annual report 2006 - abterra4 abterra ltd. chairman’s statement chairman’s statement results the...

Annual Report2006

Abterra Ltd.

Contents

ContentsContents

Corporate Information................................................3

Chairman’s Statement ...............................................4

Operating Companies................................................8

Board of Directors....................................................10

Five Year Financial Summary ..................................12

Five Year Financial Statistics ...................................13

Shareholders’ Information .......................................14

Financial Calendar...................................................17

Corporate Governance Report ................................18

Financial Statements ...............................................26

Notice of Annual General Meeting ...........................73

Proxy Form

1Abterra Ltd.

Abterra in Latin means “of the ground” or “fruits of the earth”......

Corporate InformationCorporate Information

Board of Directors

Mr Yap Tian Suan, Executive Chairman & CEOMs Cheng Hiu YingMr Maheskumar s/o Shantilal Purshotam MehtaMr Lim Hui Min JohnMr Chew Ban Chuan Victor MarkMr Gersom G. Vetuz

Company Secretary

Ms Helen Campos Thomas

Audit Committee

Mr Lim Hui Min John, ChairmanMr Chew Ban Chuan Victor MarkMr Gersom G. Vetuz

Nominating Committee

Mr Gersom G. Vetuz, ChairmanMr Lim Hui Min JohnMr Chew Ban Chuan Victor Mark

Remuneration Committee

Mr Chew Ban Chuan Victor Mark, ChairmanMr Lim Hui Min JohnMr Gersom G. Vetuz

Auditors

LTC & AssociatesAudit partner: Devdas Sawlani (appointed in 2006)

Financial Advisers

Westcomb Capital Pte Ltd

Solicitors

Rodyk & Davidson

Principal Bankers

United Overseas Bank LimitedStandard Chartered BankCommerzbank Aktiengesellschaft

Registrars

B.A.C.S. Private Limited63 Cantonment RoadSingapore 089758

Registered Office

8 Shenton Way#31-02 Temasek TowerSingapore 068811Tel : (65) 6885 9800Fax : (65) 6885 9829Email : [email protected]

Investor Relations

Email: [email protected]: www.abterra.com.sg

3Abterra Ltd.

4 Abterra Ltd.

Chairman’s StatementChairman’s Statement

RESULTS

The Group achieved a turnover of S$20.2 million in the second half, on the back of a positive sales performance from Cotton trading. Despite turnover increasing by S$19.0 million, the Group reported an operating loss of S$4.9 million in the second half against a profit of S$0.2 million in the same period last year, mainly as a result of provisions being made for long outstanding claims and prepayments amounting to S$5.3 million in relation to a claim receivable from supplier and advance made for future Iron Ore shipments. The circumstances giving rise to the provisions are that, apart from the fact that the amounts are long outstanding, the Company was not able to successfully obtain a positive confirmation from the supplier for the amounts outstanding as at June 30, 2006. Furthermore, there have been major changes in the ownership and management of the supplier, which has delayed the process for an amicable settlement. As a result, a full provision was made to show a true and fair view of the state of affairs of the Company. Additionally, the management is also trying to recover the amounts through the legal process.

Every year around March, the major producers of iron ore and representatives of the major steel mills meet to agree on the pricing of iron ore for the next 12 months. In February 2006, the market sentiment was that the price negotiation will go well and the market will resume its normal trading activity. However, the price negotiation dragged on till June 2006. Although the buyers had accepted the price increases, Abterra was at the tail end of the season and was not in a position to generate sufficient volume during the period under review.

The factors attributable to the lower trading in the second half was due to the seasonal nature of trading and the above external market factors.

For the full year ended June 30, 2006, turnover for the Group increased by 131.8% to S$33.8 million (2005: S$14.6 million). With the focus on the new commodity trading business, trading in Iron Ore and Cotton amounted to S$33.0 million. The turnover for the Spa Pool was lower with the winding down of the Singapore operation.

5


OPERATIONS

All the operations within the Group sustained operating losses for the year under review. It should be noted that the Iron Ore trading business suffered a loss of S$4.2 million, mainly due to the provisions of S$5.3 million mentioned above. Furthermore, the Cotton trading business suffered a loss of S$0.8 million as a result of it having to absorb most of the operating expenses in the second half due to very little business being generated in Iron Ore trading during the period under review. The World Spa Malaysia remains classified as a discontinuing operation, reflecting the management’s intention to exit this business at the appropriate time in the best interests of the shareholders.

As a result of the discontinuation and liquidation of the loss-making Spa Pool Singapore operation, the Group recorded an exceptional gain of S$3.6 million.

The Group reported a loss before tax of S$2.4 million (2005: loss of S$0.6 million). Loss after tax and minority interests was S$2.3 million (2005: loss of S$0.3 million), sustaining a loss per share of 0.11 cents (2005: 0.07 cents).

There were no extraordinary items during the year.

As at June 30, 2006, the Group had a net cash of S$1.3 million compared to S$2.4 million at the previous year end, mainly due to the prepayments made for future iron ore shipments of S$2.7 million. The cash inflow from liquidation of subsidiary companies amounted to S$2.1 million.

Abterra Ltd.

On May 25, 2006, the Company completed the acquisition of 51% equity interest in Southern Star, a distributor of the dentifrices “Blackgold” brand. Subsequent to the year end, the Company has entered into a Sale and Purchase Agreement to dispose the non-core business. Completion is now intended to take place on October 31, 2006 and the disposal is not expected to have any material effect on the results for the year. Consequently, the results of Southern Star has been classified under discontinuing operation.

MANAGEMENT AND PERSONNEL

During the financial year, Dilip Kothari and Tan Teck See had resigned from the Board. On behalf of the Board, I would like to thank them for their past contributions. On July 1, 2006, Mahesh Mehta was appointed as Executive Director/Head of Trade Operations, and Gersom G. Vetuz joined the Board as an Independent Director. The management team was further strengthened with the appointment of T Sutharshanom as the Chief Financial Officer, and John Baey as the General Manager. There were no other changes in the senior management of the Group.

On behalf of the Board and the shareholders, I would like to thank all our employees for their efforts and commitment during the past year.


6 Abterra Ltd.

CORPORATE DEVELOPMENTS

On August 18, 2006, the Company announced that it had entered into a Sale and Purchase Agreement to dispose Southern Star. As the turnaround time to get Southern Star fully operational with a positive contribution was taking longer than what the management had originally anticipated, the Company took advantage of an exit route to dispose the majority holding to the other minority shareholder without suffering further losses from the investment, and for the management to concentrate on the core trading activity. With the completion of the disposal, the Company will have a nil equity interest in Southern Star.

On September 1, 2006, Oversea-Chinese Banking Corporation Limited announced for and on behalf of General Nice Resources (Hong Kong) Limited (“Offeror”) that the Offeror had entered into a Sale and Purchase Agreement with Prosperity Steel (Asia) Company LimitedProsperity Steel (Asia) Company Limited on September 1, 2006 to purchase 1,337,592,585n September 1, 2006 to purchase 1,337,592,585 shares representing approximately 65% of the issued shares of the Company, at a price of S$0.0037 for each share in cash for a total consideration of S$4.9 million. Following the purchase from Prosperity, General Nice has made a mandatory unconditional cash offer for the remaining share capital in Abterra at this price. The offer document was despatched on September 20, 2006, and a response document from the Board of Abterra, including a recommendation of an independent financial adviser, was sent to the shareholders on October 4, 2006.

PROSPECTS

Iron Ore

The iron ore business during the period under review was at best sluggish, which in turn affected turnover and margins. The Indian suppliers, on whom the Group relies on heavily for sourcing, did not buckle to the reduced demand in view of their own local consumption, and as such the anticipated increase in volume of trade did not materialise.

Going forward, the Group will embark on coming up with innovative structures to ensure supplies at competitive prices with adequate buffers to enable it to penetrate the Chinese market more effectively. The Group is also looking actively at other sources of supplies to stabilise and regularise the supply source.

Cotton

The Group’s core business involves sourcing cotton from Central Asia at discounted prices, transporting it to the main evacuation ports of Riga, Latvia, and Bandar Abbas, Iran, and marketing the cotton on to competing merchants, or further downstream to spinning mills in countries such as China, Bangladesh, etc. The Group attempts to manage price risk by trading as much back-to-back business as possible.

The principal functions of an international cotton merchant like Abterra are:

(i) performing quality control in cotton producing countries, ensuring correct and even-running quality shipments;

(ii) efficient handling of logistics, documentation, custom clearance, storage and deliveries; and

(iii) financing, by extending credit to mills while paying suppliers cash upon delivery or pre-financing them in many Central Asian countries.

Chairman’s Statement

7

The Group started Cotton trading during the financial year and achieved S$20.6 million in turnover. Abterra’s name is now being recognised among traders and spinning mills in India, China and Bangladesh. The Group is able to offer very competitive prices and good services, and has local representation in Tajikistan, Turkmenistan, Uzbekistan and India, along with a sales office in China.

The Group will continue sourcing cotton in Central Asia and India and increase sales market presence in China, Bangladesh and South East Asia. Most shipments will be:- Indian cotton to China;- Tajik/Turkmen/Uzbek cotton to China and Bangladesh; and- Central Asian Extra Long Staple cotton to India and

Bangladesh.

Yap Tian SuanExecutive Chairman

October 5, 2006

Abterra Ltd.

Chairman’s Statement

OperatingC pCompanies

pp

ABTERRA LTD.

100%Prosperity Steel

Singapore Pte. Ltd.

_________________

General trading, resourses mining

100%PSA Macao Commercial

Offshore Limited

_________________

General trading in cotton, mineral, steel & related products

51%Southern Star

Trading Pte. Ltd.

_________________

Distributor of “Blackgold” brand of dentifrices

60%World Spa

Industries (M) Sdn. Bhd

_________________

Manufacturing & marketing of bathroom products

80%Monarch Shower

Systems Sdn. Bhd.

_________________

Manufacturing & trading of shower screen

100%Monarch Spa

Malaysia Sdn. Bhd.

_________________

Marketing of Spa bath & pool equipment

100%World-Trend

Industries Sdn. Bhd.

_________________

Manufacturers of shower enclosures

100%Hua Kiong

Development Pte. Ltd.

(Dormant)_________________

Builders and general contractors

Operating Companies

Abterra Ltd.8

Operating Companies

Registered Office/Singapore

Abterra Ltd. / Prosperity Steel Singapore Pte. Ltd.8 Shenton Way# 31-02 Temasek TowerSingapore 068811Tel: (65) 6885 9800Fax: (65) 6885 9829Email: [email protected]

Macao

PSA Macao Commercial Offshore LimitedAlameda Dr. Carlos D’Assumpcao nos.335-341, Edif. Centro Hotline21° andar “B”, MacaoTel: (853) 757840Fax: (853) 757836Email: [email protected]

Shanghai

Abterra Ltd. Shanghai Representative Office2504, First Building of Kerry Ever Bright CityNo. 218 West Tian Mu RdShanghai 200070, P. R. ChinaTel: (86) 21-6354 7138Fax: (86) 21-6354 7131Email: [email protected]

Malaysia

World Spa Industries (M) Sdn. Bhd.No 8 & 10, Jalan Kempas 5/1Kawasan Perindustrian Jalan Kempas81200, Tampoi, Johor, MalaysiaTel: (607) 235 5300Fax: (607) 235 5200Email: [email protected]

Operating Companies

9Abterra Ltd.

Singapore

Southern Star Trading Pte. Ltd.25 Teo Hong RoadSingapore 088333Tel: (65) 6222 5788Fax: (65) 6221 2260Email: [email protected]

DirectorsMr Yap Tian Suan was appointed as Group Executive Chairman and CEO on 18 May 2005 following the approval by shareholders of the Strategic Share Subscription in the company and is responsible for the development of strategic business of the Company. Mr Yap was the Chief Executive Officer of Prosperity Steel (Asia) Company Limited. and he has more than 20 years of experience in the specialised field of trading and merchanting in the steel industry, accumulating a large international client base and a strong reputation for integrity and performance. In 1980, Mr Yap established Tenson Industries Limited trading in steel across America, China, Europe, Russia and Asia Pacific region. In 1994, Mr Yap together with Ms Cheng jointly started Tenson Resources Limited to synergise their expertise and expand the business. Towards the end of 1998, Mr Yap invited Mr Wong Ben Koon to extend the reach of the business in China, forming the joint venture company Prosperity Steel (Asia) Company Limited and merging the business of Tenson Resources Limited. Following the completion of the Strategic Subscription for shares, Mr Yap focuses full time on his new role in Abterra, with all new business and operations of Prosperity Steel (Asia) Company Limited being undertaken in Abterra Ltd.

Board of Directors

Ms Cheng Hiu Ying was appointed as Executive Director on 18 May 2005 and she was the Chief Operating Officer of Prosperity Steel (Asia) Company Limited. She directs the daily management and operations in Hong Kong, Beijing and Shanghai. Ms Cheng has more than 15 years of experience in international trade, specialising in the field of steel industry trading. In 1989, Ms Cheng joined Tianjin Hua Sheng Import & Export Corporation (China) as a Sales Manager engaged in the trading of semi-finished steel products internationally. In 1991, Ms Cheng moved to Hong Kong and worked as the Sales Manager of Unirise Development Co. Ltd. Capitalising on her business contacts and previous experiences, Ms Cheng expanded Unirise business substantially and was promoted to Deputy General Manager within 2 years. In 1994, Ms Cheng formed Tenson Resources Limited with Mr Yap Tian Suan.

Mr Maheskumar s/o Shantilal Purshotam Mehta joined the group as a Consultant with Prosperity Steel (Asia) Company Limited. Subsequently, he joined Abterra as the Head of Trade Operations on 1 September 2005 and was appointed as Executive Director on 1 July 2006. Mr Mehta is a fellow Chartered Accountant with extensive working experiences of more than 30 years in accounting, financial institutions and trading operations. He had started his initial career with Cold Storage Holdings as Financial Accountant/Group Internal Auditor and subsequently at Gulfeast International and Gulfeast Shipping as their Finance Director. Prior to joining Abterra, he was with Rabo Bank as Senior Manager Trade and Structured Finance, Habib Bank as Head of Business Development, and at Prima Comexindo (Jakarta) as Head of Trade Operations for their worldwide operations.

PAUL YAP TIAN SUANExecutive Chairman & CEO

MAHESKUMAR S/O SHANTILAL PURSHOTAM MEHTA Executive Director / Head of Trade Operations

ELLY CHENG HIU YING Executive Director

10 Abterra Ltd.

Directors

Directors

11

Mr Lim Hui Min John joined the Board on 1 July 2003 as an Independent Director and was appointed as Chairman of the Audit Committee as well as a member of the Nominating and Remuneration Committees. Mr Lim has spent many years in China and had previously worked for leading property companies including Keppel Land and DBS Land. He was the Assistant General Manager (Regional Investment) of Keppel Land International Limited, General Manager of Keppel Land (Shanghai) Management & Consultancy Company. He is currently the Development Director of VinaCapital Real Estate Co. Ltd, a leading investment banking and fund management company in Vietnam. Mr Lim is also an independent director and chairman of the audit committee of Fabchem China Limited since April 2006. Mr Lim obtained a Bachelor’s degree in Mechanical Engineering from the National University of Singapore and Master’s degree in Business Administration from the National University of Singapore in 1985 and 1993 respectively.

Board of Directors

Mr Chew Ban Chuan Victor Mark joined the Board on 20 May 2004 as an Independent Director and was appointed as the Chairman of the Remuneration Committee as well as a member of the Audit and Nominating Committees. He is legally qualified person. He holds a Bachelor of Law (Hons) from the National University of Singapore. Mr Chew is now the Group General Manager of Enviro-Hub Holdings Ltd., a company listed on the mainboard of the SGX-ST and a director of several of its subsidaries. Mr Chew is also active in community service, sitting on the committees of the Citizens Consultative Committee, Community Club Management Committee and Resident’s committee.

Mr Gersom G Vetuz joined the Board on 1 July 2006 as an Independent Director and was appointed as Chairman of the Nominating Committee as well as a member of the Audit and Remuneration Committees. He has had 33 years of experience in Public Accounting in Singapore, having had extensive experience in financial audits of multinational companies, public listed companies and local companies in various industries such as automobile sales, services and distribution; construction; hotel, restaurant and catering; international and retail trading; insurance; marketing; manufacturing; and property development. He was an Audit Principal with Deloitte & Touche, Singapore, one of the big four Public Accounting firms from 1 June 1987 to 30 June 2005. He has since retired from Deloitte & Touche. He is now an Audit Director at Moore Stephens, Certified Public Accountants. In 1982, he attended the Executive Program in Business Administration at Columbia University, New York, USA. He has a Bachelor’s degree in Business Administration (Major in Accounting), obtained in 1965 from the University of the East, Manila, Philippines, and qualified as a Certified Public Accountant in the Philippines in 1967. He has been a member of the Singapore Institute of Directors since 2005.

CHEW BAN CHUANVICTOR MARK Independent Director and Chairman of Remuneration Committee

LIM HUI MIN JOHNIndependent Director and Chairman of Audit Committee

GERSOM G VETUZ Independent Director and Chairman of Nominating Committee

Abterra Ltd.

Five Year Financial SummaryFive Year Financial Summary

Group 2006 2005 2004 2003 2002

$’000 $’000 $’000 $’000 $’000

Turnover 33,825 14,592 84,345 120,299 94,846

Operating loss (5,601) (8,733) (23,788) (24,896) (10,042)

Financial expense (net) (353) (874) (1,658) (2,384) (2,099)

Exceptional items 3,575 9,045 (1,836) 12,033 -

Share of results of associates - - 207 (120) 22

Loss before tax (2,379) (562) (27,075) (15,367) (12,119)

Taxation 9 (16) 157 1,265 (144)

Loss after tax (2,370) (578) (26,918) (14,102) (12,263)

Minority interests 105 277 1,076 1,134 (247)

Loss attributable to shareholders (2,265) (301) (25,842) (12,968) (12,510)

Loss per ordinary share (cents) (0.11) (0.07) (8.46) (4.42) (4.79)

Shareholders’ equity:

Share capital 36,414 2,058 15,434 14,684 14,684

Reserves (35,360) 1,093 (35,454) (9,683) 3,314

Total shareholders’ equity 1,054 3,151 (20,020) 5,001 17,998

Minority interests 323 427 711 1,726 10,946

Capital employed 1,377 3,578 (19,309) 6,727 28,944

Represented by:

Non-current assets 1,547 1,392 13,797 26,564 69,187

Current assets 3,794 7,947 18,757 39,784 43,998

Current liabilities (3,559) (4,997) (47,526) (50,986) (67,324)

Net current assets (liabilities) 235 2,950 (28,769) (11,202) (23,326)

Total assets less current liabilities 1,782 4,342 (14,972) 15,362 45,861

Non-current liabilities (405) (764) (4,357) (8,635) (16,917)

Net assets (liabilities) 1,377 3,578 (19,329) 6,727 28,944

Net asset value per ordinary share (cents) 0.05 0.15 (6.49) 1.70 6.13

12 Abterra Ltd.

Five Year Financial Statistics

13

20032002

200420052006

Turnover ($’000)

14,592

33,825

83,345

120,29994,846

(15,367)(12,119)

(562)(2,379)

(27,075)

Loss before tax ($’000)

(4.42)(4.79)

(0.07)(0.11)

(8.46)

Loss per ordinary share (cents)

Shareholders’ equity ($’000)

5,00117,998

(20,020)3,151

1,054

Net asset value per ordinary share (cents)

1.706.13

(6.49)0.15

0.05

Abterra Ltd.

Five Year Financial StatisticsFive Year Financial Statistics

Shareholders’ InformationShareholders’ Information

ISSUED AND FULLY PAID- UP CAPITALNUMBER OF SHARES ISSUEDCLASS OF SHARESVOTING RIGHT

::::

$36,414,150.745 2,057,834,747 ORDINARY SHARESORDINARY SHARES 1 VOTE PER SHARE

DISTRIBUTION OF SHAREHOLDINGS AS AT 18 SEPTEMBER 2006

Size of shareholdings No. of shareholders % No. of shares %

1 – 1,000 9 0.35 4,211 0.001,001 – 10,000 1,596 62.42 6,674,008 0.32

10,001 – 1,000,000 905 35.39 103,121,950 5.011,000,001 and above 47 1.84 1,948,034,578 94.67TOTAL 2,557 100.00 2,057,834,747 100.00

14 Abterra Ltd.

62.42%

35.39%

0.35%1.84%

1,001 – 10,000

Size of Shareholdings

10,001 – 1,000,000

1,000,001 and above

1 – 1,000

94.67%

5.01%0.32%

15

TWENTY LARGEST SHAREHOLDERS AS AT 18 SEPTEMBER 2005

No. Name of shareholders No. of shares %

1 Prosperity Steel (Asia) Co Ltd 800,446,271 38.90

2 OCBC Securities Private Ltd 703,236,052 34.17

3 Hua Kok Realty (Private) Limited (R&M Appointed) 115,058,036 5.59

4 United Overseas Bank Nominees Pte Ltd 84,435,966 4.10

5 Mayban Nominees (S) Pte Ltd 38,189,123 1.86

6 Oversea Chinese Bank Nominees Pte Ltd 26,778,539 1.30

7 American Home Assurance Company 20,967,913 1.02

8 Zubeir Shefuddin 17,399,904 0.85

9 Hua Gan Pte Ltd- In Creditors’ Voluntary Liquidation 16,500,859 0.80

10 First Capital Insurance Limited – Insurance Fund A/C 14,991,466 0.73

11 China Insurance Co. (Singapore) Pte Ltd 14,232,146 0.69

12 Design & Prefabrication Services Pte Ltd (In Liquidation) 9,163,000 0.44

13 Raffles Nominees Pte Ltd 8,505,057 0.41

14 Citibank Nominees Singapore Pte Ltd 7,261,033 0.35

15 Gan Chee Chow 5,573,288 0.27

16 Tan Holdings Pte Ltd (In Creditors’ Voluntary Liq’n) 4,654,124 0.23

17 Susanto Suvanto 4,262,000 0.21

18 ABN Amro Nominees Singapore Pte Ltd 4,356,410 0.21

19 Lai Weng Kay 3,845,000 0.19

20 KBC Bank N.V. 3,655,340 0.18

TOTAL 1,903,511,527 92.50

Based on the information available to the Company, approximately 27.08% of the Company’s equity securities are held in the hands of the public. This is in compliance with Rule 723 of the Listing Manual of the SGX-ST which requires at least 10% of a listed issuer’s equity securities to be held by the public.

Abterra Ltd.


16 Abterra Ltd.

Substantial Shareholders as at 18 September 2006

Name of Substantial Shareholders

Direct Interest Deemed InterestNotes No. of Shares % No. of Shares %

General Nice Resources (Hong Kong) Limited (i) 640,038,052 31.10 697,554,533 33.90General Nice Development Limited (ii) - - 1,337,592,585 65.00Vantage Region International Limited (iii) - - 1,337,592,585 65.00Cai Sui Xin (iv) - - 1,337,592,585 65.00Tsoi Ming Chi (v) - - 1,337,592,585 65.00Prosperity Steel (Asia) Company Limited (vi) 800,446,271 38.90 60,000,000 2.92Yap Tian Suan (vii) - - 860,446,271 41.81Cheng Hiu Ying (viii) - - 860,446,271 41.81Long Harvest Holdings Limited (ix) - - 860,446,271 41.81Chow Pok Yu (x) - - 860,446,271 41.81Tan Holdings Pte Ltd (In Creditors’ Voluntary Liq’n) 4,654,124 0.23 155,000,000 7.53

Notes:

(i) General Nice Resources (Hong Kong) Limited (“GNR”) is deemed to be interested in 697,554,533 shares held by Prosperity Steel (Asia) Company Limited (“PSA HK”) pursuant to a Sale & Purchase Agreement dated 1 September 2006 (the Sale Shares”);

(ii) General Nice Development Limited (“GNDL”) has a deemed interest in the Sale Shares by virtue of Section 7 of the Companies Act, Cap. 50 (the Act”), as GNDL is the beneficial owner of 76.67% interest in GNR;

(iii) Vantage Region International Limited (“Vantage”) has a deemed interest in the Sale Shares by virtue of Section 7 of the the Act, as (i) Vantage is the legal and beneficial owner of 50% interest in GNDL; and (ii) GNDL is the beneficial owner of 76.67% interest in GNR;

(iv) Cai Sui Xin (“Cai”) has a deemed interest in the Sale Shares by virtue of Section 7 of the Act, as (i) Cai is the legal and beneficial owner of the entire issued share capital of Vantage; (ii) Vantage is the legal and beneficial owner of 50% interest in GNDL; and (ii) GNDL is the beneficial owner of 76.67% interest in GNR;

(v) Tsoi Ming Chi (“Tsoi”) has a deemed interest in the Sale Shares by virtue of Section 7 of the Act, as (i) Tsoi is the legal and beneficial owner of 35% interest in GNDL; and (ii) GNDL is the beneficial owner of 76.67% interest in GNR;

(vi) PSA HK is deemed to be interested in 60,000,000 shares held by Tan Holdings Pte Ltd (In Creditors’ Voluntary Liq’n) pursuant to the Loan and Assignment Agreement dated 27 January 2005;

(vii) Yap Tian Suan (“Yap”) currently holds 52% of the issued share capital of PSA HK. By virtue of Section 7 of the Act, Yap is deemed to be interested in all the shares held by PSA in the Company;

(viii) Cheng Hiu Ying (“Cheng”) currently holds 22% of the issued share capital of PSA HK. By virtue of Section 7 of the Act, Cheng is deemed to be interested in all the shares held by PSA in the Company;

(ix) Long Harvest Holdings Limited (“Long Harvest”) currently holds 26% of the issued share capital of PSA HK. By virtue of Section 7 of the Act, Long Harvest is deemed to be interested in all the shares held by PSA in the Company;

(x) Chow Pok Yu (“Chow”) currently owns 100% of Long Harvest which, in turn, is interested in 26% of the issued share capital of PSA HK. By virtue of Section 7 of the Act, Chow is deemed to be interested in all the shares held by Long Harvest and PSA in the Company.


17Abterra Ltd.

Financial Calendar

Despatch of annual report to shareholdersOctober 13, 2006

Annual General MeetingOctober 30, 2006

Half year endDecember 31, 2006

Announcement of interim resultsFebruary 9, 2007

Financial year endJune 30, 2007

Announcement of final resultsAugust 24, 2007

Abterra Ltd.18

Corporate Governance Report

Introduction

The Board of Directors (“Board”) and the management of Abterra Ltd. (the “Company”) are committed to maintaining a high standard of corporate governance. Underlying this commitment is the belief that good governance will help to enhance corporate performance and accountability.

This report will help shareholders better understand the Company’s practices which were in place throughout the financial year and guided by the Code of Corporate Governance (the “Code”).

Board of Directors

Principle 1 - The Board’s Conduct of Affairs

Role of the Board The Board’s primary role is to protect and enhance long-term shareholder value. To fulfil this role, the Board is responsible for the overall corporate governance of the Group including setting its strategic direction, establishing goals for management and monitoring the achievement of these goals. As part of its responsibility in discharging its duty, the Board also:

• oversees risk management and internal control processes, financial reporting and compliance, including the release of financial results and announcements of material transactions;

• approves major funding investment and divestment proposals; • approves the nominations to the Board of Directors and appointments to the various Board Committees; and • approves the framework of remuneration for the Board and key executives as recommended by the Remuneration

Committee. Board ProcessesTo give effect to the discharge of its responsibilities, the Board has delegated some of its authorities to three Committees; namely the Audit Committee, the Remuneration Committee and the Nominating Committee. These committees function within clearly defined terms of reference and operating procedures, which are reviewed on a regular basis. The effectiveness of each committee is also constantly monitored. The attendance of the board members during their tenure of office at the Board and Committee meetings of the Company and the frequency of such meetings are set out below.

Board Nominating Committee Remuneration Committee

Audit Committee

Director No of meetings

held

No of meetings attended

No of meetings

held


No of meetings

held


No of meetings

held


Yap Tian Suan 2 2 - - - - - -Cheng Hiu Ying 2 2 - - - - - -Maheskumar s/o Shantilal Purshotam Mehta (appointed on July 1, 2006)

- - - - - - - -

Lim Hui Min John 2 2 - - 1 1 3 3Chew Ban Chuan Victor Mark 2 2 - - 1 1 3 3

Gersom G. Vetuz (appointed on July 1, 2006) - - - - - - - -

Tan Teck See (resigned on June 3, 2006) 2 2 - - - - - -

Dilip Kothari (appointed on August 23, 2005, resigned on April 25, 2006)

2 1 - - 1 1 2 1

19Abterra Ltd.

Financial authorization limits have been put in place for operating and capital budgets, procurement of goods and services, and cheque signatory arrangements. Matters on which the Board’s approval is required include material acquisitions and disposals of assets, corporate or financial restructuring, share issuances and dividend payments to shareholders, and other transactions of a material nature requiring announcement under the listing rules of the Singapore Exchange Securities Trading Limited. The Board also approves the financial results for release to the Singapore Exchange Securities Trading Limited.

The Board are regularly briefed on the Group’s activities to keep them updated on Group developments. The Board are free to request sponsorship from the Company, subject to the approval from the Chairman, to attend courses to update their knowledge and better equip themselves to discharge their duties as Directors.

The Directors of the Company as at the date of this report are:

Executive Directors Non-Executive Independent Directors1. Mr Yap Tian Suan, Executive Chairman 1. Mr Lim Hui Min John2. Ms Cheng Hiu Ying 2. Mr Chew Ban Chuan Victor Mark3. Mr Maheskumar s/o Shantilal Purshotam Mehta 3. Mr Gersom G. Vetuz

Principle 2 - Board Composition and Guidance

The Board comprises six directors, of whom three are executive directors. Of the remaining three non-executive directors, all three are considered independent by the Nominating Committee. The Nominating Committee considers an independent director as one who has no relationship with the Company, its related companies or its officers that could interfere, or be reasonably perceived to interfere, with the exercise of the director’s independent business judgment with a view to the best interests of the Company.

The Nominating Committee, having reviewed the composition of the Board, is satisfied that the present size of the Board is effective for decision making. The Nominating Committee is also satisfied that the Board comprised of directors with a variety of core competencies, expertise and networkings necessary, to discharge their duties and responsibilities, and to provide strategic networking to enhance the business of the Group.

The names and the key information of the Directors of the Company in office are set out in the Profile of Board of Directors section of this Annual Report.

Principle 3 - Chairman and Chief Executive Officer

The Company does not have a separate Chairman and Chief Executive Officer. The Board is of the view that the Chairman and Chief Executive Officer is most suited to hold both positions to lead the Board and the Company in its new directions. Board agenda are prepared by the Chairman and the Chairman will also ensure that the Board members are provided with adequate and timely information prior to Board meetings. The Chief Executive Officer plays an instrumental role in developing the business of the Group and exercising control over the quality and timeliness of information flow between the Board and the management.

Principle 4 - Board Membership

Principle 5 - Board Performance

Nominating Committee

The Nominating Committee comprises entirely of non-executive independent directors. As at the date of this report, the Nominating committee comprises the following members:

Mr Gersom G. Vetuz ChairmanMr Lim Hui Min John MemberMr Chew Ban Chuan Victor Mark Member


Abterra Ltd.20

The Nominating Committee did not meet during the financial year, but going forward will schedule to meet at least once a year and at such other times as may be necessary.

The Nominating Committee is responsible for:

• evaluating the effectiveness of the Board as a whole and the contributions of each Director; • identifying the skills, expertise and capabilities for the effective functioning of the Board; • maintaining a formal process for the nomination of new Directors; • re-nominating Directors for re-election at the Annual General Meetings; and • evaluating and determining the independence of each Director.

The Articles of Association of the Company provides that one-third of the directors, except the Chief Executive Officer, shall retire from office at every Annual General Meeting and directors appointed during the course of the year will be subject to re-election at the next Annual General Meeting following his appointment. For the forthcoming Annual General Meeting, Mr Chew Ban Chuan Victor Mark and Mr Yap Tian Suan are due for re-election pursuant to Article 91 of the Company's Articles of Association. In addition, Mr Maheskumar s/o Shantilal Purshotam Mehta and Mr Gersom G. Vetuz are due for re-election pursuant to Article 97 of the Company's Articles of Association.

The effectiveness of the Board is monitored by the Nominating Committee. The Nominating Committee assesses the Board’s performance in terms of overall performance, achieving an adequate return for shareholders, and overseeing the management’s and Group's performances during the year. In evaluating the contributions and performance of each Director, factors taken into consideration include, inter alia, attendance record of the director at Board meetings and activities, contributions based on the member's respective core competencies, and maintenance of independence. The results of the evaluation process would be used by the Board to effect continuing improvements on Board processes where considered necessary.

The Nominating Committee is satisfied that Mr Lim Hui Min John, Mr Chew Ban Chuan Victor Mark and Mr Gersom G. Vetuz are independent, and any directors having external directorships have devoted sufficient time and attention to the affairs of the Group.

Principle 6 - Access to Information

Board members have separate and independent access to the Company’s senior management and the company secretary. The company secretary attends all meetings of the Board and Board Committees and ensures that board procedures are followed and that applicable rules and regulations are complied with.

Should directors, whether as a group or individually, need independent professional advice to enable them to discharge their duties, the Company will appoint a professional advisor selected by the group or individual, and approved by the Chairman, at the Company’s expense, to render the advice.

Remuneration Matters

Principle 7 - Procedures for Developing Remuneration Policies

Remuneration Committee

The Remuneration Committee comprises entirely of independent non-executive directors. As at the date of this report, the Remuneration committee, comprises the following members:

Mr Chew Ban Chuan Victor Mark ChairmanMr Lim Hui Min John MemberMr Gersom G. Vetuz Member

The Remuneration Committee is responsible for:

• reviewing and approving the structure of the compensation plans and recruitment strategies of the Group so as to align compensation with shareholders' interests; and


21Abterra Ltd.

• reviewing the executive directors' and senior management's compensation and determining appropriate adjustments.

No director is involved in deciding his own remuneration, except in providing information and documents if specifically requested by the Remuneration Committee to assist in its deliberations.

The Remuneration Committee's review covers all aspects of remuneration, including salaries, fees, allowances, bonuses and benefits-in-kind. The Remuneration Committee's recommendations are submitted for endorsement by the entire Board.

Based on the recommendation of the Remuneration Committee, the Company will be considering the preparation of service contracts for the executive directors.

Principle 8 - Level and Mix of Remuneration

The Company adopts an overall remuneration policy for employees comprising a fixed component in the form of a base salary, and a variable component in the form of a bonus that is linked to the performance of the Company, the individual, the industry and the economy.

The payment of directors’ fees is subject to the approval of shareholders.

Principle 9 - Disclosure of Remuneration

The remuneration of the Directors of the Company for the year under review are as follows:

Director Directors’ Fees (%)

Salary* (%) Bonus (%) Benefits in kind (%)

Total (%)

Below $250,000Lim Hui Min John 100 - - - 100Chew Ban Chuan Victor Mark 100 - - - 100Tan Teck See (resigned on June 3, 2006) - 65 6 29 100

Dilip Kothari (appointed on August 23, 2005, resigned on April 25, 2006) 100 - - - 100

*Salary is inclusive of CPF

The Company has three key executives (who are not directors). None of them received remuneration in excess of $250,000 during the financial year under review. Save for the Directors disclosed in the table above, there are no employees who are immediate family members of the Directors or the Chief Executive Officer whose remuneration exceeded $150,000 during the year under review.

The Company currently does not have any employee share option scheme.

Accountability and Audit

Principle 10 - Accountability

During the financial year 2006, the Company released its half year results within 45 days and full year results within 60 days from the end of the half year and financial year as the case may be.

The shareholders are provided with detailed analysis, explanation and assessment of the Group’s financial position and prospects via the issuance of annual reports and semi-annual announcements of results.


Abterra Ltd.22

Principle 11 - Audit Committee

The Audit Committee comprises entirely of non-executive independent directors of the Company. As at the date of this report, the Audit committee, comprises the following members:

Mr Lim Hui Min John Chairman Mr Chew Ban Chuan Victor Mark Member Mr Gersom G. Vetuz Member

The Board has reviewed and is satisfied that the members of the Audit Committee are appropriately qualified to discharge their responsibilities. The members of the Audit Committee are scheduled to meet at least 2 times a year, and going forward will be meeting on a quarterly basis, and have the following principal functions:

• review the scope and results of the audit undertaken by the external auditors, including non-audit services performed by them to ensure that there is a balance between maintenance of their objectivity and cost effectiveness;

• review the internal audit plans, the scope and results of internal audit procedures; • review with the external auditors the effectiveness of the Group's material internal controls, including financial,

operational and compliance controls and risk management; • review the financial statements and other announcements to shareholders and the Singapore Exchange

Securities Trading Limited (SGX-ST), prior to submission to the Board; • conduct investigation into any matter within the Audit Committee's scope of responsibility and review any

significant findings of investigations; • assess the independence and objectivity of the external auditors; • recommend to the Board the appointment or re-appointment of external auditors; • review the assistance given by the Company's officers to the external auditors; and • review interested person transactions.

The Audit Committee has undertaken a review of all non-audit services provided by the external auditors during the financial year, and in the Audit Committee's opinion, the provision of these services does not impair the independence of the external auditors.

Principle 12 - Internal Controls

The Board acknowledges that it is responsible for the overall internal control framework, but recognizes that no cost effective internal control system will preclude all errors and irregularities, as a system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can provide only reasonable and not absolute assurance against material misstatement or loss.

During the year, the Audit Committee has reviewed, with the assistance of the external auditors and the finance team, the effectiveness of the Company’s material internal controls, including operational controls. Risk assessment and evaluation take place as an integral part of the annual strategic planning cycles. Based on the review of the Audit Committee, the Board and the management have implemented stringent internal controls to safeguard shareholders’ investments and the Company’s assets, and the Audit Committee continues to review any measures implemented periodically to ensure that measures are updated and compliance is carried out.

Principle 13 - Internal Audit

The Board is responsible for maintaining a system of internal control processes to safeguard shareholders’ investments and the Group’s business and assets. The effectiveness of the internal financial control systems and procedures are monitored by the Audit Committee.

The Group has outsourced the internal audit function. At least once a year, the internal audit team will closely examine and evaluate the internal control systems of all major operating entities in accordance with the audit plan as approved by the Audit Committee. The internal audit team will report to the Audit Committee on any material non-compliance and internal control weaknesses, and will recommend improvements, where necessary. The Audit Committee will oversee and monitor the implementation of any improvements thereto.


23Abterra Ltd.

The Board is of the view that there is adequate accountability and transparency as reflected by the internal controls established within the Group.

Communications with Shareholders

Principle 14 - Regular, Effective and Fair Communication with Shareholders

The Company takes a serious view of maintaining full and adequate disclosure, in a timely manner, of material events and matters concerning its business. All the necessary disclosures are made in public announcements, press releases and annual reports to shareholders.

The Company’s website at www.abterra.com.sg also provides up-to-date information on the Group and its business.

Principle 15 - Shareholders’ Participation at Annual General Meetings

The annual general meeting of the Company provides a principal forum for dialogue and interaction with shareholders. Members of the Board and the Company’s external auditors are present to address questions raised by shareholders at Annual General Meetings.

The Articles of Association of the Company provides for voting in person at the Annual General Meetings of the Company.

Issues or matters requiring shareholders’ approval are tabled in the form of separate and distinct resolutions.

Interested Person Transactions

On September 29, 2006, the Board of Directors of Abterra Ltd. (“Company” or “Abterra”) announced that in the course of the audit for the financial year ended June 30, 2006 (“FY2006”), the Company became aware of the following two transactions between two of its unlisted wholly-owned subsidiaries, namely PSA Macao Commercial Offshore Limited (“PSA Macao”) and Prosperity Steel Singapore Pte. Ltd. (“PSS”) (on the one part) with Prosperity Steel (Asia) Company Limited (“PSA HK”), the Company’s controlling shareholder (on the other part) (collectively the “Past Transactions”): -

(i) On October 10, 2005, PSA Macao made an interest-free loan amounting to $169,000 (USD100,000) to PSA HK for the purpose of enabling PSA HK to purchase low grade iron ore from North Korea. The purchase of iron ore was made in the ordinary course of PSA HK’s trading business. This loan was interest-free, unsecured and had no fixed term of repayment and would not ordinarily be considered as an arm’s length transaction. PSA HK repaid the loan in full on January 31, 2006.

(ii) On October 18, 2005, PSS made an interest-free loan amounting to $591,000 (USD350,000) to PSA HK. The interest-free loan was made for the purposes of securing a letter of credit facility for PSA HK to undertake a contract with Global Steel Nigeria to supply catalysts used in the steel making process to Global Steel Nigeria. The supply of catalysts was made in the ordinary course of PSA HK’s trading business. This loan was interest-free, unsecured and had no fixed term of repayment and would not ordinarily be considered as an arm’s length transaction. The contract between PSA HK and Global Steel Nigeria was completed on January 11, 2006 and PSA HK repaid the loan in full on such date.

The Past Transactions took place between October 10, 2005 and October 18, 2005 (“Relevant Period”). No interest was charged on the Past Transactions as PSA HK had made interest-free loans to the Company and its subsidiaries. As the Past Transactions are between the Company’s unlisted subsidiaries and the Company’s controlling shareholder, each of the Past Transactions constituted an “interested person transaction” (“IPT”) under Chapter 9 of the SGX-ST Listing Manual (“Listing Manual”).

The aggregate value of all IPTs with PSA HK for FY2006 excluding transactions less than $100,000 or not disclosable under Rule 905 of the Listing Manual amounted to approximately $760,000 (USD450,000). As each of the Past Transactions exceeded $100,000 and was of a value more than 3% of the latest audited net tangible assets (“NTA”) of the Group at the time the relevant Past Transaction was entered into, accordingly pursuant to Rule 905(1) of the Listing


Abterra Ltd.24

Manual the Company should have immediately announced these Past Transactions. In addition, as each of the Past Transactions was of a value more than 5% of the Group’s latest audited NTA at the time the relevant Past Transaction was entered into, the Company should have obtained shareholders’ approval for each of the Past Transactions pursuant to Rule 906(1) of the Listing Manual.

Upon discovery of these Past Transactions, the Audit Committee of the Company has reviewed each of the Past Transactions and is of the view that while each of these Past Transactions would not ordinarily be considered as being on normal commercial terms (being both interest-free loans), save for the time value of money, the interests of the Company and its minority shareholders have not been prejudiced as these loans have been fully repaid. The Company has made this announcement as soon as practicable thereafter. As the loans in respect of the Past Transactions have been repaid in full, it would not serve the interests of the Company or its minority shareholders to subject the Past Transactions to the approval of shareholders in a general meeting.

The Company had in place IPT procedures (“IPT Procedures”). The Company had a change of management in May 2005. Save for Mr Tan Teck See who resigned on June 3, 2006, the executive directors of the Company at the relevant period (namely, October 2005) during which the IPTs occurred were resident in Hong Kong and were dependent on the management to advise them on IPTs and compliance with the Listing Manual. The Audit Committee also relied on the management to report IPTs to it. The then management did not report any IPTs to the directors nor the Audit Committee. It was only subsequent to the appointment of the current Chief Financial Officer (CFO) that the IPTs were discovered.

The Company will ensure that the IPT Procedures are followed. In addition, the Company will seek to enhance the IPT Procedures with the following measures:-

(a) The Audit Committee will have quarterly meetings every financial year. Previously, the Audit Committee met a minimum of twice every financial year.

(b) Previously, the Audit Committee enquired of the management whether there were any IPTs to be reported during their meetings. The Audit Committee will now require IPTs to be reported on by the management as a separate item on the agenda.

(c) The CFO will be responsible for updating the IPT register and reporting all IPTs to the Audit Committee.

(d) The Company intends to engage a compliance officer to assist the CFO to comply with the IPT Procedures and other Listing Manual requirements. The Company will announce the details of the appointment. Subject to the availability of qualified candidates, the Company intends to appoint a compliance officer within three to six months from the date of the announcement.

(e) The Audit Committee and Board of Directors shall review internal audit reports to ascertain that the guidelines and procedures established to monitor IPTs have been complied with. In addition, the Audit Committee will also review from time to time such guidelines and procedures to determine if they are adequate and/or commercially practicable in ensuring that transactions between the Group and interested person are conducted on normal commercial terms.

(f) The Company intends to appoint external auditors to review the adequacy of the Company’s internal guidelines and procedures relating to IPTs and to report on whether these guidelines and procedures have been complied with.


25Abterra Ltd.

The aggregate value of interested person transactions entered into during the financial year under review is as follows:-

Name of interested person Aggregate value of all interested person transactions during the year under review (excluding transactions less than $100,000 and transactions conducted under shareholders’ mandate pursuant to Rule 920 of the Listing Manual)

Aggregate value of all interested person transactions conducted under shareholders’ mandate pursuant to Rule 920 of the Listing Manual (excluding transactions less than $100,000)

Prosperity Steel (Asia) Company Limited

$760,000 (see note below) Nil

Note: Please see the above for the details of the Past Transactions. During the Relevant Period, Prosperity Steel (Asia) Company Limited had a direct shareholding interest in the Company of 70% and an indirect shareholding interest in the Company of 2.92%. As explained in the announcement, the Company did not obtain prior shareholders’ approval for the Past Transactions as required under Rule 906 of the Listing Manual. These Past Transactions have been completed and the controlling shareholder, Prosperity Steel (Asia) Company Limited, had repaid the loans in full.

Dealing in Securities

The Company has adopted an internal code on dealings in securities to govern dealings in its shares by the directors and the key employees of the Group. This internal code is modeled on the Best Practices Guide of the Singapore Exchange Securities Trading Limited relating to dealings in securities and has been disseminated to the directors and the key employees of the Group.

Compliance with Existing Best Practices Guide of the Singapore Exchange

The Board of Directors confirms that for the financial year ended June 30, 2006, the Company has complied with the principal corporate governance recommendations set out in the Best Practices Guide issued by the SGX-ST, except that in the course of the audit for the financial year, the Company became aware of two past interested person transactions entered into between two of the Company’s subsidiaries involving the interest of a controlling shareholder, the details of which were announced by the Company on SGXNET on September 29, 2006 and disclosed separately in the above section of this Annual Report.

On Behalf of the Board of Directors

Yap Tian SuanDirector

Cheng Hiu YingDirectors

Singapore, 5 October 2006


26 Abterra Ltd.

Financial Statements

CONTENTS

Report of the Directors 27

Statement by Directors 30

Report of the Auditors to the members of Abterra Ltd. 31

Balance sheets as at 30 June 2006 32

Consolidated profi t and loss statement for the fi nancial year ended 30 June 2006 33

Statements of changes in equity for the fi nancial year ended 30 June 2006 34

Consolidated cash fl ow statement for the fi nancial year ended 30 June 2006 36

Notes to the Financial Statement - 30 June 2006 38

26 Abterra Ltd.

The directors present their report to the members together with the audited fi nancial statements of the Company and of the Group for the fi nancial year ended 30 June 2006. During the fi nancial year, the name of the Company was changed from Hua Kok International Ltd to Abterra Ltd.

1. DIRECTORS

The directors of the Company in offi ce at the date of this report are:

Yap Tian Suan

Cheng Hiu Ying

Maheskumar s/o Shantilal Purshotam Mehta (appointed on 1 July 2006)

Lim Hui Min John

Chew Ban Chuan Victor Mark

Gersom G. Vetuz (appointed on 1 July 2006)

2. ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE SHARES OR DEBENTURES

Neither at the end of the fi nancial year nor at any time during the fi nancial year was the Company a party to any arrangement whose object is to enable the directors of the Company to acquire benefi ts by means of the acquisition of shares in or debentures of the Company or any other body corporate.

3. DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES

The following directors who held offi ce at the end of the fi nancial year had, according to the register of directors’ shareholdings required to be kept under Section 164 of the Singapore Companies Act, Cap. 50, an interest in shares of the Company and related corporations as stated below:

Direct interest Deemed interest

The Company

1 July 2005/ date of

appointment30 June

200621 July

2006


appointment30 June

200621 July 2006

Abterra Ltd.Ordinary shares

Yap Tian Suan - - - 1,500,484,323 1,500,484,323 1,500,484,323Cheng Hui Ying - - - 1,500,484,323 1,500,484,323 1,500,484,323Lim Hui Min John 100,000 100,000 100,000 - - -

27Abterra Ltd.

Report of the Directors

28 Abterra Ltd.


3. DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES (CONT’D)

Direct interest Deemed interest

The Holding Company


appointment30 June

200621 July

2006


appointment30 June

200621 July 2006

Prosperity Steel (Asia) Company LimitedOrdinary shares of HK$1 each

Yap Tian Suan 1,040,000 1,040,000 1,040,000 440,000 440,000 440,000Cheng Hiu Ying 440,000 440,000 440,000 1,040,000 1,040,000 1,040,000

No other director had an interest in any shares or debentures of the Company or related corporations either at the beginning, (or date of appointment, if later) or end of the fi nancial year ended or on 21 July 2006.

4. DIRECTORS’ CONTRACTUAL BENEFITS

Since the end of the previous fi nancial year, no director has received or become entitled to receive a benefi t (other than a benefi t or any fi xed salary of a full-time employee of the Company included in the aggregate amount of emoluments shown in the fi nancial statements, or any emoluments received from a related corporation) by reason of a contract made by the Company or a related corporation with the director or with a fi rm of which the director is a member, or with a company in which the director has a substantial fi nancial interest.

5. OPTIONS GRANTED

During the fi nancial year, there were no options granted to any person to take up unissued shares in the Company or any subsidiary company.

6. OPTIONS EXERCISED

During the fi nancial year, there were no shares of the Company issued by virtue of any exercise of option to take up unissued shares.

7. OPTIONS OUTSTANDING

At the end of the fi nancial year, there were no unissued shares of the Company under option.

8. AUDIT COMMITTEE

The Board supports the developments to improve corporate governance and confi rms compliance with the Singapore Exchange Securities Trading Limited Best Practices Guide relating to Audit Committees.

The Audit Committee comprises three independent directors, one of whom is also the Chairman of the Audit Committee. The members of the Audit Committee are:

Lim Hui Min John (Chairman)Chew Ban Chuan Victor MarkGersom G. Vetuz (appointed on 1 July 2006)Dilip Kothari (appointed on 23 August 2005, resigned on 25 April 2006)

29Abterra Ltd

8. AUDIT COMMITTEE (CONT’D)

The Audit Committee performs its functions in accordance with Section 201B(5) of the Singapore Companies Act, Cap. 50 and the requirements of the Singapore Exchange Securities Trading Limited. In performing those functions, the Audit Committee reviewed the overall scope of external audits and the assistance given by the Company’s offi cers to the auditors. The Audit Committee met with the external auditors to discuss the results of their audits and their evaluation of the systems of internal accounting controls. The Audit Committee also reviewed the fi nancial statements of the Company and the consolidated fi nancial statements of the Group for the year ended 30 June 2006, as well as the external auditors’ report thereon.

In addition the Audit Committee reviewed Interested Person Transactions for the fi nancial year ended 30 June 2006 to satisfy itself that the transactions are on normal commercial terms.

9. AUDITORS The auditors, LTC & Associates, have expressed their willingness to accept re-appointment.

Yap Tian Suan Director

Cheng Hiu Ying Director



30 Abterra Ltd.

Statement by Directors

We, Yap Tian Suan and Cheng Hiu Ying, being two of the directors of Abterra Ltd., do hereby state that, in the opinion of the directors,

(i) the accompanying balance sheets, consolidated profi t and loss statement, statements of changes in equity of the Company and the Group, and consolidated statement of cash fl ows together with notes thereto are drawn up so as to give a true and fair view of the state of affairs of the Company and of the Group as at 30 June 2006 and of the results of the business of the Group, changes in equity of the Company and the Group, and cash fl ows of the Group for the year then ended, and

(ii) at the date of the statement there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

On behalf of the Board of Directors

Yap Tian SuanDirector

Cheng Hiu YingDirector


31Abterra Ltd.

We have audited the balance sheet and statement of changes in equity of the Company, Abterra Ltd. and the consolidated fi nancial statements of the Group, for the fi nancial year ended 30 June 2006, set out on pages 32 to 72. These fi nancial statements are the responsibility of the directors of the Company. Our responsibility is to express an opinion on these fi nancial statements based on our audit. The fi nancial statements for the fi nancial year ended 30 June 2005 were audited by another auditor whose report dated 28 September 2005 expressed a qualifi ed opinion on those statements, see Note 39.

We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. An audit also includes assessing the accounting principles used and signifi cant estimates made by the directors, as well as evaluating the overall fi nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion,

(a) the consolidated fi nancial statements of the Group and the balance sheet and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Singapore Companies Act (the “Act”) and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Company and of the Group as at 30 June 2006 and the results, changes in the equity, cash fl ows of the Group, and changes in equity of the Company for the fi nancial year ended on that date; and

(b) the accounting and other records required by the Act to be kept by the Company have been properly kept in accordance with the provisions of the Act.

LTC & ASSOCIATESCertifi ed Public AccountantsPartner-in-charge: Devdas Sawlani


Report of the Auditors to the members of Abterra Ltd.

32 Abterra Ltd.

Balance sheets as at 30 June 2006

Group CompanyNote 2006 200�� 2006 200��

$’000 $’000 $’000 $’000

Shareholders’ equity:Share capital 4 36,414 2,058 36,414 2,058Reserves 5 (3�,360) 1,093 (3�,01�) 3,282

Total shareholders’ equity 1,0�4 3,151 1,399 5,340Minority interests 323 427 - -

Capital employed 1,377 3,578 1,399 5,340

Represented by:Non-current assets:Property, plant and equipment 6 1,�47 1,389 368 350Investment in subsidiaries 7 - - 203 -Other investments 8 - 3 - 3Goodwill on consolidation 9 - - - -

Total non-current assets 1,�47 1,392 �71 353

Current assets:Inventories 10 1,0�4 589 344 -Trade debtors 11 �83 848 38 -Other debtors, deposits and

prepayments 12 160 296 �9 187Loan to subsidiary companies 13 - - - -Cash and bank balances 14 1,997 1,214 1,�20 648Fixed deposits 15 - 5,000 - 5,000

Total current assets 3,794 7,947 1,961 5,835

Current liabilities:Bank overdrafts (secured) 16 2�9 2,754 - -Bills payable to banks (secured) 17 - 592 - -Trade creditors 18 1,4�4 97 38� -Other creditors and accruals 19 �30 1,370 430 484Obligations under finance leases 20 323 84 318 46Bank loans (secured) –

repayable within one year 21 �7 55 - -Amounts owing to ultimate holding

company 35(ii) 936 - - -Provision for income tax - 45 - -

Total current liabilities 3,��9 4,997 1,133 530

Net current assets 23� 2,950 828 5,305

Total assets less current liabilities 1,782 4,342 1,399 5,658

Non-current liabilities:Obligations under finance leases 20 - 345 - 318Bank loans (secured) – repayable

after one year 21 349 417 - -Deferred taxation 22 �6 2 - -

Total non-current liabilities 40� 764 - 318

Net assets 1,377 3,578 1,399 5,340

The accounting policies and explanatory notes form an integral part of the financial statements.

33Abterra Ltd.

Group Note 2006 200�

$’000 $’000

Turnover 23 33,82� 14,592Cost of sales (31,393) (12,587)

Gross profit 2,432 2,005

Other operating income 24 398 239Distribution and selling expenses - (492)Administrative expenses (1,703) (9,371)Other operating expenses (6,728) (1,114)

Operating loss 26 (�,601)�,601)) (8,733)Financial income 27 62 7Financial expenses 28 (41�)41�) (881)Exceptional items (net) 29 3,�7� 9,045

Loss before tax (2,379) (562)Taxation 30 9 (16)

Loss after tax (2,370) (578)Minority interests 10� 277

Loss attributable to shareholders (2,26�) (301)

Loss per ordinary share (cents) 31Before exceptional items:

Basic (0.28) (2.31)Diluted (0.28) (2.31)

After exceptional items:Basic (0.11) (0.07)Diluted (0.11) (0.07)


Consolidated profit and loss statement for the financial year ended 30 June 2006

34 Abterra Ltd.

GroupShare capital

Share premium

Revaluation reserve

Foreign currency

translation reserve

Accumulated losses

Total Shareholders’

equityMinority interests Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Balance as at 1 July 2005 2,058 34,356 - (94) (33,169) 3,151 427 3,578

Transfer to share capital 34,356 (34,356) - - - - - -Currency translation differences - - - (33) - (33) - (33)Inter-reserve transfers - - - 85 (85) - - -Revaluation surplus: Freehold land and building - - 256 - - 256 - 256Deferred tax liability on revaluation surplus (Note 22) - - (55) - - (55) - (55)Others - - - - - - 1 1Loss for the year - - - - (2,265) (2,265) (105) (2,370)

Balance as at 30 June 2006 36,414 - 201 (42) (3�,�19) 1,0�4 323 1,377

Balance as at 1 July 2004 15,434 12,624 - (85) (47,993) (20,020) 711 (19,309)

Capital reduction (15,125) - - - 15,125 - - -Issue of new ordinary shares 1,440 4,560 - - - 6,000 - 6,000Issue of HKI Scheme shares 309 17,172 - - - 17,481 - 17,481Currency translation differences - - - (9) - (9) - (9)Others - - - - - - (7) (7)Loss for the year - - - - (301) (301) (277) (578)

Balance as at 30 June 2005 2,058 34,356 - (94) (33,169) 3,151 427 3,578


Statements of changes in equityfor the financial year ended 30 June 2006

35Abterra Ltd.

CompanyShare capital

Share premium

Foreign currency

translation reserve

Accumulated losses Total

$’000 $’000 $’000 $’000 $’000

Balance as at 1 July 2005 2,058 34,356 - (31,074) 5,340

Transfer to share capital 34,356 (34,356) - - -Currency translation differences - - 2 - 2Loss for the year - - - (3,943) (3,943)

Balance as at 30 June 2006 36,414 - 2 (35,017) 1,399

Balance as at 1 July 2004 15,434 12,624 - (35,861) (7,803)

Capital reduction (15,125) - - 15,125 -Issue of new ordinary shares 1,440 4,560 - - 6,000Issue of HKI Scheme shares 309 17,172 - - 17,481Loss for the year - - - (10,338) (10,338)

Balance as at 30 June 2005 2,058 34,356 - (31,074) 5,340

Statements of changes in equityfor the fi nancial year ended 30 June 2006

The accounting policies and explanatory notes form an integral part of the fi nancial statements.

36 Abterra Ltd.

Note 2006 2005$’000 $’000

Cash fl ows from operating activitiesLoss from ordinary activities before taxation (2,379) (562)Adjustments for: Cost of investment in associated companies written off (net) - 207 Exceptional items 29 (3,575) (9,045) Allowance for doubtful trade debts 11 5,306 862 Allowance for stock obsolescence 10 213 675 Bad trade debts written off 21 10 Amortisation and write off of goodwill on consolidation (net) - 381 Depreciation of property, plant and equipment 6 119 213 Loss on disposal of property, plant and equipment 14 734 Waiver of debts by creditors - (9) Interest income 27 (62) (7) Interest expense 28 415 881 (Reversal) / allowance for impairment of property, plant and equipment 6 (29) 408 Revaluation defi cit - 262 Impairment loss in value and write off of unquoted investments 8&9 13 9 Unrealised exchange loss / (gain) 143 (92) Translation loss 31 320 Provision for future warranty claim - 12 Provision for unutilised leave 2 -

Operating profi t / (loss) before working capital changes 232 (4,741)(Increase) / decrease in: Inventories (803) 1,420 Trade debtors (4,206) 3,511 Other debtors, deposits and prepayments (151) (3,488)Increase / (decrease) in: Trade creditors 411 (1,480) Bills payable to banks - (3,952) Other creditors and accruals 311 7,114 Due to ultimate holding company 936 -

Cash used in operations (3,270) (1,616)


Consolidated cash fl ow statement for the fi nancial year ended 30 June 2006

37Abterra Ltd.

Note 2006 2005$’000 $’000

Interest income received 62 7Interest expense paid (415) (881)Income tax refunded 7 9

Net cash used in operating activities (3,616) (2,481)

Cash fl ows from investing activitiesPurchase of property, plant and equipment 6 (106) -Proceeds from the sale of property, plant and equipment 3 16Acquisition of subsidiary company* (10) -Cash infl ow from liquidation of subsidiary companies 32 2,122 3,859

Net cash from investing activities 2,009 3,875

Cash fl ows from fi nancing activitiesNet repayment of bank loans (53) (557)Net repayment of fi nance lease commitments (62) (175)Repayment of loan from an associated company - (130)Proceeds from issue of new shares - 6,000Fixed deposits discharged from / (pledged to) banks 5,000 (5,000)

Net cash from fi nancing activities 4,885 138

Net increase in cash and cash equivalents 3,278 1,532Cash and cash equivalents at beginning of year (1,540) (3,072)

Cash and cash equivalents at end of year 1,738 (1,540)

Cash and cash equivalents comprise:Cash and bank balances 14 1,997 1,214Bank overdrafts (secured) 16 (259) (2,754)

1,738 (1,540)

*Acquisition of subsidiary companyDuring the fi nancial year, the fair value of net assets of subsidiaries acquired were as follows:

2006 2005$’000 $’000

Group’s share of fair value of net assets acquired - -Goodwill 10 -

10 -Add: Cash and cash equivalents acquired - -

Cash outfl ow on acquisition net of cash acquired 10 -


Consolidated cash fl ow statement for the fi nancial year ended 30 June 2006 (cont’d)

38 Abterra Ltd.

1. GENERAL

The fi nancial statements of Abterra Ltd. and the consolidated fi nancial statements of Abterra Ltd. and subsidiary companies for the year ended 30 June 2006 were authorised for issue in accordance with a resolution of the directors on 5 October 2006.

Abterra Ltd. is a limited liability Company and is incorporated in Singapore.

The registered offi ce and principal place of business of Abterra Ltd. is located at 8 Shenton Way, #31-02 Temasek Tower, Singapore 068811.

The Company’s holding and ultimate holding company is Prosperity Steel (Asia) Company Limited, a company incorporated in Hong Kong.

The principal activities of the Company are trading, those of investment holding and the provision of management services to its subsidiary companies.

The principal activities of the subsidiary companies are as shown in Note 40 to the fi nancial statements.

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of accounting and preparation

The fi nancial statements are prepared in accordance with the provisions of the Singapore Companies Act and Singapore Financial Reporting Standards (“FRS”) including related Interpretations promulgated by the Council on Corporate Disclosure and Governance (“CCDG”).

The fi nancial statements are expressed in Singapore Dollar, which is also its functional currency, and prepared under the historical cost convention, except as disclosed in the accounting policies below.

The preparation of fi nancial statements in conformity with FRS requires management to exercise its judgement in the process of applying the Company’s accounting policies. It also requires the use of accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the fi nancial statements, and the reported amounts of revenues and expenses during the fi nancial year. Although these estimates are based on management’s best knowledge of current events and actions, actual results may ultimately differ from those estimates.

As described in Note 32, the “spa pools and bathroom products” segment have been classifi ed as discontinuing operations for the fi nancial year ended 30 June 2006. The carrying values of the remaining assets and liabilities as at 30 June 2006 are presented in the consolidated fi nancial statements at their fair values.

The accounting policies have been constantly applied and are consistent with those used in the previous fi nancial year.

In the current year, the Group has adopted all of the new and revised FRSs issued by CCDG that are relevant to its operations and effective for accounting periods beginning on 1 January 2005 are as follows:

FRS 1 (revised 2004) Presentation of Financial StatementsFRS 2 (revised 2004) InventoriesFRS 8 (revised 2004) Accounting Policies, Changes in Accounting Estimates and ErrorsFRS 10 (revised 2004) Events after the Balance Sheet Date


Notes to the Financial Statements - 30 June 2006

39Abterra Ltd.

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

(a) Basis of accounting and preparation (cont’d)

FRS 16 (revised 2004) Property, Plant and EquipmentFRS 17 (revised 2004) LeasesFRS 21 (revised 2004) The Effects of Changes in Foreign Exchange RatesFRS 24 (revised 2004) Related Party Disclosures FRS 27 (revised 2004) Consolidated and Separate Financial StatementsFRS 28 (revised 2004) Investments in AssociatesFRS 32 (revised 2004) Financial Instruments: Disclosure and PresentationFRS 33 (revised 2004) Earnings per ShareFRS 36 (revised 2004) Impairment of AssetsFRS 38 (revised 2004) Intangible AssetsFRS 39 (revised 2004) Financial Instruments: Recognition and MeasurementFRS 102 Share-based PaymentsFRS 103 Business CombinationsFRS 104 Insurance ContractsFRS 105 Non-current Assets Held for Sale and Discontinued Operations

The adoption for the new and revised FRS did not have any signifi cant fi nancial impact to the Group except for the following:

(Increase) / decrease$’000

Changes to the profi t and loss statement:Reversal for impairment of property, plant and equipment (29)Impairment loss in value of unquoted investments 13

Net effect (16)

New FRSs issued by CCDG which is applicable to accounting periods beginning 1 January 2006 or after are as follows:

FRS 40 Investment Property (w.e.f. 1 January 2007)FRS 106 Exploration for and Evaluation of Mineral Resources (w.e.f. 1 January 2006)FRS 107 Financial Instruments: Disclosure (w.e.f. 1 January 2007)

The management anticipate that the adoption of the above new FRSs will not result in signifi cant impact to the Group’s accounting policies.

(b) Basis of consolidation

The consolidated fi nancial statements include the fi nancial statements of the Company and all its subsidiary companies. The results of subsidiary companies acquired or disposed of during the period are included in or excluded from the Group fi nancial statements with effect from the respective dates of acquisition or disposal. Signifi cant intercompany balances and transactions have been eliminated on consolidation. Unrealised losses resulting from intercompany transactions are also eliminated unless cost cannot be recovered.

The consolidated fi nancial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances.

The World Spa Industries Pte. Ltd. and its subsidiaries were placed under liquidation. The consolidated income statement of the Group includes a loss of $344,000 in respect of those subsidiaries for the period from 1 July 2005 to 31 December 2005 based on unaudited management accounts.


40 Abterra Ltd.


(b) Basis of consolidation (cont’d)

The Company acquired 51% share in Southern Star Trading Pte. Ltd. on 25 May 2006. As the turnaround time to get Southern Star Trading Pte. Ltd. fully operational with a positive contribution is taking longer than originally anticipated, the Company took advantage of an exit route to dispose the holding to the minority shareholder on 18 August 2006. The consolidated income statement of the Group includes a loss of $16,000 in respect of those subsidiaries for the period from 25 May 2006 to 30 June 2006 based on unaudited management accounts.

(c) Subsidiary companies

Investments in subsidiary companies are stated in the fi nancial statements of the Company at cost. Impairment loss is made where there is a decline in value.

A subsidiary is a company in which the Group, directly or indirectly, holds more than half of the issued share capital, or controls more than half of the voting power, or controls the composition of the board of directors.

(d) Currency translation

(1) Functional and presentation currency

Items included in the fi nancial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated fi nancial statements are presented in Singapore Dollar, which is the Company’s functional and presentation currency.

(2) Transactions and balances

Transactions in a currency other than the functional currency (“foreign currency”) are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Currency translation gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profi t and loss statement.

(3) Translation of Group entities’ fi nancial statements

The results and fi nancial position of all the Group entities (none of which has the currency of a hyperinfl ationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(i) Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of the balance sheet;

(ii) Income and expenses for each profi t and loss statement are translated at average exchange rate (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated using the exchange rates at the dates of the transactions); and

(iii) All resulting exchange differences are taken to the foreign currency translation reserve within equity.


41Abterra Ltd.


(e) Property, plant and equipment and depreciation

Property, plant and equipment are stated at cost or valuation less accumulated depreciation and any impairment loss. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to working condition for its intended use. Expenditure for additions, improvements and renewals are capitalised and expenditure for maintenance and repairs are charged to the profi t and loss account. When assets are sold or retired, their cost and accumulated depreciation are removed from the fi nancial statements and any gain or loss resulting from their disposal is included in the profi t and loss account.

Where property, plant and equipment are revalued, any surplus on revaluation is credited to the asset

revaluation reserve. A decrease in net carrying amount arising on revaluation of property, plant and equipment is charged to the profi t and loss account to the extent that it exceeds any surplus held in reserve relating to previous revaluation of the same class of assets.

Depreciation is provided on all property, plant and equipment at the following rates calculated to write off the cost of each asset on a straight-line basis over its estimated useful life: Freehold buildings 30-50 yearsPlant, machinery, furniture and equipment 3-15 yearsMotor vehicles 5-10 yearsLeasehold improvements Leasehold period

Depreciation is not provided on freehold land and assets under construction.

The residual values and useful lives of property, plant and equipment are reviewed, and adjusted as appropriate, at each balance sheet date.

Fully depreciated property, plant and equipment are retained in the fi nancial statements until they are no longer in use and no further charge for depreciation is made in respect of these assets.

(f) Impairment

At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that these assets may be impaired. If any such indication exists, the recoverable amount (i.e. the higher of fair value less cost to sell and value in use) of the asset is estimated to determine the amount of impairment loss.

For the purpose of impairment testing of these assets, recoverable amount is determined on an individual asset basis unless the asset does not generate cash fl ows that are largely independent of those from other assets. If this is the case, recoverable amount is determined for cash generating unit to which the asset belongs.

If the recoverable amount of the asset is estimated to be less than its carrying amount, the carrying amount of an asset is reduced to its recoverable amount. The impairment loss is recognised in the profi t and loss account unless the asset is carried at revalued amount, in which case, such impairment loss is treated as a revaluation decrease.

An impairment loss for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. The carrying amount of the asset other than goodwill is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined net of amortisation or depreciation had no impairment loss been recognised for the asset in prior years.


42 Abterra Ltd.


(f) Impairment (cont’d)

A reversal of impairment loss for an asset other than goodwill is recognised in the profi t and loss account, unless the asset is carried at revalued amount in which case, such reversal is treated as a revaluation increase. However, to the extent that an impairment loss on the same revalued asset was previously recognised in the profi t and loss statement, a reversal of that impairment is also recognised in the profi t and loss statement.

(g) Other investments

Other unquoted investments are stated at cost less impairment losses for any diminution in value.

(h) Inventories

Inventories are valued at the lower of cost and net realisable value. Cost includes materials, all direct expenditure and an attributable proportion of overheads, determined on a fi rst-in, fi rst-out basis.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated cost of completion and the estimated costs necessary to make the sale.

Impairment losses are made for deteriorated, damaged, expired and slow-moving inventories.

(i) Cash and cash equivalents

Cash and cash equivalents are defi ned as cash on hand, demand deposits and short-term, highly liquid investments readily convertible to known amounts of cash and subject to insignifi cant risk of changes in values.

Cash and cash equivalents comprise of cash balances and bank deposits. For the purpose of the statement of cash fl ows, cash and cash equivalents are presented net of bank overdrafts which are repayable on demand and which form integral part of Group’s cash management.

(j) Finance leases

Finance leases, which effectively transfer to the Group substantially all the risk and rewards incidental to ownership of the leased item, are capitalised at amounts equal, at the inception of the lease, to the fair value of the leased item or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the fi nance charges and reduction of the lease liability so as to achieve a constant periodic rate of interest on the remaining balance of the liability for each period. Finance charges are charged directly to the profi t and loss account.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.

(k) Loans and borrowings

All loans and borrowings are initially recognised at cost, being the fair value of the consideration received and includes acquisition charges associated with the loans and borrowings.

Borrowing costs are generally expensed as incurred. Borrowing costs are capitalised if they are directly attributable to the acquisition, construction or production or a qualifying asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are being incurred. Borrowing costs are capitalised until the assets are ready for their intended use. If the resulting carrying amount of the asset exceeds its recoverable amount, an impairment loss is recorded.


43Abterra Ltd.


(l) Revenue recognition

Revenue for the Group comprises the fair value of the consideration received or receivable for the sale of goods and rendering of services, net of taxes, rebates and discounts, and after eliminating sales within the Group. Revenue is recognised as follows:

Revenue from sale of goods is recognised upon passage of title to the customer.

Revenue from the spa business is recognised net of discounts upon the transfer of risks and rewards.

Service income is recognised when services are rendered to customers.

Interest income is recognised on a time-proportion basis using the effective interest method.

Management income is recognised when services are rendered to the subsidiaries.

Allowance is made for any foreseeable losses as soon as they are known.

(m) Income taxes

Income tax expense is determined on the basis of tax effect accounting, using the liability method, and is applied to all temporary differences at the balance sheet date between the carrying amounts of assets and liabilities and the amounts used for tax purposes.

Deferred tax liabilities are recognised for all taxable temporary differences (unless the deferred tax liability arises from goodwill impairment or the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction affects neither accounting profi t nor taxable profi t or loss).

Deferred tax liabilities are recognised for all taxable temporary differences associated with investments in subsidiary companies and associated companies, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profi t will be available against which the deductible temporary differences, carry-forward of unused tax assets and unused tax losses can be utilised (unless the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting profi t nor taxable profi t or loss). For deductible temporary differences associated with investments in subsidiary companies and associated companies, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profi t will be available against which the temporary difference can be utilised.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that suffi cient taxable profi t will be available to allow the benefi t of part or all of the deferred tax asset to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period 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.


44 Abterra Ltd.


(n) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outfl ow of resources embodying economic benefi ts will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

(o) Goodwill

Goodwill in a business combination represents the excess of the cost of acquisition over the fair value of the Group’s share of the identifi able assets acquired and liabilities and contingent liabilities assumed.

Goodwill is stated at cost less impairment losses and it is tested annually for impairment; before 1 July 2005, goodwill was amortised using the straight-line method over a 5 year period that the benefi ts are expected to be received. Goodwill on the acquisition of subsidiaries is presented as intangible assets.

(p) Negative goodwill

Negative goodwill in a business combination represents the excess of the Group’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities over the cost of the acquisition. It is recognised directly to the profi t and loss account.

(q) Employee benefi ts

(i) Pensions and other post-employment benefi ts

The Group participates in the national pension schemes as defi ned by the laws of the countries in which it has operations. In particular, the Singapore and Malaysia companies in the Group make contributions to the Central Provident Fund scheme and the Employee Provident Fund, defi ned contribution pension schemes in Singapore and Malaysia respectively. Contributions to national pension schemes are recognised as an expense in the period in which the related service is performed.

(ii) Employee leave entitlement

Employee entitlement to annual leave is recognised when they accrue to employees. A provision is made for the estimated liability for leave as a result of services rendered by employees up to balance sheet date.

(r) Financial assets

Financial assets include cash and bank balances, trade, intercompany and other receivables and investments. Trade, intercompany and other receivables are stated at their fair value by providing suffi cient allowances for estimated irrecoverable amounts.

(s) Financial liabilities and equity

Financial liabilities include trade, intercompany and other payables, bank loans and overdrafts. Trade, intercompany and other payables are stated at their fair value. Interest-bearing bank loans and overdrafts are initially measured at fair value and are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is taken to the profi t and loss statement over the period of the borrowings using the effective interest method. Distributions to holders of fi nancial instruments classifi ed as equity are charged directly to equity.


45Abterra Ltd.


(t) Segment reporting

A business segment is a Group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different from those of segments operating in other economic environments.

(u) Trade and other debtors

Debtors, which generally are on normal credit terms, are recognised and carried at original invoiced amount less allowance for any uncollectible amounts. An estimate for doubtful debts is made when collection of the full amount is no longer probable.

(v) Trade and other creditors

Liabilities for trade and other creditors, which generally are on normal credit terms, are carried at cost which is the fair value of the consideration to be paid for goods and services received, whether or not billed to the company.

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

(a) Critical judgements in applying the entity’s accounting policies

In the process of applying the entity’s accounting policies, which are described in Note 2, management has made the following judgements that have the most signifi cant effect on the amounts recognised in the fi nancial statements (apart from those involving estimations, which are dealt with below).

Revenue recognition

In making its judgement, management considered the detailed criteria for the recognition of revenue from the sale of goods set out in FRS 18 Revenue and, in particular, whether the Group had transferred to the buyer the signifi cant risks and rewards of ownership of the goods.

(b) Critical accounting estimates and assumptions

The key assumptions concerning the future, and other key sources of estimates and assumptions at the balance sheet date, that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year, are discussed below.

(i) Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. This requires the Group to estimate the future cash fl ow expected from cash generating units and as appropriate discount rate in order to calculate the present value of the future cash fl ow. The carrying amount of goodwill at the balance sheet date is disclosed in Note 9.


46 Abterra Ltd.

3. CritiCalaCCountingestimatesandjudgements(Cont’d)

(b) Criticalaccountingestimatesandassumptions(cont’d)

(ii) impairmentandcollectabilityoftradeandotherreceivables

thegroupfollowstheguidanceofFrs39(revised2004)todeterminewhentradeandotherreceivablesareimpaired.thisdeterminationrequirescertainlevelofjudgement.thegroupfirst assesses whether objective evidence of impairment exists for individually significant debtors and collectively for debtors which are not individually significant. The Group evaluates, among other factors, financial status of the debtor, any changes in the collection status and changes in industryconditions thataffect thedebtors.tradeandotherreceivables thatarecollectively evaluated for impairment are based on historical loss experience for receivables withsimilarcreditriskcharacteristics.

themethodologyandassumptionsusedforestimatingpotentialimpairmentlossarereviewedregularly to reduce any differences between loss estimates and actual loss experience.

4. sHareCaPital

Group and Company2006 2005$’000 $’000

issuedandfullypaid:atbeginningofyear 2,057,834,747 (2005: 308,675,212) ordinary shares 2,058 15,434Capitalreductionduringtheyear - (15,125)issuedduringtheyear Nil (2005: 308,675,212 ordinary shares) for HKI Scheme Share at a premium each HKI Scheme Share at a premium - 309 Nil (2005: 1,440,484,323) ordinary shares at a premium - 1,440Transfer from share premium to share capital (See Note 5) 34,356 -

atendofyear2,057,834,747 (2005: 2,057,834,747) ordinary shares 36,414 2,058

In year 2005, following the change of authorised share capital from $0.05 to $0.001 per ordinary share, the Company cancelled its paid-up share capital by $0.049 each on its 308,675,212 ordinary shares and reduced the nominal par value of its ordinary shares from $0.05 to $0.001 each.

Following the capital reduction exercise, the Company issued 308,675,212 HKI Scheme Shares at $0.0566 each of its creditors as full and full settlement of the debts outstanding of $17.5 million.

The Company also issued 1,440,484,323 ordinary shares to Prosperity Steel (Asia) Company Limited (“PSA HK”) at $0.00417 each for $6 million cash. Following the capital injection by PSA HK, Abterra Ltd. became a 70% subsidiary company of PSA HK.

Pursuant to the Companies (Amendment) Act 2005 effective 30 January 2006, the concept of authorised share capitalandparvaluehasbeenabolished.amountstandingtothecreditofsharepremiumaccounthasbeentransferredtothesharecapitalasatthatdate.


47Abterra Ltd.

5. RESERVES

Group and Company2006 2005

sharepremium $’000 $’000

atbeginningofyear 34,356 12,624Issue of 308,675,212 HKI Scheme Shares - 17,172Issue of 1,440,484,323 new ordinary shares - 4,560transfertoshareCapitalduringtheyear(seenote4) (34,356) -

atendofyear - 34,356

movementsinotherreservesaresetoutinthestatementsofChangesinequity.

6. PROPERTY, PLANT AND EQUIPMENT

Group

FreeholdLand and Building

Plant,Machinery,

Furniture andEquipment

Motorvehicles

Leaseholdimprovements Total

$’000 $’000 $’000 $’000 $’000

Cost/valuation:As at 1 July 2005 939 1,414 797 100 3,250additions - 63 - 43 106revaluationsurplus 196 - - - 196liquidationofsubsidiarycompany - (357) (171) (40) (568)disposals - (27) - - (27)adjustment/(Writtenoff) - (88) - 7 (81)translationdifference (12) (17) (2) (2) (33)

asat30june2006 1,123 988 6244 108 2,843

accumulateddepreciation/impairment:

As at 1 July 2005 68 1,2633 436 94 1,861depreciationchargefortheyear 9 477 555 8 119reversalofimpairmentlosses - - (29) - (29)revaluationsurplus (60) - - - (60)60))liquidationofsubsidiarycompany - (339) (91) (40) (470)disposals - (10)0)) - - (10)adjustment/(Writtenoff) - (88)) - 8 (80)80))translationdifference (17) (15)5)) (1) (2)2)) (35)35))

asat30june2006 - 858 370 68 1,296296

netcarryingvalue:at30june2006atcost - 130 2544 400 424atvaluation 1,123 - - - 1,123

1,123 130 2544 400 1,547


48 Abterra Ltd.

6. PROPERTY, PLANT AND EQUIPMENT (CONT’D)

Group

FreeholdLand and Building

Plant,Machinery,

Furniture andEquipment

Motorvehicles

Leaseholdimprovements Total

$’000 $’000 $’000 $’000 $’000

Cost / valuation:As at 1 July 2004 1,784 7,298 1,421 19,214 29,717Revaluation defi cit (262) - - - (262)Liquidation of subsidiary company (536) (4,735) (621) (19,111) (25,003)Disposals - (1,125) - - (1,125)Translation difference (47) (24) (3) (3) (77)

As at 30 June 2005 939 1,414 797 100 3,250

Accumulated depreciation / Impairment:

As at 1 July 2004 529 3,986 501 12,106 17,122Depreciation charge for the year 11 120 71 11 213Liquidation of subsidiary company (470) (2,622) (368) (12,021) (15,481)Disposals - (375) - - (375)Impairment loss - 175 233 - 408Translation difference (2) (21) (1) (2) (26)

As at 30 June 2005 68 1,263 436 94 1,861

Net carrying value:At 30 June 2005At cost - 151 361 6 518At valuation 871 - - - 871

871 151 361 6 1,389

48 Abterra Ltd.


6. PROPERTY, PLANT AND EQUIPMENT (CONT’D)

Company

Machinery, Furniture and

EquipmentMotor

vehiclesLeasehold

improvements Total$’000 $’000 $’000 $’000

Cost / valuation:As at 1 July 2005 349 555 - 904Additions 63 - 43 106Disposals (27) - - (27)

As at 30 June 2006 385 555 43 983

Accumulated depreciation / impairment:As at 1 July 2005 273 281 - 554Charge for the year 26 41 4 71Disposals (10) - - (10)

As at 30 June 2006 289 322 4 615

Net carrying value:At 30 June 2006At cost 96 233 39 368

Company

Machinery, Furniture and

EquipmentMotor

vehiclesLeasehold

improvements Total$’000 $’000 $’000 $’000

Cost / valuation:As at 1 July 2004 426 555 - 981Additions 5 - - 5Disposals (82) - - (82)

As at 30 June 2005 349 555 - 904

Accumulated depreciation / impairment:As at 1 July 2004 291 40 - 331Charge for the year 47 41 - 88Disposals (65) - - (65)Impairment loss - 200 - 200

As at 30 June 2005 273 281 - 554

Net carrying value:At 30 June 2005At cost 76 274 -

350

49Abterra Ltd.


50 Abterra Ltd.

6. PROPERTY,PLANTANDEQUIPMENT(CONT’D)

a. Asat30June2006,theCompanyhadmotorvehiclesunderfinanceleaseswithanetbookvalueofapproximately $233,000 (2005: $274,000).TheGroup hadmotor vehicleswith net book values ofapproximately$253,000(2005:$361,000)respectively,whichwereacquiredunderfinanceleases.

b. Freehold landandbuildingof theGroupwithanetbookvalueofapproximately$1,123,000(2005:$871,000)havebeenchargedtoabankforbankingfacilitiesgrantedtoasubsidiarycompany.

c. In a subsidiary, a valuation has been performed by Regroup Associates (Johor) Sdn.Bhd., anindependentprofessionalvaluer,amemberoftheInstitutionofSurveyors,Malaysia.Valuationsweremadeonthebasisofcomparablemethods.Thevaluationwas$1,123,000(2005:$917,000).Freeholdlandandbuildingrecordedarevaluationsurplusof$256,000(revaluationdeficit in2005:$261,000)accordingly.

d. Asat30June2006,hadtherevaluedfreeholdlandandbuildingoftheGroupbeencarriedathistoricalcostlessaccumulateddepreciation,thenetbookvaluewouldhavebeen$840,000(2005:$851,000).

e. TheCompanyandtheGrouphavemadeadjustmentstotheirimpairedlossesforthemotorvehiclestoitsestimatedmarketvalueasat30June2006.

7. INVESTMENTINSUBSIDIARIES

Subsidiarycompaniescomprise:Company

2006 2005$’000 $’000

Unquotedequityshares:Costatbeginningofyear 3,671 13,679Additionsduringtheyear 1,030 -Written-offduringtheyear (1,865) (10,008)

Costatendofyear 2,836 3,671Lessallowanceforimpairmentinvalue (2,633) (3,671)

Investmentinsubsidiaries 203 -

Movementinallowanceforimpairmentinvalueofinvestmentinsubsidiarycompaniesisasfollows:

Company2006 2005$’000 $’000

Atbeginningofyear 3,671 10,109Allowancefortheyear 827 3,570Written-offagainstallowanceduringtheyear (1,865) (10,008)

Atendofyear 2,633 3,671

InformationrelatingtosubsidiariesisgiveninNote40.

50 Abterra Ltd.


51Abterra Ltd.

8. OTHERINVESTMENTS

Group Company2006 2005 2006 2005$’000 $’000 $’000 $’000

Unquoted investments:Club memberships 26 29 26 29Less written-off during the year (26) (3) (26) (3)Less allowance for impairment in value - (23) - (23)

Total - 3 - 3

Movement in allowance for impairment in value of unquoted investments is as follows:

At beginning of year 23 14 23 14Impairment loss for the year 3 9 3 9Less written off during the year (26) - (26) -

At end of year - 23 - 23

9. GOODWILLONCONSOLIDATION

Group 2006$’000

At beginning of year -Addition during the year 10

At end of year 10Less allowance for impairment in value (10)

Carrying amount -

Movement in impairment loss is as follows:At beginning of year -Impairment loss for the year 10

At end of year 10

Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to benefit from business combination.

The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.


52 Abterra Ltd.

10. INVENTORIES

Group Company2006 2005 2006 2005$’000 $’000 $’000 $’000

At cost:Trading goods* 772 - 344 -Finished goods 75 - - -Work-in-progress - 1 - -Raw materials 148 156 - -

995 157 344 -At net realisable value:

Trading goods 40 - - -Finished goods 3 432 - -Raw materials 16 - - -

1,0544 589 344 -

Movements in allowance for stock obsolescence during the financial year are as follows:

Group2006 2005$’000 $’000

At beginning of year 980 305Allowance for the year 213 675Write-off against subsidiary companies in liquidation (882) -Write-off against allowance (98) -

At end of year 213 980

* Included in trading goods are goods-in-transit of approximately $728,000 and $344,000 of the Group and Company respectively.

The carrying amounts of the inventories are denominated in the following currencies:

Group Company2006 2005 2006 2005$’000 $’000 $’000 $’000

United States Dollar 728 - 344 -Malaysia Ringgit 326 589 - -

1,054 589 344 -

11. TRADEDEBTORS

Group Company2006 2005 2006 2005$’000 $’000 $’000 $’000

Subsidiary companies - - 1,800 -Outside parties 5,962 1,730 3 -Less allowance for doubtful debts (5,379) (882) (1,765) -

583 848 38 -


53Abterra Ltd.

11. TRADEDEBTORS(CONT’D)

Movements in allowance for doubtful trade debts during the financial year as follows:

Group Company2006 2005 2006 2005$’000 $’000 $’000 $’000

Balance at beginning of year 882 661 - -Arising from disposal / liquidation of subsidiary companies - 20 - -Charge during the year 5,306 862 1,765 -Write-off against allowance (623) (661) - -Write back of allowance (186) - - -

Balance at end of year 5,379 882 1,765 -

The carrying amounts of current trade debtors approximate their fair values and are denominated in the following currencies:

Group Company

2006 2005 2006 2005$’000 $’000 $’000 $’000

Singapore Dollar - 532 35 -United States Dollar 9 - 3 -Malaysia Ringgit 574 316 - -

583 848 38 -

12. OTHER DEBTORS, DEPOSITS AND PREPAYMENTS

Group Company2006 2005 2006 2005$’000 $’000 $’000 $’000

Subsidiary companies* - - 1,109 -Prepayments 6 75 6 40Deposits 74 48 43 -Sundry debtors 20 173 3 147Tax recoverableax recoverable 60 - 7 -Less allowance for doubtful non-trade - - (1,109) -

160 296 59 187 Movements in allowance for doubtful non-trade debts during the financial year as follows:

Group Company2006 2005 2006 2005$’000 $’000 $’000 $’000

Balance at beginning of year - 1,369 - 924Charge during the year - - 1,109 -Write-off against allowance - (1,369) - (924)

Balance at end of year - - 1,109 -

*These balances are non-trade related, unsecured, interest-free and repayable on demand.


54 Abterra Ltd.

12. OTHER DEBTORS, DEPOSITS AND PREPAYMENTS (CONT’D)

The carrying amounts of other debtors, deposits and prepayments approximate their fair values and are denominated in the following currencies:

Group Company2006 2005 2006 2005$’000 $’000 $’000 $’000

Singapore Dollar 45 214 46 187United States Dollar 15 - - -China Yuan Renminbi 14 - 13 -Malaysia Ringgit 86 82 - -

160 296 59 187

13. LOANS TO SUBSIDIARY COMPANIES

Company2006 2005$’000 $’000

Loans to subsidiary companies 76 3,041Less allowance for doubtful non-trade debts (76) (3,041)

- -

Movements in allowance for doubtful non-trade debts during the financial year are as follows::

Company2006 2005$’000 $’000

At beginning of year 3,041 686Allowance for the year 76 2,355Write-off against allowance (2,991) -Reversal of provision no longer required (50) -

76 3,041

The balances are unsecured, bear interest at 16% (2005: 8.25%) per annum and are repayable on demand.


55Abterra Ltd.

14. CASHANDBANKBALANCES

Group Company2006 2005 2006 2005$’000 $’000 $’000 $’000

Cash and bank balances 1,647 1,214 1,520 648Fixed deposits 350 - - -

1,997 1,214 1,520 648

Fixed deposits of the Group amounting to $350,000 (2005: Nil) are placed on call deposits at interest rates ranging from 4.25% to 4.445% (2005: Nil).

The carrying amounts of cash and bank balances approximate their fair values and are denominated in the following currencies:

Group Company2006 2005 2006 2005$’000 $’000 $’000 $’000

Singapore Dollar 244 1,015 241 648United States Dollar 1,698 - 1,272 -Malaysia Ringgit 40 199 - -China Yuan Renminbi 7 - 7 -Macao Pataca 8 - - -

1,997 1,214 1,520 648

15. FIXED DEPOSITS

Fixed deposits of the Group and the Company amounting to Nil (2005: $5,000,000) and Nil (2005: $5,000,000) respectively have been pledged to banks for banking facilities granted to the Company and certain subsidiary companies.

Pledge of fixed deposits of the Company of $5,000,000 as at 30 June 2005 has been discharged during the year.

The carrying amounts of fixed deposits approximate their fair values and are denominated in the following currencies:

Group Company

2006 2005 2006 2005$’000 $’000 $’000 $’000

Singapore Dollar - 5,000 - 5,000


56 Abterra Ltd.

16. BANKOVERDRAFTS(SECURED)

Bank overdrafts of the Group are secured by a legal mortgage over a freehold land and building of the Group with a net book value of approximately $1,123,000 (2005: $871,000) [Note 6]; and

Bank overdrafts bear interest ranging from 1.15% to 1.3 % (2005: 0.75% to 2.5%) per annum above the bank’s prime rates.

The carrying amounts of bank overdrafts approximate their fair values and are denominated in the following currencies:

Group Company2006 2005 2006 2005$’000 $’000 $’000 $’000

Singapore Dollar - 2,488 - -Malaysia Ringgit 259 266 - -

259 2,754 - -

17. BILLS PAYABLE TO BANKS (SECURED)

In year 2005, bills payable to banks were secured by a legal mortgage over a freehold land and building of the Group with a net book value of approximately $871,000 (Note 6).

Bills payable to banks bear interest ranging from Nil (2005: 0.5% to 2%) per annum above the bank’s prime rates.

18. TRADECREDITORS

Group Company2006 2005 2006 2005$’000 $’000 $’000 $’000

Outside parties 1,454 97 385 -

The carrying amounts of current trade creditors approximate their fair values and are denominated in the following currencies:

Group Company2006 2005 2006 2005$’000 $’000 $’000 $’000

Singapore Dollar 47 75 2 -United States Dollar 1,384 - 383 -Malaysia Ringgit 23 22 - -

1,454 97 385 -


57Abterra Ltd.

19. OTHERCREDITORSANDACCRUALS

Group Company2006 2005 2006 2005$’000 $’000 $’000 $’000

Minority shareholders of a subsidiary company* - 20 - -Directors of a subsidiary company* - 460 - -Accrued operating expenses 491 450 395 97Sundry creditors 39 440 35 387

530 1,370 430 484

* These balances are unsecured, interest free and repayable on demand.nd.

The carrying amounts of other creditors and accruals approximate their fair values and are denominated in the following currencies:

Group Company

2006 2005 2006 2005$’000 $’000 $’000 $’000

Singapore Dollar 398 1,317 386 484United States Dollar 50 - 40 -Malaysia Ringgit 78 53 - -China Yuan Renminbi 4 - 4 -

530 1,370 430 484

20. OBLIGATIONSUNDERFINANCELEASES

Group2006 2005

Minimum payment

Present value of payment

Minimum payment


$’000 $’000 $’000 $’000

Within one year 409 323 100 84After one year but not more than five years - - 431 345

Total future minimum lease payments 409 323 531 429Less: Amounts representing finance charges (86) - (102) -Present value of net minimum lease payments 323 323 429 429


58 Abterra Ltd.

20. OBLIGATIONSUNDERFINANCELEASES(CONT’D)

Company2006 2005

Minimum payment


Minimum payment


$’000 $’000 $’000 $’000

Within one year 404 318 58 46After one year but not more than five years - - 404 318

Total future minimum lease payments 404 318 462 364Less: Amounts representing finance charges (86) - (98) -Present value of net minimum lease payments 318 318 364 364

Finance lease agreement term ranges from 1-5 years with options to purchase at the end of the finance lease agreement term. Finance lease agreement terms do not contain restrictions concerning dividends, additional debt or further financing. As at 30 June 2006, the effective interest rates are 4.74% (2005: 4.74%) and 5.05% (2005: 5.05%) per annum for the Group and the Company respectively.

21. BANKLOANS(SECURED)

The bank loans of the Group are secured by an open assignment over freehold land and buildings of the Group amounting to approximately $1.1 million (2005: $0.9 million) [Note 6].

Bank loans with an initial principal sum of $532,000 (2005: $532,000) relating to the subsidiary companies is repayable in equal monthly instalments of $4,000 commencing 1 July 2002 over 10 years. Interest is payable at the bank’s prime rate plus 1.15% per annum. The interest rate is 7.4% (2005: 7.25%).

The carrying amounts of bank loans approximate their fair values and subsequently at amortised cost. Included in the amounts are a total of $406,000 (2005: $472,000) denominated in Malaysia Ringgit.

Group Company2006 2005 2006 2005$’000 $’000 $’000 $’000

Payable: Within next one year 57 55 - - After one year but not later than five years 349 417 - -

406 472 - -

22. DEFERREDTAX

Deferred tax liabilities arise as a result of:Group Company

2006 2005 2006 2005$’000 $’000 $’000 $’000

Excess of net book value over tax written down value of property, plant and equipment 1 2 - -Revaluation of freehold land and building 55 - - -

56 2 - -


59Abterra Ltd.

22. DEFERREDTAX(CONT’D)

Movement in provision for deferred tax:

Group Company2006 2005 2006 2005$’000 $’000 $’000 $’000

Balance at beginning of year 2 13 - -Exchange rate adjustment (1) - - -Other adjustments - 56 - -Charge during the year - (23) - -Over provision in respect of prior years - (44) - -Recognised in equity 55 - - -

Balance at end of year 56 2 - -

23. TURNOVER

Group2006 2005

S$’000 S$’000

Trading - Iron Ore 12,413 -Trading - Cotton 20,592 -Spa pools and bathroom products 820 13,710Others - trading and services - 834Construction - 48

33,825 14,592

24. OTHER OPERATING INCOME

Group2006 2005$’000 $’000

Administrative income - 20Disposal of subsidiary 41 -Other service income 170 18Sale of scrap metal - 189Miscellaneous income 187 12

398 239

25. STAFFCOSTS

Group2006 2005$’000 $’000

Wages, salaries and bonuses 1,169 1,291Central and Employee Provident Fund contributions 69 76Other personnel expenses 83 42

1,321 1,409


60 Abterra Ltd.

25. STAFFCOSTS(CONT’D)

Key management’s remuneration included fees, salary, bonus, commission and other emoluments (including benefits-in-kind) computed based on the cost incurred by the Group and where the Group did not incur any costs, the value of the benefit is included. The directors’ fee and key management’s remuneration are as follows:

Group2006 2005$’000 $’000

Directors’ fee: of the Company 53 27

Directors’ remuneration: of the Company 161 287 of the Subsidiaries 25 383Others 261 111

500 808

26. OPERATING LOSS

Operating loss is arrived at after charging / (crediting) the following:

Group2006 2005$’000 $’000

Non-audit fees payable to auditors of the Company - 14Allowance for doubtful trade debts 5,306 862Bad trade debts written-off 21 10Allowance for stock obsolescence 213 675Amortisation and write-off of goodwill on consolidation (net) - 381(Reversal) / allowance for impairment of property, plant and equipment (29) 408Impairment loss in value and write-off of unquoted investments 13 9Foreign exchange loss / (gain) 143 (92)Depreciation of property, plant and equipment 119 213Loss on disposal of property, plant and equipment 14 734

27. FINANCIALINCOME

Group2006 2005$’000 $’000

Interest income: time deposit 23 7 others 39 -

62 7


61Abterra Ltd.

28. FINANCIAL EXPENSES

Group2006 2005$’000 $’000

Interest expense: bills payable 147 177 finance lease 41 19 bank loans 32 257 bank overdrafts 20 183 minority shareholders - 133Bank charges 175 65Discounts allowed - 47

415 881

29. EXCEPTIONAL ITEMS

Group2006 2005$’000 $’000

Gain on liquidation of subsidiary companies 3,575 12,908Realisation of corporate guarantee for HDB contracts owed previously by HKR - (3,863)

3,575 9,045

30. TAX CREDIT / (EXPENSE)

Group2006 2005$’000 $’000

Current tax expense: current year (12) (50) over / (under) provision in respect of prior years 21 (33)

Deferred tax: current year - 23 over provision in respect of prior years - 44

9 (16)

The Group’s current year tax charge arises mainly from profitable companies within the Group. The losses of the other companies within the Group are not available for offset against the profits of these companies on a consolidated basis.

As at 30 June 2006, the Group had unabsorbed tax losses and unutilised wear and tear allowances of approximately $3,236,000 and $152,000 (2005: $1,742,000 and $5,000) respectively, which are available for offset against future taxable income, subject to compliance with certain provisions of the tax legislation of the respective countries in which the subsidiary companies operate and agreement of the relevant tax authorities. The potential deferred tax asset arising from the unabsorbed tax losses and unutilised wear and tear allowances has been recognised in the financial statements to the extent deemed recoverable.


62 Abterra Ltd.

30. TAXCREDIT/(EXPENSE)(CONT’D)

The reconciliation of the tax expense and the product of accounting loss multiplied by the application tax rate is as follows:

Group2006 2005$’000 $’000

Accounting loss (2,379) (562)

Tax at the applicable rate of 20% (2005: 20%) (473) (112)Income not subject to tax (725) -Expenses not deductible for tax purposes 173 -Effect of differences tax rates in other countries 976 (35)(Over) / under provision in respect of prior year (21) 30Overprovision of deferred tax liability - (7)Deferred tax asset not recognised 61 235Recognition of deferred tax asset previously not recognised - (93)Others - (2)

Tax (credit) / charge (9) 16

31. LOSSPERORDINARYSHARE

Loss per ordinary share is calculated by dividing the Group’s net loss attributable to shareholders of the Company by the weighted average number of 2,057,834,747 (2005: 404,801,465) ordinary shares in issue during the financial year.

As there were no share options and warrants granted during the year, the basic and fully diluted loss per ordinary share are the same.

32. DISCONTINUED / DISCONTINUING OPERATIONSThe World Spa Industries (M) Sdn. Bhd. Group remains classified as a discontinuing operation, reflecting the management’s intention to exit this business at the appropriate time in the best interests of the shareholders.

In view of the Group’s new business focus into general trading in commodities and mineral business, the Board of Directors of the Company has decided that the Group’s spa pools and bath room products business will be discontinued in the near future.


63Abterra Ltd.

32. DISCONTINUED/DISCONTINUINGOPERATIONS(CONT’D)

Financialinformation

ThecarryingamountofthetotalassetsandliabilitiesoftheGroup’sdiscontinuingoperationsasat30June2006 are as disclosed below. Comparative information comprises both the discontinued and discontinuingoperationsinaccordancewithFRS105,DiscontinuingOperations.

As at 30 June 2006

As at30 June 2005

$’000 $’000

Non-currentassets 1,179 1,038Currentassets 755 2,112Currentliabilities (460) (4,467)Non-currentliabilities (405) (445)

1,069 (1,762)

The revenues, expenses and results of the Group’s discontinued / discontinuing spa pools and bath roomproductsbusiness, togetherwith theGroup’s constructionandother tradingandservicesbusiness, areasfollows:

From 1 July 2005

to 30 June 2006

From 1 July 2004

to 30 June 2005$’000 $’000

Revenue 820 14,592Costofsales (916) (12,587)

Gross (loss) / profit (96) 2,005Otherincome 226 230Sellinganddistributionexpenses - (493)Administrativeexpenses (738) (8,447)Otheroperatingexpenses - (103)

Lossfromoperations (608) (6,808)Financialexpenses(net) (17) (708)

Lossbeforetax (625) (7,516)Exceptionalgain 3,575 9,045Taxcredit/(expense) 9 (30)Minorityinterests 105 24

Net profit attributable to shareholders 3,064 1,523

The net cash flows attributable to the Group’s discontinued / discontinuing spa pools and bath room products business,togetherwiththeGroup’sconstructionandothertradingandservicesbusinessareasfollows:

Cash inflow from operating activities (360) (706)Cash inflow from investing activities - (2,119)Cash inflow from financing activities - 5,296

Net cash (outflow) / inflow (360) 2,471


64 Abterra Ltd.

32. DISCONTINUED / DISCONTINUING OPERATIONS (CONT’D)

The gain on liquidation of subsidiary companies and the net cash inflow from liquidation of subsidiary companies are as follows:

From 1 July 2005

to 30 June 2006

From 1 July 2004

to 30 June 2005$’000 $’000

Proceeds from liquidation of subsidiary companies - -Net liabilities disposed of (3,575) (12,908)

Gain on liquidation of subsidiary companies 3,575 12,908Tax expense - -

Gain on liquidation of subsidiary companies, net of tax 3,575 12,908

The liquidation of subsidiary companies, net of cash is represented by:

Bank overdraft 2,488 4,096Cash and cash balances (366) (237)

Net cash inflow from liquidation of subsidiary companies 2,122 3,859

33. COMMITMENTS AND CONTINGENCIES

(a) Non-cancellable operating lease commitments

The Group and the Company have operating lease agreements for office and factory premises. Lease terms do not contain restrictions on the Group’s activities concerning dividends, additional debt or further leasing.

Group Company2006 2005 2006 2005$’000 $’000 $’000 $’000

Future minimum lease payments: not later than 1 year 185 - 165 - 1 year to 5 years 177 - 174 -

362 - 339 -

(b) Contingent liabilities, unsecured

As at 30 June 2006, the Company and the Group had the following unsecured contingent liabilities:

(i) Corporate guarantees of approximately $0.7 million (2005: $3.82 million) issued in favour of banks for the granting of banking facilities to its subsidiary companies;

(ii) During the financial year ended 30 June 2005, Powen Electrical Engineering Pte Ltd (“Powen”), an unsecured creditor of Hua Kok Realty (Private) Limited (“HKR”), had on 27 September 2004 entered judgment for the sum of $574,000 against HKR and had filed an application for leave to file a claim against the Company. It was held that no leave was required for Powen to file a claim against the Company for HKR’s debts.


65Abterra Ltd.

33. COMMITMENTS AND CONTINGENCIES (CONT’D)

To date, Powen has not filed a claim against the Company. The Company believes it has reasonable grounds to resist the claim by Powen. This information was substantially disclosed in the annual report of the Company for the year ended 30 June 2005. There has been no further development in this matter.

34. RELATED PARTY TRANSACTIONS

Related companies in these financial statements refer to members of the ultimate holding company’s Group of companies.

Many of the Group’s and Company’s transactions and arrangements are with related parties and the effect of these transactions on the basis determined between the parties are reflected in the financial statements. The balances with these parties are unsecured, repayable on demand and interest-free unless stated otherwise.

(a) Related party disclosure

The following are transactions with related parties during the year:

Group Company2006 2005 2006 2005$’000 $’000 $’000 $’000

Management fee income from subsidiary companies - - 1,800 834Interest income from subsidiary companies - - 1 161Settlement of liabilities by subsidiaries - - 2,316 - Settlement of liabilities on behalf of subsidiaries - - 4,497 -Receipts by subsidiaries on behalf of holding company - - 1,606 -Receipts by holding company on behalf of subsidiaries - - 32 -Receipts by ultimate holding company on behalf of subsidiary 1,345 - - -Settlement of liabilities by holding company 3,002 - 292 -Rental expense to a subsidiary company - - - 62Loan to subsidiaries - - 188 -Loan from subsidiaries - - 73 -Loan to ultimate holding company (see note 34 (b)) 760 - - -


66 Abterra Ltd.

34. RELATED PARTY TRANSACTIONS (CONT’D)

(b) Interested Person Transactions

The aggregate value of Interested Person Transactions entered into during the financial year under review is as follows:-

Name of interested person Aggregate value of all interested person transactions during the year under review (excluding transactions less than $100,000 and transactions conducted under shareholders’ mandate pursuant to Rule 920 of the Listing Manual)

Aggregate value of all interested person transactions conducted under shareholders’ mandate pursuant to Rule 920 of the Listing Manual (excluding transactions less than $100,000)

Prosperity Steel (Asia) Company Limited $760,000 Nil

35. SUBSEQUENT EVENTS

(i) Disposal of 51% equity interest in Southern Star Trading Pte. Ltd. (“Southern Star”)Disposal of 51% equity interest in Southern Star Trading Pte. Ltd. (“Southern Star”)

The Company had entered into a sale and purchase agreement on 18 August 2006 (“SPA”) to dispose an aggregate 510 ordinary shares in the capital of Southern Star (“Disposal”) to Mr. Kong Siong Kwong (500 shares) and Ms. Kong Sze Hwa (10 shares) [together, the “Buyers”, each, a “Buyer”]. Completion of the Disposal was intended to take place on 31 August 2006 (“Completion”), upon which the Company would have a Nil equity interest in Southern Star. In conjunction with the SPA, the Company had contemporaneously entered into a shareholders’ agreement with the Buyers and Southern Star.

The consideration of $1.00 payable to each Buyer for the disposal of all the Sale Shares by the Company was arrived at on a “willing buyer willing seller” basis. Under the terms of the SPA, the loan of $115,000 extended to Southern Star shall be repaid by Southern Star on or before 31 August 2006 together with interest.

Based on Southern Star’s latest management accounts for the financial year ended 30 June 2006, it has a negative net tangible asset value of approximately $33,000.

On 31 August 2006 with the Buyers’ agreement, the completion of the divestment of Southern Star as enumerated in the SPA was postponed to 31 October 2006.

(ii) Change of Holding Company

The holding company, Prosperity Steel (Asia) Company Limited (“PSA HK”) has on 1 September 2006 entered into a sales and purchases agreement with General Nice Resources (Hong Kong) Limited (“General Nice”) to sell 1,337,592,585 ordinary shares in the capital of Abterra Ltd. (“Abterra”) to General Nice representing approximately 65% of issued shares of Abterra for a total consideration of $4.9 million. Pursuant to the Sales & Purchases Agreement, PSA HK has agreed to release and discharge Abterra from outstanding debts of US$590,000 ($936,000) owed by Abterra to PSA HK.


67Abterra Ltd.

36. FINANCIAL INSTRUMENTS

Financial risk management objectives and policies

The main risks arising from the Group’s financial instruments are interest rate risk, foreign currency risk and credit risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below.

Interest rate risk

The Group obtains additional financing through issuance of shares, bank borrowings and leasing arrangements. With respect to bank borrowings and leasing arrangements, the Group’s policy is to obtain the most favourable interest rates available without increasing its foreign exchange exposure.

Surplus funds are placed with banks or lent out to related parties. The Group does not use derivative financial instruments to hedge its interest rate exposure.

Additional information relating to the Group’s interest rate exposure is also disclosed in the notes on the Group’s borrowings and leasing arrangements.

Liquidity risk

In the management of liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate to meet its cash flow obligations. PSA HK has also agreed to provide continuing financial support to the Group for the next twelve months.

Short-term funding is obtained from overdraft facilities and bank loans.

Foreign exchange risk

The Group’s sales and purchases are predominantly denominated in Singapore Dollar and the foreign currencies of the countries in which the Group operates. The Group, however, does not hedge against the foreign currency exposure as the cash flows from purchases partially offset the cash flows from sales transactions and the remaining exposure is not considered by the directors to be significant. The Group also has foreign exchange exposure arising from its investments in foreign subsidiary companies and associated companies.

Credit risk

The carrying amount of bank balances, fixed deposits, trade and other debtors represent the Group’s maximum exposure to credit risk in relation to financial assets. No other financial assets carry a significant exposure to credit risk.

Credit risk in relation to bank balances and fixed deposits is mitigated by placing these with reputable banks.

As a result of its operating activities, the Group has a concentration of credit risk with respect to customers in the commodity trading business. To minimise this credit concentration risk, the Group has policies in place to ensure that sales are only made to customers with appropriate credit history as well as limiting the amount of credit given to any single customer or requesting the issuance of Letters of Credit.

Fair values

Fair value is the amount for which an asset could be exchanged or a liability settled, between knowledgeable willing parties in an arm’s length transaction. The following methods and assumptions are used to estimate the fair value of each class of financial instrument.


68 Abterra Ltd.

36. FINANCIAL INSTRUMENTS (CONT’D)

Current financial assets and liabilities:The carrying amounts of cash and bank balances, trade debtors and other current receivables, trade creditors, other current payables and short-term bank loans approximate their fair values given the relatively short-term maturity of these financial instruments.

Bank loans, non-current portion:The carrying amounts of bank loans approximate their fair value because they bear variable market interest rates.

Where it is practicable to estimate with sufficient reliability, the carrying amounts and estimated fair values of non-current financial assets and liabilities are as follows:

2006 2005

GroupCarrying amount Fair value

Carrying amount Fair value

$’000 $’000 $’000 $’000

Finance lease liabilities, non-current portion -

- 345 353

Company

Finance lease liabilities, non-current portion

-

- 318 326

Finance lease liabilities, non-current portion:The fair value of the non-current portion of finance lease liabilities is arrived at by discounting future contractual cash flows using the current rates available for finance lease contracts with the same maturity profile.

Fixed deposit (pledged):It is not practicable to determine, with sufficient reliability without incurring excessive costs, the fair value of fixed deposit as the fixed deposit is pledged to a bank to secure banking facilities granted to a subsidiary company and is not available for withdrawal by the Company.

37. SEGMENT INFORMATION

The Group was organised into three main operating divisions, namely:

iron ore tradingcotton trading spa pools and bathroom products


69Abterra Ltd.

37. SEGMENT INFORMATION (CONT’D)

Segment accounting policies are the same as the policies of the Group as described in Note 2.

Group Continuing operations Discontinued / discontinuing operations

2006Trading

- Iron OreTrading - Cotton

Spa pools and bathroom products

Others -trading and

services Construction Total$’000 $’000 $’000 $’000 $’000 $’000

Turnover 12,413 20,592 820 - - 33,825

Operating loss (4,163) (830) (574) (34) - (5,601)Financial expenses (net) (353)Exceptional items 3,575Taxation 9Minority interests 105

Loss attributable to shareholders (2,265)

Total assets - 3,407 1,934 - - 5,341

Total liabilities 1,065 2,018 865 16 - 3,964

Depreciation and amortization - 71 48 - - 119

Impairment losses (reversals) - - (29) 10 - (19)

Group Continuing operations Discontinued/discontinuing operations

2005Trading

- Iron OreTrading - Cotton

Spa pools and bathroom products

Others -trading and

services Construction Total$’000 $’000 $’000 $’000 $’000 $’000

Turnover - - 13,710 834 48 14,592

Operating loss - - (3,378) (5,030) (325) (8,733)Financial expenses (net) (874)Exceptional items (net) 9,045Taxation (16)Minority interests 277

Loss attributable to shareholders (301)

Total assets - - 3,150 6,189 - 9,339

Total liabilities - - 4,912 849 - 5,761

Depreciation and amortisation - - 129 84 - 213

Impairment losses - - 408 - - 408


70 Abterra Ltd.

37. SEGMENT INFORMATION (CONT’D)

Geographical segments

The Group’s business segments are managed on a worldwide basis through the main geographical areas mention below. Turnover, assets and capital expenditure are based on the location of the business operations.

Turnover Assets Capital ExpenditureGroup 2006 2005 2006 2005 2006 2005

$’000 $’000 $’000 $’000 $’000 $’000

Singapore 4,253 2,016 2,916 6,287 94 -Malaysia 652 1,286 1,934 3,052 - -Macao 28,920 - 460 - - -China - - 31 - 12 -Australia - 8,655 - - - -Middle East - 2,359 - - - -Others - 276 - - - -

Total 33,825 14,592 5,341 9,339 106 -

38. DIRECTORS’ REMUNERATION

The number of directors of the Company in remuneration bands is as follows:

2006 2005

Executive directors

Non-executive directors Total

Executive directors

Non-executive directors Total

$250,000 to $499,999 - - - 1 - 1

Below $250,000 1 3 4 2 2 4

1 3 4 3 2 5

39. RECLASSIFICATION AND COMPARATIVE FIGURESCOMPARATIVE FIGURESFIGURES

Certain reclassifications have been made to the prior year’s financial statements to enhance comparability with the current year’s financial statements for the fixed deposit of $5 million in the consolidated cash flow statement since the long-term deposit pledged to banks for banking facilities granted is not reality convertible to known amounts of cash and as a result it should not have been classified as cash equivalents.

The financial statements for last year were reported on by auditor other than LTC & Associates whose report dated 28 September 2005 expressed a qualified opinion on those financial statements as follows:

“We did not express an opinion on the financial statements for the year ended 30 June 2004 in our auditors’ report dated 17 September 2004 due to uncertainty of the ability of the Company and the Group to continue as going concerns, the completeness of recorded liabilities of the Group and the appropriateness of the carrying value of the investment in World Spa Industries Pte. Ltd. at the Company level.

As disclosed in Note 5 to the financial statements, in January 2005, the Spa World Australia Pty. Ltd. (SPA) and Giga Holdings Pty. Ltd. group (GIGA Group) were placed under liquidation. The consolidated income statement of the Group for the year ended 30 June 2005 includes a profit of $316,000 in respect of these subsidiaries for the period from 1 July 2004 to 31 December 2004 based on unaudited management accounts together with a loss on deconsolidation of these subsidiaries of $2.7 million.


71Abterra Ltd.

39. RECLASSIFICATION AND COMPARATIVE FIGURES (CONT’D)COMPARATIVE FIGURES (CONT’D)FIGURES (CONT’D)

Also as disclosed in Note 5 to the financial statements, Hua Kok Realty (Pte) Ltd Group (HKR Group) is in the process of liquidation and accordingly, had been deconsolidated effective from December 2004. The consolidated income statement of the Group for the year ended 30 June 2005 includes a loss of $404,000 in respect of HKR Group for the period from 1st July 2004 to 30 November 2004 based on unaudited management accounts together with a gain on deconsolidation of $14.7 million.

We were unable to audit the financial statements of SPA, GIGA Group and HKR Group before these were placed into liquidation due to limitations placed on the scope of our work.

Because of the significance of the matters discussed in the preceding paragraphs, we are unable to, and accordingly do not express an opinion as to whether the consolidated financial statements of the Group and the balance sheet of the Company are properly drawn up in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the Act) and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 30 June 2005 and the results, changes in equity and cash flows of the Group for the financial year ended on that date.”

The auditors for the last financial year also issued the following emphasis of matters:

“Without further qualifying our opinion, we draw attention to Note 1 of the financial statements. The Group had been incurring operating losses for the past few years. The net operating losses from continuing operations of the Group attributable to the shareholders of the Company for the year ended 30 June 2005 amounted to $1.8 million.

During the year, the Group secured a new investor, Prosperity Steel (Asia) Co, Ltd (“Prosperity” or the “ultimate holding company”), a limited company incorporated in Hong Kong to inject $6 million cash into the Company. Following the capital injection by Prosperity, the Company became a 70% subsidiary company of Prosperity. Prior to the capital injection by Prosperity, the Group had undergone a capital reduction exercise and a Scheme of Arrangement. Resulting from the above initiatives, the Group now has a net current assets position of $2.9 million and a net capital surplus of $3.6 million as at 30 June 2005 (2004: net current liability position of $28.8 million and net capital deficit of $19.3 million), and at that date, the Company has a net current asset position of $5.3 million and a net capital surplus of $6.2 million (2004: net current liability position of $12.1 million and net capital deficit of $7.8 million).

The ability of the Group and the Company to continue as going concerns is dependent on whether the:

(i) Group and the Company are able to secure new profitable businesses and contracts and generate positive cashflows; and

(ii) ultimate holding company continues to provide financial support to the Group and the Company.

If the Company and the Group are unable to continue in operational existence in the foreseeable future, the Company and the Group may be unable to discharge their liabilities in the normal course of business and adjustments may have to be made to reflect the situation that assets may need to be realised other than in the normal course of business and at amounts which could differ significantly from the amounts at which they are currently recorded in the balance sheet. In addition, the Company and the Group may have to reclassify non-current assets and liabilities as current assets and liabilities respectively. The financial statements of the Company and the consolidated financial statements of the Group do not include any such adjustments.”


72 Abterra Ltd.

40. THEABTERRAGROUPOFCOMPANIES

TheCompanyhadthefollowingsubsidiarycompaniesasat30June2006:

Name of Company Principal activities

Country of incorporation and place of

business

Percentage of effective interest

held by the Group Cost of investment2006 2005 2006 2005

% % $’000 $’000

HeldbytheCompany

ProsperitySteelSingaporePte.Ltd.*

Generaltrading,resourcesmining

Singapore 100 - 1,000 -

PSAMacaoCommercialOffshoreLtd.**

Generaltradingincotton,mineral,steel&relatedproducts

Macau 100 - 20 -

SouthernStarTradingPte.Ltd.* Distributorof“Blackgold”brandofdentifrices

Singapore 51 - 10 -

HuaKiongDevelopmentPte.Ltd.

Intheprocessofbeingstruckoff

Singapore - 100 - 101

WorldSpaIndustriesPte.Ltd. Intheprocessofbeingliquidated

Singapore - 60 - 1,764

WorldSpaIndustries(M)Sdn.Bhd.***

Manufacturingandtradinginspabathsandaccessories

Malaysia 60 60 1,806 1,806

Heldbysubsidiarycompanies

World-TrendIndustriesSdn.Bhd.***

Manufacturingofshowerenclosures

Malaysia 60 60 - -

MonarchSpaMalaysiaSdn.Bhd.***

Tradinginspabaths,spapools,showerenclosuresandaccessories

Malaysia 60 60 - -

MonarchShowerSystemsSdn.Bhd.***

Manufacturingofshowerscreen

Malaysia 48 48 - -

MonarchSpa(S)Pte.Ltd.

Intheprocessofbeingliquidated

Singapore - 60 - -

CascadeBuildingProductsPte.Ltd.


Singapore - 60 - -

ChallengInternational(S)Pte.Ltd.


Singapore - 60 - -

World-TrendInternationalPte.Ltd.


Singapore - 60 - -

2,836 3,671

* 2006:AuditedbyLTC&Associates,Singapore**AuditedbyLeongWunChao,Macao*** Audited by member firms of Ernst & Young, Global


73Abterra Ltd.

Notice of Annual General Meeting

ABTERRA LTD. Co��an�� a��on �o �� C��an�� a��on �o �� C��a��on �o �� C��a��on �o �� C �o �� C �� C

(Inco��o�a��d �n �h� ��ubl�c of S�n�a�o��)

NOTICE IS HEREBY GIVEN �ha� �h� E��h�h Annual G�n��al M��n� of ABTERRA LTD. w�ll b� h�ld a� 8 Sh�n�on Wa�� #��-�2 T��a��k Tow�� S�n�a�o�� 688�� on Monda��, �� Oc�ob�� 2��6 a� ��.�� a.�. �o ��an�ac� �h� follow�n� bu��n�� -

AS ORDINARY BUSINESS

�. To ��c��v�, con��d�� and ado�� h� Aud��d Accoun�� fo� �h� financ�al ��a� �nd�d �� Jun� 2��6 and �h� ��o�� of �h� D��c�o�� and Aud��o�� and �h� S�a��n� b�� D��c�o�� h��on. [��olu��on �]

2 To ��-�l�c� �h� follow�n� D��c�o�� n� by rotation �u��uan� �o A��cl� �� of �h� Co��an��’� A��cl�� of A��oc�a��on.

�) M� Ch�w Ban Chuan V�c�o� Ma�k* [��olu��on 2]

��) M� Ya� T�an Suan [��olu��on �]

*Mr Chew Ban Chuan Victor Mark will, upon re-election as a Director of the Company, remain as a member of the Remuneration, Audit and Nominating Committees.

�. To ��-�l�c� �h� follow�n� D��c�o�� n� �u��uan� �o A��cl� �� of �h� Co��an��’� A��cl�� of A��oc�a��on.

�) M� Mah��ku�a� �/o Shan��lal Pu��ho�a� M�h�a [��olu��on 4]

��) M� G��o� G. V��uz ** [��olu��on 5]

**Mr Gersom G. Vetuz, will, upon re-election as a Director of the Company, remain as a member of the Nominating, Audit and Remuneration Committees.

4. To a��ov� �h� �a��n� of D��c�o��’ F�� of $5�,�� fo� �h� financ�al ��a� �nd�d �� Jun� 2��6. (2��5�� $2�,��) [��olu��on 6]

5. To ��-a��o�n� M�� LTC & A��oc�a�� a� �h� Aud��o�� of �h� Co��an�� and �o au�ho�� h� D��c�o�� o fix �h�� un��a��on. [��olu��on �]

AS SPECIAL BUSINESS

To con��d�� and, �f �hou�h� fi�, �o �a�� h� follow�n� ��olu��on a� an O�d�na�� olu��on�� -

6 Au�ho�� o allo� and ��u� �ha�� u� �o fif�� c�n�u� (5�%) of �h� ��u�d �ha�� ca��al. “Tha� �u��uan� �o S�c��on �6� of �h� Co��an�� Ac�, Ca�. 5� and Clau�� 8�6 of �h� L��n� Manual of �h� S�n�a�o�� Exchan�� S�cu�� T�ad�n� L��d, �h� D��c�o�� b� and a�� h��b�� ow��d �o allo� and ��u� �ha�� and/o� conv��bl� ��cu�� wh�� h� �ax��u� nu�b�� of �ha�� o b� ��u�d u�on conv��on �� d��nabl� a� �h� �� of �h� ��u� of �uch ��cu�� n �h� Co��an�� (wh��h�� b�� wa�� of ��h��, bonu� o� o�h��w��) a� an�� and f�o� �� o �� h��af�� o �uch ��on� and on �uch �� and cond��on� and fo� �uch �u��o�� a� �h� D��c�o�� a�� n �h�� ab�olu�� d��c��on d�� fi� ��ov�d�d alwa�� ha� �h� a��a�� nu�b�� of �ha�� and/o� conv��bl� ��cu�� o b� ��u�d �hall no� �xc��d fif�� c�n�u� (5�%) of �h� ��u�d �ha�� ca��al of �h� Co��an��, of wh�ch �h� a��a�� nu�b�� of �ha�� and/o� conv��bl� ��cu�� o b� ��u�d o�h�� han on a ��o-�a�a ba�� o �x��n� �ha��hold�� hall no� �xc��d �w�n�� c�n�u� (2�%) of �h� ��u�d �ha�� ca��al of �h� Co��an�� (��c�n�a�� of ��u�d �ha�� ca��al b��n� ba��d on �h� ��u�d �ha�� ca��al a� �h�

�4 Abterra Ltd.

�� uch au�ho�� v�n af�� adju��n� fo� n�w �ha�� a��n� f�o� �h� conv��on of conv��bl� ��cu�� o� ��lo�� ha�� o��on� on ��u� a� �h� �� uch au�ho�� v�n and an�� ub��qu�n� con�ol�da��on o� �ubd�v��on of �ha��) and unl�� vok�d o� va��d b�� h� Co��an�� n ��n��al ��n� and �ha� �uch au�ho�� hall con��nu� �n fo�c� un��l �h� conclu��on of �h� n�x� Annual G�n��al M��n� o� �h� �x��a��on of �h� ��od w��h�n wh�ch �h� n�x� Annual G�n��al M��n� of �h� Co��an�� qu��d b�� law �o b� h�ld, wh�ch�v�� a�l��.” [S�� Ex�lana�o�� o�� (�)] [��olu��on 8]

�. To ��an�ac� an�� o�h�� b��n��, wh�ch �a�� o��l�� b� ��an�ac��d a� an Annual G�n��al M��n�.

By Order of The Board

HELEN CAMPOS THOMAS Co��an�� S�c��a��

S�n�a�o�� Oc�ob�� 2��6

Notes:

�. A ��b�� of �h� Co��an�� n��l�d �o a��nd and vo�� a� the Eighth Annual General Meeting (the “Meeting”) of �h� Co��an�� n��l�d �o a��o�n� on� o� �wo ��ox�� o a��nd and vo�� n h�� ad.

2. Wh�� a ��b�� a��o�n�� wo ��ox��, �h� a��o�n��n�� hall b� �nval�d unl�� h� ��c�fi�� h� ��o�o��on of h�� ha��hold�n�� (�x��d a� a ��c�n�a�� of �h� whol�) �o b� ��n��d b�� ach ��ox��.

�. A ��ox�� n��d no� b� a ��b�� of �h� Co��an��.

4. If �h� a��o�n�� a co��o�a��on, �h� �n��u��n� a��o�n��n� �h� ��ox�� u�� b� �x�cu��d und�� al o� �h� hand of �� dul�� au�ho��z�d offic�� o� a��o�n��.

5. Th� �n��u��n� a��o�n��n� a ��ox�� u�� b� d��o��d a� �h� ��d Offic� of �h� Co��an�� a� 8 Sh�n�on Wa�� #��-�2 T��a��k Tow��, S�n�a�o�� 688�� no� l�� han fo��-��h� (48) hou�� b�fo�� h� �� a��o�n��d fo� hold�n� �h� M��n�.

STATEMENT PURSUANT TO ARTICLE 54 OF THE COMPANY’S ARTICLES OF ASSOCIATION

(�) Th� �ff�c� of �h� ��olu��on no. 8 und�� h� h�ad�n� “S��c�al Bu��n��” �n �h�� o��c� of Annual G�n��al M��n� �� o ��ow�� h� D��c�o�� of �h� Co��an��, f�o� �h� da�� of �h� abov� M��n� un��l �h� da�� of �h� n�x� Annual G�n��al M��n�, �o allo� and ��u� n�w �ha�� n �h� �ha�� ca��al of �h� Co��an��. Th� nu�b�� of n�w �ha�� wh�ch �h� D��c�o�� a�� allo� and ��u� und�� h�� olu��on �hall no� �xc��d fif�� c�n�u� (5�%) of �h� ��u�d �ha�� ca��al of �h� Co��an��. Fo� ��u�� of �ha�� o�h�� han on a ��o �a�a ba�� o all �ha��hold��, �h� a��a�� nu�b�� of �ha�� o b� allo��d and ��u�d �hall no� �xc��d �w�n�� c�n�u� (2�%) of �h� ��u�d �ha�� ca��al of �h� Co��an��. Th�� au�ho�� w�ll, unl�� v�ou�l�� vok�d o� va��d a� a ��n��al ��n�, �x�� a� �h� conclu��on of �h� n�x� Annual G�n��al M��n� of �h� Co��an��.

Notice of Annual General Meeting

ABTERRA LTD. Company Registration No : 199903007C (Incorporated in the Republic of Singapore)

IMPORTANT:1. For investors who have used their CPF monies to buy shares in

Abterra Ltd. this report is forwarded to them at the request of their CPF Approved Nominees and is sent solely FOR INFORMATION ONLY.

PROXY FORM(Please see notes overleaf before completing this Form)

2. This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them.

3. CPF investors who wish to vote should contact their CPF Approved Nominees.

*I/Weofbeing *member/members of ABTERRA LTD. (the “Company”), hereby appoint

Name Address NRIC/Passport Number Proportion of Shareholdings (%)

And/or (delete as appropriate)

as my/our proxy to vote for me/us on my/our behalf and, if necessary, to demand a poll, at the Eighth Annual General Meeting of the Company to be held at 8 Shenton Way #31-02 Temasek Tower Singapore 068811 on Monday, 30 October 2006 at 10.30 a.m. and at any adjournment thereof.

(Please indicate with an “X” in the spaces provided whether you wish your vote(s) to be cast for or against the Resolutions as set out in the Notice of Eighth Annual General Meeting. In the absence of specific directions, your proxy/proxies will vote or abstain from voting as he/they may think fit, as he/they will on any other matter arising at the Eighth Annual General Meeting.)

No. Resolutions relating to: For Against

1Adoption of Audited Accounts for the financial year ended 30 June 2006 and the Reports of the Directors and Auditors and the Statement by Directors thereon.

2 Re-election of Mr Chew Ban Chuan Victor Mark retiring pursuant to Article 91 of the Articles of Association of the Company.

3Re-election of Mr Yap Tian Suan retiring pursuant to Article 91 of the Articles of Association of the Company.

4 Re-election of Mr Maheskumar s/o Shantilal Purshotam Mehta retiring pursuant to Article 97 of the Articles of Association of the Company.

5 Re-election of Mr Gersom G. Vetuz retiring pursuant to Article 97 of the Articles of Association of the Company.

6 Approval of Directors’ Fees of S$53,333 for the financial year ended 30 June 2006.

7 Re-appointment of Messrs LTC & Associates as Auditors of the Company and authorisation of Directors to fix their remuneration.

8 Authority to Directors to allot and issue new shares.

Dated this ________ day of _______________ 2006

Total number of Shares in: No. of Shares________________________________ Signature(s) of Member(s) or Common Seal of Corporation

a) CDP Register

b) Register of Members

* Delete accordingly

Notes:

1. Please insert the total number of shares held by you. If you have shares entered against your name in the Depository Register (as defined in Section 130A of the Companies Act, Cap. 50), you should insert that number of shares. If you have shares registered in your name in the Register of members, you should insert that number of shares. If you have shares entered against your name in the Depository Register and shares registered in your name in the Register of Members, you should insert the aggregate number of shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the shares held by you.

2. A member of the Company entitled to attend and vote at the Eighth Annual General Meeting is entitled to appoint one or two proxies to attend and vote in his stead. A proxy need not be a member of the Company.

3. Where a member appoints two proxies, the appointments shall be invalid unless he specifies the proportion of his shareholding (expressed as a percentage of the whole) to be represented by each proxy. However, if no such proportion is specified, the first named proxy may be treated as representing 100 per cent of the shareholding and any second named proxy as an alternate to the first named.

4. The instrument appointing a proxy or proxies must be deposited at the Registered Office of the Company at 8 Shenton Way #31-02 Temasek Tower Singapore 068811 not less than forty-eight (48) hours before the time fixed for holding the Eighth Annual General Meeting.

5. This instrument appointing a proxy or proxies must be under the hand of the appointor or his attorney duly authorized in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of any officer or attorney duly authorized.

6. A corporation which is a member may also authorize by resolution of its directors or other governing body such person as it thinks fit to act as its representative at the Eighth Annual General Meeting in accordance with Section 179 of the Companies Act, Chapter 50 of Singapore.

7. The Company shall be entitled to reject this instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies.

8. In the case of members whose Shares are entered against their names in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if such members are not shown to have Shares entered against their names in the Depository Register as at forty-eight (48) hours before the time fixed for holding the Eighth Annual General Meeting as certified by the CDP to the Company.

Annual Report

20062006p

Abterra Ltd.

Abterra Ltd.8 Shenton Way#31-02 Temasek TowerSingapore 068811Tel : 6885 9800Fax : 6885 9829Email : [email protected] : www.abterra.com.sg

Abterra Ltd. A

nnual Report 2006

annual report 2006 - abterra4 abterra ltd. chairman’s statement chairman’s statement results the...

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