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MOVI NG FORWARD

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Contents

Board of Directors04

OurVision01

06FinancialReview for FY 2010

08BusinessReview

12CorporateInformation

13CorporateGovernance Report

22FinancialContents

02Message fromNon-Executive Chairman

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OurVisionis to become amajor player inthe internationalorestry, market pulp,construction andproperty developmentbusinesses in the region.

Working within internationalcompliance standards, we will ocuson delivering high quality materials

and products, keeping environmentalresponsibility and sustainability ourtop priorities across all our businessoperations. We will leverage on theexperience o our management andemployees to urther develop ourpresence in this region and continueto seek opportunities to create valueor all our stakeholders.

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Message rom

Non-Executive Chairman

In 2010 UFS (the “Company”) embarked on a majortransition by which we hope to turn around our corporateortunes. As shareholders are aware, the Company has beenunder severe nancial pressure.

From an operations perspective, Group revenuedecreased by 5.0% to US$132.9 million in FY 2010 romUS$140.0 million in FY 2009. Te decrease was mainly eltin the Group’s Construction and Development Division asconstruction or new projects secured in late 2009 and early 2010 commenced only in the mid-2010. By comparison,construction contract revenue in 2009 was higher as a resulto higher percentage completion o projects such as Buckley

18, Newton One and Meadows @ Pierce.

Despite the revenue decrease, gross prot increased by 6.2%compared to FY 2009, mainly attributable to better marginsin Construction and Development Division.

However, as required by the accounting standards, theGroup had to incur a marked-to-market loss o US$25.3 million. Tis is due to the air-value loss o orest assets in FY 2010 based on the drat valuation by the Independent Valuer, Poyry Forest Industry Pte. Ltd(“Poyry”). In orming their opinion, Poyry had assumed

“We are condent that on successulcompletion o the Subscription Agreement,the Group will have a denite new strategicdirection with the new Investor providingthe leadership and thrust o the directions.”

M. Rajaram Non-Executive Chairman

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slower ramp-up period, uneconomical to harvest naturalorest or pulp wood, lower recoverable volume orplantation as well as the increase in harvesting and othercosts due to ination. Tis loss was in line with the overallcorrection in market valuations and as it is non-cash innature; the devaluation had no impact on the FY 2010cash ow.

Te Company’s orestry operations required an injection

o cash. Monies were also required to retire the debtsincurred in the construction o the Group’s wood chipmill. Te improvement in the global economy and theconsequential improvement in the price o timber and pulpprovided an opportunity or the Company to source or themuch needed unds. As the credit market remained tight,the Board, in early 2010, started its search or strategicinvestors who could maximise the Group’s valuableorestry concession.

In May 2010, the Group signed a term sheet with FalconCapital Global Holding Ltd (“Falcon”) or an investmento S$178 million in cash in the Company by way o subscription o new shares in the Company. Te subscription was conditional upon the completion o a sale & purchase

agreement or the purchase o a wood chip mill. While thesynergies with Falcon were compelling, the sale & purchaseconditions and the subscription conditions were not ullledby 30 November 2010, and accordingly, the agreements havesince lapsed.

On 12 January 2011, the Company and Asia Star FundLtd (“ASF”) entered into a subscription agreement (the“Subscription Agreement”) or the proposed subscription o 3,593,395,298 ordinary shares at S$0.05 each in the sharecapital o the Company and a loan agreement (the “LoanAgreement”) or an amount o US$35 million to assist theCompany to meet the demands o certain debts and creditoro the Group. SIC approval has been secured or the whitewash waiver, a condition precedent in the SubscriptionAgreement; the Subscription, when eected, is expectedto inject S$179 million in cash, and does not involve any asset purchase.

Te issue o the monies owing to China NationalMachinery & Equipment Import & Export Corporation(“CMEC”) generated much publicity. CMEC hadconstructed the Group’s woodchip plant on credit. TeCompany had issued a Perormance Bond to CMEC or therepayment o the debt. In August 2010, CMEC demandedor the payment o the debt under the Perormance Bond o

a sum o US$19,742,682. Te Company had earlier made apart payment o US$6 million o which US$1 million wasunded internally and US$5 million unded by a loan romFalcon, prior to the lapsing o their sale and purchase andsubscription agreements.

On 16 February 2011, the Company requested ASF or adrawdown o US$19.5 million under the Loan Agreement.As there were time pressures in meeting the CMEC

demand, ASF made the loan in spite o the drawdowncondition precedents not being met. Te loan was ully usedto pay CMEC. Te ull loan to CMEC has been discharged.

Te Company has also settled the loan o US$5 millionand advance o S$10 million owing to Falcon by urtherdrawing down on the acility ASF has waived thedrawdown conditions or the three withdrawals but notor the undrawn balance. Except or the ConstructionDivision which continued to do reasonably well, theForestry Division and the Wood Chip operations o theCompany were not very active, largely due to the lack o unds, uncertainty over continued log supplies andinrastructure decits.

We are actively engaged with the Investors to nalise theirplans or the Group and also to comply with the regulatory and due diligence required or the successul completion o the Subscription Agreement.

We are condent that on successul completion o theSubscription Agreement, the Group will have a denitenew strategic direction with the new Investor providing theleadership and thrust o the directions.

I am also happy to welcome ASF’s nominees, Mr Eddy,Mr Mochtar Suhadi and Mr Henry Susanto to the Boardas Non-Executive Directors in Q1 2011. I look orward totheir contribution and expertise to the Group.

I would like to end by thanking all stakeholders -our Directors, the Management, the Sta, our Clients,our Business Partners and our Shareholders or theirsupport and understanding in what has been a dicult year. We look orward to your continued support to meetthe challenges and also to explore opportunities to enhanceshareholder value.



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Board o

Directors


Mr Rajaram has beenre-designated as Non-ExecutiveChairman and Non-ExecutiveDirector o the Company with eectrom 10 November 2009. Mr Rajaramis currently the Senior Director o Straits Law Practice LLC, a ull

service Singapore law rm, wherehe heads both the banking andcorporate nance and India desk.He is an Advocate and Solicitor o theSupreme Court o Singapore and aSolicitor o England and Wales.

He is the Chairman o MillenniumSpire Investment Holding Ltd,a public company ocusing oninvestment into the real estate sectorin India.

Mr Rajaram obtained his Master o Business Administration rom the

Maastricht School o Managementand holds a Bachelor o Law (Honours) degree rom the NationalUniversity o Singapore. He is aFellow o the Singapore Instituteo Arbitrators and the CharteredInstitute o Arbitrators.

For his contributions to Society andto the business community, during histenure as Chairman o the SingaporeIndian Chamber o Commerce andIndustry, Mr Rajaram was bestowedthe PBM (Pingkat Bakti Masyarakat - Te Public Service Medal) by

the President o the Republic o Singapore. He is also actively involvedin both social and grassroots work.

Hoshi Dorab Deboo Acting Chie Executive Ofcer, Executive Director

Mr Deboo rst joined the Company as Chie Operating Ocer in August2009. He was appointed ExecutiveDirector on 10 November 2009 and

appointed as Acting Chie ExecutiveOcer on 1 December 2009.

Mr Deboo has more than 25 years o experience in general management inthe United States and Asia Pacic.He has successully developednew businesses, completed severalturnarounds and has integrated adiverse & unstructured group o acquisitions.

From 1990 to 1998, Mr Deboo was based in Singapore and wasVice-President, Asia Operations orRR Donnelley & Sons Co. where he was responsible or a US$300 millionbusiness unit operating in sevenAsian countries.

Mr Deboo holds a B.ECH (HONS)in Mechanical Engineering romthe Indian Institute o echnology,Kharagpur, India and a Master o

Science in Industrial & SystemsEngineering rom the Illinois Instituteo echnology in Chicago, Illinois,USA.

Ang Mong Seng, BBM Independent Director

Mr Ang has been an IndependentDirector o the Company since 1997.He is a member o the AuditCommittee and NominatingCommittee. He is also the Chairmano the Remuneration Committee.Mr Ang was last re-elected to theBoard on 24 April 2009.

Mr Ang is a Member o Parliamentor Hong Kah GRC (Bukit Gombak).He has almost 30 years o experiencein estate management. He is the Chie Operating Ocer o EM Services PteLtd, Chairman o Hong Kah ownCouncil and Vice Chairman o South-West Community Development Council.

Mr Ang also serves as an Independent& Non-Executive Director in variouspublic listed companies.

Paul Lim Yu Neng Independent Director

Mr Lim was appointed asNon-Executive Director on 3 August2007 and was re-designated as

Independent Director on 26 February 2009. He is the Chairman o theAudit Committee and member o both the Nominating Committee andthe Remuneration Committee.

Mr Lim has over 23 years o bankingexperience. He is the Founder andDirector o ruPartners Asia Pte.Ltd. Mr Lim is currently the InterimActing CEO and Executive Directoro Bio-reat echnology Limited.He is also a member o the Boardo Advisors to P BNI Securities inrelation to their business policies and

strategies. He was a Consultant toMorgan Stanley Asia (Singapore) PteLtd and was a consultant to DeutscheBank, AG, Singapore Branch rom2003 to 2010. Prior to that, he wasthe President Director and Head o Investment Banking o P SalomonSmith Barney, Indonesia.

Mr Lim obtained his Masters Degreein Business Administration, Financeand Bachelor o Science in ComputerScience rom the University o Wisconsin, Madison, USA. He is alsoa Chartered Financial Analyst (CFA).

Rahul Kumar Independent Director

Mr Kumar joined the Company asIndependent Director in November2009. He is the Chairman o Nominating Committee and membero both the Remuneration Committeeand Audit Committee with eect rom26 February 2010. Mr Rahul hasover 17 years o experience in thenancial markets.

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He has extensive experience in globalcapital markets trading and alternativeinvestments including private equity and hedge unds, having worked atsenior levels at Salomon Brothers,Merrill Lynch, Barclays and SocieteGenerale.

His career has also seen him startup several ventures including AmanCapital Management which wasone o Singapore’s largest hedgeunds in 2004/5. At present he servesas Director o ARCS Advisors inSingapore and India, through whichhe is actively involved with severalnancial ventures in India.

Mr Kumar holds a Bachelor o Arts(Magna cum Laude), Business andMathematics rom Coe College, CedarRapids, USA. He also holds a Mastero Science, Economics rom RiceUniversity, Houston, USA.

Chia Quee Hock, PBM Non-Executive Director

Mr Chia was re-designated asNon-Executive Director o Uniber(the “Company”) with eect rom30 November 2009.

He was appointed as the ExecutiveChairman o the Company rom 1997to 2002 and was re-designated as theDeputy Chairman o the Company in 2002. He was last re-elected to theBoard on 24 April 2009.

Mr Chia has more than 35 years o working experience in the constructionindustry.

Mr Chia is the Honorary Patrono Pasir Ris East Community ClubManagement Committee andBukit Gombak Community CenterManagement Committee.

He is also a member o the SingaporeInstitute o Directors.

Henry Susanto Non-Executive Director

Mr Susanto was appointed as aNon-Executive Director o theCompany on 16 March 2011.Mr Susanto holds a degree in BusinessManagement rom the Insitut BisnisIndonesia and has many years o experience in the oil and gas and

mining sector. He is at present theDirector o Operations o P. risula Kencana Sakti which is asubsidiary o the Sinarmas Groupo Companies. Mr Susanto is alsoa board member o the CentralKalimantan Mining Association,South Kalimantan MiningAssociation, Sumatra MiningAssociation and the Indonesian CoalMining Association.

Indrawan Prakasa Non-Executive Director

Mr Prakasa was appointed as aNon-Executive Director o theCompany on 10 November 2009.In October 2008, Mr Prakasa waspromoted to Vice President in theGroup’s wholly-owned subsidiary, PHutan Rindang Buana (“P HRB”) which owns the orest assets. He wasthe Unit Manager o P HRB rom1996 to 2004 and the ProductionDirector rom 2004 to 2008.

Prior to joining P HRB, Mr Prakasaheld various positions rom 1990 to1996 in the industrial orest plantation

o P Musi Hutan Persada, SouthSumatera, which is now part o theMarubeny Group.

Mr Prakasa holds a bachelors degree inAgriculture rom the Institut PertanianSIPER, Jogjakarta, Indonesia andMaster Degree in Human ResourceManagement rom Merdeka University,Malang, Indonesia.

Eddy Non-Executive Director

Mr Eddy was appointed as aNon-Executive Director o theCompany on 25 February 2011.Mr Eddy holds both a Bachelor o Business Administration and a Mastero Business Administration romNewport University, Los Angeles,

Caliornia. He is currently the Financeand Accounting Division Head o P Kuansing Inti Makmur, whichis part o the Sinarmas MiningDivision, Indonesia. Eddy has a wealth o experience in the areas o general business management, nance,banking and real estate sectors,having held positions with both the Jan Darmadi Group and Dwi SatryaUtama Group in Indonesia prior to joining Sinarmas.

Mochtar Suhadi Non-Executive Director

Mr Suhadi was appointed as aNon-Executive Director o theCompany on 25 February 2011.Mr Suhadi holds a degree inComputer Science rom the University o Michigan and has many years o experience in property development,building materials and miningsector. He is at present the GeneralManager o Business Development atSinarmas Energy and Mining, Jakarta,Indonesia.


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Financial

Review or FY 2010

Income Statement“Revenue” decreased 5% to US$132.9 million in FY2010rom US$140.0 million in FY2009, due largely to new projects secured in FY2009 and early FY2010 whichcommenced construction in FY2010; and lower percentagerecognition or projects in FY2010 which were substantially completed in FY2009.

“Gross prot” increased 6.2% to US$8.1 million inFY2010 rom US$7.6 million in FY2009. Overall grossprot margin or FY2010 was higher at 6% in FY2010compared with FY2009 at 5%, due to better margins in theConstruction and Development Division.

“Other income” increased to US$2.9 million in FY2010rom US$0.5 million in FY2009, largely due to theUS$1.5 million air value gain on the 5% convertible bonddue 2011 and US$0.9 million air value gain on the Group’sinvestment property, Dong Shan Poh Lian Building,located in the People’s Republic o China. Te convertiblebond maturing in September 2011, is biurcated into two

components, namely the debt component and the derivativecomponent. Te gain o US$1.5 million arose rom thechange in the air value o the derivative component as at31 December 2010 rom December 2009.

“Administrative expenses” increased to US$9.4 millionin FY2010, due to higher legal and proessional ees orthe expired proposed share subscription and proposedacquisition o a chipmill, and legal suit with China NationalMachinery & Equipment Import & Export Corporation(“CMEC”).

“Other operating expenses” increased to US$20.5 millionin FY2010 largely due to paper loss o US$11.6 millionattributed by the higher carrying cost compared to lowerrecoverable value or the Group’s woodchip mill andinventory, and US$2.3 million withholding tax expense inthe Group’s overseas operation.

Te “Fair value loss on orest asset and logs harvested” o US$25.3 million was based on the valuation developed by Poyry Forest Industry Pte Ltd (“Poyry”).

“Finance costs” increased to US$7.7 million largely due toincrease in accrued interest expenses payable to CMEC on18 February 2011.

Net loss attributable to shareholders was US$47.2 millionor FY2010.

Balance Sheet otal assets decreased rom US$291.1 million as at31 December 2009 to US$263.5 million as at 31 December2010. Te main variances were:

• “Forestasset”decreasedfromUS$134.1millionas at 31 December 2009 to US$108.5 million as at31 December 2010, as a result o the lower valuationdeveloped by Poyry.

• “Property,plantandequipment”decreased

rom US$40.7 million as at 31December 2009 toUS$26.8 million as at 31 December 2010, largely dueto paper loss o US$10.7 million as a result o thehigher carrying value than recoverable value or theGroup’s woodchip mill.

• “Tradereceivables”,“Tradeandotherreceivables”and“Construction work-in-progress” increased due toconstruction projects.

otal liabilities increased rom US$146.4 million as at31 December 2009 to US$152.9 million as at 31 December2010. Te main variances were:

• “Tradeandotherpayables”increasedforconstructionprojects; and• Reductioninthe“Progressbillingsinexcessofcosts

incurred” due to completion o certain constructionprojects during the year.

• Reductioninloansandborrowingsduetorepaymentofcertain borrowings.

• Reductionin“Deferredtaxliabilities”duetolowercarrying amount in orest asset.

• “Provisionfortaxation”increasedduetohigher withholding tax recognized during the year.

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Cash Flow Net cash ows generated rom operating activities wasUS$0.8 million, mainly due to (i) increase in trade andother payables, (ii) decrease in inventories, oset by (a) decrease in construction work-in-progress, net o progress billings in excess o costs incurred, and (b) increasein trade and other receivables and (c) interest paid.

Net cash ows used in investing activities wasUS$2.1 million, mainly due to purchase o property,

plant and equipment or the Construction andDevelopment Division.

Net cash ows used in nancing activities wasUS$0.9 million, mainly due to increase in the Group’sxed deposits pledged with nancial institutions, osetby net proceeds rom loans and borrowings. Due tothe above, total cash and cash equivalent positionsreduced rom US$14.7 million at 31 December 2009to US$12.5 million at 31 December 2010, ater adjustingor currency translation. Te US$12.5 million balanceat 31 December 2010 comprised approximately US$12.2 million held in Singapore dollars and the

balance held in IDR and USD.

Working CapitalAs at 31 December 2010, the Group has working capitalin decit o US$62.1 million.

On 12 January 2011, the Company and an investorhad entered into (1) an agreement to subscribe or3,593,395,298 ordinary shares at S$0.05 each in the sharecapital o the Company and (2) a loan agreement o

“ “Gross prot” increased 6.2% toUS$8.1 million in FY2010 romUS$7.6 million in FY2009. Overallgross prot margin or FY2010 washigher at 6% in FY2010 compared

with FY2009 at 5%, due to better

margins in the Construction andDevelopment Division.”

US$35 million or the retirement o certain creditorand borrowings and to nance the short-term workingcapital requirements beore the completion o theshare subscription.

On 14 March 2011, the Company has utilisedapproximately US$32.8 million to repay (1) a creditorloan and interest o US$19.5 million to CMEC under

Original Summons No. 872 o 2010/X, (2) loan and relatedinterest and legal expenses o US$5.4 million to FalconCapital Global Holding Limited (“Falcon”); and (3) aStatutory Letter o Demand dated 14 February 2011 servedby Falcon or the deposit o S$10 million or the proposed3,560,000,000 ordinary shares subscription or S$0.05each in the share capital o the Company, which hadautomatically lapsed on 30 November 2010.

Te Company is currently in the process o ullling thecondition precedents in the Loan Agreement and thereaterthe private share placement.

aking into account the cash ows generated romthe operations and the equity credit line acility o S$165 million, o which an unutilised amount o S$52.5 million is available to draw on till 20 July 2014;and barring all unoreseen circumstances, the Board is o the view that the Group and the Company will be able tooperate as a going-concern.

Loss Per Share And Net Tangible Asset Per ShareAt 31 December 2010, the Group reported a basic anddiluted loss per share o 1.43 US cents. Te basic anddiluted loss per share are based on the weighted averageshare capital o 3,298,895,999 shares. 72,000,000 sharesthat would be issued on ull conversion o the convertiblebond have not been included in the calculation o dilutedearnings per share because they are anti-dilutive.

As 31 December 2010, the Group reported net asset valueper share and net tangible asset per share o 3.21 US centsand 2.54 US cents respectively. Te ratios are based onissued share capital o 3,452,477,835 ordinary sharesin issue.


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Business

Review

Business Unit We were incorporated in December 1995 in the Republico Singapore as Poh Lian Holdings Pte Ltd, a privatelimited investment holding company working in theconstruction industry. In conjunction with the initial publicoering, we subsequently converted into a public limitedcompany on 15 May 1997 and changed our name to PohLian Holdings Limited. We have been listed on the main

board o the Singapore Stock Exchange since then. InApril 2002, our name was changed to United Fiber SystemLimited (“Uniber”) to reect the new core businesses o orestry and pulp production.

Following the restructuring exercise in 2002, we now ocuson two core business segments, namely (i) orestry andpulp, and (ii) construction and development, through theollowing operating entities:

Forestry P Hutan Rindang Banua (“P HRB”), a Unibersubsidiary located in South Kalimantan, Indonesia. P

HRB holds a orest concession right o 268,585 hectares inour regents at South Kalimantan, Indonesia.

Approximately 40,000 hectares o the orest concession areahas been planted with Acacia Mangium – a ast growingleguminous species which can be processed into marketpulp o excellent quality or the production o tissue andprinting and writing grade papers. P HRB will continueto plant Acacia Mangium trees on harvested areas and onavailable area within the concession.

In addition to the planting activities within its concession,P HRB has been working with the local communitiesunder its People’s Forest Scheme (“Hutan Rakyat”) toexpand orest plantations outside its concession boundaries. We work together with land owners at the surrounding area(land owners lend us land to grow trees). We provide all thematerials needed such as seeds, planting and maintenancematerial with a return o air share o prot rom theamount o logs sold descended rom the area.

We have signed several contracts or pulp logs in Q2and Q3 2010. Tese log contracts have been signed on astanding stock basis and require the customer to harvestand transport the logs with their own contractors. However

during Q4 the area experienced severe rainall. Hence only approximately 29,000 m3 o logs were harvested and18,000 m3 shipped. Sawn logs sales have slowed down since

most o our log supply is now dedicated to sale o pulp logs.

We have also commenced on a limited basis, thepreparation or planting on vacant land within theconcession area and replanting on harvested areas duringDecember 2010. Tis is expected to continue in FY2011.

Wood Chip MillP Mangium Anugerah Lestari (“P MAL”) is a Unibersubsidiary located in the village o Alle Alle, Pulau Laut,South Kalimantan, Indonesia and which owns and operatesa wood chip mill.

Te main equipment and machinery or the wood chip mill was supplied by Andritz AG, a company o the Andritz Group which is a global market leader or customized plant,systems and services or the pulp and paper industries. Te mill is complete with jetty inrastructure or exportpurposes and is designed to produce up to 700,000 bonedry tonnes (“bdt”) o wood chips annually.

P MAL’s raw material is an Acacia Mangium plantationtree. Tis raw material is sourced rom a neighboringIndonesian government plantation. Apart rom lower

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procurement costs, this arrangement provides exibility to

manage and reserve our orest wood supply or the uturepulp mill. However, the supply o logs rom this plantationare erratic and unpredictable with very slow deliveries.

Over 2010, P MAL has made approximately 27,000 bdto domestic chip shipments and export shipment to China.

Although pulp prices have begun to stabilise, chip pricing isstill trailing but showing some improvements. Tereis a signicant inventory o chips in Australia which isbeing sold at low prices to China.

Shipment o 13,000 bdt o chips was made in early

February 2011 relative to the 50,000 bdt contract that wassigned with the trading arm o the previous investor. Heavy rains in Kalimantan slowed the supply o logs rom thegovernment owned plantation located next to P MALthat supplies logs to the mill and delayed some shipments.


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Business

Review

Pulp MillP MBBM holds a license to build and operate a bleachedhardwood krat pulp mill in Satui, South Kalimantan,Indonesia.

Given the current global situation especially on pulp andpaper industry outlook and the possibility o a new Investorcoming into the Company, we have placed this initiativeon hold.

Construction Division2010 was a year o transition or Poh Lian Construction(Pte.) Ltd (“PLC”), our wholly owned subsidiary.

PLC embarked on an extensive recruitment exercisein the 1st hal o 2010 to ll key positions or the new projects secured in 2009. With the successul handingover o Newton One and Solitaire in 2009 and together with quality nishes and workmanship that won highCONQUAS scores and on time delivery, PLC has retainedits reputation as one o the top construction companies orhigh-end condominiums in Singapore.

PLC completed two more high-end condominium projectsin 2010 namely the Ardmore II in June or Wheelock Properties, and Te rillium in November or LippoRealty. With the completion o these two iconic residentialbuildings in Singapore, PLC has again demonstratedexcellent construction and technical capabilities andmanagement skills in handling such demandingconstruction projects.

PLC was awarded a new public housing project by theHDB to build 528 units o apartments under HDBContract N4 C14 at Bukit Panjang or S$73.9 million on25 August 2010 with a construction period o 29 months. Tis is the result o PLC’s eorts to diversiy her currentorder book towards more mass housing developments which will give more volume. In the past, PLC has beenmainly dependent on high-end condominium projects.

In line with the Government policy to improveproductivity, PLC has taken advantage o the variousincentive schemes oered by the BCA by investing intoplant and equipment that can improve our productivity.For an example, PLC purchased a truck-mounted concretepump rom renowned concrete pump manuacturer,Putzmeister o Germany. With an arm-reach o 42m, it will expedite the concreting process in all the large castingo wide and long E-deck, which orms an integral part o high-end condominium projects. PLC has also invested inthe ormwork system made by ULMA System Formwork rom Spain to achieve higher productivity and asteroor-to-oor construction time.

Protability improved as a result o better margins inprojects completed in 2010 and the reversal o some o theprovisional rectication costs not consumed due to a betterquality control system improvised by PLC’s newly createdQuality Management Department. PLC now employ highly-skilled oreign workers and supervisors in place o the traditional low skilled workers and supervisors to ensurequality nishes and minimize deective works in all herconstruction projects.

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Te Order Book o the Construction Division improvedto S$549 million as o 31 December 2010, an increase o S$146 million or 36% compared with the same periodin 2009. Te higher Order Book is the result o two bigprojects secured in early 2010 awarded by the GuocolandGroup, amounting to S$308 million. Te increase in theOrder Book reects the market condence in the Group’sConstruction Division. With the expected slowdown in

the private property market in Singapore, especially in theprivate high-end developments, the Group’s ConstructionDivision will be actively engaged in tendering or morepublic projects such as HDB, hospitals and educationalinstitutions including overseas projects in South East Asiaand Asia Pacic region.

Te Construction Sector is expected to see more priceuctuations in construction materials and labour cost inthe coming years. With the escalating oil price and theimposition o higher levy on oreign workers, the cost o completion o the on-going projects will be aected as well.Moving orward, PLC will be implementing tighter controlon resource allocation to obtain optimum utilization,eective cost controls and to upgrading the skills o the workers in order to achieve higher productivity and lowerthe impact caused by these cost increases.


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Corporate

Inormation

Board o DirectorsMr M. Rajaram

Non – Executive Chairman

Mr Hoshi Dorab Deboo Executive Director, Acting CEO

Mr Ang Mong Seng, BBM Independent Director

Mr Paul Lim Yu Neng Independent Director

Mr Rahul Kumar Independent Director

Mr Chia Quee Hock, PBM Non – Executive Director

Mr Henry Susanto Non – Executive Director (appointed on 16 March 2011)

Mr Indrawan Prakasa Non – Executive Director

Mr Eddy Non – Executive Director (appointed on 25 January 2011)

Mr Mochtar Suhadi Non – Executive Director (appointed on 25 January 2011)

Audit CommitteeMr Paul Lim Yu Neng Chairman

Mr Ang Mong Seng, BBM

Mr Rahul Kumar

Nominating CommitteeMr Rahul Kumar Chairman

Mr Paul Lim Yu Neng

Mr Ang Mong Seng, BBM

Remuneration CommitteeMr Ang Mong Seng, BBM Chairman

Mr Paul Lim Yu Neng

Mr Rahul Kumar

Company Secretary Ms Lim Ka Bee

External AuditorsErnst & Young LLPOne Rafes Quay, North owerLevel 18Singapore 048583 el: 6535 7777 Fax: 6532 7662

Audit Partner-In-Charge:Mr Michael Sim(appointed with eect rom nancial year ended31 December 2008)

Internal AuditorsELICI e-Risk Services Pte Ltd1 Rafess Place #20-02 OUB CentreSingapore 048616(appointed with eect rom nancial year ended31 December 2009)

Audit Director-In-Charge:

Mr Chen Yeow Sin(appointed with eect rom nancial year ended31 December 2009)

Registered Ofce103 Deu Lane 10 #02-01 BH BuildingSingapore 539223 el: 6487 3500 Fax: 6284 0074E-mail: [email protected]

Share Registrar and Share Transer OfceBoardroom Corporate & Advisory Services Pte Ltd50 Rafes Place #32-01 Singapore Land ower

Singapore 048623 el: 6536 5355 Fax: 6536 1360

Principal BankersRaieisen Bank International AG, Singapore BranchDBS Bank LtdUnited Overseas Bank GroupMalayan Banking BerhadFirst Gul Bank PJSC, Singapore BranchRHB Bank Berhad

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Corporate Governance Report

United Fiber System Limited (the “Company”) continues to be committed to achieving high standards o corporategovernance and to place importance on its corporate governance processes so as to ensure greater transparency, accountability

and protection o shareholders’ interest. Te Company has observed the principles and guidelines set out in the Code o Corporate Governance 2005 (“Code”).

Te Company’s corporate governance practices on each o the principles o the Code are outlined in the ollowing sections.

Board Matters

Principle 1 Board’s Conduct o its Aairs

Te Board oversees the business o Company and is collectively responsible or the success o the Company. It assumesresponsibility or the overall strategic plans, key operational initiatives, major investment and unding proposals, nancialperormance reviews and corporate governance practices. Te Board provides leadership and guidance or management. Te Company has in place nancial authorization and approval limits or operating and capital expenditure, procurement o goods and services, acquisitions and disposal o investments and treasury transactions. Within these guidelines, the Board

approves transactions above certain thresholds. Te Board also approves the annual budget and the nancial results orrelease to the Singapore Exchange Securities rading Limited (“SGX-S”).

Te Board is supported in its tasks by Board committees, namely, the Audit Committee, the Nominating Committee and theRemuneration Committee, which have been established to assist on the execution o its responsibilities.

Te Board conducts regular scheduled meetings at least our times a year. Ad-hoc meetings are convened as and when warranted by particular circumstances. Te Company’s Articles o Association provide or meetings to be held via telephoneconerence.

Te ollowing table discloses the number o meetings held or Board and Board Committees and the attendance o allDirectors or the nancial year ended 31 December 2010: -

Type o Meeting Board Meetings Audit

Committee

Meetings

RemunerationCommittee

Meetings

Nominating Committee

Meetings otal No. Held 10 5 2 1AttendanceM. Rajaram (1) 10 1 1 1Hoshi Dorab Deboo 10 NA NA NA

Ang Mong Seng, BBM 8 5 2 1Paul Lim Yu Neng 9 5 2 1Rahul Kumar (2) 10 4 1 NA Jaka Prasetya (3) 1 NA NA NAChia Quee Hock, PBM 10 NA NA NA

Indrawan Prakasa 7 NA NA NA

Eddy (4) NA NA NA NAMochtar Suhadi (5) NA NA NA NAHenry Susanto (6) NA NA NA NA

NA: Not Applicable

Notes(1) Step-down as NC Chairman, AC member and RC member eective rom 26 February 2010(2) Appointed as NC Chairman, AC member and RC member eective rom 26 February 2010(3) Resigned as Non-Executive Director on 29 March 2010(4) Appointed as Non-Executive Director on 25 January 2011(5) Appointed as Non-Executive Director on 25 January 2011(6)

Appointed as Non-Executive Director on 16 March 2011


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Board Composition and Guidance

Principle 2 Strong and Independent Element in the Board

Te size and composition o the Board are reviewed rom time to time by the Nominating Committee (“NC”) which strivesto ensure that the size o the Board is conducive to eective discussions and decision-making and that the Board has anappropriate balance o independent directors.

Te majority o our directors are non-executive with one-third independent. Te NC reviews the independence o eachdirector on an annual basis and it considers a director as independent i he has no relationship with the Group or its ocersthat could interere, or reasonably perceived to interere, with the exercise o the director’s independent business judgement with a view to the best interest o the Company.

Te Board presently comprises the ollowing members:

Name DesignationMr M. RajaramMr Hoshi Dorab DebooMr Ang Mong Seng, BBM Mr Paul Lim Yu NengMr Rahul KumarMr Chia Quee Hock, PBM Mr Indrawan PrakasaMr Eddy (1)

Mr Mochtar Suhadi (2)

Mr Henry Susanto (3)

Chairman, Non-Executive DirectorExecutive Director, Acting CEOIndependent DirectorIndependent DirectorIndependent DirectorNon-Executive DirectorNon-Executive DirectorNon-Executive DirectorNon-Executive DirectorNon-Executive Director

Notes:(1) Appointed as Non-Executive Director on 25 January 2011(2) Appointed as Non-Executive Director on 25 January 2011(3) Appointed as Non-Executive Director on 16 March 2011

As a group, the Directors bring with them a broad range o industry knowledge, expertise and experience in areas suchas accounting, banking, nance, business and management. Te diversity o the directors’ experience allows or the useulexchange o ideas and view as well as provide or eective decision-making. Te prole o each Board member is set outon pages 4 and 5 o this Annual Report.

Te Board considers the present size appropriate or the current nature and scope o the Group’s operations.

Chairman and Chie Executive Ocer

Principle 3 Clear Division o Responsibilities

Tere is a clear separation o the roles and responsibilities o the Chairman and the Acting Chie Executive Ocer (“ActingCEO”). Tis is to ensure appropriate balance o power and authority, accountability and decision-making.

Mr M. Rajaram, who is the Non-Executive Chairman, and Mr Hoshi Dorab Deboo, the Acting CEO o the Company arenot related to each other. Mr. Deboo is responsible or the day-to-day management o the aairs o the Company and theGroup. He ensures that the Board is kept updated and inormed o the Group’s business.

Te Chairman’s responsibilities include:

1. lead the Board to ensure its eectiveness on all aspects o its role and set its agenda;2. schedule and approve the agenda or board meetings in consultation with the Acting CEO;

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3. review key proposals and board papers beore they are presented to the Board and ensures that board members areprovided with accurate and timely inormation;

4. encourage Board members to engage Management in constructive debate on various matters including strategic issuesand business planning processes;5. ensure eective communication with shareholders; and6. promote high standards o corporate governance.

Board Membership

Principle 4 Formal and ransparent Process or the Appointment o New Directors to the Board

Te NC reviews and assesses candidates or directorship beore making recommendations to the Board. In recommendingnew directors to the Board, the NC takes into consideration the skills and experience and the current composition o theBoard, and strives to ensure that the Board has an appropriate balance o independent directors as well as directors with theright prole o expertise, skills, attributes and ability. In evaluating a director’s contribution and perormance or the purposes

o re-nomination, the NC takes into consideration a variety o actors such as attendance, preparedness, participation andcandour. Te NC makes recommendation or new directors, retirement and re-election o directors.

Te Directors submit themselves or re-nomination and re-election at regular intervals o at least once every three years. Te Company’s Articles o Association provides that one third o the Board, or the number nearest to one third is to retireby rotation at every Annual General Meeting (“AGM”). In addition, the Company’s Articles o Association also providesthat newly appointed Directors are required to submit themselves or re-nomination and re-election at the next AGM o the Company.

Board Perormance

Principle 5 Formal Assessment o the Eectiveness o the Board and Contributions by each Director

Te NC has established a ormal assessment process to assess the eectiveness o the Board as a whole. Te perormancecriteria or Board evaluation are based on nancial and non-nancial indicators such as an evaluation o the size andcomposition o the Board, the Board’s access to inormation, board processes, strategy and planning, risk management,accountability, board perormance in relation to discharging its principal unctions, communication with senior managementand standards o conduct o the directors.

Te Board and Management have strived to ensure that directors appointed to the Board possess the experience, knowledgeand skills critical to the Group’s business to enable the Board to make sound and well-considered decisions.

Access to Inormation

Principle 6 Complete, Adequate and imely Inormation to the Board Members

Te Board members are provided with adequate and timely inormation prior to Board meetings and on an ongoing basis. Te Board has separate and independent access to the Group’s senior management and the advice and services o theCompany Secretary who is responsible to the Board or ensuring board procedures are ollowed and the relevant statutory rules and regulations are complied with. Under the Articles o Association o the Company, the decision to appoint orremove the Company Secretary can only be taken by the board as a whole. Te Company Secretary attends the scheduledquarterly board meetings and ad-hoc board meetings, as and when required.

Te Board also takes independent proessional advice as and when necessary to enable it to discharge its responsibilitieseectively. Subject to the approval o the Chairman, the Directors, whether as a group or individually, may seek and obtainindependent proessional advice to assist them in their duties at the expense o the Company. Te Board is updated on theregulations o the SGX-S, Companies Act, corporate governance policies and other statutory requirements. Te newly appointed Directors will be brieed on the Group’s businesses, operations and the relevant regulations and governancerequirements.

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Board Committees

Nominating Committee

Te NC comprises three Directors, all o whom, including the Chairman are independent. Te NC members are:

Mr Rahul Kumar (Chairman)Mr Paul Lim Yu Neng (Member)Mr Ang Mong Seng, BBM (Member)

Te NC’s responsibilities include the ollowing:

1. review and assess all candidates or directorships beore making recommendation to the Board or appointment o directors;

2. review and recommend to the Board the retirement and re-election o directors in accordance with the Company’s

Articles o Association at each AGM;3. review the composition o the Board annually to ensure that the Board has appropriate balance o independent directorsand to ensure an appropriate balance o expertise, skills, attributes and ability among the directors; and

4. reviewing the independence o directors.

Remuneration Committee

Te Remuneration Committee (“RC”) comprises three Directors, all o whom including the Chairman are independent. TeRC members are as ollows:

Mr Ang Mong Seng, BBM (Chairman)Mr Paul Lim Yu Neng (Member)Mr Rahul Kumar (Member)

Te RC’s responsibilities include the ollowing:

1. review and recommend to the Board an appropriate and competitive ramework o remuneration or the Board and key executives o the Group;

2. recommend to the Board specic remuneration package or each Executive Director and the Acting CEO, taking intoaccount actors including remuneration packages o Executive Directors and/or Acting CEO in comparable industries as well as the perormance o the Company and that o the Executive Directors and/or Acting CEO;

3. review and make recommendation on the ees o Independent Non-Executive Directors or approval by the Board; and4. ensure that the remuneration policies and ramework o the Group support the Group’s objectives and strategies.

Remuneration Matters

Principle 7 Procedures or Developing Remuneration PoliciesPrinciple 8 Level and Mix o RemunerationPrinciple 9 Disclosure o Remuneration

Te remuneration package adopted or the Executive Director is as per the service contract entered into between the respectiveDirector and the Company. Te RC makes recommendation on the specic remuneration packages or the Executive Directorand/or Acting CEO upon recruitment. Tereater, the RC reviews subsequent increments, bonuses and allowances wherethese payments are discretionary. No Director or member o the RC is involved in the deliberation and decision in relationto his own remuneration.

Independent Directors do not have any service contracts with the Company. Save or Directors’ ees, Independent Directorsdo not receive any remuneration rom the Company.


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Directors’ ees are set in accordance with a remuneration ramework comprising basic ees and additional ees or serving onany o the board committees. Directors’ ees are subject to approval o shareholders o the Company as a lump sum payment

at the AGM o the Company.

No immediate amily members o a Director and/or Acting CEO have remuneration exceeding S$150,000 during the year.

Te Directors’ compensation tabled or FY2010 is as ollows:

Remuneration Bandsand nameo director

Salary %

Bonuses%

Directors’Fees

%CPF

%

Other Board

CommitteeFees

%

Allowancesand Others

% Total

%

S$250,000 to below

S$500,000Hoshi Dorab Deboo 80.33 0.57 0 10.18 0 8.93 100.00

Below S$250,000

M. Rajaram 0 0 90.32 0 9.68 0 100.00

Jaka Prasetya (1) 0 0 100.00 0 0 0 100.00

Ang Mong Seng, BBM 0 0 60.00 0 40.00 0 100.00

Paul Lim Yu Neng 0 0 54.55 0 45.45 0 100.00

Rahul Kumar 0 0 66.40 0 33.60 0 100.00

Indrawan Prakasa 88.59 4.02 0 7.38 0 0 100.00

Chia Quee Hock , PBM 91.12 1.28 0 7.59 0 0 100.00

(1) Resigned on 29 March 2010

Te ollowing table sets out the range o gross remuneration received by the top ve executives (excluding executive directors)o the Group or FY2010:

Remuneration Bands No. o Executives

2010 2009

S$500,000 and above 1 1

S$250,000 to below S$500,000 1 1

Below S$250,000 2 3 Total 4 5

Te Company currently does not have any employee share option schemes.


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Audit Committee

Principle 11 Audit Committee Principle 12 Internal Control Principle 13 Internal Audit (“IA”)

Te Audit Committee (“AC”) comprises three Directors, all o whom including the Chairman are independent. Te ACmembers are:

Mr Paul Lim Yu Neng (Chairman)Mr Ang Mong Seng, BBM (Member)Mr Rahul Kumar (Member)

Te AC perorms the ollowing main unctions:

1. recommend to the Board the appointment / reappointment o the external auditors including their remuneration andterms o engagement;

2. review with the external auditors their audit plans and the results o their examination o the nancial statements andevaluation o the system o nancial controls o the Company;

3. review with the internal auditors their audit plans, the adequacy o the internal audit procedures and their evaluation o the eectiveness o the overall internal control systems including nancial, operational and compliance control as well asrisk management o the Group;

4. review the quarterly and ull year results announcement and annual nancial statements and the auditors’ report on theannual nancial statements o the Company beore submission to the Board or approval;

5. review any signicant audit ndings and recommendations o the internal and external auditors together withmanagement’s responses thereto so as to ensure the integrity o the nancial statements and any ormal announcementsrelating to nancial perormance;

6. review interested party transactions as dened in the Listing Manual o the SGX-S;

7. review the Company’s accounting policies and reporting requirements in consultation with the external auditors andassess the adequacy o management reporting;

8. undertake such other reviews and projects as may be requested by the Board, and to report to the Board its ndings romtime to time on matters arising and requiring the attention o the AC; and

9. generally undertake such other unctions and duties as may be required by statute or the Listing Manual, and by suchamendments made thereto rom time to time.

Te AC has ull access to and receives ull co-operation rom Management, and has ull discretion to invite members o Management to attend its meetings and has been given reasonable resources to enable it to discharge its unctions. Teinternal and external Auditors have direct and unrestricted access to the AC, which is empowered to conduct or authoriseinvestigations into any matters within its terms o reerence.


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Te Company has in place a whistle-blowing ramework where sta o the Company can raise concerns about improprietiesto the AC. Te objective or such arrangement is to ensure independent investigation o such matters and or appropriate

ollow-up action.

Te Company’s internal audit unction is out-sourced to ELICI e-Risk Services Pte Ltd (“Internal Auditors”). Te InternalAuditors reports directly to the AC.

Te Internal Auditors, in the course o its audit, review the eectiveness o the Group’s material internal controls, includingnancial, operational and compliance controls, and risk management. Material non-compliance, internal control weaknessesand key business risks noted during its audit and alignment plans to address these risks and weaknesses are communicatedto Management accordingly and tabled or discussion at AC meetings with updates by management on the status o theseaction plans. Te AC has reviewed and is satised that existing controls in the Company and the Group are adequate.

Te AC reviewed the overall scope o both the internal and external audits and the assistance given by the Company’socers to the auditors. It met with the Company’s internal and external auditors to discuss the results o their respective

examinations and their evaluation o the Company’s system o internal accounting controls. Te AC has also met with theauditors, without the presence o management. Te AC has also reviewed the quarterly and ull year results announcementas well as the annual nancial statements o the Company and the Group or the nancial year ended 31 December2010 as well as the auditors’ report thereon. Te AC had also reviewed interested person transactions o the Group in thenancial year.

Te AC has conducted an annual review o all non-audit services provided by the external auditors to satisy itsel that thenature and extent o such services will not prejudice the independence and objectivity o the external auditors.

Communication with Shareholder

Principle 10 AccountabilityPrinciple 14 Communication with Shareholders

Principle 15 Greater Shareholder Participation

Te Company believes in engaging in regular, eective and air communication with shareholders and is committed toconveying pertinent inormation to shareholders on a timely basis.

All material and price sensitive inormation as well as inormation on the Company’s new initiatives are publicly released viaSGXNE on a timely basis. In addition, the Company also responds to enquiries rom investors, analysts, und managersand the press.

At the general meetings o the Company, shareholders are given the opportunity to air their views and ask questions regardingthe Company and the Group. Te Articles o Association o the Company allow shareholders to appoint one or two proxiesto attend and vote in their stead. Each item o special business included in the notice o the general meetings is accompanied, where appropriate, by an explanation or the proposed resolution. Separate resolutions are proposed or substantially separateissues at the meeting. Te Chairman o the Audit, Remuneration and Nominating Committees are normally available at themeeting to answer questions relating to the work o these committees. Te External Auditors are also present to assist theDirectors in addressing any relevant queries by shareholders.

In preparation or the AGM, shareholders are encouraged to reer to the SGX’s investor guides, namely ‘An Investor’s Guide o Reading Annual Reports’ and ‘An Investor’s Guide o Preparing For Annual General Meetings’. Te guides, in bothEnglish and Chinese versions are available at the SGX website.


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Additional Inormation

Dealings In Securities

Te Company has adopted an internal policy (“Policy”) with regards to dealings in securities to provide guidance or itsdirectors and ocers.

Te Policy provides that Directors and employees are prohibited rom dealing in the securities o the Company during theperiod commencing two weeks beore the announcement o the Company’s nancial results or the rst three quarters andone month beore the announcement o the Company’s ull year results and ending on the date o the announcements o the relevant results; or i they are in possession o unpublished price-sensitive inormation on the Group. Tey are also madeaware o the applicability o the insider trading laws at all times.

Material Contracts

Tere were no material contracts entered into by the Company and its subsidiaries involving the interests o its Acting CEO,Directors or Controlling Shareholders.

Interested Person Transactions

Te Company has adopted an internal policy in respect o any transactions with interested person and has establishedprocedures or review and approval o the interested person transactions entered into by the Group. Te AC has reviewed therationale and terms o the Group’s interested person transactions and is o the view that the interested person transactions were on normal commercial terms and are not prejudicial to the interests o the Company and its minority shareholders.

Te aggregate value o interested person transactions entered into during the nancial year ended 31 December 2010 by theGroup is as ollows:

Name o Interested Person Aggregate value o all interested persontransactions during the nancial year under review (excluding transactions less than $100,000 and transactionsconducted under shareholders’ mandatepursuant to Rule 920)

Aggregate value o all interested persontransactions conducted under shareholders’mandate pursuant to Rule 920 (excluding transactions less than $100,000)

Advisory Fees paid toM. Rajaram

S$180,000 NA

Proessional ees paid to a rmin which a director has aninterest:-

-Straits Law Practice LLC

S$56,000 NA


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Major Properties

Held by EectiveGroup Interest

LocationDescription & ApproximateLand Area

Tenure Usage

Indonesia

P Hutan Rindang Banua 100% SouthKalimantan,Indonesia

Within orestconcession areabase camp

43 years lease upto 100 years

PlantationQuarters

P Marga Buana BumiMulia

100% Sungai Cuka,Satui, SouthKalimantan,Indonesia

249.46 hectares Mill Area

P Mangium AnugerahLestari

100% Alle Alle, PulauLaut, SouthKalimantan,Indonesia

52 hectares Mill Area

Investment Property

Completed Properties Held or Sale

People’s Republic o China (PRC)

Dongshan Poh Lian RealEstate Co Ltd

100% Dongshan,Fujian Province,PRC

Land area:4,347 sqm7-Storey residential andcommercialbuilding. 43 outo 86 units havebeen sold

70 years lease(59 yearsunexpired)

40 residentialunits and 46shops


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Financial Contents

IndependentAuditors’ Report27

Report o the Directors23

29Consolidated Statement

o Comprehensive Income30 BalanceSheets

32 Statements o Changes in Equity

34 Consolidated CashFlow Statement

36Notes to the

Financial Statements102 Statistics o

Shareholdings

105 Notice o AnnualGeneral Meeting

26 Statement by Directors

Proxy Form

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Te Directors present their report to the members together with the audited consolidated nancial statements o UnitedFiber System Limited (the “Company” or “Uniber”) and its subsidiaries (collectively, the “Group”) and the balance sheet

and statement o changes in equity o the Company or the nancial year ended 31 December 2010.

Directors

Te Directors o the Company in oce at the date o this report are:

Hoshi Dorab DebooM. RajaramChia Quee Hock, PBM Paul Lim Yu NengAng Mong Seng, BBM Rahul Kumar

Indrawan PrakasaEddy (Appointed on 25 January 2011)Mochtar Suhadi (Appointed on 25 January 2011)Henry Susanto (Appointed on 16 March 2011)

In accordance with Articles 107 and 117 o the Company’s Articles o Association, M Rajaram, Ang Mong Seng, Eddy,Mochtar Suhadi and Henry Susanto, retire and being eligible, oer themselves or re-election at the orthcoming AnnualGeneral Meeting.

Arrangements to enable Directors to acquire shares and debentures

Neither at the end o nor at any time during the nancial year was the Company a party to any arrangement whose objects

are, or one o whose object is, to enable the Directors o the Company to acquire benets by means o the acquisition o shares or debentures o the Company or any other body corporate.

Directors’ interest in shares and debentures

Te ollowing Directors, who held oce at the end o the nancial year, had, according to the register o Directors’shareholdings required to be kept under section 164 o the Singapore Companies Act, Cap. 50, an interest in shares o theCompany and related corporations (other than wholly owned subsidiaries) as stated below:

Direct interest Deemed interest

Name o Director

At the beginning

o nancial year or date o

appointment

At the

end o nancial

year

At the beginning

o nancial year or date o

appointment

At the

end o nancial

year

Ordinary shares o the Company

M. Rajaram 5,300,000 5,300,000 5,957,000 5,957,000Chia Quee Hock, PBM 1,000 1,001,000 9,000,000 –Paul Lim Yu Neng – – 1,000,000 1,000,000Rahul Kumar – – 1,000,000 600,000

Tere was no change in any o the above-mentioned interests between the end o the nancial year and 21 January 2011.

Report o the DirectorsUniber AnnualReport2010

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Report o the Directors

Directors’ interest in shares and debentures (cont’d)

Except as disclosed in this report, no Director who held oce at the end o the nancial year had interests in shares ordebentures o the Company, or o related corporations, either at the beginning o the nancial year, or date o appointmenti later, or at the end o the nancial year.

Directors’ contractual benets

Except as disclosed in the nancial statements, since the end o the previous nancial year, no Director o the Company hasreceived or become entitled to receive a benet by reason o a contract made by the Company or a related corporation withthe Director, or with a rm o which the Director is a member, or with a company in which the Director has a substantialnancial interest.

Options

Tere are no options granted by the Company and its subsidiaries to take up unissued shares in the Company and its relatedcorporations.

Audit Committee

Te Audit Committee (“AC”) carried out its unctions in accordance with section 201B(5) o the Singapore Companies Act,Cap. 50, including the ollowing:

• Reviews the audit plans o the internal and external auditors o the Company, and review the internal auditors’evaluation o the adequacy o the Company’s system o internal accounting controls and the assistance given by the

Company’s management to the external and internal auditors;

• Reviews the quarterly and annual nancial statements and the auditors’ report on the annual nancial statements o the Company beore their submission to the Board o Directors;

• Reviews eectiveness o the Company’s material internal controls, including nancial, operational and compliancecontrols and risk management 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 that these groups believe should be discussed privately with the AC;

• Reviews legal and regulatory matters that may have a material impact on the nancial statements, related compliancepolicies and programs and any reports received rom regulators;

• Reviews the cost eectiveness and the independence and objectivity o the external auditors;

• Reviews the nature and extent o non-audit services provided by the external auditors;

• Recommends to the Board o Directors the external auditors to be nominated, approves the compensation o theexternal auditors, and reviews the scope and results o the audit;

• Reports actions and minutes o the AC to the Board o Directors with such recommendations as the AC considersappropriate; and

• Reviews interested person transactions in accordance with the requirements o the Singapore Exchange Securities rading Limited (SGX-S)’s Listing Manual.

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Audit Committee (cont’d)

Te AC, having reviewed all non-audit services provided by the external auditors to the Group, is satised that the natureand extent o such services would not aect the independence o the external auditors. Te AC has also conducted a review o interested person transactions.

Te AC convened 5 meetings during the year with ull attendance rom all members. Te AC has also met with internal andexternal auditors, without the presence o the Company’s management, at least once a year.

Further details regarding the AC are disclosed in the Report on Corporate Governance.

Auditors

Ernst & Young LLP have expressed their willingness to accept reappointment as auditors.

On behal o the Board o Directors,

Hoshi Dorab Deboo

Acting Chie Executive Ocer

Chia Quee Hock Non-Executive Director

Singapore1 April 2011

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We, Hoshi Dorab Deboo and Chia Quee Hock, being two o the Directors o United Fiber System Limited, do hereby statethat, in the opinion o the Directors,

(a) the accompanying balance sheets, consolidated statement o comprehensive income, statements o changes in equity and consolidated cash fow statement together with notes thereto are drawn up so as to give a true and air view o thestate o aairs o the Group and o the Company as at 31 December 2010 and the results o the business, changes inequity and cash fows o the Group and the changes in equity o the Company or the year ended on that date, and

(b) at the date o this statement, there are reasonable grounds to believe that the Company will be able to pay its debts asand when they all due.

On behal o the Board o Directors,

Hoshi Dorab DebooActing Chie Executive Ocer

Chia Quee Hock Non-Executive Director

Singapore1 April 2011

Statement by DirectorsUniber AnnualReport

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To the Members o United Fiber System Limited

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated nancial statements o United Fiber System Limited (the “Company”) andits subsidiaries (collectively, the “Group”) set out on pages 29 to 101, which comprise the balance sheets o the Group andthe Company as at 31 December 2010, the statements o changes in equity o the Group and the Company, consolidatedstatement o comprehensive income and consolidated cash fow statement o the Group or the year then ended, and asummary o signicant accounting policies and other explanatory inormation.

Management’s Responsibility or the Consolidated Financial Statements

Management is responsible or the preparation o consolidated nancial statements that give a true and air view in accordance with the provisions o the Singapore Companies Act, Cap.50 (the Act) and Singapore Financial Reporting Standards, andor devising and maintaining a system o internal accounting controls sucient to provide a reasonable assurance that assets

are saeguarded against loss rom unauthorised use or disposition; and transactions are properly authorised and that they arerecorded as necessary to permit the preparation o true and air prot and loss accounts and balance sheets and to maintainaccountability o assets.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated nancial statements based on our audit. We conducted ouraudit in accordance with Singapore Standards on Auditing. Tose standards require that we comply with ethical requirementsand plan and perorm the audit to obtain reasonable assurance about whether the consolidated nancial statements are reerom material misstatement.

An audit involves perorming procedures to obtain audit evidence about the amounts and disclosures in the consolidatednancial statements. Te procedures selected depend on the auditor’s judgment, including the assessment o the risks

o material misstatement o the consolidated nancial statements, whether due to raud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation o the consolidated nancial statementsthat give a true and air view in order to design audit procedures that are appropriate in the circumstances, but not or thepurpose o expressing an opinion on the eectiveness o the entity’s internal control. An audit also includes evaluating theappropriateness o accounting policies used and the reasonableness o accounting estimates made by management, as well asevaluating the overall presentation o the consolidated nancial statements.

We believe that the audit evidence we have obtained is sucient and appropriate to provide a basis or our qualiedaudit opinion.

Basis or Qualied Opinion

Included in the Group’s non-current trade and other receivables as at 31 December 2010 is an amount o US$28.3 million

due rom P Kiani Kertas (“P KK”). Tis same amount was included in the Group’s current trade and other receivablesin the prior nancial year ended 31 December 2009. As disclosed in Note 39 to the consolidated nancial statements,the Group used to manage the operations o the P KK pulp mill pursuant to an Operation Management Agreement(“OMA”) entered into on 25 July 2005. Under the OMA, the Group injected working capital unding into the pulp mill, o which, US$28.3 million remains outstanding as at 31 December 2010. Further, pursuant to the terms o the Share PurchaseAgreement (“SPA”) dated 5 December 2005 with the vendors o P KK, all amounts injected by the Group into P KK are recoverable rom P KK. I not received, upon acquisition o P KK, these amounts will be oset against the purchaseconsideration as stipulated under this agreement. In view o the above agreements and continued eorts to nd suitablestructures that would be acceptable or both the vendors and the Group, the Group has continued to view the working capitalunding as recoverable and enorceable. As such, this amount has been reclassied as “Advances to P KK” and is includedin non-current trade and other receivables on the Group’s balance sheet as at 31 December 2010. We were unable to obtaindirect conrmation rom P KK or the above amount. Based on the inormation available to us, we were unable to satisy ourselves as to the appropriateness and recoverability o the carrying amount o this amount as at 31 December 2010 and

31 December 2009.

Independent Auditors’ ReportFor the nancial year ended 31 December 2010


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Qualied Opinion

In our opinion, except or the eects o the matter described in the Basis or Qualied Opinion paragraph, the consolidatednancial statements o the Group and the balance sheet and statement o changes in equity o the Company are properly drawn up in accordance with the provisions o the Act and Singapore Financial Reporting Standards so as to give a true andair view o the state o aairs o the Group and o the Company as at 31 December 2010 and the results, changes in equity and cash fows o the Group and the changes in equity o the Company or the year ended on that date.

Emphasis o Matter

Without urther qualiying our opinion, we draw attention to Note 1.2 to the consolidated nancial statements. Te Groupand the Company incurred a net loss o US$47.24 million and US$109.34 million respectively during the nancial yearended 31 December 2010 and as at that date, the Group and the Company are in net current liability positions o US$62.1million and US$40.1 million respectively. As at 31 December 2010, the Group and the Company have loans and borrowingstotalling US$42.1 million and US$25.1 million respectively that are due within the next 12 months. Tese actors indicate

the existence o a material uncertainty which may cast signicant doubt about the Group and the Company’s ability tocontinue as going concerns. As disclosed urther in Note 1.2, the ability o the Group and the Company to continue as goingconcerns depends on the successul completion o the Proposed Subscription and the continued availability o the undrawncredit acilities amounting to US$40.8 million. I the Group and the Company are unable to continue in operational existenceor the oreseeable uture, the Group and the Company may be unable to discharge their liabilities in the normal course o business and adjustments may have to be made to refect the situation that assets may need to be realised other than in thenormal course o business and at amounts which could dier signicantly rom the amounts at which they are currently recorded in the balance sheet. In addition, the Group and the Company may have to reclassiy long-term assets and liabilitiesas current assets and liabilities. No such adjustments have been made to these consolidated nancial statements.

Report on Other Legal and Regulatory Requirements

In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiaries

incorporated in Singapore o which we are the auditors have been properly kept in accordance with the provisions o the Act.

Ernst & Young LLPPublic Accountants andCertied Public AccountantsSingapore

1 April 2011

Independent Auditors’ ReportFor the nancial year ended 31 December 2010

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(In United States Dollars)

Note 2010 2009US$’000 US$’000

Revenue 4 132,923 139,992Cost o sales (124,847) (132,387)

Gross prot 8,076 7,605

Other income 5 2,926 478Selling and distribution expenses (1,038) (1,884)Administrative expenses (9,363) (7,650)Other operating expenses (20,495) (5,807)

Fair value loss on orest asset and logs harvested 10 (25,289) (55,714)Finance costs 6 (7,717) (5,704)

Loss beore tax 7 (52,900) (68,676) axation 8 5,664 13,607

Loss or the year (47,236) (55,069)

Other comprehensive income:

Foreign currency translation 2,427 728

Total comprehensive income or the year (44,809) (54,341)

Loss attributable to:

Equity holders o the Company (47,232) (55,069)Non-controlling interests (4) –

(47,236) (55,069)

Total comprehensive income attributable to:

Equity holders o the Company (44,805) (54,341)Non-controlling interests (4) –

(44,809) (54,341)

Loss per share attributable to equity holders o the Company (cents per share)

Basic and diluted 9 (1.43) (1.99)

Consolidated Statement o Comprehensive IncomeFor the nancial year ended 31 December 2010

Te accompanying accounting policies and explanatory notes orm an integral part o the nancial statements.


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Group Company Note 2010 2009 01.01.2009 2010 2009(restated) (restated)

US$’000 US$’000 US$’000 US$’000 US$’000

Non-Current Assets

Forest asset 10 108,537 134,121 189,422 – –Property, plant and equipment 11 26,781 40,737 44,308 34 141Investment in subsidiaries 14 – – – 137,138 134,491Amounts due rom subsidiaries 12 – – – 392 86,586Investment properties 15 2,224 1,471 1,471 – –Club membership 16 77 69 69 – –Deerred tax assets 17 229 224 210 – –Goodwill on consolidation 18 22,890 20,970 20,479 – –Other non-current assets – 381 204 – – rade and other receivables 21 38,728 9,034 10,003 – –

199,466 207,007 266,166 137,564 221,218

Current Assets

Construction work-in-progress 19 4,308 1,685 1,047 – –Inventories 20 3,464 3,489 1,652 – – rade and other receivables 21 39,948 62,089 52,994 1,010 1,547Fixed deposits 22 3,853 2,149 1,331 – –

Cash and cash equivalents 22 12,507 14,687 7,516 720 4764,080 84,099 64,540 1,730 1,594

Current Liabilities

Progress billings in excess o costsincurred 19 28,664 31,706 21,039 – –

rade and other payables 23 48,444 28,806 21,085 16,364 18,026Hire purchase creditors 24 362 317 360 – –Provision or taxation 6,642 2,042 1,139 330 347Derivative liability 34 28 – – 28 –Short term loans and borrowings 25 42,080 21,149 22,297 25,112 10,800

126,220 84,020 65,920 41,834 29,173

Balance SheetsAt 31 December 2010


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Group Company Note 2010 2009 01.01.2009 2010 2009(restated) (restated)

US$’000 US$’000 US$’000 US$’000 US$’000

Net Current (Liabilities)/Assets (62,140) 79 (1,380) (40,104) (27,579)

Non-Current Liabilities

Amount due to a subsidiary 13 – – – 3,422 3,135 rade payables 23 4,404 3,014 2,710 – –Deerred tax liabilities 17 20,913 27,491 41,380 – –Non-current payables 23 726 481 385 – –Hire purchase creditors 24 596 689 938 – –Derivative liability 34 – 1,417 285 – 1,417Long term loans and borrowings 26 – 29,271 40,402 – 8,521

26,639 62,363 86,100 3,422 13,073

Net Assets 110,687 144,723 178,686 94,038 180,566

Equity Attributable to Equity Holders o the Company

Share capital 27 243,511 232,738 212,360 243,511 232,738Reserves (132,821) (88,016) (33,675) (149,473) (52,172)

110,690 144,722 178,685 94,038 180,566Non-controlling interests (3) 1 1 – –

Total Equity 110,687 144,723 178,686 94,038 180,566

Balance SheetsAt 31 December 2010



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Attributable to equity holders o the Company Non-

controlling Interests

TotalEquity Group

ShareCapital

(Note 27)

ForeignCurrency

TranslationOther

Reserves (1)

AccumulatedLosses

TotalReserves

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

2010

At 1 January 2010 232,738 6,492 (62,479) (32,029) (88,016) 1 144,723

otal comprehensive incomeor the year – 2,427 – (47,232) (44,805) (4) (44,809)

Issuance o shares 10,773 – – – – – 10,773

At 31 December 2010 243,511 8,919 (62,479) (79,261) (132,821) (3) 110,687

(1) Other reserves comprise equity-settled liability or acquisition o Anro Singapore Limited (“ASL”) Group o companies in year 2002.

Attributable to equity holders o the Company

Non-controlling

Interests TotalEquity Group

ShareCapital

(Note 27)

ForeignCurrency

TranslationOther

Reserves (1)

AccumulatedProt/

(Losses) Total

Reserves

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

2009

At 1 January 2009 212,360 5,764 (62,479) 23,040 (33,675) 1 178,686

otal comprehensive incomeor the year – 728 – (55,069) (54,341) – (54,341)

Issuance o shares 20,378 – – – – – 20,378

At 31 December 2009 232,738 6,492 (62,479) (32,029) (88,016) 1 144,723

(1) Other reserves comprise equity-settled liability or acquisition o ASL Group o companies in year 2002.

Statements o Changes in Equity For the year ended 31 December 2010


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Company

ShareCapital

(Note 27)

ForeignCurrency

TranslationOther

Reserves (1)

AccumulatedLosses

TotalReserves

TotalEquity

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

2010

At 1 January 2010 232,738 27,023 5,826 (85,021) (52,172) 180,566

otal comprehensive income or the year – 12,039 – (109,340) (97,301) (97,301)

Issuance o shares 10,773 – – – – 10,773

At 31 December 2010 243,511 39,062 5,826 (194,361) (149,473) 94,038(1) Other reserves comprise equity-settled liability or acquisition o ASL Group o companies in year 2002.

Company

ShareCapital

(Note 27)

ForeignCurrency

TranslationOther

Reserves (1)

AccumulatedLosses

TotalReserves

TotalEquity

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

2009

At 1 January 2009 212,360 22,073 5,826 (66,061) (38,162) 174,198

otal comprehensive income or the year – 4,950 – (18,960) (14,010) (14,010)

Issuance o shares 20,378 – – – – 20,378

At 31 December 2009 232,738 27,023 5,826 (85,021) (52,172) 180,566

(1) Other reserves comprise equity-settled liability or acquisition o ASL Group o companies in year 2002.

Statements o Changes in Equity For the year ended 31 December 2010



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2010 2009US$’000 US$’000

Cash fows rom operating activities

Loss beore tax (52,900) (68,676)

Adjustments or:Depreciation o property, plant and equipment 3,994 3,087Loss/(gain) on disposal o property, plant and equipment 12 (48)Property, plant and equipment written-o 42 3Impairment loss on property, plant and equipment 10,651 –Fair value gain on investment properties (892) –

Fair value loss on orest asset and logs harvested 25,289 55,714 Write down o inventories 58 –Fair value loss on inventories 914 –Allowance or doubtul debts – 56Fair value (gain)/loss on nancial instruments (1,471) 1,361Interest expenses 7,717 5,704Interest income (9) (5)Net exchange dierences 2,931 1,173

Operating loss beore changes in working capital (3,644) (1,631)(Decrease)/increase in construction work-in-progress, net o progress billings

in excess o costs incurred (5,665) 9,549Decrease/(increase) in inventories 129 (1,798)Increase in trade and other receivables (7,486) (6,672)Increase in trade and other payables 20,942 9,743

Cash fows rom operations 4,256 9,191Income taxes paid (143) (48)Interest paid (3,307) (4,446)

Net cash fows rom operating activities 806 4,697

Consolidated Cash Flow StatementFor the year ended 31 December 2010


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2010 2009US$’000 US$’000

Cash fows rom investing activities

Addition in costs o orest asset (781) (415)Interest received 9 5Proceeds rom disposal o property, plant and equipment 26 49Purchase o property, plant and equipment (1,355) (316)

Net cash fows used in investing activities (2,101) (677)

Cash fows rom nancing activities

Increase o pledge in xed deposits (1,704) (785)Proceeds rom issuance o ordinary shares – 5,000Proceeds rom issuance o loan notes – 15,000Proceeds rom issuance o convertible bonds – 10,000Redemption o convertible bond – (23,000)Proceeds rom loans and borrowings 15,572 –Repayment o loans and borrowings (14,703) (2,458)Repayment o hire purchase (48) (323)

Net cash fows (used in)/rom nancing activities (883) 3,434

Eect o exchange rate changes on cash and cash equivalents (2) (283)

Net (decrease)/increase in cash and cash equivalents (2,180) 7,171Cash and cash equivalents at 1 January 14,687 7,516

Cash and cash equivalents at 31 December (Note 22) 12,507 14,687

Consolidated Cash Flow StatementFor the year ended 31 December 2010



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1. General inormation

1.1 Corporate inormation

United Fiber System Limited (“Uniber” or the “Company”) is a limited liability company, incorporated and domiciledin Singapore. Te Company’s shares are publicly traded on the Singapore Exchange Securities rading Limited(SGX-S).

Te registered oce and principal place o business o the Company is located at 103 Deu Lane 10, #02-01, BHBuilding, Singapore 539223.

Te principal activities o the Company are those o an investment holding company and provision o managementservices to entities within the Uniber Group o companies. Te principal activities o the subsidiaries are set out inNote 3 to the nancial statements.

1.2 Going concern

Te Group and the Company incurred a net loss o US$47,236,000 and US$109,340,000 (2009: US$55,069,000and US$18,960,000) respectively during the nancial year ended 31 December 2010. As at that date, the Group andthe Company are in net current liability positions o US$62,140,000 (2009: net current asset o US$79,000) andUS$40,104,000 (2009: US$27,579,000) respectively.

At the balance sheet date, the Group and the Company have loans and borrowings totalling US$42,080,000 andUS$25,112,000 (2009: US$21,149,000 and US$10,800,000) respectively that are due within the next 12 months. Tese actors indicate the existence o a material uncertainty which may cast signicant doubt about the Group andCompany’s ability to continue as going concerns.

As disclosed in Note 40(iv), on 12 January 2011, the Group and the Company had entered into an agreement with

Asia Star Fund Ltd (“ASF”) whereby ASF will subscribe or 3,593,395,298 ordinary shares at S$0.05 each in the sharecapital o the Company (the “Proposed Subscription”) as well as provide a loan o US$35 million to the Group or theretirement o certain loans and borrowings and to nance the Group’s short-term working capital requirements beorethe completion o the Proposed Subscription.

As disclosed in Note 40(iv), on 14 March 2011, the Group and Company have utilised approximately US$32.8 millionto repay the loan and interest o US$19.5 million to China National Machinery & Equipment Import & ExportCorporation, loan and related interest and legal expenses o US$5.4 million to Falcon Capital Global Holding Limited(“Falcon”); and the deposit o S$10 million (equivalent to approximately US$7.8 million) received rom Falcon or theproposed 3,560,000,000 ordinary shares subscription or S$0.05 each in the share capital o the Company, which hadautomatically lapsed on 30 November 2010.

Upon the successul completion o the Proposed Subscription, the Group will be able to raise approximately US$138

million. Te successul completion o the Proposed Subscription is subject to various conditions precedent as detailedin Note 40(iv). Te approval rom the Securities Industry Council was obtained on 26 January 2011. At the date o thisreport, the Group is currently in the process o ullling the other conditions in the agreement.

In addition, the Company has an equity line o credit o US$40.8 million rom a nancial institution that has not beendrawn as at 31 December 2010 as disclosed in Note 25( ). Te credit line is available to the Company till 20 July 2014.

Te nancial statements have been prepared on the assumption that the Group and the Company will continue asgoing concerns. Te ability o the Group and the Company to continue as going concerns depends on the successulcompletion o the Proposed Subscription as described above and the continued availability o the undrawn credit lineo US$40.8 million. I the Group and the Company are unable to continue in operational existence or the oreseeableuture, the Group and the Company may be unable to discharge their liabilities in the normal course o business andadjustments may have to be made to refect the situation that assets may need to be realised other than in the normal

course o business and at amounts which could dier signicantly rom the amounts at which they are currently recorded in the balance sheet. In addition, the Group and the Company may have to reclassiy long term assets andliabilities as current assets and liabilities. No such adjustments have been made to these nancial statements.

Notes to the Financial StatementsFor the year ended 31 December 2010

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2. Summary o signicant accounting policies

2.1 Basis o preparation

Te consolidated nancial statements o the Group and the balance sheet and statement o changes in equity o theCompany have been prepared in accordance with Singapore Financial Reporting Standards (“FRS”).

Te nancial statements have been prepared on the historical cost basis except as disclosed in the accounting policiesbelow.

Te nancial statements are presented in United States Dollars (“USD” or “US$”) and all values in the tables arerounded to the nearest thousand (US$’000) as indicated.

2.2 Changes in accounting policies

Te accounting policies adopted are consistent with those o the previous nancial year except in the current nancial year, the Group has adopted all the new and revised standards and interpretations that are eective or annual nancialperiods beginning on or ater 1 January 2010. Te adoption o these standards and interpretations did not have any eect on the nancial perormance or position o the Group and the Company except as disclosed below:

FRS 103 Business Combinations (revised) and FRS 27 Consolidated and Separate Financial Statements (revised)

Te revised FRS 103 Business Combinations and FRS 27 Consolidated and Separate Financial Statements areapplicable or annual periods beginning on or ater 1 July 2009. As o 1 January 2010, the Group adopted both revisedstandards at the same time in accordance with their transitional provisions.

FRS 103 Business Combinations (revised)

Te revised FRS 103 introduces a number o changes to the accounting or business combinations that will impact theamount o goodwill recognised, the reported results in the period that an acquisition occurs, and uture reported results.Changes in signicant accounting policies resulting rom the adoption o the revised FRS 103 include:

- ransaction costs would no longer be capitalised as part o the cost o acquisition but will be expensedimmediately;

- Consideration contingent on uture events are recognised at air value on the acquisition date and any changesin the amount o consideration to be paid will no longer be adjusted against goodwill but recognised in protor loss;

- Te Group elects or each acquisition o a business, to measure non-controlling interest at air value, or atthe non-controlling interest’s proportionate share o the acquiree’s identiable net assets, and this impacts the

amount o goodwill recognised; and- When a business is acquired in stages, the previously held equity interests in the acquiree is remeasured to air

value at the acquisition date with any corresponding gain or loss recognised in prot or loss, and this impacts theamount o goodwill recognised.

According to its transitional provisions, the revised FRS 103 has been applied prospectively. Assets and liabilities thatarose rom business combinations whose acquisition dates are beore 1 January 2010 are not adjusted.


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2. Summary o signicant accounting policies (cont’d)

2.2 Changes in accounting policies (cont’d)

FRS 27 Consolidated and Separate Financial Statements (revised)

Changes in signicant accounting policies resulting rom the adoption o the revised FRS 27 include:

- A change in the ownership interest o a subsidiary that does not result in a loss o control is accounted or as anequity transaction. Tereore, such a change will have no impact on goodwill, nor will it give rise to a gain or lossrecognised in prot or loss;

- Losses incurred by a subsidiary are allocated to the non-controlling interest even i the losses exceed the non-controlling interest in the subsidiary’s equity; and

- When control over a subsidiary is lost, any interest retained is measured at air value with the corresponding gainor loss recognised in prot or loss.

According to its transitional provisions, the revised FRS 27 has been applied prospectively, and does not impactthe Group’s consolidated nancial statements in respect o transactions with non-controlling interests, attribution o losses to non-controlling interests and disposal o subsidiaries beore 1 January 2010. Te changes will aect uturetransactions with non-controlling interests.

2.3 Standards issued but not yet eective

Te Group has not adopted the ollowing standards and interpretations (“IN FRS”) that have been issued but not yet eective:

Description

Eective or annualperiods beginning

on or ater

Amendments to FRS 32 Financial Instruments: Presentation – Classication o Rights Issues 1 February 2010

IN FRS 119 Extinguishing Financial Liabilities with Equity Instruments 1 July 2010

Revised FRS 24 Related Party Disclosures 1 January 2011

Amendments to IN FRS 114 Prepayments o a Minimum Funding Requirement 1 January 2011

IN FRS 115 Agreements or the Construction o Real Estate 1 January 2011

Improvements to FRSs issued in 2010:

Amendments to FRS1 Presentation o Financial Statements 1 January 2011

ransition requirements or amendments arising as a results o FRS 27 Consolidated and Separate Financial Statements 1 July 2010

Amendments to FRS 34 Interim Financial Reporting 1 January 2011

Amendments to FRS 101 First-time Adoption o Financial Reporting Standards 1 January 2011

Amendments to FRS 103 Business Combinations 1 July 2010

Amendments to FRS 107 Financial Instruments: Disclosures 1 January 2011

Amendments to IN FRS 113 Customer Loyalty Programmes 1 January 2011

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2.3 Standards issued but not yet eective (cont’d)

Except or the revised FRS 24, the Directors expect that the adoption o the other standards and interpretations willhave no material impact on the nancial statements in the period o initial application. Te nature o the impendingchanges in accounting policy on adoption o the revised FRS 24 is described below.

Revised FRS 24 Related Party Disclosures

Te revised FRS 24 claries the denition o a related party to simpliy the identication o such relationships andto eliminate inconsistencies in its application. Te revised FRS 24 expands the denition o a related party and wouldtreat two entities as related to each other whenever a person (or a close member o that person’s amily) or a thirdparty has control or joint control over the entity, or has signicant infuence over the entity. Te revised standard alsointroduces a partial exemption o disclosure requirements or government-related entities. Te Group is currently

determining the impact o the changes to the denition o a related party has on the disclosure o related party transaction. As this is a disclosure standard, it will have no impact on the nancial position or nancial perormance o the Group when implemented in 2011.

2.4 Signifcant accounting judgements and estimates

Te preparation o the Group’s nancial statements requires management to make judgements, estimates and assumptionsthat aect the reported amounts o revenues, expenses, assets and liabilities, and the disclosure o contingent liabilitiesat the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that couldrequire a material adjustment to the carrying amount o the asset or liability aected in the uture.

Judgements made in applying accounting policies

In the process o applying the Group’s accounting policies, management has made the ollowing judgements, apartrom those involving estimations, which have the most signicant eect on the amounts recognised in the nancialstatements:

(a) Income taxes

Te Group has exposure to income taxes in numerous jurisdictions. Signicant judgement is involved indetermining the Group-wide provision or income taxes. Tere are certain transactions and computations or which the ultimate tax determination is uncertain during the ordinary course o business. Te Group recognisesliabilities or expected tax issues based on estimates o whether additional taxes will be due. Where the naltax outcome o these matters is dierent rom the amounts that were initially recognised, such dierences willimpact the income tax and deerred tax provisions in the period in which such determination is made. Tecarrying amount o the Group’s tax payables and deerred tax liabilities at 31 December 2010 was US$6,642,000

(2009: US$2,042,000) and US$20,913,000 (2009: US$27,491,000) respectively.(b) Proposed acquisition o PT Kiani Kertas (“PT KK”) now known as PT Kertas Nusantara

Te Directors o the Company have taken legal advice and continue to view the working capital undingamounting to US$28.3 million previously injected into P KK, pursuant to the Operational ManagementAgreement entered into with P KK on 25 July 2005 and the Sales and Purchase Agreement entered into withthe shareholders o P KK on 5 December 2005 is recoverable and enorceable. Te Company has sent Letterso Demand to the two shareholders Fayola and Langass in March 2011 demanding the payment.


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2.4 Signifcant accounting judgements and estimates (cont’d)

Key sources o estimation uncertainty

Te key assumptions concerning the uture and other key sources o estimation uncertainty at the balance sheet date,that have a signicant risk o causing a material adjustment to the carrying amounts o assets and liabilities within thenext nancial year are discussed below.

(a) Impairment o goodwill

Te Group assesses whether there are any indicators o impairment or goodwill at each reporting date. Goodwillis tested or impairment annually and at other times when such indicators exist.

When value in use calculations are undertaken, management must estimate the expected uture cash fows romthe cash-generating unit and choose a suitable discount rate in order to calculate the present value o the cashfows.

Te carrying amount o the Group’s goodwill as at 31 December 2010 was US$22,890,000 (2009: US$20,970,000).More details are given in Note 18.

(b) Valuation o orest asset

Forest asset is measured on initial recognition and at each balance sheet date at its air value at cost usingdiscounted cash fow (“DCF”). Annual valuation by independent proessional valuer is carried out to ascertainthe air value o orest asset. Te carrying amount o the Group’s orest asset at the balance sheet date is disclosedin Note 10 o the nancial statements.

(c) Impairment o loans and receivables

Te Group assesses at each balance sheet date whether there is any objective evidence that loans and receivablesare impaired. o determine whether there is objective evidence o impairment, the Group considers actors suchas the probability o insolvency or signicant nancial diculties o the debtor and deault or signicant delay in payments.

Where there is objective evidence o impairment, the amount and timing o uture cash fows are estimated basedon historical loss experience or assets with similar credit risk characteristics.

Te carrying amount o the Group’s loans and receivables at the balance sheet date is disclosed in Note 21 to thenancial statements. Te loans that are impaired have been ully provided or; accordingly the change o present

value o estimated cash fows on receivables will not have an impact on the impairment allowance in the incomestatement.

(d) Construction contracts

Te Group recognises contract revenue to the extent o contract costs incurred where it is probable those costs will be recoverable or based on the stage o completion method. Te stage o completion is measured by reerenceto proessional surveys o work perormed.

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2.4 Signifcant accounting judgements and estimates (cont’d)

Key sources o estimation uncertainty (cont’d)

(d) Construction contracts (cont’d)

Signicant assumptions are required in determining the stage o completion, the extent o the contract costsincurred, the estimated total contract revenue and contract costs and liquidated damage claims, as well as therecoverability o the contract costs incurred. otal contract revenue also includes an estimation o the recoverable variation works that are recoverable rom the customers. In making the estimation, the Group evaluates by relying on past experience and knowledge o the project engineers and/or the work o specialists. An estimationo recoverable variation works amounting to US$Nil (2009: US$6,507,000) was taken into consideration inarriving at the estimated total contract revenue. Any shortall in recovery o this estimation will impact the results

o the Group by the same quantum. Te carrying amounts o assets and liabilities arising rom constructioncontracts at the balance sheet date are disclosed in Note 19 to the nancial statements.

(e) Write down o inventories

Management determines the net realisable value o inventories by using prevailing market data such as mostrecent sale transactions. Tese estimates require judgement as to the anticipated sale prices by reerence to recentsales transactions. Inventories written down or the nancial year amounted to US$58,000 (2009: US$Nil).

( ) Useul lives o plant and machinery

Te cost o plant and machinery is depreciated on a straight-line basis over the plant and machinery’s estimatedeconomic useul lives. Management estimates the useul lives o these plant and machinery to be within 5 to

15 years. Tese are common lie expectancies applied in the industry. Changes in the expected level o usageand technological developments could impact the economic useul lives and the residual values o these assets,thereore, uture depreciation charges could be revised.

Te carrying amount o the Group’s plant and machinery at the balance sheet date is disclosed in Note 11 to thenancial statements. A 5% dierence in the expected useul lives o these assets rom management’s estimates would result in approximately 0.47% (2009: 0.32%) variance in the Group’s loss or the year.

2.5 Functional currency, oreign currency and presentation currency

(a) Functional currency

Management has determined Singapore Dollars (“SGD” or “S$”) as currency o the Company as a large portion

o its revenues and costs are denominated in SGD.(b) Foreign currency

ransactions in oreign currencies are measured in the respective unctional currencies o the Company and itssubsidiaries and are recorded on initial recognition in the unctional currencies at exchange rates approximatingthose ruling at the transaction dates.

Monetary assets and liabilities denominated in oreign currencies are translated at the rate o exchange rulingat the balance sheet date. Non-monetary items that are measured in terms o historical cost in a oreigncurrency are translated using the exchange rates as at the dates o the initial transactions. Non-monetary itemsmeasured at air value in a oreign currency are translated using the exchange rates at the date when the air value was determined.


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2.5 Functional currency, oreign currency and presentation currency (cont’d)

(b) Foreign currency (cont’d)

Exchange dierences arising on the settlement o monetary items or on translating monetary items at the balancesheet date are recognised in prot or loss except or exchange dierences arising on monetary items that ormpart o the Group’s net investment in oreign subsidiaries, which are recognised initially in other comprehensiveincome and accumulated under oreign currency translation reserve in equity. Te oreign currency translationreserve is reclassied rom equity to prot or loss o the Group on disposal o the oreign operation.

(c) Group companies

Te assets and liabilities o oreign operations are translated into SGD at the rate o exchange ruling at the

balance sheet date and their prot and loss are translated at the average exchange rate or the year. Te exchangedierences arising on the translation are recognised in other comprehensive income. On disposal o a oreignoperation, the component o other comprehensive income relating to that particular oreign operation isrecognised in prot or loss.

In the case o a partial disposal without loss o control o a subsidiary that includes a oreign operation, theproportionate share o the cumulative amount o the exchange dierences are re-attributed to non-controllinginterest and are not recognised in prot or loss. For partial disposals o associates or jointly controlled entitiesthat are oreign operations, the proportionate share o the accumulated exchange dierences is reclassied toprot or loss.

Te Group has elected to recycle the accumulated exchange dierences in the separate component o othercomprehensive income that arises rom the direct method o consolidation, which is the method the Group uses

to complete its consolidation.(d) Presentation currency

Te nancial statements are presented in United States Dollars (“USD” or “US$”) as the unctional currency o most subsidiaries within the Forestry and Pulp Division is pre-dominantly in USD. As the core investment o the Group is in Forestry and Pulp Division and this division is expected to contribute signicantly to the Group’sresults in the uture, the nancial statements, including comparatives o the Group and Company have beentranslated rom SGD to USD or presentation purpose.

Te nancial statements are translated rom SGD to USD using the ollowing procedures:

• Assets and liabilities or each balance sheet presented are translated at the closing rate ruling at that

balance sheet date; and • Income and expenses or each income statement are translated at average exchange rates or the year, which

approximates the exchange rates at the dates o the transactions.

All resulting exchange dierences are recognised in a separate component o equity as oreign currency translationreserves.

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2.6 Subsidiaries and basis o consolidation

(a) Subsidiaries

A subsidiary is an entity over which the Group has the power to govern the nancial and operating policies soas to obtain benets rom its activities.

In the Company’s separate nancial statements, investments in subsidiaries are accounted or at cost lessimpairment losses.

(b) Basis o consolidation

Business combinations rom 1 January 2010

Te consolidated nancial statements comprise the nancial statements o the Company and its subsidiaries asat the balance sheet date. Te nancial statements o the subsidiaries used in the preparation o the consolidatednancial statements are prepared or the same reporting date as the Company. Consistent accounting policies areapplied to like transactions and events in similar circumstances.

All intra-group balances, transactions, income and expenses and unrealised gain and losses resulting rom intra-group transactions are eliminated in ull.

Subsidiaries are consolidated rom the date o acquisition, being the date on which the Group obtains control,and continue to be consolidated until the date that such control ceases.

Business combinations are accounted or by applying the acquisition method. Identiable assets acquired and

liabilities assumed in a business combination are measured initially at their air values at the acquisition date.Acquisition-related costs are recognised as expenses in the periods in which the costs are incurred and theservices are received.

When the Group acquires a business, it assesses the nancial assets and liabilities assumed or appropriateclassication and designation in accordance with the contractual terms, economic circumstances and pertinentconditions as at the acquisition date. Tis includes the separation o embedded derivatives in host contracts by the acquiree.

Any contingent consideration to be transerred by the acquirer will be recognised at air value at the acquisitiondate. Subsequent changes to the air value o the contingent consideration which is deemed to be an asset orliability, will be recognised in accordance with FRS 39 either in prot & loss or as change to other comprehensiveincome. I the contingent consideration is classied as equity, it is not be remeasured until it is nally settled

within equity.In business combinations achieve in stages, previously held equity interests in the acquiree are remeasured to air value at the acquisition date and any corresponding gain or loss is recognised in prot or loss.

Te Group elects or each individual business combination, whether non-controlling interest in the acquiree (i any) is recognised on the acquisition date at air value, or at the non-controlling interest’s proportionate share o the acquiree identiable net assets.

Any excess o the sum o the air value o the consideration transerred in the business combination, the amounto non-controlling interest in the acquiree (i any), and the air value o the Group’s previously held equity interest in the acquiree (i any), over the net air value o the acquiree’s identiable assets and liabilities is recordedas goodwill. Te accounting policy or goodwill is set out in Note 2.12. In instances where the latter amount

exceeds the ormer, the excess is recognised as gain on bargain purchase in prot or loss on the acquisition date.


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2.6 Subsidiaries and basis o consolidation (cont’d)

(b) Basis o consolidation (cont’d)

Business combinations beore 1 January 2010

In comparison to the above mentioned requirements, the ollowing dierences applied:

Business combinations are accounted or by applying the purchase method. ransaction costs directly attributableto the acquisition ormed part o the acquisition costs. Te non-controlling interest (ormerly known as minority interest) was measured at the proportionate share o the acquiree’s identiable net assets.

Business combinations achieved in stages were accounted or as separate steps. Adjustments to those air values

relating to previously held interests treated as a revaluation and recognised in equity. When the Group acquired a business, embedded derivatives separated rom the host contract by the acquiree arenot reassessed on acquisition unless the business combination results in change in the terms o the contract thatsignicantly modied the cash fows that would otherwise be required under the contract.

Contingent consideration was recognised i, any only i, the Group had a present obligation, the economicoutfow was more likely than not and a reliable estimate was determinable. Subsequent measurements to thecontingent consideration aected goodwill.

(c) Transactions with non-controlling interests

Non-controlling interest represents the equity in subsidiaries not attributable, directly or indirectly, to owners o

the Company, and are presented separately in the consolidated statement o comprehensive income and withinequity in the consolidated balance sheet, separately rom equity attributable to owners o the Company.

Changes in the Company owner’s ownership interest in a subsidiary that do not result in a loss o control areaccounted or as equity transactions. In such circumstances, the carrying amounts o the controlling and non-controlling interests are adjusted to refect the changes in their relative interests in the subsidiary. Any dierencebetween the amount by which the non-controlling interest is adjusted and the air value o the consideration paidor received is recognised directly in equity and attributable to owners o the parent.

2.7 Associates

An associate is an entity, not being a subsidiary or a joint venture, in which the Group has signicant infuence. Teassociate is equity accounted or rom the date the Group obtains signicant infuence until the date the Group ceases

to have signicant infuence over the associate. Te Group’s investments in associates are accounted or using the equity method. Under the equity method, theinvestment in associate is carried in the balance sheet at cost plus post-acquisition changes in the Group’s share o netassets o the associate. Goodwill relating to an associate is included in the carrying amount o the investment and isneither amortised nor tested individually or impairment.

Any excess o the Group’s share o the net air value o the associate’s identiable assets, liabilities and contingentliabilities over the cost o the investment is deducted rom the carrying amount o the investment and is recognised asincome as part o the Group’s share o results o the associate in the period in which the investment is acquired.

Te prot or loss refects the share o the results o operations o the associates. Where there has been a changerecognised in other comprehensive income by the associates, the Group recognises its share o such changes in other

comprehensive income. Unrealised gains and losses resulting rom transactions between the Group and the associateare eliminated to the extent o the interest in the associates.

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2.7 Associates (cont’d)

Te Group’s share o the prot or loss o its associates is show on the ace o prot or loss beore tax and non-controllinginterests in the subsidiaries o associates.

When the Group’s share o losses in an associate equals or exceeds its interest in the associate, the Group does notrecognise urther losses, unless it has incurred obligations or made payments on behal o the associate.

Ater application o the equity method, the Group determines whether it is necessary to recognise an additionalimpairment loss on the Group’s investment in its associates. Te Group determines at each balance sheet date whetherthere is any objective evidence that the investment in the associate is impaired. I this is the case, the Group calculatesthe amount o impairment as the dierence between the recoverable amount o the associate and its carrying value andrecognises the amount in prot and loss.

Te nancial statements o the associate are prepared as o the same reporting date as the Company. Where necessary,adjustments are made to bring the accounting policies in line with those o the Group.

Upon loss o signicant infuence over the associate, the Group measures any retained investment at its air value. Any dierence between the carrying amount o the associate upon loss o signicant infuence and the air value o theaggregate o the retained investment and proceeds rom disposal is recognised in prot or loss.

2.8 Joint ventures

A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subjectto joint control, where the strategic nancial and operating decisions relating to the activity require the unanimousconsent o the parties sharing control. Te Group recognises its interest in the joint venture using proportionate

consolidation. Te Group combines its proportionate share o each o the assets, liabilities, income and expenseso the joint venture with the similar items, line by line, in its consolidated nancial statements. Te joint venture isproportionately consolidated rom the date the Group obtains joint control until the date on which the Group ceasesto have joint control over the joint venture.

Adjustments are made in the Group’s consolidated nancial statements to eliminate the Group’s share o intragroupbalances, income and expenses and unrealised gains and losses on transactions between the Group and its jointly controlled entity. Losses on transactions are recognised immediately i the loss provides evidence o a reduction in thenet realisable value o current assets or an impairment loss.

Te nancial statements o the joint venture are prepared as o the same reporting date as the Company. Wherenecessary, adjustments are made to bring the accounting policies into line with those o the Group.

Upon loss o joint control, the Group measures any retained investment at its air value. Any dierence between thecarrying amount o the ormer joint venture entity upon loss o joint venture control and the aggregate o the air valueo the retained investment and proceeds rom disposal is recognised in prot and loss.

2.9 Forest asset

Te orest asset is valued by an independent proessional valuer, using discounted cash fow (“DCF”) projections inarriving at the air value o the orest asset.

Deerred tax liability arising rom the temporary dierence between the tax base o orest asset and its carrying amountis accounted or in accordance with the accounting policy stated in Note 2.26(b).


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2.10 Property, plant and equipment

All items o property, plant and equipment are initially recorded at cost. Such cost includes the cost o replacing parto the property, plant and equipment and borrowing cost that are directly attributable to the acquisition, constructionor production o a qualiying property, plant and equipment.Te accounting policy or borrowing cost is set out inNote 2.19. Te cost o an item o property, plant and equipment is recognised as an asset i, and only i, it is probablethat uture economic benets associated with the item will fow to the Group and the cost o the item can be measuredreliably.

Subsequent to recognition, plant and equipment and urniture and xtures are measured at cost less accumulateddepreciation and accumulated impairment losses.

Depreciation is computed on a straight-line basis over the estimated useul lives as ollows:

Leasehold land and buildings 15 to 50 yearsPlant and machinery 5 to 15 yearsMotor vehicles 5 yearsComputers and oce equipment 3 yearsFurniture and ttings 5 years

Assets under construction included in plant and equipment are not depreciated as these assets are not yet availableor use.

Leasehold land and buildings includes buildings, orestry and re protection inrastructures. Plant and machinery includes eld equipment.

Te carrying values o property, plant and equipment are reviewed or impairment when events or changes incircumstances indicate that the carrying value may not be recoverable.

Te residual value, useul lie and depreciation method are reviewed at each nancial year-end and adjusted prospectively i appropriate.

An item o property, plant and equipment is derecognised upon disposal or when no uture economic benets areexpected rom its use or disposal. Any gain or loss on derecognition o the assets is included in prot and loss in the year the asset is derecognised.

2.11 Investment properties

Investment properties are properties that are either owned by the Group or leased under a nance lease in order to earn

rentals or or capital appreciation, or both, rather than or use in the production or supply o goods or services, or oradministrative purposes, or in the ordinary course o business. Investment properties comprise completed investmentproperties and properties that are being constructed or developed or uture use as investment properties. Propertiesheld under operating leases are classied as investment properties when the denition o investment properties is metand they are accounted or as nance leases.

Investment properties are initially recorded at cost including transaction costs. Te carrying amount includes the costo replacing part o an existing investment property at the time that cost is incurred i the recognition criteria are met.Subsequent to initial recognition, investment properties are measured at air value, which refects market conditions atthe balance sheet date. Proessional valuation is perormed once every year. Gains or losses arising rom changes in theair value o investment properties are included in prot or loss in the year in which they arise.

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2.11 Investment properties (cont’d)

Investment properties are derecognised when either they have been disposed o or when the investment property ispermanently withdrawn rom use and no uture economic benet is expected rom its disposal. Any gains or losseson the retirement or disposal o an investment property are recognised in prot or loss in the year o retirementor disposal.

ransers are made to or rom investment property only when there is a change in use. For a transer rom investmentproperty to owner occupied property, the deemed cost or subsequent accounting is the air value at the date o changein use. For a transer rom owner occupied property to investment property, the property is accounted or in accordance with the accounting policy or property, plant and equipment set out in Note 2.10 up to the date o change in use.

2.12 Goodwill

Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less any accumulatedimpairment losses.

For the purpose o impairment testing, goodwill acquired in a business combination is, rom the acquisition date,allocated to each o the Group’s cash-generating units that are expected to benet rom the synergies o the combination,irrespective o whether other assets or liabilities o the acquiree are assigned to those units.

Te cash-generating unit to which goodwill has been allocated is tested or impairment annually and whenever thereis an indication that the cash-generating unit may be impaired. Impairment is determined or goodwill by assessingthe recoverable amount o each cash-generating unit (or group o cash-generating units) to which the goodwill relates. Where the recoverable amount o the cash-generating unit is less than the carrying amount, an impairment loss isrecognised in prot or loss. Impairment losses recognised or goodwill are not reversed in subsequent periods.

Where goodwill orms part o a cash-generating unit and part o the operation within that cash-generating unit isdisposed o, the goodwill associated with the operation disposed o is included in the carrying amount o the operation when determining the gain or loss on disposal o the operation. Goodwill disposed o in this circumstance is measuredbased on the relative air values o the operations disposed o and the portion o the cash-generating unit retained.

Goodwill and air value adjustments arising on the acquisition o oreign operations on or ater 1 January 2005 aretreated as assets and liabilities o the oreign operations and are recorded in the unctional currency o the oreignoperations and translated in accordance with the accounting policy set out in Note 2.5.

Goodwill and air value adjustments which arose on acquisition o oreign operations beore 1 January 2005 are deemedto be assets and liabilities o the Company and are recorded in SGD at the rates prevailing at the date o acquisition.

2.13 Impairment o non-fnancial assets

Te Group assesses at each reporting date whether there is an indication that an asset may be impaired. I any suchindication exists, or when annual impairment assessment or an asset is required, the Group makes an estimate o theasset’s recoverable amount.

An asset’s recoverable amount is the higher o an asset’s or cash-generating unit’s air value less costs to sell and its value in use and is determined or an individual asset, unless the asset does not generate cash infows that are largely independent o those rom other assets or group o assets. Where the carrying amount o an asset or cash-generatingunit exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.In assessing value in use, the estimated uture cash fows expected to be generated by the asset are discounted to theirpresent value using a pre-tax discount rate that refects current market assessments o the time value o money and therisks specic to the asset.


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2.13 Impairment o non-fnancial assets (cont’d)

Impairment losses are recognised in prot or loss except or assets that are previously revalued where the revaluation was taken to other comprehensive income. In this case the impairment is also recognised in other comprehensiveincome up to the amount o any previous revaluation.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication thatpreviously recognised impairment losses may no longer exist or may have decreased. I such indication exists, theGroup estimates the asset ’s or cash-generating unit’s recoverable amount. A previously recognised impairment loss isreversed only i there has been a change in the estimates used to determine the asset’s recoverable amount since thelast impairment loss was recognised. I that is the case, the carrying amount o the asset is increased to its recoverableamount. Tat increase cannot exceed the carrying amount that would have been determined, net o depreciation, hadno impairment loss been recognised previously. Such reversal is recognised in prot or loss unless the asset is measured

at revalued amount, in which case the reversal is treated as a revaluation increase.2.14 Financial assets

Initial recognition and measurement

Financial assets are recognised on the balance sheet when, and only when, the Group becomes a party to thecontractual provisions o the nancial instrument. Te Group determines the classication o its nancial assets atinitial recognition.

When nancial assets are recognised initially, they are measured at air value plus, in the case o nancial assets not atair value through prot or loss, directly attributable transaction costs.

Subsequent measurement

Te subsequent measurement o nancial assets depends on their classication as ollows:

(a) Financial assets at air value through prot or loss

Financial assets at air value through prot or loss include nancial assets held or trading and nancial assetsdesignated upon initial recognition at air value through prot or loss. Financial assets are classied as nancialassets held or trading i they are acquired or the purpose o selling or repurchasing in the near term. Tiscategory includes derivative nancial instruments entered into by the Group that are not designed as hedginginstruments in hedge relationships as dened by FRS 39. Derivatives, including separated embedded derivativesare also classied as held or trading unless they are designed as eective hedging instruments.

Te Group has not designated any nancial assets upon initial recognition at air value through prot or loss.Subsequent to initial recognition, nancial assets at air value through prot or loss are measured at air value. Any gains or losses arising rom changes in air value o the nancial assets are recognised in the income statement.Net gains or net losses on nancial assets at air value through prot or loss include exchange dierences, interestand dividend income.

Derivatives embedded in host contracts are accounted or as separate derivatives and recorded at air value i theireconomic characteristics and risks are not closely related to those o the host contracts and the host contracts arenot held or trading or designated at air value through prot or loss. Tese embedded derivatives are measuredat air value with changes in air value recognised in prot or loss. Reassessment only occurs i there is a changein the terms o the contract that signicantly modies the cash fows that would otherwise be required.

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2.14 Financial assets (cont’d)

Subsequent measurement (cont ’d)

(b) Loans and receivables

Non-derivative nancial assets with xed or determinable payments that are not quoted in an active marketare classied as loans and receivables. Subsequent to initial recognition, loans and receivables are measured atamortised cost using the eective interest method, less impairment. Gains and losses are recognised in prot orloss when the loans and receivables are derecognised or impaired, and through the amortisation process.

(c) Available-or-sale nancial assets

Available-or-sale nancial assets include equity and debt securities. Equity investments classied as available-or sale are those, which are neither classied as held or trading nor designated at air value through prot orloss. Debt securities in this category are those which are intended to be held or an indenite period o time and which may be sold in response to needs or liquidity or in response to changes in the market conditions.

Ater initial recognition, available-or-sale nancial assets are subsequently measured at air value. Any gainsor losses rom changes in air value o the nancial asset are recognised in other comprehensive income, exceptthat impairment losses, oreign exchange gains and losses on monetary instruments and interest calculated usingthe eective interest method are recognised in the income statement. Te cumulative gain or loss previously recognised in other comprehensive income is reclassied rom equity to income statement as a reclassicationadjustment when the nancial asset is derecognised.

Investments in equity instruments whose air value cannot be reliably measured are measured at cost less

impairment loss.Derecognition

A nancial asset is derecognised where the contractual right to receive cash fows rom the asset has expired. Onderecognition o a nancial asset in its entirety, the dierence between the carrying amount and the sum o theconsideration received and any cumulative gain or loss that has been recognised directly in other comprehensiveincome is recognised in prot or loss.

All regular way purchases and sales o nancial assets are recognised or derecognised on the trade date, i.e.the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases orsales o nancial assets that require delivery o assets within the period generally established by regulation orconvention in the market place concerned.

2.15 Impairment o fnancial assets

Te Group assesses at each balance sheet date whether there is any objective evidence that a nancial asset isimpaired.

(a) Financial assets carried at cost

I there is objective evidence (such as signicant adverse changes in the business environment where the issueroperates, probability o insolvency or signicant nancial diculties o the issuer) that an impairment loss onnancial assets carried at cost has been incurred, the amount o the loss is measured as the dierence betweenthe asset’s carrying amount and the present value o estimated uture cash fows discounted at the current marketrate o return or a similar nancial asset. Such impairment losses are not reversed in subsequent periods.


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2.15 Impairment o fnancial assets (cont’d)

(b) Available-or-sale nancial assets

In the case o equity investments classied as available-or-sale, objective evidence o impairment include (i)signicant nancial diculty o the issuer or obligor, (ii) inormation about signicant changes with an adverseeect that have taken place in the technological, market, economic or legal environment in which the issueroperates, and indicates that the cost o the investment in equity instrument may not be recovered; and (iii) asignicant or prolonged decline in the air value o the investment below its costs. “Signicant” is to be evaluatedagainst the original cost o the investment and “prolonged” against the period in which the air value has beenbelow its original cost.

I an available-or-sale nancial asset is impaired, an amount comprising the dierence between its acquisition

cost (net o any principal repayment and amortisation) and its current air value, less any impairment losspreviously recognised in prot or loss, is transerred rom other comprehensive income and recognised in protor loss. Reversal o impairment losses in respect o equity instruments are not recognised in prot or loss; increasein their air value ater impairment are recognised directly in other comprehensive income.

In the case o debt instruments classied as available-or-sale, impairment is assessed based on the same criteriaas nancial assets carried at amortised cost. However, the amount recorded or impairment is the cumulativeloss measured as the dierence between the amortised cost and the current air value, less any impairment losson that investment previously recognised in prot or loss. Future interest income continues to be accrued basedon the reduced carrying amount o the asset and is accrued using the rate o interest used to discount the uturecash fows or the purpose o measuring the impairment loss. Te interest income is recorded as part o nanceincome. I, in a subsequent year, the air value o a debt instrument increases and the increases can be objectively related to an event occurring ater the impairment loss was recognised in prot or loss, the impairment loss is

reversed in prot or loss.(c) Financial assets carried at amortised cost

For nancial assets carried at amortised cost, the Group rst assesses individually whether objective evidenceo impairment exists individually or nancial assets that are individually signicant, or collectively or nancialassets that not individually signicant. I the Group determines that no objective evidence o impairmentexists or an individually assessed nancial asset, whether signicant or not, it includes the asset in a group o nancial assets with similar credit risk characteristics and collectively assess them or impairment. Assets that areindividually assessed or impairment and or which an impairment loss is, or continues to be recognised are notincluded in a collective assessment o impairment.

I there is objective evidence that an impairment loss on nancial assets carried at amortised cost has been

incurred, the amount o the loss is measured as the dierence between the asset’s carrying amount and the present value o estimated uture cash fows discounted at the nancial asset’s original eective interest rate. I a loanhas a variable interest rate, the discount rate or measuring any impairment loss is the current eective interestrate. Te carrying amount o the asset is reduced through the use o an allowance account. Te impairment lossis recognised in prot or loss.

When the asset becomes uncollectible, the carrying amount o impaired nancial assets is reduced directly or i an amount was charged to the allowance account, the amounts charged to the allowance account are written o against the carrying value o the nancial asset.

o determine whether there is objective evidence that an impairment loss on nancial assets has been incurred,the Group considers actors such as the probability o insolvency or signicant nancial diculties o the debtorand deault or signicant delay in payments.

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2.15 Impairment o fnancial assets (cont’d)

(c) Financial assets carried at amortised cost (cont’d)

I in a subsequent period, the amount o the impairment loss decreases and the decrease can be related objectively to an event occurring ater the impairment was recognised, the previously recognised impairment loss is reversed,to the extent that the carrying value o the asset does not exceed its amortised cost at the reversal date. Teamount o reversal is recognised in prot or loss.

2.16 Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and at banks and unsecured xed deposits readily convertible toknown amount o cash and which are subject to an insignicant risk o changes in value, and unsecured bank overdrats

repayable on demand that orm an integral part o the Group’s cash management.2.17 Construction work-in-progress

Construction work-in-progress comprises uncompleted building contracts. It is valued at cost plus a proportiono estimated prots earned to date less progress billings received or receivable, using the percentage o completionmethod. Te stage o completion is determined by reerence to architect certication. When reerence to architectcertication is not available in a timely manner, the stage o completion is determined by reerence to the pastexperience and knowledge o the internal quantity surveyors. Full provision is made or estimated losses to completion where applicable.

Cost comprises materials, labour, other overhead and incidental costs including interest expense.

2.18 Inventories

Inventories are stated at the lower o cost and net realisable value. Costs incurred in bringing the inventories to theirpresent locations and conditions are accounted or as ollows:

(a) Raw materials reer to purchase cost on a rst-in-rst-out basis.

(b) Finished goods and work-in-progress reers to costs o direct materials and labour and a proportion o manuacturing overheads based on normal operating capacity. Tese costs are assigned on a rst-in-rst-outbasis.

(c) Agricultural produce comprises logs. Agricultural produce at the point o harvest is measured on initialrecognition at its air value.

Where necessary, allowance is provided or damaged, obsolete and slow moving items to adjust the carrying value o inventories to the lower o cost and net realisable value.

Net realisable value is the estimated selling price in the ordinary course o business, less estimated costs o completionand the estimated costs necessary to make the sale.

2.19 Borrowing costs

Borrowing costs are capitalised as part o the cost o a qualiying asset i they are directly attributable to the acquisition,construction or production o that asset. Capitalisation o borrowing costs commences when the activities to preparethe asset or its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowingcosts are capitalised until the assets substantially completed ready or their intended use or sale. All other borrowing

costs are expensed in the period they incur. Borrowing costs consist o interest and other costs that an entity incurs inconnection with the borrowing o unds.


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2.20 Financial liabilities

Initial recognition and measurement

Financial liabilities are recognised on the balance sheet when, and only when, the Group becomes a party to thecontractual provisions o the nancial instrument. Te Group determines the classication o its nancial liabilities atinitial recognition.

Financial liabilities are recognised initially at air value and in the case o other nancial liabilities, plus directly attributable transaction costs.

Subsequent measurement

Te measurement o nancial liabilities depends on their classication as ollows:(a) Financial liabilities at air value through prot or loss

Financial liabilities at air value through prot or loss include nancial liabilities held or trading and nancialliabilities designated upon initial recognition as air value. Financial liabilities are classied as held or tradingi they are acquired or the purpose o selling in the near term. Tis category includes derivative nancialinstruments entered into by the Group that are not designated as hedging instruments in hedge relationships.Separated embedded derivatives are also classied as held or trading unless they are designated as eectivehedging instruments.

Subsequent to initial recognition, nancial liabilities at air value through prot or loss are measured at air value.Any gains or losses rom changes in air value o the nancial liabilities are recognised in prot or loss.

Te Group has not designated any nancial liabilities upon initial recognition at air value through prot or loss.

(b) Other nancial liabilities

Ater initial recognition, other nancial liabilities are subsequently measured at amortised cost using the eectiveinterest rate method. Gains and losses are recognised in prot or loss when the liabilities are derecognised, andthrough the amortisation process.

Derecognition

A nancial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Whenan existing nancial liability is replaced by another rom the same lender on substantially dierent terms, or the terms

o an existing liability are substantially modied, such an exchange or modication is treated as a derecognition o the original liability and the recognition o a new liability, and the dierence in the respective carrying amounts isrecognised in prot or loss.

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2.21 Interest bearing loans and borrowings

(a) Borrowings

Borrowings are initially recognised at the air value o the consideration received less directly attributabletransaction costs.

Ater initial recognition, borrowings are subsequently measured at amortised cost using the eective interest ratemethod.

Gains and losses are recognised in the income statement when the liabilities are derecognised as well as throughthe amortisation process.

(b) Convertible bonds

Te conversion option o convertible bonds exhibits characteristics o an embedded derivative. Te derivative isseparated rom the liability component. On initial recognition, the derivative component o the convertible bondis measured at air value and presented as part o the derivative nancial instruments. Any excess o proceeds overthe amount initially recognised as the derivative component is recognised as the liability component. Te liability component is measured at amortised cost using the eective interest rate method. ransaction costs relating tothe liability component are recognised initially as part o the liability.

(c) Derivative liability

Any gains or losses arising rom changes in air value on derivative nancial instruments are taken to the incomestatement or the period in which it arises.

2.22 Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result o a past event,it is probable that an outfow o economic resources will be required to settle the obligation and the amount o theobligation can be estimated reliably.

Provisions are reviewed at each balance sheet date and adjusted to refect the current best estimate. I it is no longerprobable that an outfow o economic resources will be required to settle the obligation, the provision is reversed. I theeect o the time value o money is material, provisions are discounted using a current pre tax rate that refects, whereappropriate, the risks specic to the liability. When discounting is used, the increase in the provision due to the passageo time is recognised as a nance cost.

2.23 Employee benefts

(a) Dened contribution plans

Te Group participates in the national pension schemes as dened by the laws o the countries in which it hasoperations. In particular, the Singapore companies in the Group make contributions to the Central ProvidentFund scheme in Singapore, a dened contribution pension scheme. Contributions to dened contributionpension schemes are recognised as an expense in the period in which the related service is perormed.

(b) Employee leave entitlement

Employee entitlements to annual leave are recognised as a liability when they accrue to employees. Te estimatedliability or leave is recognised or services rendered by employees up to the balance sheet date.


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2.24 Leases – as leasee

Te determination o whether an arrangement is, or contains a lease is based on the substance o the arrangementat inception date: whether ullment o the arrangement is dependent on the use o a specic asset or asset or thearrangement conveys a right to use the asset. For arrangements entered into prior to 1 January 2005, the date o inceptions deemed to be 1 January 2005 in accordance with the transitional requirements o IN FRS 104.

(a) Finance leases

Finance leases, which transer to the Group substantially all the risks and rewards incidental to ownershipo the leased item, are capitalised at the inception o the lease at the air value o the leased asset or, i lower,at the present value o the minimum lease payments. Any initial direct costs are also added to the amountcapitalised. Lease payments are apportioned between the nance charges and reduction o the lease liability so

as to achieve constant rate o interest on the remaining balance o the liability. Finance charges are charged toincome statement. Contingent rents, i any, are charged as expenses in the periods in which they are incurred.

Capitalised leased assets are depreciated over the shorter o the estimated useul lie o the asset and the leaseterm, i there is no reasonable certainty that the Group will obtain ownership by the end o the lease term.

(b) Operating leases

Operating lease payments are recognised as an expense in prot or loss on a straight-line basis over the leaseterm. Te aggregate benet o incentives provided by the lessor is recognised as a reduction o rental expense overthe lease term on a straight-line basis.

2.25 Revenue

Revenue is recognised to the extent that it is probable that the economic benets will fow to the Group and therevenue can be reliably measured. Revenue is measured at the air value o consideration received or receivable,excluding discounts, rebates, and sales taxes or duty. Te Group assess its revenue arrangements to determine i it isacting as principal or agent. Te Group has concluded that it is acting as a principal in all o its revenue arrangements. Te ollowing specic recognition criteria must also be met beore revenue is recognised:

(a) Construction contracts

Contract revenue and contract costs are recognised as revenue and expenses respectively by reerence to thestage o completion o the contract activity at the balance sheet date, when the outcome o a constructioncontract can be estimated reliably. When the outcome o a construction contract cannot be estimated reliably,contract revenue is recognised to the extent o contract costs incurred that are likely to be recoverable and

contract costs are recognised as expense in the period in which they are incurred. An expected loss on theconstruction contract is recognised as an expense immediately when it is probable that total contract costs willexceed total contract revenue.

Contract revenue comprises the initial amount o revenue agreed in the contract and variations in contract work, claims and incentive payments to the extent that it is probable that they will result in revenue and they arecapable o being reliably measured.

Te stage o completion is determined by reerence to the architect certication.

(b) Sale o goods

Revenue rom sale o goods is recognised upon the transer o signicant risks and rewards o ownership o the

goods to the customer. Revenue is not recognised to the extent where there are signicant uncertainties regardingrecovery o the consideration due, associated costs or the possible return o goods.

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2.25 Revenue (cont’d)

(c) Interest income

Interest income is recognised using the eective interest method.

(d) Dividend income

Dividend income is recognised when the Group’s right to receive payment is established.

(e) Management ee

Management ee is recognised when corporate services are rendered.

( ) Rental income

Rental income arising rom operating leases on investment properties is accounted or on a straight line basisover the lease terms. Te aggregate costs o incentives provided to lessees are recognised as a reduction o rentalincome over the lease term on a straight-line basis.

2.26 Taxes

(a) Current income tax

Current income tax assets and liabilities are measured at the amount expected to be recovered rom or paid tothe taxation authorities. Te tax rates and tax laws used to compute the amount are those that are enacted or

substantively enacted by end o the reporting period, in the countries where the Group operates and generatestaxable income.

Current income taxes are recognised in prot or loss except to the extent that the tax relates to items recognisedoutside prot or loss, either in other comprehensive income or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations aresubject to interpretation and establishes provisions where appropriate.

(b) Deerred tax

Deerred tax is provided using the liability method on temporary dierences at the balance sheet date betweenthe tax bases o assets and liabilities and their carrying amounts or nancial reporting purposes.

Deerred tax liabilities are recognised or all temporary dierences, except: • Where the deerred income tax liability arises rom the initial recognition o goodwill or o an asset or

liability in a transaction that is not a business combination and, at the time o the transaction aectsneither the accounting prot nor taxable prot or loss; and

• In respect o taxable temporary dierences associated with investments in subsidiaries, associates andinterests in joint ventures, where the timing o the reversal o the temporary dierences can be controlledby the Group and it is probable that the temporary dierences will not reverse in the oreseeable uture.


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2.26 Taxes (cont’d)

(b) Deerred tax (cont’d)

Deerred tax assets are recognised or all deductible temporary dierences, carry orward o unused tax creditsand unused tax losses, to the extent that it is probable that taxable prot will be available against which thedeductible temporary dierences, and the carry orward o unused tax credits and unused tax losses can beutilised except:

• Where the deerred income tax asset relating to the deductible temporary dierence arises rom the initialrecognition o an asset or liability in a transaction that is not a business combination and, at the time o thetransaction, aects neither the accounting prot nor taxable prot or loss; and

• In respect o deductible temporary dierences associated with investments in subsidiaries, associates andinterests in joint ventures, deerred income tax assets are recognised only to the extent that it is probablethat the temporary dierences will reverse in the oreseeable uture and taxable prot will be availableagainst which the temporary dierences can be utilised.

Te carrying amount o deerred tax asset is reviewed at each balance sheet date and reduced to the extent thatit is no longer probable that sucient taxable prot will be available to allow all or part o the deerred tax assetto be utilised.

Unrecognised deerred tax assets are reassessed at each balance sheet date and are recognised to the extent that ithas become probable that uture taxable prot will allow the deerred tax asset to be recovered.

Deerred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the

asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date.

Deerred tax relating to items recognised outside prot or loss is recognised outside prot or loss. Deerred taxitems are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deerred tax arising rom a business combination is adjusted against goodwill on acquisition.

Deerred tax assets and deerred tax liabilities are oset, i a legally enorceable right exists to set o currentincome tax assets against current income tax liabilities and the deerred income taxes relate to the same taxableentity and the same taxation authority.

(c) Sales tax

Revenues, expenses and assets are recognised net o the amount o sales tax except: • Where the sales tax incurred in a purchase o assets or services is not recoverable rom the taxation

authority, in which case the sales tax is recognised as part o the cost o acquisition o the asset or as parto the expense item as applicable; and

• Receivables and payables that are stated with the amount o sales tax included.

Te net amount o sales tax recoverable rom, or payable to, the taxation authority is included as part o receivablesor payables in the balance sheet.

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2.27 Segment reporting

For management purposes, the Group is organised into operating segments based on their products and services whichare independently managed by the respective segment managers responsible or the perormance o the respectivesegments under their charge. Te segment managers report directly to the management o the Company who regularly review the segment results in order to allocate resources to the segments and to assess the segment perormance.Additional disclosures on each o these segments are shown in Note 37, including the actors used to identiy thereportable segments and the measurement basis o segment inormation.

2.28 Financial guarantee

A nancial guarantee contract is a contract that requires the issuer to make specied payments to reimburse the holderor a loss it incurs because a specied debtor ails to make payment when due.

Financial guarantees are recognised initially as a liability at air value adjusted or transaction costs that are directly attributable to the issuance o the guarantee. Subsequent to initial recognition, nancial guarantees are recognisedas income in prot or loss over the period o the guarantee. I it is probable that the liability will be higher than theamount initially recognised less amortisation, the liability is recorded at the higher amount with the dierence chargedto prot or loss.

2.29 Share capital and share issuance expenses

Proceeds rom issuance o ordinary shares are recognised as share capital in equity. Incremental costs directly attributableto the issuance o ordinary shares are deducted against share capital.

2.30 Contingencies

A contingent liability is:(a) a possible obligation that arises rom past events and whose existence will be conrmed only by the occurrence

or non-occurrence o one or more uncertain uture events not wholly within the control o the Group; or

(b) a present obligation that arises rom past events but is not recognised because:

(i) It is not probable that an outfow o resources embodying economic benets will be required to settle theobligation; or

(ii) Te amount o the obligation cannot be measured with sucient reliability.

A contingent asset is a possible asset that arises rom past events and whose existence will be conrmed only by theoccurrence or non-occurrence o one or more uncertain uture events not wholly within the control o the Group.

Contingent liabilities and assets are not recognised on the balance sheet o the Group, except or contingent liabilitiesassumed in a business combination that are present obligations and which the air values can be reliably determined.

2.31 Related parties

A party is considered to be related to the Group i:

(a) Te party, directly or indirectly through one or more intermediaries,

(i) controls, is controlled by, or is under common control with, the Group;

(ii) has an interest in the Group that gives it signicant infuence over the Group; or

(iii) has joint control over the Group;


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2.31 Related parties (cont’d)

(b) Te party is an associate;

(c) Te party is a jointly-controlled entity;

(d) Te party is a member o the key management personnel o the Group or its parent;

(e) Te party is a close member o the amily o any individual reerred to in (a) or (d); or

( ) Te party is an entity that is controlled, jointly controlled or signicantly infuenced by or or which signicant voting power in such entity resides with, directly or indirectly, any individual reerred to in (d) or (e); or

(g) Te party is a post-employment benet plan or the benet o the employees o the Group, or o any entity thatis a related party o the Group.

3. Group companies

Details o the subsidiaries are as ollows:

Name o company Country o

incorporation Principal activitiesCost less

Impairment

Percentage o equity held

by the Group

2010 2009 2010 2009

US$’000 US$’000 % %

Held by the Company

Poh Lian Construction(Pte) Ltd (1)

Singapore Building contractorand property developer

6,591 6,038 100 100

Poh Lian DevelopmentPte Ltd (1), (4)

Singapore Dormant – – 100 100

Poh Lian rading Pte Ltd (6) Singapore Dormant – – – 100

Yew Hock rading Pte Ltd (6) Singapore Dormant – – – 100

Uniber Holding Pte Ltd (1), (4) Singapore Investment holding – – 100 100

Anro Singapore Ltd (2) Mauritius Investment holding 130,547 128,453 100 100

Poh Lian (Cambodia) Ltd (4), (5) Cambodia Dormant – – 100 100

Able Advance Ltd (4), (5) British VirginIslands

rading – – 100 100

137,138 134,491

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3. Group companies (cont’d)

Details o the subsidiaries and associates are as ollows:

Name o company Country o

incorporation Principal activities

Percentage o equity held by the

Group

2010 2009

% %

Held through subsidiaries

Subsidiaries

Poh Lian Realty Pte Ltd(1)

Singapore Property development 100 100

PLC Scaolding Pte Ltd (1) Singapore Construction services 100 100

Sin Poh Lian Sdn Bhd (3) (a) Malaysia Investment holding 100 100

Fortune Nest Sdn Bhd (6) Malaysia Property investment – 100

Dongshan Poh Lian Real EstateCo. Ltd (3) (b)

People’s Republico China

Property investment 100 100

P Hutan Rindang Banua (2) Indonesia Forestry operation 100 100

P Marga Buana Bumi Mulia (2) Indonesia Development o a mill 100 100

P Mangium Anugerah Lestari (2) Indonesia Manuacturing 99 99

Pacicwood Investment Ltd (2) Mauritius Investment holding and trading 100 100

Shinning Spring Resources Ltd (5) British VirginIslands

Investment holding 100 100

Associates

Poh Lian raining & Management(Bangladesh) Pvt Ltd (5) Bangladesh Dormant 30 30

(1) Audited by Ernst & Young LLP, Singapore (2) Audited by member rms o Ernst & Young Global in the respective countries(3) Audited by other rms

(a) S.C. ang & Associates, Malaysia(b) Dongshan Yongdexin Certied Public Accountants, People’s Republic o China

(4) Cost o investment does not exceed US$1,000 (5) Exempted/not required to be audited by the law o its country o incorporation(6) Voluntary liquidation completed during the nancial year


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4. Revenue

Group2010 2009

US$’000 US$’000

Construction contract revenue 128,730 136,066Sale o logs 676 526Sale o woodchips 3,340 3,400Sale o investment properties 177 –

132,923 139,992

5. Other income

Group

2010 2009

US$’000 US$’000

Interest income 9 5Foreign exchange gain 439 –Fair value gain on nancial instruments 1,471 –Fair value gain on investment properties 892 –Grant income under jobs credit scheme (1) 7 45Gain rom disposal o property, plant and equipment – 48

Others 108 380

2,926 478

(1) During the year ended 31 December 2009, the Singapore Finance Minister announced the introduction o a Jobs Credit Scheme (“Scheme”).Under this Scheme, the Singapore companies o the Group received a 12% cash grant on the rst $2,500 o each month’s wages or each employee on their Central Provident Fund payroll. During the nancial year ended 31 December 2010, the Group received grant income o US$7,000 (2009: US$45,000) under the Scheme.

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6. Finance costs

Group2010 2009

US$’000 US$’000

Interest expense on bank loans and bonds 7,840 3,283Interest expense on bank overdrats 1 7(Write back)/amortisation o transaction cost (269) 1,541Service ees 90 789Others 55 84

7,717 5,704

7. Loss beore tax

Loss beore tax is derived ater charging/(crediting) the ollowing:

Group

2010 2009

US$’000 US$’000

Allowance or doubtul debts – 56 Write down o inventories 58 –Fair value loss on inventories 914 –

Fair value gain on investment properties (Note 15) (892) –Depreciation o property, plant and equipment (Note11(e)) 3,994 3,087Property, plant and equipment written-o (Note 11) 42 3Loss/(gain) on disposal o property, plant and equipment 12 (48)Impairment loss on property, plant and equipment (Note 11) 10,651 –Fair value (gain)/loss on nancial instruments (1,471) 1,361Fair value loss on orest asset and logs harvested (Note 10) 25,289 55,714Foreign exchange (gain)/loss- realised 767 426- unrealised (1,206) (447)Interest income (9) (5)

Auditors’ remuneration – non-audit services 49 107Directors’ ees 149 94Sta costs- contribution to dened contribution plans 347 247- salaries, wages, bonuses and other costs 5,440 3,147Legal and proessional ees 1,975 907


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8. Taxation

Te major components o taxation or the years ended 31 December 2010 and 2009 are:

Group

2010 2009

US$’000 US$’000

Current income tax- current income taxation 393 508- over provision in respect o previous years (21) (171)

372 337

Deerred income tax- origination and reversal o temporary dierence 63 152- changes in air value on orest asset (6,322) (14,075)- revaluation o investment properties 223 –- eect o reduction in the rate – (21)

(6,036) (13,944)

axation or the year (5,664) (13,607)

Te reconciliation between the taxation and the product o accounting loss multiplied by the applicable corporate taxrate or the years ended 31 December 2010 and 2009 are as ollows:

Group

2010 2009

US$’000 US$’000

Loss beore tax (52,900) (68,676)

ax at the domestic rates applicable to loss in the countries where the Group operates (15,594) (19,483)

Adjustments:

Income not subjected to tax (384) (9)

Expenses not deductible or tax purposes 3,964 3,495 ax eect on partial exemption (19) (30)Deerred tax assets not recognised 6,437 2,800 ax eect on over provision in respect o previous years (21) (171)Utilisation o previously unrecognised deerred tax assets (42) (208)Others (5) (1)

axation (5,664) (13,607)

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8. Taxation (cont’d)

Te Group has unabsorbed tax losses o approximately US$27,186,000 (2009: US$20,117,000) and unabsorbedcapital allowances o approximately US$Nil (2009: US$Nil) predominantly in Indonesia available or oset againstuture taxable income or which no deerred tax asset is recognised due to uncertainty o its recoverability. Te useo these tax losses and capital allowances is subject to the agreement o the respective domestic tax authorities in thecountries concerned.

Te above reconciliation is prepared by aggregating separate reconciliations or each national jurisdiction.

9. Loss per share

Basic loss per share amounts are calculated by dividing net loss or the year attributable to ordinary equity holders o the Company by the weighted average number o ordinary shares outstanding during the year.

Diluted loss per share amounts are calculated by dividing the net loss attributable to ordinary equity holders o theCompany by the weighted average number o ordinary shares outstanding during the year plus the weighted averagenumber o ordinary shares that would be issued on the conversion o all the dilutive potential ordinary shares intoordinary shares.

Te ollowing refects the prot and share data used in the basic and diluted earnings per share computations:

Group

2010 2009

Net loss net o tax or the year attributable to ordinary equity holders o the parentcompany or basic and diluted earnings per share (US$’000) (47,232) (55,069)

Weighted average number o ordinary shares on issue applicable to basic earningsper share (’000) 3,298,896 2,771,991

Adjusted weighted average number o ordinary shares applicable to diluted earningsper share (’000) 3,298,896 2,771,991

72,000,000 (2009: 72,000,000) shares that would be issued on ull conversion o the convertible bond have not beenincluded in the calculation o diluted earnings per share because they are anti-dilutive or the current and previousnancial year presented.


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10. Forest asset

Group2010 2009

US$’000 US$’000

At 1 January 134,121 189,422Costs incurred during the year 781 415Reclassication to inventory (1,076) –Loss arising rom changes in air value o orest asset (25,289) (55,714)Net exchange dierences – (2)

At 31 December 108,537 134,121

Te valuation o the orest asset is based on the report issued by an independent proessional valuer, Pöyry ForestIndustry Pte Ltd (“Pöyry”). Te independent valuer deployed the use o discounted cash fow (“DCF”) over 10-yearperiod (target rotation age) projections in arriving at the air value o the orest asset as at 31 December 2010 o US$108.5 million (2009: US$134.1 million).

Further details o the total carrying value are as ollows:

2010 2009

Hectares US$’000 Hectares US$’000

Forest Entity Existing Plantation Forest 39,819 88,890 36,012 90,683

Utilisable Natural Forest 17,885 19,647 37,833 43,438

otal 57,704 108,537 73,845 134,121

Critical assumptions adopted in the Pöyry’s DCF analysis include:

(a) the adoption o a discount actor o 11% (2009: 11%);(b) slower ramp up in the rst three years o logs harvested in the 10 year projections compared with a constant

volume in 2009;(c) 10.6% increase in plantation orest area and reduction o 31.4% in selective harvesting area (HP) based on

more reliable survey by a third party;(d) Weighted average log price or plantation increased by 6% and natural orest by 8% as compared with 2009;(e) Sawlog selling prices increased by approximately o 18.4% to 48.45% or plantation orest and 4.07% or natural

orest as compared to 2009 valuation;( ) harvest volume predictions rom the plantation orest areas decreased by 8% compared with 2009, and(g) no value applied to conversion areas o a natural orest area (HP) o approximately 12,004 hectares due to (i) the

market or pulpwood rom this area has become limited and (ii) low net realizable value.

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11. Property, plant and equipment

Group

Leasehold land and buildings

Plant andMachinery

Motor vehicles

Computers,oce

equipment,urniture

and ttings Total

US$’000 US$’000 US$’000 US$’000 US$’000

Cost

At 1 January 2009 6,033 46,384 1,340 1,117 54,874Additions 20 247 3 46 316Disposals – (33) (224) (31) (288) Written o – – – (3) (3)

Net exchange dierences 103 69 13 23 208

At 31 December 2009 and1 January 2010 6,156 46,667 1,132 1,152 55,107

Additions – 783 391 181 1,355Disposals – – (82) (79) (161) Written o – – – (108) (108)Net exchange dierences 1,570 (1,435) 30 74 239

At 31 December 2010 7,726 46,015 1,471 1,220 56,432

Accumulated depreciation and

impairment lossAt 1 January 2009 3,019 6,045 840 662 10,566Charge or the year 493 3,114 163 247 4,017Disposals – (33) (223) (31) (287)Net exchange dierences – 39 12 23 74

At 31 December 2009 and1 January 2010 3,512 9,165 792 901 14,370

Charge or the year 995 3,275 325 229 4,824Impairment loss – 10,651 – – 10,651Disposals – – (63) (59) (122) Written o – – – (66) (66)

Net exchange dierences 9 (110) 36 59 (6)

4,516 22,981 1,090 1,064 29,651

Net carrying amount

At 31 December 2009 2,644 37,502 340 251 40,737

At 31 December 2010 3,210 23,034 381 156 26,781


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11. Property, plant and equipment (cont’d)

Company Motor

vehicles

Computers,oce

equipment,urniture and

ttings Total

US$’000 US$’000 US$’000

Cost

At 1 January 2009 3 434 437Additions – 31 31Disposal (3) (2) (5)Net exchange dierences – 10 10

At 31 December 2009 and 1 January 2010 – 473 473Additions – 12 12Disposal – (54) (54) Written o – (114) (114)Net exchange dierences – 42 42

At 31 December 2010 – 359 359

Accumulated depreciation

At 1 January 2009 2 225 227Charge or the year – 100 100

Disposals (2) (2) (4)Net exchange dierences – 9 9

At 31 December 2009 and 1 January 2010 – 332 332Charge or the year – 66 66Disposals – (38) (38) Written o – (70) (70)Net exchange dierences – 35 35

At 31 December 2010 – 325 325

Net carrying amount

At 31 December 2009 – 141 141

At 31 December 2010 – 34 34

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(a) Leasehold land and buildings

Te details o the leasehold land and buildings are as ollows:

(i) Te land on which the woodchip mill is located at South Kalimantan, Indonesia with net book value o US$894,000 (2009: US$1,007,000).

(ii) Te land on which a pulp mill plant will be constructed is located at Kalimantan Selatan, Indonesia withnet book value o US$682,000 (2009: US$682,000).

(iii) Building and inrastructure with net book value o US$ 213,957 (2009: US$623,000) related to the orestoperation.

(b) Assets pledged as security

As at 31 December 2010, assets o the wood chip mill with a net book value o US$20,922,000 (2009:US$34,331,000) has been charged or borrowings by the Group (Note 25(b) and (c)(i)).

(c) Assets held under nance lease

During the year, the Group acquired plant and equipment with an aggregate cost o US$391,343 (2009:US$Nil) by means o nance leases . Te carrying value o plant and equipment held under nance leases as at31 December 2010 was US$1,802,000 (2009: US$1,598,000).

Leased assets are pledged as security or the related nance lease liabilities (Note 24).

(d) Assets pledged as duciary security

Te Company had on 6 August 2010 entered into a denitive agreement in relation to a US$5 million loan whereby a duciary security is given by a subsidiary which secures its moveable assets to the lender.

(e) Depreciation charge

Details o the depreciation charge or the year are as ollows:

Group

2010 2009

US$’000 US$’000

Charged to income statement- other operating expenses (Note 7) 3,994 3,087- cost o goods sold 47 256Capitalised in construction work-in-progress/ progress billings in excess o

costs incurred (Note 19) 323 259Capitalised in orest asset 460 415

Depreciation or the nancial year 4,824 4,017


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( ) Impairment o assets

During the nancial year, a subsidiary o the Group within the Forest and Pulp segment, P Mangium AnugerahLestari carried out a review o the recoverable amount o its property, plant and equipment. An impairment losso US$10.7 million (2009: US$Nil), representing the write-down o these equipment to the recoverable amount was recognised in “Other Operating Expenses” (Note 7) line item o prot or loss or the nancial year ended31 December 2010. Te recoverable amount o these equipment was based on its value in use and the pre-taxdiscount rate used was 10%.

12. Amounts due rom subsidiaries

Company

2010 2009US$’000 US$’000

Amounts due rom subsidiaries 133,553 117,506Less: Allowance or impairment (133,161) (30,920)

392 86,586

During the year, the Company had provided an additional impairment allowance o US$99,411,000 (2009:US$14,334,000) due rom subsidiaries.

Te amounts due rom subsidiaries are deemed as part o the Company’s net investments in the respective subsidiaries.

Tey are unsecured, interest-ree and not expected to be repaid within the next 12 months. Te currency prole o amounts due rom subsidiaries as at the nancial year end is as ollows:

Company

2010 2009

US$’000 US$’000

USD – 50,415SGD 364 19,412IDR 28 16,759

392 86,586

13. Amount due to a subsidiary

Te amount due to a subsidiary is unsecured, interest-ree and not expected to be repayable within the next 12 months.

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14. Investment in subsidiaries

Company 2010 2009

US$’000 US$’000

Unquoted equity shares, at cost 146,956 134,633Less: Impairment loss (9,818) (142)

137,138 134,491

Details o subsidiaries are provided in Note 3.

Te recoverable amounts o the investment in subsidiaries are determined based on value-in-use calculations using

discounted cash fow projections based on nancial budget approved by management covering a 5-year period. Inthe case o the entities operating the orest asset, the discounted cash fow projects are assessed by reerence to theirconcession tenure.

15. Investment properties

Group

2010 2009

US$’000 US$’000

At 1 January 1,471 1,471Disposal (206) –Net gain rom air value adjustment recognised in prot and loss 892 –Exchange dierences 67 –

At 31 December 2,224 1,471

Included in investment properties are commercial and residential units with a site area o approximately 4,347 squaremeters, situated in Dongshan, People’s Republic o China.

Investment properties are stated at air value, which has been determined based on valuations perormed as at thebalance sheet dates. Valuations are perormed by independent proessional valuers with recent experience in thelocation and category o the properties being valued.

16. Club membership

Group

2010 2009

US$’000 US$’000

Cost 132 118Less: Impairment loss (55) (49)

77 69

At valuation 85 78


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17. Deerred tax

Group2010 2009

US$’000 US$’000

Deerred tax liabilities

Excess o net book value o plant and machinery over tax written down value (520) (999)Revaluation o orest asset (20,170) (26,492)Revaluation o investment properties (223) –

Gross deerred tax liabilities (20,913) (27,491)

Deerred tax assets

emporary dierences arising rom plant and equipment 229 224

Net deerred tax liabilities (20,684) (27,267)

18. Goodwill on consolidation

Group

US$’000

Cost

At 1 January 2009 20,479Net exchange dierences 491

At 31 December 2009 and 1 January 2010 20,970Net exchange dierences 1,920

At 31 December 2010 22,890

Net carrying amount

At 31 December 2009 20,970

At 31 December 2010 22,890

Goodwill acquired through business combinations has been allocated to Construction and Property segment, the

identied cash-generating unit (“CGU”), or impairment testing.

Te recoverable amount o the CGU is determined based on a value-in-use calculation using cash fow projections basedon nancial budget approved by management covering a 10-year period. Management believes that the Constructionand Property Division will continue to operate over the 10-year period.

Te pre-tax discount rate applied is assumed at 10% or value-in-use calculation, which is the Group’s estimated weighted average cost o capital.

Management has considered and determined the actors applied in this nancial budget include budgeted grossmargin and average growth rate. Te budgeted gross margin is based on expectation o uture market development. Te orecasted growth rates are based on published industry research and do not exceed the long-term average growthrate or the industries relevant to the CGU. Te orecasted growth rate used to extrapolate cash fow projections is 3%

or the rst ve-year period and 0% beyond the ve-year period.

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19. Construction work-in-progress/progress billings in excess o costs incurred

Group2010 2009

US$’000 US$’000

Construction work-in-progress

Cost incurred 64,571 61,220Add: Attributable prots recognised progressively less losses recognised ully 413 1,790

64,984 63,010Less: Progress billings received and receivable (60,676) (61,325)

4,308 1,685

Progress billings in excess o costs incurred

Progress billings received and receivable 442,523 427,547Less: Costs incurred (391,343) (370,115)

Attributable prots recognised progressively (22,516) (25,726)

28,664 31,706

Included in costs incurred during the nancial year are the ollowing:

Group

2010 2009

US$’000 US$’000

Depreciation o property, plant and equipment (Note 11(e)) 323 259Operating lease charges 510 81Sta costs:- Salaries, wages, bonuses and other costs 4,586 3,800- Contribution to dened contribution plans 357 278

Both construction work-in-progress and progress billings in excess o costs incurred are denominated in SGD.

20. Inventories

Group

2010 2009

US$’000 US$’000

Raw materials, at cost 900 1,061Logs 1,992 1,891Finished goods, at cost 572 537 otal inventories at lower o cost and net realisable value 3,464 3,489

Inventories written down during the nancial year amounted to US$58,000 (2009: US$Nil).


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21. Trade and other receivables

Group Company 2010 2009 01.01.2009 2010 2009

US$’000 US$’000 US$’000 US$’000 US$’000

(Restated) (Restated)

Financial assets

Current

rade receivables 38,861 32,052 23,557 – –Advances to P KK (Note 39) – 28,286 28,286 – –Deposits 995 673 439 9 234Receivables rom subsidiaries:- rade – – – 384 115

Other receivables 2,953 3,125 2,194 567 1,175

42,809 64,136 54,476 960 1,524Less: Allowance or doubtul debt (3,115) (2,853) (2,729) – –

39,694 61,283 51,747 960 1,524Prepayments 254 806 1,247 50 23

39,948 62,089 52,994 1,010 1,547

Non-current

rade receivables 10,442 9,034 10,003 – –Advances to P KK (Note 39) 28,286 – – – –

38,728 9,034 10,003 – –

78,676 71,123 62,997 1,010 1,547

Add: Cash and bank balances(Note 22) 16,360 16,836 8,847 720 47

Less: Prepayments (254) (806) (1,247) (50) (23)

otal loans and receivables 94,782 87,153 70,597 1,680 1,571

rade receivables are non-interest bearing and are generally on 30 to 60 days’ terms. Tey are recognised at theiroriginal invoice amounts which represent their air values on initial recognition.

As at 31 December 2010, US$9.4 million and US$10.4 million (2009: US$8.9 million and US$9 million) o retentionsums relating to construction contracts are included in current and non-current trade receivables, respectively.

Receivables rom subsidiaries are unsecured, interest-ree and are repayable on demand.

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21. Trade and other receivables (cont’d)

rade receivables that are past due but not impaired

Te Group has trade receivables amounting to US$488,000 (2009: US$330,000) that are past due at the balancesheet date but not impaired. Tese receivables are unsecured and the analysis o their aging at the balance sheet dateis as ollows:

Group

2010 2009

US$’000 US$’000

rade receivables past due:

61 to 120 days – 2

121 to 180 days – 19More than 180 days 488 309

488 330

rade receivables that are impaired

Te Group’s trade receivables that are impaired at the balance sheet date and the movement o the allowance accountsused to record the impairment are as ollows:

GroupIndividually impaired

2010 2009

US$’000 US$’000

rade receivables – nominal amount 1,232 1,128Less: Allowance or impairment (1,232) (1,128)

– –

Movement in allowance account:At 1 January 1,128 1,101Exchange dierences 104 27

At 31 December 1,232 1,128


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Other receivables that are past due but not impaired

Te Group has other receivables amounting to US$29,678,000 (2009: US$30,058,000) that are past due at the balancesheet date but not impaired. Tese other receivables are unsecured and the analysis o their aging at the balance sheetdate is as ollows:

Group

2010 2009

US$’000 US$’000

Other receivables past due:

61 to 120 days 7 –

121 to 180 days 194 –More than 180 days 29,477 30,058

29,678 30,058

Other receivables that are impaired

Te Group’s other receivables that are impaired at the balance sheet date and the movement o the allowance accountsused to record the impairment are as ollows:

GroupIndividually impaired

2010 2009

US$’000 US$’000

Other receivables – nominal amount 2,015 1,777Less: Allowance or impairment (1,883) (1,725)

132 52

Movement in allowance account:At 1 January 1,725 1,628Charge or the year – 56Exchange dierences 158 41

At 31 December 1,883 1,725

rade and other receivables that are individually determined to be impaired at the balance sheet date relate to debtorsthat are in signicant nancial diculties and have deaulted on payments. Tese receivables are not secured by any collateral or credit enhancements.

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Te currency prole o trade and other receivables as at the nancial year end is as ollows:

Group Company

2010 2009 2010 2009

US$’000 US$’000 US$’000 US$’000

USD 29,080 28,824 665 177SGD 47,889 41,966 345 1,370IDR 726 302 – –Others 981 31 – –

78,676 71,123 1,010 1,547

22. Cash and bank balances

Group Company

2010 2009 2010 2009

US$’000 US$’000 US$’000 US$’000

(i) Cash and cash equivalents

Cash on hand 12 16 – – Cash at banks 12,495 14,671 720 47

otal 12,507 14,687 720 47

(ii) Fixed deposits

Fixed deposits, secured 3,853 2,149 – –

Cash and bank balances 16,360 16,836 720 47

Te secured xed deposits are pledged to secure the Group’s banking acilities issued by the nancial institutions.

Fixed deposits are made or varying period o between one month and twelve months and earn interests at therespective deposit rates. Te weighted average eective interest rate as at the nancial year end or the Group is 0.1638%

(2009: 0.1995%) per annum. Te currency prole o cash and bank balances as at the nancial year end is as ollows:

Group Company

2010 2009 2010 2009

US$’000 US$’000 US$’000 US$’000

USD 171 90 152 9SGD 16,034 16,457 568 38IDR 83 71 – –Others 72 218 – –

16,360 16,836 720 47


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23. Trade and other payables

Group Company 2010 2009 01.01.2009 2010 2009

US$’000 US$’000 US$’000 US$’000 US$’000

(Restated) (Restated)

Financial liabilities

Current

rade payables 30,884 22,912 15,359 – –Accrued expenses (3) 5,749 3,225 2,846 342 424Accrual or directors’ ee and variable

bonus 164 452 335 164 452Non-trade payables (4) 8,204 1,331 1,163 7,776 –

Non-trade payables to subsidiaries (1) – – – 7,609 6,904Loans payable to a subsidiary (2) – – – – 10,000Others 3,443 886 1,382 473 246

48,444 28,806 21,085 16,364 18,026

Non-current

rade payables 4,404 3,014 2,710 – –Non-current payables 726 481 385 – –Amount due to a subsidiary – – – 3,422 3,135

5,130 3,495 3,095 3,422 3,135

Add: Loans and borrowings 42,080 50,420 62,699 25,112 19,321Hire purchase creditors 958 1,006 1,298 – –

otal nancial liabilities carried atamortised costs 96,612 83,727 88,177 44,898 40,482

(1) Non-trade payables to subsidiaries are unsecured, interest ree and repayable on demand.

(2) Loans payable to a subsidiary was repaid during the nancial year.

(3) Interest payable to CMEC o US$3.1 million was ully settled on 15 February 2011 (Note 26 (i)).

(4)

In accordance with the conditional subscription agreement dated 31 August 2010 between the Company and Falcon Capital Global Holding Limited (“Falcon”), the Company is required to repay to Falcon an amount o S$10 million being the down payment paid by Falcon to the Company as part payment o the consideration or the Falcon subscription. On 16 February 2011, the Company has received rom Falcon ademand dated 14 February 2011 or payment o the said sum o S$10 million. On 8 March 2011, payment o S$10 million has been made bythe Company in ull and nal settlement in respect o Falcon’s demand.

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23. Trade and other payables (cont’d)

Te currency prole o trade and other payables as at the nancial year end is as ollows:

Group Company

2010 2009 2010 2009

US$’000 US$’000 US$’000 US$’000

USD 5,000 2,264 42 10,020SGD 45,713 27,361 19,730 10,021IDR 2,841 2,374 – 1,120Others 20 302 14 –

53,574 32,301 19,786 21,161

24. Hire purchase creditors

Group

Minimumpayments

Present value o payments

Minimumpayments

Present value o payments

2010 2010 2009 2009

US$’000 US$’000 US$’000 US$’000

Within one year 407 362 353 317

Ater one year but not more than ve years 668 596 777 689 otal minimum payments 1,075 958 1,130 1,006Less: Amounts representing interest (117) – (124) –

Present value o minimum payments 958 958 1,006 1,006

Te nance lease obligations are secured over the leased assets (Note 11 (c)). Te average discount rate implicit in thelease is 5.24% (2009: 5.09%). Tese obligations are denominated in the respective unctional currencies o the Group’sentities.

Te hire purchase plans do not contain any renewal option or escalation clauses and do not provide or contingentrents. Tere are no restrictions placed upon the Group by entering into these leases.


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25. Short term loans and borrowings

Group Company 2010 2009 2010 2009

US$’000 US$’000 US$’000 US$’000

Bank overdrats, secured (a) 541 – – –Current portion o long-term loans, secured (b) – 380 – –Short-term loan, secured (c) (i) 10,000 – 10,000 –Short-term loan, secured (c) (ii) – 9,969 – –Short-term loan, secured (c) (iii) 5,000 – 5,000 –Short-term loan, secured (c) (iv) 16,427 – – –Short-term loan, unsecured (d) – 10,800 – 10,8005% coupon convertible bond (e) 10,112 – 10,112 –

42,080 21,149 25,112 10,800

(a) Te bank overdrats o US$541,000 (2009: US$Nil) is secured by a corporate guarantee given by the Company and proceeds rom certain construction projects o a subsidiary, and bear eective interest rom 3.68% to 4.40%per annum.

(b) Te loan o US$380,000 was secured by all assets o the Group’s woodchip mill, a corporate guarantee o the Company and legal mortgage over the shares o a subsidiary. Te loan borne eective interest rate rom6.95% to 7.10% (2009: 4.55% to 7.25%) per annum and was ully repaid during the year.

In 2009, a subsidiary o the Group did not ulll the requirement to sell a certain agreed upon quantity o woodchips per year, and to meet a debt service coverage ration agreed upon. Te subsidiary received a waiverrom the bank or the above breaches or the year ended 31 December 2009.

(c) (i) Te loan o US$10,000,000 (2009: US$Nil) is secured by a corporate guarantee given by a subsidiary andall assets o the woodchip mill. Te loan bears eective interest rom 3.86% to 4.60% per annum. Te loanis due payable on 31 May 2010.

Te Company, new investor and the nancial institution are in negotiation to enter into a standstillagreement, which allows the Company to retire the entire loan amount on the completion o the proposedshare subscription exercise.

(c) (ii) Te loan o US$9,969,000 was secured by corporate guarantee given by the Company and proceedsrom certain construction projects o a subsidiary. Te loan borne eective interest rom 3.65% to 3.75%(2009: 3.15% to 5.1%) per annum and was ully repaid during the year.

(c) (iii) Te loan o US$5,000,000 (2009: US$Nil) is secured by the pledge o 100% shares in a subsidiary by itsimmediate holding companies, as well as a duciary security o moveable assets o the subsidiary. Te loanbears eective interest o 10% per annum and is due payable in February 2011.

Subsequent to the year end, the Company received a letter o demand dated 14 February 2011 romthe lender or settlement o the US$5,000,000 loan, the related accrued interests and legal expenses. On4 March 2011, the outstanding loan, the related accrued interest and legal expenses were ully settled by the Company to the lender.

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25. Short term loans and borrowings (cont’d)

(e) (cont’d)In January 2011, Abax Nai Xin A Ltd and Abax Jade Ltd have transerred their rights on the convertible bondsto ASM Asia Recovery (Master) Fund, ASM Co-Investment erm rust 1 and ASM Hudson River Fund.Under the convertible bond agreement, the lenders are contractually entitled to redeem all o the bonds in cashin an amount equal to 100% o the principal amount plus the interest to redemption in the event o deault.

ASM Asia Recovery (Master) Fund, ASM Co-Investment erm rust 1 and ASM Hudson River Fund havenot requested or immediate redemption o the convertible as at the date when these nancial statements areauthorized or issue.

( ) Te Company has an equity line o credit o S$165 million granted by a nancial institution (the “FinancialInstitution”). Under the Equity Line o Credit Agreement between the Company and the Financial Institutiondated 7 December 2004 and subsequently amended on 23 December 2004, 2 August 2005 and 21 July 2009,the Company is entitled to issue loan notes to the Financial Institution and request advance rom the FinancialInstitution at any time beore 20 July 2014. Te Company will repay the loan note amount by issuing shares tothe Financial Institution according to the schedule agreed between the two parties.

Te request or drawdown on the equity line by the Company is by way o delivery o Advance Notice to theFinancial Institution and its acceptance, inter alia, are subject to the ollowing conditions:

(i) Te Advance Notice must not speciy an amount which when aggregated with amount o all precedingAdvances exceeds the Maximum Investment Amount, that is, S$165 million; or exceeds the MinimumAdvance Amount, that is, in any 3 Market Day period an aggregate amount equal to the lesser o S$2.5 million and any unused portion up to a limit o aggregate amount o S$5 million;

(ii) No Event o Deault, as specied in the Equity Line o Credit Agreement;(iii) All the necessary authorisations or the issue o shares and Admission o the shares to the SGX-S have

been obtained; and(iv) Te trading o the Company’s shares is not suspended by the SGX-S.

As at 31 December 2010, the Company has undrawn amount rom the equity line o S$52.5 million (equivalentto US$40.8 million).

Breach o covenants

(i) During the nancial year, the Company has breached a covenant o the Equity Line o Credit grantedby the Financial Institution in that a deault event has occurred when the Company was unable to repay a loan to another nancial institution. Te Company has notied the Financial Institution o the deaultevent. Te Financial Institution has conrmed that notwithstanding the occurrence o deault event, theundrawn credit acility is still available to the Company up to the original tenure ending 20 July 2014.

(ii) During the nancial year, the Company has breached a covenant o credit acilities granted by a nancialinstitution. Te Group did not ulll the requirement to maintain gearing ratio at 1.3:1 and tangible wortho minimum US$100 million or credit acilities o approximately US$15.5 million (equivalent to S$20million). Te credit acilities comprise o perormance bonds acility o approximately US$9.3 million(equivalent to S$12 million) and overdrat acility o US$6.2 million (equivalent to S$8 million). At thebalance sheet date, the Group has not utilized the overdrat acility but the perormance bonds acility hasbeen issued or a certain construction project. Te nancial institution is contractually entitled to requestor immediate termination o the perormance guarantee and repayment o the outstanding overdratamount in the event o breach o covenant.

Te nancial institution had not requested or immediate cancellation o the perormance guarantee asat the date when these nancial statements are authorized or issue, and has granted the Company atemporary waiver o the nancial covenants until June 2011.

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26. Long term loans and borrowings

Group Company 2010 2009 2010 2009

US$’000 US$’000 US$’000 US$’000

Long-term loan (i) – 20,750 – –5% coupon convertible bond (Note 25 (e)) – 8,521 – 8,521

– 29,271 – 8,521

(i) Relates to supplier credit rom a vendor, China National Machinery & Equipment Import & Export Corporation(“CMEC”), or the construction o the woodchip mill. Te loan bears interest at eective rate o 6% per annumand is repayable in 24 monthly instalments commencing on 5 September 2010. Te borrowing was classied as

current liabilities as at 31 December 2010. Note 25 (c)(iv) to the nancial statements provides urther details o the balance.

27. Share capital

Group and Company

2010 2009

No. o shares No. o shares

‘000 US$’000 ‘000 US$’000

Issued and ully paid ordinary shares (1)

At 1 January 3,116,077 232,738 2,420,736 212,360Issued during the year (2) 336,401 10,773 695,341 20,378

At 31 December 3,452,478 243,511 3,116,077 232,738


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27. Share capital (cont’d)

(1)

Te holders o ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restriction. Te ordinary shares have no par value.

(2) Equity shares were issued as partial repayment o the US$15,000,000 Series B Equity Line Backed Loan Note at the corresponding price per share during the year:

Number o shares issued

Priceper share

‘000 (S$)

9,259 0.04868,604 0.05238,427 0.0534

8,841 0.05099,719 0.046310,000 0.045010,393 0.043310,638 0.042310,638 0.042311,222 0.04013,173 0.05058,826 0.05108,491 0.05308,755 0.05149,574 0.0470

9,868 0.045610,638 0.042310,158 0.044310,000 0.045018,000 0.05009,000 0.05009,454 0.047620,000 0.04509,595 0.04699,202 0.048919,149 0.047018,219 0.0494

7,601 0.05927,550 0.05967,614 0.05917,732 0.05827,909 0.05698,152 0.0552

336,401

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28. Comparative gures

Certain comparative gures were changed to conorm with current year’s presentation:

Reclassication o US$9,034,000 o retention sums receivable and US$3,014,000 o retention sums payable romtrade and other receivables (current) and trade and other payables (current) into trade and other receivables (non-current) and trade and other payables (non-current) respectively to better refect the nature o the transactions.

Group

2009 As

previously stated

Reclassi-cation

adjustment

2009 As

restatedtotal

US$’000 US$’000 US$’000

Balance sheets

Non-Current Assets rade and other receivables – 9,034 9,034

Current Assets rade and other receivables 71,123 (9,034) 62,089

Non-Current Liabilities rade and other payables – 3,014 3,014

Current Liabilities rade and other payables 31,820 (3,014) 28,806

Balance sheet at the beginning o earlier comparative period is required when accounting policy is appliedretrospectively, there is retrospective restatement, or classication o items. Accordingly, a third balance sheet as at1 January 2009 is presented.

29. Operating lease commitments

Te Group and the Company lease certain properties under lease agreements that are non-cancellable within a year with no renewal option or escalation clauses included in the contracts. Lease terms do not contain restrictionsconcerning dividend, additional debts or urther leasing. Operating lease payments recognised in the consolidatedprot and loss account during the year amounted to US$20,000 (2009: US$23,000).

Future minimum lease payments or all leases with initial or remaining terms o one year or more are as ollows:

Group

2010 2009

US$’000 US$’000

Within one year 670 252Ater one year but not more than ve years 454 –

1,124 252


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30. Capital commitment

Pulp mill project

On 22 February 2008, P MBBM entered into a urnkey Agreement (the “Agreement”) with China MCC20Construction Co. Ltd (“MCC20”), a subsidiary o China Metallurgical Group Corporation (“MCC”) or theconstruction o a bleached hardwood krat pulp mill in South Kalimantan with a capacity o 600,000 air dry tonnesper annum (the “Project”).

In addition to the urnkey Agreement, pursuant to the Supplier’s Credit Agreement entered into by P MBBM andMCC20 on the same date, the Company had also secured 75% o unds required to construct the mill in the orm o supplier’s credit rom MCC20. Te balance 25% was planned to be raised rom a strategic partner and term sheets hadpreviously been executed with them.

Given the current global situation especially on the pulp and paper industry outlook and the possibility o a new

Investor coming into the Group, we have placed this initiative on hold.

31. Contingent liabilities

(a) Certain subsidiaries are operating in countries where the practical application o tax legislation is subject to varying interpretations. Tere is a risk that these subsidiaries could be exposed to urther tax liabilities on theirincome or current and prior years, i the tax authorities adopt a dierent interpretation o the tax legislation atthe time o nalisation o these tax returns.

(b) Since year 2005, Poh Lian Development Pte Ltd (“PLD”), a wholly owned subsidiary o the Company, hasinitiated court proceedings in the High Court o the Republic o Singapore against Hok Mee Property Pte Ltd(“Hok Mee”), Leong Hwa Monastery (“Leong Hwa”), Hok Chung Construction Co Pte Ltd (“Hok Chung”)

and Kek Kim Hok (“Kek”). On 11 March 2011, PLD has proceeded to serve Statutory Letters o Demandsunder Section 254(2)(a) o the Company Act (Chap. 50) to Hok Mee, Hok Chung and Kek. Note 38 to thenancial statements provides urther details o the legal proceedings.

32. Interests in joint ventures

Te Group has the ollowing signicant interests in joint ventures:

(a) A 52.5% (2009: 52.5%) interest in a property development project with China Construction Realty Co. Pte Ltd;

(b) A 40% (2009: 40%) interest in a building contract with Shimizu Corporation; and

(c) A 40% (2009: 40%) interest in the construction o a social housing project in Libya with SG Asia Pte. Ltd.*

Te Group is entitled to a proportionate share o the proceeds received and bears a proportionate share o the netresults or the above joint ventures.

* In the process o voluntary liquidation

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32. Interests in joint ventures (cont’d)

Te ollowing amounts are included in the Group’s nancial statements as a result o the proportionate consolidationo these joint ventures:

Group

2010 2009

US$’000 US$’000

Current assets 334 306

otal assets 334 306

Current liabilities (298) (273)

Net assets 36 33

Revenue – –Expenses 4 4

4 4

33. Related party disclosures

(a) Sales and purchases o goods and services

In addition to those related party inormation disclosed elsewhere in the nancial statements, the ollowingsignicant transactions between the Group and related parties who are not members o the Group took placeduring the year at terms agreed between the parties.

Group

2010 2009

US$’000 US$’000

Paid to a rm in which a director o the Company has an interest:- proessional ee 42 –Paid to a director o the Company:

- advisory ee 132 –

174 –


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33. Related party disclosures (cont’d)

(b) Compensation o key management personnel

Group

2010 2009

US$’000 US$’000

Short-term employee benets paid to:- directors o the Company 620 937- other key management personnel 1,678 1,630

otal compensation paid to key management personnel 2,298 2,567

Included in the compensation paid to key management personnel is Central Provident Fund contributionsamounted to US$51,465 (2009: US$53,844).

(c) Corporate guarantee given to subsidiaries

Te Company has provided guarantees to banks or acilities granted to certain subsidiaries. Te total acilitiesand drawn down amounts in respect o these bank acilities are as ollows:

Group

2010 2009

US$’000 US$’000

otal acilities granted 109,278 56,943

otal amounts drawn down:- borrowings (19,258) (31,130)- perormance bonds and guarantees (51,427) (23,813)

Te Company has agreed to provide continuing nancial support to certain subsidiaries.

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34. Fair value o nancial instruments

(a) Fair value o nancial instruments that are carried at air value

Te ollowing table shows an analysis o the nancial instruments carried at air value by level o air valuehierarchy:

Group

Signicant other observable inputs

(Level 2)

2010 2009

US$’000 US$’000

Financial liability:- derivative liability (Note 25 (e)) 28 1,417

Fair value hierarchy

Te Group classiy air value measurement using a air value hierarchy that refects the signicance o the inputsused in making the measurements. Te air value hierarchy have the ollowing levels:

• Level 1 – Quoted prices (unadjusted) in active markets or identical assets or liabilities• Level 2 – Inputs other than quoted prices included within Level 1 that are observable or the asset or

liability, either directly (i.e., as prices) or indirectly (i.e., derived rom prices), and• Level 3 – Inputs or the asset or liability that are not based on observable market data

(unobservable inputs)

Determination o air value

Derivative liability (Note 25 (e)): Te derivative liability arises rom the conversion option o the 5% couponconvertible bond. Te derivative components are measured separately at air value on initial recognition andat each balance sheet date subsequently. A one-actor model where stock prices are assumed to be stochastic(lognormal) while interest rates are assumed to be deterministic (dened by a xed discount actor curve) is used. Te methodology utilises a trinomial tree to model changes in the stock price which is determined by parameterssuch as the number o time steps and the (constant) volatility o the stock price.

(b) Fair value o nancial instruments by classes that are not carried at air value and whose carrying amountsare reasonable approximation o air value

rade and other receivables and payables, non-current payables (Notes 21 and 23), and current loans and borrowingsat foating rate (Note 25)

Te carrying amounts o these nancial assets and liabilities are reasonable approximation o air values, eitherdue to their short-term nature or that they are foating rate instruments that are re-priced to market interest rateson or near the balance sheet date.

As disclosed in Note 39, included in non-current trade and other receivables are amounts o US$28.3 milliondue rom P KK. Te management is o the opinion that these receivables are ully recoverable. Te auditorshave indicated that they are unable to obtain sucient appropriate audit evidence to be satised that the saidamounts would be ully recoverable and have made a note o this in their audit report.


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34. Fair value o nancial instruments (cont’d)

(c) Fair value o nancial instruments by classes that are not carried at air value and whose carrying amountsare not reasonable approximation o air value

Te air value o nancial liabilities that are not carried at air value and whose carrying amount is not reasonableapproximation o air value are as ollows:

2010 2009

NoteCarrying amount

Fair value

Carrying amount

Fair value

US$’000 US$’000 US$’000 US$’000

Group

Financial liabilities:- Hire purchase creditors 24 596 621 689 706- 5% coupon convertible bond 25(e) 10,112 6,374 8,521 9,039Long term loans and borrowings 26 – – 20,750 17,056

Company

Financial liabilities:- 5% coupon convertible bond 25(e) 10,112 6,374 8,521 9,039

Hire purchase creditors (Note 24), xed rate loans and 5% coupon convertible bond (Note 25)

Te air values as disclosed in the table above are estimated by discounting expected uture cash fows at market

incremental lending rate or similar types o lending, borrowing or leasing arrangements at the balance sheetdate.

Amounts due rom subsidiaries (Note 12)

Te amounts due rom subsidiaries are deemed as part o the Company’s net investments in the respectivesubsidiaries. Tey have no repayment terms and are repayable only when the cash fows o the borrower permits.Accordingly the air value o the loan is not determinable as the timing o the uture cash fows arising rom theloan cannot be estimated reliably.

Amount due to a subsidiary (Note 13)

Te amount due to a subsidiary has no repayment terms. Accordingly the air value o the loan is not determinable

as the timing o the uture cash fows arising rom the loan cannot be estimated reliably.

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35. Financial risk management objectives and policies

Te Group and the Company are exposed to nancial risks arising rom its operations and the use o nancialinstruments. Te key nancial risks include interest rate risk, liquidity risk, credit risk, oreign currency risk andcommodity price risk. Te Board o Directors reviews and agrees policies and procedures or the management o theserisks. Te Audit Committee provides independent oversight to the eectiveness o the risk management process. TeGroup and the Company do not apply hedge accounting.

Te ollowing sections provide details regarding the Group’s and the Company’s exposure to the above-mentionednancial risks and the objectives, policies and processes or the management o these risks.

(a) Interest rate risk

Interest rate risk is the risk that the air value or uture cash fows o the Group’s and the Company’s nancialinstruments will fuctuate because o changes in market interest rates. Te Group’s and the Company’s exposure

to interest rate risk arises primarily rom their loans and borrowings and the issuance o a nancial instrumentto a strategic investor.

Te Group’s policy is to manage interest expense by sourcing or competitive quotations or these loans andborrowings. Surplus unds are placed with reputable banks.

Sensitivity analysis or interest rate risk

At the balance sheet date, i SGD and USD interest rates had been 75 (2009: 75) basis points lower/higher withall other variables held constant, the Group’s loss net o tax would have been approximately US$79,000 (2009:US$78,000) lower/higher, arising mainly as a result o lower/higher interest expense on foating rate loans andborrowings. Te assumed movement in basis points or interest rate sensitivity analysis is based on the currently observable market environment, showing a signicantly higher volatility in prior years.

Inormation relating to the Group’s interest rate exposure is also disclosed in Note 25 and 26.

(b) Liquidity risk

Liquidity risk is the risk that the Group or the Company will encounter diculty in meeting nancial obligationsdue to shortage o unds. Te Group’s and the Company’s exposure to liquidity risk arises primarily rommismatch o the maturities o nancial assets and liabilities.

Te Group’s objective is to maintain sucient credit acilities or its operations.

o manage liquidity risk, the Group monitors its net operating cash fows and maintains an adequate level o cash and cash equivalents and secured committed unding acilities rom nancial institutions. In assessing the

adequacy o the acilities, management reviews its working capital requirements regularly.


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35. Financial risk management objectives and policies (cont’d)

(b) Liquidity risk (cont’d)

Analysis o nancial instruments by remaining contractual maturities

Te table below summarises the maturity prole o the Group’s and the Company’s nancial assets and nancialliabilities at the balance sheet date based on contractual undiscounted payments:

Group

1 year or less 1 to 5 years Total

US$’000 US$’000 US$’000

2010

Financial assets: rade and other receivables 39,694 38,728 78,422Cash and cash equivalents 16,360 – 16,360

otal undiscounted nancial assets 56,054 38,728 94,782

Financial liabilities: rade and other payables 48,444 4,404 52,848Hire purchase creditors 407 668 1,075Loans and borrowings 47,382 – 47,382Derivative liability 28 – 28Non-current payables – 726 726

otal undiscounted nancial liabilities 96,261 5,798 102,059

2009

Financial assets: rade and other receivables 61,283 9,034 70,317Cash and cash equivalents 16,836 – 16,836

otal undiscounted nancial assets 78,119 9,034 87,153

Financial liabilities:

rade and other payables 28,806 3,014 31,820Hire purchase creditors 353 777 1,130Loans and borrowings 22,035 33,533 55,568Derivative liability – 1,417 1,417Non-current payables – 481 481


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(b) Liquidity risk (cont’d)

Company

1 year or less 1 to 5 years Total

US$’000 US$’000 US$’000

2010

Financial assets: rade and other receivables 960 – 960Cash and cash equivalents 720 – 720

otal undiscounted nancial assets 1,680 – 1,680

Financial liabilities: rade and other payables 16,364 – 16,364Loans and borrowings 27,321 – 27,321Derivative liability 28 – 28Amount due to a subsidiary – 3,422 3,422


2009

Financial assets:

rade and other receivables 1,524 – 1,524Cash and cash equivalents 47 – 47

otal undiscounted nancial assets 1,571 – 1,571

Financial liabilities: rade and other payables 18,026 – 18,026Loans and borrowings 11,253 10,656 21,909Derivative liability – 1,417 1,417Amount due to a subsidiary – 3,135 3,135


Te table below shows the contractual expiry by maturity o the Group and Company’s contingent liabilities andcommitments. Te maximum amount o the nancial guarantee contracts are allocated to the earliest period in which the guarantee could be called.

Company 1 year or less 1 to 5 years Total

US$’000 US$’000 US$’000

2010

Financial guarantees 54,131 55,147 109,278

2009

Financial guarantees 13,888 43,055 56,943


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(c) Credit risk

Credit risk is the risk o loss that may arise on outstanding nancial instruments should a counterparty deault on its obligations. Te Group and the Company’s exposure to credit risk arises pr imarily rom tradeand other receivables.

Credit risk is limited to the risk arising rom the inability o a debtor to make payments when due. It is theGroup’s policy to provide credit terms to creditworthy customers. Tese debts are continually monitored andthereore, the Group does not expect to incur material credit losses.

Te Group’s objective is to seek continual revenue growth while minimising losses incurred due to increasedcredit risk exposure. For international trade transaction o signicant value, the Group accepts letter o creditissued by a reputable international bank. Te Construction Division bids or projects rom developers with good

nancial standing. Te carrying amount o trade and other receivables and cash and bank balances represent the Group’s maximumexposure to credit risk. No other nancial assets carry a signicant exposure to credit risk.

Note 39 provides in greater detail the concentration o credit risk associated with an advance to P KK.

Exposure to credit risk

At the balance sheet date, the Group’s and the Company’s maximum exposure to credit risk is represented by thecarrying amount o each class o nancial assets recognised in the balance sheet.

Credit risk concentration prole

Te Group determines concentrations o credit risk by monitoring the country and industry sector prole o itstrade and other receivables on an on-going basis. Te credit risk concentration prole o the Group’s trade andother receivables at the balance sheet date is as ollows:

2010 2009

US$’000 % o total US$’000 % o total

By country

Singapore 48,522 62% 42,116 59%Indonesia 925 1% 728 1%Others 29,229 37% 28,279 40%

otal 78,676 71,123

By industry sector

Construction and property 48,878 62% 40,714 57%Forest and pulp 29,301 37% 28,984 41%Others 497 1% 1,425 2%

otal 78,676 71,123

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(c) Credit risk (cont’d)

Credit risk concentration prole (cont ’d)

At the balance sheet date, approximately:

- 36% (2009: 40%) o the Group’s trade and other receivables were due rom P KK (see Note 39 or moredetails).

- 60% (2009: 56%) o the Group’s trade and other receivables were rom external parties who are property developers.

Financial assets that are neither past due nor impaired

rade and other receivables that are neither past due nor impaired are due rom credit worthy debtors. Cash andcash equivalents that are neither past due nor impaired are placed with reputable local or international banks with high credit ratings.

Financial assets that are either past due or impaired

Inormation regarding nancial assets that are either past due or impaired are disclosed in Note 21.

(d) Foreign currency risk

Te Group has transactional currency exposures arising rom borrowings that are denominated in a currency other than the respective unctional currencies o Group entities, primarily USD and IDR.

Te Group and the Company hold cash and cash equivalents denominated in oreign currencies or workingcapital purposes. At the balance sheet date, such oreign currency balances amount to US$83,000 (mainly inIDR) and US$171,000 (mainly in USD) (2009: US$71,000 and US$90,000) respectively.

Te Group relies on operational cash fow to hedge against its oreign currency exposure.


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(d) Foreign currency risk (cont’d)

Sensitivity analysis or oreign currency risk

Te ollowing table demonstrates the sensitivity o the Group’s loss net o tax to a reasonably possible change inthe USD and IDR against SGD, with all other variables held constant.

Group

Loss net o tax

2010 2009

US$’000 US$’000

USD - strengthened 3% (2009: 3%) (755) (893)- weakened 3% (2009: 3%) 755 893

IDR - strengthened 3% (2009: 3%) (4) (8)- weakened 3% (2009: 3%) 4 8

Te Group is also exposed to currency translation risk arising rom its net investments in oreign operations incountries such as Indonesia, Malaysia, People’s Republic o China, Mauritius and British Virgin Islands.

Te Group’s net investments in these countries are long term in nature.

(e) Commodity price risk

Commodity price risk is the risk that the air value o uture cash fows o the Group’s nancial instruments willfuctuate because o changes in commodity prices.

Te Group is exposed to commodity price risk arising rom changes in market value o the mature orest asset.

Te Group is o the view that log and wood chip prices are stable. Te Group’s objective is to monitor the trendo these commodity prices and would reduce level o harvesting activities in period o price decline.

Sensitivity analysis or commodity price risk

At the balance sheet date, i the price o logs had been 5% (2009: 5%) higher/lower with all other variables heldconstant, the Group’s loss net o tax would have been US$10,070,000 (2009: US$14,457,000) lower/higher,

arising as a result o higher/lower air value gains on the orest asset.

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36. Capital management

Te primary objective o the Group’s capital management is to ensure that it maintains a strong credit rating andhealthy capital ratios in order to support its business and maximise shareholder value.

Te Group manages its capital structure and makes adjustments to it, in light o changes in economic conditions. omaintain or adjust capital structure, the Group may adjust the dividend payment to shareholders, issue new shares orreturn capital to shareholders. No changes were made in the objectives, policies or processes between the years ended31 December 2009 and 2010 respectively.

Te Group monitors capital using gearing ratio, which is net debt divided by total capital plus net debt. Te Group’spolicy is to keep the gearing ratio between 20% and 45%. Te Group includes within net debt, loans and borrowings,trade and other payables, hire purchases less cash and cash equivalents. Capital includes equity attributable to theequity holders o the parent, capital reserves and other reserves.

Group2010 2009

US$’000 US$’000

Loans and borrowings 42,080 50,420 rade and other payables 52,848 31,820Hire purchases creditors 958 1,006Less: Cash and bank balances (16,360) (16,836)

Net debts 79,526 66,410Equity attributable to equity holders o the Company 110,690 144,722

Capital and net debts 190,216 211,132

Gearing ratio 42% 31%

37. Segment inormation

For management purposes, the Group is organised into business units based on their products and services, and hasthree reportable operating segments as ollows:

• Te Construction and property segment is involved in the construction o residential properties and industrialprojects and in property development.

• Te Forestry and pulp segment is engaged in orestry operations and manuacture o wood chips.

• Te Others segment is investment holding and trading company.

Except as indicated above, no operating segments have been aggregated to orm the above reportable operatingsegments.

Management monitors the operating results o its business units separately or the purpose o making decisions aboutresource allocation and perormance assessment. Segment perormance is evaluated based on operating prot or loss which in certain respects, as explained in the table below, is measured dierently rom operating prot or loss in theconsolidated nancial statements. Group nancing (including nance costs) and income taxes are managed on a groupbasis and are not allocated to operating segments.


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37. Segment inormation (cont’d)

ranser prices between operating segments are on an arm’s length basis in a manner similar to transactions withthird parties.

Constructionand property

Forestry and pulp Others Elimination Note Consolidated

2010 2009 2010 2009 2010 2009 2010 2009 2010 2009

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Revenue:Revenue rom

externalcustomers 128,907 136,066 4,016 3,926 – – – – 132,923 139,992

Inter segment

revenue – – – – 708 662 (708) (662) A – –

otal revenue 128,907 136,066 4,016 3,926 708 662 (708) (662) 132,923 139,992

Results:Segment results 3,681 1,714 (54,566) (65,466) (106,120) (14,955) 111,822 15,735 B (45,183) (62,972)

Finance costs (7,717) (5,704)

Loss beore tax (52,900) (68,676) axation 5,664 13,607

Loss or the

year (47,236) (55,069)


Forestry and pulp Others Elimination Note Consolidated

2010 2009 2010 2009 2010 2009 2010 2009 2010 2009

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Assets andLiabilities:

Segment assets 85,967 82,450 180,163 233,957 26,861 111,490 (29,445) (136,791) 263,546 291,106

otal assets 85,967 82,450 180,163 233,957 26,861 111,490 (29,445) (136,791) 263,546 291,106

Segmentliabilities 72,729 73,436 173,168 159,735 58,590 54,406 (179,183) (170,727) 125,304 116,850

Unallocatedliabilities C 27,555 29,533

otal liabilities 152,859 146,383

Capitalexpenditure 1,278 38 54 116 23 31 1,355 185

Depreciationo property,plant andequipment(Note 11(e)) 80 28 3,847 2,958 67 101 3,994 3,087

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A Inter-segment revenues are eliminated on consolidation.

B Te ollowing items are added to/(deducted rom) segment results to arrive at “Loss beore tax” present in theconsolidated statement o comprehensive income:


Forestry and pulp Others Total

US$’000 US$’000 US$’000 US$’000

2010

Other income/ (expenses) 926 (6,471) 8,471 2,926Selling and distribution expenses (399) (563) (76) (1,038)

Administrative expenses (4,565) (2,204) (2,594) (9,363)Other operating expenses (576) (19,845) (74) (20,495)Fair value loss on orest assets and logs harvested – (25,289) – (25,289)

2009

Other income 156 261 61 478Selling and distribution expenses (218) (1,573) (93) (1,884)Administrative expenses (3,401) (1,371) (2,878) (7,650)Other operating expenses (883) (7,776) 2,852 (5,807)Fair value loss on orest assets and logs harvested – (55,714) – (55,714)

C Unallocated liabilities comprise o current income provision or taxation and deerred tax liabilities amountingto US$6,642,000 and US$20,913,000 (2009: US$2,042,000 and US$27,491,000) respectively.

Geographical inormation

Revenue and non-current assets inormation based on the geographical location o customers and assets respectively are as ollows:

Singapore Indonesia Asia Pacic

Countries Consolidated

US$’000 US$’000 US$’000 US$’000

2010

otal revenue rom external customers 131,027 1,532 364 132,923Non-current assets 13,220 129,042 57,204 199,466

2009

otal revenue rom external customers 136,059 3,933 – 139,992Non-current assets 10,911 169,870 26,226 207,007

Non-current assets inormation presented above consists o orest asset, property, plant and equipment, goodwill onconsolidation and other non-current assets.


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Inormation about a major customer

Revenue rom one major customer amounted to US$45.9 million (2009: US$42.0 million), arising rom sales by theconstruction and property segment.

38. Legal proceedings

(i) Poh Lian Development Pte Ltd (“PLD”), the Company’s wholly owned subsidiary has initiated court proceedingsin the High Court o the Republic o Singapore against the deendants, Leong Hwa Chan Si emple (“LeongHwa”), Hok Mee Property Pte Ltd (“Hok Mee”), Hok Chung Construction Co Pte Ltd (“Hok Chung”) andKek Kim Hok (“Kek”). PLD had entered into a partnership with Hok Mee and Leong Hwa to develop andmanage a columbarium development at Choa Chu Kang, Singapore in 1999. PLD’s role in the partnership was

mainly to provide nancing or the construction o the columbarium.

On 1 July 2009, the High Court Judge reverted with his grounds o decision (“GD”), but the nal judgementhas not been rendered as all parties are still in the midst o clariying the ndings in GD with the Judge.On 25 August 2010, the High Court Judge ruled that the deendants Hok Mee, Hok Chung and Kek are jointly and severally liable to pay to PLD the sum o S$2.28 million, which the deendants appealed on 28 February 2011, but was unsuccessul. On 11 March 2011, PLD has proceeded to serve the Statutory Letters o demand toHok Mee, Hok Chung and Kek pursuant to Section 254(2)(a) o the Companies Act Chap. 50.

No gain has been recognised in the Group’s income statement due to its uncertainty.

(ii) Te Company has in October 2009 commenced legal proceedings in the New York Court, United States againstMerrill Lynch & Company, Inc and Merrill Lynch (Singapore) Pte Ltd (“Merrill Lynch”) or their improper

conduct in connection with the Company’s eorts to acquire P Kiani Kertas in Indonesia. Te Company isseeking compensations or damages due to, amongst others, Merrill Lynch’s breach o contract, breach o impliedcovenant o good aith and air dealing, negligent misrepresentation, raud and raudulent inducement, breach o duciary duty, and tortuous intererence with contract. Te case is still ongoing and the Company’s lawyers in theUnited States are o the opinion, based on the acts made available to them that, there are reasonable prospectso succeeding in the above matter.

39. Proposed acquisition o PT Kiani Kertas (“PT KK”) now known as PT Kertas Nusantara

(i) Acquisition details

On 20 February 2006, the Company has entered into a novation agreement with Kingsclere Finance Limited

(“Kingsclere”), Fayola Investment Limited (“Fayola”) and Langass Oshore Inc (“Langass”). Kingsclere is acompany owned by a substantial shareholder o the Company while Fayola and Langass collectively are the vendors o P KK. Te novation agreement stipulates the Company to acquire the entire issued and paid-upshare capital and the entire issued and outstanding unconverted mandatory convertible bonds o P KK as atthe date o completion o the proposed acquisition rom Fayola and Langass.

Despite the execution o the binding sales and purchase agreement, the proposed acquisition ailed to closeas the vendors wanted to reconsider other alternatives to selling. Te Company has continued its eorts tond suitable structures that would be acceptable to both vendors and the Company and has been in variousdiscussions on the potential structures, including exploring various commercial arrangements, joint-ventures,take-over or asset injection.

During the year, the Company was inormed that P KK has entered into an operational partnership with P

MEDCO Papua (“Medco”), which may take control o P KK i the cooperation between the two parties went well or one year. Te Medco is an energy company with orest concessions in Papua.

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39. Proposed acquisition o PT Kiani Kertas (“PT KK”) now known as PT Kertas Nusantara (cont’d)

(ii) Advances to P KK Te Company managed the operations o P KK pursuant to an Operations Management Agreement (“OMA”)entered into with P KK on 25 July 2005. Under the OMA, the Company injected working capital unding intoP KK, o which US$28.3 million remains outstanding as at 31 December 2010 (2009: US$28.3 million). Tisamount was classied as “Advances to P KK” and included in non-current trade and other receivables on theBalance Sheet o the Group (Note 21).

Pursuant to the terms o Share Purchase Agreement (“SPA”) dated 5 December 2005 with the vendors o PKK, all amounts injected by the Company into P KK are recoverable rom P KK and shall be oset againstthe purchase consideration. I the SPA is terminated or any reason, the vendors under the SPA are required toprocure P KK to reund the amounts injected into P KK net o recoveries, and ailure by P KK attaches aliability on the vendors to make the reund.

On 12 August 2008, the Directors o the Company have taken legal advice and continue to view the workingcapital unding amounting to US$28.3 million previously injected into P KK, pursuant to the OMA enteredinto with P KK on 25 July 2005 and the Sales and Purchase Agreement entered into with Fayola and Langasson 5 December 2005 as recoverable and enorceable. With the recent development between P KK and Medco,and the discussions and deliberation between the Company and the incoming investors, Asia Star Fund Ltd, theCompany has sent Letters o Demand to the two shareholders Fayola and Langass in March 2011 demanding thepayment. Notwithstanding the above, the Company is optimistic that recovery is possible through negotiations with Medco, the incoming investor and the Company. Te Company, together with the incoming investor, willreview the options available or recovery.

40. Events occurring ater the balance sheet date

(i) On 31 August 2010, the Company and Falcon Capital Global Holding Ltd (“Falcon”) had entered into:

(a) a subscription agreement or the proposed investment o S$178,000,000 or the subscription o 3,560,000,000 ordinary shares at S$0.05 each in the share capital o the Company; and

(b) a sale and purchase agreement in relation to the proposed acquisition by the Company a woodchip locatedin Balikpapan, East Kalimantan, or US$65,000,000.

Prior to entering into the subscription agreement and the sale and purchase agreement, the Company and Falconhas entered into a term sheet dated 14 May 2010 in relation to the transactions, and Falcon paid S$10,000,000as down-payment to the Company, as part payment o the subscription consideration. Te down-payment shallbe payable on demand to Falcon in the event that the proposed subscription is not completed or any reason.

On 11 October 2010, the Company submitted the drat circular and additional listing application to SGX-S.

On 2 November 2010, the Company received a letter rom the SGX-S advising the Company that based onrepresentations and inormation provided by the Company, the proposed acquisition (viewed in conjunction with the proposed subscription) will not be considered a reverse take-over pursuant to Rule 1015 o the ListingManual, subject to the ullment o specic conditions.

As the sale and purchase conditions and the subscription conditions have not been ullled by 30 November2010, and accordingly, the agreements have since lapsed. Te Company has also been inormed by Falcon thatthe conditions in the SGX-S letter o 2 November 2010 are not acceptable to them. Subsequent to the year end, the Company on 16 February 2011 received a Statutory Letter o demand romFalcon, made under Section 254 o the Companies Act (Cap. 50) dated 14 February 2011 or payment o thedown-payment. On 8 March 2011, payment o S$10,000,000 was made by the Company in ull and nalsettlement in respect o Falcon’s demand.


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40. Events occurring ater the balance sheet date (cont’d)

(ii) In July 2010, the Company received a demand letter rom China National Machinery & Equipment Import & Export Corporation (“CMEC”) or the repayment o a debt which was due and owing to CMEC under a Deedo Settlement entered into between the Company and CMEC on 2 September 2008 in connection with (a) thecontract or the delivery o a Woodchip Mill urnkey Package (“CMEC Contract”) dated 22 September 2003(as amended) between CMEC and a subsidiary o the Group, and (b) a Perormance Bond dated 2 September2008 granted by the Company in avour o CMEC to secure the perormance o the subsidiary under theCMEC contract.

On 27 July 2010, the Company made a partial repayment o the debt o US$1,000,000 through internal unding.On the same day, the Company entered into a term sheet with Falcon or a US$5,000,000 loan to the Company or the purpose o unding the partial repayment o the debt. On 6 August 2010, the Company and Falconentered into a denitive loan agreement in relation to the US$5,000,000 loan. On 10 August 2010, the Company utilised the US$5,000,000 to partially repay CMEC.

On 20 August 2010, the Company received a Statutory Letter o demand rom CMEC, made under Section254(2)(a) o the Companies Act (Chap 50 o Singapore), or the payment o the sum o US$19,742,682. TeCompany disputed CMEC’s right to serve the Statutory Letter o demand and instructed solicitors to vigorously resist the claims made therein.

On 23 August 2010, the Company led an originating summons (Originating Summons No. 872 o 2010/X)(the “Originating Summons”) with the High Court o Singapore to seek amongst others, relies. On 24 August2010, the Company led an application (“Summons No. 3987/2010/Z”) with the High Court to seek aninterim injunction that pending the determination o the Originating Summons, CMEC be restrained romcommencing any winding up proceedings against the Company on the basis o the debt reerred to in CMEC’sStatutory Letter o demand.

Te Judge gave his judgement on 28 January 2011, that CMEC’s demand is valid to the extent o the debt owedby the Group to CMEC as o 20 August 2010 and that the Company is to make ull settlement to CMEC by 18 February 2011.

Subsequent to the year end, the Company on 15 February 2011 made the ull and nal settlement o US$19,500,000 (including accrued interest) to CMEC. Te Company’s and its subsidiaries’ liabilities to CMEChave since been discharged.

(iii) Subsequent to the year end, the Company received a letter o demand dated 14 February 2011 rom Falcon orsettlement o the US$5,000,000 loan, the related accrued interests and legal expenses. Te loan was granted by Falcon to the Company in relation to the CMEC’s demand in July 2010. (Note 40(ii))

On 4 March 2011, the outstanding loan, the related accrued interest and legal expenses were ully settled by the

Company to Falcon.


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40. Events occurring ater the balance sheet date (cont’d)

(iv) Subsequent to the year end, the Company has on 12 January 2011 entered into the ollowing agreements with ASF:

(a) a subscription agreement in relation to the proposed subscription by ASF o 3,593,395,298 issued andpaid up ordinary shares in the capital o the Company at a subscription price o S$0.05 each (“ProposedSubscription”); and

(b) a loan agreement or a US$35,000,000 loan to be granted by ASF to the Company (“Loan”).

Te successul completion o the Proposed Subscription is subject to various conditions precedent, detailedas ollows:

a) Te approval rom the shareholders o the Company on the Proposed Subscription;

b) Te satisactory outcome o due diligence carried out by ASF;c) Te whitewash waiver approval granted by the Securities Industry Council (“SIC”) in relation to theobligation o ASF to make a general oer under Rule 14 o the Singapore Code on ake-overs andMergers as a result o the Proposed Subscription;

d) All necessary registration and approvals or the Share Subscription under the laws o Singapore; ande) Other material documents as may be reasonably required by ASF.

Te approval rom the SIC was obtained on 26 January 2011. As at the date o the nancial statements,the Company is currently ullling the other conditions above. Te Proposed Subscription is expected to becompleted by September 2011.

Te proceeds rom the Loan are to assist the Company to retire certain debt and borrowings and to nance theshort-term working capital requirements beore the completion o the share subscription.

As at the date o the nancial statements, the Group has utilised the Loan to repay CMEC debt, Falcon’sS$10,000,000 down-payment, Falcon’s US$5,000,000 loan, its related accrued interest and legal expenses.Due to the time pressure in meeting the repayments to CMEC and Falcon, ASF has agreed to waive thedrawdown conditions.

41. Authorisation o nancial statements

Te nancial statements or the year ended 31 December 2010 were authorised or issue in accordance with a resolutiono the Directors dated on 1 April 2011.



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Statistics o ShareholdingsAs at 18 March 2011

Share Capital

Issued and Paid Up Capital S$396,066,330.00Number o shares 3,452,477,835Class o shares Ordinary Voting Rights 1 vote per ordinary share

Distribution o Shareholdings

Size o ShareholdingsNo. o

shareholders% No. o shares %

1 - 999 183 1.49 86,331 0.001,000 - 10,000 4,283 34.81 19,195,825 0.5610,001 - 1,000,000 7,643 62.11 895,858,743 25.951,000,001 and Above 196 1.59 2,537,336,936 73.49 otal 12,305 100.00 3,452,477,835 100.00

Twenty Largest Shareholders

No. Name No. o shares %

1 HSBC (SINGAPORE) NOMINEES PTE LTD 554,907,000 16.07

2 PARAMOUNT ASSETS INVESTMENTS PTE LTD 351,000,000 10.17

3 CITIBANK NOMINEES SINGAPORE PTE LTD 157,060,121 4.55

4 UNITED OVERSEAS BANK NOMINEES (PTE) LTD 139,771,000 4.055 DBS NOMINEES PTE LTD 135,636,625 3.93

6 DBS VICKERS SECURITIES (SINGAPORE) PTE LTD 118,142,242 3.42

7 BANK OF SINGAPORE NOMINEES PTE LTD 112,800,000 3.27

8 OCBC SECURITIES PRIVATE LTD 94,053,771 2.72

9 UOB KAY HIAN PTE LTD 79,736,556 2.31

10 PHILLIP SECURITIES PTE LTD 67,032,500 1.94

11 TOURBILLION REALTY PTE LTD 64,300,000 1.86

12 DB NOMINEES (SINGAPORE) PTE LTD 29,595,654 0.86

13 MAYBAN NOMINEES (SINGAPORE) PTE LTD 25,510,000 0.74

14 MERRILL LYNCH (SINGAPORE) PTE LTD 24,556,573 0.7115 WISANGGENI LAUW 23,432,660 0.68

16 NG WEE HAN 22,000,000 0.64

17 KIM ENG SECURITIES PTE. LTD. 20,693,000 0.60

18 LOW WOO SWEE @ LOH SWEE TECK 15,000,000 0.43

19 NG KIM CHOON 14,598,000 0.42

20 OCBC NOMINEES SINGAPORE 13,936,000 0.40

otal 2,063,761,702 59.77

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Substantial Shareholders(as shown in the Company’s Register o Substantial Shareholders)

No. o shares which Shareholders have an interest

Direct % Deemed %

Paramount Assets Investments Pte Ltd 351,000,000 10.17 – –

Lee Pineapple Company (Pte) Limited (1) – – 351,000,000 10.17

Lee Foundation (2) – – 351,000,000 10.17

Lee Foundation, States o Malaya (3) – – 351,000,000 10.17

Wisanggeni Lauw (4) 23,432,660 0.68 210,006,298 6.08

Argyle Street Management Limited (5) – – 449,448,000 13.02

Argyle Street Management Holdings Limited (6) – – 449,448,000 13.02

Chan Kin (7) – – 449,448,000 13.02 Yeh V-Nee (8) – – 449,448,000 13.02

ASM Asia Recovery Fund (9) – – 367,395,000 10.64

ASM Asia Recovery (Master) Fund (10) – – 367,395,000 10.64

Notes:

(1) Lee Pineapple Company (Pte) Limited is deemed to be interested in the Shares held by its wholly-owned subsidiary,Paramount Assets Investment Pte Ltd, by virtue o Section 7 o the Companies Act, Cap 50.

(2) Lee Foundation, by virtue o its not less than 20% interest in Lee Pineapple Company (Pte) Limited, is deemed tobe interested in the Shares held by Paramount Assets Investment Pte Ltd, by virtue o Section 7 o the Companies

Act, Cap 50.

(3) Lee Foundation, States o Malaya, by virtue o its not less than 20% interest in Lee Pineapple Company (Pte)Limited, is deemed to be interested in the Shares held by Paramount Assets Investment Pte Ltd, by virtue o Section7 o the Companies Act, Cap 50.

(4) Te deemed interests held are held through UOB Kay Hian Pte. Ltd. or Adriatic Assets Limited, United OverseasBank Nominees and DBS Vickers Securities Pte. Ltd. or Acasia Limited. Mr. Wisanggeni Lauw is deemed to havean interest in the shares held by Acasia Limited and his spouse in Adriatic Assets Limited by virtue o Section 7 o the Companies Act, Cap 50.

(5) Argyle Street Management Limited, by virtue that it is the benecial holder o more than 20% o the voting shareso ASM Hudson River Fund and ASM Asia Recovery Fund, is deemed to be interested in the Shares held by ASM

Hudson River Fund and ASM Asia Recovery (Master) Fund, by virtue o Section 7 o the Companies Act, Cap 50.

(6) Argyle Street Management Holdings Limited, by virtue that it is the benecial holder o more than 50% o the voting shares o Argyle Street Management Limited, is deemed to be interested in the Shares held by ASM HudsonRiver Fund and ASM Asia Recovery (Master) Fund, by virtue o Section 7 o the Companies Act, Cap 50.

(7) Chan Kin, by virtue that he is the benecial holder o more than 20% o the issued share capital o Argyle StreetManagement Holdings Limited, is deemed to be interested in the Shares held by ASM Hudson River Fund andASM Asia Recovery (Master) Fund, by virtue o Section 7 o the Act.


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(8) Yeh V-Nee, by virtue that he is the benecial holder o more than 20% o the issued share capital o Argyle StreetManagement Holdings Limited, is deemed to be interested in the Shares held by ASM Hudson River Fund and

ASM Asia Recovery (Master) Fund, by virtue o Section 7 o the Companies Act, Cap 50.(9) ASM Asia Recovery Fund, by virtue that it is the benecial holder o more than 50% o the issued share capital o

ASM Asia Recovery (Master) Fund, is deemed to be interested in the Shares held by ASM Asia Recovery (Master)Fund, by virtue o Section 7 o the Companies Act, Cap 50.

(10) ASM Asia Recovery (Master) Fund’s interest is registered under HSBC (Singapore) Nominees Private Limited.

Public Float

Rule 723 o the Listing Manual o the Singapore Exchange Securities rading Limited (“SGX-S”) requires that at least10% o the equity securities (excluding preerence shares and convertible equity securities) o a listed company in a classthat is listed is at all times held by the public. Te Company has complied with this requirement. As at 18 March 2011,

approximately 59.01% o its shares listed on the SGX-S were held in the hands o the public.

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2010

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Notice o Annual General Meeting

NOICE IS HEREBY GIVEN that the Annual General Meeting o United Fiber System Limited (“the Company”) willbe held at Orchid Country Club, Emerald Suite, Gol Clubhouse, 1 Orchid Club Road, Singapore 769162 on Tursday,

28 April 2011 at 9 am or the ollowing purposes:

As Ordinary Business

1. o receive and adopt the Directors’ Report and the Audited Accounts o the Company or the year ended 31December 2010 together with the Auditors’ Report thereon.

(Resolution 1)

2. o re-elect the ollowing Directors o the Company retiring pursuant to Article 107 o the Articles o Association o the Company:

Mr M. Rajaram (Resolution 2)Mr Ang Mong Seng (Resolution 3)

[See Explanatory Note (i)]

3. o re-elect the ollowing Directors o the Company retiring pursuant to Article 117 o the Articles o Association o the Company:

Mr Eddy (Resolution 4)Mr Mochtar Suhadi (Resolution 5)

Mr Henry Susanto (Resolution 6)

4. o approve the payment o Directors’ ees o S$207,232 or the year ended 31 December 2010 (previous year:S$196,246).

(Resolution 7)

5. o re-appoint Ernst & Young LLP as the Auditors o the Company and to authorise the Directors o the Company to x their remuneration.

(Resolution 8)

6. o transact any other ordinary business which may properly be transacted at an Annual General Meeting.

As Special Business

o consider and i thought t, to pass the ollowing resolution as Ordinary Resolution, with or without any modications:

7. Authority to issue new shares

Tat pursuant to Section 161 o the Companies Act, Cap. 50 and Rule 806 o the Listing Manual o the SingaporeExchange Securities rading Limited (“SGX-S”), the Directors o the Company be authorised and empoweredto:

(a) (i) issue shares in the Company (“shares”) whether by way o rights, bonus or otherwise; and/or

(ii) make or grant oers, agreements or options (collectively, “Instruments”) that might or would requireshares to be issued, including but not limited to the creation and issue o (as well as adjustments to)options, warrants, debentures or other instruments convertible into shares,

at any time and upon such terms and conditions and or such purposes and to such persons as the Directorso the Company may in their absolute discretion deem t; and


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Notice o Annual General Meeting

(b) (notwithstanding the authority conerred by this Resolution may have ceased to be in orce) issue shares inpursuance o any Instruments made or granted by the Directors o the Company while this Resolution was in

orce,

provided that:

(1) the aggregate number o shares (including shares to be issued in pursuance o the Instruments, made or grantedpursuant to this Resolution) to be issued pursuant to this Resolution shall not exceed ty per centum (50%) o thetotal number o issued shares (excluding treasury shares) in the capital o the Company (as calculated in accordance with sub-paragraph (2) below), o which the aggregate number o shares to be issued other than on a pro ratabasis to shareholders o the Company shall not exceed twenty per centum (20%) o the total number o issuedshares (excluding treasury shares) in the capital o the Company (as calculated in accordance with sub-paragraph(2) below);

(2) (subject to such calculation as may be prescribed by the SGX-S) or the purpose o determining the

aggregate number o shares that may be issued under sub-paragraph (1) above, the total number o issuedshares (excluding treasury shares) shall be based on the total number o issued shares (excluding treasury shares) in the capital o the Company at the time o the passing o this Resolution, ater adjusting or:

(a) new shares arising rom the conversion or exercise o any convertible securities;

(b) new shares arising rom exercising share options or vesting o share awards which are outstanding orsubsisting at the time o the passing o this Resolution; and

(c) any subsequent bonus issue, consolidation or subdivision o shares;

(3) in exercising the authority conerred by this Resolution, the Company shall comply with the provisions o theListing Manual o the SGX-S or the time being in orce (unless such compliance has been waived by the

SGX-S) and the Articles o Association o the Company; and(4) unless revoked or varied by the Company in a general meeting, such authority shall continue in orce until

the conclusion o the next Annual General Meeting o the Company or the date by which the next AnnualGeneral Meeting o the Company is required by law to be held, whichever is earlier.

[See Explanatory Note (ii)]

(Resolution 9)

By Order o the Board

Lim Ka Bee

Company Secretary Singapore, 13 April 2011

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2010

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Explanatory Notes:

(i) Mr Ang Mong Seng will, upon re-election as a Director o the Company, remain as Chairman o the RemunerationCommittee and a member o the Audit and Nominating Committee. He will be considered independent or thepurposes o Rule 704(8) o the Listing Manual o the Singapore Exchange Securities rading Limited.

(ii) Te Ordinary Resolution (9) in item 7 above, i passed, will empower the Directors o the Company, eective untilthe conclusion o the next Annual General Meeting o the Company, or the date by which the next Annual GeneralMeeting o the Company is required by law to be held or such authority is varied or revoked by the Company in ageneral meeting, whichever is the earlier, to issue shares, make or grant Instruments convertible into shares and toissue shares pursuant to such Instruments, up to a number not exceeding, in total, 50% o the total number o issuedshares (excluding treasury shares) in the capital o the Company, o which up to 20% may be issued other than on apro-rata basis to shareholders.

For determining the aggregate number o shares that may be issued, the total number o issued shares (excluding

treasury shares) will be calculated based on the total number o issued shares (excluding treasury shares) in the capitalo the Company at the time this Ordinary Resolution is passed ater adjusting or new shares arising rom theconversion or exercise o any convertible securities or share options or vesting o share awards which are outstandingor subsisting at the time when this Ordinary Resolution is passed and any subsequent bonus issue, consolidation orsubdivision o shares.

Notes:

1. A member entitled to attend and vote at the Annual General Meeting (the “Meeting”) is entitled to appoint not morethan two proxies to attend and vote in his/her stead. A proxy need not be a member o the Company.

2. Te instrument appointing a proxy must be deposited at the registered oce o the Company at 103 Deu Lane 10, #02-01 BH Building, Singapore 539223 not less than orty-eight (48) hours beore the time appointed or holdingthe Meeting.

Notice o Annual General MeetingUniber AnnualReport2010

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Tis page is intentionally let blank.

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I/We

o being a member/members o United Fiber System Limited (the “Company”), hereby appoint:

United Fiber System Limited(Company Registration No. 199508589E)(Incorporated in the Republic o Singapore)

PROXY FORM(Please see notes overlea beore completing this Form)

IMPORTANT1. For investors who have used their CPF monies to buy United Fiber System Limited’s shares,

this Report is orwarded to them at the request o the CPF Approved Nominees and is sentsolely FOR INFORMAION ONLY.

2. Tis Proxy Form is not valid or use by CPF investors and shall be ineective or all intentsand purposes i 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 rame specied. I they also wish to

vote, they must submit their voting instructions to the CPF Approved Nominees within thetime rame specied to enable them to vote on their behal.

Name NRIC/Passport No. Proportion o Shareholdings

No. o Shares %

Address

and/or (delete as appropriate)

Name NRIC/Passport No. Proportion o Shareholdings

No. o Shares %

Address

or ailing the person, or either or both o the persons, reerred to above, the Chairman o the Meeting as my/our proxy/proxies to vote or me/us on my/our behal at the Annual General Meeting (the “Meeting”) o the Company to be held atOrchid Country Club, Emerald Suite, Gol Clubhouse, 1 Orchid Club Road, Singapore 769162 on Tursday, 28 April 2011 at9 am and at any adjournment thereo. I/We direct my/our proxy/proxies to vote or or against the Resolutions proposed at the Meetingas indicated hereunder. I no specic direction as to voting is given or in the event o any other matter arising at the Meeting and at any

adjournment thereo, the proxy/proxies will vote or abstain rom voting at his/her discretion. Te authority herein includes the right todemand 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 Against

1 Directors’ Report and Audited Accounts or the year ended 31 December 2010

2 Re-election o Mr M. Rajaram as a Director

3 Re-election o Mr Ang Mong Seng as a Director

4 Re-election o Mr Eddy as a Director

5 Re-election o Mr Mochtar Suhadi as a Director

6 Re-election o Mr Henry Susanto as a Director

7 o approve the payment o Directors’ ees o S$207,232 or the year ended 31 December 2010(previous year: S$196,246)

8 Re-appointment o Ernst & Young LLP as Auditors

9 Authority to issue new shares

Dated this day o 2011

Signature o Shareholder(s) or,Common Seal o Corporate Shareholder

*Delete where inapplicable

otal number o Shares in: No. o Shares

(a) CDP Register

(b) Register o Members

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Notes :

1. Please insert the total number o Shares held by you. I you have Shares entered against your name in the Depository Register(as dened in Section 130A o the Companies Act, Chapter 50 o Singapore), you should insert that number o Shares. I youhave Shares registered in your name in the Register o Members, you should insert that number o Shares. I you have Sharesentered against your name in the Depository Register and Shares registered in your name in the Register o Members, youshould insert the aggregate number o Shares entered against your name in the Depository Register and registered in your namein the Register o Members. I no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate toall the Shares held by you.

2. A member o the Company entitled to attend and vote at a meeting o the Company is entitled to appoint one or two proxies toattend and vote in his/her stead. A proxy need not be a member o the Company.

3. Where a member appoints two proxies, the appointments shall be invalid unless he/she species the proportion o his/hershareholding (expressed as a percentage o the whole) to be represented by each proxy.

4. Completion and return o this instrument appointing a proxy shall not preclude a member rom attending and voting at theMeeting. Any appointment o a proxy or proxies shall be deemed to be revoked i a member attends the meeting in person, andin such event, the Company reserves the right to reuse to admit any person or persons appointed under the instrument o proxy to the Meeting.

5. Te instrument appointing a proxy or proxies must be deposited at the registered oce o the Company at 103 Deu Lane 10,

#02-01 BH Building, Singapore 539223 not less than orty-eight (48) hours beore the time appointed or the Meeting.

6. Te instrument appointing a proxy or proxies must be under the hand o the appointor or o his attorney. Where the instrumentappointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand o anocer or attorney duly authorised. Where the instrument appointing a proxy or proxies is executed by an attorney on behal o the appointor, the letter or power o attorney or a duly certied copy thereo must be lodged with the instrument.

7. A corporation which is a member may authorise by resolution o its directors or other governing body such person as it thinkst to act as its representative at the Meeting, in accordance with Section 179 o the Companies Act, Chapter 50 o Singapore.

General:

Te Company shall be entitled to reject the instrument appointing a proxy or proxies i it is incomplete, improperly completed orillegible, or where the true intentions o the appointor are not ascertainable rom the instructions o the appointor specied in theinstrument appointing a proxy or proxies. In addition, in the case o Shares entered in the Depository Register, the Company may rejectany instrument appointing a proxy or proxies lodged i the member, being the appointor, is not shown to have Shares entered againsthis name in the Depository Register as at orty-eight (48) hours beore the time appointed or holding the Meeting, as certied by TeCentral Depository (Pte) Limited to the Company.

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ufs - ar 2010

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