets held at fair value through profi t and loss 62 –Allowance for loss on development property completed for sale 512 –There are no non-audit fees paid to the auditors of the Company during the fi nancial year.ANNUAL REPORT 2005

48Notes to the Financial Statements- 31 December 2005ACE DYNAMICS LIMITED5. Finance costsGroup2005 2004$’000 $’000Interest expense :- bank overdrafts 106 46- hire purchase interest 81 61- trust receipts 177 109- term loans 583 214947 4306. TaxationProvision for taxation in respect of results for the fi nancial year:- current taxation 884 591- deferred taxation (149) (30)Share of associated companies taxation 166 54Effect of change in tax rate for deferred taxation – (78)901 537Under/(over)provision of prior years’- current taxation 232 196- deferred taxation – (52)232 1441,133 681A reconciliation between the tax expense and the product of accounting profi t/(loss) multiplied by the applicable tax rate for yearsended 31 December are as follows :Profi t/(loss) before taxation 1,754 (3,705)Tax at domestic rates applicable to profi ts/(losses) in the countries where the Group operates 385 (735)Expenses not deductible for tax purposes 266 1,143Income not subject to tax (33) (117)Utilisation of tax losses and capital allowances brought forward (18) (54)Share of associated companies taxation 166 54Effect of change in tax rate for deferred taxation – (78)Tax rebate (54) (47)Deferred tax asset not recognised 225 381Others (36) (10)901 537Underprovision in respect of prior year 232 1441,133 681ANNUAL REPORT 2005At 31 December 2005, the Group has unutilised tax losses and unabsorbed capital allowances of approximately $2,425,000 and$420,000, respectively (2004 : $2,794,000 and $nil, respectively), which are available for set off against future taxable incomesubject to the respective local tax provisions and regulations. No deferred tax asset is recognised in the fi nancial statement for theseunutilised tax losses due to uncertainty of its recoverability.7. Basic and diluted earnings/(loss) per shareBasic earnings/(loss) per share is calculated by dividing the net earnings/(loss) for the year attributable to ordinary shareholders bythe weighted average number of ordinary shares outstanding during the year.Diluted earnings/(loss) per share is calculated by dividing the net earnings/(loss) for the year attributable to ordinary shareholders bythe weighted average number of ordinary shares outstanding during the year (adjusted for the effects of dilutive options).

49Notes to the Financial Statements- 31 December 20057. Basic and diluted earnings/(loss) per share (cont’d)The following refl ects the income and share data used in the basic and diluted earnings/(loss) per share computations for the yearsended 31 December :Group2005 2004$’000 $’000(Restated)Net profi t/(loss) attributable to ordinary shareholders forbasic and diluted earnings per share 622 (4,493)ACE DYNAMICS LIMITED2005 2004’000 ’000Weighted average number of ordinary shares on issueapplicable to basic earnings per share 140,010 127,774Effect of dilutive securities :- Share options – 692Adjusted weighted average number of ordinary sharesapplicable to diluted earnings per share 140,010 128,46613,707,000 (2004 : 14,809,000) of share options granted to employees under the existing employe share option plans have notbeen included in the calculation of diluted earnings per share because they are anti-dilutive for the current and previous fi nancial yearspresented.8. Property, plant and equipmentLeasehold Plant and Otherproperty machinery assets Total$’000 $’000 $’000 $’000GroupCost or valuationBalance at 1 January 2004 -Valuation 4,500 – – 4,500Cost 10,320 277 923 11,52014,820 277 923 16,020Translation adjustment – (5) (11) (16)Additions 91 191 983 1,265Disposals – (50) (571) (621)Due to subsidiary company assumed – 8,411 297 8,708Balance at 31 December 2004 14,911 8,824 1,621 25,356Balance at 1 January 2005 -Valuation 4,500 – – 4,500Cost 10,411 8,824 1,621 20,85614,911 8,824 1,621 25,356Translation adjustment – 1 5 6Additions 79 423 721 1,223Disposals – (138) (61) (199)Balance at 31 December 2005 14,990 9,108 2,286 26,384ANNUAL REPORT 2005

50Notes to the Financial Statements- 31 December 2005ACE DYNAMICS LIMITED8. Property, plant and equipment (cont’d)Leasehold Plant and Otherproperty machinery assets Total$’000 $’000 $’000 $’000Accumulated depreciationBalance at 1 January 2004 4,060 146 538 4,744Translation adjustment – (2) (6) (8)Charge for 2004 625 450 192 1,267Disposals – (33) (114) (147)Due to subsidiary company assumed – 3,060 354 3,414Balance at 31 December 2004 and 1 January 2005 4,685 3,621 964 9,270Translation adjustment – 1 3 4Charge for the year 632 1,185 287 2,104Disposals – (119) (56) (175)Balance at 31 December 2005 5,317 4,688 1,198 11,203Net book valueAt 31 December 2005 9,673 4,420 1,088 15,181At 31 December 2004 10,226 5,203 657 16,086(a) The details of the Group’s leasehold property are as follows :Site areaDescriptionLocation (sq. metres) Tenure and usage1 Shipyard Road 24,712 Leasehold, 30 years Offi ce andSingapore 628128 commencing manufacture1 November 1991 of gas(b) The revaluation of the Group’s leasehold property was made by the Directors in 1989 based on professional appraisals by anindependent valuer.Had the leasehold property that had been revalued be stated at cost, the net book value of the revalued portion at the end of thefi nancial year would have been $1,208,923 (2004 : $1,311,757).(c) Other assets of the Group include offi ce equipment, furniture and fi ttings and motor vehicles. During the year, the Group acquiredplant and machinery and motor vehicles with an aggregate fair value of $161,000 (2004 : $249,600) by means of fi nancelease. The net book value of other assets as at 31 December 2005 include assets under hire purchase contracts amounted to$2,286,036 (2004 : $3,796,568) for the Group.(d) A legal charge on the Group’s leasehold property at 1 Shipyard Road, Singapore 628128 is made to a fi nancial institution asmentioned in Note 18 and 21.ANNUAL REPORT 2005

Notes to the Financial Statements- 31 December 2005519. Development propertyGroup2005 2004$’000 $’000Land acquisition costs 9,945 9,945Development costs 10,598 5,81220,543 15,757Less : Attributable loss (3,410) –: Progress payment received (8,135) (2,601)8,998 13,156Less : Provision for expected losses (622) (4,032)8,376 9,124Borrowing costs capitalised during the year 331 583ACE DYNAMICS LIMITEDThe details of the development property are as follows :Site areaGroup’s effectiveLocation (sq. metres) Tenure interest16 units of cluster houses 2,226 Freehold 100%at 9 Recreation LaneSingapore 546561Development costs include an amount of directors’ remuneration of $nil (2004 : $110,613).The development property is charged to a fi nancial institution for credit facilities as mentioned in Note 21.10. Subsidiary companiesCompany2005 2004$’000 $’000Investments in unquoted shares, at cost 24,782 19,935Less : Impairment loss (5,019) (2,319)19,763 17,616Amounts due from subsidiary companies - non-trade 6,710 29,024Amounts due to subsidiary companies - non-trade (464) (1,381)Allowance for doubtful amounts due from subsidiary companies (684) (7,246)5,562 20,39725,325 38,013All amounts due from and to subsidiary companies are unsecured, bears interest at 6% (2004 : nil) per annum and are not expectedto be repaid within the next twelve months.ANNUAL REPORT 2005

52Notes to the Financial Statements- 31 December 2005ACE DYNAMICS LIMITED11. Associated companiesGroupCompany2005 2004 2005 2004$’000 $’000 $’000 $’000Cost of investment 2,517 3,067 – –Impairment loss – (25) – –Share of post-acquisition reserves 2,539 1,980 – –Amounts due from associated companies (non-trade) 1,043 13,162 – 18Amounts due to associated companies (non-trade) – (138) – (9)Allowance for doubtful debts (non-trade) – (3,113) – –6,099 14,933 – 9The amounts due from and to associated companies are unsecured, interest-free and are not expected to be repaid within the nexttwelve months.During the fi nancial year, the Company disposed off its interest in an associated company, OMD Holdings Pte Ltd, for a considerationof $500,000.During the year, the Company invested in an associated company, Everfl ow Industry Sdn Bhd, for a cost of RM233,330 (S$102,666)and disposed off the same associated company during the same fi nancial year for a consideration of RM233,330 (S$102,666). Thereis no profi t and loss impact to the Group.The summarised fi nancial information of the associated companies are as follows:Group2005 2004$’000 $’000Assets and liabilities :Current assets 13,306 17,803Non-current assets 26,261 64,479Total assets 39,567 82,282Non current liabilities (5,631) (49,921)Current liabilities (19,869) (19,816)Total liabilities (25,500) (69,737)Results :Revenue 28,459 65,896Profi t/(loss) for the year 159 (195)ANNUAL REPORT 2005

Notes to the Financial Statements- 31 December 20055312. Other investmentsGroup2005 2004$’000 $’000Quoted investments compriseShares in corporations 94 171Club memberships :At cost :At beginning of the year 411 411Impairment loss (176) (176)Reclassifi ed to intangible assets (Note 14) (235) -- 235Total 94 406ACE DYNAMICS LIMITED13. Investment propertyAt beginnning of the year 875 -Additions 43 875Impairment loss (80) -838 875The investment property comprise :Site areaLocation Description (sq. metres) Tenure UsageNo. 458 Siglap Road Condominium 187 Freehold Residential#03-03, Flamingo Valley,Singapore 455938The investment property is charged to fi nancial institution for credit facilities as mentioned in Note 18 and 21.Investment property is stated at fair value which has been determined based on valuation as at 31 December 2005 performed by aregistered independent appraiser having an appropriate recognised professional qualifi cation.ANNUAL REPORT 2005

54Notes to the Financial Statements- 31 December 2005ACE DYNAMICS LIMITED14. Intangible assetsGroupClub Distributionmembership rights Goodwill Total$’000 $’000 $’000 $’000CostBalance at 1.1.2004 – – – –Acquisition through business combination – – 2,000 2,000Balance at 31.12.2004 and 1.1.2005 – – 2,000 2,000Additions – 87 – 87Elimination of accumulated amortisation – – (400) (400)Impairment loss – – (1,600) (1,600)Reclassifi ed from other investments (Note 12) 235 – – 235Balance at 31.12.2005 235 87 – 322Accumulated amortisationBalance at 1.1.2004 – – – –Amortisation recognised – – 400 400Balance at 31.12.2004 and 1.1.2005 – – 400 400Amortisation recognised (35) – – (35)Elimination of accumulated amortisation – – (400) (400)Balance at 31.12.2005 (35) – – (35)Net carrying amountBalance at 31.12.2005 200 87 – 287Balance at 31.12.2004 – – 1,600 1,600Impairment tests for goodwill arising on consolidationIn accordance with FRS 103, the carrying value of the Group’s goodwill on acquisition of subsidiary company as at 31 December wasassessed for impairment.Goodwill acquired through business combinations has been allocated to the individual entity, Omnidisc Manufacturing Pte Ltd, whichis also the cash generating unit for impairment testing.The recoverable amount is determined based on a value in use calculation using cash fl ow projections based on fi nancial budgets andforecasts approved by management covering a fi ve-year period. Management has considered and determined the factors applied inthese fi nancial budgets which include margins and average growth rate. The budgeted margins are based on past performance andits expectation of market development. The discount rate applied is assumed at 6% based on the average borrowing costs of theGroup at the beginning of the budgeted year.ANNUAL REPORT 2005A full impairment loss was required for the fi nancial year ended 31 December 2005 for the goodwill assessed as the recoverable valueis less than its carrying value.

Notes to the Financial Statements- 31 December 20055515. Development property completed for saleGroup2005 2004$’000 $’000Completed units, at cost 14,293 –Less : Impairment loss (512) –This comprises the 22 remaining condominium units situated at 31 Kim Keat Lane, Singapore 32888213,781 –ACE DYNAMICS LIMITED16. StocksFinished goods for resale- at cost 9,148 4,870- at net realisable value 583 1,013Goods-in-transit stated at cost 3,939 448Raw materials stated at cost 21 241Total inventories at lower of cost and net realisable value 13,691 6,57217. Other debtorsGroupCompany2005 2004 2005 2004$’000 $’000 $’000 $’000Sundry deposits * 375 78 – –Staff loans – 2 – –Other debtors + 1,400 645 9 139Loan # – 420 – –Amounts due from a subsidiary company + – – 12,981 –1,775 1,145 12,990 139* Sundry deposits of $42,530 (2004: $70,112) are not expected to be repaid within the next twelve months as these are securitydeposits for services which are not expected to be terminated and approximates their fair value.# The loan was unsecured and interest-free and repayable on demand.+ Amounts due from a subsidiary company and other debtors are non-trade in nature, unsecured, interest-free and are repayableon demand.GroupCompany2005 2004 2005 2004$’000 $’000 $’000 $’000The following amounts are stated after deductingallowance for doubtful debts of :- subsidiary company – – 6,563 –- other debtors 868 804 – –ANNUAL REPORT 2005

56Notes to the Financial Statements- 31 December 2005ACE DYNAMICS LIMITED18. Amounts due to bankersGroupCompany2005 2004 2005 2004$’000 $’000 $’000 $’000Secured -Term loan 641 357 357 357Machinery loan 68 68 – –Property loan 16,123 42 – –Bank overdrafts (Note 25) 1,562 1,283 963 993Unsecured -Money market facilities 1,100 1,100 1,000 1,000Bills payables and trust receipts 5,790 2,873 – –Term loan 334 – 334 –25,618 5,723 2,654 2,350(i) The term loan bears interest from 3.35% to 5.77% (2004 : 3.29% to 4.00%) per annum and is secured by a legal mortgageover the property at 1 Shipyard Road, Singapore 628128 (Note 8).(ii) The machinery loan bears interest at 6.25% (2004 : 6.25%) per annum and is secured by a fi xed charge over the machine infavour of a fi nancial institution.(iii) The property loan bears interest from 2.5% to 6.25% (2004 : 3.75%) per annum and is secured by a fi rst legal mortgageover the investment property at unit #03-03, 458 Siglap Road, Flamingo Valley, Singapore 455398 (Note 13) and developmentproperty completed for sale, at 31 Kim Keat Lane, Singapore 328882, and development property at 9 Recreation Lane, Singapore546561.(iv) The bank overdrafts bear interest from 5.6% to 6.4% (2004 : 5.95% to 6.50%) per annum and are obtained by corporateguarantees from the Company and its subsidiary companies. The bank overdrafts are also secured by a legal mortgage over theleasehold property at 1 Shipyard Road, Singapore 628128 (Note 8).(v) The money market facilities bear interest from 3.85% to 5.31% (2004 : 2.81% to 3.45%) per annum and are obtained by acorporate guarantee issued by the Company.(vi) The bills payable and trust receipts bear interest from 6.08% to 7.5% (2004 : 2.13% to 9.80%) per annum and are obtainedby a corporate guarantee issued by the Company.19. Other creditorsGroupCompany2005 2004 2005 2004$’000 $’000 $’000 $’000Accruals 3,546 3,433 181 132Sundry creditors 577 320 21 50Advances to contractor 774 376 – –4,897 4,129 202 182The advances to contractor is non-interest bearing and will be used to offset the construction costs payable and to be incurred for theGroup’s development property.ANNUAL REPORT 2005

Notes to the Financial Statements- 31 December 20055720. Hire purchase creditorsThe Group acquired certain plant and machinery under hire purchase arrangements over the next 1 to 7 years. The implied interestcharged is between 1.9% to 3.2% (2004 : 1.9% to 7.86%) per annum. The future minimum lease payments together with thepresent value of the net minimum lease payments are as follows :PresentPresentMinimum value of Minimum valuepayments payments payments of payments2005 2005 2004 2004$’000 $’000 $’000 $’000ACE DYNAMICS LIMITEDGroupWithin 1 year 500 453 841 772After 1 year but not more than 5 years 769 662 976 882After 5 years 19 17 87 77788 679 1,063 959Total minimum lease payments 1,288 1,132 1,904 1,731Less : Amounts representing fi nance charges (156) – (173) –Present value of lease payments 1,132 1,132 1,731 1,73121. Long-term loansGroupCompany2005 2004 2005 2004$’000 $’000 $’000 $’000Secured :(a) Property loan 606 8,129 – –(b) Machinery loan 68 132 – –(c) Term loan 982 1,339 982 1,339Unsecured :(a) Term loan 667 – 667 –2,323 9,600 1,649 1,339(a) (i) The property loan bears interest from 2.5% to 6.25% (2004 : 4.25% to 6.25%) per annum and is secured by :• a fi rst legal mortgage on the development property situated at 9 Recreation Lane, Singapore 546561 (Note 9);• a fi rst legal mortgage on the investment property situated at unit #03-03, 458 Siglap Road, Flamingo Valley, Singapore455398 (Note 13); and• an insurance policy for an amount equal to the replacement cost of the property with a fi nancial institution.(ii) The Company issued guarantees to obtain the loans. The principal of the loan of $nil (2004 : $7,799,000) together with allinterests thereon shall be fully repaid by 29 November 2006 or 6 months from the date of issuance of Temporary OccupationPermit. This amount has been transferred to short term loan (Note 18) in year 2005.(b) The machinery loan bears interest at 6.25% (2004 : 6.25%) per annum and is secured by a fi rst fi xed charge over the machinein favour of the fi nancial institution.(c) The term loan bears interest at rates from 3.35% to 5.77% (2004 : 3.29% to 4.00%) per annum and is secured by a legalmortgage over the leasehold property at 1 Shipyard Road, Singapore 628128 (Note 8).ANNUAL REPORT 2005

58Notes to the Financial Statements- 31 December 2005ACE DYNAMICS LIMITED22. Deferred tax liabilitiesGroup2005 2004$’000 $’000Balance at beginning of year 1,025 787Due to subsidiary company acquired – 446Provision for the year 15 54Reversal for the year (164) (136)Reversal for the year due to change in tax rate – (78)Reversal to asset revaluation reserve due to change in tax rate – (48)Balance at end of year 876 1,025Deferred taxes as at 31 December relate to the following:Differences in carrying values of property, plant and equipmentfor accounting and tax purposes 597 746Difference in carrying value of the revaluation reserve foraccounting and tax purposes 279 279Net deferred tax liabilities 876 1,02523. Share capitalGroup & Company2005 2004$’000 $’000Authorised :300,000,000 ordinary shares of $0.20 each 60,000 60,000Issued and fully paid ordinary shares :140,009,878 (2004 : 114,101,251) shares of $0.20 each at beginning of year 28,002 22,820Nil (2004 : 5,664,000) shares of $0.20 each issuedon exercise of share options – 1,133Nil (2004 : 20,244,627) shares of $0.20 each at a premiumof $0.02 each in consideration for the acquisition of a subsidiary company – 4,049– 5,182140,009,878 (2004 : 140,009,878) shares of $0.20 each at end of year 28,002 28,002The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry onevote per share without restriction.Details of outstanding share options of the Company are set out in Note 26.24. Share premium, asset revaluation reserve, capital reserve, employee share option reserve and foreign currency translation reserveANNUAL REPORT 2005Group & Company2005 2004$’000 $’000Share premiumBalance at beginning of year 15,740 15,335Share premium of $0.02 each arising from issuance of ordinaryshares in consideration for the acquisition of a subsidiary company – 405Balance at end of year 15,740 15,740The share premium account may be applied only for the purposes specifi ed in the Singapore Companies Act, Cap. 50. The balance isnot available for distribution of dividends except in the form of shares.

59Notes to the Financial Statements- 31 December 200524. Share premium, asset revaluation reserve, capital reserve, employee share option reserve and foreign currency translation reserve(cont’d)Assets revaluation reserveThe asset revaluation reserve arose from the revaluation of the leasehold property in 1989 as mentioned in Note 8.Capital reserveThe capital reserve is not available for distribution as dividends.ACE DYNAMICS LIMITEDEmployee share option reserveEmployee share option reserve represents the equity settled share options granted to employees.Foreign currency translation reserveThe foreign currency translation reserve is used to record exchange differences arising from the translation of the fi nancial statementsof foreign operations whose functional currencies are different from that of the Group’s presentation currency.25. Cash and cash equivalentsCash and cash equivalents are as follows as at 31 December :Group2005 2004$’000 $’000Fixed deposits 1,300 –Cash and bank balances 4,924 3,132Bank overdrafts (Note 18) (1,562) (1,283)4,662 1,849The fi xed deposits earned interest at 1.83% (2004 : nil) per annum.Included in cash and cash equivalents of the Group is an amount of approximately $980,000 (2004 : $690,000) denominated in USdollars.26. Equity compensation benefitsShare Option Scheme(a) Ace Dynamics Share Option Scheme (the “Scheme”)At the Extraordinary meeting held on 19 February 2000, shareholders approved the adoption of the Scheme. Under the Scheme,options may be granted to selected employees of the Group including employees of its associated companies and non-executiveDirectors. Controlling shareholders and their associates are not eligible to participate in the Scheme. Further details of theScheme are set out in the circular to shareholders dated 28 January 2000. Details of the various exercise prices per share areset out in paragraph (b) below.ANNUAL REPORT 2005

60Notes to the Financial Statements- 31 December 2005ACE DYNAMICS LIMITED26. Equity compensation benefits (cont’d)(b) As at the end of the fi nancial year, details of the share options granted under the Scheme on the unissued ordinary shares of$0.20 each of the Company were as follows :Movements of share options outstanding :No.BalanceGrant Option outstanding Options Option outstanding Last dealt Exercisedate price Granted Accepted as at 1.1.2005 exercised lapsed as at 31.12.2005 price period23.02.2000 $0.38 3,744,000 3,744,000 2,222,000 Nil 608,000 1,614,000 $0.38 22.02.2002 to21.02.200724.07.2000 $0.26 160,000 160,000 160,000 Nil – 160,000 $0.26 24.07.2001 to23.07.200716.01.2001 $0.20 6,733,000 6,683,000 1,732,000 Nil 194,000 1,538,000 $0.20 16.01.2002 to15.01.200815.01.2002 $0.20 2,990,000 2,990,000 640,000 Nil – 640,000 No trade 15.01.2002 to14.01.200923.10.2003 $0.24 3,000,000 3,000,000 3,000,000 Nil 300,000 2,700,000 $0.245 23.10.2004 to22.10.201024.08.2004 $0.20 7,085,000 7,055,000 7,055,000 Nil – 7,055,000 $0.19 24.08.2005 to23.08.2011Total 23,712,000 23,632,000 14,809,000 – 1,102,000 13,707,000(c) The fair value of share options as at the date of grant, is estimated by an external valuer using a binomial model, taking intoaccount the terms and conditions upon which the options were granted. The inputs to the model used for the years ended 31December 2005 and 31 December 2004 are shown below.2005 2004Dividend yield (%) 1 1Expected volatility (%) 46.71 46.71Historical volatility (%) 46.71 46.71Risk-free interest rate (%) 2.25 to 2.81 2.25 to 2.81Expected life of option (years) 2.5 2.5Weighted average share price ($) 0.19 0.19The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur.The expected volatility refl ects the assumption that the historical volatility is indicative of future trends, which may also notnecessarily be the actual outcome. No other features of the option grant were incorporated into the measurement of fair value.ANNUAL REPORT 2005The carrying amount of the liability recognised in the Group’s and the Company’s balance sheets relating to cash-settled optionsgranted under the Scheme at 31 December 2005 is $303,000 (2004: $101,000). No options granted under the Scheme hadvested as at 31 December 2005 (2004: Nil).

Notes to the Financial Statements- 31 December 20056127. CommitmentsThe Group has entered into leases on its leasehold property and retail shops. These non-cancellable leases have remaining lease termsof 1 to 17 years. The lease on the Group’s leasehold property include a clause to enable upward revision of the rental charge on anannual basis. The lease term do not contain any restriction on the Group’s activities concerning dividends, additional debt or furtherleasing. Future minimum lease payments under non-cancellable operating leases are as follows as of 31 December :Group2005 2004$’000 $’000Due within one year 447 413Due within two to fi ve years 1,482 1,634Due after fi ve years 3,898 4,7655,827 6,812ACE DYNAMICS LIMITEDCapital expenditure contracted for as at the balance sheet date but not recognised in the fi nancial statements is as follows :2005 2004$’000 $’000Capital commitment in respect of property, plant and equipment 748,009 –28. Contingent liabilitiesContingent liabilities not provided for in the fi nancial statements for year ended 31 December comprised:GroupCompany2005 2004 2005 2004$’000 $’000 $’000 $’000(a) unsecured(i) Guarantees issued for bank facilities of subsidiary companies – – 20,902 16,212(ii) Guarantees to provide fi nancial support to certain subsidiary companies – – 7,343 7,249(b) secured(i) Guarantees issued for bank facilities of subsidiary companies – – 50,135 8,800(ii) Guarantees issued for bank facilities of associated company – 34,335 – 34,335(iii) Indemnity issued for performance guarantee of associated company – 14,101 – 14,101The Company has undertaken to provide fi nancial support to certain subsidiary companies.In connection with (b)(ii) and (b)(iii) above, counter-indemnities amounting to $nil (2004 : $22,468,000) have been received from afellow corporate shareholder and its shareholders.ANNUAL REPORT 2005

62Notes to the Financial Statements- 31 December 2005ACE DYNAMICS LIMITED29. Significant related party disclosuresGroup2005 2004$’000 $’000Rental income and service fee from an associated company 735 735Directors’ and key executives’ remunerationDirectors’ remuneration and fees amount to approximately $863,089 (2004 : $822,449) and $103,417 (2004 : $55,400)respectively.Key executive offi cers’ remuneration totalled $745,279 (2004 : $735,460).30. Risk managementThe Group is exposed to market risks, including primarily interest rate risk, liquidity risk, foreign currency risk and credit risk. TheGroup does not hold or issue derivative fi nancial instruments for trading purposes. The Board reviews and agrees policies formanaging each of these risks and they are summarised below :Interest rate riskThe Group obtains additional fi nancing through bank borrowings and, hire purchase and fi nance leasing arrangements. The Group’spolicy is to obtain the most favourable interest rates available.The following table sets out the carrying amount, by maturity, of the Group’s and the Company’s fi nancial instruments that are exposedto interest rate risk:2005 Within 1 - 2 2 - 3 3 - 4 4 - 5 More thanGroup 1 year years years years years 5 years Total$’000 $’000 $’000 $’000 $’000 $’000 $’000Fixed rateAmounts due to bankers 16,363 135 1,000 1,339 – 652 19,489Hire purchase creditors 195 12 481 37 158 249 1,132Floating rateBank overdrafts 1,562 – – – – – 1,562Amount due to bankers 6,890 – – – – – 6,8902005CompanyFixed rateAmounts due to bankers – – 1,000 1,339 – – 2,339ANNUAL REPORT 2005Floating rateBank overdrafts 964 – – – – – 964Amount due to bankers 1,000 – – – – – 1,000

63Notes to the Financial Statements- 31 December 200530. Risk management (cont’d)2004 Within 1 - 2 2 - 3 3 - 4 4 - 5 More thanGroup 1 year years years years years 5 years Total$’000 $’000 $’000 $’000 $’000 $’000 $’000Fixed rateAmounts due to bankers – 7,998 – – 1,696 373 10,067Hire purchase creditors 58 686 16 635 47 289 1,731Floating rateBank overdrafts 1,283 – – – – – 1,283Amount due to bankers 3,973 – – – – – 3,973ACE DYNAMICS LIMITED2004CompanyFixed rateAmounts due to bankers – – – – 1,696 – 1,696Floating rateBank overdrafts 993 – – – – – 993Amount due to bankers 1,000 – – – – – 1,000Surplus funds are placed with reputable banks.Information relating to the Group’s interest rate exposure is also disclosed in the notes to the fi nancial statements.Liquidity riskTo ensure continuity of funding, the Group’s policy is to obtain loans and borrowings from fi nancial institutions which offer the mostfavourable terms. Short-term funding is obtained through bank overdraft and trade facilities.Foreign currency riskThe Group uses forward foreign exchange contracts in managing its foreign currency risk arising from cash fl ows from anticipatedtransactions and fi nancing arrangements denominated in foreign currencies, primarily US dollars. Transaction risk is calculated inforeign currency and includes foreign currency probable purchases and sales commitments.The contract notional amounts of the outstanding forward foreign exchange contracts and their fair values for the year ended31 December were as follows :Contract values Fair values Contract values Fair values2005 2005 2004 2004$’000 $’000 $’000 $’000Forward foreign exchange contracts – – 74 71The fair values represent the market rates of the forward foreign exchange contracts at the balance sheet dates. The unrealised losson the outstanding contracts of $3,000 is not adjusted to the opening accumulated losses in the consolidated fi nancial statementsas the amount is not material to the Group.Included in trade debtors and trade creditors of the Group are amounts of approximately $2,200,000 (2004 : $1,400,000) and$5,800,000 (2004 : $4,400,000) denominated in US dollars.As at the balance sheet date, the Group’s currency exposures are insignifi cant.ANNUAL REPORT 2005

64Notes to the Financial Statements- 31 December 2005ACE DYNAMICS LIMITED30. Risk management (cont’d)Credit riskThe carrying amounts of investments, trade and other receivables, and cash represent the Group’s maximum exposure to credit risk.No other fi nancial assets carry a signifi cant exposure to credit risk.The Group has no signifi cant concentrations of credit risk. Cash is placed with substantial fi nancial institutions.Fair valuesThe carrying amounts of fi nancial assets and fi nancial liabilities of the Group including trade and other debtors, cash, bank overdraft,trade and other creditors, and short-term loans approximate their fair values due to their short-term nature.The carrying amount of the long term loans approximate their fair values because the interest rates are generally reset to prevailingmarket rates at regular intervals.The amount due from subsidiary and associated companies have no repayment terms and are repayable on when the cash fl ows ofthe borrower permits. Accordingly, the fair value of the receivables is not determinable as the timing of the future cash fl ows arisingfrom the loan cannot be estimated reliably.31. Segment informationReporting formatThe primary segment reporting format is determined to be business segments as the Group’s risks and rates of return are affectedpredominantly by differences in the products and services produced. Secondary information is reported geographically. The operatingbusinesses are organised and managed separately according to the nature of the products and services provided, with each segmentrepresenting a strategic business unit that offers different products and serves different markets.The Group is organised into 2 main operating segments, namely :(a) Distribution of industrial equipment, hardware and safety products; and(b) property investment/development(c) other operations, include the Group’s compact disc manufacturing operations.Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on areasonable basis. Unallocated items mainly comprise of investment in associated companies, provision for taxation and deferred taxliabilities.ANNUAL REPORT 2005

Notes to the Financial Statements- 31 December 20056531. Segment information (cont’d)By industryDistribution ofindustrial equipment,hardware and safety Property investment/ Others Consolidatedproducts development2005 2004 2005 2004 2005 2004 2005 2004$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000Segment revenueSales to external customers 47,524 34,890 21,899 1,017 3,884 4,028 73,307 39,935ACE DYNAMICS LIMITEDSegment results 3,887 2,239 (174) (5,186) (544) (341) 3,169 (3,288)Amortisation of goodwill arising on consolidation - (400)Impairment loss on goodwill arising on consolidation (1,600) –Interest expense (947) (430)Share of profi t in associated companies 1,132 413Profi t/(loss)before tax 1,754 (3,705)Tax expense (1,133) (681)Net profi t/(loss) for the year 621 (4,386)Segment assets 29,285 18,667 40,683 21,550 6,092 10,899 76,060 51,116Unallocated assets 6,099 14,933Total assets 82,159 66,049Segment liabilities 19,306 10,946 17,944 9,529 6,464 8,238 43,714 28,713Unallocated liabilities 1,796 1,726Total liabilities 45,510 30,439Other segment informationCapital expenditure 823 815 207 295 191 155 1,221 1,265Depreciation 551 217 671 654 882 396 2,104 1,267Impairment in value of investment 30 – 147 151 – – 177 151By geographicalGeographical segmentsThe Group’s geographical segments are based on the location of the Group’s assets. Sales to external customers disclosed ingeographical segments are based on the geographical location of the Group’s operations.Singapore Others Consolidated2005 2004 2005 2004 2005 2004$’000 $’000 $’000 $’000 $’000 $’000Segment revenueSales to external customers 66,160 35,235 7,147 4,700 73,307 39,935Other geographical informationSegment assets 78,252 62,962 3,907 3,087 82,159 66,049Capital expenditure 1,062 1,207 159 58 1,221 1,265ANNUAL REPORT 2005

66Notes to the Financial Statements- 31 December 2005ACE DYNAMICS LIMITED32. Subsequent events(a) On 13 January 2006, Green Aces Development Pte Ltd (“GAD”), a wholly owned subsidiary, acquired 70,000 ordinary shares ofS$1 each at par for cash in Green Aces Paterson Pte Ltd (“GAP”). Subsequent to the acquisition, GAD owns 70% of the equityinterests of GAP.It is not practicable to disclose the net fair value of intangible assets and liabilities of the subsidiary acquired as the Company isin progress of determining these fair values.(b) On 25 January 2006, American Dynamics Holdings Pte Ltd (“ADH”), a wholly owned subsidiary has together with Ion ExchangeAsia Pacifi c Pte Ltd (“IEAP”), incorporated a joint venture company known as Ion Exchange Dynamics Pte. Ltd. (“IED”). Pursuantto the joint venture, both ADH and IEAP will hold 50% each in IED.(c) On 24 January 2006, one of the Company’s associated companies, Bondfl ex Private Limited (“Bondfl ex”) entered into an EquityTransfer Agreement with Molemab SpA, Italy for the acquisition of a 28% equity in Jiangyan Sumeng Grinding Wheel Co. Ltd. ata consideration of Renminbi (“RMB”) 2,800,000.On 6 March 2006, an additional shareholders’ loan of $567,175 was made available to Bondfl ex by ADH for the above-mentionedacquisition.ANNUAL REPORT 2005

Shareholding StatisticsAs at 20 March 200667Issued and fully paid-up capital : S$28,001,975.60Class of shares : 140,009,878 ordinary sharesVoting rights : One vote per shareDistribution Of ShareholdingsSize of ShareholdingNumber ofShareholders% Number of Shares %1 - 999 151 3.22 52,786 0.041,000 - 10,000 3,705 78.98 14,664,707 10.4710,001 - 1,000,000 818 17.44 43,076,711 30.771,000,001 and above 17 0.36 82,215,674 58.724,691 100.00 140,009,878 100.00ACE DYNAMICS LIMITEDTwenty Largest ShareholdersNo. Name of Shareholders No. of Shares %1. United Overseas Bank Nominees Pte Ltd 16,506,000 11.792. Hong Leong Finance Nominees Pte Ltd 12,550,500 8.963. Kim Eng Securities Pte Ltd 8,837,200 6.314. Fraser Securities Pte Ltd 6,879,000 4.915. HL Bank Nominees (S) Pte Ltd 6,045,000 4.326. Phillip Securities Pte Ltd 4,864,219 3.477. Southern Nominees (S) Sdn Bhd 4,412,000 3.158. Lim How Boon 3,350,142 2.399. HSBC (Singapore) Nominees Pte Ltd 3,015,000 2.1510. Raffl es Nominees Pte Ltd 3,005,400 2.1511. Eber Geb Linden Marianne Doris 2,701,577 1.9312. DBS Nominees Pte Ltd 2,168,000 1.5513. Esser Heinz Johann 1,947,741 1.3914. UOB Kay Hian Pte Ltd 1,909,600 1.3615. Lee Chee Fatt 1,490,000 1.0616. OCBC Nominees Singapore Pte Ltd 1,421,000 1.0117. Sam Yoke Tatt 1,113,295 0.8018. Lee Lai Ying 1,000,000 0.7119. Ler Chwee Chua 1,000,000 0.7120. Chng Gim Huat 991,000 0.71Total 85,206,674 60.83ANNUAL REPORT 2005

68Shareholding StatisticsAs at 20 March 2006ACE DYNAMICS LIMITEDSubstantial Shareholders(As recorded in the Register of Substantial Shareholders)Direct InterestDeemed InterestIn Nominees’ NameOthersNo of shares % Note No of shares % Note No of shares % NoteTham Weng Cheong Steven - - - 20,945,000 14.96 - - - -Lim How Boon 3,350,142 2.39 - 3,200,000 2.29 (1) 1,000,000 0.71 (2)Kelvin Lee Chee Fatt 1,490,000 1.06 - 5,632,000 4.02 (3) - - -Samsco Pte Ltd 8,638,000 6.17 - - - - - - -Notes :(1) By virtue of Mr Lim How Boon holding not less than 20% of the voting rights in Greenline Holdings Pte Ltd (“Greenline”), he is deemedto be interested in the 3,200,000 shares held by UOB Kay Hian Pte Ltd and Kim Eng Securities Pte Ltd as nominees for Greenline.(2) Held by spouse.(3) By virtue of Mr Lee Chee Fatt holding not less than 20% of the voting rights in Greenline Holdings Pte Ltd (“Greenline”), he is deemedto be interested in the 3,200,000 shares held by UOB Kay Hian Pte Ltd and Kim Eng Securities Pte Ltd as nominees for Greenline.He is also deemed to be interested in 2,172,000 shares held by Philip Securities Pte Ltd and 260,000 shares held under his CPFNominees Account.Public FloatBased on the information available to the Company, 57.68% of the Company’s shares are held in the hands of the public. Accordingly, theCompany has complied with Rule 723 of the Listing Manual of the SGX-ST.ANNUAL REPORT 2005

69ACE DYNAMICS LIMITED(Company Registration No. 196400172G)(Incorporated in the Republic of Singapore)Notice of Annual General MeetingNOTICE IS HEREBY GIVEN that the 42nd Annual General Meeting of ACE DYNAMICS LIMITED will be held at 1 Shipyard Road, Singapore628128 on Friday, 28 April 2006 at 10.30 a.m. for the following purposes:AS ORDINARY BUSINESS1. To receive and adopt the Directors’ Report and the Audited Accounts of the Company for the year ended 31 December 2005.(Resolution 1)ACE DYNAMICS LIMITED2. To re-elect the following Directors retiring pursuant to Article 94 of the Company’s Articles of Association:-(i) Mr Tony Chan Wing Khei (Resolution 2)(ii) Mr Leslie Struys (Resolution 3)Mr Tony Chan Wing Khei will, upon re-election as a Director of the Company, remain as the Chairman of the Audit Committeeand a member of the Nominating Committee/Remuneration Committee and will be considered as an independent director.Mr Leslie Struys will, upon re-election as a Director of the Company, remain as the Chairman of the Nominating Committee/Remuneration Committee and a member of the Audit Committee and will be considered as an independent director.3. To approve Directors’ Fees of S$103,417 for the year ended 31 December 2005. (2004: S$55,400) (Resolution 4)4. To re-appoint Ernst & Young as auditors and to authorise the directors to fi x their remuneration. (Resolution 5)5. To transact any other business which may properly be transacted at an Annual General Meeting.AS SPECIAL BUSINESSTo consider and if thought fi t, to pass the following resolutions as Ordinary Resolutions, with or without any modifi cations:6. Authority to allot and issue shares up to 50 per centum (50%) of issued share capitalThat pursuant to Section 161 of the Companies Act, Cap. 50 and Rule 806 of the Listing Manual of the Singapore Exchange SecuritiesTrading Limited, the Directors be empowered to allot and issue shares, convertible securities and any shares pursuant to convertiblesecurities (whether by way of rights, bonus or otherwise) in the capital of the Company at any time and upon such terms and conditionsand for such purposes as the Directors may, in their absolute discretion, deem fi t provided that (a) the aggregate number of shares(including shares to be issued in accordance with the terms of convertible securities issued, made or granted pursuant to thisResolution) to be allotted and issued pursuant to this Resolution shall not exceed fi fty per centum (50%) of the issued share capitalof the Company at the time of the passing of this Resolution, of which the aggregate number of shares and convertible securities tobe issued other than on a pro rata basis to all shareholders of the Company shall not exceed twenty per centum (20%) of the issuedshare capital of the Company and that (b) such authority shall, unless revoked or varied by the Company in general meeting, continuein force (i) until the conclusion of the Company’s next Annual General Meeting or the date by which the next Annual General Meeting ofthe Company is required by law to be held, whichever is earlier or (ii) in the case of shares to be issued in accordance with the termsof convertible securities issued, made or granted pursuant to this Resolution, until the issuance of such shares in accordance with theterms of such convertible securities. [See Explanatory Note (i)] (Resolution 6)ANNUAL REPORT 2005

70Notice of Annual General MeetingACE DYNAMICS LIMITED7. Authority to allot and issue shares under the Ace Dynamics Share Option SchemeThat pursuant to Section 161 of the Companies Act, Cap. 50, the Directors be authorised and empowered to allot and issue sharesin the capital of the Company to all the holders of options granted by the Company, whether granted during the subsistence of thisauthority or otherwise, under the Ace Dynamics Share Option Scheme (“the Scheme”) upon the exercise of such options and inaccordance with the terms and conditions of the Scheme, provided always that the aggregate number of additional ordinary shares tobe allotted and issued pursuant to the Scheme shall not exceed fi fteen per centum (15%) of the issued share capital of the Companyfrom time to time. [See Explanatory Note (ii)] (Resolution 7)By Order of the BoardTan Cher Liang/Low Geok Eng SusieJoint Company Secretaries12 April 2006SingaporeExplanatory Notes:(i)The Ordinary Resolution 6 proposed in item 6 above, if passed, will empower the Directors from the date of this Meeting until thedate of the next Annual General Meeting, or the date by which the next Annual General Meeting is required by law to be held or whenvaried or revoked by the Company in general meeting, whichever is the earlier, to allot and issue shares and convertible securities inthe Company. The aggregate number of shares and convertible securities that the Directors may allot and issue under this resolutionwould not exceed fi fty per centum (50%) of the issued capital of the Company at the time of the passing of this resolution. For issueof shares and convertible securities other than on a pro rata basis to all shareholders, the aggregate number of shares and convertiblesecurities to be issued shall not exceed twenty per centum (20%) of the issued capital of the Company.For the purpose of this resolution, the percentage of issued capital is based on the Company’s issued capital at the time this proposedOrdinary Resolution is passed after adjusting for (i) new shares arising from the conversion or exercise of convertible securities,(ii) new shares arising from the exercise of share options or the vesting of share awards outstanding or subsisting at the time thisproposed Ordinary Resolution is passed (provided the options or awards were granted in compliance with the rules of the ListingManual) and (iii) any subsequent consolidation or subdivision of shares.(ii)Resolution 7 if passed, will empower the Directors of the Company to issue shares pursuant to the Scheme, up to a maximum offi fteen per centum (15%) of the issued share capital of the Company.Notes:1. A Member entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and vote in his/her stead. A proxy neednot be a Member of the Company.ANNUAL REPORT 20052. If the appointor is a corporation, the proxy must be executed under seal or the hand of its duly authorised offi cer or attorney.3. The instrument appointing a proxy must be deposited at the Registered Offi ce of the Company at 1 Shipyard Road, Singapore 628128not less than forty-eight (48) hours before the time for holding the meeting.

ACE DYNAMICS LIMITED[Company Registration No. 196400172G](Incorporated In The Republic of Singapore with limited liability)PROXY FORM 42nd Annual General Meeting(Please see notes overleaf before completing this Form)IMPORTANT:1. For investors who have used their CPF monies to buy Ace Dynamics Limited’s shares, thisReport is forwarded to them at the request of the CPF Approved Nominees and is sent solelyFOR INFORMATION ONLY.2. This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents andpurposes if used or purported to be used by them.3. CPF investors who wish to attend the Meeting as an observer must submit their requeststhrough their CPF Approved Nominees within the time frame specifi ed. If they also wish to vote,they must submit their voting instructions to the CPF Approved Nominees within the time framespecifi ed to enable them to vote on their behalf.I/We,_________________________________________________________________________________________________________of ___________________________________________________________________________________________________________being a member/members of ACE DYNAMICS LIMITED (the “Company”), hereby appoint:Name NRIC/Passport No. Proportion of ShareholdingsNo. of Shares %Addressand/or (delete as appropriate)Name NRIC/Passport No. Proportion of ShareholdingsNo. of Shares %Addressor failing him/her, the Chairman of the Meeting as my/our proxy/proxies to vote for me/us on my/our behalf at the Annual General Meeting(the “Meeting”) of the Company to be held on Friday, 28 April 2006 at 10.30 a.m. and at any adjournment thereof. I/We direct my/ourproxy/proxies to vote for or against the Resolutions proposed at the Meeting as indicated hereunder. If no specifi c direction as to voting isgiven or in the event of any other matter arising at the Meeting and at any adjournment thereof, the proxy/proxies will vote or abstain fromvoting at his/her discretion. The authority herein includes the right to demand or to join in demanding a poll and to vote on a poll.(Please indicate your vote “For” or “Against” with a tick [] within the box provided.)No. Resolutions relating to: For Against1 Directors’ Report and Audited Accounts for the year ended 31 December 20052 Re-election of Mr Tony Chan Wing Khei as a Director3 Re-election of Mr Leslie Struys as a Director4 Approval of Directors’ fees amounting to S$103,4175 Re-appointment of Ernst & Young as Auditors6 Authority to allot and issue new shares7 Authority to allot and issue shares under the Ace Dynamics Share Option SchemeDated this_________________day of _________________ 2006Total number of Shares in:(a) CDP Register(b) Register of MembersNo. of Shares__________________________________Signature of Shareholder(s)or, Common Seal of Corporate Shareholder✃

Notes :1. Please insert the total number of Shares held by you. If you have Shares entered against your name in the Depository Register (asdefi ned in Section 130A of the Companies Act, Chapter 50 of Singapore), you should insert that number of Shares. If you have Sharesregistered in your name in the Register of Members, you should insert that number of Shares. If you have Shares entered against yourname in the Depository Register and Shares registered in your name in the Register of Members, you should insert the aggregatenumber of Shares entered against your name in the Depository Register and registered in your name in the Register of Members. Ifno number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the Shares held by you.2. A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint one or two proxies to attendand vote in his/her stead. A proxy need not be a member of the Company.3. Where a member appoints two proxies, he/she should specify the proportion of his/her shareholding (expressed as a percentage ofthe whole) to be represented by each proxy. If no such proportion is specifi ed, the fi rst named proxy shall be treated as representing100% of the shareholding and any second named proxy as an alternate to the fi rst named proxy.1 st Fold4. The instrument appointing a proxy or proxies must be deposited at the registered offi ce of the Company at 1 Shipyard Road,Singapore, 628128 not less than 48 hours before the time appointed for the Meeting.5. The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly authorised in writing.Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or underthe hand of an offi cer or attorney duly authorised. Where the instrument appointing a proxy or proxies is executed by an attorney onbehalf of the appointor, the letter or power of attorney or a duly certifi ed copy thereof must be lodged with the instrument.6. A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks fi t toact as its representative at the Meeting, in accordance with Section 179 of the Companies Act, Chapter 50 of Singapore.General:The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible orwhere the true intentions of the appointor are not ascertainable from the instructions of the appointor specifi ed in the instrument appointinga proxy or proxies. In addition, in the case of Shares entered in the Depository Register, the Company may reject any instrument appointing aproxy or proxies lodged if the member, being the appointor, is not shown to have Shares entered against his name in the Depository Registeras at 48 hours before the time appointed for holding the Meeting, as certifi ed by The Central Depository (Pte) Limited to the Company.2 nd FoldAffi xstamphereThe Company SecretaryACE DYNAMICS LIMITED1 Shipyard RoadSingapore, 628128

ACE DYNAMICS LIMITED1 Shipyard Road Singapore 628128[Company Registration No:196400172G]