JOURNEY FORWARD UNITED FIBER SYSTEM Ltd. …Unifiber 2007 Annual Report 1 JOURNEY FORWARD Annual Report 2007 UNITED FIBER SYSTEM Ltd. 47 Scotts Road #07-03/04 Goldbell Towers Singapore

1Unifiber 2007 Annual Report

JOURNEY FORWARD

Annual Report 2007

UNITED FIBER SYSTEM Ltd.47 Scotts Road #07-03/04Goldbell TowersSingapore 228233Tel. : +65 6838 7500 Fax. : +65 6284 0074E-mail : [email protected]

www.ufs.com.sg

Annual R

epo

rt 2007

UNITED FIBER SYSTEM LTD.

2 Unifiber 2007 Annual Report

Paper using 100% Post Consumer WastePrinted in SingaporeCopyright©2008. United Fiber System Limited. All Rights Reserved.




ACCOUNTABILITYMessage from Chairman & CEOA Letter to Our EmployeesOur Vision New IdentityCorporate Structure

BELIEVINGAbout UnifiberBusiness Review Planned Pulp Mill

212227

813151617

CONTENTS


COMMUNICATIONSBoard of DirectorsKey Executives

3034

The Green LandHolding a forest concession of 268,585 hectares across South Kalimantan, we are aware of our responsibility to maintain the sustainability of the natural resources throughout our operations.

SUSTAINABILITYEnvironmental ResponsibilityCorporate Governance ReportCorporate Information

FINANCIAL REVIEW

Statistics of ShareholdingsNotice of Annual General MeetingProxy Form

384050

51

128130133


Integrated Wood chips are the feedstock for many pulp mills around the world. Our wood chips production gets us one step closer to achieving our goal to become an integrated forestry to pulp operation.


ACCOUNTABILITY

The cornerstone of Unifiber


It is our policy to preserve natural forest with high biodiversity value and to exclusively use plantation wood in our mills. Believing in the close co-operation with the government and the local community, and recognizing our responsibility to build the local economy is our full action to commit to sustainable development”.

“

The continuous enhancement of shareholders’ value is paramount. Seamless execution of our business plan, measured by the strengthening of our overall performance is how we translate our vision to become a major player in the international pulp market”.

“

Jaka PrasetyaCHIEF EXECUTIVE OFFICER

Sven EdströmCHAIRMAN


MESSAGE FROM CHAIRMAN & CEO



A journey of a thousand miles needs to be taken one step at a time, and we need to keep on stepping.

We are glad to update our shareholders that in 2007, we have successfully completed important steps in our venture and we are now accelerating our pace in achieving our long-term development goals.

2007 was an eventful year for Unifiber! Through the year 2007, we have made significant progress in many areas and have achieved a number of important milestones across our business:

Firstly, 2007 marked the commencement of the full operation of our wood chip mill in Pulau Laut. We are now one of the major wood chip suppliers in the region and we have successfully placed our high-quality wood chip products into strategic markets such as China, Korea, Taiwan and Southeast Asia. The wood chip mill continues to ramp up its production and is expected to make a significant contribution to our revenue and profitability going forward.

Secondly, 2007 also saw the strong momentum in the operation of our forestry operation. Planting activities continued during the year with approximately 6,000 hectares of new plantations being established within the forest concession area. Going forward, some 15,000 hectares are expected to be planted annually. Taking advantage of the region’s shortage of wood supply, our harvesting activities have also picked up. We have entered into our maiden contracts for the sale of our Acacia Mangium logs during the year and the sales will further provide the financial support to the Group.

Thirdly, during the same year, the order book of our property construction business in Singapore hit a record high of S$356 million, thanks to its record procurement of new projects worth S$289 million for the year. With the new prestigious projects such as the Ardmore II, the Solitaire and the Trillium condominiums, we continue to be one of the preferred high quality property construction companies in Singapore.

We proceeded into 2008 with two more important milestones: Firstly, in February 2008, we made a strategic decision with regards to our planned greenfield pulp mill project in Indonesia. We entered into a new turnkey agreement with MCC20 and effectively replaced the previous contract executed with CMEC. The decision was made after a thorough and careful consideration and despite our longstanding relationship with CMEC, the management is of the

view that MCC20 is a more synergistic partner for the project. MCC20 is a subsidiary of one of the largest equipment manufacturers in China, who is also the only central enterprise that is authorized to run pulp and papermaking business in and outside of China. We strongly believe that the move would allow us to advance forward with the project in the manner that is most timely, with the groundbreaking of the project expected to commence this year.

Secondly, in March 2008, our construction business capitalized the momentum by setting another record high of S$550 million order book with the award of the Green Meadows project. This further confirmed that our strong track records coupled with our clients’ appreciation of our quality, safety records and environmental achievements put us in an excellent position to continue to take advantage of the current upbeat Singapore property market environment.

A journey of a thousand miles needs to be taken one step at a time. As important as each of the steps itself, it is equally important that we continue to learn from the past unfortunate mistakes we made along the way. We will continue to embrace this learning spirit and look forward to accelerating and advancing with greater progress in the years ahead.

On behalf of the Management, we would like to extend our appreciation to all our shareholders for their support and we thank our staff and business partners for their contribution to our achievements. We are thankful that all our efforts have so far yielded in a satisfactory venture in the year of 2007.

Sincerely yours,

Dear Shareholders,


2008年3月，宝联建筑继续取得良好的业绩，成功

争取到Green Meadows 共管公寓发展项目，把合

同总值推高到5亿5500万新元。宝联建筑的良好业

绩加上生意伙伴对公司追求卓越，安全和环境保

护的宗旨所拥有的信心，更加肯定了公司在目前

蓬勃的产业市场发展的潜能。

千里之行，始于足下。

公司以往所面对的措折对我们继续学习和进步有

如行走的每一步一样重要。我们将继续以谦恭的

心态，为公司的来年争取更好的业绩。

我们的目标是为大家谋取更大的利益。我们谨代

表管理层对股东、客户、银行家及商业伙伴所给

予的支持致以万二分的谢意。我们也在此对员工

们的贡献表示感激。

我们期待与每位分享另一个丰收的年头。

不积跬步，无以成千里。

我们乐意向股东们报告公司在2007年里在发展项

目中所取得的成果，也加快了追随公司长期的发

展远景。

2007年对联合纤维系统 (Unifiber) 而言是重要

的一年，公司在多项工程领域中取得重要的成就

和里程碑。

2007年，PT MAL 坐落于印尼海岛的木片厂工程完

成后，进而投入操作。我们目前已成为了本地区

木片资源主要供应商之一，并且成功的把我们优

质的木片销售到中国、韩国、台湾和东南亚。

木片生产将继续的提高到最高的生产量，并为公

司带来不菲的盈利。

2007年, PT HRB 种植活动继续展开，公司已在

6千公顷的树林，种植了可用来制造纸浆的树木。

公司计划每年所种植的树林占地面积能达到1万5

千公顷。当市场缺乏木材之时，PT HRB 也开始与

集团外的客户签署销售合约，而这项合约对集团

财务作出贡献。

同年，宝联建筑新开发的项目，订单总值高达2亿

8920万新元，以至2007年建筑合同总值打破3亿

5600万新元。通过开发最新的优质房地产项目，

如 Ardmore II、Solitaire、The Trillium 共

管公寓建筑合同，宝联建筑将继续成为新加坡首

选的房地产发展商之一。

我们在2008里取得了两项重要的里程碑：

2008年2月，我们为将设在印尼的新纸浆厂工程作

出了重要的决策。 PT MBBM 与中国二十冶建设有

限公司 (MCC20) 签署了协议，这项协议取代了之

前与中国机械设备进出口总公司 (CMEC) 的合作

关系。管理层在作了周详和谨慎的考虑后，认为

MCC20 是更有推动力的合作夥伴。MCC20属于中国

最大的建筑安装工程企业之一，同时是中国唯一

在国内外被授权经营纸浆和造纸的国有企业。

我们深信，这将对新纸浆厂的建设计划起积极的

作用；纸浆厂计划在2008展开动工。

埃德斯伦

主席

何良泉

总裁

主席及总裁致词

敬爱的股东，


Perjalanan seribu mil harus ditempuh selangkah demi selangkah, dan kita harus terus melangkah. Dengan rasa syukur kami menyampaikan bahwa pada tahun 2007, kami telah berhasil menapak langkah-langkah penting dan saat ini kami terus meningkatkan laju proses pencapaian tujuan jangka panjang Perusahaan.

2007 adalah tahun yang sibuk bagi Unifiber! Sepanjang tahun 2007, kami mencatat beberapa hal penting yang berhasil dicapai di seluruh bidang usaha Perusahaan:

Pertama, 2007 ditandai dengan mulai beroperasinya pabrik kayu serpih kita di Pulau Laut. Saat ini kita telah menjadi salah satu penjual kayu serpih ter-besar di kawasan Asia dan telah berhasil menjual kayu serpih berkualitas tinggi ke pasaran strategis, seperti Cina, Korea, Taiwan, dan Asia Tenggara. Pabrik kayu serpih kita akan terus meningkatkan kegiatan produksinya dan selanjutnya diharapkan dapat memberikan peningkatan pendapatan dan keuntungan bagi Perusahaan.

Kedua, 2007 juga menunjukan momentum yang baik di bidang operasi kehutanan kita. Kegiatan menanam terus berlanjut dan sepanjang tahun ini di lahan konsesi kita sudah tertanam sekitar 6.000 hektar tanaman baru. Di masa mendatang, direncanakan sekitar 15.000 hektar akan di tanam setiap tahunnya. Melihat kondisi kurangnya penawaran bahan baku kayu di pasaran, kegiatan penebangan pohon juga sudah berjalan. Kontrak penjualan kayu bulat Akasia Mangium pertama telah ditandatangani di tahun 2007 dan pendapatan dari penjualan kayu tersebut akan lebih menunjang posisi keuangan Perusahaan.

Ketiga, masih pada tahun yang sama, total nilai buku kontrak dari kegiatan konstruksi properti kita berhasil mencapai nilai tertinggi dalam sejarah Perusahaan sebesar S$356 juta, dengan diperolehnya kontrak pekerjaan baru terbesar untuk tahun 2007 sebesar S$289 juta. Proyek-proyek pembangunan gedung apartemen mewah seperti condominium Ardmore II, Solitaire, dan Trillium, menegaskan status kita sebagai salah satu kontraktor pilihan berkualitas tinggi di Singapura.

Kita memasuki tahun 2008 dengan dicatatnya dua kejadian yang penting:

Pertama, di bulan Februari 2008, kami mengambil keputusan strategis untuk proyek pembangunan pabrik kertas bubur kita di Indonesia. Kami telah menandatangani perjanjian kontrak turnkey baru dengan MCC20 dan mengganti kontrak serupa yang sebelumnya ditanda-tangani dengan CMEC.

SURAT DARI CHAIRMAN & DIREKTUR UTAMA

Yang terhormat para Pemegang Saham,

Keputusan ini diambil setelah mempertimbangkan dengan seksama dan walaupun mengingat hu-bungan kerja kita yang telah lama dengan CMEC, jajaran manajemen berpendapat bahwa MCC20 lebih sinergis sebagai partner. MCC20 adalah anak perusahaan dari salah satu pembuat mesin pabrik terbesar di Cina yang juga satu-satunya perusahaan yang diberikan kewenangan untuk mengoperasikan pabrik kertas bubur dan pabrik kertas di dalam dan luar Cina. Dengan perubahan kontraktor ini, kami percaya sepenuhnya bahwa kita akan berpeluang memulai proyek pembangunan pabrik dengan le-bih cepat. Peletakan batu pertama pembangunan pabrik direncanakan tahun ini juga.

Kedua, pada bulan Maret 2008, unit usaha konstruksi kita memperoleh proyek pembangunan gedung apartemen Green Meadows, sehingga total nilai buku kontrak melonjak dan sekali lagi mencatat nilai terbesar dalam sejarah Perusahaan sebesar S$550 juta. Dengan penghargaan dari mitra kerja atas kualitas kerja kita, catatan keselamatan kerja dan pencapaian prestasi lingkungan kita, menempatkan kita di posisi yang sangat baik untuk seterusnya menuai keuntungan dari kondisi pasar properti yang sedang berkembang pesat di Singapura.

Perjalanan seribu mil, harus ditempuh selangkah demi selangkah.

Sama pentingnya dengan setiap langkah yang diambil, adalah penting bahwa kita dapat selalu memetik pelajaran dari kesalahan-kesalahan yang terjadi sepanjang jalan. Kami akan terus menganut semangat belajar ini dan akan berusaha keras untuk meningkatkan laju perkembangan dan mencapai kemajuan yang lebih besar lagi di tahun-tahun mendatang.

Atas nama seluruh jajaran manajemen, kami meng-ucapkan terima kasih kepada seluruh Pemegang Saham atas dukungan yang kami terima dan juga terima kasih kepada seluruh jajaran karyawan dan mitra usaha atas kontribusi yang diberikan. Kami sangat bersyukur bahwa seluruh kegiatan yang kami jalankan telah membuahkan hasil yang menggembirakan di tahun 2007.

Hormat kami,

Jaka PrasetyaDIREKTUR UTAMA



Co-existingWe believe that sustainable development and a friendly approach to the environment are paramount in ensuring our existence and success. Captioned here are one-year-young acacia trees, which we have recently successfully planted.


A LETTER TO OUR EMPLOYEES

Date: 7 January 2008

Dear Colleagues,

Happy New Year 2008!

There has been a dramatic increase in our business activities across the business of Unifiber in the past year – which is a good thing. Increase in business activities comes with various challenges. These challenges call for certain ethical expectations of the way we conduct our businesses: we as a company and you as an individual that makes things happen.

I feel very strongly that we all need to be on the same page with regards to how we should handle these challenges and how we should work with each other. With this, I would like to introduce Unifiber ABC.

What is Unifiber ABC?

Unifiber ABC is a set of guiding principles that act as a framework for our conduct as employees of Unifiber. The principles adhere to the values we all hope to share to ensure a successful Unifiber, as well as build our brand within the business community at large.

The main purpose of Unifiber ABC is to define accepted/acceptable behaviors across the firm and to promote high standards of practice. I truly believe that by adhering to these values and continuously refer to them in everything we do, we will be able to help each other and eventually help the firm to succeed in the overall business environment.

A for Accountability

Accountability is the cornerstone on which Unifiber is being built. We MUST be accountable in what-ever we do and that means we always strive for excellence and continuous improvements in our day-to-day work. When you are accountable to the firm, the firm will be accountable to you too. The management and I personally will ensure that you will be fairly rewarded for your contributions. As a firm, we strive to deliver the best products to our customers in the best possible way. We value a sustainable development and a friendly approach to the environment because we believe it is critical in ensuring our existence and success. We value corporate governance and always promote transparencies.

Unifiber ABC

B for Believing

We are currently in a high growth period and experiencing a dramatic increase in our business activities. With growth, come challenges. With challenges, come opportunities. To be successful, we need to believe that we have all it takes to turn challenges into opportunities, and opportunities into success. The good news is we have all it takes to do so.

Our vision is to become a major player in the international market pulp industry. WE WILL GET THERE! We are making real progress every day and we are one step closer to where we want to be. Believing in what we have, we should always strive to implement the best solution for every problem we are facing. Believing in what we have, we should always strive to employ the best approach in solving our problems.

C for Communications

Communications are an absolute necessity in ensuring success. Good communications should be established among employees and with our shareholders and business partners. Communications promote clear goals and an efficient means to attain them. Communications means teamwork and respect for individuals.

Our biggest asset is our people. The men behind the guns. I am very confident that we have all the necessary human capital in our organization that can make things happen. The question is how to ensure that we utilize effectively whatever resources we have currently to achieve our goals. Brainstorm, discuss, action and update! Communicate with each other and always work as a team! We are heading towards an integrated forestry – wood chip – pulp operation. As a team, we need to be integrated too!

Accountability, Believing and Communications!

From now on, whatever we do, let’s start with ABC.

Regards,



Acacia Mangium A fast growing leguminous tree, which can be best harvested after6 years. Acacia Mangium is considered one of the best alternatives for forestry development as it also improves soil fertility, amelioration of saline soil and oxygen flow.


Our vision is to become a major player in the international market pulp industry.

We have started all pertinent business activities towards achieving vertical integration from forestry to pulp business within Unifiber.

Our forestry nursery has started cultivation of Acacia Mangium seedlings in late 2005 and today can produce up to 48 million seedlings per year to support replanting and planting of 15,000 to 20,000 hectares of trees annually.

The wood chip mill has commenced operations in April 2007 and can produce up to 700,000 bone dry tonnes of wood chips on a full operating capacity basis. This can well serve the feedstock needs of

From ForestryTo Pulp

OUR VISION

pulp and paper operators in the currently acute fiber shortage market.

Our greenfield bleached hardwood kraft pulp mill to be built within the forestry is targeted to take off with groundbreaking in 2008.

We will, in the execution of our forestry and pulp related activities, continue to work in compliance with international standards and keep the environ-mental responsibility as our top priorities whilst focusing on delivering high quality and competitively priced products to end buyers.

We will leverage on the experience of our people to develop and enhance our presence in this region and will continue to seek opportunities to create value for our stakeholders.


Emphasison Performance

NEW IDENTITY


New identity Previous identity

Along with the growth and development in our forestry and pulp business, Unifiber considered that a change in the corporate identity was timely and inevitable.

The previous corporate logo that we have been identified with since 2002 required a face lift. We have taken on a new corporate look that is modern, minimalist and meaningful. The new corporate logo, UNIFIBER in bold deep red distinctively represents our name and reflects our strength and

confidence in facing challenges. The growing tree on the letter “U” and “N” combined represents infinite growth potential of our strategic forest asset, as well as our responsibility and commitment to the environment in which we operate in.

Put together, the new logo represents our mission and passion to translate challenges into performance and deliver results to our stakeholders, whilst keeping environmental responsibility.


CORPORATE STRUCTURE

100%Able

Advance Ltd

99.98%PT Mangium

AnugerahLestari

100%Poh Lian

Realty Pte Ltd

100%PLC

ScaffoldingPte Ltd

100%Dongshan

Poh Lian RealEstate Co Ltd

48%PT Magnate

Property Sdn Bhd

30%Poh Lian Trading& Management

(Bangladesh)Pte Ltd

100%Poh Lian

Trading Pte Ltd

100%Unifiber

Holding Pte Ltd

100%Poh Lian

DevelopmentPte Ltd

100%Yew Hock

Trading Pte Ltd

100%Poh Lian

(Cambodia)Ltd

100%Poh Lian

InternationalPte Ltd

Fortune NestSdn Bhd

100%Sin Poh Lian

Sdn Bhd

100%Poh Lian

ConstructionPte Ltd

85.19%

14.81%

100%Shinning SpringResources Ltd

100%Pacificwood

Investment Ltd

100%Anrof

Singapore Ltd

PT MargaBuana Bumi

Mulia

PT HutanRindang Banua

90%

10%

90%



NursingUnifiber nursery can produce up to 48 million Acacia Mangium seedlings per year to support replanting and planting of 15.000 - 20.000 hectares every year.


BELIEVING

We have all it takes


On the move2007 marked the full operation of our wood chip mill operation and our forestry operation. Pictured here are logs from the plantation being unloaded from a truck to our logyard.


ABOUT UNIFIBER

OurBusiness

Following the restructuring exercise in 2002, we now focus on two core business segments, namely (i) forestry and pulp, and (ii) property construction, through the following operating entities:

•

•

•

•

We were incorporated in December 1995 in the Republic of Singapore as Poh Lian Holdings Pte Ltd, a private limited investment holding company working in the construction industry. In conjunction with the initial public offerings, we subsequently converted into a public limited company in May 1997 and changed our name to Poh Lian Holdings Limited. We have been listed on the main board of the Singapore Stock Exchange since then.

In April 2002, our shareholders approved the plan to venture into the forestry and pulp business. The restructuring exercise involved the acquisition of the entire issued and paid-up share capital of Anrof Singapore Ltd group of companies with a forest concession right and extensive forest plantations in Indonesia, as well as a license to build and operate a bleached hardwood kraft pulp mill in Indonesia with an annual production capacity of 600,000 tonnes. Our name was then changed to United Fiber System Limited (“Unifiber”) to reflect the new core businesses of forestry and pulp production.

AT A GLANCE

PT Hutan Rindang Banua (or PT HRB), a wholly owned subsidiary located in Banjarbaru, Indonesia which holds a forest concession right of 268,585 hectares in South Kalimantan.

PT Mangium Anugerah Lestari (or PT MAL), a wholly owned subsidiary located in the village of Alle Alle, Pulau Laut, Indonesia and which owns and operates a 700,000 bone dry tonnes per annum wood chip production mill.

PT Marga Buana Bumi Mulia (or PT MBBM), a wholly owned subsidiary located in the village of Sungai Cuka, Satui, Indonesia and which will own and operate a 600,000 air dry tonnes per annum pulp production mill.

Poh Lian Construction Pte Ltd (or PLC), a wholly owned subsidiary incorporated in Singapore and which operates a property and construction business.


AchievingMilestones

FORESTRY & PULP DIVISION

FORESTRY

PT HRB holds a forest concession right of 268,585 hectares in South Kalimantan, Indonesia, which entitles us to plant, maintain, process and market products extracted from the concession area for a period of 43 years commencing 27 February 1998.

To-date, approximately 80,000 hectares of the forest concession area has been planted with Acacia Mangium – a fast growing leguminous species which can be processed into market pulp of excellent quality for the production of tissue and printing and writing grade papers. Large areas of free land have been planted during the planting season and some areas with old Acacia Mangium trees have also been harvested.

With 8,000 hectares having been planted during the year 2005 to 2007, PT HRB is gradually expanding its planting on log-over areas and replanting on those areas that have been harvested. Going forward, PT HRB will plant approximately 15,000 to 20,000 hectares annually.

PT HRB has also embarked on a three-pronged strategy to be an independent, self-sustaining business unit. Firstly, in addition to the planting activities within its concession, it has worked well with and will continue to co-operate with the local communities under its People’s Forest Scheme (“Hutan Rakyat”) to expand forest plantations outside its concession boundaries. Secondly, PT HRB has set up its first permanent nursery to produce its own high quality seeds as well as explore the suitability of planting other species of leguminous trees such as Eucalyptus Pellita, depending on the suitability of the soil conditions. Thirdly, PT HRB has embarked on Research and Development initiatives by employing advanced silvicultural methods and techniques to further increase the yield of its plantations. It has mechanized its pest and disease monitoring activities. This strategy has the aim of ensuring that we have a sustainable supply of high quality wood raw material to the planned pulp mill.

We have appointed Pöyry Forest Industry (Pöyry), a reputable international engineering and consulting group specializing in forestry-based industries to conduct an in-depth valuation of the forest asset. Based on the valuation, the forest within the concession area has a fair value less estimated point-of-sale costs of approximately USD256.7 million as at 31 December 2007.

With the global shortage of wood raw material in view, PT HRB’s forest concession right remains as our most strategic asset. We will be able to optimise and realise the full potential of this forest asset when the pulp mill under PT MBBM comes into fruition in 2010. As the forest concession is located close to the pulp mill, PT HRB will provide the primary source of wood raw materials supply on a sustainable, reliable and controllable cost basis versus third party suppliers for the mill’s efficient operation.

WOOD CHIP MILL

PT MAL was established on 9 September 2003 for the manufacturing and trading of wood chips. We have built a wood chip mill in South Kalimantan, Indonesia through a contractor, China National Machinery & Equipment Import & Export Corp (“CMEC”) on a turnkey basis at a total development cost of approximately USD45 million. The main equipment and machinery was supplied by Andritz AG, a company of the Andritz Group which is a global market leader for customized plant, systems and services for the pulp and paper, hydropower, steel and other specialized industries (solid/liquid separation, feed and biofuel). The mill is complete with jetty infrastructure for import and export purposes and is designed to produce up to 700,000 bone dry tonnes of wood chips annually. The mill obtained its Certificate of Operational Test Acceptance from Poyry Forest Industry AB, independent technical consultant for the project on 4 April 2007 and it has commenced operations shortly after.

BUSINESS REVIEW


PT MAL sources its raw materials, i.e. plantation wood from a neighbouring plantation under a yearly supply arrangement. Apart from lower procurement costs (as transportation costs are lower compared to supply from its own plantation), this arrangement provides flexibility to manage and reserve our forest wood supply for the future pulp mill.

PT MAL currently has an off-take agreement with CellMark, one of the world’s largest pulp and paper traders. All wood chips produced by the woodchip mill are to be sold to end buyers at prevailing market prices. Shipments of wood chips have been made to end buyers in Philippines, China, Korea, Taiwan and Indonesia.

The wood chip mill project epitomizes our technical and operational execution ability from inception to commercialization. The mill employs about 150 technical, support and administrative personnel to ensure efficient day to day running of the facility. Many of the employees were hired from the villages in the neighbouring vicinity of the mill, hence providing employment and income to the islanders.

With inherent shortage of wood for pulp in the industry and sales outlook for wood chips continuing to look favourable into 2008, we are optimistic of PT MAL making important contribution to our revenue and earnings potential going forward.

PULP MILL

PT MBBM holds a license to build and operate a bleached hardwood kraft pulp mill in South Kalimantan, Indonesia. The main equipment and machineries of the pulp mill will be supplied by Andritz AG, utilising Best Available Technology (or BAT) principles to minimize emissions and the impact on the environment as a whole. The mill will have a production design capacity of 600,000 air dry tonnes of pulp per annum and will be built within the forest concession area held by PT HRB. We plan

to kick-start pulp manufacturing operations in 2010 to realise our vertical integration plans.

On 22 February 2008, PT MBBM entered into a Turnkey Agreement with China MCC20 Construction Co. Ltd (“MCC20”) for the construction of the pulp mill. The turnkey contract with CMEC has been rescinded as such. The management decision was made after thorough consideration given our long-standing relationship with CMEC. The management views MCC20 as more synergistic as a turnkey contractor for the MBBM project. MCC20 is a subsidiary of one of the largest equipment manufacturers in China, who is also the only central enterprise that is authorized to run pulp and papermaking business inside and outside of China. We believe that the move will allow us to advance forward with the project in the manner that is most timely.

Production is expected to operate on a very synergistic and competitive cost structure, as the mill is designed to utilize raw materials supplied by PT HRB’s forest plantation. Our strategy is to supply the bulk of the mill’s wood raw material requirements from our own forest concession and the remaining from neighbouring plantations in a socially responsible means to support the other plantations. The proximity of its raw material supply will enable savings on freight and transport costs, as well as ensure a highly reliable and sustainable supply of quality wood at all times.

Pre-construction work is presently going on to prepare the mill site. Ground-breaking is expected to take place in mid 2008 and completion of the mill, barring any unforeseen circumstances will eventuate in 2010. As the pulp mill will only commence operation in 2010, PT MBBM will not contribute to our revenue until then. However, the pulp mill once in operations will significantly boost our financial position.


CONSTRUCTION DIVISION

We have more than 20 years of experience in the construction industry with its construction business undertaken via Poh Lian Construction Pte Ltd (“PLC”) which mainly operates in Singapore. PLC has successfully established itself as a reliable contractor with a strong track record and as one of the preferred high quality main contractors for upscale residential development given the quality of its workmanship, safety emphasis and standards and environmentally friendly practices. As a certified A1 contractor, PLC is able to tender for public sector projects of unlimited value.

For year 2007, PLC’s order book reached a high of S$356 million, thanks to the record high of S$289 million new projects secured for the year. As of March 2008, the order book escalated to S$550 million, giving PLC a very strong project pipeline.

PLC has completed many projects such as the IKEA Warehouse, Urbana Condominium, Beauford Condominium and Cosmopolitan Condominium. Other prestigious projects procured and in the development pipeline are Buckley 18 Condominium, Newton One Condominium, Ardmore II Condominium, The Solitaire Condo-minium, The Trillium Condominium and Green Meadows Condominium.

PLC’s corporate slogan, “Take Pride, Build It Right” exemplifies its holistic approach to business and human capital management. During the year, PLC implemented several initiatives to enhance its quality assurance and control systems. PLC was awarded with several accolades such as the Safety Award (Gold) for inculcating the best safety practices at construction sites, Green Mark Gold Plus award for adopting environmental friendly approach to construction, Best Buildable Design Award (Gold) for innovative designs as well as a nomination for Excellent Buildable Design from numerous statutory authorities, including the Building and Construction

Authority (BCA) and premier developers. PLC also received a Singapore OK certification for adopting hygienic and environmental friendly practices at construction sites. Going forward, PLC will continue to enhance the quality of its workforce by organizing campaigns related to innovation, green work place, safety, and building excellence efforts as well as striving for industry standard certifications to maintain and improve its position as the preferred Class A1 main contractor in Singapore. PLC is currently BCA certified for ISO 9000 Quality Management System, ISO 14000 Environmental Management System and OHSMS Occupational Health & Safety Management System.

Total construction contracts in Singapore reached approximately S$19 billion in 2007 and analysts expect that the demand is likely to sustain at this high level in 2008 and 2009. The sharp increase in construction demand coincides with a global surge in construction activities, especially in China, India, and the Middle East. Indicators of demand like contracts awarded and loans to the construction sector are expected to show stronger readings too. Nonetheless, there is great pressure on construction resources and local building capacity. Considering the cyclicality of the property construction business, the management is of the view that we should start looking at expanding its business overseas. The management is actively looking at various development opportunities with primary focus in Southeast Asia and the Middle East and will update the shareholders timely.


QualityWe continue to be one of the preferred main contractors for high-end residential development, given our quality workmanship, safety and environment friendly practices. Shown here is the construction of Newton One.


LIME KILN

bark

Waste Water Treatment

PLANTATION

WOOD CHIP MILL

PULP MILL



pulp

black liquor


Fully IntegratedOperation

PLANNED PULP MILL

The pulp-making process in the planned pulp mill of Unifiber is an independent and self sustaining one. The wood raw materials will be supplied from our own forestry plantation. In the pulp-making process, by using the additional supporting equipment, every stage will have a maximum recycling process that utilises materials produced through the main processes.

PLANTATION PROCESS

Acacia Mangium seedling are prepared from seeds for 9 months before planted. For the first year, maintenance on the young trees is routinely done to make sure they grow well. Only after 6 years, the log will be harvested and hauled to the wood chip mill.

MAIN PROCESS

Wood ChippingThe logs will be debarked in a rotary drum de-barker, chipped and screened, before being conveyed to an outdoor storage area, waiting for pulp process. Bark is sent to Power Generation Process.CookingWood chips are cooked at predetermined temperature using strong alkaline cooking liquor. The lignin from the wood is made soluble at the cooking temperature in order for the pulp fibers to separate. In this stage there are two recycle process included, Chemical Recovery Process and Power Generation Process.Washing The unbleached pulp is further cleaned from the black liquor containing the inorganic chemicals. The black liquor is sent to Chemical Recovery Process. The mill processes producing water waste which is sent straight to the Waste Water Treatment to be recovered. Impurified water is reused for the Mill Processes, while the rest is then discharged.BleachingThe unbleached pulp is further bleached in a four-stage bleaching by an elemental chlorine free bleaching method. Bleaching of pulp is accomplished by producing all the required bleaching chemicals a site using the most advanced technology, and using industrial salt as the raw-material. The water recycle process is also occurred in this stage.Pulp SheetingThe bleached pulp is further cleaned from dirt in selected cleaners and formed into sheets in high-speed air heated sheeting machine. The dry pulp sheet with 10% moisture is sheeted into smaller size, baled, unitized, and shipped out. The water used throughout this process is recycled by the Water Treatment and reused in the Mill Processes.

Power Generation ProcessBark from Wood Handling process and Organic Material from Black Liquor are use as Bio Mass Fuel. Each at Power Boiler and at Recovery Boiler to produce steam for power generation. No other fuel required for this plant.Chemical RecoveryThe black liquor is further sent to the Evaporation and the Recovery Boiler to recover the inorganic chemicals. The green liquor outcome is sent through the Recausticizing process to recover final chemicals producing a white colored liquor ready to be reused in the next cooking process.Waste Water TreatmentThe whole system uses minimum amount of water with maximum recycle processes. Resultant waste water is treated in biological aerated activated sludge plant and solid are composted and utilized for soil amendment in the plantations.

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RECYCLE PROCESS


DeliveringWe have success-fully placed our high quality wood chip products into markets such as China, Korea, Taiwan and Southeast Asia. Pictured here is the stream of chips coming off the chipping machine into the chip piles. Ready for exporting.


COMMUNICATIONS

An absolute necessity


Mr. Sven Gösta Thordsson EdströmNon-Executive Chairman

Mr. Jaka PrasetyaChief Executive Officer (CEO)

Mr. Chia Quee Hock, PBM

Mr. Prasetya is the CEO and Executive Director since year 2006. Mr. Prasetya was last re-elected to the Board on 20 April 2007. Mr. Prasetya has over 8 years of experience in financing and project management. Prior to joining the Company, he was a Director and Head of Investment Banking, Indonesia with Deutsche Bank in Singapore. Prior to that, he was with the Telecom Invest-ment Banking group of Merrill Lynch and the M&A team of UBS, both in Hong Kong. His other experience includes his role with Centre Solutions, the structured finance/ principal investment arm of Zurich Financial Services in Hong Kong. Mr. Prasetya is a member of the Sin-gapore Institute of Directors and also a Commissioner and an Independent Director of PT Berlian Laju Tanker, Indo-nesia, a listed company in Singapore.

Mr. Prasetya obtained his Master of Business Administration - Financial Management Track from M.I.T. Sloan School of Management at Massachusetts Institute of Technology, USA and holds a Bachelor of Electrical Engineering from Institut Teknologi Bandung, Indonesia.

Mr. Chia has been Executive Director of Unifiber since 1997. He was appointed as the Deputy Chairman of the Company in year 2002. Mr. Chia is also a member of the Nominating Committee of the Company. He was last re-elected to the Board on 21 April 2006.

Mr. Chia has more than 35 years of working experience in the construction industry. Mr. Chia is the Honorary Patron of Pasir Ris East Community Club Management Committee and Bukit Gombak Community Center Management Committee.

He is also a member of the Singapore Institute of Directors and sits on the Advisory Committee of Tampines Junior College.

Deputy Chairman

Mr. Edström joined the Company on 1 June 2002 and was appointed Chairman and CEO on 1 October 2002. On 14 September 2004, Mr. Edström relinquished his post as CEO and remained as Executive Chairman until 1 Febuary 2007 when he was engaged as Non Executive Chairman.

Pursuant to Article 107 of the Company’s Article of Association, Mr. Edström is due for re-election at the Company’s forthcoming Annual General Meeting on 25 April 2008.

Mr. Edström has more than 40 years of experience in the international pulp and paper industry. Prior to joining the Company, he was the President of Kvaerner ASA’s Representative Office /Kvaerner Pulp and Paper Asia in Jakarta, Indonesia.

Mr. Edström holds a Master of Science in Chemical Engineering (Pulp and Paper) from the Royal Institute of Technology (KTH), Stockholm, Sweden. He is a member of SPCI (The Swedish Association of Pulp and Paper Engineers).

Dedicationand Commitment

BOARD OF DIRECTORS


Mr. Lee Kan Yuk Mr. Lim Yu Neng PaulTechnical Director Non-Executive Director

Mr. Lee is the Technical Director of the Company. He joined the Company as Vice President, Fiber Division and was appointed as Executive Director in year 2002.

Pursuant to Article 107 of the Company’s Article of Association, Mr. Lee is due for re-election at the Company’s forth-coming Annual General Meeting on 25 April 2008.

Mr. Lee has 23 years of experience in the pulp and paper industry. Prior to joining the Company, he was the General Manager of PT Marga Buana Bumi Mulia.

Mr. Lee holds a Bachelor of Science (Honours) in Chemical Engineering from The Queen’s University of Belfast, United Kingdom. He also holds a Diploma in Pulp and Paper Technology from AF-IPK Industries Process Konsult/ Swedish Forest Industries, Sweden.

Mr. Lee is a member of the Singapore Institute of Directors.

Mr. Lim was appointed as Non- Executive Director on 3 August 2007. Pursuant to Article 117 of the Company’s Article of Association, Mr. Lim is due for re-election at the Company’s forthcoming Annual General Meeting on 25 April 2008.

Mr. Lim has over 20 years of banking experience. He is the Founder and Director of TruPartners Asia Pte Ltd and is also a Consultant to Deutsche Bank, AG, Singapore.

Mr. Lim was the President Director and Head of Investment Banking of PT Salomon Smith Barney, Indonesia and also the Director of Salomon Smith Barney International Merchant Bankers Limited (Singapore).

Mr. Lim is an Independent Director and a member of the Audit Committee and Nominating Committee of Bio-Treat Technology Limited.

Mr. Lim obtained his Master Degree in Business Administration, Finance and Bachelor of Science in Computer Science from the University of Wisconsin, Madison, USA. He is also a Chartered Financial Analyst (CFA).

Mr. Dominic Tan Eng KiatExecutive Director

Mr. Tan was appointed as an Independent Non Executive Director of the Company on 1 September 2007. He is also a member of the Audit Committee of the Company. On 3 March 2008, Mr. Tan has been re-designated as Executive Director of the Company and as Chief Executive Officer of PLC. With the new appointment, he has stepped down as a member of the Audit Committee. Pursuant to Article 117 of the Company’s Article of Asso-ciation, Mr. Tan is due for re-election at the Company’s forthcoming Annual General Meeting on 25 April 2008.

Mr. Tan has over 40 years of international construction experience including the negotiation of infrastructure contracts and project management of large Civil Engineering and Building Contracts.

Prior to joining the Company, he was the the Divisional Managing Director (Engineering) of the United Engineers Group. Mr. Tan is an Independent Non Executive Director of Dayen Environmental Limited and Non Executive Director of Yongnam Holding Limited. He is also a member of the Singapore Institute of Directors.


Mr. Ang Lian HaiIndependent Non-Executive Director

Mr. Ang has been an Independent Non-Executive Director of the Company since 2004. He is a member of the Audit Committee, the Nominating Committee and the Remuneration Committee of the Company.

Mr. Ang was last re-elected to the Board on 22 April 2005.

Mr. Ang has 20 years of experience in the plantation and trading sectors. He is a Director and shareholder of ANGBRO Corporation Sdn Bhd and Sri Kuli Sdn Bhd in Sabah, Malaysia. Mr. Ang also is the Vice Chairman of Sandakan Hockien Association, Advisor to the Sandakan Hockien Association Youth Wing, Secretary of the Management Committee of Chi Hwa Primary School and is a Committee Member of Chi Hwa Kindergarden Management Committee, Sabah, Sabah Thalassaemia Society and Member of Buddhist Tzu-Chi Merit Society Malaysia in Sabah.

Mr. Ang obtained his Bachelor of Science in Electronics from Salford University, United Kingdom and holds professional licenses of Future Brokers Representative, Stock Dealer and Person Dealing in Unit Trusts in Malaysia.

Mr. Ang Mong Seng, BBMIndependent Non-Executive Director

Mr. Ang has been an Independent Non-Executive Director of the Company since 1997. He is a member of the Audit Committee and Chairman of the Remuneration Committee of the Company. Mr. Ang was last re-elected to the Board on 20 April 2007.

Mr. Ang is a Member of Parliament for Hong Kah GRC (Bukit Gombak). He has over 30 years of experience in estate management. He is the ChiefOperating Officer of EM Services Pte Ltd, Chairman of Hong Kah Town Council and Vice Chairman of South-West Community Development Council.

Mr. Ang is also an Independent Non-Executive Director of Ecowise Holdings Limited, Vicplas International Ltd, AnnAik Ltd, Chip Eng Seng Corporation Limited and Hoe Leong Corporation Ltd. Besides being a member of the Audit Committees of these companies, Mr. Ang also serves as a member of the Nominating and Remuneration Committees in Chip Eng Seng Corporation Limited, and a member of the Nominating Committee and Chairman of the Remuneration Committee in Ecowise Holdings Limited, Vicplas International Ltd, Ann Aik Ltd and Hoe Leong Corporation.

Mr. Ang holds a Bachelor of Arts degree from Nanyang University.

Mr. Ho Yew YuenIndependent Non-Executive Director

Mr. Ho has been an Independent Non-Executive Director of the Company since 2006. He was also appointed as the Chairman of the Company’s Audit Committee and Nominating Committee and a member of the Remuneration Committee. Mr. Ho was last re-elected to the Board on 20 April 2007.

Mr. Ho has 40 years of experience in the audit and assurance business with an international accounting firm inSingapore of which he was a senior partner for 20 years. Currently, Mr. Ho is the Executive Director of his own private consultancy firm. He is also anIndependent Non-Executive Directorof Techcomp (Holdings) Limited, a listed company in Singapore.

Mr. Ho also serves as a member of the National Parks Board, Singapore and as a non-executive director of its wholly-owned subsidiary, Singapore Garden City Pte Ltd.

Mr. Ho is a fellow member of the Institute of Chartered Accountants in England & Wales, the Association ofChartered Certified Accountants and the Institute of Certified Public Accountants of Singapore. He is also a member of the Singapore Institute of Directors.


Mr. M. RajaramIndependent Non-Executive Director

Mr. M. Rajaram was appointed as a Non Executive Independent Director on 25 March 2008. Pursuant to Article 117 of the Company’s Article of Association, he is due for re-election at the Company’s forthcoming Annual General Meeting on 25 April 2008.

Mr. Rajaram is currently the Senior Director of Straits Law Practice LLC where he heads banking and corporate finance and the India desk. His main areas of works include Corporate Finance and Restructuring, Insolvency and Arbitration. He is an Advocate and Solicitor of the Supreme Court of Singapore and a Solicitor of England and Wales.

Mr. Rajaram is currently the Chairman of the Singapore Indian Chamber of Commerce and Industry and the Vice Chairman of the Singapore Business Federation. He is also an Independent Director of Hiap Seng Engineering Ltd.

Mr. Rajaram obtained his Master of Business Administration from the Maastricht School of Management and holds a Bachelor of Law (Honours) degree from the University of Singapore. He is a Fellow of the Singapore Institute of Arbitrators and the Chartered Institute of Arbitrators.


In The Field

KEY EXECUTIVES

UNIFIBER CORPORATE OFFICE

Lars Ingemar Johansson is the Project Director of Pulp Division. He has more than 35 years of international experience in Project Management in the energy and process, pulp and paper industries. Mr. Johansson obtained a Bachelor Degree in Engineering from the Technical Institute of Norbotten, Sweden.

Wong Vun Khi is the Director of Corporate Development. He has more than 20 years of experience in the pulp and paper industry. Mr. Wong obtained his Bachelor of Science (Honours) in Chemical Engineering from the University of Newcastle-Upon-Tyne, United Kingdom and holds a Diploma in Pulp and Paper Technology from AF-IPK Industrins Process Konsult/Swedish Forest Industries, Sweden.

Kwong Pei Meng is the Group Financial Controller. He has more than 12 years of experience in the fields of assurance, corporate finance, cross border taxation and regional financial operations. Mr. Kwong holds a Bachelor of Business (Accountancy) from RMIT University, Australia, a Masters in Management from the Asian Institute of Management, Philippines and a Graduate Diploma in Techno-prenuership and Innovation issued jointly by the University of Washington (USA) and the Nanyang Technological University Singapore. He is also a Chartered Accountant with the Institute of Certified Public Accountants of Australia.

Cheng Fong Yee Fonda is the General Manager of Business Development. She has more than 20 years of experience in the insurance industry. Ms. Cheng has extensive experience in major overseas insurance projects, particularly in the Asia region. Fonda is an Associate of the Australian Insurance Institute and is an Independent Director of Bio-Treat Technology Limited.

Leong Siew Why is the General Manager of Administration and Business Division. He has 16 years of experience in the instrument and control industry and more than 10 years of experience in management. Mr. Leong obtained his Master in Business Administration from the University of Bradford, United Kingdom. He also holds a Bachelor of Engineering (Mechanical) degree from the National University of Singapore.

Lau Hui Leng Celestine is the General Manager of Finance. She has more than 15 years of experience in accounting, finance and human resource management. Ms. Lau holds a Bachelor of Accountancy degree from the National University of Singapore and has completed an Executive Program at INSEAD, Fontainebleau, France. She is a Fellow Certified Public Accountant with the Institute of Certified Public Accountants of Singapore.

CONSTRUCTION & PROPERTY DIVISON

Tan Soon Kian is the Director of Poh Lian Construction Pte Ltd. He has more than 24 years of experience in the construction industry. Mr.Tan is responsible for all matters including project management, defect rectifi-cation, accounts, human resource, training, plant and machinery. He holds a Diploma in Building from Singapore Polytechnic. Mr. Tan is a Member of BCA Construction Excellence Awards Assessment Committee (2006 to 2007).

Voon Kim Loon is the Director of Poh Lian Realty Pte Ltd. He has more than 20 years of experience in the construction industry. Mr. Voon holds a Diploma in Civil Engineering from the Singapore Polytechnic, a Bachelor (Honours) degree in Civil Engineering from Monash University of Australia, and a Master of Science in International Construction Manage-ment from Nanyang Technological University, Singapore.


Antonius Kristijanto is the President Director of PT MAL. He was trained in Mechanical Engineering and has morethan 20 years of experience in the pulp and paper industry in Indonesia.

Artomo Urip Singodirejo, SH is the President Commissioner of PT HRB. Mr. Singodirejo has extensive experience in the legal system of Indonesia with over 30 years as District Attorney and Public Prosecutor in Indonesia. He was previously Head of the High Public Prosecutor in Lampung, Indonesia.

Charlie Dhungga is the Country Head for Indonesia and also the Commis-sioner of PT MAL. He has more than 15 years of experience in business development and finance obtained his Master in Business Administration and holds a Bachelor of Science in Finance from Portland State University, Portland, Oregon, USA.

Djohan Effendi is the President Commissioner of PT MBBM. He has over 40 years of governmental experience and was formerly the State Secretary of the Republic of Indonesia. Mr. Effendi is also known as the activist of several NGOs in promoting pluralism and multiculturalism. Mr. Effendi graduated from Deakin University, Australia.

Hans Broerse is the Mill Manager of PT MAL. He has over 35 years of experience in forestry and wood chip mill operations. He holds a diploma degree in Forestry from Saasveld Forestry College in George, South- Africa.

FORESTRY & PULP DIVISION

Hardjono Arisman is the Vice President Director of PT HRB. He has over 30 years of experience in plantation management. Mr. Arisman obtained a Degree in Forest Engineer-ing from Universitas Gadjah Mada Indonesia and a Master Degree in Forestry from University of New Brunswick Fredericton Canada.

Ho Ming Siang, Andy is the General Manager (Projects), Fiber Division. He has over 20 years of working experience in the pulp and paper, chemical processing and environmental industries. Mr. Ho holds a Bachelor of Science in Chemical Engineering from Canada and a Diploma in Pulp & Paper Technology from Sweden.

Indrawan Prakasa is the Production Director of PT HRB. He has more than 17 years of experience in forest plantation. Mr. Prakasa obtained his Master Degree majoring in Human Resources from Merdeka University, Malang, Indonesia. He also holds adegree in Agricultural Engineering from INSTIPER Yogyakarta, Indonesia.

K. R. Natarajan is the General Manager (Environment & Services), Fiber Division. He has over 30 years of experience in large integrated pulp & paper companies in India and South East Asia. Mr. Natarajan graduated in Sciences majoring in Chemistry from Osmania University, India.

Petrus Teddy Makaminang is the Finance Director of PT HRB. He has more than 14 years of experience in finance and administration and 10 years of experience in general affairs. Mr. Makaminang holds a degree in Economics from Widya Gama University, Malang Indonesia.

Rizka Sari Nauli Hutabarat is the Director of PT MBBM and PT MAL. She obtained her Bachelor of Law degree from University of Krinadwipayana, Jakarta. Ms Rizka was certified as Sworn Advocate by the Indonesian Ministry of Justice in 2002.

Svante Thorolf Nyfors is the President Director of PT HRB. He has 20 years of experience in the pulp and paper industry. Mr. Nyfors graduated as an Electrical Engineer from the School of Technology, Vasa, Finland.

Wong Yun Chong is the General Manager (Power & Recovery), Fiber Division. He has more than 20 years of experience in the power and utility industry. Mr. YC Wong holds a degree in Mechanical Engineering from National Cheng Kung University, Taiwan. He is also a Registered Engineer of Factory & Machinery Department, Malaysia.


ResponsibleWe recognise our social responsibility to support the development of the local economy and initiate Corporate Social Responsibility Programs – where as at Unifiber means working along with the local community.


SUSTAINABILITY

Our continuing obligations


OUR RESPECT FOR NATURE

Holding a forest concession of 268,585 hectares along the southern coast of Kalimantan, Unifiber is aware of its responsibility to sustain natural resources.

Planting

Unifiber’s policy is to protect natural forest with high biodiversity value and only plant on non-productive, degraded, logged over land - grassland, bush, and scrub land. This is in-line with the policy of the Indonesian government to rehabilitate degraded land, which is in a critical condition. It is the commitment of Unifiber to never touch the natural forests or convert any Primary Tropical Moist Forest for plantation use. Until now, approximately 80,000 hectares of concession area have been planted with Acacia Mangium, a fast growing leguminous tree, which can be best harvested 6 years after planting and can also bring improvement to the environment such as the improvement of soil fertility, amelioration of saline soil, and oxygen flow. Unifiber has already started replantation since 1994, and additional forest plantations will be continued in the forthcoming years to maintain sustainability.

The wood chip mill, (PT MAL), and the pulp mill, (PT MBBM), are designed to produce 700,000 tonnes of wood chip and 600,000 tonnes of bleached hardwood craft, both by only using Acacia Mangium wood as raw material. The mill machinery specification is not designed for any use of raw material from natural forests a.k.a ‘Mixed Tropical Hardwood’. This will always be our commitment to keeping environmental responsibility.

At the forest plantation (PT HRB), fire watch towers as per industry norm are situated at various locations to monitor fire breakouts. All the employees of the forestry sector are trained to act in a responsible manner in the event of fire. Line of reporting system to seek guidance and assistance in case of an emergency are clearly in place. Good rapport is maintained with local authorities to summon external help to extinguish fire in case of an emergency.

SustainableDevelopment

ENVIRONMENTAL RESPONSIBILITY


Harvesting

In-line with increasing pulp production needs, Unifiber will ensure that plantation and harvesting remains equivalent and environmentally safe. Our harvest activities are based on a Sustainable Forest Management Plan and international guidelines to Forest Harvesting Operations. The forest operations comply with the standard forest plantation practices so that it is certified by a recognised forest certification body in due course. We also recognise our responsibility to do our best to protect the natural forest within the concession right from illegal logging. Therefore, all the harvesting and log transporting contractors will be governed by the environmental guidelines to handle various lubricants, oils etc., in an environmentally friendly way without causing any pollution to the soil or water.

Unifiber has not harvested any tropical hardwood from any primary tropical forest, high conservation value forest, critical natural habitats, neither violated any local or national laws in respect of illegal logging, nor logging of any endangered species of wild flora and fauna. Having not harvested any natural forest, we believe that we have not caused any habitat alteration or loss of biodiversity, nor the existing habitats of wild life. In fact, we have reinstated the green belt since 1994 by establishing fast growing plantations in unproductive degraded land infested with Imperata Cylendrica.

OUR SOCIAL RESPONSIBILITY

With a concession area of over 260,000 ha, we strongly believe that close co-operation with the government and the local community is most valuable. We recognise our social responsibility to support the development of the local economy and initiate Corporate Social Responsibility Programs - where as at Unifiber means working along with the local community.

Community Development

Together with the people, we take action on the plantation security, forest fire prevention, and planting activity. Unifiber has developed a social program called Hutan Rakyat (“The People’s Forest”) given especially to land owners who lend us land to grow trees. We provide all the materials needed such as seeds, planting and maintenance material with a return of fair share of profit from the amount of logs sold descended from the area. We have also successfully initiated, trained, and demonstrated the multiple benefits of growing cash crops in between plantations where wild grass exists. The villagers have benefited through the growth of seasonal cash crops such as dry rice and chili. This program is known as Tumpang Sari.

Employee & Equipment Safety

We fully respect and safeguard the rights of our employees. We conduct periodical meetings with the employees to understand occupational grievances and other safety related matters. Human Resource Department handles all such issues. We have always maintained cordial relations with the community and the society around its operations.

Employees are trained and advised to use pesticides such as weed and pest killers with care in order to safeguard employee health and the environment. The pesticides are used at sites where deemed necessary and avoided its migration to off-site. Pesticides or weed killers, and fertilizers are stored in secure place to avoid spills in its original packing, ensuring no hazardous incidents both to humans and the environment. Employees are advised to use protective clothing during application of pesticides, fertilizers, and weed killers. Employees engaged in the field operations are also provided with safety boots, and hand gloves where applicable.

We engages contractors to handle harvesting, slashing, and transporting logs by dedicated trucks. The contractors are professionals who have been in this activity for several decades. However, we constantly monitor them through field forest operators with regards to safety of operations, such as felling trees, slashing the branches, and log transportation. We have its own heavy equipment workshop where regular maintenance activities are carried out to keep the heavy operating equipment in good order. The contractors are also advised to maintain all their equipment in good and safe working order for accident free operations. Overall, our plantation forest and mills open an enormous work employment for the local community and also opens attractive investment for Indonesia. Together with our motto – Unifiber ABC - and respect for the environment, we are optimistic that the external relation between us, government, and local community will remain honest and transparent resulting in excellent business for all parties.

40 Unifiber 2007 Annual Report40 Unifiber 2007 Annual Report

United Fiber System Limited (the “Company”) continues to be committed to achieving high standards of corporate governance conduct and to place importance on its corporate governance processes and systems so as to ensure greater transparency, accountability and protections of shareholders’ interest. The Company has observed the principles and guidelines set out in the revised Code of Corporate Governance which took effect from 1 January 2007.

The Company’s corporate governance practices on each of the principles of the Code are outlined in the following sections.

BOARD MATTERS

Principle 1 Board’s Conduct of Its Affairs

The Board oversees the business of Company and is collectively responsible for the success of the Company. It assumes responsibility for the overall strategic plans, key operational initiatives, major investment and funding proposals, financial performance reviews and corporate governance practices. The Board provides leadership and guidance for management. The Company has in place financial authorization and approval limits for operating and capital expenditure, procurement of goods and services, acquisitions and disposal of investments and treasury transactions. Within these guidelines, the Board approves transactions above certain thresholds. The Board also approves the annual budget and the financial results for release to the Singapore Exchange Securities Trading Limited (“SGX-ST”)

The Board is supported in its tasks by Board committees that have been established to assist in the execution of its responsibilities. In order to facilitate decision-making and to ensure the smooth operation of the Company, the Board has delegated some of its powers to the Executive Committee. The Board is also supported by the Audit Committee, the Nominating Committee and the Remuneration Committee.

The Board conducts regular scheduled meetings at least four times a year Ad-hoc meetings are convened as and when warranted by particular circumstances. The Company’s Articles of Association provide for meetings to be held via telephone conference. The attendance of the Directors at meetings of the Board and Board committees, as well as frequency of such meetings, is disclosed in this report.

HighStandards

CORPORATE GOVERNANCE REPORT


BOARD COMPOSITION AND GUIDANCE

Principle 2 Strong and Independent Element in The Board

The size and composition of the Board are reviewed from time to time by the Nominating Committee which strives to ensure that the size of the Board is conducive to effective discussions and decision-making and that the Board has an appropriate balance of independent directors.

The majority of our directors are non-executive and independent directors. The Nominating Committee reviews the independence of each director on annual basis and it considers a director as independent if he has no relationship with the Group or its officers that could interfere, or reasonably perceived to interfere, with the exercise of the director’s independent business judgement with a view to the best interest of the Company.

As a group, the Directors bring with them a broad range of industry knowledge, expertise and experience in areas such as accounting, banking, finance, business and management. The diversity of the directors’ experience allows for the useful exchange of ideas and view as well as provide for effective decision-making. The profile of each Board member is set out on pages 30, 31, 32 and 33 of this Annual Report.

The Board considers the present size appropriate for the current nature and scope of the Group’s operations.

CHAIRMAN AND CHIEF EXECUTIVE OFFICER

Principle 3 Clear Division of Responsibilities at The Top of The Company

There is a clear separation of the roles and responsibilities of the Chairman and the Chief Executive Officer (CEO). This is to ensure appropriate balance of power and authority, accountability and decision-making.

Mr. Sven Edström, who is the Chairman, and Mr. Jaka Prasetya the CEO of the Company are not related to each other. Mr. Prasetya is responsible for the day-to-day management of the affairs of the Company and the Group. He plays a leading role in developing and expanding the businesses of the Group and ensures that the Board is kept updated and informed of the Group’s business.

The Chairman’s responsibilities include:


The Board comprises the following members:

Notes:1. Appointed as Non-Executive Director on 1 September 2007 and re-designated as Executive Director on 3 March 20082. Appointed on 3 August 20073. Appointed on 25 March 2008

scheduling meetings and leading the Board to ensure its effectiveness and approves the agenda of Board meetings in consultation with the CEO;reviewing key proposals and Board papers before they are presented to the Board and ensures that Board members are provided with accurate and timely information;ensuring that Board members engage Management in constructive debate on various mattersincluding strategic issues and business planning processes; andpromoting high standards of corporate governance.

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NAME OF DIRECTORS ROLE

Mr. Sven Gösta Thordsson Edström Chairman, Non-Executive Director

Mr. Chia Quee Hock, PBM Executive Director

Mr. Jaka Prasetya Executive Director

Mr. Lee Kan Yuk Executive Director

Mr. Dominic Tan Eng Kiat (1) Executive Director

Mr. Paul Lim Yu Neng (2) Non-Executive Director

Mr. Ho Yew Yuen Non Executive and Independent

Mr. Ang Mong Seng, BBM Non Executive and Independent

Mr. Ang Lian Hai Non Executive and Independent

Mr. M. Rajaram(3) Non Executive and Independent


BOARD MEMBERSHIP

Principle 4 Formal and Transparent Process for The Appointment of New Directors to The Board

The Nominating Committee (“NC”) reviews and assesses candidates for directorship before making recommendations to the Board. In recommending new directors to the Board, the NC takes into consideration the skills and experience and the current composition of the Board, and strives to ensure that the Board has an appropriate balance of independent directors as well as directors with the right profile of expertise, skills, attributes and ability. In evaluating a director’s contribution and performance for the purposes of re-nomination, the Nominating Committee takes into consideration a variety of factors such as attendance, preparedness, participation and candour. Recommendation for new directors and retirement of directors are made by the Nominating Committee.

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

BOARD PERFORMANCE Principle 5 Formal Assessment of The Effectiveness of The Board and Contributions by Each Director

The NC has established a formal assessment process to assess the effectiveness of the Board as a whole. The performance criteria for Board evaluation are based on financial and non-financial indicators such as an evaluation of the size and composition of the Board, the Board’s access to information, Board processes, strategy and planning, risk management, accountability, Board performance in relation to discharging its principal functions, communication with senior management and standards of conduct of the directors.

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

ACCESS TO INFORMATION

Principle 6 Complete, Adequate and Timely information to The Board Members

The Board members are provided with adequate and timely information prior to Board meetings and on an ongoing basis. The Board has separate and independent access to the Group’s senior management and the advice and services of the Company Secretary who is responsible to the Board for ensuring board procedures are followed and the relevant statutory rules and regulations are complied with. Under the Articles of Association of the Company, the decision to appoint or remove the Company Secretary can only be taken by the board as a whole. The Company Secretary attends all the required board meetings.

The Board also takes independent professional advice as and when necessary to enable it to discharge its responsibilities effectively. Subject to the approval of the Chairman, directors, whether as a group or individually, may seek and obtain independent professional advice to assist them in their duties at the expense of the Company. The Board is updated on the regulations of the SGX-ST, Companies Act, corporate governance policies and other statutory requirements. Upon the appointment of a new Director, a formal letter is provided, setting out the director’s duties and obligations. The newly appointed Director will be briefed on the Group’s businesses, operations and the relevant regulations and governance requirements.


BOARD COMMITTEES

EXECUTIVE COMMITTEE

The Executive Committee (“EXCO”) comprises:

Mr. Chia Quee Hock, PBM

Mr. Jaka PrasetyaMr. Lee Kan YukMr. Dominic Tan Eng Kiat

The role of the EXCO is to formulate the Group’s strategic initiatives, provide directions for new investments and business opportunities, review material financial and non-financial matters as well as oversee the Group’s conduct and corporate governance structure. In carrying out their duties, the EXCO makes assessment and manages areas of significant business and financial risks. The key areas include the inherent risks associated with the business operations of the Group and financial risks associated with interest rate, liquidity, foreign currency and credit risks. The objective is to ensure that the Group achieves its desired performance goals as well as enhance long-term shareholders’ value.

NOMINATING COMMITTEE

The Nominating Committee (“NC”) comprises the following members:

Mr. Ho Yew Yuen (Chairman)Mr. Ang Lian HaiMr. Sven Gösta Thordsson Edström

The NC’s responsibilities include the following:

REMUNERATION COMMITTEE

The Remuneration Committee (“RC”) comprises the following members:

Mr. Ang Mong Seng, BBM (Chairman)Mr. Ang Lian HaiMr. Paul Lim Yu Neng

The RC’s responsibilities include the following:

review and assess all candidates for directorships before making recommendation to the Board for appointment of directors;reviews and recommends to the Board the retirement and re-election of directors in accordance with the Company’s Articles of Association at each AGM;reviews the composition of the Board annually to ensure that the Board has appropriate balance of independent directors and to ensure an appropriate balance of expertise, skills, attributes and ability among the directors;reviews the independence of directors

1.

2.

3.

4.

reviews and recommends to the Board an appropriate and competitive framework of remuneration for the Board and key executives of the Group; recommends to the Board specific remuneration packages for each Executive Director, taking into account factors including remuneration packages of Executive Directors in comparable industries as well as the performance of the Company and that of the Executive Directors;reviews and make recommendation on the fees of independent non-executive directors for approval by the Board; andensure the remuneration policies and systems of the Group support the Group’s objectives and strategies.

1.

2.

3.

4.


Notes(1) Resigned on 1 August 2007(2) Appointed as Non Executive Director on 3 August 2007(3) Appointed as Independent Non Executive Director on 1 September 2007; re-designated as Executive Director on 3 March 2008

REMUNERATION BANDS AND NAME OF DIRECTOR

ABOVE S$500,000

S$250,000 TO S$500,000

BELOW S$250,000

Sven Edström

% % % % % %

Chia Quee Hock

Jaka Prasetya

Lee Kan Yuk

Choo Lye Heng (1)

Paul Lim Yu Neng (2)

Ho Yew Yuen

Ang Mong Seng

Ang Lian Hai

Dominic Tan Eng Kiat (3)

6.44

6.78

0.00

0.00

7.58

0.00

0.00

0.00

0.00

0.00

15.46

9.49

5.87

66.67

0.00

90.97

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

9.03

50.00

66.67

66.67

85.72

0.00

0.00

0.00

7.69

0.00

0.00

50.00

33.33

33.33

14.28

0.80

2.41

0.70

15.38

1.54

0.00

0.00

0.00

0.00

0.00

100.00

100.00

100.00

100.00

100.00

100.00

100.00

100.00

100.00

100.00

77.30

81.32

93.43

10.26

90.88

0.00

0.00

0.00

0.00

0.00

%

SALARY BONUSES DIRECTORS’ FEES

CPF OTHER BOARD COMMITTEE

FEES

ALLOWANCES AND OTHERS

TOTAL

REMUNERATION MATTERS

Principle 7 Procedures for Developing Remuneration PoliciesPrinciple 8 Level and Mix of RemunerationPrinciple 9 Disclosure of Remuneration

The remuneration package adopted for the Executive Directors is as per the service contract entered into between the respective Director and the Company. The RC will recommend on the specific remuneration package for an Executive Director upon recruitment. Thereafter, the RC will review subsequent increments, bonuses and allowances where these payments are discretionary. No Director or member of the RC is involved in deciding his own remuneration.

Independent Non-Executive Directors do not have any service contracts with the Company. Save for Directors’ fees, Independent Non-Executive Directors do not receive any remuneration from the Company.

Directors’ fees are set in accordance with a remuneration framework comprising basic fees and additional fees for serving on any of the committees. Directors’ fees are subject to approval of shareholders of the Company as a lump sum payment at the AGM of the Company.

No immediate family members of a Director or CEO have remuneration exceeding S$150,000 during the year.

The Directors’ compensation tabled for FY2007 is as follows:


The following table sets out the range of gross remuneration received by the top five executives (excluding executive directors) of the Group for FY2007:

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

AUDIT COMMITTEE

Principle 11 Audit CommitteePrinciple 12 Internal ControlPrinciple 13 Internal Audit (“IA”)

The Audit Committee (“AC”) comprises the following three members, all of whom are Independent Non-Executive Directors, appropriately qualified to discharge their responsibilities:

Mr. Ho Yew Yuen (Chairman)Mr. Ang Mong Seng, BBM Mr. Ang Lian Hai Mr. M. Rajaram The AC performs the following main functions:

The AC has full access to and receives full co-operation from Management, and has full discretion to invite members of Management to attend its meetings and has been given reasonable resources to enable it to discharge its functions. The Internal and External Auditors have direct and unrestricted access to the AC, which is empowered to conduct or authorise investigations into any matters within its terms of reference.

The Company’s Internal Audit function is out-sourced to Pioneer Management Services Pte Ltd. The Internal Auditors reports directly to the AC. The internal audit function is adequately resourced and has appropriate standing within the Company and the Group.

Internal Auditors, in the course of its audit, review the effectiveness of the Group’s material internal controls, including financial, operational and compliance controls, and risk Management. Material non-compliance, internal control weaknesses and key business risks noted during its audit and alignment plans to address these risks and weaknesses are communicated to Management accordingly and tabled for discussion at AC meetings with updates by management on the status of these action plans. The AC has reviewed and is satisfied that existing controls in the Company and the Group are adequate.

recommends to the Board of Directors on the appointment, reappointment and removal of the external auditor as well as the remuneration and terms of engagement;reviews the scope, audit plans, results and effectiveness of the Internal and External Auditors;reviews any related significant findings and recommendations of the Internal and External Auditors together with management’s responses thereto;reviews the adequacy of the Group’s system of internal controls, financial and management reporting systems;reviews with Management, Internal and External Auditors significant risks or exposures that exist and assesses the steps management has taken to minimise such risks to the Group;reviews significant financial reporting issues and judgements so as to ensure the integrity of the financial statements and any formal announcements relating to financial performance;reviews interested party transactions as defined in the Listing Manual of the SGX-ST;reviews legal and regulatory matters that may have a material impact on the financial statements; reviews the adequacy of the internal controls and risk management policies and systems established by Management; andreviews the effectiveness of the internal audit function.

1.

2.3.

4.

5.

6.

7.8 . 9.

10.

$200,000 to $249,999 3

$150,000 to $199,999 2

5

REMUNERATION BANDS

TOTAL

NO. OFEXECUTIVES


Type of Meeting Board Meetings Audit Committee Meetings

Remuneration Committee Meetings

Nominating Committee Meetings

Total No. Held 4 5 1 4

Attendance

Sven Gösta Thordsson Edström 4 NA NA NA

Chia Quee Hock, PBM 4 NA NA 4

Jaka Prasetya 4 NA NA NA

Lee Kan Yuk 4 NA NA NA

Choo Lye Heng (1) 2 NA NA NA

Paul Lim Yu Neng (2) 2 NA NA NA

Ho Yew Yuen 4 5 1 4

Ang Mong Seng, BBM 4 4 1 NA

Ang Lian Hai 4 5 1 4

Dominic Tan Eng Kiat (3) 1 1 NA NA

M. Rajaram (4) 0 0 NA NA

The AC has reviewed the overall scope of both the internal and external audits and the assistance given by the Company’s officers to the auditors. It met with the Company’s internal and external auditors to discuss the results of their respective examinations and their evaluation of the Company’s system of internal accounting controls. The AC has also met with the auditors, without the presence of management.

The AC has also reviewed the half yearly and annual financial statements of the Company and the Group for the financial year ended 31 December 2007 as well as the auditors report thereon. Interested person transactions of the Group in the financial year have been reviewed by the AC.

The AC has conducted an annual review of all non-audit services by the auditor to satisfy itself that the nature and extent of such services will not prejudice the independence and objectivity of the auditors.

Five AC meetings were held during the year 2007. The Board is kept informed of the AC’s activities.

COMMUNICATION WITH SHAREHOLDER

Principle 10 Accountability Principle 14 Communication with ShareholdersPrinciple 15 Greater Shareholder Participation

The Company believes in engaging in regular, effective and fair communication with shareholders and is committed to conveying pertinent information to shareholders on a timely basis. All material and price sensitive information as well as information on the Company’s new initiatives are publicly released via SGXNET on a timely basis. In addition, the Company also responds to enquiries from investors, analysts, fund managers and the press.

At the general meetings of the Company, shareholders are given the opportunity to air their views and ask questions regarding the Company and the Group. The Articles of Association of the Company allow

NA: Not Applicable

Notes

Resigned on 1 August 2007Appointed as Non Executive Director on 3 August 2007Appointed as Independent Non Executive Director on 1 September 2007; re-designated as Executive Director on 3 March 2008Appontied as Independent Non Executive Director on 25 March 2008

(1)

(2)

(3)

(4)


shareholders to appoint one or two proxies to attend and vote in their stead. Each item of special business included in the notice of the general meetings is accompanied, where appropriate, by an explanation for the proposed resolution. Separate resolutions are proposed for substantially separate issues at the meeting. The Chairmen of the Audit, Remuneration and Nominating Committees are normally available at the meeting to answer those questions relating to the work of these committees. The External Auditors are also present to assist the Directors in addressing any relevant queries by shareholders.

MATERIAL CONTRACTS

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

DEALINGS IN SECURITIES

The Company has adopted an internal code with regards to dealings in securities to provide guidance for its directors and officers.

The Company’s Code provides that Directors and employees are prohibited from dealing in the securities of the Company during the period commencing one month before the announcement of the Company’s half and full year financial results and ending on the date of the announcements of the results or if they are in possession of unpublished price-sensitive information on the Group. They are also made aware of the applicability of the insider trading laws at all times.

Held by Effective Group Interest

Location Description & Approximate Land Area

Tenure Usage

Indonesia

PT Hutan Rindang Banua 100% South Kalimantan, Indonesia

Within forest concession area base camp

43 years leaseup to 100 years

Plantation Quarters

PT Marga Buana Bumi Mulia 100% Sungai Cuka, Satui, South Kalimantan, Indonesia

249.46 hectares

Mill Area

PT Mangium Anugerah Lestari 100% Alle Alle, Pulau Laut, South Kalimantan, Indonesia

52 hectares Mill Area

INVESTMENT PROPERTY

COMPLETED PROPERTIES HELD FOR SALE

People’s Republic of China (PRC)

Dongshan Poh Lian Real Estate Co Ltd

100% Dongshan, Fujian Province, PRC

Land area:4,347 sqm 7-Storeyresidential and commercial building.43 out of 86 units have been sold

70 years lease (61 years unexpired)

40 residential units and 46 shops



CapacityOur wood chip mill in Pulau Laut, South Kalimantan, Indonesia is designed to produce 700,000 bone dry tonnes of wood chips annually.


Board of DirectorsMr. Sven Gösta Thordsson Edström Non Executive Chairman

Mr. Chia Quee Hock, PBM Deputy Chairman

Mr. Jaka Prasetya Chief Executive OfficerMr. Lee Kan Yuk Technical DirectorMr. Dominic Tan Eng Kiat Executive DirectorMr. Paul Lim Yu NengNon Executive DirectorMr. Ho Yew Yuen Independent Non Executive DirectorMr. Ang Mong Seng, BBM Independent Non Executive DirectorMr. Ang Lian Hai Independent Non Executive DirectorMr. M. RajaramIndependent Non Executive Director

Audit CommitteeMr. Ho Yew Yuen (Chairman)Mr. Ang Mong Seng, BBM

Mr. Ang Lian HaiMr. M. Rajaram

External AuditorsErnst & YoungOne Raffles Quay, North TowerLevel 18Singapore 048583Tel. : +65 6535 7777Fax. : +65 6532 7662

Audit Partner-In-Charge:Mr. Steven Phan Swee Kim(appointed with effect from financial year ended 31 December 2003)

Internal AuditorsPioneer Management Services Pte Ltd4 Shenton Way #04-01 SGX Centre 2Singapore 068807Tel. : +65 6327 6266 Fax. : +65 6327 3855

Managing Director-In-Charge: Ms. Mona Low(appointed with effect from financial year ended 31 December 2006)

Registered Office47 Scotts Road #07-03/04Goldbell TowersSingapore 228233Tel. : +65 6838 7500 Fax. : +65 6284 0074E-mail : [email protected]

Share Registrar and Share Transfer OfficeBoardroom Corporate & Advisory Services Pte Ltd(formerly known as Lim Associates (Pte) Ltd)3 Church Street #08-01 Samsung Hub Singapore 049483Tel. : +65 6536 5355 Fax. : +65 6536 1360

Principal BankersDBS Bank LtdMalayan Banking BerhadRaiffeisen Zentralbank Österreich AG (RZB-Austria), SGRHB Bank BerhadUnited Overseas Bank Group

Nominating CommitteeMr. Ho Yew Yuen (Chairman)Mr. Ang Lian HaiMr. Sven Gösta Thordsson Edström

Remuneration CommitteeMr. Ang Mong Seng (Chairman)Mr. Ang Lian HaiMr. Paul Lim Yu Neng

Company SecretaryMs. Lim Ka Bee

(appointed on 30 November 2007)

CORPORATE INFORMATION


FINANCIALREVIEW

General InformationReport of the DirectorsStatement by DirectorsIndependent Auditors’ ReportConsolidated Profit and Loss AccountBalance SheetsStatements of Changes in EquityConsolidated Statement of Cash FlowsNotes to the Financial StatementsStatistics of ShareholdingsNotice of Annual General MeetingProxy Form

535457586061636769

128130133



General Information

Directors

Sven Gösta Thordsson EdströmChia Quee Hock, PBM

Jaka PrasetyaLee Kan YukDominic Tan Eng Kiat

Paul Lim Yu Neng

Ho Yew YuenAng Mong Seng, BBM

Ang Lian HaiChew Hai Chwee

Choo Lye Heng

Audit Committee

Ho Yew YuenAng Mong Seng, BBM

Ang Lian Hai Dominic Tan Eng Kiat

Company Secretary

Lim Ka BeeTan Hwee Eng, Blossom

Registered Office

47 Scotts Road#07-03/04Goldbell TowersSingapore 228233

Auditors

Ernst & YoungOne Raffles QuayNorth Tower, Level 18Singapore 048583

Steven Phan Swee Kim

Principal bankers

Raiffeisen Zentralbank Österreich AG;(RZB-Austria), Singapore branchDBS Bank LtdUnited Overseas Bank LimitedMalayan Banking BerhadRHB Bank Berhad

Non-Executive ChairmanDeputy Chairman Chief Executive Officer Technical DirectorExecutive Director (Appointed as Independent Non-Executive Director on 1 September 2007 and redesignated as Executive Director on 3 March 2008)Non-Executive Director (Appointed on 3 August 2007)Independent Non-Executive DirectorIndependent Non-Executive DirectorIndependent Non-Executive DirectorExecutive Director(Resigned on 31 January 2007)Finance Director (Resigned on 31 July 2007)

Chairman

(Appointment as above)

(Appointed on 30 November 2007)(Resigned on 30 November 2007)

(Partner in charge since financial year ended 31 December 2003)


The Directors are pleased to present their report to the members together with the audited consolidated financial statements of United Fiber System Limited (the “Company” or “Unifiber”) and its subsidiaries (collectively, the “Group”) and the balance sheet and statement of changes in equity of the Company for the financial year ended 31 December 2007.

Report of the Directors

Directors

The Directors of the Company in office at the date of this report are:

Sven Gösta Thordsson EdströmChia Quee Hock, PBM

Jaka Prasetya Lee Kan YukDominic Tan Eng Kiat Paul Lim Yu NengHo Yew YuenAng Mong Seng, BBM

Ang Lian Hai

In accordance with Articles 107 and 117 of the Company’s Articles of Association, Sven Gösta Thordsson Edström, Lee Kan Yuk, Dominic Tan Eng Kiat and Paul Lim Yu Neng, retire and being eligible, offer themselves for re-election.

Arrangements to enable Directors to acquire shares and debentures

Neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose objects are, or one of whose object is, to enable the Directors of the Company to acquire benefits by means of the acquisition of shares or debentures of the Company or any other body corporate.

Directors’ interest in shares and debentures

The following Directors, who held office at the end of the financial 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:

-

47,634,355

-

-

-

54,634,355

-

-

1,000,000

1,000

3,000,000

1,000,000

1,000,000

1,000

1,000,000

1,000,000

Ordinary shares of the CompanySven Gösta Thordsson Edström

Chia Quee Hock, PBM

Jaka Prasetya

Paul Lim Yu Neng

Name of Director

At the beginning of financial year

or date of appointment

At the end of

financial year

At the beginning of financial year

or date of appointment

At the end of

financial year

Direct interest Deemed interest



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

There was no change in any of the above-mentioned interests between the end of the financial year and 21 January 2008.

Except as disclosed in this report, no Director who held office at the end of the financial year had interests in shares or debentures of the Company or of related corporations, either at the beginning of the financial year, or date of appointment if later, or at the end of the financial year.

Directors’ contractual benefits

Except as disclosed in the financial statements, since the end of the previous financial year, no Director of the Company has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the Director, or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest.

Options

There are no options granted by the Company and its subsidiaries to take up unissued shares in the Company and its related corporations.

Audit Committee

The Audit Committee (“AC”) carried out its functions in accordance with section 201B(5) of the Singapore Companies Act, Cap. 50, including the following

•

•

•

•

•

•

•

•

Reviews the audit plans of the internal and external auditors of the Company and review the internal auditors’ evaluation of the adequacy of the Company’s system of internal accounting controls and the assistance given by the Company’s management to the external and internal auditors;

Reviews the quarterly and annual financial statements and the auditors’ report on the annual financial statements of the Company before their submission to the board of Directors;

Reviews effectiveness of the Company’s material internal controls, including financial, operational and compliance controls and risk management via reviews carried out by the internal auditors;

Meets with the external auditors, other committees, and management in separate executive sessions to discuss any matters that these groups believe should be discussed privately with the AC;

Reviews legal and regulatory matters that may have a material impact on the financial statements, related compliance policies and programs and any reports received from regulators;

Reviews the cost effectiveness and the independence and objectivity of the external auditors;

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

Recommends to the board of Directors the external auditors to be nominated, approves the compensation of the external auditors, and reviews the scope and results of the audit;



Audit Committee (cont’d)

•

•

Reports actions and minutes of the AC to the board of Directors with such recommendations as the AC considers appropriate; and

Reviews interested person transactions in accordance with the requirements of the Singapore Exchange Securities Trading Limited (SGX-ST)’s Listing Manual.

The AC, having reviewed all non-audit services provided by the external auditors to the Group, is satisfied that the nature and extent of such services would not affect the independence of the external auditors. The AC has also conducted a review of interested person transactions.

The AC convened four meetings during the year with full attendance from all members. The AC has also met with internal and external auditors, without the presence of the Company’s management, at least once a year.

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

Auditors

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

On behalf of the board of Directors,

Chia Quee HockDeputy Chairman

Jaka PrasetyaChief Executive Officer

Singapore20 March 2008


Statement by Directors

We, Chia Quee Hock and Jaka Prasetya, being two of the Directors of United Fiber System Limited, do hereby state that, in the opinion of the Directors,

(a)

(b)

the accompanying balance sheets, consolidated profit and loss account, statements of changes in equity, and consolidated cash flow statement together with notes thereto are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2007 and the results of the business, changes in equity and cash flows of the Group and the changes in equity of the Company for the year ended on that date, and

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

On behalf of the board of Directors,

Chia Quee HockDeputy Chairman

Jaka PrasetyaChief Executive Officer



Independent Auditors’ Report

To the Members of United Fiber System Limited

We have audited the accompanying financial statements of United Fiber System Limited (the “Company”) and its subsidiaries (collectively, the “Group”), which comprise the balance sheets of the Group and the Company as at 31 December 2007, the statements of changes in equity of the Group and the Company, the profit and loss account and statement of cash flows for the Group for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of the Singapore Companies Act, Cap 50 (the “Act”) and Singapore Financial Reporting Standards. This responsibility includes:

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical require-ments and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorized used or disposition; and transactions are properly authorized and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets:

selecting and applying appropriate accounting policies; and

making accounting estimates that are reasonable in the circumstances.

(a)

(b)

(c)


(i)

(ii)

(a)

(b)

To the Members of United Fiber System Limited (cont’d)

Opinion

In our opinion,

Without qualifying our opinion, we draw attention to Note 42 to the financial statements which highlights the fol-lowing:

the consolidated financial 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 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 31 December 2007 and the results, changes in equity and cash flows of the Group and the changes in equity of the Company for the year ended on that date; and

the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.

The Company incurred certain expenses amounting to US$7.2 million as at 31 December 2007 for the proposed acquisition of a pulp mill, PT Kiani Kertas in Indonesia (“PT KK”). The Company has deferred these expenses and classified as prepayments on the Balance Sheets of the Group and Company as at 31 December 2007.

The Company used to manage the operations of the PT KK pulp mill, pursuant to an Operation Management Agreement (“OMA”) entered into on 25 July 2005. Under the OMA, the Company injected working capital funding into the pulp mill, of which, US$28.2 million remains outstanding as at 31 December 2007. This amount has been classified as “Advances to PT KK” on the Balance Sheet of the Group. Pursuant to the terms of the Share Purchase Agreement (“SPA”) dated 5 December 2005 with the vendors of PT KK, all amounts injected by the Company into PT KK are recoverable from PT KK. If not received, uponacquisition of PT KK, these amounts will be offset against the purchase consideration as stipulated under this agreement.

Discussions on the potential transaction on PT KK are ongoing. In the event that the proposed acquisition of PT KK is unsuccessful, the deferred expenses (US$7.2 million) will be written off to the Profit and Loss Account and the Advances to PT KK (US$28.2 million) may have to be reassessed.

Independent Auditors’ Report

ERNST & YOUNGPublic Accountants andCertified Public Accountants Singapore



Consolidated Profit and Loss Accountfor the year ended 31 December 2007

(In United States dollars)

RevenueCost of sales

Gross profitOther income

Selling and distribution expenses

Administrative expenses

Other operating expenses

Finance costs

Profit before taxTax expenses

Profit for the year

Attributable to:Equity holders of the Company

Minority interests

Earnings per share attributable to equity holders of the CompanyBasic (in cents per share)

Diluted (in cents per share)

Notes

4

5

6

7

8

9

9

2007

US$’000

82,925

(77,530)

5,395

27,528

(1,760)

(11,643)

(5,192)

(5,175)

9,153

(8,236)

917

917

-

917

0.04

0.04

2006

US$’000

125,208

(112,938)

12,270

22,156

(5,705)

(9,015)

(3,862)

(6,676)

9,168

(6,673)

2,495

2,495

-

2,495

0.12

0.12

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


Balance Sheetsat 31 December 2007

Group Company


Non-Current AssetsForest asset

Property, plant and equipment

Amounts due from subsidiaries

Investments in subsidiaries

Investments in associates

Investment property

Other investments

Club membership

Deferred tax assets

Goodwill on consolidation

Current AssetsConstruction work-in-progress

Completed properties held for sale

Inventories

Trade and other receivables

Cash on hand and at banks

Current LiabilitiesConstruction progress billings in excess of costs

Trade and other payables

Hire purchase creditors

Provision for taxation

Short term loans & borrowings

Net Current Assets

Notes

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

20

25

26

27

2007

US$’000

249,507

46,146

-

-

-

-

59

69

79

20,400

316,260

326

1,369

9,466

65,135

6,733

83,029

7,198

45,697

116

1,220

15,174

69,405

13,624

2006

US$’000

226,188

48,194

-

-

-

404

51

102

806

19,163

294,908

438

1,138

815

67,042

34,974

104,407

5,965

62,886

98

856

32,270

102,075

2,332

2007

US$’000

-

249

80,342

130,827

-

-

59

-

-

-

211,477

-

-

-

8,131

1,382

9,513

-

8,710

-

672

-

9,382

131

2006

US$’000

-

5,593

16,258

122,898

-

-

51

-

-

-

144,800

-

-

-

39,779

29,300

69,079

-

11,066

-

33

17,111

28,210

40,869



Balance Sheets (cont’d)at 31 December 2007

Group Company


Non-Current LiabilitiesDeferred tax liabilities

Non-current payables


Derivative Liability

Long term loans & borrowings

Net Assets

Equity Attributable to Equity Holders of the CompanyShare capital

Reserves

Minority interests

Total Equity

Notes

18

28

26

29

29

30

2007

US$’000

67,143

-

121

405

23,951

91,620

238,264

209,560

28,703

238,263

1

238,264

2006

US$’000

59,830

-

178

-

2,990

62,998

234,242

209,560

24,681

234,241

1

234,242

2007

US$’000

-

3,050

-

405

23,951

27,406

184,202

209,560

(25,358)

184,202

-

184,202

2006

US$’000

-

2,771

-

-

-

2,771

182,898

209,560

(26,662)

182,898

-

182,898



Statements of Changes in Equityfor the year ended 31 December 2007



Attributable to equity holders of the Company

ShareCapital

(Note 30)US$’000

2007Group

209,560

-

-

-

209,560

ForeignCurrency

TranslationUS$’000

(1,916)

3,105

-

3,105

1,189

OtherReserves (1)

US$’000

(62,479)

-

-

-

(62,479)

AccumulatedProfit

US$’000

89,076

-

917

917

89,993

TotalReserves

US$’000

24,681

3,105

917

4,022

28,703

234,242

3,105

917

4,022

238,264

TotalEquity

US$’000

At 1 January 2007

Net effect of exchange differences

Profit for the year

Total recognised income and

expenses for the year

At 31 December 2007

MinorityInterests

US$’000

1

-

-

-

1

(1) Other reserves comprises equity-settled liability for acquisition of ASL group of companies in year 2002.


US$’000



ShareCapital

(Note 30)US$’000

2006Group (cont’d)

114,945

-

-

-

31,728

64,189

(1,302)

209,560

ForeignCurrency


(3,120)

1,204

-

1,204

-

-

-

(1,916)

OtherReserves (1)

US$’000

(62,479)

-

-

-

-

-

-

(62,479)

AccumulatedLosses

US$’000

86,581

-

2,495

2,495

-

-

-

89,076

TotalReservesUS$’000

20,982

1,204

2,495

3,699

-

-

-

24,681

167,656

1,204

2,495

3,699

-

64,189

(1,302)

234,242

TotalEquity

At 1 January 2006

Net effect of exchange

differences

Profit for the year

Total recognised income

and expenses for the year

Transfer of share premium

reserve to share capital

(Note 30)

Issuance of shares

Expenses incurred on

issuance of shares

At 31 December 2006


Statements of Changes in Equity (cont’d)for the year ended 31 December 2007

31,728

-

-

-

(31,728)

-

-

-

SharePremiumUS$’000

Minority InterestsUS$’000

1

-

-

-

-

-

-

1





ShareCapital

(Note 30)US$’000

2007Company

209,560

-

-

-

209,560

ForeignCurrency


9,594

11,381

-

11,381

20,975

OtherReserves (1)

US$’000

5,826

-

-

-

5,826

AccumulatedLosses

US$’000

(42,082)

-

(10,077)

(10,077)

(52,159)


(26,662)

11,381

(10,077)

1,304

(25,358)

US$’000

182,898

11,381

(10,077)

1,304

184,202

TotalEquity

At 1 January 2007


Loss for the year



At 31 December 2007







2006Company (cond’t)

ShareCapital

(Note 30)US$’000

114,945

-

-

-

31,728

64,189

(1,302)

209,560

ForeignCurrency


99

9,495

-

9,495

-

-

-

9,594

OtherReserves (1)

US$’000

5,826

-

-

-

-

-

-

5,826

AccumulatedLosses

US$’000

(36,265)

-

(5,817)

(5,817)

-

-

-

(42,082)


(30,340)

9,495

(5,817)

3,678

-

-

-

(26,662)

116,333

9,495

(5,817)

3,678

-

64,189

(1,302)

182,898

US$’000

TotalEquity

At 1 January 2006


Loss for the year



Transfer of share premium to share

capital (Note 30)

Issuance of shares

Expenses incurred on issuance of

shares

At 31 December 2006




31,728

-

-

-

(31,728)

-

-

-

SharePremiumUS$’000


Consolidated Statement of Cash Flowsfor the year ended 31 December 2007

2007

US$’000

2006

US$’000

Cash flows from operating activities

Profit before tax

Adjustments for:

Depreciation and amortization

Gain arising from increase in fair value less estimated point-of-sale costs

of forest asset

Gain arising from increase in fair value of financial instruments

Interest expenses

Interest income

Impairment in value of property, plant and equipment

Impairment in value of investment property

Impairment in club membership

Reversal of value of other investments

Reversal of impairment in value of completed properties

held for sale

Gain on disposal of investment property

Gain on disposal of property, plant and equipment

Property, plant and equipment written-off

(Gain)/ loss on disposal of other investments

Net exchange differences

Operating loss before working capital changes

(Increase)/ decrease in completed properties held for sale

Decrease in construction work-in-progress, net of construction progress

billings in excess of costs

(Increase)/ decrease in inventories

Decrease/ (increase) in trade and other receivables

(Decrease)/ increase in trade and other payables

Cash flows used in operations

Tax paid

Interest paid

Net cash flows used in operating activities

9,153

2,525

(23,291)

(1,693)

5,175

(379)

-

-

38

(23)

-

(20)

(94)

50

(31)

1,457

(7,133)

(231)

1,177

(3,869)

6,232

(19,734)

(23,558)

(254)

(5,175)

(28,987)

9,168

344

(21,329)

-

6,676

(368)

746

32

-

(32)

(13)

-

(323)

21

6

88

(4,984)

1,019

3,109

1,280

(19,702)

7,516

(11,762)

(10)

(6,676)

(18,448)




Consolidated Statement of Cash Flows (cont’d)for the year ended 31 December 2007

2007

US$’000

2006

US$’000

Cash flows from investing activities

Addition in costs of forest asset

Interest received

Proceeds from disposal of property, plant and equipment

Proceeds from disposal of other investments

Proceeds from disposal of investment property

Purchase of property, plant and equipment

Net cash flows used in investing activities

Cash flows from financing activities

Proceeds from issuance of convertible bond

Proceeds from issuance of ordinary shares

(Repayment)/ proceeds from bank borrowings, net

Repayment of hire purchase, net

(Increase)/ decrease of pledge in fixed deposits

Net cash flows from financing activities

Effect of exchange rate changes on cash

and cash equivalents

Net (decrease)/ increase in cash and cash equivalents

Cash and cash equivalents at 1 January

Cash and cash equivalents at 31 December

(2,949)

379

5,897

52

450

(6,998)

(3,169)

25,000

-

(22,211)

(56)

(68)

2,665

1,618

(27,873)

33,223

5,350

(815)

380

511

133

-

(997)

(788)

-

31,639

13,760

(44)

1,474

46,829

92

27,685

5,538

33,223


Notes 31



Notes to the Financial Statement31 December 2007

1.

2.

2.1

2.2

Corporate information

United Fiber System Limited (“Unifiber” or the “Company”) is a limited liability company, incorporated and domiciled in the Republic of Singapore. The Company’s shares are publicly traded on the Singapore Exchange (SGX-ST).

The registered office of the Company is located at 47 Scotts Road #07-03/04, Goldbell Towers, Singapore 228233.

The principal activities of the Company are those of an investment holding company and provision of manage-ment services to entities within the Unifiber Group of companies. The principal activities of the subsidiaries are set out in Note 3 to the financial statements.

Summary of significant accounting policies

Basis of preparation

The consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company have been prepared in accordance with Singapore Financial Reporting Standards (“FRS”).

The financial statements have been prepared on a historical cost basis except as disclosed in the accounting policies below.

The financial statements are presented in United States Dollars (“USD” or “US$”).

Changes in accounting policies

Except for the changes in accounting policies discussed below, the accounting policies have been consistently applied by the Group and the Company and are consistent with those used in the previous financial year,

a) Change in accounting policy for forest asset The fair value of the forest assets for the financial year ended 31 December 2007 includes the fair value of the immature forest asset, in addition to the fair value of the mature forest assets. Immature forest assets refer to trees less than 5 years of age. The Forestry and Pulp Division re-commenced planting development in October 2006 with full scale planting and replanting activities conducted throughout 2007. Accordingly, management has fair valued these immature forest assets as prescribed by FRS 41: Agriculture. The effect of the change led to an increase in fair value less estimated point of sale costs of forest assets by US$4.5 million recognised in 2007 (2006: immaterial)


2.

2.2

2.3

Summary of significant accounting policies

Changes in accounting policies (cont’d)

Future changes in accounting policies

The Group has not adopted the following FRS and INT FRS that have been issued but not yet effective:

FRS 23 : Amendment to FRS 23, Borrowing Costs

FRS 108 : Operating Segments

INT FRS 111 : Group and Treasury Share Transactions

INT FRS 112 : Service Concession Arrangements

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

Notes to the Financial Statements31 December 2007

b) Change in estimated useful life of property, plant and equipment.

The useful life and residual value of property, plant and equipment have been revised as follow effective 1 January 2007:

Leasehold land and buildings includes buildings, forestry and fire protection infrastructures. Plant and machinery includes field equipment.

The revised depreciation rates are applied prospectively without adjustments to previously reported amounts. This change has increased current year depreciation expenses of the Group and Company by approximately US$493,000 and US$ nil respectively.


Leasehold land and buildingsPlant and machinery Motor vehiclesFurniture and fittingsOffice equipment and computers

Revised

15 to 50 years 5 to 15 years5 years5 years3 years

Previous

15 to 50 years5 to 10 years5 to 10 years5 to 10 years3 to 10 years

Effective date (Annual periods beginning or after)

1 January 2009

1 January 2009

1 March 2007

1 January 2008



2.

2.4

Summary of significant accounting policies (cont’d)

Significant accounting judgments and estimates

The preparation of the Group’s financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates would result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future.

Judgments made in applying accounting policies

In the process of applying the Group’s accounting policies, management has made the following judgments, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements:

Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

a)

b)

Income taxes

The Group has exposure to income taxes in numerous jurisdictions. Significant judgment is involved in determining the Group-wide provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The carrying amount of the Group’s tax payables and deferred tax liabilities at 31 December 2007 was US$1,220,000 (2006: US$856,000) and US$67,143,000 (2006: US$59,830,000) respectively.

Proposed acquisition of PT Kiani Kertas (“PT KK”)

The Directors of the Company continue to view the opportunity to acquire PT KK as a positive strategic move towards achieving the Group’s vision to be a major player in the international market pulp industry. As PT KK is an important asset of the vendors, the vendors have to take all the time they require to evaluate their options, which includes the sale to Unifiber. The Directors believe that this process for a major acquisition in Indonesia is to be expected and is not unusual. On this basis, the Company has deferred expenses amounted to US$7.2 million (2006: US$7.2 million) as at 31 December 2007. Further, the Directors are of the opinion that Advances to PT KK amounting to US$28.2 million (2006: US$28.2 million) are recoverable. Note 42 to the financial statements provides further details on the proposed acquisition of PT KK.



Significant accounting judgments and estimates (cont’d)

Impairment of goodwill

The Group assesses whether there are any indicators of impairment for goodwill at each reporting date. Goodwill is tested for impairment annually and at other times when such indicators exist.

When value in use calculations are undertaken, management must estimate the expected future cash flows from the cash-generating unit and choose a suitable discount rate in order to calculate the present value of the cash flows.

The carrying amount of the Group’s goodwill at 31 December 2007 was US$20,400,000 (2006: US$19,163,000). More details are given in Note 19.

Useful lives of property, plant and equipment

Property, plant and equipment is depreciated on a straight-line basis over the property, plant and equipment’s estimated economic useful lives. Management’s assessment of the useful lives of prop-erty, plant and equipment are stated in Note 2.2(b). Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore, future depreciation charges could be revised. The carrying amount of the Group’s and Company’s property, plant and equipment at the balance sheet date is disclosed in Note 11 to the financial statements.

Impairment of loans and receivables

The Group assesses at each balance sheet date whether there is any objective evidence that loans and receivables are impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.

Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. The carrying amount of the Group’s loans and receivables at the balance sheet date is disclosed in Note 23 to the financial statements.

Construction contracts

The Group recognises contract revenue by reference to the stage of completion of the contract activity at the balance sheet date, when the outcome of a construction contract can be estimated reliably. The stage of completion is measured by reference to architect certification. When reference to architect certification of work performed is not available in a timely manner, the stage of completion is determined by reference to the past experience and knowledge of the internal quantity surveyors. Assumptions are required to estimate the stage of completion. The estimates are made based on past experience and knowledge of the quantity surveyors. The carrying amounts of assets and liabilities arising from construction contracts at the balance sheet date are disclosed in Note 20 to the financial statements.


2.

2.4

c)

d)

e)

f)



Significant accounting judgments and estimates (cont’d)

Functional currency, foreign currency and presentation currency

Allowance for inventories obsolescence

The Group recognises allowance on inventory obsolescence when inventory are identified as obso-lete. Obsolescence is based on the physical and internal condition of inventory. Obsolescence is also established when inventory are no longer marketable. Obsolete goods are charged to profit and loss account. The Group believes that such estimates represent a fair charge of the level of inven-tory obsolescence in a given year. For the financial year ended 31 December 2007, no allowance for inventories is made (2006: nil)

Functional currency

Management has determined Singapore Dollars (“SGD” or “S$”) as currency of the Company as a large portion of its revenue and cost are denominated in SGD.

Foreign currency

Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates.

Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Exchange differences arising on the settlement of monetary items or on translating monetary items at the balance sheet date are recognised in the profit and loss account except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign subsidiaries, which are recognised initially in equity as foreign currency translation reserve in the consolidated balance sheet and recognised in the consolidated profit and loss account on disposal of the subsidiary. On consolidation, the assets and liabilities of foreign operations are translated into SGD at the rate of exchange ruling at the balance sheet date and their profit and loss account are translated at the average exchange rate for the year. The exchange differences arising on the translation are taken directly to a separate component of equity as foreign currency translation reserve. On disposal of a foreign operation, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the profit and loss account.


2.

2.4

2.5

g)

a)

b)



Functional currency, foreign currency and presentation currency (cont’d)

Subsidiaries and basis of consolidation


2.

2.5

2.6

Presentation currency The financial statements are presented in United States Dollars (“USD”) as the functional currency of most subsidiaries within the Forestry and Pulp Division is pre-dominantly in USD. As the core investment of the Group is in Forestry and Pulp Division and this division is expected to contribute significantly to the Group’s results in the future, the financial statement, including comparatives of the Group and Company have been translated from SGD to USD for presentation purpose.

The financial statements are translated from SGD to USD using the following procedures:

All resulting exchange differences are recognised in a separate component of equity as foreign currency translation reserves.

Subsidiaries

A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities.

In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less impairment losses.

Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the balance sheet date. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied to like transactions and events in similar circumstances.

All intra-group balances, transactions, income and expenses and unrealized gain and losses resulting from intra-group transactions, are eliminated in full.

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

Acquisitions of subsidiaries are accounted for by applying the purchase method. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Adjustments to those fair values relating to previously held interests are treated as a revaluation and recognised in equity.

c)

a)

b)

•

•

Assets and liabilities for each balance sheet presented are translated at the closing rate ruling at that balance sheet date; andIncome and expenses for each income statement are translated at average exchange rates for the year, which approximates the exchange rates at the dates of the transactions.




Subsidiaries and basis of consolidation (cont’d)

Transaction with minority interests

Minority interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group and are presented separately in the consolidated profit and loss account and within equity in the consolidated balance sheet, separately from the parent shareholders’ equity. Transactions with minority interests are accounted for using the entity concept method, whereby, transactions with minority interests are accounted for as transactions with equity holders. On acquisition of minority interests, the difference between the consideration and book value of the share of the net assets acquired is reflected as being a transaction between owners and recognised directly in equity. Gain or loss on disposal to minority interests is recognised directly in equity.

Associates

An associate is an entity, not being a subsidiary or a joint venture, in which the Group has significant influence. The associate is equity accounted for from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associate.

The Group’s investments in associates are accounted for using the equity method. Under the equity method, the investment in associate is measured in the balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the associates. Goodwill relating to an associate is included in the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the associate’s identifiable assets, liabilities and contingent liabilities over the cost of the investment is deducted from the carrying amount of the investment and is recognised as income in the determination of the Group’s share of the associate’s profit or loss in the period in which the investment is acquired.

When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

The financial statements of the associates are prepared as of the same reporting date as the Company. Where necessary, adjustments are made to bring the accounting policies into line with those of the Group.

In the company’s separate financial statements, investments in associates are accounted for at cost less impair-ment losses.

2.

2.6

2.7

2.8

Basis of consolidation (cont’d)

Any excess of the cost of the business combination over the Group’s share in the net fair value of the acquired subsidiary’s identifiable assets, liabilities and contingent liabilities is recorded as goodwill on the balance sheet. Accounting policy for goodwill is set out in Note 2.13.

Any excess of the Group’s share in the net fair value of the acquired subsidiary’s identifiable assets, liabilities and contingent liabilities over the cost of the business combination is recognised in the profit and loss account on the date of acquisition.

b)




Joint ventures

A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control, where the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control. The Group recognises its interest in the joint venture using proportionate consolidation. The Group combines its share of each of the assets, liabilities, income and expenses of the joint venture with the similar items, line by line, in its consolidated financial statements. The joint venture is proportionately consolidated from the date the Group obtains joint control until the date on which the Group ceases to have joint control over the joint venture.

The financial statements of the joint venture are prepared as of the same reporting date as the Company. Where necessary, adjustments are made to bring the accounting policies into line with those of the Group.

In the company’s separate financial statements, investments in joint ventures are accounted for at cost less any impairment loss.

Forest asset

Forest asset is measured at its fair value less estimated point-of-sale costs. The fair value of the forest asset is estimated based on market price of the standing stock of forest asset in its present location and condition.

Immature forest asset refers to forest asset under 5 years of age. Mature forest asset refers to forest asset at 5 years of age or more and is considered merchantable.

Any gain or loss arising from changes in fair value less estimated point-of-sale costs of forest asset is recognised in the profit and loss account for the period in which it arises.

Deferred tax liability arising from the temporary difference between the tax base of forest asset and its carrying amount is accounted for in accordance with the accounting policy stated in Note 2.28(b). Annual valuation by an independent professional valuer is carried out to ascertain the fair value less estimated point-of-sale costs of forest asset.


All items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.

Subsequent to recognition, plant and equipment and furniture and fixtures are measured at cost less ac-cumulated depreciation and accumulated impairment losses. Leasehold land and buildings are measured at fair value less accumulated depreciation on buildings and impairment losses recognised after the date of the revaluation. Valuations are performed with sufficient regularity to ensure that the carrying amount does not differ materially from the fair value of the land and buildings at the balance sheet date.

2.

2.9

2.10

2.11




Property, plant and equipment (cont’d)

Depreciation is computed on a straight-line basis over the estimated useful lives as follows:

Leasehold land and buildings 15 to 50 years Plant and machinery 5 to 15 yearsMotor vehicles 5 yearsFurniture and fittings 5 yearsOffice equipment and computers 3 years

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

Leasehold land and buildings include buildings, forestry and fire protection infrastructures. Plant and ma-chinery includes field equipment.

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

The residual value, useful life and depreciation method are reviewed at each financial year-end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on derecognition of the assets is included in the profit and loss account in the year the asset is derecognised.

Investment properties

Investment properties are initially recorded at cost. Subsequent to recognition, investment properties are measured at fair value, which reflects market conditions at the balance sheet date. Professional valuation is performed once every three years. Gains or losses arising from changes in the fair value of investment properties are included in the profit and loss account in the year which they arise.

Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in the profit and loss account in the year of retirement or disposal.

Goodwill

Goodwill acquired in a business combination is initially measured at cost. Following initial recognition, goodwill is measured at cost less accumulated impairment losses. Goodwill is reviewed for impairment, annually or more frequently if events and circumstances indicate that the carrying value may be impaired.

For the purpose of impairment testing, goodwill acquired is allocated to each of the Group’s cash-generating units that are expected to benefit from the synergies of the combination.

2.

2.11

2.12

2.13




Goodwill (cont’d)

The cash-generating unit to which goodwill has been allocated is tested for impairment annually and whenever there is an indication that the cash-generating unit may be impaired, by comparing the carrying amount of the cash-generating unit, including the allocated goodwill, with the recoverable amount of the cash-generating unit. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised in the profit and loss account. Impairment losses recognised for goodwill are not reversed in subsequent periods.

Where goodwill forms part of a cash-generating unit and part of the operation within that cash-generating unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative fair values of the operation disposed of and the portion of the cash-generating unit retained.

Goodwill and fair value adjustments arising on the acquisition of foreign operations on or after 1 January 2005 are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated in accordance with the accounting policy set out in Note 2.5.

Goodwill and fair value adjustments which arose on acquisition of foreign operations before 1 January 2005 are deemed to be assets and liabilities of the Company and are recorded in SGD at the rates prevailing at the date of acquisition.

Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment assessment for an asset is required, the Group makes an estimate of the asset’s recoverable amount.

An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets. In assessing value in use, the estimated future cash flows expected to be generated by the asset are discounted to their present value. Where the carrying amount of an asset exceeds its recoverable amount, the asset is written down to its recoverable amount.

Impairment losses are recognised in the profit and loss account except for assets that are previously revalued where the revaluations was take to equity. In this case the impairment is also recognised in equity up to the amount of any previous revaluation.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. A previously recognised impairment loss is reversed 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. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in the profit and loss account unless the asset is measured at revalued amount, in which case the reversal is treated as a revaluation increase.

2.

2.13

2.14



Financial assets

Financial assets are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument.

When financial assets are recognised initially, they are measured at fair value plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs.

A financial asset is derecognised where the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that has been recognised directly in equity is recognised in the profit and loss account.

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

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and at banks, unsecured fixed deposits and unsecured bank overdrafts repayable on demand that form an integral part of the Group’s cash management.


2.

2.15

2.16

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets classified as held for trading. Financial assets classified as held for trading are derivatives (including separated embedded derivatives) or are acquired principally for the purpose of selling or repurchasing it in the near term.

Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value of the financial assets are recognised in the income statement. Net gains or net losses on financial assets at fair value through profit or loss include exchange differences, interest and dividend income.

Loans and receivables

Financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit and loss account when the loans and receivables are derecognised or impaired, and through the amortisation process.

The Group classifies the following financial assets as loans and receivables:

Cash and cash equivalents (Note 2.16), andTrade and other receivables.

••

a)

b)




Impairment of financial assets

The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset is impaired.

Construction work-in-progress

Construction work-in-progress comprises uncompleted building contracts. It is valued at cost plus a propor-tion of estimated profits earned to date less progress billings received or receivable, using the percentage of completion method. The stage of completion is determined by reference to architect certification. When reference to architect certification is not available in a timely manner, the stage of completion is determined by reference to the past experience and knowledge of the internal quantity surveyors. Full provision is made for estimated losses to completion where applicable.

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

2.

2.17

2.18

Assets carried at cost

If there is objective evidence (such as significant adverse changes in the business environment where the issuer operates, probability of insolvency or significant financial difficulties of the issuer) that an impairment loss on financial assets carried at cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed in subsequent periods.

Assets carried at amortised cost

If there is objective evidence that an impairment loss on financial assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the assets’ carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. The impairment loss is recognised in the profit and loss account.

When the asset becomes uncollectible, the carrying amount of impaired financial assets is reduced directly or if an amount was charged to the allowance account, the amounts charged to the allowance account are written off against the carrying value of the financial asset.

To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.

If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impair-ment loss is reversed, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in the profit and loss account.

a)

b)





Completed properties held for sale are stated at the lower of cost and net realizable value. Cost includes land, development and all other incidental expenditure, including interest incurred during the period of construction. Net realizable value represents the estimated selling price less costs to be incurred in selling the property.

Inventories

Inventories are stated at the lower of cost and net realizable value. Costs incurred in bringing the inventories to their present locations and conditions are accounted for as follows:

Borrowing costs

Borrowing costs are recognised in the profit and loss account as incurred except to the extent that they are capitalized. Borrowing costs are capitalized if they are directly attributable to the acquisition, construction or production of a qualifying asset. Capitalization 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 incurred. Borrowing costs are capitalized until the assets are ready for their intended use or sale.

Financial liabilities

Financial liabilities are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument.

Financial liabilities are recognised initially at fair value, plus, in the case of financial liabilities other than de-rivatives, directly attributable transaction costs.

Subsequent to initial recognition, all financial liabilities are measured at amortised cost using the effective interest method, except for derivatives, which are measured at fair value.

A financial liability is derecognised when the obligation under the liability is extinguished. For financial liabilities other than derivatives, gains and losses are recognised in the profit and loss account when the liabilities are derecognised or impaired, and through the amortisation process. Any gains or losses arising from changes in fair value of derivatives are recognised in the profit and loss account. Net gains or losses on derivatives include exchange differences.

2.19

2.20

2.21

2.22

Raw materials refers to purchase cost on a first-in-first-out basis

Finished goods and work in progress refers to costs of direct materials and labor and a proportion of manufacturing overheads based on normal operating capacity. These costs are assigned on a first-in-first-out basis.

Agricultural produce comprises logs. Agricultural produce at the point of harvest is measured on initial recognition at its fair value less estimated point-of-sale costs at Group level.

a)

b)

c)




Interest bearing loans and borrowings

Borrowings

Borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs.

After initial recognition, borrowings are subsequently measured at amortized cost using the effective interest rate method.

Gains and losses are recognised in the profit and loss account when the liabilities are derecognised as well as through the amortization process.

Convertible bonds

The conversion option of convertible bonds exhibits characteristics of an embedded derivative. The derivative is separated from its liability component. On initial recognition, the derivative component of the convertible bond is measured at fair value and presented as part of the derivative financial instruments. Any excess of proceeds over the amount initially recognised as the derivative component is recognised as the liability component. The liability component is measured at amortized cost using the effective interest rate method. Transaction costs relating to the liability component are recognised initially as part of the liability.

Derivative liability

Any gains or losses arising from changes in fair value on derivative financial instruments are taken to the profit and loss account for the year.

Provisions

Provisions are recognised when the Group has a present obligation, as a result of a past event, it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be estimated reasonably.

Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

Employee benefits

2.

2.23

a)

b)

2.24

2.25

Defined contribution plans

The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. Contributions to defined contribution pension schemes are recognised as an expense in the period in which the related service is performed.

a)


2.25

2.26


Employee benefits (cont’d)

Employee leave entitlement

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

Leases

As lessee

Finance leases, which transfer to the Group substantially all the risks and rewards incidental to owner-ship of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and re-duction of the lease liability so as to achieve constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit and loss account. Contingent rents, if any, are charged as expenses in the periods in which they are incurred.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.

Operating lease payments are recognised as an expense in the profit and loss account on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.

As lessor

Leases where the Group retains substantially all the risks and rewards of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income. The accounting policy for rental income is set out in Note 2.27(f).

b)

a)

b)




Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of consideration received or receivable.

2.

2.27

Construction contracts

When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs are recognised as revenue and expenses, respectively, by reference to architect certification. When reference to architect certification for work performed is not available in a timely manner, the stage of completion is determined by reference to the past experience and knowledge of the internal quantity surveyors. An expected loss on the construction contract is recognised as an expense im-mediately when it is probable that total contract costs will exceed total contract revenue.

Revenue arising from fixed price contracts is recognised in accordance with the percentage of com-pletion method. The stage of completion is measured by reference to professional surveys of work performed.

Sale of goods

Revenue from sale of goods is recognised upon the transfer of significant risks and rewards of ownership of the goods to the customer. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.

Interest income

Interest income is recognised using the effective interest method.

Dividend income

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

Management fee

Management fee is recognised when corporate services are rendered.

Rental income

Rental income arising on investment properties is accounted for on a straight-line basis over the lease terms. The aggregate costs of incentives provided to lessees are recognised as a reduction of rental income over the lease term on a straight-line basis.

a)

b)

c)

d)

e)

f)


Current tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantially enacted by the balance sheet date. Current taxes are recognised in the profit and loss account except that tax relating to items recognised directly in equity is recognised directly in equity.

Deferred tax

Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all temporary differences, except:

In respect of deductible temporary differences and carry-forward of unused tax credits and unused tax losses, if it is not probable that taxable profit will be available against which the deductible temporary difference and carry-forward of unused tax credits and unused tax losses can be utilised.

The carrying amount of deferred tax asset is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognised deferred tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date.

Deferred taxes are recognised in the profit and loss account except that deferred tax relating to items recognised directly in equity is recognised directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition.



Income taxes

2.

2.28

a)

b)

Where the deferred tax 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 the accounting profit nor taxable profit or loss; and

In respect of temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled by the group and it is probable that the temporary differences will not reverse in the foreseeable future; and

•

•




Income taxes (cont’d)

Segment reporting

A business segment is a distinguishable component of the Group that is 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 a distinguishable component of the Group that is engaged in providing products or services within a particular economic environment and that is subject to risks and returns that are different from those of components operating in other economic environments.

2.

2.28

2.29

Sales tax

Revenues, expenses and assets are recognised net of the amount of sales tax except:

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

c)

Where the sales tax incurred in a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

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

•

•



Group companies

Details of the subsidiaries are as follows:

3.

Held by the Company

Poh Lian Construction Pte Ltd (1)

Poh Lian Development Pte Ltd (1,4)

Poh Lian International Pte Ltd (4,6)

Poh Lian Trading Pte Ltd (1, 4)

Yew Hock Trading Pte Ltd (1,4)

Unifiber Holding Pte Ltd (1,4)

Sin Poh Lian Sdn Bhd (3a)

Anrof Singapore Ltd (2)

Poh Lian (Cambodia) Ltd (4,5)

Able Advance Ltd (4,5)

Name of company

Building contractor &

property developer

Dormant

Dormant

Dormant

Dormant

Investment holding

Investment holding

Investment holding

Dormant

Trading

Principal activities

Singapore

Singapore

Singapore

Singapore

Singapore

Singapore

Malaysia

Mauritius

Cambodia

British

Virgin

Islands

Country ofincorporation

5,874

-

-

-

-

-

-

124,953

-

-

130,827

2007US$’000

5,517

-

-

-

-

-

-

117,381

-

-

122,898

2006US$’000

Cost lessimpairment

100

100

100

100

100

100

100

100

100

100

2007%

100

100

100

100

100

100

100

100

100

100

2006%

Percentage of equity held

by the Group



Group companies (cont’d)

Details of the subsidiaries and associates are as follows:

3.

Held through subsidiaries

Subsidiaries

Poh Lian Realty Pte Ltd (1)

Poh Lian Construction Scaffolding Pte Ltd (1,7)

Fortune Nest Sdn Bhd (3a)

Dongshan Poh Lian Real Estate Co. Ltd (3b)

PT Hutan Rindang Banua (2)

PT Marga Buana Bumi Mulia (2)

PT Mangium Anugerah Lestari (2)

Pacificwood Investment Ltd (2)

Shinning Spring Resources Ltd (5)

Associates

Magnate Property Sdn Bhd (3a)

Poh Lian Training & Management

(Bangladesh) Pvt Ltd (5)

Name of company

Property development

Construction services

Property investment

Property investment

Forestry operation

Development of a mill

Manufacturing

Investment holding and

trading

Investment holding

Property investment

Dormant

Principal activities

Singapore

Singapore

Malaysia

People’s

Republic of

China

Indonesia

Indonesia

Indonesia

Mauritius

British

Virgin Islands

Malaysia

Bangladesh

Country ofincorporation

100

100

100

100

100

100

99

100

100

48

30

2007%

100

-

100

100

100

100

99

100

100

48

30

2006%

Percentage of equity held

by the Group

(1) Audited by Ernst & Young, Singapore(2) Audited by member firms of Ernst & Young Global in the respective countries(3) Audited by other firms(a) S.C. Tang & Associates, Malaysia(b) Dongshan Yongdexin Certified Public Accountants, People’s Republic of China(4) Cost of investment does not exceed US$1,000(5) Exempted/not required to be audited by the law of its country of incorporation(6) In the process of striking off(7) The company is incorporated on 19 September 2007



Revenue4.

81,520

-

-

1,337

68

-

82,925

2007US$’000

88,730

893

35,370

-

173

42

125,208

2006US$’000

Group

Construction contract revenue

Sale of completed properties

Sale of pulp product

Sale of woodchips

Rental income

Others

Other income5.

23,291

1,693

2,544

27,528

2007US$’000

21,329

-

827

22,156

2006US$’000

Group

Gain arising from increase in fair value less

estimated point-of-sale costs of forest asset and logs (Note 10)

Net fair value gain on financial instruments

Others (1)

(1) Included in Others is an amount of US$1.7 million pertaining to the waiver of interest and penalty related to the Reforestation Loan. Note 40 to the financial statements provides additional information on the reforestation loan.

Finance costs6.

3,687

119

-

1,120

210

39

5,175

2007US$’000

2,593

143

839

250

2,472

379

6,676

2006US$’000

Group

Bank loans interest expense

Bank overdrafts interest expense

Marketing agent commission

Amortization of transaction cost

Financing commitment fees

Others



Profit before tax

Profit before tax is derived after charging/ (crediting) the following:

7.

Group

1,477

148

2,436

192

-

(77)

773

(94)

(20)

-

-

-

(23)

(379)

(31)

50

-

38

246

3,442

2007US$’000

44

73

344

170

13

(9)

1,470

(323)

-

(1)

746

32

(32)

(368)

6

21

(13)

-

192

2,993

2006US$’000

Allowance for doubtful debts

Auditors’ remuneration – non-audit services

Depreciation and amortization (Note 11(e))

Directors’ fees

- current

- under provision in prior years

Foreign exchange (gain)/ loss

- realized

- unrealized

Gain on disposal of property, plant and equipment

Gain on disposal of investment property

Gross dividend income from quoted investments

Impairment in value of property, plant and equipment (Note 11(f))

Impairment in value of investment property

Reversal of value of other investments

Interest income from deposits

(Gain)/ loss on disposal of other investments

Property, plant and equipment written-off (Note 11)

Reversal of completed properties held for sale

Impairment in club membership

Staff costs

- contribution to defined contribution plans

- salaries, wages, bonuses and other costs



Tax expenses8.Group

235

1

(220)

8,009

8,025

211

8,236

2007US$’000

11

3

-

5,976

5,990

683

6,673

2006US$’000

Current tax

- Singapore

- Overseas

Deferred tax

- Singapore

- Overseas

Under provision in respect of previous years

Tax expenses

The reconciliation between the tax expenses and the product of accounting profit multiplied by the applicable corporate tax rate for the years ended 31 December 2007 and 2006 is as follows:

Group

9,153

3,136

2,939

2,342

-

(170)

(11)

8,236

2007US$’000

9,168

4,826

501

878

(66)

683

(149)

6,673

2006US$’000

Profit before tax

Tax at domestic rate applicable to profits in the countries concerned

Adjustments:

Permanent differences and/ or expenses not deductible for tax purposes

Deferred tax assets not recognised

Benefits from previously unrecognised tax losses

Tax effect on (over)/ under provision in respect of previous years

Others

Tax expenses

The corporate tax rate applicable to Singapore companies of the Group was reduced to 18% for the year of assessment 2008 onwards from 20% for the year of assessment 2007.



Tax expenses (cont’d)

The Group has unabsorbed tax losses of approximately US$3,240,000 (2006: US$6,400,000) and unabsorbed capital allowances of approximately US$313,000 (2006: US$294,000) predominantly in Singapore available for offset against future taxable income, subject to the agreement of the respective domestic tax authorities in the countries concerned.

Deferred tax assets of approximately US$79,000 (2006: US$806,000) have been recognised in view of the probable recoverability in the near future.

Earnings per share

Basic earnings per share amounts are calculated by dividing profit for the year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the profit for the year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. The following reflects the profit and loss and share data used in the computation of basic and diluted earnings per share for the years ended 31 December:

8.

9.

Group

917

‘000

2,310,814

89,558

2,915

2,403,287

2007US$’000

2,495

‘000

2,045,305

89,558

2,915

2,137,778

2006US$’000

Profit net of tax for the year attributable to ordinary equity holders of the

Company used in computation of basic and diluted earnings per share

Weighted average number of ordinary shares on issue applicable to

basic earnings per share

Effect of issuance of 89,558,000 shares as second tranche consideration

shares

Effect of issuance of 2,914,953 shares as settlement of deferred cash

consideration

Adjusted weighted average number of ordinary shares applicable to

diluted earnings per share


(1) Included in costs incurred during the year is depreciation of US$658,000

(2006: US$263,000) (Note 11(e)).

(2) Gain arising from changes in fair value of forest asset

Gain arising from changes in fair value of logs harvested

In line with the market practice in the region, the Group has not procured fire insurance on its forest asset. However, the Group has ensured that adequate firebreaks and other fire fighting measures are in place to prevent any possible destruction to the forest.

Total fair value gain (Note 5)

Further details of the total carrying value are as follows:

At fair value less estimated point-of-sale costs

Mixed tropical hardwood

Industrial forest plantation - mature

Industrial forest plantation - immature

The valuation of the forest asset is based on the report issued by an independent professional valuer, Pöyry Forest Industry Pte Ltd (“Pöyry”). Significant basis of Pöyry’s valuation report are as follows:

(i)(ii)(iii)

The fair value less estimated point-of-sale costs of logs harvested during the year was US$6,722,000 (2006: negligible).


Forest asset10.Group

226,188

3,633

18,898

788

249,507

2007US$’000

203,680

508

21,329

671

226,188

2006US$’000

At 1 January

Costs incurred during the year (1)

Gain arising from changes in fair value less estimated

point-of-sale costs (2)


At 31 December

18,898

4,393

23,291

Mature forest asset is at least 5 years of age and immature forest asset is less than 5 years of age;The forest asset is measured at its fair value less estimated point-of-sale costs; andFair value of the forest asset is determined based on market prices in the local area.

72,094

172,897

4,516

249,507

2007US$’000

90,012

136,176

-

226,188

2006US$’000

Group

21,329

-

21,329



Property, plant and equipment11.

CostAt 1 January 2006

Additions

Disposals

Written off


At 31 December 2006 and 1 January 2007

Additions

Transfer (from)/ to

Disposals

Written off


At 31 December 2007

Accumulated depreciation and impairmentAt 1 January 2006

Charge for the year

Impairment loss

Disposals

Written off



Charge for the year

Impairment loss

Disposals

Written off


At 31 December 2007

Net carrying amount

At 31 December 2006

At 31 December 2007

Group

3,460

48

(1,691)

(165)

289

1,941

2,875

38,077

(122)

(496)

112

42,387

2,738

244

-

(1,513)

(147)

235

1,557

2,335

-

(94)

(457)

107

3,448

384

38,939

Plant and machinery

US$’000

12,301

22

-

-

1,028

13,351

818

626

(8,333)

-

330

6,792

3,293

449

746

-

-

322

4,810

681

-

(2,529)

-

50

3,012

8,541

3,780

Leasehold land and buildings

US$’000

651

155

-

(128)

55

733

388

-

(12)

(288)

35

856

496

83

-

-

(125)

44

498

183

-

(12)

(277)

29

421

235

435

4,123

34,294

-

-

(2)

38,415

2,466

(38,703)

-

-

55

2,233

-

-

-

-

-

-

-

-

-

-

-

-

-

38,415

2,233

21,209

34,870

(1,691)

(293)

1,421

55,516

6,998

-

(8,467)

(815)

557

53,789

6,870

860

746

(1,513)

(272)

631

7,322

3,506

-

(2,635)

(765)

215

7,643

48,194

46,146

Motor Vehicles

US$’000

Computers, office

equipment, furniture

and fittings

US$’000

Capital work-in

progress

US$’000

Total

US$’000

674

351

-

-

51

1,076

451

-

-

(31)

25

1,521

343

84

-

-

-

30

457

307

-

-

(31)

29

762

619

759



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

Company


US$’000

Motor Vehicles

US$’000

Computers, office

equipment, furniture

and fittings

US$’000

Total

US$’000

CostAt 1 January 2006

Additions

Written off



Additions

Disposals

Written off


At 31 December 2007

Accumulated depreciation and impairmentAt 1 January 2006

Charge for the year

Impairment loss

Disposals

Written off



Charge for the year

Impairment loss

Disposals

Written off


At 31 December 2007

Net carrying amount

At 31 December 2006

At 31 December 2007

7,274

-

-

605

7,879

-

(8,332)

-

453

-

1,273

191

746

-

-

136

2,346

84

-

(2,529)

-

99

-

5,533

-

311

17

(88)

26

266

276

-

(186)

17

373

242

31

-

-

(87)

21

207

78

-

-

(179)

20

126

59

247

7,588

17

(88)

631

8,148

276

(8,332)

(186)

470

376

1,516

223

746

-

(87)

157

2,555

163

-

(2,529)

(179)

117

127

5,593

249

3

-

-

-

3

-

-

-

-

3

1

1

-

-

-

-

2

1

-

-

-

(2)

1

1

2


Notes to the Financial Statements 31 December 2007


(a)

(b)

(c)

(d)

(i)

(ii)


The details of the leasehold land and buildings are as follows:

Capital work in progress

Construction of woodchip mill was completed in the second quarter of 2007 and transferred to plant and machinery.

Assets of the wood chip mill at net book value of US$37,069,000 as at 31 December 2007 has been charged for borrowings by the Group (Note 29(iii)).

Capital work in progress relates to additional civil works performed at the mill.

Capitalization of borrowing costs

The Group’s capital work-in-progress includes borrowing costs incurred in connection to the con-struction of a wood chip mill. The borrowing costs capitalized as cost of capital work-in-progress during the year ended 31 December 2007 amounted to US$447,000 (2006: US$669,000). The capital-ization rate used to determine the amount of borrowing costs eligible for capitalization was 14.39% (2006: 15.77%).

Assets held under finance lease

During the year, the Group acquired motor vehicles with an aggregate fair value of US$92,000 (2006: US$248,000) by means of finance leases. The carrying value of motor vehicles, computer, office equip-ment and furniture and fittings held under finance leases as at 31 December 2007 was US$375,000 (2006: US$270,000).

Leased assets are pledged as security for the related finance lease liabilities (Note 26).

The building at Defu Lane 10 Singapore was disposed during the year. The borrowings were settled during the year (Note 27(i), 27(v));

The building with net book value of US$5,533,000 as at 31 December 2006 was charged for borrowings to a financial institution in prior year.

A commercial retail unit in Amcorp Mall, Petaling Jaya, Selangor, Malaysia with net book value of US$119,000 (2006: US$114,000).

11.


Depreciation charge

Details of the depreciation charge for the year are as follows:

Impairment of assets

No impairment of assets was recorded in 2007.

An independent professional valuation was carried out by a professional valuer in December 2006 on the building at Defu Lane 10, Singapore. In 2006, impairment losses amounting to US$746,000 in relation to the above property was recognised in other operating expenses.



Amounts due from subsidiaries (non-current)

The amounts due from subsidiaries are deemed as part of the Company’s net investments in the respective subsidiaries. They are unsecured, interest-free and not expected to be repaid within the next 12 months.

Amount due from subsidiaries (non-current) as at the financial year end is denominated in SGD.

(e)

(f)

11.

12

Charged to Profit and Loss Account

- other operating expenses (Note 7)

- cost of goods sold

Capitalized in construction work-in-progress/

construction progress billings in excess of costs (Note 20)

Capitalized in forest asset (Note 10)

Capitalized in inventory - finished goods (Note 22)

2006US$’000

2007US$’000

344

-

253

263

-

860

2,436

89

180

658

143

3,506

Amounts due from subsidiaries

Group

2006US$’000

2007US$’000

16,25880,342

Company



Investments in subsidiaries

Investments in associates

Investment property

Unquoted equity shares, at cost

Less: Impairment loss

Details of investments in subsidiaries are provided in Note 3.

Unquoted equity shares, at cost


Details of investments in associates are provided in Note 3.

At valuation

The investment property relates to a 99-year leasehold condominium unit of approximately 113 square meters situated at Tanah Merah Kechil Road, Singapore. This investment property was disposed during the year.

This investment property was charged for borrowings by the Group in 2006. The loan has been fully repaid in 2007 (Note 29(ii)).

2006US$’000

2006US$’000

2006US$’000

123,739

(841)

122,898

179

(179)

-

404

2007US$’000

2007US$’000

2007US$’000

131,723

(896)

130,827

191

(191)

-

-

Company

Group

Group

13.

14.

15.


Other investments

Club membership

Deferred tax


At fair valueQuoted equity shares

The investments in quoted equity shares are stated at fair value net impairment loss of US$8,000 (2006: US$53,000).

2007US$’000

2006US$’000

2006US$’000

2007US$’000

CompanyGroup

59 515159

16.

17.

18.

Deferred tax liabilities

Excess of tax written down value over

net book value of plant and machinery

Revaluation of forest asset

Gross deferred tax liabilities

Deferred tax assets

Unutilized tax losses

Net deferred tax liabilities

Cost

Less: Impairment value

At market value

2006US$’000

2007US$’000

118

(49)

69

135

(33)

102

Group

2006US$’000

2007US$’000

Group

(299)

(59,531)

(59,830)

806

(59,024)

(388)

(66,755)

(67,143)

79

(67,064)



Goodwill on consolidation19.

CostAt 1 January 2006 as previously reported




Additions


At 31 December 2007

Net carrying amount

At 31 December 2006

At 31 December 2007

Goodwill acquired through business combinations has been allocated to Construction and Property segment, the identified cash-generating unit (“CGU”), for impairment testing.

The recoverable amount of the CGU is determined based on a value-in-use calculation using cash flow projections based on financial budget approved by management covering a 10-year period. Management believes that the Construction and Property Division will continue to operate over the 10-year period.

The discount rate applied is assumed at 10.0% for value in use calculation, which is the Group’s estimated weighted average cost of capital.

Management has considered and determined the factors applied in this financial budget which include budgeted gross margin and average growth rate. The budgeted gross margin is based on expectation of future market development.

US$’000

17,692

-

1,471

19,163

-

1,237

20,400

19,163

20,400

Group


Depreciation of property, plant and equipment (Note 11(e))

Operating lease charges

Staff costs:

- Contribution to defined contribution plans

- Salaries, wages, bonuses and other costs

Construction work-in-progress/construction progress billings in excess of costs

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


20.

Construction work-in-progress

Cost incurred

Add : Attributable profits recognised progressively

Less: Progress billings received and receivable

2006US$’000

175,054

9,375

184,429

(183,991)

438

2007US$’000

180,118

11,612

191,730

(191,404)

326

Group

Construction progress billings in excess of costs

Progress billings received and receivable

Less: Costs incurred

Less: Attributable profits recognised progressively

Included in costs incurred during the financial year are the following:

2006US$’000

255,156

(238,447)

(10,744)

5,965

253

25

151

2,051

2007US$’000

345,223

(323,235)

(14,790)

7,198

180

63

218

2,496

Group


Raw materials – others, at cost

Logs

Finished goods, at cost

Total inventories at lower of cost and net realizable value

As at 31 December 2007, the completed properties comprises commercial and residential units held for sale with site area of approximately 4,347 square meters, situated in Dongshan, People’s Republic of China.

Included in inventory is depreciation expense amounting to US$143,000 (2006: Nil) (Note 11(e)).



21.

22.

At lower of cost and net realizable value

2006US$’000

1,138

2007US$’000

1,369

2006US$’000

236

579

-

815

Inventories

2007US$’000

1,185

6,506

1,775

9,466

Group

Group


Trade and other receivables

2006US$’000

2006US$’000

2007US$’000

2007US$’000

25,203

28,286

929

-

-

-

1,906

56,324

8,811

65,135

Financial assets

Trade receivables

Advances to PT KK (Note 42)

Deposits

Receivables from subsidiaries:

- Trade

- Non-trade

Non-trade receivables from associates

Other receivables

Non-financial assets

Prepayments

22,896

28,179

615

-

-

1,414

634

53,738

13,304

67,042

-

-

63

-

780

-

93

936

7,195

8,131

-

-

7

958

30,739

650

196

32,550

7,229

39,779

CompanyGroup

23.




23.

24.

Trade and other receivables (cont’d)

Trade receivables are non-interest bearing and are generally on 30 to 90 days’ terms. They are recognised at their original invoice amounts which represent their fair values on initial recognition.

As at 31 December 2007, US$9.2 million (2006: US$8.3 million) of retention sums relating to construction contracts are included in trade receivables.

Included in prepayments are deferred expenses amounting to US$7.2 million (2006: US$7.2 million) relating to the proposed acquisition of PT KK in Indonesia. Note 42 to the financial statement provide further details on the proposed acquisition PT KK.

Non-trade receivables from subsidiaries and associates are unsecured, interest-free and are repayable upon demand.

The currency profile of trade and other receivables (excluding prepayments) as at the financial year end is as follows:

Cash on hand and at banks

2006US$’000

2006US$’000

2006US$’000

2006US$’000

2007US$’000

2007US$’000

2007US$’000

2007US$’000

28,868

25,910

1,509

37

56,324

55

4,186

1,109

5,350

1,383

6,733

USD

SGD

Indonesia Rupiah (“IDR”)

Others

Cash on hand

Cash at banks

Fixed deposits, unsecured

Cash and cash equivalent (Note 31)

Fixed deposits, secured

29,743

23,914

27

54

53,738

60

33,679

-

33,739

1,235

34,974

-

936

-

-

936

2

1,320

-

1,322

60

1,382

-

32,550

-

-

32,550

1

29,299

-

29,300

-

29,300

Company

Company

Group

Group


Financial liabilities

Trade payables

Accrued expenses

Accrual for Directors’ fee and variable bonus

Non-trade payables to subsidiaries

Non-trade payables to associates

Payable for purchase of assets (1)

Others

(1) Payable for purchase of assets relate to supplier credit from a vendor for the construction of woodchip mill.


24.

25.

Cash on hand and at banks (cont’d)

The secured fixed deposits are pledged to secure the Group’s banking facilities issued by the financial institutions, of which approximately US$1,383,000 (2006: US$1,235,000) is secured against bank overdrafts as stated in Note 27(iv).

The currency profile of cash on hand and at banks as at the financial year end is as follows:


2006US$’000

2006US$’000

2006US$’000

2006US$’000

2007US$’000

2007US$’000

2007US$’000

2007US$’000

1,503

4,378

730

122

6,733

20,327

2,364

340

-

-

21,500

1,166

45,697

USD

SGD

IDR

Others

5,673

28,801

418

82

34,974

20,705

3,901

192

-

8

36,835

1,245

62,886

451

276

655

-

1,382

-

282

340

7,715

-

-

373

8,710

663

28,637

-

-

29,300

-

2,301

192

8,160

-

-

413

11,066

Company

Company

Group

Group


Within one year

After one year but not more than five years

More than five years

Total minimum Payments

Less: Amounts representing interest

Present value of minimum payments

The Group has finance leases for certain items of property, plant and equipment (Note 11 (d)).

The hire purchase plans do not contain any renewal option or escalation clauses and do not provide for contingent rents. There are no restrictions placed upon the Group by entering into these leases.

Trade and other payables (cont’d)

Non-trade payables to subsidiaries and associates are unsecured, interest-free and are repayable on demand.

The currency profile of trade and other payables as at the financial year end is as follows:



25.

26.

2006US$’000

2006US$’000

2007US$’000

2007US$’000

Presentvalue of

payments2006

US$’000

Presentvalue of

payments2007

US$’000

Minimumpayments

2006US$’000

MinimumPayments

2007US$’000

23,003

20,118

2,387

189

45,697

177

115

-

292

(55)

237

USD

SGD

IDR

Others

38,815

22,385

1,642

44

62,886

116

121

-

237

-

237

-

8.710

-

-

8,710

137

218

1

356

(80)

276

1,532

9,534

-

-

11,066

98

177

1

276

-

276

CompanyGroup

Group



27. Short term loans

2006US$’000

2006US$’000

2007US$’000

2007US$’000

-

-

-

11,769

2,023

-

-

1,382

15,174

Short-term loan, secured (i)

Short-term loan, secured (ii)

Short-term loan, secured (iii)

Current portion of long-term loans

secured (Note 29) (iii))

Bank overdrafts

- secured (iv)

- unsecured (Note 31)

Trust receipt, secured (v)

Short-term loan, secured (vi)

This loan was fully repaid during the year. It was secured by a first legal mortgage on a building at Defu Lane 10 Singapore and corporate guarantees given by two of the subsidiaries. It bore an average interest of 4.79% in year 2006.

This loan was fully repaid during the year. It is secured by a charge over shares in the Company held by a substantial shareholder and charge over a bank account maintained by a substantial shareholder. It bore an average interest of 10% in year 2006.

This loan was fully repaid during the year. Note 40 to the financial statements provides further details of the reforestation loan.

The bank overdrafts are secured by fixed deposit of a subsidiary (Note 24), a corporate guarantee given by the Company and proceeds from certain construction projects of a subsidiary, and bear interest from 5.5% to 6.5% (2006: 5.5% to 5.7%) per annum.

The trust receipt was fully repaid during the year. It was secured by a first legal mortgage on a building at Defu Lane 10 Singapore and corporate guarantees given by two of the subsidiaries, and bore an average interest of 5.96% per annum in year 2006.

This loan is secured by proceeds from certain construction projects of a subsidiary, and bear interest from 5.3% to 6.6% (2006: nil) per annum.

(i)

(ii)

(iii)

(iv)

(v)

(vi)

977

15,000

12,962

-

1,681

516

1,134

-

32,270

-

-

-

-

-

-

-

-

-

977

15,000

-

-

-

-

1,134

-

17,111

CompanyGroup


Amount due to subsidiaries

Amount due to subsidiaries is interest free, long term and has no fixed repayment terms.

Amount due to subsidiaries is denominated in SGD


27. Short term loans (cont’d)

The currency profile of amounts due to financial institutions as at the financial year end is as follows:

2006US$’000

2006US$’000

2007US$’000

2007US$’000

11,770

3,404

-

-

15,174

USD

SGD

IDR

Others

16,134

3,231

12,905

-

32,270

-

-

-

-

-

16,134

977

-

-

17,111

CompanyGroup

28. Non-current payables

2006US$’000

2007US$’000

3,050 2,771

Company



29.

(i)

(ii)

(iii)

(iv)

This loan was fully repaid during the year. Note 40 to the financial statement provides further details on the reforestation loan.

This loan was fully repaid during the year. It is secured by an investment property (Note 15) and a corporate guarantee of the Company.

This loan relates to the construction of the wood chip mill and is secured by all assets of the wood chip mill project (Note 11(b)), a corporate guarantee of the Company and legal mortgage over the shares of a subsidiary.

On 6 August 2007, the Company issued a 5-year unsecured zero coupon convertible bond of an aggregate principal amount of US$25,000,000 (collectively, the “Bond”) at an issue price of 100% of the principal amounts of the Bond. The Bond is due on 6 August 2012 and is convertible into new ordinary shares in the capital of the Company (collectively, the “Conversion Shares”) at the conversion price of S$0.355 per Conversion Shares, subject to anti-dilution adjustments in accordance with the terms and conditions in the agreement. The Bond shall be redeemed upon majority at a rate of 10% per annum.

The conversion option of the convertible bond exhibits characteristics of an embedded derivative. See Note 2.23 for accounting policy for convertible bonds.

The derivative components are measured separately at fair value on initial recognition. A one factor model where stock prices are assumed to be stochastic (lognormal) while interest rates are assumed to be deterministic (defined by a fixed discount factor curve) is used. The methodology utilizes a trinomial tree to model changes in the stock price which is determined by parameters such as the number of time steps and the (constant) volatility of the stock price.

Long term loans

2006US$’000

2006US$’000

2007US$’000

2007US$’000

Long-term loan (i)

Long-term loan (ii)

Long-term loan (iii)

Zero coupon convertible bond (iv)

Repayable within

12 months (Note 27)

Repayable after 12 months

-

-

11,769

23,951

35,720

(11,769)

23,951

12,905

165

2,882

-

15,952

(12,962)

2,990

-

-

-

23,951

23,951

-

23,951

-

-

-

-

-

-

-

CompanyGroup



29. Non-current payables (cont’d)

2007US$’000

Face value of convertible bond

Derivative component at fair value on inception date

Liability component at initial recognition on August 6, 2007

Interest expense using effective interest rate method

Fair value of convertible bond at December 31, 2007

The convertible bond recognised in the balance sheet is calculated as follows:

The fair value of the derivative liability as at 31 December 2007 amounted to US$405,000 (2006: nil).

The currency profile of long term loans as at the financial year end is as follows:

25,000

(2,168)

22,832

1,119

23,951

2006US$’000

2006US$’000

2007US$’000

2007US$’000

USD

SGD

23,951

-

23,951

2,882

108

2,990

23,951

-

23,951

-

-

-

CompanyGroup


(1) The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restriction.

(2) In year 2006, the following shares were issued:

(3) In accordance with the Companies (Amendment) Act 2006, on 30 January 2007, the shares of the Company ceased to have a par value and the amount standing in the share premium reserve became part of the Company’s share capital.

Four tranches of shares were issued to return to Tektronix Industries Ltd (“Tektronix”), pursuant to the Securities Lending Agree-ment as follows:

The Company has earlier borrowed a total of 183,794,223 shares from Tektronix to deliver to a financial institution for the full payment of the US$30.1 million Series Three Loan Note.

180 million new ordinary shares were issued at S$0.27 per share, pursuant to the Equity Placement Agreements with a number of investment funds.


30. Share capital

2006

US$’000

No. ofshares

’000US$’000

No. ofshares

’000

2007

Issued and fully paid (1)

At 1 January

Issued during the year (2)

Transfer of share premium reserve to share capital (3)

Expenses incurred on issuance of shares

At 31 December

22,458,964 shares at S$0.2672 per share;48,989,056 shares at S$0.2858 per share;50,854,936 shares at S$0.2950 per share; and61,491,267 shares at S$0.2439 per share.

114,945

64,189

31,728

(1,302)

209,560

1,947,020

363,794

-

-

2,310,814

209,560

-

-

-

209,560

2,310,814

-

-

-

2,310,814

Group and Company

a)

b)



31.

32.

Cash and cash equivalents

2006US$’000

2007US$’000

Cash on hand and at banks (Note 24)

Bank overdrafts, unsecured (Note 27)

5,350

-

5,350

33,739

(516)

33,223

Group

(a) Operating lease payable

The Group and the Company lease certain properties under lease agreements that are non-cancellable within a year with no renewal option or escalation clauses included in the contracts. Lease terms do not contain restrictions concerning dividend, additional debts or further leasing. Operating lease payments recognised in the consolidated profit and loss account during the year amounted to US$16,000 (2006: US$221,000).

Future minimum lease payments for all leases with initial or remaining terms of one year or more are as follows:

Operating lease commitments

2006US$’000

2007US$’000

Within one year


After five years

231

405

-

636

256

716

226

1,198

Group


Operating lease receivables

The Group and the Company have entered into commercial and residential property leases on its properties. These non-cancellable leases have remaining non-cancellable lease term of more than one year but not more than five years. Future minimum lease payments receivables for all leases with initial or remaining terms of one year or more are as follows:

Within one year


2006US$’000

2007US$’000

-

-

-

104

1

105

Group


(b)



33.

34.

(a)

(b)

Certain subsidiaries are operating in countries where the practical application of tax legislation is subject to varying interpretations. There is a risk that these subsidiaries could be exposed to further tax liabilities on their income for current and prior years, if the tax authorities adopt a different interpretation of the tax legislation at the time of finalization of these tax returns.

The Company has agreed to provide continuing financial support to certain subsidiaries.

Capital commitment

Pulp mill project

On 22 February 2008, PT MBBM entered into a Turnkey Agreement (the “Agreement”) with China MCC20 Construction Co. Ltd (“MCC20”), a subsidiary of China Metallurgical Group Corporation (“MCC”) for the construction of a bleached hardwood kraft pulp mill in South Kalimantan with a capacity of 600,000 air dry tonnes per annum (the “Project”).

Under the Agreement, MCC20 will be responsible for, inter alia, the design, procurement and supply of all machinery and equipment, civil work, and the installation work required to set up a complete pulp mill for a consideration value of approximately US$863 million. MCC20 will also provide supplier’s credit for the Project. According to the Agreement, within one month from the signing of the Agreement, both parties are expected to settle all the major pending items including the financing package, detailed construction programs, the schedule and groundbreaking of the Project. The Board of Directors will make a further announcement upon agreement of the financing package by both parties.

This agreement effectively replaces the turnkey contract signed with China National Machinery & Equip-ment Import & Export Corporation on 18 December 2002.

Wood chip mill

On 4 April 2007, the Company announced that its wholly-owned subsidiary, PT Mangium Anugerah Lestari, obtained the Certificate of Operation Test Acceptance (“COTA”) for its wood chip mill from Pöyry, the independent technical consultant for the project. This COTA was an important milestone for the mill as it confirms the full certification of the production capacity and the quality of the final products of the mill.

The net book value of the wood chip mill as at 31 December 2007 is US$37,069,000 (2006: US$38,415,000).

Contingent liabilities

2006US$’000

2007US$’000

Corporate guarantees given to banks for

banking facilities to subsidiaries (Note 36)

Guarantees and performance bonds

25,158

-

14,173

21

Company


Contingent liabilities (cont’d)

Interests in joint ventures

The Group has the following significant interests in joint ventures:

The Group is entitled to a proportionate share of the proceeds received and bears a proportionate share of the net results for the above joint ventures.

The following amounts are included in the Group’s financial statements as a result of the proportionate consolidation of these joint ventures:


34.

35.

(c)

(a)

(b)

Since year 2005, Poh Lian Development Pte Ltd (“PLD”), a wholly owned subsidiary of the Company, has initiated court proceedings in the High Court of the Republic of Singapore against Hok Mee Property Pte Ltd, Leong Hwa Monastery, Hok Chung Construction Co Pte Ltd and Kek Kim Hok (together the “Defendants”). PLD’s claims include recovery of a loan of S$13.3 million made to the partnership. The Defendants have made counterclaims against PLD for an aggregate of ap-proximately S$9 million excluding interest and costs.

The Directors have received legal advice that PLD has strong defence for the aforesaid counterclaims which are likely to fail on the account of lack of merits or evidence. Note 41 to the financial statements provides further details of the legal proceedings.

A 50% (2006: 50%) interest in a property development project with China Construction Realty Co Pte Ltd; and

A 40% interest in a building contract with Shimizu Corporation.

Non-current assets

Current assets

Total assetsCurrent liabilities

Non-current liabilities

Net assets

Revenue

Expenditure

2006US$’000

2007US$’000

-

352

352

(78)

-

274

285

(287)

(2)

-

255

255

-

-

255

988

(1,019)

(31)

Group


Related party disclosures

An entity or individual is considered a related party of the Group for the purposes of the financial statements if:

Sales and purchases of goods and services

Details on corporate guarantee given to subsidiaries are provided in Note 34(b).

In addition to those related party information disclosed elsewhere in the financial statements, the following significant transactions between the Group and related parties who are not members of the Group took place during the year at terms agreed between the parties.

Compensation of key management personnel

Included in the compensation paid to key management personnel is Central Provident Fund contributions amounted to US$45,000 (2006: US$46,000).


36.

(i)

(ii)

it possesses the ability, directly or indirectly, to control or exercise significant influence over the op-erating and financial decisions of the Group or vice versa; or

it is subject to common control or common significant influence.

2006US$’000

2006US$’000

2007US$’000

2007US$’000

Paid to a company owned by a substantial shareholder of the Company

- retainer fee in connection to pulp mill project

- business advisory fee in connection to forestry, pulp mill

and wood chip mill

- arranger fee in connection to loan facility

- compensation fee in connection to proposed acquisition of PT KK

Short-term employee benefits paid to

- Directors of the Company

- other key management personnel

Total compensation paid to key management personnel

398

571

-

-

969

1,647

736

2,383

482

239

746

2,049

3,516

1,913

659

2,572

Group

Group



37. Financial risk management objectives and policies

The Group and the Company are exposed to financial risks arising from its operations and the use of financial instruments. The key financial risks include interest rate risk, liquidity risk, credit risk, foreign currency risk and commodity price risk. The Board of Directors reviews and agrees policies and procedures for the management of these risks. The Audit Committee provides independent oversight to the effectiveness of the risk management process. The Group and the Company do not apply hedge accounting.

The following sections provide details regarding the Group’s and the Company’s exposure to the above-mentioned financial risks and the objectives, policies and processes for the management of these risks.

a)

b)

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of the Group’s and the Company’s financial instruments will fluctuate because of changes in market interest rates. The Group’s and the Company’s exposure to interest rate risk arises primarily from their loans and borrowings and the issuance of a financial instrument to a strategic investor.

The Group’s policy is to manage interest expense by sourcing for competitive quotations for these loans and borrowings. Surplus funds are placed with reputable banks.

Sensitivity analysis for interest rate risk

At the balance sheet date, if SGD and USD interest rates had been 10 (2006: 10) basis points lower/higher with all other variables held constant, the Group’s profit net of tax would have been approxi-mately $18,000 (2006: $8,000) higher/ lower, arising mainly as a result of lower/ higher interest expense on floating rate loans and borrowings.

Information relating to the Group’s interest rate exposure is also disclosed in the notes on loans and borrowings.

Liquidity risk

Liquidity risk is the risk that the Group or the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatch of the maturities of financial assets and liabilities.

The Group’s objective is to maintain sufficient credit facilities for its operations.

To manage liquidity risk, the Group monitors its net operating cash flows and maintains an adequate level of cash and cash equivalents and secured committed funding facilities from financial institutions. In assessing the adequacy of the facilities, management reviews its working capital requirements regularly.

The table on the next page summarises the maturity profile of the Group’s and the Company’s finan-cial liabilities at the balance sheet date based on contractual undiscounted payments.


Liquidity risk (cont’d)

Credit risk

Credit risk is limited to the risk arising from the inability of a debtor to make payments when due. It is the Group’s policy to provide credit terms to credit worthy customers. These debts are continually monitored and therefore, the Group does not expect to incur material credit losses.

The Group’s objective is to seek continual revenue growth while minimizing losses incurred due to increased credit risk exposure. For international trade transaction of significant value, the Group accepts letter of credit issued by a reputable international bank. The Construction Division bids for projects from developers with good financial standings.

The carrying amount of trade and other receivables and cash and bank balances represent the Group’s maximum exposure to credit risk. No other financial assets carry a significant exposure to credit risk.

Note 42 provides in greater detail the concentration of credit risk associated with an advance to PT KK.

Exposure to credit risk

At the balance sheet date, Group’s and the Company’s maximum exposure to credit risk is repre-sented by the carrying amount of each class of financial assets recognised in the balance sheet.

Credit risk concentration profile

The Group determines concentrations of credit risk by monitoring the country and industry sector profile of its trade and other receivables on an on-going basis. The credit risk concentration profile of the Group’s trade and other receivables at the balance sheet date, is as follows:


37.

b)

c)

2007 2006

1 year or less

$’000

7,198

45,697

116

1,220

15,174

-

-

69,405

-

-

121

-

23,951

67,143

405

91,620

-

-

-

-

-

-

-

-

7,198

45,697

237

1,220

39,125

67,143

405

161,025

5,965

62,886

98

856

32,270

-

-

102,075

-

-

178

-

2,990

59,830

-

62,998

-

-

-

-

-

-

-

-

5,965

62,886

276

856

35,260

59,830

-

165,073

Group

Construction progress



Provision for taxation

Loans and borrowings


Derivative liability

1 to 5 years $’000

Over 5 years$’000

Total$’000

1 year or less

$’000

1 to 5 years$’000

Over 5 years

$’000Total$’000

Financial risk management objectives and policies (cont’d)



37.

c)

d)


Credit risk (cont’d)

At the balance sheet date, approximately:

- 43% (2006: 42%) of the Group’s trade and other receivables were due from PT KK (see Note 42 for further discussion)

- 38% (2006: 49%) of the Group’s trade and other receivables were from external parties who are property developers.

Financial assets that are neither past due nor impaired

Trade and other receivables that are neither past due nor impaired are due from credit worthy debtors. Cash and cash equivalents that are neither past due nor impaired are placed with reputable local or international banks with high credit ratings.

Financial assets that are either past due or impaired

Information regarding financial assets that are either past due or impaired are disclosed in Note 23.

Foreign currency risk

The Group has transactional currency exposures arising from borrowings that are denominated in a currency other than the respective functional currencies of Group entities, primarily SGD and USD.

The Group hold cash and cash equivalents denominated in foreign currencies for working capital purposes. At the balance sheet date, such foreign currency balances (mainly in USD) amount to $2,355,000 (2006: US$6,173,000).

The Group relies on operational cash flow to hedge against its foreign currency exposure.

By countrySingapore

Indonesia

Others

Total

By industry sectorConstruction & property

Forest & pulp

Others

Total

2007 2006

% of total$’000% of total$’000

34,444

30,651

40

65,135

27,983

30,651

6,501

65,135

53%

47%

0%

43%

47%

10%

31,911

35,069

62

67,042

23,929

35,069

8,044

67,042

48%

52%

0%

36%

52%

12%

USD



37.

d)

e)


Foreign currency risk (cont’d)

Sensitivity analysis for foreign currency risk

The following table demonstrates the sensitivity to a reasonably possible change in the USD and IDR against SGD, with all other variables held constant, of the Group’s profit net of tax and equity.

The Group is also exposed to currency translation risk arising from its net investments in foreign operations in countries such as Indonesia, Malaysia, People’s Republic of China, Mauritius and British Virgin Islands.

The Group’s net investments in these countries are long term in nature.

Commodity price risk

Market price risk is the risk that the fair value of future cash flows of the Group’s financial instruments will fluctuate because of changes in market prices.

The Group is exposed to commodity price risk arising from changes in market value of the mature forest asset.

The Group is of the view that log and wood chip prices are stable if not, on an upward trend. The Group’s objective is to monitor the trend of these commodity prices and would reduce level of harvesting activities in period of price decline.

Sensitivity analysis for commodity price risk

At the balance sheet date, if the price of logs had been 3% (2006: 3%) higher/ lower with all other vari-ables held constant, the Group’s profit net of tax would have been US$9,797,000 (2006: US$8,947,000) higher/ lower, arising as a result of higher/ lower fair value gains on the forest asset.

2006US$’000

Profit net of tax

2007US$’000

Profit net of tax

742

(742)

23

(23)

23

(23)

7

(7)

Group

USD - strengthened 3% (2006: 3%)

- weakened 3% (2006: 3%)

IDR - strengthened 3% (2006: 3%)

- weakened 3% (2006: 3%)



38.

39.

Capital Management

The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value.

The Group manages its capital structure and makes adjustments to it, in light of changes in economic con-ditions. To maintain or adjust capital structure, the Group may adjust the dividend payment to shareholders, issue new shares or return capital to shareholders. No changes were made in the objectives, policies or processes between the years ended 31 December 2006 and 2007 respectively.

The Group monitors capital using gearing ratio, which is net debt divided by total capital plus net debt. The Group’s policy is to keep the gearing ratio between 20% and 45 %. The Group includes within net debt, loans and borrowings, trade and other payables, hire purchases less cash and cash equivalents. Capital includes equity attributable to the equity holders of the parent, capital reserves and other reserves.

Segmental information

Reporting format

The primary segment reporting format is determined to be business segments as the Group’s risks and rates of returns are affected predominantly by differences in the products and services produced. Secondary information is reported geographically. The operating businesses are organized and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. Business segments The Construction and Property segment is involved in the construction of residential properties and industrial projects and in property development. The Forestry and Pulp segment is engaged in forestry operations, manufacture of wood chips and the trading of pulp product.

Loans and borrowings


Hire Purchases

Less: Cash and cash equivalents

Net Debts

Equity attributable to equity holders of the parent

Capital and net debts

Gearing ratio

39,125

45,697

237

(6,733)

78,326

238,264

316,590

25%

2006US$‘000

35,260

62,886

276

(34,974)

63,448

234,242

297,690

21%

Group

2007US$‘000



39. Segmental information (cont’d)

Geographical segments The Group’s geographical segments are based on the location of the Group’s assets. Sales to external cus-tomers disclosed in geographical segments are based on the geographical location of its customers. Allocation basis Segment results, assets and liabilities include those directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly tax liabilities.

Inter segment transactions are determined at terms agreed between segments.

Construction and property

Forestryand pulp Others Elimination Consolidated

2006US$’000

125,208

-

125,208

15,844

(6,676)

9,168

(6,673)

2,495

2007US$’000

82,925

-

82,925

14,328

(5,175)

9,153

(8,236)

917

2006US$’000

-

(1,570)

(1,570)

(329)

2007US$’000

-

(705)

(705)

539

2006US$’000

215

1,570

1,785

(3,417)

2007US$’000

68

705

773

(7,496)

2006US$’000

35,370

-

35,370

18,874

2007US$’000

1,337

-

1,337

19,528

2006US$’000

89,623

-

89,623

716

2007US$’000

81,520

-

81,520

1,757

Revenue:

Revenue from

external Customers

Inter segment

revenue

Total revenue

Other segment

information:

Segment results

Finance costs

Profit before tax

Tax expenses

Profit for the year



39. Segment information (cont’d)

Business segments

Construction and property

Forestryand pulp Others Consolidated

Segment assets

Consolidated total assets

Segment liabilities

Unallocated corporate liabilities

Consolidated total liabilities

Capital expenditure

Depreciation and amortization

Impairment losses

Reversal of impairment losses

2007US$’000

399,289

399,289

92,662

68,363

161,025

6,998

2,436

38

-

2007US$’000

28,539

28,539

25,415

276

166

-

-

2007US$’000

34,225

34,225

29,880

152

303

13

-

2006US$’000

399,315

399,315

104,387

60,686

165,073

34,870

344

778

(45)

2006US$’000

62,343

62,343

19,711

18

225

746

(32)

2006US$’000

32,212

31,212

29,630

85

79

32

(13)

2007US$’000

336,525

336,525

37,367

6,570

1,967

25

-

2006US$’000

304,760

304,760

55,046

34,767

40

-

-

Geographical segments

Total revenue from

external customers

Segment assets

Capital expenditure

82,925

399,289

6,998

2007US$‘000

1,235

21,827

-

2007US$‘000

81,581

40,937

428

2007US$‘000

2006US$‘000

125,208

399,315

34,870

2006US$‘000

35,427

200

673

2006US$‘000

89,781

73,618

102

ConsolidatedAsia Pacific CountriesSingapore Indonesia

109

336,525

6,570

2007US$‘000

2006US$‘000

-

325,497

34,095

a)

b)



40.

41.

Status of the reforestation loan

Pursuant to due diligence conducted and further written clarifications with PT Bank Mandiri Tbk (Persero) (the “Bank”) as the channelling agent of the reforestation loan, and Minister of Forestry (“MOF”) between May to October 2007, it was affirmed that the previous shareholder of PT Hutan Rindang Banua (“PT HRB”) has repaid the reforestation loan to the Bank with no penalty and interest. Accordingly, PT HRB’s liability with respect with the said matter was between the company and the previous shareholder.

As at 18 October 2007, PT HRB had fully repaid this liability to the previous shareholder. This repayment was in line with the covenants of the convertible bond issue (Note 29 (i)). The penalty interest has been reversed during the year (Note 5).

Detailed below is background information on the reforestation loan:

The former Indonesia MOF issued a decree dated 24 October 2002 cancelling the right of PT HRB to develop industrial forest plantations (obtained through Ministry of Forestry Decree dated 27 February 1998). PT HRB had filed a lawsuit against the former MOF to the Jakarta Court for Government Administration (Pengadilan Tata Usaha Negara) on 21 November 2002. On 10 June 2003, the Indonesian Court has ordered the former MOF to withdraw the decree revoking the grant of the concession right issued to PT HRB. The former MOF has filed an appeal application on the court order which was defeated at the Jakarta High Court. Consequently, the former MOF has filed another appeal with the Supreme Court. As announced on 28 October 2005, the Supreme Court has rejected the application by the former MOF to uphold the decree issued by the MOF to revoke the concession right.

Pursuant to the restoration of the concession right, PT HRB has also postponed instalment payments of its reforestation loan which were due on 15 July 2003, 15 January 2004, 15 July 2004, 15 January 2005, 15 July 2005 and 15 January 2006. Under the loan agreement, if a demand notification letter from the Bank is issued, and the payment default is not settled within 30 days from the issuance of the demand notification letter, the Bank can declare the whole loan as due immediately and demand for immediate payment of the loan including the fiduciary transfer over the right of PT HRB’s assets pledged as collateral. On 11 January 2005, PT HRB received a letter from the Bank reminding PT HRB of the past due instalments as mentioned above, and also informing the penalty of 2% above the normal loan interest rate on these past due instalments. As at 31 December 2006, the loan amount of approximately US$12.9million (2005: US$11.3 million), including penalty interest, was included in the Group’s current liabilities.

Legal proceedings

PLD, the Company’s wholly owned subsidiary has initiated court proceedings in the High Court of the Republic of Singapore against Hok Mee Property Pte Ltd (“Hok Mee”); Leong Hwa Monastery (“Leong Hwa“); Hok Chung Construction Co Pte Ltd (“Hok Chung”) and Kek Kim Hok (“Kek”). PLD entered into a partnership with Hok Mee and Leong Hwa to develop and manage a columbarium development at Choa Chu Kang, Singapore in 1999. PLD’s role in the partnership was mainly to provide financing for the construction of the columbarium. As at 31 December 2004, the Group had provided advances to the partnership amounting to approximately S$15.6 million (included accumulated interest of approximately S$2.14 million). In addition to the advances made to the partnership, the Company had provided S$24.8 million corporate guarantee to a bank to secure bank borrowings to the partners for the development of the project. As announced on 11 December 2003, PLD, together with the other two partners, accepted an offer to sell the partnership’s entire interest in the columbarium project (the “Sales”). Pursuant to the completion of the Sales announced on 1 September 2004, the corporate guarantee given by the Company had been fully discharged.



41.

42.

Legal proceedings (cont’d)

As the entire sales proceeds from the Sales were used to repay the amounts due to the bank, the recoverability of the Group’s total exposure was doubtful. Therefore, full provision of allowance for doubtful receivables and doubtful trade receivables amounting to S$15.6 million and S$5.1 million, respectively, were made in the Group’s 2004 accounts. PLD initiated these proceedings to seek accountability of receipts and payments from its partners as well as overpayments from Hok Chung and/ or Kek in respect of the construction of the columbarium. The claims by PLD include recovery of a loan of S$13.3 million made to the partnership. Hok Mee, Leong Hwa and Hok Chung have submitted their defence and have made counterclaims against PLD for an aggregate of approximately S$9 million excluding interest and costs. This aggregate is made up of a claim by Hok Mee for outstanding management fee payable; a claim by Leong Hwa for reimbursement of marketing expenses; and a claim by Hok Chung for unpaid retention monies and loan extended to the partnership. PLD is defending and disputing the said counterclaims. A trial was heard before the High Court between September and October 2007. In continuance of the above trial, the matter has been scheduled to be heard again in the second quarter of 2008.

No disputes were settled during the year.

The Directors have received legal advice that PLD has strong ground for defence for the aforesaid counter-claims which are likely to fail on the account of lack of merit or evidence. The Directors are of the view that no accrual in respect of the above mentioned legal proceedings is required.

Proposed acquisition of PT KK

Acquisition details

On 20 February 2006, the Company has entered into a novation agreement with Kingsclere Finance Limited (“Kingsclere”), Fayola Investment Limited (“Fayola”) and Langass Offshore Inc (“Langass”). Kingsclere is a company owned by a substantial shareholder of the Company while Fayola and Langass collectively are the vendors of PT KK. The novation agreement stipulates the Company to acquire the entire issued and paid-up share capital and the entire issued and outstanding unconverted mandatory convertible bonds of PT KK as at the date of completion of the proposed acquisition from Fayola and Langass.

The Company continues to review the various alternatives to move forward with the proposed acquisition.



42.

43.

Proposed acquisition of PT KK (cont’d)

Deferred expenses

The Company incurred certain expenses amounting to US$7.2 million as at 31 December 2007 (2006: US$7.2 million) which mainly relate to professional fees for due diligence studies, legal fees and retainer fees paid in relation to the above proposed acquisition of pulp mill.

The Company has deferred these expenses and classified them as prepayments (Note 23) on the Balance Sheets of the Group and the Company as at 31 December 2007. In the event that the proposed acquisition of PT KK is unsuccessful, these expenses will be written off to the Profit and Loss Account.

Unifiber maintains the view that the possibility for the proposed acquisition of PT KK remains real and positive, despite a protracted and prolonged acquisition exercise.

Advances to PT KK

The Company managed the operations of PT KK pursuant to OMA entered into with PT KK on 25 July 2005. Under the OMA, the Company injected working capital funding into PT KK, of which US$28.2 million remains outstanding as at 31 December 2007 (2006: US$28.2 million). This amount was classified as “Advances to PT KK” on the Balance Sheet of the Group (Note 23).

Pursuant to the terms of OMA and the Share Purchase Agreement (“SPA”) dated 5 December 2005 with the vendors of PT KK, all amounts injected by Unifiber into PT KK are recoverable from PT KK. Alternatively, upon acquisition of PT KK, if any, these amounts shall be offset against the purchase consideration. If the SPA is terminated for any reason, the vendors under the SPA are required to procure PT KK to refund the amounts injected into PT KK net of recoveries, and failure by PT KK attaches a liability on the vendors to make the refund. As with any commercial arrangement of this type a collection risk does exist in connection with these amounts. However, the Company believes that such risk has been sufficiently mitigated in the OMA and SPA.

Subsequent events

Pulp mill project

Note 33 to the financial statements provides further details the subsequent event on the pulp mill project.


Comparative figures

The following have been reclassified to better reflect the nature of the balances and to conform to current year’s classifications:

Authorization of financial statements

The financial statements of the Company for the year ended 31 December 2007 were authorized for issue in accordance with a Directors’ resolution dated on 20 March 2008.

Profit and loss accountAdministrative expenses

Other operating expenses

Balance SheetDeferred tax assets


(1,310)

1,310

381

(381)

Reclassification$’000

As previously stated$’000

As reclassified$’000

(7,705)

(5,172)

425

(59,449)

(9,015)

(3,862)

806

(59,830)


44.

45.


Statistics of Shareholdingsas at 17 March 2008

Issued and Fully Paid Up Capital

Number of Shares

Classs of Shares

S$344,006,074

2,310,814,068

Ordinary share

:

:

:

DISTRIBUTION OF SHAREHOLDINGS

TWENTY LARGEST SHAREHOLDERS

1 - 999

1,000 - 10,000

10,001 - 1,000,000

1,000,001 AND ABOVE

TOTAL

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

20.

TOTAL

UOB KAY HIAN PTE LTD

DBS VICKERS SECURITIES (SINGAPORE) PTE LTD

CITIBANK NOMINEES SINGAPORE PTE LTD

MERRILL LYNCH (SINGAPORE) PTE LTD

UNITED OVERSEAS BANK NOMINEES PTE LTD

DBS NOMINEES PTE LTD

KIM ENG SECURITIES PTE. LTD.

SBS NOMINEES PTE LTD

HSBC (SINGAPORE) NOMINEES PTE LTD

PARAMOUNT ASSETS INVESTMENTS PTE LTD

OCBC SECURITIES PRIVATE LTD

PHILLIP SECURITIES PTE LTD

CIMB-GK SECURITIES PTE. LTD.

MAYBAN NOMINEES (SINGAPORE) PTE LTD

PARKER VELA ENTERPRISES LTD

EMERALD EYE INVESTMENTS LIMITED

RAFFLES NOMINEES PTE LTD

MALAYAN BANKING BERHAD

HL BANK NOMINEES (SINGAPORE) PTE LTD

LUM CHIN WENG

597,913,556

498,593,932

90,139,000

88,930,999

79,861,500

75,069,501

60,267,000

56,927,000

35,623,000

34,613,000

28,267,000

22,453,860

22,000,000

21,014,355

13,932,000

13,768,000

12,051,000

12,000,000

9,845,000

9,000,000

1,782,269,703

Name No of Shares %

25.87

21.58

3.90

3.85

3.46

3.25

2.61

2.46

1.54

1.50

1.22

0.97

0.95

0.91

0.60

0.60

0.52

0.52

0.43

0.39

77.13

178

4544

4564

86

9,372

84,681

20,728,050

313,302,400

1,976,698,937

2,310,814,068

Size of Shareholdings

No

1.90

48.48

48.70

0.92

100.00

0.00

0.90

13.56

85.54

100.00

% %No. of Shareholders No. of Shares


Statistcs of Shareholdings

REGISTER OF SUBSTANTIAL SHAREHOLDERS

Direct Interest Deemed Interest Total

Tektronix Industries Ltd

Wisanggeni Lauw*

868,605,314 shares are held as follows:-

242,438,958 shares are held as follows:-

(a)

(b)

(c)

(a)

(b)

(c)

(d)

(e)

3,764,284 shares registered in own name

364,841,030 shares registered in the name of DBS Vickers Securities (S) Pte Ltd

500,000,000 shares registered in the name of UOB Kay Hian Pte Ltd

68,284,056 shares registered in the name of UOB Kay Hian Pte Ltd

13,432,660 shares registered in the name of DBS Vickers Securities Pte Ltd - Wisanggeni Lauw

30,000,000 shares registered in the name of United Overseas Bank Nominees

93,722,242 shares registered in the name of DBS Vickers Securities Pte Ltd - Acasia Limited

37,000,000 shares registered in the name of SBS Nominees Pte Ltd

3,764,284

0

864,841,030

242,438,958

868,605,314

242,438,958

No. of Share No. of Share No. of Share

0.16

0.00

37.43

10.49

37.59

10.49

% % %

1.

2.

NameNo

Note :

* Mr. Wisanggeni Lauw is deemed to have an interest in the shares of Acasia Limited and his spouse in Adriatic Assets Limited by virtue of the provisions under Section 7 of the Companies’ Act, Cap 50.

Public Shareholding

Based on the Registers of Shareholders and to the best knowledge of the Company, the percentage of shareholdings held in the hands of the public is 49.67%. The Company is therefore in compliance with Rule 723 of the SGX-ST Listing Manual.

1.

2.

as at 17 March 2008


NOTICE IS HEREBY GIVEN that the Annual General Meeting of United Fiber System Limited (“the Company”) will be held at 168 Robinson Road, Capital Tower, FTSE Room (Level 9) Singapore 068912, on 25 April 2008 at 9:00 a.m. for the following purposes:

AS ORDINARY BUSINESS

AS SPECIAL BUSINESS

To consider and if thought fit, to pass the following resolution as Ordinary Resolution, with or without any modifications:

1.

2.

3.

4.

5.

6.

To receive and adopt the Directors’ Report and the Audited Accounts of the Company for the year ended 31 December 2007 together with the Auditors’ Report thereon.

To re-elect the following Directors of the Company retiring pursuant to Articles 107 and 117 of the Articles of Association of the Company:

To approve the payment of Directors’ fees of S$219,110 for the year ended 31 December 2007 (previous year: S$257,781).

To re-appoint Ernst & Young as the Auditors of the Company and to authorise the Directors of the Company to fix their remuneration.

To transact any other ordinary business which may properly be transacted at an Annual General Meeting.

UNITED FIBER SYSTEM LIMITED(Company Registration No. 199508589E) (Incorporated in the Republic of Singapore)

Notice of Annual General Meeting

a)b)c)d)e)

Mr. Sven Gösta Thordsson EdströmMr. Lee Kan YukMr. Paul Lim Yu NengMr. Dominic Tan Eng KiatMr. M. Rajaram*

(Resolution 1)

(Resolution 2)(Resolution 3)(Resolution 4)(Resolution 5)(Resolution 6)

(Resolution 7)

(Resolution 8)

Authority to issue shares up to 50 per centum (50%) of the issued shares in the capital of the Company

That pursuant to Section 161 of the Companies Act, Cap. 50 and Rule 806 of the Listing Manual of the Singapore Exchange Securities Trading Limited, the Directors of the Company be authorised and empowered to:

a) (i)

(ii)

issue shares in the Company (“shares”) whether by way of rights, or otherwise; and/or

make or grant offers, agreements or options (collectively, “Instruments”) that might or would require shares to be issued, including but not limitedto the creation and issue of (as well as adjustments to) options, warrants, debentures or other instruments convertible into shares,

at any time and upon such terms and conditions and for such purposes and to such persons as the Directors of the Company may in their absolute discretion deem fit; and

(Retiring under Article 107)(Retiring under Article 107)(Retiring under Article 117)(Retiring under Article 117)(Retiring under Article 117)


b)

(1)

(2)

(3)

(4)

the aggregate number of shares (including shares to be issued in pursuance of the Instruments, made or granted pursuant to this Resolution) and Instruments to be issued pursuant to this Resolution shall not exceed fifty per centum (50%) of the total number of issued shares in the capital of the Company (as calculated in accordance with sub-paragraph (2) below), of which the aggregate number of shares and Instruments to be issued other than on a pro rata basis to existing shareholders of the Company shall not exceed twenty per centum (20%) of the total number of issued shares in the capital of the Company (as calculated in accordance with sub-paragraph (2) below);

(subject to such calculation as may be prescribed by the Singapore ExchangeSecurities Trading Limited) for the purpose of determining the aggregate number of shares and Instruments that may be issued under sub-paragraph (1) above, the percentage of issued shares and Instruments shall be based on the total number of issued shares in the capital of the Company at the time of the passing of this Resolution, after adjusting for:

(a) new shares arising from the conversion or exercise of the Instruments or any convertible securities; (b) new shares arising from exercising share options or vesting of share awards outstanding and subsisting at the time of the passing of this Resolution; and (c) any subsequent consolidation or subdivision of shares;

in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the Listing Manual of the Singapore Exchange Securities Trading Limited for the time being in force (unless such compliance has been waived by the Singapore Exchange Securities Trading Limited) and the Articles of Association of the Company; and

unless revoked or varied by the Company in a general meeting, such authority shall continue in force (i) until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier or (ii) in the case of shares to be issued in pursuance of the Instruments, made or granted pursuant to this Resolution, until the issuance of such shares in accordance with the terms of the Instruments.

[See Explanatory Note (i)]

BY ORDER OF THE BOARD

LIM KA BEE SecretarySingapore, 10 April 2008


(notwithstanding the authority conferred by this Resolution may have ceased to be in force) issue shares in pursuance of any Instrument made or granted by the Directors of the Company while this Resolution was in force,

provided that:

(Resolution 9)


*

Explanatory Notes:

Notes:

Statement pursuant to Rule 704(8) of the Listing Manual of the SGX-ST.

Mr. M. Rajaram is currently deemed to be an Independent Director of the Company. If re-elected, he will remain as Member of Audit Committee and will be considered as an Independent Director of the Company.

The Ordinary Resolution 9 in item 6 above, if passed, will empower the Directors of the Company from the date of this Meeting until the date of the next Annual General Meeting of the Company, or the date by which the next Annual General Meeting of the Company is required by law to be held or such authority is varied or revoked by the Company in a general meeting, whichever is the earlier, to issue shares, make or grant instruments convertible into shares and to issue shares pursuant to such instruments, up to a number not exceeding, in total, 50% of the total number of issued shares in the capital of the Company, of which up to 20% may be issued other than on a pro-rata basis to existing shareholders of the Company.

For determining the aggregate number of shares that may be issued, the percentage of issued shares in the capital of the Company will be calculated based on the total number of issued shares in the capital of the Company at the time this Ordinary Resolution is passed after adjusting for new shares arising from the conversion or exercise of the Instruments or any convertible securities, the exercise of share options or the vesting of share awards outstanding or subsisting at the time when this Ordinary Resolution is passed and any subsequent, consolidation or subdivision of shares.

A Member entitled to attend and vote at the Annual General Meeting (the “Meeting”) is entitled to appoint a proxy to attend and vote in his/her stead. A proxy need not be a Member of the Company.

The instrument appointing a proxy must be deposited at the Registered Office of the Company at 47 Scotts Road, #07-03/04 Goldbell Towers, Singapore 228233 not less than forty-eight (48) hours before the time appointed for holding the Meeting.

*

(I)

1.

2.



For investors who have used their CPF monies to buy United Fiber System Limited’s shares, this Report is forwarded to them at the request of the CPF Approved Nominees and is sent solely FOR INFORMATION ONLY.

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.

CPF investors who wish to attend the Meeting as an observer must submit their requests through their CPF Approved Nominees within the time frame specified. If they also wish to vote, they must submit their voting instructions to the CPF Approved Nominees within the time frame specified to enable them to vote on their behalf.

Proxy Form

UNITED FIBER SYSTEM LIMITEDCompany Registration No. 199508589E(Incorporated In The Republic of Singapore)

(Please see notes overleaf before completing this Form)

I/ We,

of

being a member/ members of United Fiber System Limited (the “Company”), hereby appoint:

No. Resolutions relating to: For Against

1 Directors’ Report and Audited Accounts for the year ended 31 December 2007

2 Re-election of Sven Gösta Thordsson Edström as a Director (Article 107)

3 Re-election of Lee Kan Yuk as a Director (Article 107)

4 Re-election of Paul Lim Yu Neng as a Director (Article 117)

5 Re-election of Dominic Tan Eng Kiat as a Director (Article 117)

6 Re-election of M. Rajaram as a Director (Article 117)

7 Approval of Directors’ fees amounting to S$219,110

8 Re-appointment of Ernst & Young as Auditors

9 Authority to issue new shares

or failing the person, or either or both of the persons, referred to above, the Chairman of the Meeting as my/ our proxy/ proxies to vote for me/ us on my/ our behalf at the Annual General Meeting (the “Meeting”) of the Company to be held on 25 April 2008 at 9:00 a.m. and at any adjournment thereof. I/ We direct my/ our proxy/ proxies to vote for or against the Resolutions proposed at the Meeting as indicated hereunder. If no specific direction as to voting is given or in the event of any other matter arising at the Meeting and at any adjournment thereof, the proxy/ proxies will vote or abstain from voting at his/ her discretion. The authority herein includes the right to demand or to join in demanding a poll and to vote on a poll.

Name NRIC/Passport No. Proportion of Shareholdings

No. of Shares %

Address

and/ or (delete as appropriate)

(Please indicate your vote “For” or “Against” with a tick [√] within the box provided.)

Signature of Shareholder(s)or, Common Seal of Corporate Shareholder

*Delete where inapplicable

Name NRIC/Passport No. Proportion of Shareholdings

No. of Shares %

Address

Dated this day of 2008

1.

2.

3.

IMPORTANT:

Total number of Shares in: No. of Shares

(a) CDP Register

(b) Register of Members


The Company shall be entitled to reject the 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. In addition, in the case of Shares en-tered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the member, being the appointor, is not shown to have Shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding the Meeting, as certified by The Central Depository (Pte) Limited to the Company.

Notes:

General:

1.

2.

3.

4.

5.

6.

7.

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, Chapter 50 of Singapore), 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.

A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint one or two proxies to attend and vote in his/ her stead. A proxy need not be a member of the Company.

Where a member appoints two proxies, the appointments shall be invalid unless he/ she specifies the propor-tion of his/ her shareholding (expressed as a percentage of the whole) to be represented by each proxy.

Completion and return of this instrument appointing a proxy shall not preclude a member from attending and voting at the Meeting. Any appointment of a proxy or proxies shall be deemed to be revoked if a member attends the meeting in person, and in such event, the Company reserves the right to refuse to admit any person or persons appointed under the instrument of proxy to the Meeting.

The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at 47 Scotts Road, #07-03/04 Goldbell Towers, Singapore 228233 not less than 48 hours before the time appointed for the Meeting.

The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of an officer or attorney duly authorised. Where the instrument appointing a proxy or proxies is executed by an attorney on behalf of the appointor, the letter or power of attorney or a duly certified copy thereof must be lodged with the instrument.

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

Proxy Form (cont’d)



Documents

JOURNEY FORWARD UNITED FIBER SYSTEM Ltd. …Unifiber 2007 Annual Report 1 JOURNEY FORWARD Annual Report 2007 UNITED FIBER SYSTEM Ltd. 47 Scotts Road #07-03/04 Goldbell Towers Singapore