2011 - Mencast Holdings - Investor Relations: Mencast...

2011Annual Report

Complete MRO Solutions Provider in the Marine and Oil & Gas IndustriesEstablished in 1981, Mencast Holdings Ltd. and its subsidiaries (”Mencast” or the "Group") is a Singapore-based maintenance, repair and overhaul ("MRO") solutions provider. The Group was successfully listed in June 2008 as the first sponsor-approved listing on Singapore's SGX Catalist and later became the first such company to transfer to the SGX Mainboard.

From humble beginnings in a rented workshop at Choa Chu Kang Road, the Group has steadily expanded its business over the last three decades. After becoming an established leader in the manufacture and repair of propellers and sterngear equipment, the Group expanded into the Marine MRO industry. Today, through a combination of organic growth and acquisitions, the Group has transformed into a complete MRO solutions provider catering to the Marine and Oil & Gas industries.

Led by a dedicated and experienced management team, and soon to be operating from new waterfront facilities with 51,353 sqm of land area, Mencast is well on track to achieve its goal of becoming a leader in the Marine MRO industry.

At present, the Group has two business segments, being Marine Services and Offshore & Engineering Services.

Marine ServicesMarine Services includes sterngear manufacturing and refurbishment, ship inspection, repair & maintenance services and engineering & fabrication works. This segment includes the business of Recon Propeller & Engineering Pte Ltd (“Recon”), which was acquired in 2009. Recon has a long track record of providing quality propeller repair and modification services to the worldwide Offshore Marine and Oil & Gas industries.

Offshore & Engineering ServicesOffshore & Engineering Services includes services such as inspection, maintenance and fabrication of offshore structures as well as engineering and other services related to onshore structures. This segment includes the businesses of three subsidiaries which were acquired over the last year, Top Great Engineering & Marine Pte Ltd (“Top Great”), Unidive Marine Services Pte Ltd (“Unidive”), Team International Development and Team Precision Engineering (“Team Assets”).

Top Great is a specialist in the design, procurement, fabrication and installation of structural and precision engineering systems and plants. It also provides skilled professionals and manpower, as well as full turnkey project management of engineering projects. Unidive’s provides a full range of topside (rope access) and subsea (diving) services for the Offshore and Inshore Marine industry, particularly in inspections, repairs and maintenance. Team Assets is principally engaged in the manufacturing of metal precision components.

CORPORATE PROFILE

Mencast Holdings Ltd.Annual Report 2011

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YEAR IN REVIEWGROWTH DRIVERSEnhanced capabilities as a complete Maintenance, Repair and Overhaul (“MRO”) solutions provider in Marine and Oil & Gas industries through:

• Integration of complementary businesses including Top Great, Unidive and Team Assets to harness positive synergies

- Additional revenue streams for the Group

- Expanded customer base and geographical coverage

- Elevated corporate profile in the industry

• Capacity expansion with the completion of “Mencast Central”, waterfront facilities at 42E Penjuru Road, by 2nd half of FY2012, bringing total production area to 51,353 square meters.

During the year, Mencast also transferred its listing from Catalist to the Mainboard, becoming the first Catalist sponsored company to receive approval from SGX to make this transfer.


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“We continue to entrench ourselves as a leading MRO player in the Marine and Oil & Gas industries and are committed to pride ourselves as “Partner Perfect” to all our stakeholders.”


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The Group continued to deliver record top and

bottom line performance in FY2011, making it

the seventh straight year of all time high

revenue and profit.

Chairman’s MessageDear Valued Shareholders,

ANOTHER RECORD YEAROn behalf of the Board of Directors of Mencast Holdings Ltd and our subsidiaries (“Mencast” or the “Group”), it is my honour and privilege to present our Annual Report for the year ended 31 December 2011 (“FY2011”).

Amidst a challenging environment, I am delighted to report that Mencast once again achieved record revenue and net profit. In FY2011, Group’s turnover surged 75.9% to S$56.4 million, while net profit attributable to equity holders grew 20.5% to S$10.2 million.

These results mark seven consecutive years of double-digit growth. Despite the deep economic contraction in the intervening years, our revenue and net profit attributable to shareholders have grown at compounded annual rates of 27.1% p.a. and 29.4% p.a. respectively from FY2006 to FY2011.

A YEAR OF TRANSFORMATIONBeyond the financial numbers, FY2011 was a pivotal year in which we completed our transformation into a fundamentally stronger company with greater profit potential and improved earnings quality.

Since our last annual report, Mencast has made several important acquisitions. Successful integration from these acquisitions has transformed us into a complete maintenance, repair and overhaul ("MRO") solutions provider. The acquired companies are the Top Great group

of companies (“Top Great”), Unidive group of companies (“Unidive”) and the assets of Team International Development and Team Precision Engineering (“Team Assets”). During the year, we also transferred our listing from Catalist to the Mainboard, becoming the first Catalist sponsored company to receive approval from SGX to make this transfer.

A “PARTNER PERFECT” MENCAST Our growth and transformation during the turbulent environment of the last three years have been rapid. As we look to the future, it is appropriate to share a perspective on what drives us, and what you as shareholders can expect from us in the future.

When we announced our listing in 2008, more than a few of our friends were surprised that after operating successfully for 27 years as a private company, we would choose to subject ourselves under the spotlight of the public markets.

The reason behind our choice was simple: the public markets offered a robust platform to lift our business to a new level by allowing us to access the capital and credibility needed to build Mencast into a much larger and stronger organization. Growth is best sustained where value is created for all stakeholders – our shareholders, customers, staff, suppliers and other business partners.


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occupation permit (“TOP”), and construction of the quay wall is on track for completion in the second half of

FY2012. Piling on the adjacent plot at 42E Penjuru Road has commenced and is expected to be completed in the first half of FY2012.

The economies of scale and improvements in workflow and logistics provided by “Mencast Central” are anticipated to bring substantially higher efficiency and productivity in 2012 and beyond.

2. New Revenue Streams As well as significantly increasing the Group’s revenue

potential from our waterfront facility, our expanded capacity in combination with the new skill sets from our acquisitions, allow us to provide a comprehensive range of MRO solutions to a broader base of clients in the Marine and Oil & Gas industries:

• Top Great allows us to perform full turnkey project management, including engineering design, procurement, fabrication and installation of structural and precision engineering systems and plants.

• Unidive allows us to provide a full range of topside (rope access) and subsea (diving) services for the offshore and onshore marine industry, particularly for inspections, repairs and maintenance.

• Team Assets has enhanced our capabilities in the manufacture of metal precision components.

• The waterfront access and new equipment at “Mencast Central” allow us to offer a much greater range of products and services.

This year, we are intending to establish a new Energy segment, focusing on high-tech engineering in the scope of air, water and power sciences and other environmentally sustainable initiatives sought by the Marine and Oil & Gas industries. Such initiatives are an integral part of the asset life cycle of our clients and the formation of an Energy segment aligns to our goal of being a leading MRO solutions provider by assisting our clients in optimizing the useful life and efficiency of their assets.

This philosophy has been formalised in our new slogan “Partner Perfect”, which embodies the mindset and core values that have guided our business for the past three decades.

“Partner Perfect” is a long term way of thinking that requires every business relationship and transaction to benefit every stakeholder involved. Through aligning our business model with our customer’s needs, we harness the enormous power that is generated when all stakeholders work in unison towards a common goal. Even as we continue to position our business towards attractive new opportunities, Mencast will be guided by the same principles that we were founded upon. We will resolutely strengthen our capabilities and seek to drive synergy and productivity across our businesses. Above all, we shall adhere to the principle of financial prudence, which includes measuring the attractiveness of every business opportunity by the time tested yardsticks of profit, margins, cash flow and value creation for shareholders.

“TRIPLE PLAY” DELIVERYOver the past year, we achieved three significant internal targets, namely the transformation of our business into a complete MRO service provider, to surpass S$10 million in net profit and attain S$100 million in market capitalization. The achievement of these targets is the result of the successful execution of the “Triple Play” strategy outlined in last year’s Annual Report. This strategy comprises three primary components:

1. Capacity Expansion The combined built up area of our premises would

increase from approximately 9,644 sqm at the time of our IPO to 51,353 sqm by the end of 2012. The bulk of this increase is from “Mencast Central”, our new state-of-the-art waterfront facilities at 42E Penjuru Road.

Construction of “Mencast Central” is progressing well, with our factory building already obtaining a temporary


3. Mergers and Acquisitions As well as boosting our capabilities, the acquisition of

Top Great, Unidive and Team Assets have driven significant increases in Group’s revenue and profit. Our “Partner Perfect” business model allowed for the rapid and successful integration of these companies and has captured the attention of other potential partners. We are continuing to explore opportunities for M&A using the same criteria as ever - companies with high margins, high ROE and with reputable and likeminded management that offers earnings accretion, synergy and long term creation of shareholder value.

DIVIDENDThough we are in a rapid growth phase and the demands on our capital are high, we are committed to rewarding shareholders whenever we can. In recognition of our good results and to show our sincere gratitude to shareholders for their steadfast support, the Board is pleased to recommend a dividend of 1.2 cents per share for FY2011. This is a 9% increase over the prior year and the second consecutive year in which we have increased our dividend.

LOOKING AHEAD Several days before writing this letter, Mencast was honoured by the entry of two highly respected investors as our shareholders, being Heliconia Capital Management Pte. Ltd. and Dymon Asia Special Opportunities Fund. Heliconia Capital Management Pte. Ltd. is an unit of Temasek Holdings, while Dymon Asia Special Opportunities Fund manages US$2.8 billion and is one of Asia’s top performing funds. We are privileged and humbled to receive the endorsement of two such prestigious organisations.

The industry we serve is a cyclical one and there will undoubtedly be challenging years in the future. Nonetheless, the arduous work of transforming Mencast has largely been completed and we are confident that the fruits of these efforts will be harvested in the years ahead.

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Our total assets have grown four fold since our IPO. Behind this number are enhanced capabilities and facilities that allow us to generate far more revenue than in previous years. Barring unforeseen circumstances such as a sharp industry contraction, we expect 2012 to be another good year for Mencast.

The entire team at Mencast is energised by the transformation that has been achieved in our business and the opportunity to create substantial value for all our partners in the years ahead. In many ways, this is the moment we have been working toward for many years. I am privileged to work with the talented and committed team at Mencast and look forward to delivering on our promise to be a “Perfect Partner” in the years ahead.

APPRECIATIONFinally, I wish to thank our directors, staff, customers and all Mencast Partners for their enormous contribution to what has been achieved. The sterling financial performance and remarkable accomplishments of the prior years are testaments to the strength, talent and commitment of all our Mencast Partners.

On behalf of the Board, I also extend a warm welcome to Mr Wong Boon Huat, who joined our Board as an Executive Director during the year. Mr Wong was the driving force behind the success of Top Great, and his decades of senior experience in the offshore, marine and environmental industry makes him a fine addition to our already accomplished Board.

Last and certainly not the least, I would like to thank you, our shareholders for your trust and confidence in Mencast and look forward to the opportunity to meet you at our Annual General Meeting.

Glenndle Sim Executive Chairman & Chief Executive Officer


07Mencast Holdings Ltd.Annual Report 2011

08 Mencast Holdings Ltd.Annual Report 2011

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GROUP STRUCTURE

MENCAST OFFSHORE

AND MARINE PTE LTD (Singapore)

100%

TOP GREAT HOLDINGS PTE LTD

(Singapore)100%

TOP GREAT ENGINEERING & MARINE SDN BHD

(Malaysia)100%

TG OFFSHORE PTE LTD(Singapore)

49% 51%TOWELL TOP GREATENGINEERINGSERVICES LLC

(Sultanate of Oman)50%

PT. TOP GREAT ENGINEERING & MARINE

(Indonesia)100%

MENCAST ENERGY PTE LTD

(Formerly known as M.B.A. Heavy Industries

Pte Ltd) (Singapore)

100%

RECON PROPELLER & ENGINEERING PTE LTD

(Singapore)100%

MENCAST ENGINEERING

PTE LTD(Singapore)

100%

MENCAST HOLDINGS LTD.

MENCAST MARINE PTE LTD

(Singapore)100%

UNIDIVE MARINE SERVICES PTE LTD

(Singapore)100%

UNIDIVE MARINE SERVICES (MALAYSIA)

SDN BHD (Malaysia)

100%

INDUSTRIAL ROPE ACCESS PTE LTD

(Singapore)100%

UNIDIVE OFFSHORE PTE LTD(Singapore)

100%

TOP GREAT ENGINEERING

& MARINE PTE LTD (Singapore)

100%

MCGLYNN SDN BHD(Malaysia)

100%

TOP GREAT ENGINEERING SERVICES LLC

(Sultanate of Oman)100% (30% in trust)


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REVENUE BY GEOGRAPHICAL COVERAGE

FY2011 FY2010

Singapore


Financial Highlights

For the year (S$'000) FY2011 FY2010 FY2009 FY2008 FY2007

Revenue 56,358 32,031 26,274 25,063 18,876

Earnings before interest, tax, depreciation and amortisation 14,089 12,106 10,669 8,343 6,729

Profit before income tax 10,488 9,800 8,732 7,241 5,892

Net profit attributable to equity holders 10,236 8,495 7,033 5,803 4,816

Operating cashflow 7,246 2,240 6,161 6,349 2,380

At year end (S$'000)

Total Assets 137,225 62,141 48,548 33,824 22,475

Total Liabilities 80,067 21,624 20,412 13,093 9,946

Total Equity 57,158 40,517 28,136 20,731 12,529

Property, plant and equipment 54,818 25,967 22,145 17,050 11,257

Cash and cash equivalents 9,451 11,604 12,706 8,107 2,243

Asia

82.7%

7.4%

9.9%

19.5%

3.2%

77.3%

Rest of the world Singapore Asia Rest of the world


GROSS PROFIT MARGIN

NET PROFIT MARGIN

45.9% 45.0%47.3%

49.8%

41.6%

FY2007 FY2008 FY2009 FY2010 FY20110

10

20

30

40

50

5

15

25

35

45

18.2%

26.5%26.8%

23.2%

25.5%

GROSS PROFIT (S$’000)

8,663

11,285

12,43915,958

23,466

FY2007FY2008FY2009FY2010FY2011

18,87625,063

26,274

32,031

56,358

FY2007FY2008FY2009FY2010FY2011

REVENUE (S$’000)

%

4,8165,803

7,033

8,495

10,236

NET PROFIT (S$’000)

FY2007FY2008FY2009FY2010FY2011

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OPERATIONS REVIEW2011 was a pivotal year where we successfully grew our businesses, diversified our earnings streams and transformed into a complete maintenance, repair and overhaul ("MRO") solutions provider for the Marine and Oil & Gas industries. For the financial year ended 31 December 2011 (“FY2011”), the Group again delivered record profitability, with net profit attributable to shareholders of S$10.2 million, representing an increase of 20.5% from the prior year. This marks our seventh consecutive year of record revenue and profits.

Key Business Highlights in 2011Following a general strengthening of the economy, the Group aggressively executed the “Triple Play Strategy” we laid out in our last Annual Report for the financial year 31 December 2010 (“FY2010”). This Strategy is a key component in our master plan to transform into a leading MRO solutions provider.

Our “Triple Play” strategy has three main components:• Capacity expansion• Generate new revenue streams• Make synergistic acquisitions

Our Group has made outstanding progress in execution on all three fronts.

The commissioning of our new waterfront facilities at 42E Penjuru Road will increase the land area of the Group’s facilities from 9,644 sqm to 51,353 sqm and bring with it an enormous increase in our business potential.

Our new facilities, along with new advanced equipment have allowed us to successfully add new revenue streams such as the production of the Mewis Duct for our alliance

partner, Becker Marine Systems Gmbh & Co. KG ("Becker"). The Mewis Duct is a propulsion improvement device that produces up to 10% fuel and emission savings. Becker is the global market leader for high-end performance rudder and manoeuvring solutions and Mencast is honoured to be their preferred manufacturer of heavy rudder assemblies and high-end sterngear equipment in the Asia Pacific region.

Over the past year, as part of our strategy to expand our business and increase our capabilities, we successfully acquired and integrated several companies being Top Great group of companies (“Top Great”), Unidive group of companies (“Unidive”) and the assets of Team International Development and Team Precision Engineering. (“Team Assets”).

Transformation into a Complete MRO organizationMencast's business focuses on time sensitive, high precision and mission critical needs of our customers and the reputation built over the years has rewarded us with an excellent base of quality customers. Leveraging on our strong brand name and industry standing to expand our business and become a complete MRO solution specialist not only diversifies our revenue streams, but also creates positive synergies, economies of scale and strengthens our value proposition, attracting new customers and retaining existing customers.


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Our “Partner Perfect” BrandTo reflect the transformation of our Group’s business, we have also undertaken a new branding initiative. Our management, in conjunction with staff, clients and other stakeholders unanimously endorsed our new “Partner Perfect” philosophy. This embodies the collective efforts and responsibility to be the perfect partners in every aspect to our customers, suppliers, employees and business partners.

This branding exercise also sees the integration of our subsidiaries and businesses under one banner and unites our employees and subsidiaries with a common vision, mission and goal.

Our service credo reflects “Expert solutions, lasting relationships”, highlights that our customers partner with Mencast for the high standards we hold ourselves to and the relationships we build and maintain with them as our partners. Our brand value proposition is supported by the following six pillars:

• Commercial ethos• Full engagement • Responsiveness• Superior technical ability• Resourceful• Environmental championship

Mencast Centre of ExcellenceOur people are the key to our success and growth. At Mencast, we believe in nurturing our staff and helping them grow their skill sets even further. We are establishing a “Mencast Centre of Excellence” in 2012 with the aim to build on our skills base in key areas such as production, safety, management and operational skills.

As a training-oriented employer, Mencast seeks to develop the potential of each employee to the fullest, thus retaining them within the Group and exposing them to the different opportunities available within each subsidiary. Through this centre, productivity and work practices will improve as knowledge created in areas of focus are


disseminated across the Group. This will not only benefit our existing employees to diversify their skill sets but also help us attract new talent to the Group.

Review of Financial PerformanceAs a result of the successful execution of our “Triple Play” strategy, the Group achieved a very significant revenue increase of 75.9% to S$56.4 million in FY2011. The increase was mainly due to the maiden revenue contributions from our newly acquired subsidiaries, Top Great, Unidive and the Team Assets.

The revenue contribution from the newly acquired subsidiaries was offset by lower revenue in the Marine Services business segment. This decrease was mainly due to lower manufacturing orders following the Group’s decision to focus on new growth areas and subdued new

shipbuilding orders during the year. Repair services business was largely unchanged as compared to the prior year.

With maiden contributions from the newly acquired subsidiaries, the Group’s gross profit increased 47.0% to S$23.5 million in FY2011. The Group’s gross profit margin decreased from 49.8% in FY2010 to 41.6% in FY2011 due to the combination of a change in business mix and decrease in gross profit margin from Marine Services as a result of competitive pricing.

The Group’s administrative expenses more than doubled from S$6.2 million in FY2010 to S$12.6 million in FY2011. The increase was mainly due to expenses of approximately S$5.8 million attributable to Top Great and Unidive following the completion of their acquisitions.


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Finance expenses also increased by 67.7% to S$0.8 million in FY2011 due mainly to additional working capital loans and construction loans drawdown amounting to S$24.4 million.

The Group continued to maintain a good cash balance of S$9.5 million in FY2011. Operating and financing activities helped to maintain this healthy balance. The increase in cash from operating activities was due to higher profit and better working capital management. The increase in cash from financing activities was mainly due to the net proceeds from bank borrowings and finance lease liabilities, offset partly with payment of dividends.


The purchase of equipment and machinery, the construction of the Group's manufacturing plant at 42E Penjuru Road and partial payment for the recent acquisitions, resulted in a net cash outflow from investing activities for the Group in FY2011.

The Group achieved a return on equity of 17.9% in FY2011. Earnings per share increased from 5.39 cents in FY2010 to 5.77 cents in FY2011. Net asset per ordinary share registered an increase from 23.8 cents as at 31 December 2010 to 30.5 cents as at 31 December 2011.

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BOARD OF DIRECTORS


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SIM SOON NGEE GLENNDLEExecutive Chairman & Chief Executive Officer

Mr Glenndle Sim is responsible for the overall management, strategic planning, operations and marketing of the Group. Mr Glenndle Sim is a member of the Nominating Committee. He graduated from the National University of Singapore with a Bachelor in Business Administration and later obtained a Master of Business Administration from the University of Delaware in the USA. Mr Glenndle Sim also attended the Cast Metal Institute Inc. (USA) in 1996 and completed the certification curriculum in General Foundry Technology and Non-Ferrous Metals Technology. Mr Glenndle Sim was appointed to our Board on 30 January 2008 and was appointed as the Executive Chairman of the Board on 9 October 2009. He is the son of the Group’s founder, the late Mr Sim Gok Hian.


WONG BOON HUATExecutive DirectorMr Wong is the Managing Director of Top Great Engineering & Marine Pte Ltd (“Top Great”). Mr Wong is responsible for the general management, overall strategic planning and direction of Top Great. He also oversees the formulation and implementation of Top Great’s plans and policies. Prior to the founding of Top Great, Mr Wong had been involved in various vocations within the marine industry. Armed with 30 years of experience in the industry, Mr Wong has contributed significantly to the development and growth of Top Great.

SUNNY WONG FOOK CHOYLead Independent Director

Mr Sunny Wong joined the Board on 29 May 2008 and is Chairman of the Nominating Committee and a member of the Audit and Remuneration Committees. A practicing advocate and solicitor of the Singapore Supreme Court, Mr Sunny Wong is currently the Managing Director of Wong Tan & Molly Lim LLC. He graduated from the National University of Singapore with a Bachelor of Laws (Honours) and is currently also a Non-Executive Director of Albedo Limited, Excelpoint Technology Ltd and KTL Global Limited.

HO CHEW THIMIndependent Director

Mr Ho is the Chairman of the Audit Committee and a member of the Remuneration and Nominating Committees. He joined our Board on 29 May 2008.Mr Ho is an accountant by vocation. He has over 33 years experience in financial management and has held senior financial positions in mainly listed companies and banks. These include China Water Holdings Pte Ltd (an associate of SGX-listed CNA Group Ltd), CNA Group Ltd, Achieva Limited, China World Trade Centre Ltd (an associate of Shangri-La Asia Limited), Poh Tiong Choon Logistics Limited, China-Singapore Suzhou Industrial Park Development Co. Ltd, Deutsche Bank (Singapore Branch), L & M Group Investments Ltd, United Industrial Corporation Limited and United Overseas Bank Limited. He is also an Independent Director on the Board of several public listed companies in Singapore. Mr Ho is a Fellow Member of Institute of Certified Public Accountants of Singapore and CPA Australia. He graduated with a Bachelor of Accountancy (First Class Honours) degree from University of Singapore in 1976.

NG ENG HOIndependent Director

Mr Ng joined the Board on 29 May 2008 and is Chairman of the Remuneration Committee and a member of the Audit and Nominating Committees. He is currently a Director of Audelia Pte Ltd, a consultancy and investment services firm in Singapore. Mr Ng was previously Executive Vice President in charge of operations at Singapore Technologies Telemedia. He has also held the positions as Deputy President Director of PT Indosat TBK, Managing Director of Keppel Telecommunications & Transportation, General Manager of Folec Communications and Assistant General Manager of Steamers Maritime Holdings. Before that, Mr Ng was a Chief Signal Officer holding various command and staff positions in the Singapore Armed Forces. He graduated from the Royal Military College of Science (UK) with a Bachelor of Science (Honours) in Engineering.

NG CHEE KEONGIndependent Director

Mr Ng is our Independent Director and a member of the Audit, Remuneration and Nominating Committees. He joined our Board on 9 October 2009. He is currently a special advisor to PSA International Pte Ltd (“PSA”). Mr Ng joined PSA in 1971 and has since then, held various positions including Group President & CEO, President & CEO (Singapore region) and Global Head of Technical and Operations Development. He retired in January 2005 from his position as President & CEO of PSA. Mr Ng received a Bachelor of Social Science (Economics) from the then University of Singapore and graduated from the Advanced Management Programs at Stanford University (USA) and subsequently, INSEAD. He was awarded the Public Administration Medal (Gold) by the Singapore Government in 1997.

KEY MANAGEMENT

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Phua Poh Cheng, JackDirector, Sterngear Services

Mr Jack Phua is the co-founder of Recon Propeller & Engineering Pte. Ltd. (“Recon”). He joined us as the Director of Sterngear Services Division on 23 July 2009. He is responsible for business development and customer relations, as well as managing the day to day operations of the Divisions. In 1986, Mr Jack Phua set up Recon to provide propeller repair and modification services to the worldwide Offshore Marine and Oil & Gas industries. Mr Jack Phua has more than 23 years of technical and management experience in the shipbuilding, ship repair and ship maintenance industry and has been instrumental in the growth and development of Recon.

Phua Keow WeeTechnical Manager, Recon

Mr Phua is the Technical Manager and a founding member of Recon Propeller & Engineering Pte. Ltd. (“Recon”). Mr Phua is responsible for the technical management and operation of Recon’s machining shop and finishing workshop. He also oversees the development of engineering solutions and setting quality standards for Recon. Armed with more than 30 years of experience in the Offshore Marine and Oil & Gas industries, Mr Phua is integral with the business expansion of Recon.

Tan Eng Hoe, EdwinManaging Director, Unidive Mr Edwin Tan is the Managing Director of Unidive Marine Services Pte Ltd (“Unidive”). Mr Edwin Tan is responsible for the diving, marine inspection, repairs and maintenance operations at Unidive. He oversees Unidive’s day-to-day management and is also responsible for the cash flow management and accounting operations of Unidive. Mr Edwin Tan is a certified diver and instructor with more than 20 years of diving experience. With more than 15 years of experience in the Marine and Offshore industry, Mr Edwin Tan is central to the development and business expansion of Unidive.

Ong Yong Chye, FrancisOperations Director, Unidive

Mr Francis Ong is the Operations Director of Unidive Marine Services Pte Ltd (“Unidive”). Mr Francis Ong holds a certification in IRATA (Industrial Rope Access Trade Association) Rope Access Level 3, the highest accolade awarded by the only worldwide association on industrial rope access. Mr Francis Ong leads a team of 40 rope access technicians in addition to his responsibilities of managing the operations of Unidive. Prior to joining Unidive, Mr Francis Ong was a Dive Supervisor with Metalock Underwater Maintenance Pte Ltd for 3 years and a Naval Diver with the Republic of Singapore Navy for 3 years. Mr Francis Ong is a certified diver with more than 20 years of experience.

Chan Tuck Wai, BenjaminFinancial Controller

Mr Chan joined our Group in December 2007 and is responsible for the financial, accounting and taxation functions as well as the compliance and reporting obligations of our Group. Mr Chan has accumulated more than 20 years of experience in the financial field, holding various accounting and financial positions in listed and nonlisted companies. Mr Chan had also spent many years in professional audit firms, including being an audit senior at Coopers & Lybrand from January 1982 to August 1992. Mr Chan is a fellow member of The Chartered Association of Certified Accountants since 1997. He is a certified Public Accountant and non-practising member of the Institute of Certified Public Accountants of Singapore.

Wong Chin HinProduction Manager

Mr Wong joined our Group in 1999. His responsibilities include workers’ supervision, production planning and scheduling, liaison with customers and determination of work scopes for customers’ job. Prior to joining the Group, Mr Wong was a Production Manager with Lintech Engineering Pte Ltd for ten years. From 1979 to 1989, he was an electrical technician for Metallock Pte Ltd. Mr Wong graduated from the National Industrial Board in Singapore with a certificate in electrical fitting and installation.

Sim Wei WeiAdministration and Human Resource Manager

Ms Sim joined our Group in May 2005 and is in charge of planning and implementing human resource policies and procedures, as well as handling general administrative duties. Her responsibilities include various human resource functions such as career development, compensation and benefits, payroll, screening and recruitment of staff. Ms Sim graduated from the Singapore Management University with a Bachelor’s degree in Business Management in 2003. Ms Sim is the daughter of the Group’s founder, the late Mr Sim Gok Hian, and the sister of the Group’s Executive Chairman and Chief Executive Officer, Mr Sim Soon Ngee Glenndle.


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Steve Tian Boon ChyeGeneral Manager, International Business Development

Mr Steve Tian is the General Manager of International Business Development in Mencast Marine Pte Ltd (“Mencast Marine”). Mr Steve Tian’s responsibilities include the exploration of new business opportunities, the establishment of the Mencast Marine brand in overseas markets and the strategic planning and execution of overseas expansion plans. Having been a managing partner at Aced Consultancy based out of the Netherlands for 3 years, Mr Steve Tian has significant experience in the Asian and European markets prior to joining Mencast Marine in Dec 2010. Mr Steve Tian graduated from the National University of Singapore with a Bachelor’s Degree in Business Administration.

Wong Boon HweeMarine/Production Director, Top Great

Mr Wong is the Director of the Marine division in Top Great Engineering & Marine Pte Ltd (”Top Great”). His responsibilities include the planning of project processes and procedures, optimizing resource management of project activities, overseeing the day-to-day operations of projects and leading a cross-functional team in the timely manner while maintaining a high quality in execution of projects. Mr Wong has more than 15 years of experience in the marine industry and is essential to the functionality of Top Great. Mr Wong is the brother of our Executive Director, Mr Wong Boon Huat.

Aung Wunna, EdwardBusiness Development Director, Top Great

Mr Edward Aung is the Director of the Oil & Gas Water Treatment division in Top Great Engineering & Marine Pte Ltd (”Top Great”). He is the key decision maker for various division projects and his responsibilities include the leading, planning and execution of projects, conducting technical reviews and assisting in major issues and policy conflicts. An engineer by training, Mr Edward Aung graduated with a Master of Science in Project Management from the National University of Singapore prior to joining Top Great in 2005.


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INVESTORRELATIONS

INVESTORRELATIONS


OPEN COMMUNICATION WITH SHAREHOLDERSWe adopt a proactive approach in communicating with our shareholders through timely dissemination of corporate information so that all capital players can make informed decisions. We held more than 20 one-to-one and group meetings in FY2011 and have met over 50 different investors in Singapore. Such meetings provide a useful platform for investors and analysts to engage our management and gain in-depth understanding of our business model and approach. This also facilitates communication between the management and the investment community which will contribute towards relationship building with our long-term shareholders.

We announce our financial results on a semi-annual basis and will arrange for group meetings subsequent to our financial results with analysts, funds and other investors. These meetings are mostly well-attended by over 18-20 investors. Our top management also participates actively in conferences including OSK-DMG ASEAN Top Small Cap Conference 2011 and roadshow presentations arranged by UOB KayHian and CIMB. We are currently covered by both CIMB and UOB KayHian who have published a BUY rating on our company.

During the year, we also arranged yard tours to our facilities and subsidiaries cum management dialogues. We arranged with NextInsight, an online investment portal, who brought along more than 10 retail and high net worth investors and several analysts. Tours around the facilities allow investors to relate more to the operational capabilities of the Group and gain an insight of the business operations.

To reach stakeholders in a timely and effective manner, we promptly update our corporate website, www.mencast.com.sg, with news announcement at the beginning or at the end of a trading day besides uploading on the Singapore Exchange website.

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Announcements of Results and Dividends

FINANCIAL YEAR 2011

Announcement of FY2010 Financial Results

Annual General Meeting

Acquisition of Top Great Group

Acquisition of Unidive Group

Announcement of HY2011 Financial Results

Transfer from SGX-Catalist to SGX-Mainboard

Extraordinary General Meeting

Jan Jun Jul Sep Oct Dec

24

18

21

4

14

21

28

21

20

Acquisition of assets from Team Precision Engineering and Team International Development

Increased investment in Mencast Offshore & Marine Pte Ltd to S$4.0 million

Feb Mar Apr May Aug Nov

FINANCIAL CALENDAR


22

PEOPLEDEVELOPMENT

RETAINING AND ATTRACTING TALENT

Our people are our core asset Mencast is committed to be an employer of choice through recognising the contributions of employees, providing opportunities to maximise potential and developing their ability to contribute to the Group’s success.

Our ability to attract and retain key talent is a key competitive advantage of our Group. For the past several years, we have worked towards building an open and inclusive culture that values common goals, personal accountability, integrity and trust as a mean to achieve better business performance.

Sustaining and fostering this culture requires a balanced remuneration strategy that engages our staff while aligning with shareholder interests. Following a review with external consultants, Mencast will revise our practice of compensation using primarily base salary and variable bonus. Looking forward, we intend to compensate staff using three transparent components, being base salary, performance based incentives and employee share ownership options.

Our revised remuneration strategy will help build a performance based culture where employees have a sense of purpose and are rewarded for work that contribute to Group objectives. This will spur employees to perform to the best of their ability while aligning with the goals of creating client satisfaction and shareholder value. Additionally, through incentivising employees, managers and teams will work across departments to achieve organizational goals, greater effectiveness and productivity.

With increased flexibility, non-cash and long term elements of remuneration, we also expect to improve our overall management of the Group, through the alignment of processes and objectives across departments, teams and individual employees.

SKILLS DEVELOPMENTIn FY2012, our Group plans to establish the “Mencast Centre of Excellence” to cater to the training needs of our employees. The “Mencast Centre of Excellence” will help deliver on our goal of developing talent and enhancing our overall expertise in the areas of production, safety and other management and operational skills.

By deploying talent across our business units we also harness our Group’s inherent synergy as well as achieving several important goals simultaneously. These include career development, staff retention, enhancing the use of best practice and building a talent pool to ensure a smooth and effective succession for key management positions.


CORPORATE SOCIAL RESPONSIBILITY

The Melrose Home provides a supportive environment for children between the ages of 3 to 18 years old, a "home away from home" for children and teenagers who need care and protection in a residential setting.

Mencast brought the children to Bollywood Veggies, an organic, planet-friendly vegetable farm where they enjoyed a guided tour of the farm and engaged in games designed to stimulate the mind and promote the importance of teamwork. Working with established societies maximizes the impact of our efforts in implementing community building initiatives and Mencast will continue to support all our employees and businesses in finding new ways of becoming involved to give back to their communities.

We recognize that our social conduct has a direct effect on our reputation. The Board takes full responsibility for CSR and is wholly dedicated to developing a programme that reaches out to all parties who may have an interest in our activities. This includes our customers, suppliers, employees and our shareholders. We strive to create an environment that fosters the innovation and teamwork that is critical to the success and growth of the Group.

As part of our ongoing efforts to give back to society, Mencast embarked on its maiden CSR initiative in November 2011. Together with our recently acquired subsidiary, Top Great, we paid a visit to the Melrose Home under the care of the Children’s Aid Society.


CORPORATEINFORMATIONBOARD OF DIRECTORS

Executive:Sim Soon Ngee Glenndle Executive Chairman & Chief Executive Officer

Wong Boon HuatExecutive Director

Non-Executive and Independent:Sunny Wong Fook Choy Lead Independent Director

Ho Chew ThimIndependent Director

Ng Eng HoIndependent Director

Ng Chee KeongIndependent Director

AUDIT COMMITTEEHo Chew ThimChairman

Sunny Wong Fook Choy Ng Eng HoNg Chee Keong

NOMINATING COMMITTEESunny Wong Fook Choy Chairman

Ng Eng HoSim Soon Ngee GlenndleHo Chew ThimNg Chee Keong

REMUNERATION COMMITEENg Eng HoChairman

Sunny Wong Fook Choy Ho Chew ThimNg Chee Keong

SECRETARYLee Tiong Hock

REGISTERED OFFICENo. 7 Tuas View CircuitSingapore 637642

SHARE REGISTRARBoardroom Corporate & Advisory Services Pte. Ltd.50 Raffles Place #32-01 Singapore Land TowerSingapore 048623

AUDITORSNexia TS Public Accounting CorporationPublic Accountants and Certified Public Accountants100 Beach RoadShaw Tower #30-00Singapore 189702Director-In-ChargeLoh Ji KinAppointed since financial year 31 December 2010

PRINCIPAL BANKERSUnited Overseas Bank LimitedOverseas-Chinese Banking Corporation LimitedStandard Chartered BankDBS Bank Ltd

INVESTOR & MEDIA RELATIONSFinancial PR Pte Ltd4 Robinson Road #04-01The House of EdenSingapore 048543



The board of directors (the “Board”) of Mencast Holdings Ltd. (the “Company”) is committed to achieving a high standard of corporate governance within the Company and its subsidiaries (the “Group”) and to putting in place effective self-regulatory corporate practices to protect the interests of the Company’s shareholders (“Shareholders”) and enhance long-term Shareholders’ value. The Company adopts practices based on the Code of Corporate Governance 2005 (the “Code”). The Board is pleased to report on the compliance of the Company with the Code except where otherwise stated and such compliance is regularly reviewed to ensure transparency and accountability.

Principle 1: The Board’s Conduct of Its Affairs

Apart from its statutory duties and responsibilities, the Board supervises the management of the businesses and affairs of the Group. The Board reviews and approves on the Group’s strategic plans, key operational initiatives, major funding and investment proposals, identifies principal risks of the Group’s businesses and ensures the appropriate systems are in place to manage these risks; reviews the financial performances of the Group; evaluates the performances and compensation of senior management personnel.

The Board is generally responsible for the approval of the half-yearly and yearly results announcement, annual report and accounts, major investments and fundings, material acquisitions and disposal of assets and interested person transactions of a material nature.

To facilitate effective management, certain functions have been delegated by the Board to the following committees:

• Audit Committee

• Nominating Committee

• Remuneration Committee

These committees operate under clear defined terms of references and operating procedures. The Chairman of the respective committees reports the outcome of the committee meetings to the Board.

The Board meets at least quarterly informally and twice formally to oversee the business and affairs of the Group. To assist the Board in fulfilling its responsibilities, the Board will be provided with management reports containing complete, adequate and timely information and papers containing relevant background or explanatory information required to support the decision making process.

The number of Board and other committee meetings held during the financial year ended 31 December 2011 (“FY2011”) and the attendance of each director of the Company (“Director”) where relevant, is set out as follows:

Audit Nominating Remuneration

Board Committee Committee Committee

No. of meetings held 2 2 1 1

No. of meetings attended

Sim Soon Ngee Glenndle 2 2* 1 1*

Sunny Wong Fook Choy 2 2 1 1

Ho Chew Thim 2 2 1 1

Ng Eng Ho 2 2 1 1

Ng Chee Keong 2 2 1 1

Wong Boon Huat(1) - NA NA NA

* By Invitation

(1) Mr Wong Boon Huat was appointed as a Director of the Company on 4 August 2011.

CORPORATE GOVERNANCE STATEMENT


Principle 2: Board Composition and Balance

The Board currently has six members, comprising two executive Directors and four independent Directors. As at the date of this report, the Board comprises the following members:

Sim Soon Ngee Glenndle Executive Chairman and Chief Executive Officer (“CEO”)Sunny Wong Fook Choy Lead Independent DirectorNg Eng Ho Independent DirectorHo Chew Thim Independent DirectorNg Chee Keong Independent DirectorWong Boon Huat Executive Director

The Board is of the opinion that its current size and composition is appropriate for decision making, taking into account the scope and nature of the Group’s operations. The concept of independence adopted by the Board is in accordance with the definition of an independent director in the Code. An “independent director” is one who has no relationship with the Company, its related corporations, its substantial shareholders or its officers that could interfere or be reasonably perceived to interfere, with the exercise of the Director’s independence business judgment.

To assess and review the independence of each director, each independent director is required to complete a Director’s Independence Confirmation Form annually to confirm his independence.

The Board consists of high calibre members with a wealth of experience and knowledge in business. They contribute valuable direction and insight, drawing from their vast experience in matter relating to accounting, finance, legal, business, industry knowledge and general corporate matters. The Nominating Committee of the Company (“NC”) is of the opinion that the current Board composition represents a well balanced mix of expertise and experience to provide core competencies necessary to meet the Company’s requirements.

The Board has no dissenting view on the CEO’s statement to Shareholders for the financial year in review.

Principle 3: Chairman and CEO

Mr Sim Soon Ngee Glenndle is both the Chairman of the Board and the CEO of the Company. As the Executive Chairman and the CEO, he gives guidance on the corporate direction of the Group, which includes the scheduling and chairing of Board meetings and controlling the quality, quantity and timeliness of information supplied to the Board. As the CEO, he sets the business strategies and directions for the Group and manages the business operations of the Group.

The Board is of the opinion that based on the Group’s current size and operation, it is not necessary to separate the roles of the chairman and the CEO. The Board is also of the view that it is in the best interests of the Company to adopt a single leadership culture.

To enhance the independence of the Board, Mr Sunny Wong Fook Choy, the Company’s lead independent Director, coordinates the activities of the independent non-executive Directors and act as the principal liaison between the independent non-executive Directors and Chairman on sensitive issues.

The Nominating Committee, Remuneration Committee and Audit Committee of the Company are also all chaired by independent Directors. The Board is of the view that there are sufficient safeguards and checks in place to ensure that the process of decision making by the Directors is independent and based on collective decision-making without our Executive Chairman and CEO being able to exercise considerable concentration of power or influence.



Nominating Committee

Principle 4: Board MembershipPrinciple 5: Board Performance

The NC comprises the following members, the majority of the members, including the Chairman of the NC, are independent non-executive Directors:

Sunny Wong Fook Choy Chairman, Lead Independent DirectorSim Soon Ngee Glenndle Member, CEONg Eng Ho Member, Independent DirectorHo Chew Thim Member, Independent Director Ng Chee Keong Member, Independent Director

The principle functions of the NC include:

• making recommendations to the Board on the appointment of new executive and non-executive Directors;

• assessing the effectiveness of the Board as a whole and the contribution of each individual Director to the effectiveness of the Board;

• evaluating the independence of the Directors; and

• regularly reviewing the Board structure, size and composition having regard to the scope and nature of the operations of the Group and the core competencies of the Directors as a group.

In the event that a vacancy on the Board arises, the NC may identify suitable candidates for appointment as new Directors through the business network of the Board members or engage independent professional advisers to assist in the search for suitable candidates. The NC will generally identify suitable candidates skilled in core competencies such as accounting or finance, business or management expertise, or industry knowledge. If the NC decides that the candidate is suitable, the NC then recommends its choice to the Board. Meetings with such candidates may be arranged to facilitate open discussion. Upon appointment, arrangements will be made for the new director to attend various briefings with the management team.

Board renewal must be an ongoing process to ensure good governance and to maintain relevance to the changing needs of the Group. Pursuant to the Company’s Articles of Associations, one-third of directors, including the CEO who also serves on the board (or, if their number is not a multiple of three, the number nearest to but not less than one-third) shall retire from office by rotation. This results in all directors having to retire at least once in three years. All newly appointed directors by the Board shall only hold office until the next annual general meeting (“AGM”), and be eligible for re-election at the AGM.

At the upcoming AGM, Mr Wong Boon Huat, Mr Ng Eng Ho and Mr Ng Chee Keong shall retire and being eligible, agree to be re-elected.

The Board’s performance is a function of the experience and expertise that each of the Directors bring with them. The NC would access on an annual basis, the effectiveness of the Board as a whole. Each Director is required to complete a Board Performance Evaluation Form (Evaluation Form) annually, to facilitate the NC in its assessment of the performance of the Directors. Through the Evaluation Form, feedback is collated from the Board on various aspects of the Board’s performance and the Company Secretary will compile the results of the evaluation form for the purpose of discussion during the NC meeting. During the meeting, the NC Chairman will then based on the results, ascertain key areas for improvement and requisite follow-up actions.



Principle 6: Access to Information

The management of the Company provides Board members with quarterly management accounts and other financial statements to enable the Board to fulfil its responsibilities. Board members have full and independent access to senior management and the company secretary at all times. In addition, the Board or an individual Board member may seek independent professional advice, if necessary, at the Company’s expense.

The company secretary is responsible for ensuring that Board procedures are being followed and the Company complies with the requirement of the Singapore Companies Act (the “Act”), and other rules and regulations, which are applicable to the Company.

Remuneration Committee

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

The Remuneration Committee of the Company (“RC”) comprises the following members, all of whom are independent non-executive Directors:

Ng Eng Ho Chairman, Independent DirectorSunny Wong Fook Choy Member, Lead Independent DirectorHo Chew Thim Member, Independent DirectorNg Chee Keong Member, Independent Director

The functions of the RC include:

• Recommending to the Board a framework of remuneration for the Board and the key executives of the Group, covering all aspects of remuneration such as Directors’ fees, salaries, allowances, bonuses, options and benefit-in-kind;

• Proposing to the Board, appropriate and meaningful measures for assessing the executive Directors’ performance;

• Determining the specific remuneration package for our CEO; and

• Considering and recommending to the Board the disclosure of details of the Company’s remuneration policy, level and mix of remuneration and procedure for setting remuneration and details of the specific remuneration packages of the directors and key executives of the Group to those required by law or by the Code.

In performing its function, the RC endeavours to establish an appropriate remuneration policy to attract, retain and motivate senior executives and executive Directors, while at the same time ensuring that the reward in each case takes into account individual performance as well as the Group’s performance.



The Company advocates a performance based remuneration system for executive Directors and key executives that is flexible and responsive to the market, comprising a base salary and other fixed allowances, as well as variable performance bonus and participation in an employee share option scheme or performance share award scheme based on the Group’s performance and linking it to the individual’s performance.

In determining such remuneration packages, the RC will ensure that they are adequate by considering, in consultation with the CEO, amongst other things, the respective individuals’ responsibilities, skills, expertise and contribution to the Group’s performance, and whether they are competitive and sufficient to ensure that the Group is able to attract and retain the best available executive talent.

The RC also administers the Company’s share-based remuneration incentive plans, namely, the Mencast Employee Share Option Scheme (“ESOS”) and Mencast Performance Share Award Scheme (“PSAS”).

The purpose of the ESOS is to provide an opportunity for full time employees and directors of the Group to participate in the equity of the Company so as to motivate them to greater dedication, loyalty and higher standards of performance, and to give recognition to past contributions and services.

The rationale of PSAS is to complement the ESOS and to increase the Company’s flexibility and effectiveness in its continuing efforts to reward, retain and motivate the Group executive and non-executive Director when and after pre-determined performance target(s) being achieved. Performance targets set under the PSAS are intended to be based on medium-term corporate objectives covering market competitiveness, quality of returns, business growth and productivity growth. The PSAS is to provide the Company with a more comprehensive set of remuneration tools and further strengthen its competitiveness in attracting and retaining superior local and foreign talent.

To date, the Company has not granted any options or awards under the ESOS and PSAS.

In carrying out the above, the RC may obtain independent external human resource experts and other professional advice as it deem necessary. The expense of such advice will be borne by the Company.

The independent Directors receive Directors’ fees in accordance with their level of contributions, taking into account factors such as responsibilities, effort and time spent for serving on the Board and Board committees. The Director’s fees are recommended by the Board for approval by Shareholders at the AGM of the Company.

The Company has entered into a new Service Agreements with Mr Sim Soon Ngee Glenndle, the Executive Chairman and CEO for a fixed period of three years commencing from 30 May 2011 and Mr Wong Boon Huat, the Executive Director for a fixed period of three years commencing from 4 August 2011, and thereafter each renewable for a fixed period of three years.

The following table shows a breakdown of the annual remuneration of the Directors and the five key executives of the Group for FY2011.



Remuneration BandSalary and Other

Benefits Performance Bonus(1) Directors’ Fees(2)

% % %DirectorsS$500,000 to S$749,999Sim Soon Ngee Glenndle 45 55 -Below S$250,000Sunny Wong Fook Choy - - 100Ng Eng Ho - - 100Ho Chew Thim - - 100Ng Chee Keong - - 100Wong Boon Huat 89 11 -

Key ExecutivesBelow S$250,000 Phua Poh Cheng, Jack 90 10 -Phua Keow Wee 86 14 -Wong Chin Hin 92 8 -Chan Tuck Wai Benjamin 92 8 -Sim Wei Wei(3) 96 4 -Steve Tian Boon Chye 100 0 -Tan Eng Hoe Edwin 89 11 -Ong Yong Chye 89 11 -

Wong Boon Hwee(4) 88 12 -Aung Wunna, Edward 89 11 -

Notes:

(1) Performance bonus, the amounts of which are determined in accordance with the respective service agreement, will be paid in June 2012.

(2) Directors’ fees are subject to Shareholders’ approval at the AGM to be held on 24 April 2012.

(3) Sim Wei Wei is the daughter of substantial shareholder, Chua Kim Choo and sister of Executive Chairman & CEO, Sim Soon Ngee Glenndle.

(4) Wong Boon Hwee is the brother of the Executive Director, Wong Boon Huat.

Other than as specified above, there are no immediate family members of a Director or substantial Shareholder whose remuneration exceeds S$150,000 for FY2011.

Principle 10: Accountability

The Board is accountable to the Shareholders while the management is accountable to the Board. As defined in the Code, the Board presents to Shareholders a balanced and understandable assessment of the Group’s performance, position and prospects. The management provides all Board members with management reports and accounts which represent balanced, understandable assessment of the Group’s performance, position and prospects on a regular basis.

It is the Board’s policy to provide to Shareholders with all important and price sensitive information. These are done through the SGXNET.



Audit Committee

Principle 11: Audit CommitteePrinciple 12: Internal ControlsPrinciple 13: Internal Audit

The Audit Committee of the Company (“AC”) comprises four members, all of whom are independent non-executive Directors:

Ho Chew Thim Chairman, Independent DirectorNg Eng Ho Member, Independent DirectorSunny Wong Fook Choy Member, Lead Independent DirectorNg Chee Keong Member, Independent Director

The AC carried out its functions in accordance with Section 201B (5) of the Singapore Companies Act. In performing those functions, the committee carried out the following: -

• Reviews the scope and results of internal audit procedures with the internal auditor;

• Reviews the adequacy of the Group’s internal financial controls, operational and compliance controls and risk management policies and systems;

• Reviews with the independent auditor the audit plan and its report on the weaknesses of internal accounting controls arising from the statutory audit;

• Reviews the assistance given by management to the independent auditor, and discusses problems and concerns, if any, arising from the statutory audit, with the management;

• Reviews the balance sheet of the Company and the consolidated financial statements of the Group for the financial year ended 31 December 2011 before their submission to the Board of Directors, as well as the independent auditor’s report on the balance sheet of the Company and the consolidated financial statements of the Group;

• Reviews the half-year and annual financial statements of the Group before submission to the Board for approval, focusing, in particular, on changes in accounting policies and practices, major risk areas, significant adjustments resulting from the audit, compliance with accounting standards as well as compliance with any stock exchange and statutory/regulatory requirements;

• Reviews and discusses with the independent auditor any suspected fraud and irregularity, or suspected infringement of any relevant laws, rules and regulations, which has or is likely to have a material impact on the Group’s operating results or financial position, and management response;

• Reviews non-audit services performed by the independent auditor to ensure that the nature and extent of such services will not prejudice the independence and objectivity of the independent auditor before recommending to the Board;

• Reviews the independence and objectivity of the independent auditor;

• Evaluated quality of work carried out by independent auditor;



• Considers the appointment and re-appointment of the Independent Auditor and approve the remuneration and terms of engagement of the Independent Auditor; and

• Reviews transactions falling within the scope of Chapter 9 of the Singapore Exchange Securities Trading Limited (“SGX-ST”) Listing Manual.

The AC shall also undertake:

• Such other reviews and projects as may be requested by the Board and report to the Board its findings from time to time on matters arising and requiring the attention of the AC; and

• Such other functions and duties as may be required by statute or the Listing Rules, and by such amendments made thereto from time to time.

To effectively discharge its responsibility, the AC has full access to, and the co-operation of, the management and has full discretion to invite any Director and executive Director to attend its meetings. Full resources are made available to the AC to enable it to discharge its function properly.

The AC has full access to the Independent Auditor and meets them at least once a year without the presence of management.

During the year under review, the aggregate amount of fees paid/payable to the Independent Auditor for the audit and non-audit services amounted to S$125,000 and S$73,000 respectively.

The AC confirms that it has undertaken a review of all the non-audit services provided by the Independent Auditor during the year and is satistied that such services would not, in the AC’s opinion, compromise the independence of the Independent Auditor. Having satisfied the independence of the Independent Auditor, the AC, with the concurrence of the Board, has recommended the re-appointment of Nexia TS Public Accounting Corporation (“Nexia”) at the upcoming AGM.

Save for three foreign-incorporated subsidiaries which are not significant, all the Company’s subsidiaries are audited by Nexia. The Board and AC are satisfied that the appointment of different auditors would not compromise the standard and effectiveness of the audit of the Company. The Group is in compliance with Rule 712 and Rule 716 in relation to its Independent Auditor.

The AC has reviewed with management and the assistance of the Independent Auditor, the major business risks and the effectiveness of the Group’s internal controls, including financial, operational and compliance controls and risk management.

With the assistance of the Independent Auditor, management has identified the main business processes and the associated financial, operational and compliance risks, and developed a set of minimum acceptable controls to address the key risks.

The internal audit function has been outsourced to a professional firm, TransFingo Pte Ltd (“the Internal Auditor”) in order to satisfy and comply with the requirements of best practices set out in the Code. The Internal Auditor reports directly to the AC on audit related matters and reports to the Financial Controller of the Company on administrative-related matters. The Internal Auditor plans its audit schedules in consultation with, but independent of, the management. The audit schedules are approved by the AC.



The Internal Auditor has met the standards as set out by the Standards for the Professional Practice of Internal Auditing set by The Institute of Internal Auditors. The AC and Board are satisfied that the internal auditor has adequate resources and appropriate standing within the Group and the Company.

The Group has put in place a Whistle Blowing Policy (the “Policy”), which provides a channel for employees of the Group to report in confidence, without fear of reprisals, concerns about possible improprieties in financial reporting or other matters. The Policy is to assist the AC in managing allegations of fraud or other misconduct; disciplinary and civil actions that are initiated following the completion of the investigations are appropriate and fair; and actions taken to correct the weakness in the existing system of internal processes which allowed the perpetration of the fraud and/or misconduct and to prevent recurrence.

In compliance with Rule 1207(10), the Board with the concurrence of the AC is of the opinion that the Company has a robust and effective internal control system and the system is adequate to address the financial, operational and compliance risks, based on the reports from the internal auditor, Independent Auditor and the various management control put in place.

The Board affirms its overall responsibility for the Group’s systems of internal controls and noted that all internal control systems contain inherent limitations and no system of internal controls could provide absolute assurance against the occurrence of material errors, poor judgement in decision-making, human error, fraud or other irregularities.

Principle 14: Communication with ShareholdersPrinciple 15: Greater Shareholder Participation

The Board endeavours to maintain regular, timely and effective communication with Shareholders and investors. Half-yearly and full year results, including disclosure of information on material matters required by the Listing Rules, will be promptly disseminated to Shareholders through announcements made via the SGXNET followed by a news release, and are available on the Company’s website.

The Company’s market capitalization as at 31 December 2011 was approximately S$92 million. As such, the Company would commence quarterly reporting with effect from financial year 2013 pursuant to Rule 705(2)(c).

The Board welcomes the view of Shareholders on matters affecting the Group. Shareholders are informed of meetings through notices published in the newspapers and reports or circulars sent to all Shareholders.

At general meetings, Shareholders are given the opportunity to pose any questions to the Directors or management relating to the Group’s business or performances. A general meeting is the principal forum for any dialogue the shareholders may have with the Directors and management of the Company. The Chairman of the AC, NC and RC are normally available at the meeting to answer those questions relating to the work of these committees.

Interested Person Transactions

The Company has established procedures to ensure that all transactions with interested persons are reported in a timely manner to the AC and that the transactions are carried out on an arm’s length basis. There was no interested person transaction entered into by the Company or any of its subsidiaries in FY2011.



Material Contracts

Save for the service agreements between the Executive Directors and the Company, there were no material contracts of the Company or its subsidiaries involving the interest of any Director or controlling Shareholder either still subsisting as at the financial year under review or if not subsisting, were entered into at the end of the financial year ended 31 December 2011.

Securities Transactions

The Company has adopted internal regulations with respect to dealings in securities by Directors and officers of the Group which complies with Rule 1207(19) of the SGX-ST Listing Manual. The Directors, management and officers of the Group who have access to price-sensitive, financial or confidential information are not permitted to deal in the Shares during the periods commencing one month before the announcement of the Group’s half-yearly and yearly results, and ending on the date of announcement of such result, or when they are in procession of unpublished price-sensitive information of the Group. In addition, the officers of the Company are advised not to deal with the Shares for short-term considerations and are expected to observe the insider trading laws at all times even when dealing in securities within the permitted trading periods.

Risk Management Policies and Processes

The Company does not have a Risk Management Committee. The executive Director and senior management assume the responsibilities of the risk management function. They regularly assess and review the Group’s business and operational environment in order to identify areas of significant business and financial risks, such as market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk as well as appropriate measures to control and mitigate these risks. The Board is responsible for setting the objectives and underlying principles of financial risk management for the Group including establishing policies such as authority levels, oversight responsibilities, risk identification and measurement and exposure limits. The AC provides independent oversight to the effectiveness of the risk management process. The financial risk management objectives and policies are outlined in the financial statements.

Use of Proceeds

IPO

Pursuant to the Company’s initial public offering (“IPO”), the Company issued 22,500,000 new Shares at S$0.28 each on 25 June 2008. Of the total net proceeds of S$5.0 million raised from the IPO, an aggregate of S$2.2 million had been utilised as at 31 December 2010.

As at the date of report, the Company has not utilised the balance of the IPO proceeds of S$2.8 million. The Company will continue to provide periodic updates as and when the balance are materially utilised.

Placement

Pursuant to a private placement exercise (“Placement”), the Company issued 15,506,600 new Shares at S$0.350 each on 1 November 2010, raising net proceeds of approximately S$5.4 million. As at the date of this Annual Report, the net proceeds have been fully utilised to fund the cash portion of the 1st payment tranche for the acquisition of the entire issued and paid-up share capital of Top Great Engineering & Marine Pte Ltd by the Company.

The above utilisation of the Net Proceeds is consistent with the disclosure made in the placement announcement.



The directors present their report to the members together with the audited financial statements of the Group for the financial year ended 31 December 2011 and the balance sheet of the Company as at 31 December 2011.

Directors

The directors of the Company in office at the date of this report are as follows:

Sim Soon Ngee Glenndle Sunny Wong Fook Choy Ho Chew Thim Ng Eng Ho Ng Chee KeongWong Boon Huat (appointed on 4 August 2011)

Arrangements to enable directors to acquire shares or debentures

Neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose object was to enable the directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate, other than as disclosed under “Share Options” and “Performance Shares” on pages 36 to 37 of this report.

Directors’ interests in shares or debentures

According to the register of directors’ shareholdings, none of the directors holding office at the end of the financial year had any interest in the shares or debentures of the Company or its related corporations, except as follows:

Holdings registered in the Holdings in which director is

name of director or nominee deemed to have an interest

The Company As at 31.12.2011

As at 1.1.2011 or date of

appointment As at 31.12.2011 As at 1.1.2011

(No. of ordinary shares)

Sim Soon Ngee Glenndle 50,400,000 31,000,000 47,287,000 67,076,000

Sunny Wong Fook Choy 100,000 100,000 - -

Ho Chew Thim 100,000 100,000 - -

Ng Eng Ho 100,000 100,000 - -

Wong Boon Huat 8,915,102 150,000 - -

The directors’ interests in the ordinary shares of the Company as at 21 January 2012 were the same as those as at 31 December 2011.

By virtue of Section 7 of the Singapore Companies Act, Sim Soon Ngee Glenndle is deemed to have interests in the shares of all the subsidiaries at the beginning and at the end of the financial year.

DIRECTORS’ REPORTFor the financial year ended 31 December 2011


Directors’ contractual benefits

Since the end of previous financial year, no director 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 he is a member or with a company in which he has a substantial financial interest, except as disclosed in the accompanying financial statements and in this report.

Share options

The Company implemented the Mencast Employee Share Option Scheme (the “ESOS”) on 30 May 2008 for granting of options to full-time employees and directors of the Company and its subsidiaries. The total number of ordinary shares over which the Company may grant under the ESOS shall not exceed 15% of the issued share capital of the Company on the day preceding the date of grant.

The Scheme is administered by the Remuneration Committee (“RC”) which consist of directors (including directors or persons who may be participants of the ESOS). A member of the Remuneration Committee who is also a participant of the ESOS must not be involved in its deliberation in respect of options granted or to be granted to him.

The exercise price for each ordinary share in respect of which an option is exercisable shall be determined by the Committee as follows:

(i) at a price equal to the average of the last dealt prices for the five consecutive Market Days immediately preceding the relevant date of grant of the relevant option; or

(ii) at a price which is set at a discount to the Market Price provided that the maximum discount shall not exceed 20% of the Market Price.

Options granted with the exercise price set at Market Price shall only be exercisable after 12 months of the date of grant of that option. Options granted with the exercise price set at a discount to Market Price shall only be exercisable after 24 months from the date of grant of that option. Options granted under the ESOS will have a life span of ten years.

Under the rules of the ESOS, there are no fixed periods for the grant of options. As such, offers for the grant of options may be made at any time from time to time at the discretion of the Remuneration Committee. However, no options shall be granted during the period of 30 days immediately preceding the date of announcement of interim or final results (as the case may be).

In addition, in the event that an announcement on any matter of an exceptional nature involving unpublished price sensitive information is imminent, offers may only be made after the second Market Day from the date on which the aforesaid announcement is made.

The lapsing of option is provided for upon the occurrence of certain events, which includes:

(a) termination of the participant’s employment;(b) bankruptcy of the participant;(c) death of the participant;(d) take-over of the Company; and(e) the winding-up of the Company (voluntary or otherwise).



Share options (continued)

Since the commencement of the ESOS till the end of the financial year, no option has been granted under the ESOS.

No shares have been issued during the financial year by virtue of the exercise of options to take up unissued shares of the Company and its subsidiaries.

There were no unissued shares of the Company and its subsidiaries under option at the end of the financial year.

Performance shares

The Mencast Performance Share Award Scheme (the “Scheme”) was approved by members of the Company at extraordinary general meeting (“EGM”) held on 10 November 2010 which provides for the award of fully paid-up ordinary shares in the share capital of the Company, free of charge to Group executive and non-executive Directors when and after pre-determined performance target(s) being achieved.

Controlling shareholders or associates of a controlling shareholder who meet the eligibility criteria are also eligible to participate in the Scheme provided that the participation of and the terms of each grant and the actual number of awards granted under the Scheme to a participant who is a controlling shareholder or an associate of a controlling shareholder shall be approved by the independent shareholders in separate resolutions for each such person.

The Scheme is a share incentive scheme which will allow the Company, inter alia, to target specific performance objectives and to provide an incentive for Participants to achieve these targets. The directors believe that the Scheme will help to achieve the following positive objectives:

(a) reward, retain and motivate employees to achieve increased performance;

(b) provide Company with comprehensive set of remuneration tools and further strengthen its competitiveness in attracting and retaining superior local and foreign talent; and

(c) encourage greater dedication and loyalty by enabling the Company to give recognition for past contributions and services as well as motivating Scheme Participants generally to contribute towards the Group’s long-term prosperity.

The Scheme is administered by directors which should comprise one independent director at all times.

The Scheme shall continue in force at the discretion of the Remuneration Committee, subject to a maximum period of ten (10) years commencing on the date on which the Scheme is adopted by the Company in general meeting, provided always that the Scheme may continue beyond the above stipulated period with the approval of Shareholders by ordinary resolution in general meeting, and of any relevant authorities which may then be required.

The Company may deliver shares pursuant to awards granted under the Scheme by way of:-

(i) issuance of new shares; and/or

(ii) delivery of existing shares purchased from the market or shares held in treasury

The total number of ordinary shares over which the Company may grant under the Scheme shall not exceed 15% of the issued share capital of the Company on the day preceding the date on which the award is granted.

The adoption of the Scheme is to complement the existing Mencast Employee Share Option Scheme (the “ESOS”).



Performance shares (continued)

Since the commencement of the Scheme, the Company has not granted any awards under the Scheme.

Audit Committee

The members of the Audit Committee at the end of the financial year were as follows:

Ho Chew Thim (Chairman)Sunny Wong Fook ChoyNg Eng HoNg Chee Keong

All members of the Audit Committee were independent and non-executive directors.

The Audit Committee carried out its functions in accordance with Section 201B (5) of the Singapore Companies Act. In performing those functions, the Committee:

• Reviews the scope and results of internal audit procedures with the internal auditor;

• Reviews the adequacy of the Group’s internal financial controls, operational and compliance controls and risk management policies and systems;

• Reviews with the independent auditor the audit plan and its report on the weaknesses of internal accounting controls arising from the statutory audit;

• Reviews the assistance given by management to the independent auditor, and discusses problems and concerns, if any, arising from the statutory audit, with the management;

• Reviews the balance sheet of the Company and the consolidated financial statements of the Group for the financial year ended 31 December 2011 before their submission to the Board of Directors, as well as the independent auditor’s report on the balance sheet of the Company and the consolidated financial statements of the Group;

• Reviews the half-year and annual financial statements of the Group before submission to the Board for approval, focusing, in particular, on changes in accounting policies and practices, major risk areas, significant adjustments resulting from the audit, compliance with accounting standards as well as compliance with any stock exchange and statutory/regulatory requirements;

• Reviews and discusses with the independent auditor any suspected fraud and irregularity, or suspected infringement of any relevant laws, rules and regulations, which has or is likely to have a material impact on the Group’s operating results or financial position, and management response;

• Reviews non-audit services performed by the independent auditor to ensure that the nature and extent of such services will not prejudice the independence and objectivity of the independent auditor before recommending to the Board;

• Reviews the independence and objectivity of the independent auditor;

• Considers the appointment and re-appointment of the independent auditor and approve the remuneration and terms of engagement of the independent auditor; and

• Reviews transactions falling within the scope of Chapter 9 of the Singapore Exchange Securities Trading Limited (“SGX-ST”) Listing Manual.

The Audit Committee has recommended to the board that the independent auditor, Nexia TS Public Accounting Corporation, be nominated for re-appointment at the forthcoming Annual General Meeting of the Company.



Independent Auditor

The independent auditor, Nexia TS Public Accounting Corporation, has expressed its willingness to accept re-appointment.

On behalf of the directors

_____________________________________Sim Soon Ngee GlenndleDirector

_____________________________________Wong Boon HuatDirector

26 March 2012



In the opinion of the directors,

(a) the balance sheet of the Company and the consolidated financial statements of the Group as set out on pages 42 to 92 are drawn up so as to give a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2011 and of the results of the business, changes in equity and cash flows of the Group for the financial year then ended; and

(b) 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.

The board of directors has, on the date of this statement, authorised these financial statements for issue.

On behalf of the directors

_____________________________________Sim Soon Ngee GlenndleDirector

_____________________________________Wong Boon HuatDirector

26 March 2012

STATEMENT BY DIRECTORSFor the financial year ended 31 December 2011


Report on the Financial Statements

We have audited the accompanying financial statements of Mencast Holdings Ltd. (the “Company”) and its subsidiaries (the “Group”), which comprise the consolidated balance sheet of the Group and the balance sheet of the Company as at 31 December 2011, the consolidated statement of comprehensive income, statement of changes in equity and statement of cash flows of the Group for the financial year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Singapore Companies Act (the “Act”) and Singapore Financial Reporting Standards, and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised 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.

Auditor’s 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 requirements and plan and perform the audit to obtain reasonable assurance about 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 judgement, 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 of financial statements that give a true and fair view 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.

Opinion

In our opinion, the consolidated financial statements of the Group and the balance sheet of the Company are properly drawn up in accordance with the provisions of the 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 2011, and the results, changes in equity and cash flows of the Group for the financial year ended on that date.

Report on Other Legal and Regulatory Requirements

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

Nexia TS Public Accounting CorporationPublic Accountants and Certified Public Accountants

Director-in charge: Loh Ji KinAppointed since financial year ended 31 December 2010

Singapore26 March 2012

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MENCAST HOLDINGS LTD.


Note 2011 2010

$’000 $’000

Revenue 4 56,358 32,031

Cost of sales (32,892) (16,073)

Gross profit 23,466 15,958

Other gains – net 5 374 476

Expenses

- Administrative (12,582) (6,167)

- Finance 8 (783) (467)

Share of profit of joint venture 17 13 -

Profit before income tax 10,488 9,800

Income tax expense 9 (252) (1,295)

Net profit 10,236 8,505

Other comprehensive income/(loss):

Currency translation differences arising from consolidation (121) -

Total comprehensive income 10,115 8,505

Net profit attributable to:

Equity holders of the Company 10,236 8,495

Non-controlling interests - 10

10,236 8,505

Total comprehensive income attributable to:

Equity holders of the Company 10,115 8,495

Non-controlling interests - 10

10,115 8,505

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

- Basic and diluted 10 5.77 5.39

The accompanying notes form an integral part of these financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFor the financial year ended 31 December 2011


Group CompanyNote 2011 2010 2011 2010

$’000 $’000 $’000 $’000ASSETSCurrent assetsCash and cash equivalents 11 9,451 11,604 4,076 9,483Trade and other receivables 12 25,929 13,924 6,590 2,669Inventories 13 6,436 4,463 - -

41,816 29,991 10,666 12,152Non-current assetsFinancial assets,

available-for-sale 15 127 127 - -Investments in subsidiaries 16 - - 63,750 20,900Investment in joint venture 17 907 - - -Property, plant and equipment 18 54,818 25,967 - -Deposits for purchase of property,

plant and equipment 970 1,247 - -Intangible assets 19 38,559 4,781 - -Club memberships 28 28 - -

95,409 32,150 63,750 20,900Total assets 137,225 62,141 74,416 33,052

LIABILITIES Current liabilitiesTrade and other payables 20 26,682 8,413 31,248 9,149Borrowings 21 16,856 5,340 - -Current income tax liabilities 1,199 1,237 - -

44,737 14,990 31,248 9,149Non-current liabilitiesOther payables 20 11,513 - 11,513 -Borrowings 21 22,487 5,392 - -Deferred income tax liabilities 23 1,330 1,242 - -

35,330 6,634 11,513 -Total liabilities 80,067 21,624 42,761 9,149NET ASSETS 57,158 40,517 31,655 23,903

EQUITY Capital and reserves

attributable to equity holders of the Company

Share capital 24 33,538 25,126 33,538 25,126Fair value reserve 47 47 - -Translation reserve (121) - - -Retained profits/(accumulated

losses) 23,694 15,334 (1,883) (1,223)57,158 40,507 31,655 23,903

Non-controlling interests - 10 - -Total equity 57,158 40,517 31,655 23,903


BALANCE SHEETSAs at 31 December 2011


Attributable to equity holders of the Company

Note Share capitalFair value reserve*

Translation reserve*

Retained profits** Total

Non-controlling interests Total equity

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

2011

Beginning of financial year 25,126 47 - 15,334 40,507 10 40,517

Issue of new shares 24 8,412 - - - 8,412 - 8,412

Dividends paid relating to 2010 25 - - - (1,876) (1,876) - (1,876)

Total comprehensive income/(loss) for the year - - (121) 10,236 10,115 (10) 10,105

End of financial year 33,538 47 (121) 23,694 57,158 - 57,158

2010

Beginning of financial year 19,699 47 - 8,390 28,136 - 28,136

Issue of new shares 24 5,427 - - - 5,427 - 5,427

Dividends paid relating to 2009 25 - - - (1,551) (1,551) - (1,551)

Total comprehensive income for the year - - - 8,495 8,495 10 8,505

End of financial year 25,126 47 - 15,334 40,507 10 40,517

* Fair value and translation reserves are not available for distribution.

** The retained profits of the Group and the Company are distributable.


CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the financial year ended 31 December 2011


2011 2010

Note $’000 $’000

Cash flows from operating activitiesNet profit 10,236 8,505

Adjustments for:

- Income tax expense 252 1,295

- Depreciation of property, plant and equipment 18 2,818 1,839

- Share of profit of joint venture (13) -

- Gain on disposal of property, plant and equipment (196) (95)

- Dividend income on financial assets, available-for-sale (5) -

- Interest income (19) (18)

- Interest expense 783 467

- Currency translation differences (121) -

13,735 11,993

Change in working capital, net of effects from acquisitions of subsidiaries and business:

- Trade and other receivables (1,953) (7,314)

- Inventories 1,506 (2,395)

- Trade and other payables (5,173) 1,357

Cash generated from operations 8,115 3,641

Interest received 19 18

Income tax paid (888) (1,419)

Net cash provided by operating activities 7,246 2,240

Cash flows from investing activitiesDividend received on financial assets, available-for-sale 5 -

Proceeds from disposal of property, plant and equipment 243 247

Acquisition of subsidiaries and business, net of cash acquired 31 (7,830) -

Purchase of property, plant and equipment (15,012) (5,770)

Placement of short-term bank deposits pledged (4,441) -

Net cash used in investing activities (27,035) (5,523)

Cash flows from financing activitiesDividend paid (1,876) (1,551)

Interest paid (783) (467)

Repayment of borrowings (8,380) (1,846)

Repayment of finance lease liabilities (1,243) (1,466)

Proceeds from borrowings 24,416 2,084

Proceeds from issuance of shares - 5,427

Net cash provided by financing activities 12,134 2,181

Net decrease in cash and cash equivalents (7,655) (1,102)

Cash and cash equivalents at beginning of financial year 11,604 12,706

Cash and cash equivalents at end of financial year 11 3,949 11,604


CONSOLIDATED STATEMENT OF CASH FLOWSFor the financial year ended 31 December 2011


These notes form an integral part of and should be read in conjunction with the accompanying financial statements.

The financial statements of the Group and the Company for the financial year ended 31 December 2011 were authorised for issue in accordance with a resolution of directors on 26 March 2012.

1. General information

Mencast Holdings Ltd (the “Company”) is listed on the Mainboard of the Singapore Exchange Securities Trading Limited and incorporated and domiciled in Singapore. The address of its registered office is No. 7 Tuas View Circuit, Singapore 637642.

The principal activity of the Company is that of investment holding. The principal activities of the subsidiaries are disclosed in Note 16 to the financial statements.

The Group acquired Top Great Engineering & Marine Pte Ltd (“Top Great”) and its subsidiaries, a marine and offshore engineering group and Unidive Marine Services Pte Ltd (“Unidive”) and its subsidiaries, a topside and subsea service provider, both operating in Singapore, during the financial year (Note 31).

2. Significant accounting policies

2.1 Basis of preparation

These financial statements have been prepared in accordance with Singapore Financial Reporting Standards (“FRS”). The financial statements have been prepared under the historical cost convention, except as disclosed in the accounting policies below.

The preparation of financial statements in conformity with FRS requires management to exercise its judgement in the process of applying the Group’s accounting policies. It also requires the use of certain critical accounting estimates and assumptions. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Note 3.

Interpretations and amendments to published standards effective in 2011

On 1 January 2011, the Group adopted the new or amended FRS and Interpretations to FRS (“INT FRS”) that are mandatory for application from that date. Changes to the Group’s accounting policies have been made as required, in accordance with the transitional provisions in the respective FRS and INT FRS.

The adoption of these new or amended FRS and INT FRS did not result in substantial changes to the Group’s and Company’s accounting policies and had no material effect on the amounts reported for the current or prior financial years.

2.2 Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and rendering of services in the ordinary course of the Group’s activities. Revenue is presented, net of goods and services tax, rebates and discounts, and after eliminating sales within the Group.

NOTES TO THE FINANCIAL STATEMENTSFor the financial year ended 31 December 2011


2. Significant accounting policies (continued)

2.2 Revenue recognition (continued)

The Group recognises revenue when the amount of revenue and related cost can be reliably measured, it is probable that the collectability of the related receivables is reasonably assured and when the specific criteria for each of the Group’s activities are met as follows:

(i) Sale of goods

Revenue from sale of goods is recognised when the Group has delivered the products to the customer, the customer has accepted the products and the collectibility of the related receivables is reasonably assured.

(ii) Rendering of services

Reconditioning service Revenue from reconditioning services is recognised in the period in which the services are

rendered and accepted by customers, hence, advances from customers are deferred and classified as “deferred revenue” under “trade and other payables”. Labour and overhead costs incurred relating to reconditioning services are deferred and classified as “deferred cost” under “inventories” until the revenue is recognised.

Logistic service Revenue from logistic service is recognised over the period in which the services are rendered,

by reference to completion of the specific transaction assessed on the basis of the actual service provide as a proportion of the total service to be performed.

(iii) Construction contracts

Revenue from long-term contract to provide services is recognised based on percentage-of- completion method in proportion to the stage of completion, provided that the outcome of such work can be reliably estimated.

Please refer to the paragraph “Construction contracts” for more details on accounting policy for revenue from construction contracts.

(iv) Interest income

Interest income is recognised using the effective interest method.

(v) Dividend income

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




2.3 Group accounting

(a) Subsidiaries

(i) Consolidation

Subsidiaries are entities (including special purpose entities) over which the Group has power to govern the financial and operating policies so as to obtain benefits from its activities, generally accompanied by a shareholding giving rise to a majority of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date on which control ceases.

In preparing the consolidated financial statements, transactions, balances and unrealised gains on transactions between group entities are eliminated. Unrealised losses are also eliminated but are considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Non-controlling interests are that part of the net results of operations and of net assets of a subsidiary attributable to the interests which are not owned directly or indirectly by the equity holders of the Company. They are shown separately in the consolidated statement of comprehensive income, statement of changes in equity and balance sheet. Total comprehensive income is attributed to the non-controlling interests based on their respective interests in a subsidiary, even if this results in the non-controlling interests having a deficit balance.

(ii) Acquisition of businesses

The acquisition method of accounting is used to account for business combinations by the Group.

The consideration transferred for the acquisition of a subsidiary comprises the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary.

Acquisition-related costs are expensed as incurred.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date.

On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree at the date of acquisition either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets.




2.3 Group accounting (continued)

(a) Subsidiaries (continued)

(ii) Acquisition of businesses (continued)

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase. Please refer to the paragraph “Intangible assets - Goodwill on acquisitions” for the subsequent accounting policy on goodwill.

(iii) Disposals of subsidiaries or businesses

When a change in the Company’s ownership interest in a subsidiary results in a loss of control over the subsidiary, the assets and liabilities of the subsidiary including any goodwill are derecognised. Amounts recognised in other comprehensive income in respect of that entity are also reclassified to profit or loss or transferred directly to retained earnings if required by a specific Standard.

Any retained interest in the entity is remeasured at fair value. The difference between the carrying amount of the retained investment at the date when control is lost and its fair value is recognised in profit or loss.

Please refer to the paragraph “Investments in subsidiaries” for the accounting policy on investments in subsidiaries in the separate financial statements of the Company.

(b) Transactions with non-controlling interests

Changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control over the subsidiary are accounted for as transactions with equity owners of the Group. Any difference between the change in the carrying amounts of the non-controlling interest and the fair value of the consideration paid or received is recognised in a separate reserve within equity attributable to the equity holders of the Company.

(c) Joint venture

The Group’s joint venture is an entity over which the Group has contractual arrangement to jointly share the control over the economic activity of the entity with one or more parties.

Investment in joint venture is accounted using the equity method of accounting less impairment losses. In applying the equity method of accounting, the Group’s share of its investment in a joint venture’s post-acquisition profits or losses is recognised in profit or loss and its share of post-acquisition movements in reserves is recognised in equity directly. These post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in a joint venture equals or exceeds its interest in the joint venture, the Group does not recognise further losses, unless it has obligations or has made payments on behalf of the joint venture.

Investment in joint venture is initially recognised at cost. The cost of an acquisition is measured at the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.




2.4 Property, plant and equipment

(a) Measurement

(i) Leasehold buildings

Leasehold buildings are initially recognised at cost. Leasehold buildings are subsequently carried at cost less accumulated depreciation and accumulated impairment losses.

(ii) Other property, plant and equipment

All other items of property, plant and equipment are initially recognised at cost and subsequently carried at cost less accumulated depreciation and accumulated impairment losses.

(iii) Components of costs

The cost of an item of property, plant and equipment initially recognised includes its purchase price and any cost that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Cost also includes borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset.

(b) Depreciation

Depreciation on other items of property, plant and equipment is calculated using the straight-line method to allocate their depreciable amounts over their estimated useful lives as follows:

Useful livesMachinery and equipment 10 - 15 yearsFurniture and fittings 5 yearsOffice equipment 5 yearsMotor vehicles 5 to 10 yearsComputers 1 yearRenovation 5 years Vessels 15 yearsLeasehold buildings 30 to 60 years

No depreciation is provided on construction-in-progress.

The residual values, estimated useful lives and depreciation method of property, plant and equipment are reviewed, and adjusted as appropriate, at each balance sheet date. The effects of any revision are recognised in profit or loss when the changes arise.

Effective from 1 January 2011, the Group revised the estimated useful lives of certain machineries from 10 years to 15 years and motor vehicles from 5 years to 10 years. The revision of the estimated useful lives was made after reassessment of the future economic benefits embodied in the assets and the expected consumption by the Group.

The change in the estimated useful lives resulted in a decrease in depreciation expense for the financial year and increase in net book value of property, plant and equipment as at 31 December 2011 of approximately $442,000.




2.4 Property, plant and equipment (continued)

(c) Subsequent expenditure

Subsequent expenditure relating to property, plant and equipment that has already been recognised is added to the carrying amount of the asset only when 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. All other repair and maintenance expenses are recognised in profit or loss when incurred.

(d) Disposal

On disposal of an item of property, plant and equipment, the difference between the disposal proceeds and its carrying amount is recognised in profit or loss within ‘Other gains – net’. Any amount in revaluation reserve relating to that asset is transferred to retained profits directly.

2.5 Club memberships

Club memberships are stated at cost less impairment loss.

2.6 Intangible assets

Goodwill on acquisitions

Goodwill on acquisitions of subsidiaries on or after 1 January 2010 represents the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the net identifiable assets acquired.

Goodwill on acquisition of subsidiaries prior to 1 January 2010 represents the excess of the cost of the acquisition over the fair value of the Group’s share of the net identifiable assets acquired.

Goodwill on subsidiaries is recognised separately as intangible assets and carried at cost less accumulated impairment losses.

Gains and losses on the disposal of subsidiaries include the carrying amount of goodwill relating to the entity sold, except for goodwill arising from acquisitions prior to 1 January 2001. Such goodwill was adjusted against retained profits in the year of acquisition and is not recognised in profit or loss on disposal.

2.7 Borrowing costs

Borrowing costs are recognised in profit or loss using the effective interest method.




2.8 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 the stage of completion of the contract activity at the balance sheet date (“percentage-of-completion method”). When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that are likely to be recoverable. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

Contract revenue comprises the initial amount of revenue agreed in the contract and variations in the contract work and claims that can be measured reliably. A variation or a claim is recognised as contract revenue when it is probable that the customer will approve the variation or negotiations have reached an advanced stage such that it is probable that the customer will accept the claim.

The stage of completion is measured by reference to the proportion of contract costs incurred to date to the estimated total costs for the contract. Costs incurred during the financial year in connection with future activity on a contract are excluded from the costs incurred to date when determining the stage of completion of a contract. Such costs are shown as construction contract work-in-progress on the balance sheet unless it is not probable that such contract costs are recoverable from the customers, in which case, such costs are recognised as an expense immediately.

At the balance sheet date, the cumulative costs incurred plus recognised profit (less recognised loss) on each contract is compared against the progress billings. Where the cumulative costs incurred plus the recognised profits (less recognised losses) exceed progress billings, the balance is presented as due from customers on construction contracts within “trade and other receivables”. Where progress billings exceed the cumulative costs incurred plus recognised profits (less recognised losses), the balance is presented as due to customers on construction contracts within “trade and other payables”.

Progress billings not yet paid by customers and retentions by customers are included within “trade and other receivables”. Advances received are included within “trade and other payables”.

2.9 Investments in subsidiaries

Investments in subsidiaries are carried at cost less accumulated impairment losses in the Company’s balance sheet. On disposal of investments in subsidiaries, the difference between disposal proceeds and the carrying amounts of the investments are recognised in profit or loss.




2.10 Impairment of non-financial assets

(a) Goodwill

Goodwill recognised separately as an intangible asset is tested for impairment annually and whenever there is indication that the goodwill may be impaired.

For the purpose of impairment testing of goodwill, goodwill is allocated to each of the Group’s cash-generating-units (“CGU”) expected to benefit from synergies arising from the business combination.

An impairment loss is recognised when the carrying amount of a CGU, including the goodwill, exceeds the recoverable amount of the CGU. The recoverable amount of a CGU is the higher of the CGU’s fair value less cost to sell and value-in-use.

The total impairment loss of a CGU is allocated first to reduce the carrying amount of goodwill allocated to the CGU and then to the other assets of the CGU pro-rata on the basis of the carrying amount of each asset in the CGU.

An impairment loss on goodwill is recognised as an expense and is not reversed in a subsequent period.

(b) Property, plant and equipment Investments in subsidiaries Investment in joint venture

Property, plant and equipment and investments in subsidiaries and joint venture are tested for impairment whenever there is any objective evidence or indication that these assets may be impaired.

For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash inflows that are largely independent of those from other assets. If this is the case, the recoverable amount is determined for the cash-generating-units (“CGU”) to which the asset belongs.

If the recoverable amount of the asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount.

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

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




2.11 Financial assets

(a) Classification

The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, held-to-maturity, and available-for-sale. The classification depends on the nature of the asset and the purpose for which the assets were acquired. Management determines the classification of its financial assets at initial recognition. There are no financial assets categorised at fair value through profit or loss and held-to-maturity.

(i) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are presented as current assets, except for those expected to be realised later than 12 months after the balance sheet date which are presented as non-current assets. Loans and receivables are presented as “trade and other receivables” and “cash and cash equivalents” on the balance sheet.

(ii) Financial assets, available-for-sale

Financial assets, available-for-sale are non-derivatives that are either designated in this category or not classified in any of the other categories. They are presented as non-current assets unless management intends to dispose of the assets within 12 months after the balance sheet date.

(b) Recognition and derecognition

Regular way purchases and sales of financial assets are recognised on trade date – the date on which the Group commits to purchase or sell the asset.

Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. On disposal of a financial asset, the difference between the carrying amount and the sale proceeds is recognised in profit or loss. Any amount in the fair value reserve relating to that asset is reclassified to profit or loss.

(c) Initial measurement

Financial assets are initially recognised at fair value plus transaction costs.

(d) Subsequent measurement

Financial assets, available-for-sale are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method.

Interest and dividend income on financial assets, available-for-sale are recognised separately in income. Changes in the fair values of available-for-sale debt securities (i.e. monetary items) denominated in foreign currencies are analysed into currency translation differences on the amortised cost of the securities and other changes; the currency translation differences are recognised in profit or loss and the other changes are recognised in the fair value reserve. Changes in fair values of available-for-sale equity securities (i.e. non-monetary items) are recognised in the fair value reserve, together with the related currency translation differences.




2.11 Financial assets (continued)

(e) Impairment

The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired and recognises an allowance for impairment when such evidence exists.

(i) Loans and receivables

Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy, and default or significant delay in payments are objective evidence that these financial assets are impaired.

The carrying amount of these assets is reduced through the use of an impairment allowance account which is calculated as the difference between the carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. When the asset becomes uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are recognised against the same line item in profit or loss.

The allowance for impairment loss account is reduced through profit or loss in a subsequent period when the amount of impairment loss decreases and the related decrease can be objectively measured. The carrying amount of the asset previously impaired is increased to the extent that the new carrying amount does not exceed the amortised cost had no impairment been recognised in prior periods.

(ii) Financial assets, available-for-sale

In addition to the objective evidence of impairment described in Note 2.11(e)(i), a significant or prolonged decline in the fair value of an equity security below its cost is considered as an indicator that the available-for-sale financial asset is impaired.

If any evidence of impairment exists, the cumulative loss that was recognised in the fair value reserve is reclassified to profit or loss. The cumulative loss is measured as the difference between the acquisition cost (net of any principal repayments and amortisation) and the current fair value, less any impairment loss previously recognised as an expense. The impairment losses recognised as an expense on equity securities are not reversed through profit or loss.

(f) Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.




2.12 Financial guarantees

The Company has issued corporate guarantees to banks for borrowings of its subsidiaries. These guarantees are financial guarantees as they require the Company to reimburse the banks if the subsidiaries fail to make principal or interest payments when due in accordance with the terms of their borrowings.

Financial guarantees are initially recognised at their fair values plus transaction costs in the Company’s balance sheet.

Financial guarantees are subsequently amortised to profit or loss over the period of the subsidiaries’ borrowings, unless it is probable that the Company will reimburse the bank for an amount higher than the unamortised amount. In this case, the financial guarantees shall be carried at the expected amount payable to the bank in the Company’s balance sheet.

Intra-group transactions are eliminated on consolidation.

2.13 Borrowings

Borrowings are presented as current liabilities unless the Group has an unconditional right to defer settlement for at least 12 months after the balance sheet date.

Borrowings are initially recognised at fair value (net of transaction costs) and subsequently carried at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.

2.14 Trade and other payables

Trade and other payables are initially recognised at fair value, and subsequently carried at amortised cost, using the effective interest method.

2.15 Fair value estimation of financial assets and liabilities

The fair values of financial instruments traded in active markets (such as exchange-traded and over-the-counter securities and derivatives) are based on quoted market prices at the balance sheet date. The quoted market prices used for financial assets are the current bid prices; the appropriate quoted market prices for financial liabilities are the current asking prices.

The fair value of current financial assets and liabilities carried at amortised cost approximate their carrying amounts.




2.16 Leases

(a) When the Group is the lessee:

The Group leases motor vehicles and certain plant and machinery under finance leases and land under operating leases from non-related parties.

(i) Lessee – Finance leases

Leases where the Group assumes substantially all risks and rewards incidental to ownership of the leased assets are classified as finance leases.

The leased assets and the corresponding lease liabilities (net of finance charges) under finance leases are recognised on the balance sheet as plant and equipment and borrowings respectively, at the inception of the leases based on the lower of the fair value of the leased assets and the present value of the minimum lease payments.

Each lease payment is apportioned between the finance expense and the reduction of the outstanding lease liability. The finance expense is recognised in profit or loss on a basis that reflects a constant periodic rate of interest on the finance lease liability.

(ii) Lessee – Operating leases

Leases where substantially all risks and rewards incidental to ownership are retained by the lessors are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessors) are recognised in profit or loss on a straight-line basis over the period of the lease.

Contingent rents are recognised as an expense in profit or loss when incurred.

2.17 Inventories

Inventories are carried at the lower of cost and net realisable value. Cost is determined using the first-in, first-out method. The cost of finished goods and work-in-progress comprises raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity) but excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and applicable variable selling expenses.

2.18 Income taxes

Current income tax for current and prior periods is recognised at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.

Deferred income tax is recognised for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except when the deferred income tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction.




2.18 Income taxes (continued)

A deferred income tax liability is recognised on temporary differences arising on investments in subsidiaries, associated companies and joint ventures, except where the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

A deferred income tax asset is recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilised.

Deferred income tax is measured:

(i) at the tax rates that are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date; and

(ii) based on the tax consequence that will follow from the manner in which the Group expects, at the balance sheet date, to recover or settle the carrying amounts of its assets and liabilities

Current and deferred income taxes are recognised as income or expense in profit or loss, except to the extent that the tax arises from a business combination or a transaction which is recognised directly in equity. Deferred tax arising from a business combination is adjusted against goodwill on acquisition.

2.19 Provisions for other liabilities and charges

Provisions for other liabilities and charges are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated.

2.20 Employee compensation

Employee benefits are recognised as an expense, unless the cost qualifies to be capitalised as an asset.

(a) Defined contribution plans

Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into separate entities such as the Central Provident Fund on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid.

(b) Share-based compensation

The Group operates an equity-settled, share-based compensation plan. The value of the employee services received in exchange for the grant of options is recognised as an expense with a corresponding increase in the share option reserve over the vesting period. The total amount to be recognised over the vesting period is determined by reference to the fair value of the options granted on the date of the grant. Non-market vesting conditions are included in the estimation of the number of shares under options that are expected to become exercisable on the vesting date. At each balance sheet date, the Group revises its estimates of the number of shares under options that are expected to become exercisable on the vesting date and recognises the impact of the revision of the estimates in profit or loss, with a corresponding adjustment to the share option reserve over the remaining vesting period.




2.20 Employee compensation (continued)

(b) Share-based compensation (continued)

When the options are exercised, the proceeds received (net of transaction costs) and the related balance previously recognised in the share option reserve are credited to share capital account, when new ordinary shares are issued, or to the “treasury shares” account, when treasury shares are re-issued to the employees.

(c) Performance shares

Benefits to employees including the directors are provided in the form of share-based payment transactions, whereby employees render services in exchange for the shares or right over shares (“equity-settled transactions”). The fair value of the employee services rendered is determined by reference to the fair value of the shares awarded or granted, excluding the impact of any non-market vesting conditions. The amount is determined by reference to the fair value of the performance shares on the grant date. This fair value is recognised in profit or loss over the remaining vesting period of the share-based payment scheme, with the corresponding increase in equity. The value of charge is adjusted in profit or loss over the remaining vesting period to reflect expected and actual levels of shares vesting, with the adjustment made in equity. Cancellations of grants of equity instruments during the vesting period (other than a grant cancelled by forfeiture when the vesting conditions are not satisfied) are accounted as an acceleration of vesting, therefore any amount unrecognised that would otherwise have been charged is recognised immediately in profit or loss.

(d) Employee leave entitlement

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

2.21 Currency translation

(a) Functional and presentation currency

Items included in the financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (“functional currency”). The financial statements are presented in Singapore Dollars, which is the functional currency of the Company.

(b) Transactions and balances

Transactions in a currency other than the functional currency (“foreign currency”) are translated into the functional currency using the exchange rates at the dates of the transactions. Currency translation differences resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the closing rates at the balance sheet date are recognised in profit or loss.

Non-monetary items measured at fair values in foreign currencies are translated using the exchange rates at the date when the fair values are determined.




2.21 Currency translation (continued)

(c) Translation of Group entities’ financial statements

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

(i) Assets and liabilities are translated at the closing exchange rates at the reporting date;

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

(iii) All resulting currency translation differences are recognised in other comprehensive income and accumulated in the currency translation reserve.

Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign operations and translated at the closing rates at the reporting date.

2.22 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Board of Directors whose members are responsible for allocating resources and assessing performance of the operating segments.

The Group is principally engaged in the manufacture and service of sterngear equipment. The Group has since consolidated its activities into two business segments, Marine Services business division and Offshore & Engineering Services business division. No separate segmental information by business segment is presented, except for segment revenue, as both business segments use the same resources and share the same costs. Management is of the opinion that is not practicable to separate the costs, assets and liabilities for each business segment.

2.23 Cash and cash equivalents

For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents include cash on hand, deposits with financial institutions which are subject to an insignificant risk of change in value.

2.24 Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new equity instruments are deducted against the share capital account.

2.25 Dividends to Company’s shareholders

Dividends to the Company’s shareholders are recognised when the dividends are approved for payment.




2.26 Government grants

Grants from the government are recognised as a receivable at their fair value when there is reasonable assurance that the grant will be received and the Group will comply with all the attached conditions. Government grants relating to expenses are shown separately as other income.

3. Critical accounting estimates, assumptions and judgements

Estimates, assumptions and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

(a) Estimated impairment of non-financial assets

Goodwill is tested for impairment annually and whenever there is indication that the goodwill may be impaired. Property, plant and equipment and investments in subsidiaries and joint ventures are tested for impairment whenever there is any objective evidence or indication that these assets may be impaired.

The recoverable amounts of these assets and where applicable, cash-generating units, have been determined based on value-in-use calculations. These calculations require the use of estimates. Details of investments in subsidiaries, investment in joint venture, property, plant and equipment, and goodwill are disclosed in Note 16, 17, 18 and 19 respectively.

(b) Income taxes

The Group is subjected to income taxes in Singapore, Malaysia, Indonesia and Sultanate of Oman. Significant judgement is required in determining the capital allowances and deductibility of certain expenses during the estimation of the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities based on estimates of whether additional taxes will be due. Where the final tax is different from the amounts that were initially recorded, such differences will impact the income tax and deferred income tax provisions in the period in which such determination is made. The carrying amount of income tax and deferred income tax is disclosed in Note 9 and Note 23 respectively.

(c) Construction contracts

The Group uses the percentage-of-completion method to account for its contract revenue. The stage of completion is measured by reference to the contract costs incurred to date compared to the estimated total costs for the contract.

Significant assumptions are required to estimate the total contract costs and the recoverable variation works that affect the stage of completion and the contract revenue respectively. In making these estimates, management has relied on past experience and the work of specialists. Details of construction contracts are disclosed in Note 14.

If the revenue on uncompleted contracts at the balance sheet date increases/decreases by 10% from management’s estimates, the Group’s revenue will increase/decrease by $863,000.

If the contract costs of uncompleted contracts to be incurred increase/decrease by 10% from management’s estimates, the Group’s profit will decrease/increase by $642,000.



3. Critical accounting estimates, assumptions and judgements (continued)

(d) Depreciation of property, plant and equipment

Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives. Management estimates the useful lives of these assets to be within 1 to 60 years. The carrying amounts of the Group’s property, plant and equipment as at 31 December 2011 were $54,818,000 (2010: $25,967,000). Changes in the expected level of usage could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised.

(e) Impairment of loans and receivables

Management reviews its loans and receivables for objective evidence of impairment at least quarterly. Significant financial difficulties of the debtor, the probability that the debtor will enter bankruptcy, and default or significant delay in payments are considered objective evidence that a receivable is impaired. In determining this, management makes judgement as to whether there is observable data indicating that there has been a significant change in the payment ability of the debtor, or whether there have been significant changes with adverse effect in the technological, market, economic or legal environment in which the debtor operates in.

Where there is objective evidence of impairment, management makes judgements as to whether an impairment loss should be recorded as an expense. In determining this, management uses estimates based on historical loss experience for assets with similar credit risk characteristics. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between the estimated loss and actual loss experience. Details of trade and other receivables and allowance for impairment are disclosed in Note 12.

4. Revenue

Group2011 2010

$’000 $’000

Marine 38,355 32,031Offshore & Engineering 18,003 -

56,358 32,031

5. Other gains - net

Group2011 2010

$’000 $’000

Dividend income on financial assets, available-for-sale 5 -Foreign currency exchange loss - net (286) (21)Gain on disposal of property, plant and equipment 196 95Government grant 33 49Interest income – bank deposits 19 18Mooring fees 64 96Rental income 54 -Sales of scrap 256 236Other income 33 3

374 476



6. Expenses by nature

Group2011 2010

$’000 $’000

Purchases of inventories 24,230 11,525Advertisement 133 106Fees on audit services paid/payable to:- Auditor of the Company 125 85- Other auditor* 15 -Fees on non-audit services paid/payable to:- Auditor of the Company 73 -- Other auditor 29 39Allowance for impairment of trade receivables (Note 28) 129 116Commission 114 145Depreciation of property, plant and equipment (Note 18) 2,818 1,839Directors’ fees 192 225Donation 56 59Employee compensation (Note 7) 13,264 6,951Entertainment and refreshment 272 169Employee welfare 479 241Freight and handling charges 289 258Insurance 451 187Property tax 254 206Printing and stationery 140 97Professional fees 745 257Rental expense on operating lease 644 718Security fees 143 118Telephone 146 70Transportation 258 119Travelling 301 293Upkeep of motor vehicles and transportation 314 97Upkeep of vessels 146 -Utilities 667 388Others 1,020 327Changes in inventories (1,973) (2,395)Total cost of sales and administrative expenses 45,474 22,240

* includes the network member firms of Nexia International.



7. Employee compensation

Group

2011 2010

$’000 $’000

Wages and salaries 12,507 6,595

Employer’s contribution to defined contribution plans including Central Provident Fund 757 356

13,264 6,951

8. Finance expenses

Group

2011 2010

$’000 $’000

Interest expense on:

- bank borrowings 437 291

- finance lease liabilities 346 176

783 467

9. Income taxes

Group

2011 2010

$’000 $’000

Income tax expenses

Tax expense attributable to profit is made up of:

Profit from current financial year

- Current income tax - Singapore 1,281 1,273

- Deferred income tax (Note 23) - 184

1,281 1,457

Under/(over) provision in prior financial years

- Current income tax - Singapore (1,027) 13

- Deferred income tax (Note 23) (2) (175)

252 1,295



9. Income taxes (continued)

The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the Singapore standard rate of income tax as follows:

Group2011 2010

$’000 $’000

Profit before income tax 10,488 9,800

Tax calculated at tax rate of 17% (2010: 17%) 1,783 1,666Effects of: - different tax rates in other countries (46) -- statutory tax exemption (144) (134)- tax incentive under Productivity and Innovation Credit (29) -- income not subject to tax (39) (14)- group relief surrendered without payment (105) -- expenses not deductible for tax purposes 285 296- deferred income tax not recognised (388) (307)- other (36) (50)

1,281 1,457

10 Earnings per share

(a) Basic earnings per share

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

(b) Diluted earnings per share

For the purpose of calculating diluted earnings per share, profit attributable to equity holders of the Company and the weighted average number of ordinary shares outstanding are adjusted for the effects of all dilutive potential ordinary shares.

There are no dilutive potential ordinary shares in respect of share options and performance shares during the financial year.

Group

2011 2010

Net profit attributable to equity holders of the Company ($’000) 10,236 8,495

Weighted average number of ordinary shares outstanding for basic and diluted earnings per share (’000) 177,476 157,658

Basic and diluted earnings per share (cents per share) 5.77 5.39



11. Cash and cash equivalents

Group Company2011 2010 2011 2010

$’000 $’000 $’000 $’000

Cash at bank and on hand 4,965 2,175 62 54Short-term bank deposits 4,486 9,429 4,014 9,429

9,451 11,604 4,076 9,483

For the purpose of presenting the consolidated statement of cash flows, cash and cash equivalents comprise the following:

Group2011 2010

$’000 $’000

Cash and bank balances (as above) 9,451 11,604Less : Short-term bank deposits pledged (4,441) -Less : Bank overdrafts (Note 21) (1,061) -Cash and cash equivalents per consolidated statement of cash flows 3,949 11,604

Short-term bank deposits are pledged to secure certain borrowings (Note 21).

12. Trade and other receivables

Group Company2011 2010 2011 2010

$’000 $’000 $’000 $’000Trade receivables - Non-related parties 22,693 13,188 - -Less: Allowance for impairment of

trade receivables - non-related parties (790) (123) - -

Trade receivables - net 21,903 13,065 - -

Construction contracts- Due from customers (Note 14) 260 - - -

Non-trade amounts due from subsidiaries - - 6,589 2,668

Accrued service revenue 1,797 - - -Advances to suppliers 764 321 - -Advances to staffs 47 - - -Deposits 365 325 - -Prepayments 193 126 1 1Goods and services tax receivables 170 - - -Other receivables 430 87 - -

25,929 13,924 6,590 2,669

The non-trade amounts due from subsidiaries are unsecured, interest-free and are repayable on demand.



13. Inventories

Group2011 2010

$’000 $’000

Raw materials 3,436 2,743

Work-in-progress 1,594 1,046

Finished goods 324 602

Deferred costs 1,082 72

6,436 4,463

The cost of inventories recognised as an expense and included in “cost of sales” amounted to $22,257,000 (2010: $9,130,000).

14. Construction contracts

Group2011 2010

$’000 $’000

Aggregate costs incurred and profits recognised (less losses recognised) to date on uncompleted construction contracts 8,651 -

Less: Progress billings (9,608) -

(957) -

Presented as:

Due from customers on construction contracts (Note 12) 260 -

Due to customers on construction contracts (Note 20) (1,217) -

(957) -

15. Financial assets, available-for-sale

Group2011 2010

$’000 $’000

Beginning and end of financial year 127 127

Financial assets, available-for-sale are analysed as follows:

Group2011 2010

$’000 $’000

Listed securities

- equity securities - Singapore 10 10

- equity securities - Malaysia 117 117

127 127



16. Investments in subsidiaries

Company2011 2010

$’000 $’000

Equity investments at cost

Beginning of financial year 20,900 20,900

Additions 4,000 -

Acquisition (Note 31) 38,850 -

End of financial year 63,750 20,900

Details of subsidiaries are as follows:

Name of companies Principal activities

Country of business/

incorporation

Effective equity holding

2011 2010

% %

Held by the company

Mencast Marine Pte Ltd (a) Manufacture, supply and refurbishment and reconditioning of sterngear equipment

Singapore 100 100

Mencast Engineering Pte Ltd (“MEPL”) (a) Supply of sterngear equipment and services

Singapore 100 100

Mencast Offshore & Marine Pte Ltd (a) Repair of ships, tankers and other ocean-going vessels

Singapore 100 100

Mencast Energy Pte Ltd (Formerly known as M.B.A. Heavy Industries Pte Ltd) (a)

Manufacture of marine parts & equipment

Singapore 100 100

Recon Propeller & Engineering Pte Ltd (“Recon”)(a) Sterngear services Singapore 100 100

TG Offshore Pte Ltd (a) Construction and repair of engines, boilers and machinery

Singapore 100 51

Top Great Engineering & Marine Pte Ltd (a) Provision of mechanical engineering works, and repair of ships, tankers and other ocean going vessels

Singapore 100 -



16. Investments in subsidiaries (continued)

Details of subsidiaries are as follows (continued):



incorporation


2011 2010

% %

Held by the company (continued)

Unidive Marine Services Pte Ltd (a) Underwater commercial diving services provider

Singapore 100 -

Held by Top Great Engineering & Marine Pte LtdPT. Top Great Engineering & Marine (b) Fabrication of steel

structure, ship building and repairs

Indonesia 100 -

Top Great Engineering & Marine Sdn Bhd (c) Engineering construction and development work

Malaysia 100 -

Top Great Holdings Pte Ltd (a) Investment holding Singapore 100 -

Held by Top Great Holdings Pte LtdTop Great Engineering Services LLC (d) Provision of marine

servicesSultanate of

Oman100 -

Held by Top Great Engineering & Marine Sdn BhdMcGlynn Sdn Bhd (c) Development in

structural steel, marine, environment and water engineering systems

Malaysia 100 -

Held by Unidive Marine Services Pte LtdUnidive Offshore Pte Ltd (e) Inactive Singapore 100 -

Unidive Marine Services (Malaysia) Sdn Bhd(c) Underwater commercial diving services provider

Malaysia 100 -

Industrial Rope Access Pte Ltd (e) Inactive Singapore 100 -

(a) Audited by Nexia TS Public Accounting Corporation, Singapore.

(b) Audited by Riyanto, SE, AK, Indonesia.

(c) Audited by SSY Partners, Malaysia, a member firm of Nexia International

(d) Audited by MHMY Auditors, Sultanate of Oman.

(e) Not required to be audited under the laws of the country of incorporation. Audited by Nexia TS Public Accounting Corporation, Singapore for consolidation purposes.



17. Investment in joint venture

Group2011 2010

$’000 $’000Equity investment at costBeginning of financial year - -Acquisition of subsidiaries (Note 31) 894 -Share of profit 13 -End of financial year 907 -

The summarised financial information of joint venture, not adjusted for the proportion of ownership interest held by the Group, is as follows:

Group2011 2010

$’000 $’000

Total assets 5,406 -Total liabilities 3,592 -Net assets 1,814 -

Company’s share of joint venture’s net assets 907 -

Company’s share of joint venture’s contingent liabilities 645 -

Revenue - -

Profit for the year 26 -

Company’s share of joint venture’s profit for the year 13 -

At 31 December 2011, the joint venture had contingent liabilities amounting to $1,290,000 (2010: Nil) in respect of performance guarantee issued in the normal course of business from which it is anticipated that no material actual liabilities will arise.

Details of joint venture is as follows:



incorporation


2011 2010

% %

Towell Top Great Engineering Services LLC(a) Building and construction contracts of residential buildings

Sultanate of Oman

50 -

(a) Audited by PricewaterhouseCoopers, Sultanate of Oman.



18. Property, plant and equipment

Machinery Furniture Construction

and and Office Motor Leasehold in

Equipment Fittings Equipment Vehicles Vessels Computers Buildings Renovation Progress Total

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

Group

2011CostBeginning of

financial year 13,472 275 257 1,601 - 218 14,550 34 2,186 32,593

Currency translation differences 135 8 - 18 - 10 - 12 - 183

Additions 5,793 5 51 143 1,669 46 349 38 10,990 19,084

Acquisition of subsidiaries and business (Note 31) 4,244 473 131 2,001 1,902 350 7,499 356 - 16,956

Disposals (180) (17) (2) (198) - (14) - (38) - (449)

End of financial year 23,464 744 437 3,565 3,571 610 22,398 402 13,176 68,367

Accumulated depreciationBeginning of

financial year 3,794 167 148 888 - 196 1,420 13 - 6,626

Currency translation differences 6 1 - 2 - 1 - 1 - 11

Depreciation charge (Note 6) 1,549 46 61 328 124 59 607 44 - 2,818

Acquisition of subsidiaries and business (Note 31) 1,350 415 99 1,087 656 269 356 264 - 4,496

Disposals (153) (15) (1) (184) - (13) - (36) - (402)

End of financial year 6,546 614 307 2,121 780 512 2,383 286 - 13,549

Net book valueEnd of

financial year 16,918 130 130 1,444 2,791 98 20,015 116 13,176 54,818



18. Property, plant and equipment (continued)

Machinery Furniture Construction

and and Office Motor Leasehold in

Equipment Fittings Equipment Vehicles Computers Buildings Renovation Progress Total

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

Group

2010

Cost

Beginning of financial year 10,499 255 197 1,806 184 13,275 19 1,040 27,275

Additions 3,069 20 60 194 34 138 15 2,283 5,813

Reclassifications - - - - - 1,137 - (1,137) -

Disposals (96) - - (399) - - - - (495)

End of financial year 13,472 275 257 1,601 218 14,550 34 2,186 32,593

Accumulated depreciation

Beginning of financial year 2,811 128 107 917 176 987 4 - 5,130

Depreciation charge (Note 6) 1,025 39 41 272 20 433 9 - 1,839

Disposals (42) - - (301) - - - - (343)

End of financial year 3,794 167 148 888 196 1,420 13 - 6,626

Net book value

End of financial year 9,678 108 109 713 22 13,130 21 2,186 25,967

Additions during the year included machinery and equipment and motor vehicles acquired under finance leases amounting to $3,709,000 (2010: $1,207,000).

The carrying amounts of machinery and equipment and motor vehicles held under finance leases are $8,663,000 (2010: $6,709,000) at the balance sheet date.

Bank loans are secured on leasehold buildings of the Group with carrying amounts of $17,345,000 (2010: $11,827,000) (Note 21).




19. Intangible asset

Group

2011 2010

$’000 $’000

Composition:

Goodwill arising on acquisition of business (Note 31) 3,488 -

Goodwill arising on consolidation (a) 35,071 4,781

38,559 4,781

(a) Goodwill arising on consolidation

Group

2011 2010

$’000 $’000


Acquisition of subsidiaries (Note 31) 30,290 -


Impairment tests for goodwill

Goodwill is allocated to the Group’s cash-generating units (“CGUs”) identified according to operating entities as follows:

Group

2011 2010

$’000 $’000

Recon 4,781 4,781

Top Great 17,513 -

Unidive 12,777 -

MEPL 3,488 -

38,559 4,781

The recoverable amount of a CGU was determined based on value-in-use. Cash flow projections used in the value-in-use calculations were based on financial budgets approved by management covering a five-year period. There was no impairment of goodwill allocated to Recon, Top Great, Unidive and MEPL as at the balance sheet date.

Key assumptions used for value-in-use calculations:

2011 2010

Net margin 26 - 31% 26 - 31%

Growth rate 5 - 15% 5 - 15%

Discount rate 11% 11%


20. Trade and other payables

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

Trade payables

- non-related parties 10,326 4,303 - -

Construction contracts

- Due to customers (Note 14) 1,217 - - -

Deferred revenue 1,591 586 - -

Amount due to subsidiaries (non-trade) - - 19,599 7,093

Amount due to former shareholders of Recon (non-trade) - 1,800 - 1,800

Amount due to former shareholders of Top Great (non-trade) 10,800 - 10,800 -

Amount due to former shareholders of Unidive (non-trade) 7,638 - 7,638 -

Amount due to former owners of Team (non-trade) 4,500 - 4,500 -

Accruals for operating expenses 1,219 1,374 209 194

Other payables 904 350 15 62

38,195 8,413 42,761 9,149

Less non-current portion of:

Amount due to former shareholders of Top Great (non-trade) 5,400 - 5,400 -

Amount due to former shareholders of Unidive (non-trade) 3,713 - 3,713 -

Amount due to former owners of Team (non-trade) 2,400 - 2,400 -

11,513 - 11,513 -

26,682 8,413 31,248 9,149

The non-trade amount due to subsidiary is unsecured, interest-free and are repayable on demand.

The amounts due to former shareholders of Top Great and Unidive and former owners of Team pertain to the balance of purchase consideration of $22,938,000, which consist of $10,525,000 (Note 31) to be settled by cash and $12,413,000 (Note 31) to be settled by issuance of ordinary shares of the Company. These amounts are to be settled within 2 years in accordance with the terms and conditions of the sale and purchase agreements. These amounts are unsecured and interest-free.



21. Borrowings

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

Current

Bank borrowings 13,020 3,912 - -

Bank overdraft (Note 11) 1,061 - - -

Finance lease liabilities (Note 22) 2,775 1,428 - -

16,856 5,340 - -

Non-Current



22,487 5,392 - -

Total borrowings 39,343 10,732 - -

The exposure of the borrowings of the Group and of the Company to interest rate changes and the contractual repricing dates at the balance sheet dates are as follows:

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

6 months or less 13,340 3,952 - -

6 - 12 months 3,581 1,388 - -

1 - 5 years 15,967 4,795 - -

Over 5 years 6,455 597 - -

39,343 10,732 - -

(a) Security

The bank borrowings are secured by the Group’s leasehold buildings (Note 18), certain short-term bank deposits (Note 11) and corporate guarantees by the Company.

Finance lease liabilities of the Group are secured by leased machinery and equipment and motor vehicles, as the legal title is retained by the lessor and will be transferred to the Group upon full payment.



21. Borrowings (continued)

(b) Fair value of non-current borrowings

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000



The fair values above are determined from the cash flow analyses, discounted at market borrowing rates of an equivalent instrument at the balance sheet date which the directors expect to be available to the Group as follows:

Group Company

2011 2010 2011 2010

% % % %

Bank borrowings 4.06% 5.14% - -

Finance lease liabilities 4.50% 5.39% - -

22. Finance lease liabilities

The Group leases certain plant and equipment, and motor vehicles from non-related parties under finance leases. The lease agreements do not have renewal clauses but provide the Group with options to purchase the leased assets at nominal values at the end of the lease term.

Group

2011 2010

$’000 $’000

Minimum lease payments due

- Not later than one year 2,992 1,598

- Between one and five years 4,953 2,132

7,945 3,730

Less: Future finance charges (596) (322)

Present value of finance lease liabilities 7,349 3,408

The present value of finance lease liabilities is analysed as follows:

- Not later than one year 2,775 1,428

- Between one and five years 4,574 1,980

7,349 3,408



23. Deferred income taxes

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current income tax assets against current income tax liabilities and when the deferred income taxes relate to the same fiscal authority. The amounts, determined after appropriate offsetting, are shown on the balance sheet as follows:

Group

2011 2010

$’000 $’000

Deferred income tax liabilities to be settled after one year 1,330 1,242

Movement in deferred income tax account is as follows:

Group

2011 2010

$’000 $’000

Accelerated tax depreciation


Tax credited to profit or loss (Note 9) - 184

Over provision in prior financial year (Note 9) (2) (175)

Acquisition of subsidiaries (Note 31) 90 -


24. Share capital

No. of ordinary

shares Amount

Issued share capital

Share capital

‘000 $’000

Group and Company

2011


Shares issued 16,918 8,412


2010


Shares issued 15,507 5,427


All issued ordinary shares are fully paid. There is no par value for these ordinary shares.



24. Share capital (continued)

Fully paid ordinary share carry one vote per share and carry a right to dividends as when declared by the Company.

On 19 August 2011, the Company issued and allotted 14,693,877 new ordinary shares in the capital of the Company for total consideration of $7,200,000 pursuant to acquisition of Top Great. The newly issued shares rank pari passu in all respects with the previously issued shares.

On 19 September 2011, the Company issued and allotted 2,224,770 new ordinary shares in the capital of the Company for total consideration of $1,212,000 pursuant to acquisition of Unidive. The newly issued shares rank pari passu in all respects with the previously issued shares.

On 1 November 2010, the Company issued 15,507,000 ordinary shares for total consideration of $5,427,000 pursuant to a private placement exercise. The newly issued shares rank pari passu in all respects with the previously issued shares.

(i) Share options

The Company implemented the Mencast Employee Share Option Scheme (the “ESOS”) on 30 May 2008 for granting of options to full-time employees and directors of the Company and its subsidiaries. The total number of ordinary shares over which the Company may grant under the ESOS shall not exceed 15% of the issued share capital of the Company on the day preceding the date of grant.

The Scheme is administered by the Remuneration Committee (“RC”) which consist of directors (including directors or persons who may be participants of the ESOS). A member of the Remuneration Committee who is also a participant of the ESOS must not be involved in its deliberation in respect of options granted or to be granted to him.

The exercise price for each ordinary share in respect of which an option is exercisable shall be determined by the Committee as follows:

(i) at a price equal to the average of the last dealt prices for the five consecutive Market Days immediately preceding the relevant date of grant of the relevant option; or

(ii) at a price which is set at a discount to the Market Price provided that the maximum discount shall not exceed 20% of the Market Price.

Options granted with the exercise price set at Market Price shall only be exercisable after 12 months of the date of grant of that option. Options granted with the exercise price set at a discount to Market Price shall only be exercisable after 24 months from the date of grant of that option. Options granted under the ESOS will have a life span of ten years.

Under the rules of the ESOS, there are no fixed periods for the grant of options. As such, offers for the grant of options may be made at any time from time to time at the discretion of the Remuneration Committee. However, no options shall be granted during the period of 30 days immediately preceding the date of announcement of interim or final results (as the case may be).

In addition, in the event that an announcement on any matter of an exceptional nature involving unpublished price sensitive information is imminent, offers may only be made after the second Market Day from the date on which the aforesaid announcement is made.




(i) Share options (continued)

The lapsing of option is provided for upon the occurrence of certain events, which includes:

(a) termination of the participant’s employment;(b) bankruptcy of the participant;(c) death of the participant;(d) take-over of the Company; and(e) the winding-up of the Company (voluntary or otherwise)

Since the commencement of the ESOS till the end of the financial year, no option has been granted under the ESOS.

No shares have been issued during the financial year by virtue of the exercise of options to take up unissued shares of the Company and its subsidiaries.

There were no unissued shares of the Company and its subsidiaries under option at the end of the financial year.

(ii) Performance shares

The Mencast Performance Share Award Scheme (the “Scheme”) was approved by members of the Company at extraordinary general meeting (“EGM”) held on 10 November 2010 which provides for the award of fully paid-up ordinary shares in the share capital of the Company, free of charge to Group executive and non-executive Directors when and after pre-determined performance target(s) being achieved.

Controlling shareholders or associates of a controlling shareholder who meet the eligibility criteria are also eligible to participate in the Scheme provided that the participation of and the terms of each grant and the actual number of awards granted under the Scheme to a participant who is a controlling shareholder or an associate of a controlling shareholder shall be approved by the independent shareholders in separate resolutions for each such person.

The Scheme is a share incentive scheme which will allow the Company, inter alia, to target specific performance objectives and to provide an incentive for Participants to achieve these targets. The directors believe that the new plan will help to achieve the following positive objectives:

(a) reward, retain and motivate employees to achieve increased performance;

(b) provide Company with comprehensive set of remuneration tools and further strengthen its competitiveness in attracting and retaining superior local and foreign talent; and

(c) encourage greater dedication and loyalty by enabling the Company to give recognition for past contributions and services as well as motivating Scheme Participants generally to contribute towards the Group’s long-term prosperity.




(ii) Performance shares (continued)

The Scheme is administered by the directors which should comprise one independent director at all times.

The Scheme shall continue in force at the discretion of the Remuneration Committee, subject to a maximum period of ten (10) years commencing on the date on which the Scheme is adopted by the Company in general meeting, provided always that the Scheme may continue beyond the above stipulated period with the approval of Shareholders by ordinary resolution in general meeting, and of any relevant authorities which may then be required.

The Company may deliver shares pursuant to awards granted under the Scheme by way of:

(i) issuance of new shares; and/ or

(ii) delivery of existing shares purchased from the market or shares held in treasury

The total number of ordinary shares over which the Company may grant under the Scheme shall not exceed 15% of the issued share capital of the Company on the day preceding the date on which the award is granted.

The adoption of the Scheme is to complement the existing Mencast Employee Share Option Scheme (the “ESOS”). Since the commencement of the Scheme, the Company has not granted any awards under the Scheme.

25. Dividends

Group and Company

2011 2010

$’000 $’000

Ordinary dividends paid

Final exempt dividend paid in respect of the previous

financial year of $0.011 (2010: $0.01) per share 1,876 1,551

At the Annual General Meeting on 24 April 2012, a final exempt (one-tier) dividend of $0.012 per share amounting to $2,250,000 will be recommended. These financial statements do not reflect this dividend, which will be accounted for in shareholders’ equity as an appropriation of retained profits in the financial year ending 31 December 2012.



26. Contingencies

The Company has given an undertaking to provide continued financial support to certain subsidiaries in the normal course of business.

27. Commitments

(a) Capital commitments

Capital expenditure contracted for at the balance sheet date but not recognised in the financial statements are as follows:

Group

2011 2010

$’000 $’000

Property, plant and equipment 5,806 7,667

(b) Operating lease commitments – where the Group is a lessee

The Group leases land from non-related parties under non-cancellable operating lease agreements. The leases have varying terms, escalation clauses and renewal rights.

The future aggregate minimum lease payables under non-cancellable operating leases contracted for at the balance sheet date but not recognised as liabilities, are as follows:

Group and Company

2011 2010

$’000 $’000

Not later than one year 1,193 1,070

Later than one year but not later than five years 4,797 4,278

Later than five years 28,955 27,009

34,945 32,357

28. Financial risk management

Financial risk factors

The Group’s activities expose it to market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management strategy seeks to minimise any adverse effects from the unpredictability of financial markets on the Group’s financial performance. It is, and has been throughout the year under review, the Group’s policy that no trading in derivative financial instruments shall be undertaken.



28. Financial risk management (continued)

Financial risk factors (continued)

The Board of Directors is responsible for setting the objectives and underlying principles of financial risk management for the Group. This includes establishing policies such as authority levels, oversight responsibilities, risk identification and measurement and exposure limits.

Financial risk management is carried out by the finance department in accordance with the policies set. The finance personnel identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. The finance personnel measures actual exposures against the limits set and prepares daily reports for review by the Financial Controller. Regular reports are also submitted to the Board of Directors.

(a) Market risk

(i) Currency risk

The Group’s exposure to currency risk is not significant as it operates mainly in Singapore. Revenue and expenses are predominantly denominated in Singapore Dollar.

Currency risk arises within entities in the Group when transactions are denominated in foreign currencies such as United State Dollar (“USD”).

The Group’s currency exposure based on the information provided to key management is as follows:

SGD USD Others Total$’000 $’000 $’000 $’000

At 31 December 2011

Financial assetsCash and cash equivalents and financial

assets, available-for-sale 8,603 704 271 9,578

Trade and other receivables 23,501 971 1,264 25,736

32,104 1,675 1,535 35,314

Financial liabilitiesTrade and other payables (23,687) (188) (1,907) (25,782)

Borrowings (39,301) - (42) (39,343)

(62,988) (188) (1,949) (65,125)

Net financial (liabilities)/assets (30,884) 1,487 (414) (29,811)

Add: Net non-financial assets 99,382 - - 99,382

Currency profile including non-financial assets 68,498 1,487 (414) 69,571

Currency exposure of financial assets net of those denominated in the respective entities’ functional currencies - 1,487 - 1,487




(a) Market risk (continued)

(i) Currency risk (continued)

SGD USD Total

$’000 $’000 $’000

At 31 December 2010

Financial assets

Cash and cash equivalents and financial assets, available-for-sale 11,731 - 11,731

Trade and other receivables 11,130 2,668 13,798

22,861 2,668 25,529

Financial liabilities

Trade and other payables (6,518) (1,895) (8,413)

Borrowings (10,732) - (10,732)

(17,250) (1,895) (19,145)

Net financial assets 5,611 773 6,384

Add: Net non-financial assets 34,007 - 34,007

Currency profile including non-financial assets 39,618 773 40,391

Currency exposure of financial assets net of those denominated in the respective entities’ functional currencies - 773 773

If the USD change against the SGD by 5% (2010: 5%) with all other variables including tax rate being held constant, the effects arising from the net financial liability/asset position to the net profit and equity of the Group will not be significant.

The Company is not exposed to currency risk since all its financial assets and liabilities as at 31 December 2010 and 2011 are denominated in Singapore Dollar.




(a) Market risk (continued)

(ii) Price risk

The Group is exposed to equity securities price risk arising from the investments classified as financial assets, available-for-sale. These securities are listed in Singapore and Malaysia.

Further details of these equity investments can be found in Note 15 to the financial statements.

Equity price sensitivity

In respect of equity investments classified as financial assets, available-for-sale, if equity prices had been 10% higher or lower, with all other variables including tax rate being held constant, the impact to the net profit and equity of the Group will not be significant.

(iii) Cash flow and fair value interest rate risks

Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the fair value of a financial instrument will fluctuate due to changes in market interest rates. As the Group has no significant interest bearing assets, the Group’s income is substantially independent of changes in market interest rates.

The Group’s exposure to cash flow interest rate risks arises mainly from non-current variable-rate bank borrowings that are mainly denominated in SGD. The Group manages its interest rate risk by keeping bank borrowings to the minimum required to sustain the operations of the Group.

If the SGD interest rates had increased/decreased by 1% (2010:1%), will all other variables including tax rate being held constant, the impact to net profit and quity of the Group will not be significant.

(b) Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. The major classes of financial assets of the Group and of the Company are bank deposits and trade receivables. For trade receivables, the Group adopts the policy of dealing only with customers of appropriate credit history, and obtaining sufficient collateral or buying credit insurance where appropriate to mitigate credit risk. For other financial assets, the Group adopts the policy of dealing only with high credit quality counterparties.

Credit exposure to an individual counterparty is restricted by credit limits that are approved by the management of operating entity level based on on-going credit evaluation. The counterparty’s payment profile and credit exposure are continuously monitored at operating entity level by the respective management.




(b) Credit risk (continued)

As the Group and the Company do not hold any collateral, the maximum exposure to credit risk for each class of financial instruments is the carrying amount of that class of financial instruments presented on the balance sheet, except as follows:

Company

2011 2010

$’000 $’000

Corporate guarantees provided to banks on subsidiaries’ loans 25,890 7,324

The trade receivables of the Group comprise 2 debtors (2010: 1 debtor) that individually represented 10 - 20% of trade receivables.

The credit risk for trade receivables based on the information provided to key management is as follows:

Group Company

2010 2010 2011 2010

$’000 $’000 $’000 $’000

By types of customers

Non-related parties

- Multi-national companies 3,855 2,277 - -

- Other companies 18,048 10,788 - -

21,903 13,065 -

(i) Financial assets that are neither past due nor impaired

Bank deposits that are neither past due nor impaired are mainly deposits with banks with high credit-ratings assigned by international credit-rating agencies. Trade receivables that are neither past due nor impaired are substantially companies with a good collection track record with the Group. The Group has no trade receivables past due or impaired that were re-negotiated during the financial year.

(ii) Financial assets that are past due and/or impaired

There is no other class of financial assets that is past due and/or impaired except for trade receivables.




(b) Credit risk (continued)

(ii) Financial assets that are past due and/or impaired (continued)

The age analysis of trade receivables past due but not impaired is as follows:

Group Company

2010 2010 2011 2010

$’000 $’000 $’000 $’000

Past due 0 to 3 months 6,557 8,751 - -

Past due 3 to 6 months 3,056 1,680 - -

Past due over 6 months 2,350 879 - -

11,963 11,310 - -

The carrying amount of trade receivables individually determined to be impaired and the movements in the related allowance for impairment are as follows:

Group Company

2010 2010 2011 2010

$’000 $’000 $’000 $’000

Gross amount 936 138 - -

Less: Allowance for impairment (790) (123) - -

146 15 - -

Beginning of financial year 123 7 - -

Allowance made (Note 6) 129 116 - -

Acquisition of subsidiaries 538 -

End of financial year 790 123 - -

(c) Liquidity risk

Prudent liquidity risk management includes maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. At the balance sheet date, assets held by the Group and Company for managing liquidity risk included cash and short-term bank deposits as disclosed in Note 11.

Management monitors rolling forecasts of the Group’s and Company’s liquidity reserve and cash and cash equivalents (Note 11) on the basis of expected cash flow. This is generally carried out at local level in the operating entities of the Group in accordance with the practice and limits set by the Group.




(c) Liquidity risk (continued)

The table below analyses non-derivative financial liabilities of the Group and the Company into relevant maturity groupings based on the remaining period from the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying amounts as the impact of discounting is not significant.

Between Between

Less than 1 and 2 2 and 5 Over

1 year years years 5 years

$’000 $’000 $’000 $’000

Group

At 31 December 2011

Trade and other payables (26,682) (9,414) (1,200) -

Borrowings (17,648) (4,341) (13,579) (7,960)

At 31 December 2010

Trade and other payables (8,413) - - -

Borrowings (5,621) (2,867) (2,753) (772)

Company

At 31 December 2011

Trade and other payables (31,248) (10,313) (1,200) -

Financial guarantees (25,890) - - -

At 31 December 2010

Trade and other payables (9,149) - - -

Financial guarantees (7,324) - - -

(d) Capital risk

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern and to maintain an optimal capital structure so as to maximise shareholder value. In order to maintain or achieve an optimal capital structure, the Group may adjust the amount of dividend payment, return capital to shareholders, issue new shares, buy back issued shares, obtain new borrowings or sell assets to reduce borrowings.

Management monitors capital based on a gearing ratio. The Group’s strategies, which were unchanged from 2010, are to maintain positive gearing ratios within 10% to 60%.

The gearing ratio is calculated as net debt divided by total capital. Net debt is calculated as borrowings plus trade and other payables less cash and cash equivalents. Total capital is calculated as equity plus net debt.




(d) Capital risk (continued)

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

Net debt 68,087 7,541 38,685 -

Total equity 57,158 40,517 31,655 23,903

Total capital 125,245 48,058 70,340 23,903

Gearing ratio 54% 16% 55% -

The Group and the Company has no externally imposed capital requirements for the financial years ended 31 December 2010 and 2011.

(e) Fair value measurements

The following table presents assets and liabilities measured at fair value and classified by level of the following fair value measurement hierarchy:

(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1)

Group

2011 2010

$’000 $’000

Assets

Financial assets, available-for-sale 127 127

The fair value of financial instruments traded in active markets (such as trading and available-for-sale securities) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in Level 1.

The carrying amount less impairment provision of trade receivables and payables are assumed to approximate their fair values. The fair value of current borrowings approximates their carrying amount.



29. Related party transactions

(a) Key management personnel compensation

Key management personnel compensation is as follows:

Group

2011 2010

$’000 $’000

Wages and salaries 1,988 1,749

Employer’s contribution to defined contribution plans,

including Central Provident Fund 86 51

2,074 1,800

Key management personnel compensation includes directors’ remuneration amounting to $935,000 (2010:$1,013,000).

30. Segment information

The Group is principally engaged in the manufacture and service of sterngear equipment and provision of marine and offshore engineering services. The Group has consolidated its activities into two business segments, Marine Services business division, and Offshore & Engineering Services business division. No separate segmental information by business segment is presented, except for segment revenue (Note 4), as both business segments use the same resources and share the same costs. Management is of the opinion that it is not practicable to separate the costs, assets and liabilities for each business segment.

The following table provides an analysis of the Group revenue by geographical market which is analysed based on the country of domicile of the customers:

Group

2011 2010

$’000 $’000

Singapore 46,583 24,745

Asia (1) 4,167 6,254

Rest of the world (2) 5,608 1,032

Total 56,358 32,031

Notes:

(1) Asia refers to customers from Malaysia, Brunei, China, Indonesia, Philippines, Thailand, Vietnam, Hong Kong, India, Sri Lanka, Maldives and Australia.

(2) Rest of the world refers to customers from Europe, the Middle East and United States of America.



31. Business combinations

On 1 May 2011, the Group acquired a 100% equity interest in Top Great. The principal activity of Top Great is that of design, procurement, fabrication and installation of structural and precision engineering systems and plants. It is also provides skilled professionals and manpower, as well as full turnkey project management of engineering projects.

On 1 June 2011, the Group acquired a 100% equity interest in Unidive. The principal activity of Unidive is the provision of full range of topside (rope access) and subsea (diving) services for the offshore and inshore marine industry, particularly in inspections, repairs and maintanance.

On 28 November 2011, the Company acquired the business of Team Precision Engineering (“TPE”) and Team International Development (“TID”), collectively known as “Team Assets” including certain machineries, for a total consideration of $4,500,000. The principal activities of TPE and TID are that of metal precision components manufacturing.

Details of the consideration paid, the assets acquired and liabilities assumed and the effects on the cash flows of the Group, at the acquisition date, are as follows:

Acquisition of

subsidiaries Acquisition of business Total

$’000 $’000 $’000

(a) Purchase consideration:

Cash paid 12,000 - 12,000

Consideration settled via issuance of shares (Note 24) 8,412 - 8,412

20,412 - 20,412

Outstanding portion of purchase consideration (Note 20)

- Cash 10,025 500 10,525

- To be settled via issuance of shares 8,413 4,000 12,413

18,438 4,500 22,938

38,850 4,500 43,350

(b) Effect on cash flows of the Group:

Cash paid (as above) 12,000 - 12,000

Less: Cash and cash equivalents in subsidiaries acquired (4,170) - (4,170)

Cash outflow on acquisition 7,830 - 7,830



31. Business combinations (continued)

Acquisition of

subsidiaries Acquisition of business Total

$’000 $’000 $’000

(c) The fair value of identifiable assets acquired and liabilities assumed

Cash and cash equivalents 4,170 - 4,170

Property, plant and equipment (Note 18) 11,448 1,012 12,460

Investment in joint venture (Note 17) 894 - 894

Inventories 3,479 - 3,479

Trade and other receivables 10,515 - 10,515

Total assets 30,505 1,012 31,518

Trade and other payables 11,808 - 11,808

Borrowings 8,962 - 8,962

Current income tax liabilities 1,086 - 1,086

Deffered income tax liabilities (Note 23) 90 - 90

Total liabilities 21,946 - 21,946

Total identifiable net assets 8,560 1,102 9,572

add: Goodwill (Note 19) 30,290 3,488 33,778

Consideration transferred for the business 38,850 4,500 43,350

(d) Acquisition-related costs

Acquisition-related costs are included in administrative expenses in the consolidated statement of comprehensive income and in operating cash flows in the consolidated statement of cash flows.

(e) Goodwill

The goodwill of $33,778,000 arising from the acquisition is attributable to new earning streams, leveraging on the established client base, industry reputation and the positive synergies expected to arise from the economies of scale in combining the operations of the Group with those of Top Great, Unidive and Team Assets.

(f) Revenue and profit contribution

The acquisition of Top Great contributed revenue of $29,807,000 and net profit of $4,027,000 to the Group from the period from 1 May 2011 to 31 December 2011. The acquisition of Unidive contributed revenue of $8,643,000 and net profit of $3,061,000 to the Group from the period from 1 June 2011 to 31 December 2011. The acquisition of Team contributed revenue of $251,000 and net profit of $3,061,000 to the Group from the period from 28 November 2011 to 31 December 2011.

Had Top Great, Unidive and Team been acquired from 1 January 2011, consolidated revenue and profit for the year ended 31 December 2011 would have been $54,126,000 and $10,310,000 respectively.



32. Events occurring after balance sheet date

On 19 March 2012, the Company entered into subscription agreements with third parties to allot and issue the aggregate number of 22,500,000 new ordinary shares in the Company at an issue price of $0.53. The Company intends to use the net proceeds for future acquisitions, expansions and for general capital working purposes.

33. New or revised accounting standards and interpretations

The mandatory standards, amendments and interpretations to existing standards that have been published, and are relevant for the Company’s accounting periods beginning on or after 1 January 2012 or later periods and which the Company has not early adopted are:

• Amendments to FRS 1 Presentation of Financial Statements (effective for annual periods beginning on or after 1 July 2012)

• FRS 12 (revised 2011) Deferred Tax: Recovery of Underlying Assets (effective for annual periods beginning on or after 1 January 2012)

• FRS 27 (revised 2011) Separate Financial Statements (effective for annual periods beginning on or after 1 July 2013)

• FRS 28 (revised 2011) Investments in Associates and Joint Ventures (effective for annual periods beginning on or after 1 January 2013)

• FRS 110 (revised 2011) Consolidated Financial Statements (effective for annual periods beginning on or after 1 January 2013)

• FRS 111 (revised 2011) Joint Arrangements (effective for annual periods beginning on or after 1 January 2013)

• FRS 112 (revised 2011) Disclosure of Interests in Other Entities (effective for annual periods beginning on or after 1 January 2013)

• FRS 113 Fair Value Measurement (effective for annual periods beginning on or after 1 July 2013)

The management anticipates that the adoption of the above FRS and amendments to FRS in the future periods will not have a material impact on the financial statements of the Group in the period of their initial adoption.



SHARE CAPITAL

Number of Shares : 191,012,373Class of shares : Ordinary sharesVoting rights : One vote per ordinary shareTreasury shares : Nil

DISTRIBUTION OF SHAREHOLDINGS

NO. OF

SIZE OF SHAREHOLDINGS SHAREHOLDERS % NO. OF SHARES %

1 - 999 0 0.00 0 0.00

1,000 - 10,000 205 39.81 1,019,000 0.53

10,001 - 1,000,000 285 55.34 28,202,898 14.77

1,000,001 AND ABOVE 25 4.85 161,790,475 84.70

TOTAL 515 100.00 191,012,373 100.00

TWENTY LARGEST SHAREHOLDERS

NO. NAME NO. OF SHARES %

1. HSBC (SINGAPORE) NOMINEES PTE LTD 53,420,000 27.97

2. CHUA KIM CHOO 27,811,000 14.56

3. SIM SOON NGEE GLENNDLE 19,400,000 10.16

4. SIM WEI WEI (SHEN WEIWEI) 9,776,000 5.12

5. SIM SOON YING (SHEN SHUNYING) 9,700,000 5.08

6. WONG BOON HUAT 8,765,102 4.59

7. WONG BOON KOK (HUANG WENGUO) 4,040,816 2.12

8. CIMB SECURITIES (SINGAPORE) PTE LTD 2,916,000 1.53

9. WONG CHEE HERNG 2,265,000 1.19

10. MAYBAN NOMINEES (S) PTE LTD 2,179,000 1.14

11. BANK OF SINGAPORE NOMINEES PTE LTD 1,870,000 0.98

12. NG KENG TEONG 1,813,000 0.95

13. CHENG SHAORONG 1,760,563 0.92

14. HUANG ZHIYONG 1,760,563 0.92

15. WONG SWEE CHUN 1,700,000 0.89

16. GOH SENG HUAT 1,551,000 0.81

17. LIM HO HAI 1,551,000 0.81

18. TAN CHEONG HEANG 1,500,000 0.79

19. SONG BONG JOO 1,403,061 0.73

20. LEOW DAVID IVAN 1,270,000 0.66

TOTAL : 156,452,105 81.92

STATISTICS OF SHAREHOLDINGSAS AT 19 MARCH 2012


SUBSTANTIAL SHAREHOLDERS

Substantial ShareholdersDirect

Interest %Deemed Interest %

Sim Soon Ngee Glenndle(1) 50,400,000 26.39 47,287,000 24.76

Chua Kim Choo(1) 27,811,000 14.56 69,876,000 36.58

Sim Wei Wei(1) 9,776,000 5.12 87,911,000 46.02

Sim Soon Ying(1) 9,700,000 5.08 87,987,000 46.06

Gay Chee Cheong(2) 9,110,000 4.77 6,050,000 3.17

Chua Siok Lan(2) 6,000,000 3.14 9,160,000 4.80

Ni Wei Ming(2) 50,000 0.03 15,110,000 7.91

Notes:

(1) 31,000,000 shares are registered in the name of HSBC (Singapore) Nominees Pte Ltd. Sim Soon Ngee Glenndle is deemed interested in the shares of Chua Kim Choo, Sim Wei Wei and Sim Soon Ying. Sim Soon Ngee Glenndle is the son of Chua Kim Choo and the brother of Sim Wei Wei and Sim Soon Ying. Each is deemed to have an interest in the shares held by each other.

(2) Gay Chee Cheong is deemed interested in the shares of Chua Siok Lan and Ni Wei Ming. Gay Chee Cheong is the husband of Chua Siok Lan and father of Ni Wei Ming. Each is deemed to have an interest in the shares held by each other.

COMPLIANCE WITH RULE 723 OF THE SGX-ST LISTING MANUAL

Based on information available and to the best knowledge of the Company, as at 19 March 2012, approximately 34.3% of the ordinary shares of the Company are held by the public. The Company is therefore in compliance with Rule 723 of the Listing Manual of the Singapore Exchange Securities Trading Limited.

The Company has no treasury shares as at 19 March 2012.

SUBSTANTIAL SHAREHOLDERSAs recorded in the Register of Substantial Shareholders


NOTICE IS HEREBY GIVEN that the Annual General Meeting of Mencast Holdings Ltd. (the “Company”) will be held at Jurong Country Club, Level 2, 9 Science Centre Road, Singapore 609078 on Tuesday, 24 April 2012 at 10.00 a.m. for the following purposes:

AS ORDINARY BUSINESS

1. To receive and adopt the Directors’ Report and the Audited Accounts of the Company for the financial year ended 31 December 2011 together with the Auditors’ Report thereon. (Resolution 1)

2. To declare a first and final 1-tier tax exempt dividend of 1.2 cent per ordinary share in the capital of the Company for the financial year ended 31 December 2011 (previous year: 1.1 cent per ordinary share). (Resolution 2)

3. To re-elect the following directors of the Company (“Directors”) retiring pursuant to Articles 88 and 89 of the Articles of Association of the Company:

Mr Wong Boon Huat (Retiring under Article 88) (Resolution 3)

Mr Ng Eng Ho (Retiring under Article 89) (Resolution 4)

Mr Ng Chee Keong (Retiring under Article 89) (Resolution 5)

Mr Ng Eng Ho will, upon re-election as a Director of the Company, remain as the Chairman of the Remuneration Committee and a member of the Nominating Committee and Audit Committee of the Company and will be considered independent.

Mr Ng Chee Keong will, upon re-election as a Director of the Company, remain as a member of the Audit Committee, Nominating Committee and Remuneration Committee of the Company and will be considered independent.

4. To approve the payment of Directors’ fees of S$189,000.00 for the financial year ended 31 December 2011 (previous year: S$189,000.00). (Resolution 6)

5. To re-appoint Nexia TS Public Accounting Corporation as the Independent Auditors of the Company and to authorise the Directors to fix their remuneration. (Resolution 7)

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

AS SPECIAL BUSINESS

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

7. Authority to issue shares in the capital of the Company (“Shares”)

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

(a) (i) issue shares whether by way of rights, bonus or otherwise; and/or

(ii) make or grant offers, agreements or options (collectively, “Instruments”) that might or would require shares to be issued, including but not limited to 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

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

NOTICE OF ANNUAL GENERAL MEETING


provided that:

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

(2) (subject to such calculation as may be prescribed by the SGX-ST) for the purpose of determining the aggregate number of shares that may be issued under sub-paragraph (1) above, the total number of issued shares (excluding treasury shares) shall be based on the total number of issued shares (excluding treasury 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 any convertible securities;

(b) new shares arising from exercising share options or vesting of share awards which are outstanding or subsisting at the time of the passing of this Resolution; and

(c) any subsequent bonus issue, consolidation or subdivision of shares;

(3) in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the Listing Manual of the SGX-ST for the time being in force (unless such compliance has been waived by the SGX-ST) and the Articles of Association of the Company; and

(4) unless revoked or varied by the Company in a general meeting, such authority shall continue in force until the conclusion of the next Annual General Meeting (“AGM”) of the Company or the date by which the next AGM of the Company is required by law to be held, whichever is earlier.

[See Explanatory Note (i)] (Resolution 8)

8. Authority to issue shares under the Mencast Employee Share Option Scheme

That pursuant to Section 161 of the Companies Act, the Directors be authorised and empowered to offer and grant options (“Options”) under the prevailing Mencast Employee Share Option Scheme (the “ESOS”) and to issue from time to time such number of fully-paid Shares as may be required to be issued pursuant to the exercise of Options, whether granted during the subsistence of this authority or otherwise, provided always that the aggregate number of Shares to be allotted and issued pursuant to the ESOS, when added to the number of Shares issued and issuable in respect of all options granted or awards granted under any other share incentive schemes or share plans adopted by the Company and for the time being in force, shall not exceed fifteen per centum (15%) of the total number of issued Shares (excluding treasury shares) from time to time and that such authority shall, unless revoked or varied by the Company in a general meeting, continue in force until the conclusion of the next AGM or the date by which the next AGM is required by law to be held, whichever is earlier.

[See Explanatory Note (ii)] (Resolution 9)



9. Authority to issue shares under the Mencast Performance Share Award Scheme

That pursuant to Section 161 of the Companies Act, the Directors be and are hereby authorized to offer and grant awards (“Awards”) in accordance with the provisions of the Mencast Performance Share Award Scheme (the “Scheme’) and to allot and issue from time to time such number of fully-paid Shares as may be required to be issued pursuant to the vesting of the Awards under the Scheme, provided that the aggregate number of Shares to be allotted and issued pursuant to the Scheme, when added to the number of Shares issued and issuable in respect of all Awards, and all Shares issued and issuable in respect of all options granted or awards granted under any other share incentive schemes or share plans adopted by the Company and for the time being in force, shall not exceed fifteen per centum (15%) of the total issued Shares (excluding treasury shares) from time to time and that such authority shall, unless revoked or varied by the Company in a general meeting, continue in force until the conclusion of the next AGM or the date by which the next AGM is required by law to be held, whichever is earlier.

[See Explanatory Note (iii)] (Resolution 10)

10. Renewal of Share Buy-Back Mandate

That for the purposes of Sections 76C and 76E of the Companies Act, the Directors be and are hereby authorised to make purchases or otherwise acquire issued Shares in the capital of the Company from time to time (whether by way of market purchases or off-market purchases on an equal access scheme) of up to ten per centum (10%) of the total number of issued Shares (excluding treasury shares) (as ascertained as at the date of AGM) at the price of up to but not exceeding the Maximum Price as defined in the Appendix attached, and this authority shall, unless revoked or varied by the Company in general meeting, continue in force until the date on which the next AGM is held or required by law to be held; the date on which the purchase(s) of Share(s) by the Company is carried out to the full extent mandated; or the date on which the authority contained in the Share Buy-Back Mandate is revoked or varied by shareholders of the Company in general meeting.

[See Explanatory Note (iv)] (Resolution 11)

By Order of the Board

Lee Tiong Hock

Secretary

Singapore, 9 April 2012



Explanatory Notes:

i. The Ordinary Resolution 8, if passed, will empower the Directors, to issue Shares, make or grant Instruments up to a number not exceeding 50% of the total number of issued Shares (excluding treasury shares), of which up to 20% may be issued other than on a pro-rata basis to shareholders of the Company.

ii. The Ordinary Resolution 9, if passed, will empower the Directors, to issue Shares pursuant to the exercise of Options granted or to be granted under the ESOS. The aggregate number of Shares which may be issued pursuant to the ESOS and any other share-based schemes (if applicable) shall not exceed in aggregate (for the entire duration of the ESOS) fifteen per centum (15%) of the total number of issued Shares (excluding treasury shares) from time to time.

iii. The Ordinary Resolution 10, if passed, will empower the Directors to offer and grant Awards under the Scheme in accordance with the provisions of the Scheme and to issue from time to time such number of fully paid Shares as may be required to be issued pursuant to the vesting of the Awards subject to the maximum number of Shares prescribed under the terms and conditions of the Scheme. The aggregate number of Shares which may be issued pursuant to the Scheme and any other share-based schemes (if applicable) shall not exceed in aggregate (for the entire duration of the Scheme) fifteen per centum (15%) of the total number of issued Shares (excluding treasury shares) from time to time.

iv. The Ordinary Resolution 11 is to renew the Share Buy-Back Mandate and to permit the Company to purchase or acquire Shares at the Maximum Price as defined in the Appendix attached. The rationale for, the authority and limitation on, the sources of funds to be used for the purchase or acquisition including the amount of financing and the financial effects of the purchase or acquisition of Shares by the Company pursuant to the Share Buy-Back Mandate on the audited consolidated financial accounts of the Group for the financial year ended 31 December 2011 are set out in greater detail in the Appendix attached.

Notes:

1. A Member entitled to attend and vote at the AGM is entitled to appoint not more than two proxies to attend and vote in his/her stead. A proxy need not be a Member of the Company.

2. The instrument appointing a proxy must be deposited at the Registered Office of the Company at 7 Tuas View Circuit, Singapore 637642, not less than forty-eight (48) hours before the time appointed for holding the AGM.

PROXY FORM

MENCAST HOLDINGS LTD.Company Registration No. 200802235C(Incorporated In The Republic of Singapore)

(Please see notes overleaf before completing this Form)

I/We________________________________________________________________________________________________of___________________________________________________________________________________________(address) being a member/members of Mencast Holdings Ltd. (the “Company”), hereby appoint:

Name NRIC/ Passport No. Proportion of shareholdings to be represented by proxy (%)

Address No. of Shares %

and/or (delete as appropriate)

Name NRIC/ Passport No. Proportion of shareholdings to be represented by proxy (%)

Address No. of 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 at Jurong Country Club, Level 2, 9 Science Centre Road, Singapore 609078 on Tuesday, 24 April 2012 at 10.00 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.

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

No. Resolutions relating to: For Against1. Directors’ Report and Audited Accounts for the financial year ended 31 December 20112. Payment of proposed first and final 1-tier tax exempt dividend of 1.2 cent per ordinary share

in the capital of the Company.3. Re-election of Mr Wong Boon Huat as a Director of the Company4. Re-election of Mr Ng Eng Ho as a Director of the Company5. Re-election of Mr Ng Chee Keong as a Director of the Company6. Approval of Directors’ fees amounting to S$189,000.00 7. Re-appointment of Nexia TS Public Accounting Corporation as Independent Auditors of

the Company8. Authority to issue shares in the capital of the Company9. Authority to issue shares under the Mencast Employee Share Option Scheme10. Authority to issue shares under the Mencast Performance Share Award Scheme11. Renewal of Share Buy-Back Mandate

Dated this ________day of ____________________, 2012 Total Number of Shares Held in:

No. of Shares

(a) CDP Register(b) Register of Members

______________________________________________

Signature of Shareholder(s)

or, Common Seal of Corporate Shareholder

*Delete where inapplicable

Notes:-

1. Please insert the total number of shares in the capital of the Company (“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.

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

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

4. 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.

5. The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at 7 Tuas View Circuit, Singapore 637642 not less than forty-eight (48) hours before the time appointed for the Meeting.

6. 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.

7. 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.

General:

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 entered 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 forty-eight (48) hours before the time appointed for holding the Meeting, as certified by The Central Depository (Pte) Limited to the Company.

AFFIX POSTAGE

STAMP

The Company SecretaryMENCAST HOLDINGS LTD.No 7 Tuas View Circuit Singapore 637642

DO

NO

T ST

APLE

. GLU

E AL

L SI

DES

FIR

MLY

DO

NO

T STAPLE. G

LUE ALL SID

ES FIRM

LY

DO NOT STAPLE. GLUE ALL SIDES FIRMLY

Designed by: Printed by:

MENCAST HOLDINGS LTD.

No. 7, Tuas View Circuit, Singapore 637642T +65 6268 4155 F +65 6264 4156E [email protected]

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